20-F 1 fy2019arbplc.htm 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,
 
2019
 
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 number
Barclays PLC
1-09246
 
BARCLAYS PLC
 
(Exact Name of Registrant as Specified in its Charter)
 
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:
 
 
Title of each class
 
Trading
 
symbol(s)
 
Name of each exchange
on which registered
 
25p ordinary
 
shares*
Not applicable*
New York
 
Stock Exchange*
 
 
Title of each class
 
Trading
 
symbol(s)
 
Name of each exchange
on which registered
 
American Depositary Shares, each representing
 
four 25p
 
ordinary shares
BCS
New York
 
Stock Exchange
4.338% Fixed
 
-to-Floating Rate Senior Notes due 2024
BCS24A
New York
 
Stock Exchange
Floating Rate Senior Notes due 2024
BCS24B
New York
 
Stock Exchange
4.972%
 
Fixed-to-Floating Rate Senior Notes due 2029
BCS29
New York
 
Stock Exchange
4.610%
 
Fixed-to-Floating Rate Senior Notes due 2023
BCS23B
New York
 
Stock Exchange
Floating Rate Senior Notes due 2023
BCS23C
New York
 
Stock Exchange
4.375%
 
Fixed Rate Subordinated Notes due 2024
BCS24
New York
 
Stock Exchange
3.65% Fixed Rate Senior Notes due 2025
BCS25
New York
 
Stock Exchange
2.875%
 
Fixed Rate Senior Notes due 2020
BCS20B
New York
 
Stock Exchange
5.25% Fixed Rate Senior Notes due 2045
BCS45
New York
 
Stock Exchange
3.25% Fixed Rate Senior Notes due 2021
BCS21B
New York
 
Stock Exchange
4.375%
 
Fixed Rate Senior Notes due 2026
BCS26
New York
 
Stock Exchange
5.20% Fixed Rate Subordinated
 
Notes due 2026
BCS26A
New York
 
Stock Exchange
3.20% Fixed Rate Senior Notes due 2021
BCS21
New York
 
Stock Exchange
Floating Rate Senior Notes due 2021
BCS21A
New York
 
Stock Exchange
Floating Rate Senior Notes due 2023
BCS23
New York
 
Stock Exchange
3.684% Fixed Rate Senior Notes due 2023
BCS23A
New York
 
Stock Exchange
4.337%
 
Fixed Rate Senior Notes due 2028
BCS28
New York
 
Stock Exchange
4.950% Fixed Rate Senior Notes due 2047
BCS47
New York
 
Stock Exchange
4.836% Fixed Rate Subordinated
 
Callable
 
Notes due 2028
BCS28A
New York
 
Stock Exchange
3.250% Fixed Rate Senior Notes due 2033
BCS33
New York
 
Stock Exchange
3.932%
 
Fixed-to-Floating Rate Senior Notes due 2025
BCS25A
New York
 
Stock Exchange
5.088%
 
Fixed-to-Floating Rate Subordinated Notes due 2030
BCS30
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.
 
Securities registered or to be registered
 
pursuant to Section 12(g)
 
of the Act:
 
None
 
Securities for which there is a reporting
 
obligation pursuant to Section 15(d)
 
of the Act:
 
None
 
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common
 
stock as
 
of the close of the period covered
 
by the annual
report
 
.
 
 
25p ordinary
 
shares
17,322,057,836
Indicate by check mark if the 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 registrant is 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 registrant (1) has filed all reports required
 
to be filed by Section 13 or 15(d)
 
of the Securities
 
Exchange Act of 1934
during the preceding
 
12 months (or for such shorter
 
period that the
 
registrant was required
 
to file
 
such reports), and (2)
 
has been subject to
 
such filing
requirements for
 
the past 90 days.
 
Yes
 
No
 
Indicate by check mark whether
 
the registrant has submitted electronically every Interactive Data File required
 
to be submitted pursuant to Rule 405 of
Regulation S-T
 
(§ 232.405
 
of this
 
chapter) during
 
the preceding 12 months (or for such shorter period that the registrant was required to submit and
submit such files).
 
Yes
 
No
 
Indicate by check mark whether
 
the registrant is a large accelerated filer, an accelerated filer,
 
a non-accelerated filer, or an emerging
 
growth
 
company. See
definition of “large accelerated filer”, “accelerated
 
filer” and “emerging
 
growth
 
company” in Rule 12b
 
-2
 
of the Exchange Act:
 
 
Large Accelerated Filer
Accelerated Filer
Non-Accelerated
 
Filer
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 chec
 
ked 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
181,
 
183,
 
303
 
B.
 
Capitalization and indebtedness
Not applicable
 
C.
 
Reason for the offer and use
 
of proceeds
Not applicable
 
D.
 
Risk factors
90-100
4
Information on the Company
 
 
A.
 
History and development of the company
i (Notes), 178
 
-199, 268
 
-271 (Note 26), 297 (Note
41), 299,
 
311
 
B.
 
Business overview
ii (Market and other data), 171
 
-177,
 
185
 
-192, 219-
220 (Note
 
2)
 
C.
 
Organizational structure
286
 
-290 (Notes 34 and
 
35), 321
 
-324
 
D.
 
Property,
 
plants and equipment
257
 
-261
 
(Notes 20 and 21)
4A
Unresolved
 
staff
 
comments
Not applicable
5
Operating and Financial Review and Prospects
 
 
A.
 
Operating results
90-100,
 
103
 
-107,
 
139, 165,
 
167-177,
 
179-
 
192,
236
 
-243
 
(Note 14)
 
B.
 
Liquidity and capital resources
137
 
-138, 145
 
-158, 165-166, 210,
 
212-
 
213, 236-
243
 
(Note 14), 272
 
-275 (Notes 27 and 28), 286-
287 (Note
 
34), 291
 
-292 (Note 37), 316
 
-326
 
C.
 
Research and development,
 
patents and licenses, etc.
41
 
D.
 
Trend
 
information
92
 
-100, 146
 
-169, 178
 
-199
 
E.
 
Off-balance sheet arrangements
109
 
-111,
 
267 (Note 25), 287-
 
290 (Note 35)
 
F.
 
Tabular disclosure of contractual
 
obligations
327
 
G.
 
Safe harbor
ii
 
(Forward
 
-looking statements)
6
Directors, Senior Management and Employees
 
 
A.
 
Directors and senior management
3-5, 313
 
-316
 
B.
 
Compensation
45-47,
 
63, 73
 
-76, 79, 163
 
-164, 279
 
-285 (Notes 32
and 33), 294
 
-296 (Note 39), 471
 
C.
 
Board
 
practices
3-5, 11
 
-19, 38, 59
 
-61, 79
 
-81
 
D.
 
Employees
83-86, 185,
 
187,
 
191,
 
219-
 
220 (Note 2)
 
E.
 
Share ownership
78, 279
 
-280 (Note
 
32), 294-
 
296 (Note 39), 319-
320
7
Major Shareholders
 
and Related Party
 
Transactions
 
 
A.
 
Major shareholders
41
 
-43, 312
 
B.
 
Related party transactions
C.
 
Interests of experts and counsel
294
 
-296 (Note 39), 345
Not applicable
8
Financial Information
 
 
A.
 
Consolidated statements and other financial information
201
 
-214,
 
214
 
-298,
 
300
 
-301
 
B.
 
Significant changes
Not applicable
9
The Offer and Listing
 
 
A.
 
Offer and listing details
303
 
-304,
 
311
 
B.
 
Plan of distribution
Not applicable
 
C.
 
Markets
303
 
-304,
 
311
 
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
41
 
-43, 299
 
-302
 
C.
 
Material contracts
48, 52
 
-62, 79
 
D.
 
Exchange controls
308
 
E.
 
Taxation
305
 
-308
 
F.
 
Dividends and paying agents
Not applicable
 
G.
 
Statement by experts
Not applicable
 
H.
 
Documents on display
308
 
I.
 
Subsidiary information
286
 
-287 (Note
 
34), 321-
 
324
11
Quantitative and Qualitative Disclosure
 
about Market
 
Risk
87-1
 
77,
 
237
 
-255 (Notes 14-17)
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
303
 
,
 
309
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
312
 
B.
 
Management’s annual report on
 
internal control over
 
financial reporting
38
 
C.
 
Attestation report
 
of the registered public accounting firm
201
 
-204
 
D.
 
Changes in internal control over
 
financial reporting
38
16A
Audit Committee Financial Expert
12
16B
Code of Ethics
31
 
1
16C
Principal
 
Accountant Fees and
 
Services
18
 
-19, 296
 
(Note 40)
16D
Exemptions from the Listing Standards
 
for Audit Committees
Not applicable
16E
Purchases of Equity Securities by the Issuer
 
and Affiliated Purchasers
42
16F
Change in Registrant’s Certifying Accountant
Not applicable
16G
Corporate Governance
311
16H
Mine Safety Disclosure
Not applicable
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.
 
fy2019arbplcp6i1.jpg
 
 
fy2019arbplcp6i0.gif fy2019arbplcp6i0.jpg fy2019arbplcp6i3.jpg fy2019arbplcp6i2.jpg
 
 
 
 
Delivering for our stakeholders
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Barclays
 
PLC
2019 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
 
Decem
 
ber 2019 to the corresponding twelve months of 2018 and balance sheet analysis as
 
at 31 December 2019
 
with comparatives
relating
 
to 31 December 2018. The abbreviations ‘£m’ and ‘£bn’ represent millions and thousands of millions of Pounds Sterling respectively; the
abbreviations ‘$m’ and
 
‘$bn’ represent millions and thousands of millions of US Dollars respectively
 
;
 
and the abbreviations
 
‘€m’ and ‘€bn’ represent
millions and
 
thousands of millions of Euros respectively.
 
Non-IFRS performance measures
Barclays management
 
believes that the non
 
-IFRS performance measures
 
included in
 
this
 
document
 
provide valuable information to the readers of the
financial
 
statements
 
as
 
they enable
 
the reader to identify a more consistent basis for comparing the businesses’
 
performance
 
between financial periods
and provide
 
more detail concerning the elements of performance which the manag
 
ers
 
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 193 to 199 for further information
 
and calculations
 
of non-IFRS
performance
 
measures
 
included
 
throughout this document, and the most directly comparable IFRS measures.
 
Key non
 
-IFRS measures
 
included
 
in this
 
document,
 
and the most directly comparable IFRS measures, are:
 
– Attributable
 
profit excluding litigation and conduct represents attributable profit excluding litigation and conduct charges. The comparable IFRS
measure is attributable
 
profit. A reconciliation is provided on pages 197-199;
 
– Average allocated
 
equity represents the average shareholders’ equity that is allo
 
cated to
 
the businesses.
 
The comparable
 
IFRS measure is average
equity.
 
A reconciliation is provided on pages 197-199
 
;
 
– Average allocated
 
tangible equity is calculated as
 
the average
 
of the previous month’s period end allocated tangible equity and the cu
 
rrent month’s
period
 
end allocated tangible equity.
 
The average allocated tangible equity for the period is the average of the monthly averages within that period.
Period
 
end allocated tangibl
 
e
 
equity is
 
calculated
 
as
 
13.0% (2018:
 
13.0%) of RWAs
 
for each b
 
usiness,
 
adjusted
 
for capital deductions, excluding
goodwill
 
and intangible assets,
 
reflecting
 
the assumptions the Group uses
 
for capital
 
planning purposes. Head Office allocated tangible equity represents
the difference
 
between the Group’s
 
tangible
 
shareholders’ equity and the amounts allocate
 
d
 
to businesses.
 
The comparable
 
IFRS measure is
 
average
equity.
 
A reconciliation is provided on pages 197-199
 
;
 
– Average tangible
 
shareholders’ equity is calculated as the average of the previous month’s period end
 
tangible equity and the current month’s period
end tangible
 
equity.
 
The average tangible shareholders’
 
equity
 
for the period is
 
the average
 
of the monthly averages within that period. The comparable
IFRS measure is average equity.
 
A reconciliation is
 
provid
 
ed on pages
 
197
 
-199;
 
– Basic earnings
 
per share excluding litigation and conduct
 
is calculated by dividing statutory profit after tax attributable to ordinary shareholders
excluding
 
litigation and conduct charges, by the basic weighted average number of shares.
 
The comparable
 
IFRS measure is basic earnings per share.
A reconciliation
 
is provided on pages 197-199;
 
– Cost: income
 
ratio excluding litigation and conduct represents operating expenses excluding
 
litigation and conduct charges, divided by total income.
The comparabl
 
e
 
IFRS measure is cost:
 
income
 
ratio. A reconciliation is provided on pages 197-199
 
;
 
– Operating
 
expenses
 
excluding
 
litigation and conduct represents operating expenses
 
excluding
 
litigation and conduct charges. The comparable IFRS
mea
 
sure is operating expenses. A
 
reconciliation
 
is provided on pages 197-199
 
;
 
– Operating
 
expenses
 
excluding
 
litigation and conduct, and a Guaranteed Minimum Payments (GMP)
 
charge of £140m
 
for 2018 represents operating
expenses excluding
 
litigation and conduct charges, and a GMP charge of £140m for 2018.
 
The comparable IFRS measure is operating expenses. A
reconciliation
 
is provided on page 181;
 
– Profit before
 
tax excluding litigation and conduct
 
represents profit before tax excluding litigation and conduct charges. The comparable IFRS measure
is profit before
 
tax. A reconciliation is provided on pages 197-199;
 
– 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 197;
 
– Return on average allocated
 
tangible equity is calculated as
 
the annualised
 
profit after tax attributable to ordinary equity holders of the parent, as a
proporti
 
on of average allocated tangible equity. The comparable
 
IFRS measure is return on equity. A reconciliation is provided on page 196
 
;
 
– Return on average allocated
 
tangible equity excluding litigation and conduct is calculated as the annualised profit after tax attributable to ordina
 
ry
equity
 
holders of the parent excluding litigation
 
and conduct charges,
 
as
 
a proportion
 
of average allocated tangible equity. The comparable IFRS
measure is return on equity.
 
A reconciliation is provided on page 196;
 
– Return on average tangible
 
shareholders’
 
equity
 
is calculated as the annualised profit after tax attributable to ordinary equity holders of the parent, as
 
a
proportion
 
of average shareholders’
 
equity
 
excluding non
 
-controlling interests
 
and other equity
 
instruments
 
adjusted
 
for the deduction of intangible
assets and goodwill.
 
The comparable IFRS measure is return on equity. A reconciliation is provided on
 
page 196;
 
and
 
– 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 199
 
.
 
Forward
 
-looking statements
This document
 
contains certain
 
forward-looking statements within the meaning of Section 21E of the US Securities Exchange
 
Act of 1934, as
 
amended,
and Section
 
27A of the US Securities Act of 1933, as amended, with respect to the Group. Barclays cautions readers that no forward-looking statement
is a guarantee
 
of future performance and that actual results or
 
other financial
 
condition or performance measures could differ materially from those
contained
 
in the forward
 
-looking statements.
 
These forward-looking
 
statements can be identified by the fact that they do not relate only to historical or
current facts. Forward-looking
 
statements sometimes use
 
words such as ‘may’, ‘will’, ‘seek’, ‘continue’,
 
‘aim’, ‘anticipate’, ‘target’, ‘projected’, ‘expect’,
‘estimate’,
 
‘intend’, ‘plan’, ‘goal’, ‘believe’,
 
‘achieve’ or
 
other words of similar meaning.
 
Forward-looking statements can be made in writing but also may
be made
 
verbally by members of the management
 
of the Group (including, without limitation, during management presentations to financial analysts)
 
in
 
 
connection
 
with this document. Examples of forward-looking statements include, among others, statements or guidance regarding or relating to the
Group’s future financial
 
position, income growth, assets,
 
impairment
 
charges, provisions, business
 
strategy, capital,
 
leverage and other regulatory ratios,
payment
 
of dividends (including dividend payout ratios and expected payment strategies), projected levels of growth in the
 
banking and financial
markets, projected
 
costs
 
or savings, any commitments
 
and
 
targets, estimates of capital expenditures, plans and objectives for future operations,
projected
 
employee numbers, IFRS impacts and other statements that are not historical fact. By their nature, forward
 
-looking statements
 
involve risk and
uncertainty
 
because they relate to future events and circumstances. The forward
 
-looking statements
 
speak only as at the date on which they
 
are made
and such statements may be affected
 
by changes in legislation, the development of standards and interpretations under IFRS, including evolving
practices with regard to the
 
interpretation and
 
application of accounting and regulatory standards, the outcome of current and future legal proceedings
and regulatory
 
investigations, future levels of conduct provisions, the policies and actions of governmental and regulatory authorities, geopolitical risks
and the impact
 
of competition. In addition, factors including (but not limited to) the following may have an effect: capital, leverage and other regulatory
rules applicable
 
to past, current and future periods; UK, US,
 
Eurozone
 
and global macroeconomic and business conditions; the effects of any volatility in
credit markets; market related
 
risks
 
such as changes
 
in interest rates and foreign exchange
 
rates; effects of changes
 
in valuati
 
on of credit market
exposures; changes in
 
valuation
 
of issued securities; volatility in capital markets; changes in credit ratings of any entity within the Group or any securities
issued by such entities;
 
the potential for one or more countries exiting the Eurozone; instability as a result of the exit by the UK from the European Union
and the disruption
 
that may subsequently result in the UK and globally; and the success
 
of future acquisitions,
 
disposals and other strategic transactions.
A number of these i
 
nfluences and factors are beyond the Group’s control.
 
As
 
a result, the Group’s actual financial
 
position, future results,
 
dividend
payments, capital,
 
leverage or other regulatory ratios
 
or other financial
 
and non-financial metrics or
 
performance
 
measures
 
may differ
 
materially from the
statements or guidance
 
set forth in the Group’s forward-looking statements.
 
Subject
 
to our obligations under the applicable laws and regulations of any relevant jurisdiction, (including,
 
without limitation, the UK and the US), in
relation
 
to disclosure and ongoing information, we undertake no obligation to update publicly or revise any forward-looking statements, whether as a
result of new information,
 
future events
 
or otherwise.
 
Market and other data
This document
 
contains information, including statistical data, about certain Barclays markets
 
and its competitive
 
position. Except as otherwise
indicated,
 
this
 
information is taken or derived from Datastream
 
and other external sources. Barclays cannot guarantee the accuracy of information taken
from external
 
sources,
 
or that, in respect of internal
 
estimates,
 
a third party using different methods would obtain
 
the same estimates as
 
Barclays.
 
Uses of Internet addresses
This document
 
contains inactive textual addresses
 
to internet
 
websites operated by us and third parties. Reference
 
to such websites
 
is made for
information
 
purposes only, and
 
information found at such websites
 
is not incorporated
 
by reference into this
 
document.
 
References
 
to Strategic Report
 
and Pillar
 
3 Report
This document
 
contains references throughout to the Barclays
 
PLC Strategic
 
Report and Pillar 3 Report.
 
References
 
to the aforementioned report
 
s
 
are
made for information
 
purposes
 
only,
 
and information found in said report
 
s
 
is not incorporated by reference into this document.
 
 
 
 
 
 
 
1
 
Barclays
 
PLC 2019
 
Annual Report
 
on Form
 
20-F.
 
Contents
What’s
 
inside this
 
report
 
Governance
 
Governance
 
contents
2
 
Directors’ report
9
 
Remuneration
 
report
44
 
Colleagues
83
Risk review
 
Risk review contents
87
 
Risk management
90
 
Material
 
existing and emerging risks
92
 
Principal
 
Risk
 
management
102
 
Risk performance
108
 
Supervision
 
and regulation
171
Financial
 
review
 
Financial
 
review contents
178
 
Key performance
 
indicators
179
 
Consolidated
 
summary income statement
181
 
Income
 
statement commentary
182
 
Consolidated
 
summary balance sheet
183
 
Balance
 
sheet commentary
184
 
Analysis of results by business
185
 
Non-IFRS performance
 
measures
193
Financial
 
statements
 
Financial
 
statements contents
200
 
Consolidated
 
financial statements
205
 
Notes to the financial
 
statements
214
Shareholder
 
information
 
Key dates, Annual
 
General Meeting, Dividends, and useful information
299
 
 
 
 
 
 
2
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
OUR GOVERNANCE
Contents
 
 
Welcome to our Governance report. This report
explains who we are, at Board and Executive
Committee (“ExCo”) level how our
 
governance
framework operates, and our key areas of focus in
2019.
 
 
Our primary aim
 
is that our governance:
 
Is effective
 
in providing challenge, advice and support to management; Provides checks
and balances and
 
encourages constructive challenge; Drives informed, collaborative
and accountable
 
decision
 
-making; and Creates
 
long
 
-term sustainable value for our
shareholders, having
 
regard to our other stakeholders.
 
We are in a new regime
 
for 2019, with the revised 2018 UK Corporate Governanc
 
e
Code (the “Code”) and the Companies
 
(Miscellaneous Reporting) Regulations 2018
 
(the
“Regulations”) now in force, and
 
our Governance Report reflects these requirements.
 
To
 
view our specific compliance
 
as
 
against the
 
Code, please see
 
pages 33 to 38.
 
Certain additional
 
information, signposted throughout this report, will be available at
barclays.com/ourgovernance
.
 
Page
Directors’
 
Report
Board of Directors: a year of renewal
3
 
Executive
 
Committee: strategically enhanced and strengthened
6
 
Striving
 
for simplicity and effectiveness
7
 
Our key areas of focus in 2019
9
 
Key priorities
10
 
Board Audit
 
Committee report
11
 
Board Nominations
 
Committee report
20
 
Board Risk Committee
 
report
25
 
How we comply
33
 
Other statutory information
39
Remuneration Report
44
 
 
 
 
 
fy2019arbplcp12i1.jpg
 
fy2019arbplcp12i3.jpg fy2019arbplcp12i2.jpg fy2019arbplcp12i0.jpg fy2019arbplcp12i4.jpg
 
3
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
DIRECTORS’
 
REPORT
Board
 
of Directors:
 
a year of
 
renewal
 
 
 
 
 
Relevant
 
skills and experience:
 
Nigel is the Group Chairman. He
 
is also Chairman
 
of
Barclays
 
Bank PLC.
 
Nigel has extensive
 
experience
in, and understanding of, banking
 
and financial
services,
 
gained
 
through a
 
36-year career at
Rothschild
 
& Co. where
 
he was most recently
 
Deputy
Chairman. Prior to that he was Chairman
 
of the Group
Executive
 
Committee and
 
Managing Partner
 
of
Rothschild
 
& Co. He is a
 
seasoned
 
business leader
with a strong track record in leading
 
and chairing
 
a
range of organisations and in acting as
 
a strategic
adviser
 
to multiple major
 
international
 
corporations
and governments. The breadth of
 
Nigel’s knowledge
and operational experience with international
 
banking
groups, building teams and culture,
 
and growing
businesses
 
are all hugely
 
beneficial to
 
Barclays, and
enables Nigel to contribute to the strategic
 
direction
and long-term sustainable success of
 
Barclays.
 
 
Key current appointments
 
Chairman, Sadler’s Wells; Non-Executive
 
Director,
Tetra Laval
 
Group
 
 
Committee membership
 
Board Nominations Committee (Chair)
 
 
 
 
Relevant
 
skills and experience
 
Jes has nearly four decades of extensive
 
experience
in banking and financial services.
 
He brings a
 
wealth
of investment banking knowledge
 
to the Board
 
as well
as strong executive leadership, and this
 
contribution
is reflected in Barclays strategy and
 
long-term
sustainable success of the business.
 
He previously
worked for more than 30 years at
 
JP Morgan where
he initially trained as a commercial banker,
 
later
advancing
 
to the leadership
 
of major businesses
involving
 
equities, private
 
banking and
 
asset
management,
 
and ultimately
 
heading
 
JP Morgan’s
Global Investment Bank.
 
 
Key current appointments
 
Board Member, Bank Policy Institute; Board
 
Member,
Institute
 
of International
 
Finance
 
 
Committee membership
 
None
 
 
 
 
 
 
Relevant
 
skills and experience
 
Crawford has extensive business
 
and management
experience at executive and board level
 
spanning
over 30 years. Beneficial to the Board
 
and to
Barclays’ strategy and long-term
 
sustainable success
is his key
 
understanding
 
of stakeholder
 
needs and his
experience in international and cross-sector
organisations, strong leadership and
 
strategic
decision-making. Crawford brings to the
 
Board robust
remuneration experience gained
 
from his former
remuneration committee chairmanships
 
at Standard
Life plc and other current positions.
 
 
Key current appointments
 
Non-Executive Director, SSE plc; Chairman,
Edrington Group
 
 
Committee membership
 
Board Audit Committee, Board Nominations
Committee,
 
Board Remuneration
 
Committee (Chair)
 
 
 
 
Relevant
 
skills and experience
 
Mike has deep knowledge
 
of accounting, auditing
 
and
associated
 
regulatory
 
issues, having
 
previously
worked at KPMG
 
for over 20 years. Mike’s former
roles include acting as the lead engagement
 
partner
on the audits of large financial services
 
groups
including HSBC, Standard Chartered
 
and the Bank
 
of
England, as Head of Quality and Risk
 
Management
for KPMG Europe LLP and
 
as KPMG UK’s Ethics
Partner. The Board benefits from his extensive
experience in accounting, auditing
 
and financial
reporting and therefore Mike continues
 
to contribute
to the long-term sustainable success
 
of the business.
 
 
Key current appointments
 
Member, Cabinet Office Board; Member, International
Ethics Standards Board for Accountants;
 
Member,
ICAEW Ethics Standards Committee;
 
Member,
Charity
 
Commission
 
Committee membership
 
Board Audit Committee (Chair), Board
 
Nominations
Committee,
 
Board Risk
 
Committee
 
 
 
 
 
Full Director biographies can be
 
found on pages
 
313 to 315.
 
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4
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
 
 
 
Relevant
 
skills and experience
 
Tim’s continued contribution to Barclays’
 
strategy
 
and
long-term sustainable success comes
 
from his
extensive
 
financial
 
services experience,
 
knowledge
 
of
risk management and UK and EU
 
regulation, as
 
well
as an understanding of key investor
 
issues. He
 
had a
distinguished career with Legal &
 
General, where,
among other roles, he was the Group
 
CEO until June
2012, and this experience enables
 
Tim to provide
challenge, advice and support to management
 
on
business performance and decision-making.
 
Key current appointments
 
Chairman, Apax Global Alpha Limited
 
Committee membership
 
Board Audit Committee, Board Nominations
Committee,
 
Board Remuneration
 
Committee,
 
Board
Risk Committee (Chair)
 
 
 
Relevant
 
skills and experience
 
Sir Ian is a member of the Board and
 
is also Chair of
Barclays
 
Bank UK PLC.
 
He contributes
 
to the Board
substantial
 
business experience
 
particularly in
 
the
international retail sector from his lengthy
 
executive
career at the Kingfisher Group, as
 
well as experience
in sustainability and environmental matters
 
which are
important
 
to the Group’s
 
strategy
 
and long-term
sustainable success. Sir Ian holds strong
 
credentials
in leadership, is involved with many
 
charitable
organisations, such as The Prince of Wales’s
Charitable Foundation, and is highly regarded
 
by the
Government for his work with various
 
Government
departments
 
.
 
Key current appointments
 
Chairman, Maisons du Monde; Chairman,
 
Menhaden
plc; Lead Non-Executive Director for the
 
Government;
Trustee, Institute for Government
 
Committee membership
 
Board Nominations Committee
 
 
 
 
Relevant
 
skills and experience
 
Mary Anne is an experienced Non-Executive
 
Director
with considerable financial services and
 
investment
banking experience, following an executive
 
career
spanning over 20 years with Morgan
 
Stanley. This
enables her to contribute to the effectiveness
 
of
Barclays
 
 
operations, strategy
 
and long-term
sustainable success of the business.
 
Her current
other Non-Executive positions and
 
Senior Advisory
role with Blackstone, coupled with
 
her previous board
and senior management level positions
 
(with Dollar
Tree Inc., Health
 
Net, Inc.,
 
and Blackstone
 
Advisory
Partners), contribute to the wide-ranging
 
global,
strategic
 
and advisory
 
experience
 
she can provide to
the Board.
 
Key current appointments
 
Non-Executive Director, HP Inc.; Non-Executive
Director,
 
Ahold Delhaize
 
N.V.; Non-Executive
Director,
 
Alcoa Corporation;
 
Senior Advisor, The
Blackstone
 
Group L.P.
 
Committee membership
 
Board Risk Committee
 
 
 
 
 
 
Relevant
 
skills and experience
 
Mohamed is a highly respected economist
 
and
investor,
 
with considerable
 
experience
 
in the asset
management industry and multilateral
 
institutions.
 
He
is chief
 
economic advisor
 
at Allianz
 
SE, the corporate
parent of PIMCO (Pacific Investment
 
Management
Company LLC) where he formerly
 
served as Chief
Executive
 
and Co-Chief
 
Investment
 
Officer. As well
 
as
serving
 
on several advisory
 
committees
 
and boards,
Mohamed is a regular
 
columnist for Bloomberg
Opinion and a
 
contributing editor at the Financial
Times. He has also published widely on international
economic and financial topics. He
 
spent 15 years
 
at
the IMF where he
 
served
 
as Deputy Director
 
before
moving
 
to the private
 
sector and
 
financial services.
Mohamed’s acute knowledge and understanding
 
of
international economics and the financial
 
services
sector strengthens the Board’s capacity
 
for
overseeing
 
the strategic
 
direction
 
and development
 
of
the Group. Mohamed’s knowledge and
 
experience
enables him to contribute to the long-term
 
sustainable
success
 
and strategy
 
of the business.
 
Key current appointments
 
Board Member (Non-Executive),
 
Under Armour Inc.;
Chief
 
Economic Advisor,
 
Allianz SE; Senior
 
Advisor,
Gramercy Fund
 
s
 
Management;
 
Senior Advisor,
Investcorp Bank BSC
 
Committee membership
 
None
 
 
Relevant
 
skills and experience
 
Dawn is a highly experienced financial
 
executive who
holds the role of Chief Investment
 
Officer at Soros
Fund Management LLC.
 
Her previous
 
experience
includes 25 years with UBS and its predecessor
organisations, most recently as Head
 
of Investments
for UBS Asset Management. Her
 
knowledge of
 
the
businesses
 
and markets
 
in which the Group
 
operates
further
 
strengthens
 
the depth and
 
range of relevant
sector skills and experience across the
 
Board. This
enables Dawn to challenge and contribute
 
effectively
to the Group’s operations and the long-term
sustainable success of the business.
 
Key current appointments
 
Chief
 
Investment Officer at Soros
 
Fund Management
LLC;
 
Member of The New York Federal Reserve’s
Investor
 
Advisory Committee
 
on Financial
 
Markets;
Member of Advisory Board and Investment
Committee of the Open Society Foundations’
 
and
their Economic Justice Programme
 
Committee membership
 
Board Risk Committee
 
 
 
Relevant
 
skills and experience
 
Mary has extensive and diverse board-level
experience across a range of industries,
 
including her
previous
 
Non-Executive
 
Directorships of the
 
Bank of
England, Alliance & Leicester, Aviva, Centrica and
Swiss Re Group. Through her
 
former senior executive
positions with HM Treasury, the Prime Minister’s
Office,
 
and as Director
 
General of
 
the Association
 
of
British Insurers, she brings to the Board
 
a strong
understanding of the interaction between
 
public and
priv
 
ate sectors, skills in
 
strategic
 
decision-making
 
and
reputation management and promotes
 
strong board
governance
 
values, which
 
enables her
 
to continue
 
to
contribute effectively to the long-term
 
sustainable
success
 
of the Group.
 
Key current appointments
 
Non-Executive Director, Valaris PLC; Member of
Advisory
 
Panel, The
 
Institute of Business
 
Ethics;
Member, UK Takeover
 
Appeal Board
 
Committee membership
 
Board Remuneration Committee
 
 
 
 
fy2019arbplcp14i3.jpg fy2019arbplcp14i2.jpg fy2019arbplcp14i1.jpg fy2019arbplcp14i0.jpg
 
5
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
DIRECTORS’
 
REPORT
Board
 
of Directors:
 
a year of
 
renewal
 
 
 
 
 
Relevant
 
skills and experience
 
Brian has served as Chief Financial Officer
 
for BP
p.l.c.
 
since 2012. He
 
joined BP in
 
1986 after obtaining
a PhD in Mathematics. After performing
 
a broad
range of commercial and financial roles
 
across all
facets
 
of the group, he
 
became chief executive
 
of
BP’s integrated supply and trading function
 
(2005 –
2009). Brian will
 
retire fro
 
m
 
BP in June
 
2020. His
experience outside BP includes serving
 
as a
 
Non-
Executive
 
Director and
 
audit committee
 
member of
 
Air
Liquide S.A., the Royal Navy, and the Francis Crick
Institute.
 
Brian also
 
chairs the ‘100 Group’
 
of the
FTSE 100 Finance Directors. Brian brings
 
to the
Board his extensive experience of
 
management,
finance
 
and strategy gained
 
at BP
 
and other public
and private boards. His experience
 
with, and
understanding of, the challenges
 
and opportunities
inherent in advancing a sustainable
 
energy future
 
will
be invaluable as Barclays considers
 
how it can help
to accelerate the transition to a
 
low carbon world.
 
 
Key current appointments
 
Chief
 
Financial Officer, BP p.l.c.;
 
Non-Executive
Director,
 
Air Liquide S.A.;
 
Non-Executive Director,
 
the
Royal
 
Navy; Senior Independent
 
Director, the Francis
Crick Institute; Chairman, the 100 Group
 
of the FTSE
100 Finance Directors
 
 
Committee membership
 
None
 
 
 
 
Relevant
 
skills and experience
 
Tushar is a chartered accountant with over
 
25 years
of strategic
 
financial
 
management,
 
investment
banking, operational and regulatory
 
relations
experience, which enables him to
 
contribute to the
long-term sustainable success and strategy
 
of the
business.
 
He joined
 
Barclays from
 
JP Morgan,
 
where
he held various senior roles including
 
the CFO
 
of its
Corporate & Investment Bank at the
 
time of the
merger of the investment bank and
 
the wholesale
treasury/security services business.
 
 
Key current appointments
 
Member, the 100 Group of the FTSE 100
 
Finance
Directors
 
;
 
Main Committee Chair,
 
Sterling Risk Free
Reference Rates Working Group
 
 
Committee membership
 
None
 
 
 
 
 
Relevant
 
skills and experience
 
Diane is a member of the Board, Chair
 
of Barclays
Execution Services Limited and a
 
member of the
Board of Barclays US LLC. She brings
 
to Barclays a
wealth of experience in managing
 
global, cross-
discipline business operations, client services
 
and
technology in the financial services
 
industry, which
enables her to robustly challenge
 
the Group’s
strategy
 
and support the
 
long-term sustainable
success
 
of Barclays.
 
Diane had
 
an extensive career
at Merrill Lynch,
 
holding
 
a variety of senior
 
roles,
including responsibility for banking, brokerage
services
 
and technology
 
provided to the
 
company’s
retail and middle market clients.
 
 
Key current appointments
 
None
 
 
Committee membership
 
Board Audit Committee, Board Nominations
Committee,
 
Board Risk
 
Committee
 
 
 
Company Secretary
 
 
 
 
Relevant
 
skills and experience
 
Stephen was appointed Company
 
Secretary in
November 2017 having previously
 
served as the
Group Company Secretary and Deputy
 
General
Counsel of
 
SABMiller plc.
 
Prior to
 
this, he practised
law as a partner in a
 
law firm in South Africa, and
subsequently
 
in corporate
 
law and
 
M&A at Hogan
Lovells
 
in the UK. Stephen
 
has extensive
 
experience
in corporate governance, legal, regulatory
 
and
compliance matt
 
ers.
 
Stephen serves as
 
Vice Chair of
the GC100, the association of General
 
Counsel
 
and
Company Secretaries working in FTSE
 
100
companies,
 
and has
 
previously served
 
as Chairman
of the ICC UK
 
’s Committee
 
on Anti-Corruption.
 
 
 
 
 
fy2019arbplcp15i0.jpg
 
6
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
Executive
 
Committee:
 
strategically
enhanced
 
and strengthened
 
 
 
We have changed
 
the composition of the
ExCo, removing
 
a management layer and
bringing
 
key
 
business areas closer
 
to, and
making their
 
leaders a part of, the most senior
management
 
forum for the Group.
 
The following
 
new roles
 
and additions to the
ExCo mean that
 
it now has a stronger
 
and
closer strategic focus on, and
 
oversight over,
the businesses comprising
 
our CIB and our
global
 
consumer banking and payments
businesses:
 
New roles
President of Barclays Bank PLC
 
Paul Compton
 
Global Head of Consumer Banking and
Payments
 
Ashok Vaswani
 
Paul and
 
Ashok
 
were previously members of
the ExCo in their
 
capacities as
 
Chief Operating
Officer and
 
CEO of Barclays UK respectively
 
Roles elevated to the ExCo
Global Head of Banking
 
Joe McGrath
 
Global Head of Markets
 
Stephen
 
Dainton
 
Head of Corporate Banking
 
Alistair
 
Currie
 
 
Group Executive
 
Committee biographies can
be found
 
on pages 314 to 316.
 
 
 
fy2019arbplcp16i0.jpg
 
7
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
Striving
 
for simplicity
 
and effectiveness
 
Barclays is a large, diversified organisation. We are committed, through
our governance model, to driving four key features: simplification,
collaboration, accountability and quality of decision-making.
 
 
Our governance framework
Our Group-wide governance
 
framework
 
has
been designed
 
to facilitate the effective
management
 
of the Group by our CEO and his
ExCo whilst preserving the constructive
challe
 
nge, support and oversight of our major
subsidiary boards in the UK, Ireland
 
and the
US, consistent with their respective
 
legal and
regulatory
 
responsibilities. The Barclays PLC
(BPLC) Board sets the strategic direction
 
and
risk appetite
 
of the Group and is
 
the ultimate
decision
 
-making body for matters of
 
Group-
wide strategic,
 
financial, regulatory or
reputational
 
significance.
 
BPLC is the group parent
 
company and has a
premium
 
listing on the London Stock
Exchange.
 
Each of our main operating entities,
Barclays Bank PLC (BBPLC), Barclays Bank
UK PLC (BBUKPLC), Barclays Bank Ireland
PLC, Barclays US LLC and Barclays Bank
Delaware,
 
has its
 
own board
 
comprising
Executive
 
and
Non-Executive
 
Directors.
 
Each also has its
own board committees.
 
During the year,
 
we consolidated
 
and
streamlined
 
membership of the BPLC and
BBPLC boards, such that membership
 
of the
BBPLC board is now a subset of the BPLC
Board, with
 
all members of the BPLC Board
except the Senior
 
Independent Director (SID),
the Chairm
 
an of BBUKPLC and one Non
 
-
Executive
 
Director now also serving on the
board of BBPLC.
 
This partial
 
consolidation has
significantly
 
increased coordination and
efficiency,
 
and reduced complexity and
duplication.
 
The revised BBPLC board
composition
 
vests
 
oversight over the activities
of BBPLC in a board the
 
members of which
also have direct
 
accountability to BPLC
 
’s
shareholders through
 
their separate
responsibilities
 
as
 
members of the BPLC
Board.
Board composition
In 2019, we welcomed
 
our new
 
Chairman,
Nigel
 
Higgins. We also announced
 
the
appointment
 
of two new Non-Executive
Directors:
 
 
Dawn Fitzpatrick, who joined
 
the Board on
25 September
 
2019;
 
and
 
Mohamed
 
A. El-Erian, who joined the Board
on 1 January 2020.
 
In January 2020,
 
we announced the
appointment
 
of Brian Gilvary who joined the
Board on 1 February 2020.
 
All of these appointments bring
 
tremendous
insight
 
and experience relevant to the markets
in which we operate.
 
In accordance with the
recommendation
 
of the Code, Reuben Jeffery
and Dr. Dambisa
 
Moyo, each
 
having served on
the Board for nine
 
years, stepped down, as did
Sir Gerry Grimstone
 
and Mike Turner.
 
Matthew
Lester stepped down
 
on 1 January
 
Board Governance Framework
 
 
 
fy2019arbplcp17i0.jpg
 
8
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
2020. We also bade
 
farewell to John
McFarlane,
 
who stepped down after four years
as Chairman,
 
including a period where he was
Executive
 
Chairman. We are grateful to them all
for their service to Barclays.
 
We are actively
 
seeking to complement the
current range of skills on our Board, ideally
 
with
individuals
 
who can bring additional retail
banking
 
and technology
 
experience. Our strong
belief
 
in the benefits of diversity – of gender,
ethnicity
 
and thought – underpins
 
our search. In
the report of our Nominations
 
Committee we
address the continuing
 
evolution of our Board.
 
Principal committees
The principal
 
Committees of the BPLC Board,
and the core responsibilities
 
of each, are
described in
 
the “Board Governance
Framework” table
 
at the foot of the previous
page. The
 
remit of each Committee is set
 
out in
brief in the
 
table, and you can read more
 
about
the Committees
 
and their work
 
on pages
 
11
 
to
32
 
and 80 to 82
 
.
 
In September
 
2019, the Board reviewed the
responsibilities
 
of the Reputation Committee
and reallocated
 
them mainly to the Board so
that it could
 
itself directly oversee the critical
topics of culture,
 
the environment and
reputation.
 
Responsibility for the oversight of
Conduct risk and Compliance
 
was
 
transferred
from the Reputation
 
Committee to the Risk
Committee.
 
We measure our effectiveness
An effective
 
Board is one that delivers for
stakeholders. We assess the effectiveness of
our Board, its Committees
 
and Board members
each year, as required
 
by the Code. Although
the Code only
 
requires an externally facilitated
evaluation
 
every three years,
 
for each of the
past four years we have used the services of an
external
 
agency to facilitate the assessment of
the effectiveness of the Board.
 
This year, the
Nominations
 
Committee decided to ask our
SID, with the support of the Company
Secretary,
 
to conduct the
 
assessment.
 
They are
well placed
 
to do this, having been closely
involved
 
in the transition to a new Chairman
and the evolving
 
composition of the Board and
the way it operates. You
 
can read more about
our 2019 process and our progress against the
2018 review
 
on page
 
s
 
23 to 24.
 
 
 
 
fy2019arbplcp18i0.jpg
 
9
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
DIRECTORS’
 
REPORT
Our key
 
areas
 
of focus
 
in 2019
 
We think of governance as how we govern the organisation and make
decisions to promote its success for the long-term benefit of our
stakeholders. Effective governance makes possible the delivery of our
purpose and our strategy.
 
 
Governance in action: our
programme of prioritised deep
dives
To
 
underpin
 
informed and sound decision-
making,
 
the Board needs to have a deep and
granular
 
understanding of the Group as a
whole and
 
each of its significant businesses –
where the key risks lie, how and
 
where
resources are allocated
 
and the contribution
made by each
 
part of the business.
Led by
 
the Chairman,
 
the Board and the
ExCo have agreed
 
a prioritised series of deep
dives which now form a significant
 
part of
each Board meeting,
 
with two to four deep
dives on the agenda
 
for a typical Board
meeting.
 
The materials for each deep dive
facilitat
 
e
 
an in-depth understanding of the
issues and generate
 
meaningful discussion,
debate,
 
support to management and
challenge
 
on key topics, allowing the Board
 
to
exercise effective
 
oversight and assist
 
the
delivery
 
of the Group’s strategy.
Through
 
this process,
 
the Board considers
strategy at every meeting,
 
rather than in a set
piece
 
event once
 
a year.
The Board
 
has discharged its responsibilities
as described in this high
 
-level flow diagram.
 
 
 
10
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
Key priorities
 
 
Core areas of focus
 
Our programme
 
of deep dives is outlined below
and in the
 
“Governance
 
in action” section on
the previous page.
 
This programme
commenced
 
in July 2019, following the
appointment
 
of Nigel Higgins as
 
Chairman.
The deep
 
dives held this year
 
included
consideration
 
of a wide range of topics,
covering
 
selected individual business units as
well as Group-wide
 
matters such as
 
our capital
allocation
 
framework, our
 
costs, our societal
purpose, our culture,
 
the environment and our
risk profile.
 
Feedback from our shareholders and
 
wider
stakeholders has been taken into
 
account
 
in
arriving
 
at and prioritising our deep dives.
 
The Board
 
received updates on the
performance
 
of the business
 
and execution
of the strategy at every meeting,
 
and the
approval
 
of our MTP,
 
in which our strategy is
embedded,
 
was
 
a key Board responsibility
 
at
its November
 
and December 2019 mee
 
tings.
We also gave considerable
 
focus to
developments in
 
the regulatory environment,
and to engagement
 
with our regulators in the
UK and the US in particular.
 
The oversight of
risk and of our control environment
 
is also
a core Board responsibility
 
and has
 
been
addressed at meetings through
 
the year.
 
The Board
 
believes
the right
 
culture
 
and
values,
 
supported
 
by
effective
 
leadership
and a consistent
 
tone
from the
 
top, are
crucial
 
to the success
of the Group.
 
 
Stakeholder engagement
 
We have enjoyed
 
extensive engagement with
our shareholders in 2019
 
through a variety of
mechanisms,
 
including:
 
 
 
In February, March
 
and April
 
2019, Nigel
Higgins held
 
around 50 meetings with
shareholders and other
 
stakeholders. This
was a “listening
 
tour”, the aim of which was
for Nigel to introduce
 
himself to a wide
range of stakeholders, including
 
our
institutional
 
shareholders,
 
and to hear
directly
 
from them their views on the
Company
 
before he became Chairman in
May 2019.
 
We also engaged with activist
investor Sherborne
 
Investors
 
Management
LP as part of this process;
 
 
Our AGM, where the Board engaged
extensively
 
with shareholders, both
formally
 
during the meeting and
informally
 
before and after the AGM; and
 
 
Through
 
our intensive Investor Relations
programme
 
of conference calls, webcasts
and meetings
 
at the time
 
of each of our
quarterly
 
results releases.
 
Our broader stakeholder engagement
 
is
described in
 
the Strategic Report
 
available at
home.barclays/annualreport
. Specifically
with regard to our workforce, engagement
 
with
our colleagues
 
has long been
 
a part of our
DNA as an organisation.
 
The Board conducted
a full review
 
of our existing engagement model
and concluded
 
that this, with certain
enhancements,
 
would be the best and most
effectiv
 
e
 
means to ensure sustained
engagement
 
with our workforce
 
whilst also
meeting
 
the objectives of the Code’s
 
new
workforce engagement
 
requirements. Our
workforce engagement
 
model is described in
the People
 
section on page
 
83 to 86.
Purpose, culture and values
 
Our purpose, adopted
 
in May 2018, is
“Creating opportunities to rise”. This is
underpinned
 
by our values: respect, integrity,
service, excellence
 
and stewardship, and by
the behaviours associated with
 
them. Our
purpose, values and
 
behaviours are designed
to support each other,
 
to drive our culture
 
and
to guide
 
our strategy and decision
 
-making.
 
The Board
 
has recently examined
 
our purpose
and concluded
 
that whilst it is fully integrated
into many
 
of our key
 
processes and decision-
making forums, we have further
 
work to do to
bring to life:
 
to express
 
and apply
 
it consistently
across the Group, and
 
for it to better connect
all of our stakeholders, our businesses, ESG
activities and
 
ambitions. This work is under
way.
 
Our values were adopted
 
in January 2013.
They were, and
 
remain, fully
 
embedded and
integrated
 
into the Group.
 
Our culture is a core area of focus for the
Board, which
 
bel
 
ieves
 
that the right
 
culture and
values, supported
 
by effective leadership and a
consistent tone from
 
the top, are crucial to the
success of the Group.
 
How
 
does the
 
Board review
our culture?
 
The Board
 
reviews our culture in a number of
ways, including:
 
 
 
Quantitative
 
and qualitative feedback on
how our culture aligns with
 
our purpose,
values and strategy through
 
Culture
Dashboards, so the Board can
 
see the
effect our people
 
engagement has on our
performance,
 
and the continued strength
of our culture;
 
 
Analysis of employee
 
survey results;
 
 
Face-to-face engagement
 
with employees
locally
 
to hear what they think; and
 
 
Review of people
 
policies, which are
designed
 
to provide equal opportunities
and create an inclusive
 
culture, in line with
our values and i
 
n
 
support of our long term
success.
 
 
 
11
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
DIRECTORS’
 
REPORT,
 
BOARD AUDIT
 
COMMITTEE REPORT
Ensuring
 
reporting
 
integrity
 
and
an effective
 
controls
 
environment
 
 
The Board Audit Committee has a central role in maintaining and
challenging the quality of Barclays external disclosures and its internal
control environment.
 
Dear Fellow
 
Shareholder
 
2019 was a year of steady progress for
the Group both
 
in enhancing its control
environment
 
and embedding new financial
reporting
 
requirements, particularly in relation
to the expected
 
credit loss
 
(ECL) model
introduced
 
by the implementation of IFRS 9
in 2018.
 
Ensuring focus on strengthening
 
the
 
Barclays
internal
 
control environment
has continued to
be a key activity
 
for the Committee. 2019 was
an important
 
year for
 
the Barclays Internal
Control Environment
 
Programme (BICEP)
which commenced
 
in January 2017 and is
 
on
track to complete
 
by the end of March 2020. As
at the end of 2019,
 
94% of issues
 
were either
closed or in validation
 
with 96% of the BICEP
milestones
 
achieved. When BICEP is fully
completed,
 
the Group’s control environment
will
 
be in a much stronger position, but
inevitably,
 
as
 
expect
 
ations and standards
change
 
and new control events occur, work is
still required
 
both to maintain and to further
develop
 
it. The Committee is therefore working
to ensure that as we transition
 
to “business
 
as
usual”, management
 
has a robust
 
framework
for identifying
 
and responding to control issues
with appropriate
 
reporting to the Committee
and other Board
 
Committees. A key
component
 
of this will be the work
 
the Chief
Controls Office
 
is doing to further streamline
and automate
 
the Risk
 
and Controls Self-
Assessment (RCSA) process to make it more
dynamic.
 
In assessing general
 
control issues for
disclosure in this Annual
 
Report, the
Committee
 
continued to apply similar concepts
to those used for assessing internal
 
financial
controls for the purposes of the US Sarbanes-
Oxley Act. The
 
conclusion we reached is that
there are no control
 
issues that are considered
to be a material
 
weakness
 
and which
 
therefore
merit specific
 
disclosure.
 
IFRS 9
continued
 
to be a major focus for the
Committee
 
this year as
 
models conti
 
nue to be
validated
 
and refined. In addition disclosures
have been
 
enhanced, although more work is
required
 
to develop the ability to generate and
disclose more meaningful
 
sensitivity analyses.
Following
 
the introduction of the time bar by
the FCA at the e
 
nd of August, the level
 
of
subjectivity
 
of the PPI provision at 31
December 2019
 
has been considerably
reduced.
 
However the Committee did consider
whether the “spike” in complaints received
 
just
before the
 
deadline
 
might have been
anticipated
 
and was satisfied that there was no
evidence
 
that would have justified an earlier
significant
 
increase in the provision.
 
I continued
 
my regular meetings with the
Chairs of the main
 
subsidiary audit
committees,
 
including the Chair of the BBPLC
audit
 
committee until the partial consolidation
of the BPLC and BBPLC
 
boards. Since that
time
 
I have also met with the
 
Chair of the
Barclays US LLC audit
 
committee, attended
a meeting
 
of the Barclays Bank
 
Ireland
 
PLC
audit
 
committee, and attended
 
the meeting of
the BBUKPLC au
 
dit committee which
considered
 
the main year
 
-end accounting
issues. The Chair
 
of the BBUKPLC audit
committee
 
also attends the meeting of the
Committee
 
where we consider the control
environment
 
of BBUKPLC as
 
part of our year-
end evaluation.
 
I also continued to meet
frequently
 
with members of senior
management,
 
including the Group Finance
Director and Chief
 
Internal Auditor.
 
In relation
to the latter,
 
I am pleased that the Committee
approved
 
the appointment in September 2019
of Lindsay O’Reilly
 
as
 
the new Chi
 
ef Internal
Auditor
 
following a joint reco
 
mmendation from
myself and the
 
Group Chief
 
Executive Officer.
As she was appointed
 
to this
 
role from a first
line
 
of defence function, the Committee have
taken steps to understand
 
and safeguard
against potential
 
and
 
perceived conflicts of
interest that may
 
arise in order to support BIA’s
continued
 
independence from the business.
BIA is a key component
 
in supporting the
Committee’s work and I am pleased
 
with
the way that the function
 
has continued to
develop
 
throughout the year in scoping,
performing
 
and reporting the outcomes
of its work both to management
 
and
the Committee.
 
I have also continued
 
my regular engagement
with the Group’s regulators both
 
in the UK and
US. This has encompassed not
 
only my work
as the Chair of the Committee,
 
but also my role
as the Group’s Whistleblowing
 
Champion. In
that respect, I also oversaw the production
 
of
the first of three annual
 
reports which we have
agreed to submit
 
to the FCA and PRA in the
UK and also the New York Department
 
of
Financial
 
Services containing certain
information
 
regarding our whistleblowing
programme.
 
Committee
 
performance
 
The performance
 
of the Committee was
assessed internally
 
as
 
part of the annual
effectiveness review of the Board.
 
In line
 
with
the approach
 
adopted for all Board
Committees in
 
2019, the process involved
completion
 
of a tailored questionnaire by
Committee
 
members
 
and standing
 
attendees.
 
The results confirm
 
that the Committee is
operating
 
effectively, and the Board takes a
high
 
level of assurance from the technical
and commercial
 
competence and diligence
of the Committee’s work. It is considered
 
well-
constituted,
 
with the right balance of skills
 
and
experience
 
to provide an appropriately broad
level
 
of challenge and oversight of the areas
within
 
its remit. Consideration will need to be
given
 
to adding an
 
additional member of the
Committee
 
with recent and relevant financial
experience
 
following the departure of Matthew
Lester at the end
 
of the year.
 
Last year’s review commented
 
on the improved
focus of the Committee
 
on key issues
 
in the
context of managing
 
a demanding agenda
efficiently
 
so
 
that time is allocated to the
 
most
significant
 
items for discussion. As
 
the
Committee
 
has taken on additional
responsibilities
 
during the year,
 
for example the
oversight of tax matters, continued
 
focus on
this area will
 
be beneficial.
 
In response to a request to provide
 
feedback
on the interaction
 
with subsidiary audit
committees,
 
the review highlighted that
interaction
 
with the BBUKPLC audit committee
had
 
been helpful
 
and effective. Following the
consolidation
 
of the membership of the
Committee
 
with the BBPLC audit committee,
coverage of BBPLC
 
matters within concurrent
meetings
 
was
 
considered
 
adequate, noting that
it will
 
benefit from further embedment.
 
Looking ahead
 
In 2020 the Committee
 
will still continue to
monitor
 
the embedment of IFRS 9 processes
and further enhancements
 
to our disclosure,
particularly
 
as
 
regards sensitivities.
 
We will
 
also be looking to assess
 
the reporting
of control issues after the conclusion
 
of BICEP
as well as monitor
 
the satisfactory completion
of remediation
 
programmes which are due to
extend beyond
 
31 March 2020, in particular the
Designated
 
Markets
 
Activity
 
remediation plan.
 
Mike Ashley
Chair, Board
 
Audit Committee
 
 
12
 
February 2020
 
fy2019arbplcp21i0.jpg fy2019arbplcp21i1.jpg
 
12
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Committee
 
composition
and meetings
The Committee
 
is composed solely of
independent
 
Non-Executive Directors, with
membership
 
designed to provide the
breadth
 
of financial
 
expertise
 
and
commercial
 
acumen it needs to fulfil its
responsibilities.
 
Its
 
members as a whole
have recent and
 
relevant experience of the
banking
 
and financial services sector, in
addition
 
to general management and
commercial
 
experience, and are financially
literate.
 
In particular, Mike Ashley, who is
the designated
 
financial expert on the
Committee
 
for the purposes of 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. Matthew
 
Lester, who
resigned from the
 
Committee on 1 January
2020, held
 
a number
 
of senior finance roles
across a range of business sectors,
including
 
financial services, during his
executive
 
career. You
 
can find more details
of the experience
 
of Committee members
 
in
their biographies
 
on pages 3 to 6.
During 2019,
 
the Committee met 10 times
and the chart opposite
 
shows
 
how it
allocated
 
its time. Attendance by members
at Committee
 
meetings is
 
also shown
opposite.
 
Committee meetings were
attended
 
by representatives
 
from
management,
 
including the Group Chief
Executive
 
Officer, Group Finance Director,
Chief Internal
 
Auditor,
 
Chief Controls
Officer,
 
Chief Risk
 
Officer,
 
Chief Operating
Officer,
 
Group General Counsel
 
and Group
Chief Compliance
 
Officer, as well as
representatives from the
 
businesses
 
and
other functions.
 
The lead audit engagement
partner of KPMG,
 
Michelle Hinchliffe, also
attended
 
Committee meetings. The
Committee
 
held a number of separate
private sessions with each of the Chief
Internal
 
Auditor and the lead audit
engagement
 
partner, which were not
attended
 
by management.
Committee
 
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
 
policies and procedures;
and
 
Overseeing significant
 
legal and
regulatory
 
investigations, including the
proposed litigation
 
statement for
inclusion
 
in the statutory accounts.
 
 
 
 
 
 
 
13
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
DIRECTORS’
 
REPORT,
 
BOARD AUDIT
 
COMMITTEE REPORT
Ensuring
 
reporting
 
integrity
 
and
an effective
 
controls
 
environment
 
Area of focus
Reporting
 
issue
Role of the Committee
Conclusion/action
 
taken
Fair, balanced and
understandable
reporting
(including
 
Country-by-
Country Reporting
 
and
Modern
 
Slavery
Statement)
In light
 
of the Board’s obligation
under the Code,
 
the Committee
assesses external
 
reporting to
ensure it is fair, balanced
 
and
understandable.
In addition
 
to this Annual Report and
associated year-end
 
reports, the
Committee
 
also reviewed the Group’s
quarterly
 
reports and the GFD’s
presentations to analysts.
The Committee
 
informed these
reviews by:
■ Consideration
 
of reports of the
Disclosure Committee
 
which
included
 
views on content,
accuracy and tone;
■ Direct
 
questioning
 
of management
including
 
the CEO and GFD on the
transparency and accuracy
 
of
disclosures;
■ Consideration
 
of management’s
response to letters issued by the
FRC;
■ Evaluation
 
of the output of the
Group’s internal
 
control
assessments and Sarbanes
 
-Oxley
s404 internal
 
control process;
 
and
■ Consideration
 
of the results of
management’s processes relating
to financial
 
reporting matters
 
and
to evidence
 
the representations
provided
 
to the external auditors.
The Committee
 
noted specifically that
whilst the disclosures regarding
IFRS9 met nearly
 
all the
recommendations from the
 
Enhanced
Disclosure Task
 
Force these were
still evolving.
 
The Committee
encouraged
 
management to continue
to enhance
 
the disclosure particularly
as the ability
 
to analyse
 
sensitivities
was developed.
Having evaluated
 
all of the available
information,
 
the assurances
 
by
management
 
and underlying
processes used to prepare the
published
 
financial information, the
Committee
 
concluded and advised
the Board that
 
the 2019
 
Annual
Report and financial
 
statements are
fair balanced
 
and understandable.
Going concern
 
and
long-term
 
viability
Barclays is required
 
to assess
whether it is appropriate
 
to prepare
the financial
 
statements on a going
concern basis and also, in
accordance
 
with the Code, Barclays
must provide a statement
 
of its
viability.
The Committee
 
considered both the
going
 
concern assumption and the
form and content
 
of the viability
statement
 
having regard to:
■ The
 
MTP and
 
WCR;
■ The
 
forecasted liquidity
 
and
funding
 
profile;
■ The
 
results of
 
stress tests based
on both internal
 
and regulatory
specified
 
assumptions as reviewed
by the Risk Committee;
 
and
■ Current risk and
 
strategy
disclosures.
The Committee
 
recommended to the
Board that the
 
financial statements
should be prepared
 
on a going
concern basis and that there were no
material
 
uncertainties
 
that may cast
significant
 
doubt on the Group’s
ability
 
to continue as
 
a going
 
concern.
The Committee
 
also agreed that the
appropriate
 
time frame for the viability
statement
 
continued to be three
 
years
and recommended
 
the viability
statement
 
to the Board for approval.
 
 
 
 
 
 
 
14
 
Barclays PLC
 
2019 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)
Following
 
implementation of IFRS9,
ECLs
 
are modelled
 
using a range of
forecast economic
 
scenarios. The
key areas of judgement
 
include
setting the modelling
 
assumptions,
developing
 
the macroeconomic
scenarios and the
 
methodology for
weighting
 
them, establishing the
criteria
 
to determine significant
deterioration
 
in credit quality and the
application
 
of management
adjustments
 
to the modelled output.
As part of their
 
monitoring the
Committee
 
considered a number of
reports from management
 
on:
■ The
 
continued development and
embedding
 
of controls over the
internal
 
processes
 
supporting
 
the
ECL calculation
 
and related
assessment of SOx compliance
(including
 
by the external
auditors);
■ Model
 
changes and refinements to
the staging
 
criteria;
■ Regeneration
 
of the
macroeconomic
 
variables
 
and
associated weighting;
■ Adjustments
 
made to the
 
modelled
output
 
to reflect updated data and
known model
 
deficiencies;
■ Comparisons
 
betwe
 
en actual
experience
 
and forecast losses;
and
■ Single
 
name exposures.
Having considered
 
and scrutinised
the reports, the Committee
 
agreed
with management’s
 
conclusion that
the impairment
 
provision (including
specifically
 
the £150m for anticipated
economic
 
uncertainty in the UK) was
appropriate.
Going
 
forward the Committee also
agreed with
 
management that it
would be
 
appropriate to review the
frequency
 
of regenerating the
macroeconomic
 
scenarios.
Conduct provisions
(refer to Note 24
to the
financial
 
statements)
Barclays makes certain
assumptions and estimates,
analysis of which underpins
provisions made
 
for the costs of
customer redress, such as for PPI.
With a view to evaluating
 
adequacy of
the provision,
 
the Committee
analysed
 
the judgements and
estimates made
 
with regard to
Barclays’ provisioning
 
for PPI claims,
taking into
 
account:
■ Forecasts
 
and assumptions made
for PPI complaints;
■ Actual
 
claims levels and validity of
claims; and
■ Increased
 
levels of claims based
on the August 2019
 
time bar for
claims (including
 
claims from the
Official
 
Receiver).
In light
 
of information received, the
Committee
 
agreed with management
that the PPI provision
 
was
 
adequate
during
 
H1 2019 and did not
 
need to
be increased.
 
The PPI provision
 
was
increased in
 
Q3 2019 by £1.4bn
 
due
to the exceptionally
 
high volume of
claims received
 
in late August 2019
prior to the time
 
bar. The Committee
agreed with
 
this increase and that
 
the
level
 
of provision at the end of the
year was appropriate.
The Commit
 
tee also made
recommendations regarding
 
the
sensitivity disclosures.
Legal, competition
and
 
regulatory
provisions
(refer to Notes 24
and 26
to the financial
statements)
Barclays is engaged
 
in various
legal,
 
competition and regulatory
matters which may give
 
rise to
provisioning
 
based on the facts.
The level
 
of provisioning is subject
to management
 
judgement on the
basis of legal
 
advice and is,
therefore,
 
an area of focus for the
Committee.
Evaluated
 
advice on the status of
current legal,
 
competition and
regulatory
 
matters and assessed
management’s judgements
 
on the
levels of provisions to be taken and
accompanying
 
disclosure.
The Committee
 
discussed provisions
and utilisation
 
and having reviewed
the information
 
available to determine
what was both probable
 
and could be
reliably
 
estimated, the Committee
agreed that
 
the level of provision at
the year-end was appropriate.
 
The
Committee
 
also considered that the
disclosures made
 
provided the
appropriate
 
information for investors
regarding
 
the legal, comp
 
etition and
regulatory
 
matters being addressed
by the Group.
 
 
 
 
 
 
15
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
DIRECTORS’
 
REPORT,
 
BOARD AUDIT
 
COMMITTEE REPORT
Ensuring
 
reporting
 
integrity
 
and
an effective
 
controls
 
environment
 
Area of focus
Reporting
 
issue
Role of the Committee
Conclusion/action
 
taken
Valuations
(refer to Notes 13 to 17 to
the financial
 
statements)
Barclays exercises judgement
 
in the
valuation
 
and disclosure of financial
instruments, derivative
 
assets
 
and
certain
 
portfolios, particularly where
quoted
 
market prices are not
available.
The Committee:
■ Evaluated
 
reports from the Group
Financial
 
Controller;
■ Monitored
 
the valuation methods
applied
 
by management requiring
significant
 
judgement such as
 
the
ESHLA portfolio;
 
and
■ Reviewed
 
the restructuring of the
long
 
-dated derivative portfolio
which had
 
previously
 
given rise to
a significant
 
valuation disparity
with the counterparty.
The Committee
 
noted that there were
no new significant
 
valuation
judgements
 
at the end of the year.
The Committee
 
was
 
satisfied with the
accounting
 
treatment on an amortised
cost basis of the investments now
held
 
as
 
a result of the restructuring
 
of
the long
 
-dated derivative portfolio.
The Committee
 
was
 
also satisfied
that the day one
 
valuation ascribed to
resultant instruments
 
was
 
appropria
 
te
by reference both
 
to the existing
valuation
 
methodology and the
ongoing
 
profitability of the instruments
now held.
Tax
(refer to Note 9
to the
financial
 
statements)
Barclays is subject to taxation
 
in a
number
 
of jurisdictions globally
 
and
makes judgements
 
with regard to
provisioning
 
for tax at risk,
 
and on
the recognition
 
and measurement of
deferred tax assets.
The Committee
 
is responsible for
considering
 
the Group’s tax
 
strategy
and overseeing
 
compliance with the
Group’s Tax
 
Code of Conduct.
 
In this
regard the Committee
 
received
reports from the Tax
 
Management
Oversight Committee
 
and in particular
considered
 
the utilisation of the
Luxembourg
 
tax losses
 
and revised
US holding
 
company structure.
The Committee
 
reviewed the
appropriateness of provisions made
for uncertain
 
tax positions, including
the retrospective
 
de-grouping of
certain entities from the
 
UK VAT
group.
The Committee
 
also confirmed that
the estimates and
 
assumptions used
in assessing the recoverability
 
of
deferred tax assets were supported
by the MTP.
The Committee
 
was
 
satisfied that
specific strategies were in line
 
with
the Group’s Tax
 
Code of Conduct
 
and
on behalf
 
of the Board approved the
UK Tax
 
Strategy statement
 
published
as part of the Country-by-Country
Report.
The Committee
 
noted that the
uncertain
 
tax positions covered a
diverse range of issues and as a
consequence
 
agreed with
management’s view that
 
there was
not a significant
 
risk
 
of a material
adjustment
 
during the next year.
The Committee
 
was
 
also satisfied
that deferred
 
tax assets
 
recognition
was appropriate.
 
 
 
 
 
 
 
16
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Area of focus
Reporting
 
issue
Role of the Committee
Conclusion/action
 
taken
Internal
 
controls
and
 
business
control environment
Read more about
Barclays’ internal
 
control
and risk management
processes on page
 
s
 
37
to 38.
The effectiveness of the overall
control
 
environment,
 
including the
status of any significant
 
control
issues and the progress of specific
remediation
 
plans.
 
The Committee:
■ Evaluated
 
and tracked the status
of the most significant
 
control
issues through
 
regular reports
from the Chief
 
Controls Officer,
including
 
updates on lessons
learned
 
and assessment
 
against
the Controls Maturity
 
Model. The
Committee
 
also received
independent
 
evaluations
 
from BIA
and external
 
auditors;
■ Evaluated
 
the status of specific
significant
 
control Hot Spots,
specifically;
 
transaction
operations,
 
cyber, treasury and
capital
 
liquidity risk
 
reporting
 
and
model
 
risk
 
(control framework and
model
 
reporting);
■ Scrutinised
 
reports from individual
businesses and functions on their
control
 
environment
 
and focused
on the progress relating
 
to
remediation
 
areas; and
■ Monitored
 
CASS updates and
associated remediation
 
activities.
At its next meeting,
 
the Committee
will
 
receive feedback from the Chief
Controls Office
 
on the 2019
 
RCSA
process, which will
 
help inform the
Committee’s overall
 
assessment
 
of
the Group’s control environment.
 
The
Committee
 
also received preliminary
feedback from the
 
Chief Controls
Officer on the
 
2019 RCSA process
which helped
 
inform the Committee’s
overall
 
assessment
 
of the Group’s
control environment.
Throughout
 
2019, the Committee
has:
■ Monitored
 
progress
 
of BICEP
against completion.
 
At the end of
2019, the
 
Committee noted that
BICEP was on target for
completion
 
by March 2020;
■ Monitored
 
key
 
control issues
through
 
a series
 
of deep
 
dives and
scrutinised the pathway
 
to ‘Return
to Satisfactory’ in respect of
internal
 
controls operated by the
various functions
 
and businesses;
■ Recommended
 
enhancements
 
to
the RCSA review process,
including
 
streamlining review
through
 
integration with the
internal
 
control process
 
review;
and
■ Enhanced
 
monitoring of liquidity
risk remediation
 
actions
 
relating
 
to
buffer increases, following
 
an
increase in regulatory
 
technical
breaches.
Raising concerns
The adequacy
 
of the Group’s
arrangements
 
to allow employees to
raise concerns in confidence
 
and
anonymously
 
without fear of
retaliation,
 
and the outcomes of
 
any
substantiated
 
cases.
The Committee:
■ Has
 
overseen the embedding
 
of a
new centralised
 
team to manage
concerns raised; and
■ Received
 
reports from
management
 
and monitored
whistleblowing
 
metrics and
retaliation
 
reports.
The Committee
 
received two in
 
-depth
semi-annual
 
reports on
whistleblowing
 
from management. At
year-end the Co
 
mmittee noted the
recent ‘Satisfactory’ rating
 
by BIA of
the audit
 
of the centralised team and
considered
 
that the whistleblowing
programme
 
generally met with best
practice
 
as
 
identified
 
by the PRA.
However the Committee
 
encouraged
the team
 
to consider how interaction
with whistleblowers might
 
be further
enhanced
 
to improve their experience
with the process. In addition
 
the
Committee
 
stressed
 
the importance
of ensuring the time
 
taken to
investigate
 
concerns
 
robustly was
 
as
short as possible in order to mini
 
mise
the potential
 
stress
 
for all concerned.
 
 
 
 
 
 
 
17
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
DIRECTORS’
 
REPORT,
 
BOARD AUDIT
 
COMMITTEE REPORT
Ensuring
 
reporting
 
integrity
 
and
an effective
 
controls
 
environment
 
Area of focus
Reporting
 
issue
Role of the Committee
Conclusion/action
 
taken
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.
The Committee
 
has:
■ Scrutinised
 
and agreed internal
audit
 
plans, methodology and
deliverables for 2020
 
including
assessing internal
 
audit resources
and hiring
 
levels, and any impacts
on the audit
 
plan;
■ Tracked
 
the levels of
unsatisfactory audits,
 
and
monitored
 
related remediation
plans;
■ Considered
 
the recommendation
for the appointment
 
of the Chief
Internal
 
Auditor;
■ Discussed
 
BIA’s approach
 
to data
analytics;
■ Discussed
 
BIA’s assessment of
the management
 
control approach
and control
 
environment in
BBUKPLC, BBPLC
 
and the
functions;
 
and
■ Evaluated
 
the outcomes from
BIA’s annual
 
self-assessment.
At year-end the Committee
 
approved
the 2020
 
Audit Plan detailing the
number
 
of audits and areas of focus,
and was satisfied with the
 
level of
resource to be allocated.
In particular.
 
the Committee has
scrutinised:
■ The
 
appointment of the
 
new Chief
Internal
 
Auditor;
■ Internal
 
audit resource and the
ability
 
of BIA to support the 2020
Audit
 
Plan; and
■ BIA’s
 
assessment of the overall
control environment.
External audit
The work and performance
 
of
KPMG.
The Committee:
■ Met
 
with key members of the
KPMG audit
 
team to discuss
 
the
2019 audit
 
plan and KMPG’s
areas of focus;
■ Assessed regular
 
reports from
KPMG on the
 
progress
 
of the
2019 audit
 
and any material
accounting
 
and control issues
identified;
■ Discussed
 
KPMG’s feedback on
Barclays’ critical
 
accounting
estimates and judgements;
■ Discussed
 
KPMG’s draft report on
certain
 
control areas and the
control
 
environment
 
ahead of the
2019 year end;
 
and
■ considered
 
the draft SOx control
report and the draft
 
audit
 
opinion.
The Committee
 
approved the audit
plan
 
and the main
 
areas
 
of focus.
Read more about
 
the Committee’s
role in assessing the performance,
effectiveness and independence
 
of
the external
 
auditor below.
 
 
 
 
 
18
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
 
External auditor
Following
 
an external audit tender in 2015,
KPMG was appointed
 
as
 
Barclays’
 
statutory
auditor
 
with effect from the 2017 financial year.
Michelle
 
Hinchliffe of KPMG is the Senior
Statutory
 
Auditor and was appointed to this
role with effect
 
for the 2018 financial year.
 
Assessing external auditor
effectiveness, objectivity and
independence and non-audit
services
The Committee
 
is responsible for assessing
the effectiveness, objectivity
 
and independence
of the Group
 
’s
 
auditor,
 
KPMG. This
responsibility
 
was
 
discharged
 
throughout the
year at formal Committee
 
meetings, during
private mee
 
tings
 
with KPMG,
 
and through
discussions with key executive
 
stakeholders. In
addition
 
to the matters noted above, the
Committee
 
also:
 
 
 
Approved
 
the terms of the audit
engagement
 
letter and associated fees,
on behalf
 
of the Board;
 
Discussed and agreed
 
revisions to the
Group policy
 
on the
Provision of Services
by the Group Statutory
 
Auditor
(the Policy)
and regularly
 
analysed reports
 
from
management
 
on the non-audit services
provided
 
to Barclays;
 
 
Evaluated
 
and approved revisions to
 
the
Group policy
 
on
Employment of
Employees or Workers from the Statutory
Auditor
and ensured compliance with the
policy
 
by regularly assessing
 
reports from
management
 
detailing any appointments
made;
 
 
 
 
 
 
The Committee
considered
 
that
KPMG
 
maintained
 
its
independence
 
and
objectivity, and
 
that
the audit
 
process
was effective.
 
Was briefed
 
by KPMG on critical
accounting
 
judgements and estimates and
internal
 
controls over financial reporting;
 
Considered the
 
formal report from the
Public
 
Company Audit Oversight Board on
their review of KPMG
 
’s
 
audit
 
of the 2017
financial
 
statements
 
and the consequential
revisions made by KPMG
 
to their audits for
both the 2018
 
and 2019 financial
statements. These were in lin
 
e
 
with the
provisional
 
results reported last year; and
 
 
Assessed any potential
 
threats
 
to
independence
 
that were self-identified and
reported by KPMG.
 
The Committee
 
is aware that the FRC
 
has also
reviewed
 
certain
 
aspects of
 
KPMG
 
’s
 
audit
 
of
the 2018
 
fina
 
ncial
 
statements although its
report is not yet available.
 
KPMG has informed
the Committee
 
of areas for
 
improvement
 
which
are likely to be reported
 
by the FRC
 
and how
these matters have been
 
addressed in the
2019 audit.
 
Based on its understanding to date,
the Committee
 
believes
 
that KPMG
 
’s
 
audit
work should provide
 
reasonable assurance that
the financial
 
statements are free of material
misstatement.
 
KPMG
 
’s
 
performance,
 
independence and
objectivity
 
during 2019 were also formally
assessed at the beginning
 
of 2020 by way of a
questionnaire
 
completed by key
 
stakeholders
across the Group, including
 
the chairs of the
BBUKPLC, Barclays US LLC and Barclays
Bank Ireland
 
PLC audit committees. The
questionnaire
 
was
 
designed
 
to evaluate
KPMG
 
’s
 
audit
 
process and addressed matters
such as the quality
 
of planning and
communication,
 
technical knowledge, the level
of scrutiny and challenge
 
applied and KPMG’s
understanding
 
of the business.
 
In addition,
 
as
in the prior year,
 
KPMG nominated
 
a senior
partner of the audit
 
team reporting to the
Senior
 
Statutory Auditor to have
 
specific
responsibility
 
for ensuring audit quality. The
Committee
 
therefore met with the partner
concerned
 
without the Senior Statutory Auditor
to receive a report on his assessment of audit
quality.
 
Taking
 
into account
 
the result of all of the
above,
 
the Committee
 
considered that KPMG
maintained
 
its independence and objectivity
and that the
 
audit process was
 
effective.
 
Non-audit services
In order to safeguard the auditor
 
’s
independence
 
and objectivity, Barclays has in
place
 
a policy
 
setting out the circumstances in
which the auditor
 
may be engaged to provide
services other than those covered
 
by the
Group audit.
 
The Policy applies to all Barclays’
subsidiaries and other
 
material entities over
which Barcla
 
ys
 
has significant
 
influence. The
core principle
 
of the Policy is that non
 
-audit
services (other than those legally
 
required to
be carried out by the Group
 
’s
 
auditor)
 
should
only be performed
 
by the auditor in certain
controlled
 
circumstances. The Policy sets
 
out
those types of services that are strictly
prohibited
 
and those that are allowable in
principle.
 
Any service types that do not fall
within
 
either list are considered by the
Committee
 
Chair on a case-by-case basis,
supported by a risk assessment provided
 
by
management.
 
A summary of the Policy can be
found at
home.barclays/who
 
-we-are/our-
governance/auditor
 
-independence
.
 
The P
 
olicy
 
is reviewed on an annual basis
 
to
ensure that it is fit for purpose, and
 
that it
reflects applicable
 
rules
 
and guidelines
 
.
 
The P
 
olicy
 
is also aligned with KPMG’s
 
own
internal
 
policy on non-audit services for
 
FTSE
350 companies
 
which broadly restricts non-
audit
 
work
 
to services that are ‘closely
 
related
 
to the audit.
 
Any changes to the Policy
 
are approved at a
Group level
 
by the Committee. This is
 
in
accordance
 
with European Union law and
 
FRC
guidance,
 
pursuant to which audit committees
of Public
 
Interest Entities (such
 
as Barclays)
are required
 
to approve non
 
-audit services
provided
 
by their auditors to such
 
entities,
 
and
subsidiary Public
 
Interest Entities in the UK –
such as BBUKPLC and BBPLC
 
– can rely on
the approval
 
of non
 
-audit services
 
by the
ultimate
 
parent’s
 
audit
 
committee. It should be
noted that
 
audit services, and the fee cap, will
also be monitored
 
by the rele
 
vant audit
committee,
 
as
 
appropriate.
 
Under the Policy
 
the Committee has pre-
approved
 
all allowable services for which fees
are less than £100,000.
 
However, all proposed
work, regardless of the fees, must be
sponsored by a senior executive
 
and recorded
on a centralised
 
online system, with a detailed
explanation
 
of the clear commercial benefit
arising from engaging
 
the auditor over other
potential
 
service providers. The audit
engagement
 
partner must also confirm that the
engagement
 
has been approved in accordance
with the auditor
 
’s
 
own internal
 
ethical
standards and does not pose any threat to the
auditor
 
’s
 
independence
 
or objectivity.
 
All
requests to engage
 
the auditor are assessed
by independent
 
management before work can
commence.
 
Requests
 
for allowable
 
service
types in respect of which the fees are expected
to meet or exceed
 
the above
 
threshold must
 
be
approved
 
by the Chair of the Committee before
work is permitted
 
to begin. Services where the
fees are expected
 
to be £250,000 or higher
must be approved
 
by the Committee as a
whole.
 
All expenses and disbursements must
be included
 
in the fees calculation.
 
 
19
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
DIRECTORS’
 
REPORT:
 
BOARD
 
AUDIT COMMITTEE
 
REPORT
 
Ensuring
 
reporting
 
integrity
 
and
an effective
 
controls
 
environment
 
During 2019,
 
all engagements where expected
fees met or exceeded
 
the above threshold
were evaluated
 
by either the Committee Chair
or the Committee
 
as
 
a whole who, before
confirming
 
any approval, assured themselves
that there was justifiable
 
reason for engaging
the auditor
 
and that its independence and
objectivity
 
would not be threatened. No
requests to use KPMG were declined
 
by the
Committee
 
in 2019 (2018: none). On a
quarterly
 
basis, the Committee
 
reviewed
details
 
of individually
 
approved and pre-
approved
 
services
 
undertaken by KPMG
 
in
order to satisfy itself that they
 
posed no risk
to independence,
 
either in isolation or on an
aggregated
 
basis.
 
 
For the purposes of the Policy,
 
the Comm
 
ittee
has determined
 
that any pre-approved service
of a value of under
 
£50,000 is to be regarded
as trivial
 
in terms of its impact on Barclays’
financial
 
statements
 
and requires the Group
Financial
 
Controller to specifically review and
confirm
 
to the Commi
 
ttee that any pre-
approved
 
service with a value of £50,000-
£100,000
 
may be regarded as
 
such. The
Committee
 
undertook a review of pre-approved
services at its meeting
 
in December 2019 and
satisfied itself
 
that such pre-approved
 
services
were trivial
 
in the context of their impact
 
on the
financial
 
statements.
 
 
The fees payable
 
to KPMG for the year ended
31 December
 
2019 amounted to £56m, of
which £11m
 
(2018: £11m) was payable
 
in
respect of non
 
-audit services. A
 
breakdown of
the fees payable
 
to the auditor for statutory
audit
 
and non
 
-audit work
 
can be found
 
in Note
40.
 
Of the £11m
 
of non-audit services provided
by KPMG during
 
2019, the significant
categories of engagement,
 
i.e. services where
the fees amounted
 
to more than £500,000,
included:
 
 
 
Audit
 
-related services: services
 
in
connection
 
with CASS audits;
 
 
Other services in connection
 
with
regulatory,
 
compliance and internal control
reports and audit
 
procedures, required by
law or regulation
 
to be provided by the
statutory auditor;
 
and
 
 
Other attest and assurance services, such
as ongoing
 
attestation and assurance
services for treasury and capital
 
markets
transactions to meet
 
regulatory
requirements, including
 
regular reporting
obligations
 
and verification reports.
 
The Statutory Audit Services
for Large Companies Market
Investigation (Mandatory Use
of Competitive Tender Processes
and Audit Committee
Responsibilities) Order 2014
 
An external
 
audit tender was conducted in
 
2015 and
 
the decision was made to appoint
KPMG as Barclays’
 
external
 
auditor with effect
from the 2017
 
financial year, with
 
PwC
resigning
 
as
 
the Group
 
’s
 
statutory auditor
 
at
the conclusion
 
of the 2016 audit.
 
 
Barclays is in compliance
 
with the
requirements of The
 
Statutory Audit Services
for Large Companies Market Investigation
(Mandatory
 
Use
 
of Competitive
 
Tender
Processes and Audit
 
Committee
Responsibilities) Order 2014,
 
which relates to
the frequency
 
and governance of tenders for
the appointment
 
of the external auditor and the
setting of a policy
 
on the provision
 
of non-audit
services.
 
 
Provided
 
that KPMG continue to maintain their
independence
 
and objectivity, and the
Committee
 
remains satisfied with their
performance,
 
the Group has no intention of
appointing
 
an alternative external auditor
before the
 
end of the current required
 
period of
10 years.
 
fy2019arbplcp29i0.jpg fy2019arbplcp29i1.jpg
 
20
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
DIRECTORS’
 
REPORT:
 
BOARD
 
NOMINATIONS
 
COMMITTEE REPORT
Delivering
 
effectiveness
 
An effective Board is a cohesive Board that provides
informed and constructive support and challenge to
the management team. This is vital to the generation
of increased and sustainable stakeholder value.
 
Achieving
 
this – through its focus on the
composition
 
of the Board, its Committees
and the ExCo, and
 
by ensuring a pipeline of
succession to these and other
 
senior
management
 
key
 
roles – is the main role
 
of the
Nominations
 
Committee.
Delivering
 
effectiveness is
 
not however just
about the
 
continuous task of
 
evolving
 
the
composition
 
of the Board, a Committee or the
ExCo to ensure that each
 
is diverse and well
balanced
 
with the right mix of talent, skills and
experience
 
(illustrated below). As important
is how the Board operates – the quality
of its agenda
 
and its engagement with
management,
 
of the papers and presentations
it considers and of the rigour of its
discussions. The effectiveness of the Board
was enhanced
 
in 2019 through revisi
 
ons
to the Board engagement
 
process
 
with an
intensive
 
focus on the preparation of our
Board papers, the delivery
 
of targeted training
sessions to the Board and
 
our new programme
of prioritised
 
deep dives discussed
 
on page 10
 
.
Much was done
 
in 2019
 
on all of these fronts,
and there is more to do.
The Committee
 
comprises
 
solely Non-
Executive
 
Directors and is chaired by
our Group Chairman.
 
Details
 
on Committee
membership
 
and attendance are set out on this
page.
 
 
 
21
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
DIRECTORS’
 
REPORT,
 
BOARD NOMINATIONS
 
COMMITTEE
 
REPORT
Delivering
 
effectiveness
 
Principal activities
The Committee
 
’s
 
allocation
 
of time and
the principal
 
activities during the year
under review are set out on page
 
s
 
20 to 22.
 
Board composition
With the restructuring
 
of Barclays largely
complete,
 
and a new Chairman in place,
the Nominations Committee
 
recognised that
balancing
 
the existing skills
 
on the Board with
further banking
 
and technology experience
would enhance
 
its ability to provide informed
and constructive
 
challenge to management,
and therefore
 
its effectiveness.
 
Building
 
on the work
 
of the Committee
under previous Chairman
 
John McFarlane,
the Committee
 
analysed the skills and
experience
 
on the Board against those
required
 
to drive forward the execution of
the Group
 
’s
 
strategy and
 
the performance
 
of
the business. The
 
Committee concluded that
the Board must now include
 
more Directors
with experience
 
in technology,
 
retail banking
and wholesale
 
banking. Capturing the clear
benefits
 
of greater diversity of background and
opinion
 
was
 
also recognised
 
as
 
a top priority.
The Committee
 
also concluded that to be more
effective
 
the Board would need to be smaller.
 
 
 
The Board
 
was delighted
to announce
 
the
appointment
 
of Dr. El-
Erian, Ms
 
Fitzpatrick
 
and
Dr. Gilvary as
 
Non-
Executive
 
Directors.
Each will
 
make a
significant
 
contribution
 
to
the effectiveness
 
of the
Board.
Working alongside
 
independent external
search firms Egon Zehnder
 
and Spencer
Stuart, neither
 
of which has any connection
to Barclays or any of the Directors other than to
assist with searches for executive
 
and non-
executive
 
talent, the Committee set rigorous
criteria
 
for the roles it was seeking to fill, both
in terms of technical
 
capabilities and
cultural/style
 
attributes,
 
and conducted
extensive search and selection
 
processes.
Open advertising
 
for Board positions was
 
not
used this year.
 
The Board
 
was
 
delighted
 
to announce the
appointment
 
in September 2019 of two new
Non-Executive
 
Directors,
 
Dawn Fitzpatrick
and Mohamed
 
A. El-Erian, and is
 
confident that
each will
 
make a very significant contribution to
the effectiveness of the Board.
 
Their respective
skills and experience
 
are set
 
out in their
biographies
 
on page 3
 
.
 
Since the year end, the
Board has announced
 
the appointment of Brian
Gilva
 
ry. The Committee
 
’s
 
focus now is on
securing a further Non-Executive
 
Director with
outstanding
 
retail banking and technology
experience
 
to join the Board, with the benefits
of diversity remaining
 
a key
 
consideration.
 
The Committee
 
has also made progress
against its goal
 
of delivering a smaller Board –
a reduction
 
in membership during 2019 from
15 to 11, going
 
up to 12 with the appointment
of Dawn Fitzpatrick. On 1 January 2020,
Mohamed
 
A. El-Erian joined the Board and
Matthew
 
Lester stepped down, as announced
on 16 December
 
2019. Brian Gilvary joined
the Board on 1 February 2020.
 
Executive
 
succession
Executive
 
succession is
 
a key consideration
and during
 
the year, the Committee closely
monitored
 
the status and progress of Barclays’
strategies for attracting
 
and retaining the
best talent.
 
The Committee
 
played an important role in the
management
 
changes at ExCo level which
took place
 
in March 2019. It recognised the
significant
 
strategic an
 
d
 
operational benefits of:
 
 
Elevating
 
to the ExCo the heads of key
businesses within
 
the CIB; and
 
 
Aligning
 
the Group’s
 
global
 
consumer
banking
 
and payments business under a
newly created
 
ExCo role of Global Head of
Consumer Banking
 
and Payments.
 
You
 
can read more about
 
these and the other
management
 
changes on page 6.
Simplification of
 
governance
The Board
 
is already a little smaller than it was,
and with the
 
support of our regulators we have
simplified
 
the multi-tier structure
 
at the top of
the organisation
 
by bringing about a much
greater overlap
 
between the Board and the
board of BBPLC.
 
We expect
 
this to produce
more cohesive
 
and efficient
 
governance, and
to enhance
 
oversight by and accountability to
the Board of this key part of our business.
 
Diversity
At the end of 2019
 
we had met our 2020 Board
gender diversity
 
target of 33%. Although recent
appointments
 
took us to 31% we
 
are
committed
 
to continuing to bring the very best,
diverse talent
 
we can attract to the Board.
 
 
Alongside
 
the Board, the Committee continues
to champion
 
the benefits of diversity – be it
religious,
 
ethnic or gender diversity or diversity
of social backgrounds or cognative
 
and
personal strengths – at Board,
 
Committee and
senior management
 
level. In pursuit of this, the
Committee
 
is monitoring and supporting the
Group’s
 
focus on accelerated
 
development of
the female
 
talent pipeline, with the aim of
moving
 
more female talent into the ‘Ready
Now’ succession positions. The
 
mechanisms
being
 
used Group-wide to achieve this include:
 
 
Identifying
 
female talent;
 
Providing
 
leadership and mentoring
programmes;
 
and
 
Launching
 
‘Aspire’
 
– a programme used
to fast track the development
 
of high
potential
 
Vice Presidents to Director
(of which the majority
 
in the programme
are female).
 
Successful leadership
 
and governance
comes from different
 
experiences and
perspectives, not just one point
 
of view.
Our commitment
 
is to attract and retain a broad
based pool
 
of talent – not a particular type of
person – and the
 
Board Diversity Policy and
the Committee
 
terms of reference support this.
Both are available
 
at
home.barclays/corpo
 
rate governance
.
 
For additional
 
information on diversity and
inclusion,
 
our Diversity Policy and data on the
percentage
 
of females in senior management
positions, please
 
see pages 28 and 31
respectively
 
of the Strategic Report
 
available at
home.barclays/annualreport
.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
fy2019arbplcp31i11.jpg fy2019arbplcp31i9.jpg fy2019arbplcp31i4.jpg fy2019arbplcp31i0.jpg fy2019arbplcp31i15.jpg fy2019arbplcp31i13.jpg fy2019arbplcp31i10.jpg fy2019arbplcp31i5.jpg fy2019arbplcp31i1.jpg fy2019arbplcp31i16.jpg fy2019arbplcp31i16.jpg fy2019arbplcp31i16.jpg fy2019arbplcp31i16.jpg fy2019arbplcp31i12.jpg fy2019arbplcp31i7.jpg fy2019arbplcp31i6.jpg fy2019arbplcp31i2.jpg fy2019arbplcp31i14.jpg fy2019arbplcp31i8.jpg fy2019arbplcp31i3.jpg fy2019arbplcp31i6.jpg
 
22
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Committee
 
responsibilities
 
Ensuring the
 
right individuals
are appointed
 
– in
 
line with
suitability criteria
 
– who
 
can
discharge the
 
duties and
responsibilities of
 
directors.
Effective
 
Exco, Board and
Committee composition,
 
through
focus on
 
appointment and
succession based
 
on merit
 
and
 
skill,
through
 
a diversity
 
lens.
Leading
 
candidate search
 
and
identification.
Regular
 
review of
 
succession
planning
 
and
 
recommendations
 
for
key executive
 
and
 
non-executive
roles.
Monitoring of
 
time commitments
 
for
incoming and
 
existing Directors
 
to
ensure
 
sufficient time for
 
effective
discharge of
 
duties.
Monitoring compliance
 
against
corporate
 
governance
 
guidelines
and
 
the Diversity
 
Policy, including
yearly review
 
and
any recommendations
 
for
enhancements.
Ensuring compliance
 
by the Board
with legal
 
and
 
regulatory
requirements.
Individual
 
Director, Board
and
 
Committee effectiveness
reviews
 
and
 
implementing
any required
 
actions.
Considering
 
and
 
authorising,
subject to ratification
 
by the
 
Board,
any conflicts of
 
interest.
 
Principal activities
 
 
Approval
 
of re-allocation of management positions and reporting
lines following
 
the reorganisation of the Group’s consumer banking
and payments
 
business.
 
Approval
 
of key
 
executive
 
appointments including the Global Head
of Markets.
 
Consideration
 
and approval of new Group Chief Operating Officer
and CEO of BX, allowing
 
the current role holder (Paul Compton) to
focus on the role
 
of BBPLC President.
 
 
Candidate
 
evaluation for both executive and non-executive current
and future
 
roles including
 
review of core skills
 
and (for internal
candidates) scrutiny of internal
 
feedback.
Review of the balance
 
of skills
 
and diversity on
 
the Board, and
leading
 
the search and recruitment process
 
(including
 
conflict
analysis) for candidates
 
with relevant banking
 
and technology
experience.
 
The Committee utilised external search consultants
Egon Zehnder
 
and Spencer Stuart to facilitate the targeted external
search processes based on agreed and
 
reviewed criteria.
 
Directors’ tenure and
 
effectiveness review, and identifying
candidates for re-election.
 
Approval
 
of the appointment of Ms Schueneman to the
Nominations
 
Committee.
 
Analysed ExCo composition
 
and succession
 
planning
 
for strengths
and weaknesses, focussing on increasing
 
diversity.
 
Reviewed
‘Ready Now’ successors for key roles such as Group Chief
 
Risk
Officer,
 
Group Human
 
Resources
 
Director and Group
 
Chief
Compliance
 
Officer and suggested external market mapping for
any roles where a lack of a strong pipeline
 
was
 
identified.
 
Reviewed
 
recommendations and suggested improvements arising
from the 2018
 
Board Effectiveness
 
Review.
 
Approved
 
that the 2019 Effectiveness Review be conducted
internally,
 
led by the SID with support from the Company Secretary
and Nominations
 
Committee oversight.
 
Approved
 
further enhancements to Director training through deep
dive Director training
 
sessions.
 
Review and approval
 
of the composition of the Board Committees.
 
 
 
23
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
DIRECTORS’
 
REPORT:
 
BOARD
 
NOMINATIONS
 
COMMITTEE REPORT
Delivering
 
effectiveness
 
Review of
 
Board, Committee
 
and
individual Director effectiveness
 
 
Progress against 2018
 
Board
effectiveness
 
review
 
The 2018
 
externally
 
-facilitated
 
effectiveness
review outlined
 
the following key
recommendations:
 
Board size and composition:
The 2018
review highlighted
 
that the Board, at 15
members, was large
 
relative to peers and
suggested that a Board of 10 to12
members is optimal,
 
with 8 to 10 Non-
Executive
 
Directors, provided that diversity,
succession planning
 
and skills mix criteria
continue
 
to be
 
met.
 
2019:
The size of the Board
 
was
 
reduced
to 11 (post AGM) and
 
is currently 13.
The Committee
 
believes that the size of the
Board is now more appropriate,
 
with more
work to do to reduce it further
 
in size, and
that its effectiveness, and
 
the balance of
skills, experience
 
and diversity on the
Board, have
 
been enhanced
 
during 2019.
 
Culture, purpose and values:
The 2018
review recommended
 
that the Board
ensure that the Company’s purpose and
values are fully
 
aligned with its culture
and that all
 
Directors
 
lead
 
by example
and promote
 
the desired culture.
 
2019:
Deep dives have been
 
held by the
Board covering
 
purpose, values and culture
and considerable
 
progress
 
has been made
in relation
 
to these recommendations.
 
Director training and development:
The 2018
 
review recommended that
enhanced
 
training be provided for Board
members and senior executives on
 
UK
corporate governance,
 
and that refresher
training
 
sessions
 
and more opportunities
 
for
site visits be made available.
 
2019:
Training
 
on UK corporate
governance
 
has been delivered in 2019
to Non-Executive
 
Directors and to key
executives,
 
and a new programme
 
of
training
 
sessions
 
for Directors has been
implemented,
 
with sessions
 
held
 
to date
focusing on technical
 
aspects of
 
some
of the more complex
 
areas
 
of the business,
in particular
 
within the CIB. Opportunities
for site visits in the US and the
 
UK have
been made
 
available to all Board members.
 
Board objectives:
The 2018 review
recommended
 
that to enable the Board
to spend more time
 
on longer
 
-term
and strategic issues a short set of annual
objectives would
 
help to bring focus
to key issues and would
 
result in papers
and meetings being
 
more effective.
2019:
Through
 
the programme of deep dives,
which covers a rolling
 
18-month period and
reflects the Board’s key priorities
 
and
objectives, and
 
through the effort
 
to address
the deep
 
dive topics effectively in
 
the papers
 
to
the Board, the
 
Committee believes that this
recommendation
 
has, in substance,
been addressed. Time
 
is now devoted
to strategy and strategic issues at every
meeting
 
of the Board, rather than once a year.
 
2019
 
Board
 
effectiveness
 
review
 
The 2019
 
Board effectiveness
 
review was
conducted
 
internally, in line
 
with the Code, and
was led
 
by the SID with support from the
Company
 
Secretary.
 
The review followed a
structured interview
 
process
 
with Board
members, senior management
 
and other
stakeholders, including
 
our auditors,
 
building
on the last year’s externally
 
facilitated review.
 
The review
 
is an important part of the way
Barclays monitors a
 
nd improves Board
performance
 
and effectiveness; maximising
strengths and highlighting
 
areas for further
development.
 
Feedback indicated
 
that recent changes
 
in the
composition
 
of the Board have made it more
effective,
 
with the new mix of skills and
experi
 
ence enhancing the quality of
discussion.
 
Board members commented
 
that meetings are
characterised
 
by constructive dialogue on
strategic issues, and healthy
 
challenge in an
open and
 
collegiate environment. The quality
of management’s input
 
to Board meetings
 
is
felt to have
 
improved,
 
in part as
 
a result of
more active
 
Board engagement
 
in shaping
materials
 
for debate.
 
The induction
 
of the new Chairman has been
effective,
 
enabling him to quickly understand
the organisation
 
and provide effective
challenge
 
and a strong
 
platform for inclusive
debate.
 
The integration
 
of BBPLC and BPLC board
meetings
 
is viewed as efficient, whilst still
enabling
 
the appropriate focus on matters
relevant
 
to each entity.
 
Recommendations
■ The
 
breadth
 
and complexity of some issues
may necessitate a deeper
 
discussion than
is currently possible
 
in Board meetings.
Consideration
 
will be given to the best way
to achieve
 
this without significantly
increasing
 
demands on the Board’s time;
 
■ As Barclays, and
 
the wider industry,
becomes incr
 
easingly more digital, there
may be benefit
 
to adding greater
technology
 
expertise to the Board. This
could
 
be achieved
 
either through greater
external
 
input, or by looking to expand or
adjust Board membership;
■ There
 
may also be opportunities to
increase
 
the input
 
to the Board from outside
Barclays on a wider range of issues,
thereby further
 
strengthening decision-
making and
 
ensuring that Board members
have the fullest understanding
 
of the
context for their
 
decisions; and
 
 
■ Barclays should
 
ensure that its ongoing,
structured approach
 
to workforce
engagement
 
includes
 
appropriate
opportunities for Board members to engage
directly
 
with employees, to help the Board
take the issues of interest to employees
into acc
 
ount in decision
 
-making.
 
Review
 
of Nominations
Committee effectiveness
The performance
 
of the Committee was
assessed internally
 
in
 
line with the approach
adopted
 
for all Board Committees in 2019. The
process involved
 
completion of a tailored
questionnaire
 
by Committee members and
standing
 
attendees.
 
The results confirm
 
that the Committee is
operating
 
effectively. This year’s
 
review
highlights that
 
the Committee
 
continues
 
to be
well constituted
 
and that the role and
responsibilities
 
of the Committee are clear and
well understood.
 
The Committee’s interaction
with the Board,
 
Board Committees and senior
management
 
is considered effective. In
particular,
 
this
 
year’s
 
review noted
 
the positive
steps which had
 
been taken to address
feedback from the
 
previous review on ensuring
the same flow of infor
 
mation is received by all
Non-Executive
 
Directors
 
in relation
 
to
discussions and decisions made
 
by the
Committee.
 
The review
 
also noted that the Committee may
benefit
 
from a more formalised meeting
schedule.
 
It was
 
acknowledged
 
that due to the
nature of the Committee’s roles and
responsibilities
 
this is
 
not always possible, but
further consideration
 
will be given to this
during
 
the year.
 
In response to a request to provide
 
feedback
on interaction
 
with subsidiary committees, the
review noted
 
that interaction with the
BBUKPLC nominations committee
 
had been
effective.
 
Following the consolidation of the
membership
 
of the Committee with the BBPLC
nominations
 
committee,
 
coverage of BBPLC
matters within
 
concurrent meetings was
considered
 
adequate, noting that
 
it will benefit
from further embedment.
 
 
24
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Review
 
of the effectiveness
 
of other
Committees
In addit
 
ion to reviewing its own effectiveness,
the Committee
 
also reviewed the outcomes
of the effectiveness reviews conducted
 
by the
Audit,
 
Remuneration and Risk Committees
which had
 
also been conducted by way of
tailored
 
questionnaire. You can read about
those reviews in the individual
 
Committee
reports elsewhere in
 
this Governance
 
Report.
 
Following
 
consideration of the findings of the
2019 Board
 
and Board Committee
effectiveness reviews, the Directors remain
satisfied that the
 
Board and each of the Board
Committees are operating
 
effectively.
 
Individual
 
Director Effectiveness
All Directors in office
 
at the end of 2019 (with
the exception
 
of Matthew Lester who stepped
down on 1 January 2020)
 
were subject to an
individual
 
effectiveness
 
review. The
 
Chairman
and the SID considered
 
each Director’s
individual
 
contribution to the Company as
well as any feedback received
 
as
 
part of the
broader Board
 
and Committee
 
effectiveness
review. The
 
reviews were conducted by the
Chairman
 
and the Chairman’s review was
conducte
 
d
 
by the SID. The Committee also
reviewed
 
the independence of the Directors,
and in the
 
cases of Tim Breedon,
 
Mike Ashley
and Crawford Gillies,
 
all of whom have
 
served
(or will
 
have by the time of the 2020 AGM) on
the Board for more than
 
six years,
 
their
independence
 
was
 
subjected
 
to a more
rigorous review as required
 
by the Code.
 
Based on these reviews and the additional
review in respect of Mr. Staley
 
described
below
 
,
 
the Board accepted the view of the
Committee
 
that each Director proposed for
election
 
or
 
re-election
 
at the 2020 AGM
continues
 
to be effective,
 
and contributes to
the Company’s long
 
-term sustainable success.
 
Director effectiveness
 
assessment:
disclosure of
 
regulatory
 
investigation
In accordance
 
with the Code,
 
all of the current
Directors of the Company
 
will be submitting
themselves for election
 
or re-election at the
2020 AGM
 
to be held
 
on 7 May 2020, and will
be unanimously
 
recommended by the Board
for election
 
or re-election as
 
app
 
ropriate.
 
Further information
 
in this regard will be set
out in the Notice
 
of Meeting which will be
published
 
in due course.
 
In deciding
 
whether to recommend Jes Staley
for re-election,
 
the Board has carried out its
usual formal
 
and rigorous performance
assessment, which it does in respect of the
effectiveness of each of the Directors.
 
As part
of its determination
 
in respect of Mr. Staley,
the Board has had regard to media
 
reports
 
in
the past 6 months that
 
have highlighted
historical
 
links
 
between
 
Mr. Staley
 
and Jeffrey
Epstein.
 
 
As has been widely
 
reported, earlier in his
career Mr. Staley
 
developed a professional
relationship
 
with Mr. Epstein.
 
In the summer
of 2019, in
 
light of the renewed media interest
in the relationship,
 
Mr. Staley volunteered an
 
d
gave to certain
 
executives, and the Chairman,
an explanation
 
of his relationship with Mr.
Epstein.
 
Mr. Staley
 
also confirmed to the
Board that he
 
has had no contact whatsoever
with Mr. Epstein
 
at any time
 
since taking up his
role as Barclays Group CEO in
 
December
2015.
 
The relationship
 
between Mr. Staley
 
and Mr.
Epstein was the subject
 
of an enquiry from the
Financial
 
Conduct Authority (FCA),
 
to which
the Company
 
responded.
 
The FCA and the
Prudential
 
Regulation Authority subsequently
commenced
 
an investigation, which is
ongoing,
 
into Mr. Staley's characterisation to
the Company
 
of his relationship with Mr.
Epstein and
 
the subsequent description of that
relationship
 
in the Company’s response
 
to the
FCA.
 
 
Based on a review, conducted
 
with the support
of external
 
counsel, of the
 
information
available
 
to us
 
and representations made
 
by
Mr. Staley,
 
the Board (the Executive Directors
having
 
been recused) believes that Mr. Staley
has been sufficiently
 
transparent with the
Company
 
as
 
regards the nature
 
and extent
 
of
his relationship
 
with Mr. Epstein.
 
Accordingly,
Mr. Staley
 
retains the full confidence of the
Board, and
 
is being unanimously
recommended
 
for re-election at the 2020
AGM.
 
The Board
 
will continue to cooperate fully with
the regulatory
 
investigation, and will provide a
further update
 
as
 
and when it is appropriate
 
to
do so.
 
 
25
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
DIRECTORS’
 
REPORT,
 
BOARD RISK
 
COMMITTEE
 
REPORT
 
Effective
 
risk management:
designed
 
to identify, assess
and control
 
our risks
 
As a British universal bank, Barclays is subject to a variety of financial,
operational, legal and conduct risks.
 
 
Dear Fellow
 
Shareholders
During 2019,
 
the Committee maintained its
focus on the potential
 
impact of macro-
economic
 
developments and market volatility
on the risk profile
 
of the Group. These issues
remain
 
challenging and we continue to work
with management
 
to position the Group
conservatively
 
in response to a heightened risk
environment.
 
UK risks
were the subject of particular
attention
 
due to the economic uncertainty
arising from the
 
planned withdrawal from the
EU. The October
 
2019 withdrawal agreement
and the subsequent
 
General Election
 
result
have reduced
 
political uncertainty significantly
but the future
 
trading relationship with
 
the EU
is yet to be agreed.
 
Given the
 
tight timetable
and the potential
 
economic consequences this
remains a significant
 
area of risk.
 
The
Committee
 
has also been active in ensuring
the operational
 
resilience of the Group should
the UK leave the
 
EU without reaching an
agreement
 
on the future trading relationship.
 
We have continued
 
to encourage management
to manage
 
consumer and corporate credit
exposure in the UK in a cautious
 
man
 
ner and
this has helped
 
the Group to limit losses
 
and
avoid
 
a number of the
 
high profile corporate
failures seen during
 
2019.
 
Other key risks with potential
 
for wider
contagion
 
include those related to the
US economy
 
where underlying economic
performance
 
remains
 
robust but growth
has slowed and consumer and
 
corporate
indebtedness is high and
 
growing. Political and
trade tensions, notably
 
with China and Europe,
have increased
 
and present a threat to growth
globally.
 
 
Despite the strength of the US economy
 
in
2019, the
 
Committee remains focused on the
credit quality
 
of our consumer and corporate
lending
 
portfolios. In particular, the US credit
cards strategy was reviewed and
 
the
Committee
 
supported a continued steady
transition
 
to a higher quality book and l
 
ower-
risk new business mix.
The Committee
 
has also considered the
ageing
 
of the credit cycle
 
and rising
recessionary risks in our major
 
markets. In the
second half of 2019,
 
central banks
 
undertook
synchronised rate cuts and other
 
monetary
easing measures, with the Federal
 
Reserve
Bank reversing its 2018 rate increases in the
face of moderate
 
inflationary pressure
 
and a
weaker growth outlook.
 
This has supported
asset markets but increased
 
the margin
pressures on banks from very low or negative
interest rate
 
s,
 
whilst also presenting
operational
 
challenges. Policy tools available
to central banks to deal with
 
further economic
weakness are limited
 
and with abundant
liquidity
 
influencing risk-pricing in financial
markets, the potential
 
exists
 
for extreme
market moves to occur, not
 
least in response
to policy
 
errors.
 
These risks are actively
managed
 
and the Committee maintains
regular oversight
 
of the overall risk
 
profile
 
of
the Group’s balance
 
sheet and actions taken.
The ongoing
 
focus
 
on book quality is
evidence
 
d
 
by another positive impairment
performance
 
this
 
year.
 
The Committee
 
again reviewed in detail with
management
 
the
Group’s leveraged finance
business
 
in light
 
of continued concerns
regarding
 
reduced market liquidity, particularly
for larger transactions, lower quality
 
issues
and more aggressive structures. The
 
balance
of risk and reward in this market continues to
be acceptable
 
and underwriting losses
 
in the
year were modest. However management
 
was
encouraged
 
to remain particularly vigilant to
these trends.
 
Barclays’ strategy includes some expansion
 
of
structured credit exposures and an enhanced
control
 
framework has
 
been established
 
to
control
 
exposures and to ensure they are in
line
 
with strategy in both scale and type.
 
The Committee
 
also took on responsibility for
Conduct risk
 
following
 
the dissolution of the
Board Reputation
 
Committee in September.
The role
 
of the Committee is to oversee the
management
 
of regulatory risk
 
and challenge
the business to continue
 
to deliver fair
outcomes for customers. We have welcomed
the opportunity
 
to achieve further alignment in
the consideration
 
of both financial and non-
financial
 
risks.
 
In addition
 
to focusing on the
Conduct risk profile
 
of our core businesses,
the Committee
 
has identi
 
fied a number
 
of key
conduct
 
themes requiring active management.
Finally,
 
the Committee reviewed the significant
enhancements
 
the Group has made in its
approach
 
to the management of the
risks
 
of
climate
 
change
. Both physical and transition
risks across al
 
l
 
portfolios were considered in
the context
 
of a severe but plausible climate
stress. This analysis will
 
support the Group’s
response to the forthcoming
 
Bank of England
(BoE) industry-wide stress test. This progress
was welcomed
 
whilst acknowledging the need
for risk management
 
practices generally to
evolve
 
further across the whole industry in
respect of climate
 
change risk.
 
Operational risk
During the year,
 
the Committee
 
continued
to monitor
 
and challenge the progress
 
being
made by management
 
in the identification,
assessment and management
 
of operational
risk. A key part of this was the further delivery
and embedding
 
of work
 
commenced
 
in prior
years. Two complementary
 
risk
 
management
tools used by management
 
are the Risk
 
and
Control Self
 
-Assessments
 
(RCSAs) and
Structured Scenario
 
Assessments
 
(SSAs).
 
The RCSAs give
 
“day-to-day” coverage
 
of the
risk and control
 
environment
 
of the Group.
They are built
 
on a foundation of the actual
processes the Group employs
 
and the risks
it faces from its activities. This
 
approach
enables management
 
to better identify and
manage
 
operational risks
 
going
 
forward and
also to review in detail
 
risk
 
events that
 
have
occurred in order to identify
 
root causes.
 
 
26
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
The Committee
 
continued to see progress
on SSAs and a number
 
of specific scenarios
were reviewed during
 
the course of the
year covering
 
both Conduct (e.g. mis-selling of
products) and Non-Conduct
 
(e.g. customer
data compromise,
 
supplier financial failure)
scenarios. The SSAs are used to evaluate
operational
 
risk
 
arising from more
 
extreme but
plausible
 
situations and so
 
complement
 
the
RCSA approach,
 
in combination they enable
the Committee
 
to oversee the risk
 
the Group
faces at both ends of the risk likelihood
spectrum. The
 
SSAs are also an important
input
 
to our Operational
 
risk
 
stress testing and
capital
 
frameworks.
 
Risk appetite and risk models
One of the most important
 
roles
 
of the
Committee
 
is to recommend to the Board an
appropriate
 
risk
 
appetite
 
for the Group
. This
represents the amount
 
of risk
 
the Group is
able
 
to take to earn an appropriate return
whilst meeting
 
minimum internal and
regulat
 
ory capital requirements
 
in a severe but
plausible
 
stress
 
environment.
 
The Committee
analyses Barclays performance
 
in both its
internally
 
-generated stress
 
tests and those run
externally
 
by such bodies
 
as
 
the Bank of
England,
 
the European Banking Authority and
the Federal
 
Reserve Board, and following such
analysis, will
 
recommend adjustments to the
Group’s overall
 
risk
 
profile.
 
For our
internal
 
stress
 
test
, the Committee
received
 
a detailed briefing
 
on the process
being
 
applied and was satisfied that the
internally
 
-generated scenario was
appropriately
 
calibrated, and also stressed
the particular
 
vulnerabilities of the Bank. They
were further satisfied that the
 
Group would
meet internal
 
and regulatory requirements for
capital
 
and liquidity in such a scenario.
The Committee
 
continued to oversee the
improvement
 
of model risk
 
management
 
in the
Group and the
 
ongoing validation of our
models,
 
with specific
 
progress
 
and
methodology
 
enhancements in the model
outputs supporting
 
our stress
 
tests, including
the Interna
 
l
 
Capital Adequacy Assessment
Process (ICAAP) and Internal
 
Liquidity
Adequacy
 
Assessment
 
Process (ILAAP)
. Our
models are the core foundation
 
upon which
 
the
majority
 
of our internal assessment
 
processes
run. The Committee
 
is pleased to report that
progress has continued
 
during 2019 to embed
the Model
 
risk
 
management
 
framework as
evidenced
 
by an increasingly stable model
inventory
 
and further improvements in
documentation
 
and control. However, models
remain
 
a key
 
risk area for the Group,
 
and the
Committee
 
is closely monitoring the
development
 
of the Group’s approach.
 
Risk function
The Committee
 
is responsible for ensuring the
independence
 
and effectiveness
 
of the Risk
function
 
whose primary role is the oversight
and challenge
 
of risk-taking
 
as the second line
of defence.
 
It accomplishes this by
establishing
 
the policies, limits, rules and
constraints under which
 
first line activities shall
be performed,
 
consistent with the Group’s risk
appetite
 
and through monitoring the
performance
 
of the first line of defence
 
against
these policies,
 
limits and constraints. The
Committee’s responsibilities
 
include designing
a consistent classification
 
of the risks
 
faced by
the Group in
 
order to organise their
management
 
and reporting; designing and
operating
 
the process
 
of setting risk appetite
and material
 
limits for the Group as
 
a whole
and its main
 
entities; setting or approving
strategies for approvals
 
of transactions, and
sanctioning
 
large individual agreements; and
establishing
 
key
 
controls requirements to
which customer
 
-facing areas of Barclays must
adhere in
 
the conduct of their businesses.
The Committee
 
reviewed the Risk
 
function’s
own assessment of its capability
 
in late 2019
which showed the function
 
continues to meet
regulatory
 
expectations in providing effective
and
 
independent
 
oversight with strong
stewardship and technical
 
competency.
Progress continued
 
in 2019 to ensure systems
and strategic architecture
 
are fit for purpose
with further enhancement
 
on technology
capabilities due
 
from the delivery of further
strategic infrastructure
 
in 2020.
 
Compliance function
The Compliance
 
function is responsible for the
overall
 
management and oversight of Conduct
and Reputation
 
risk
 
management
 
practices as
the second line
 
of defence. Compliance
participates in
 
the prevention, detection and
management
 
of breaches of applicable laws,
rules, regulations and
 
relevant procedures and
has a key role in
 
helping Barclays achieve the
right conduct
 
outcomes. The Committee
supports the Compliance
 
function to be
independent
 
from operational functions and
have sufficient
 
authority, stature, resources
and access to the management
 
body.
 
The Committee
 
monitored
 
the delivery of the
Compliance
 
function’s Annual Plan for 2019
and approved
 
the Compliance function’s
Annual
 
Plan for 2020.
 
Committee
 
effectiveness
The 2019
 
Committee effectiveness review
was conducted
 
in line with the Code. This
internal
 
review involved completion of a
tailored
 
questionnaire by Committee members,
senior management
 
and other stakeholders,
including
 
our auditors, building on the prior
year’s externally
 
-facilitated review. The review
is an important
 
part of the way
 
Barclays
monitors and
 
improves Committee
performance
 
and effectiveness, maximising
strengths and highlighting
 
areas for further
development.
 
The results of the review were positive
 
and
indicated
 
that the Committee is operating
effectively;
 
and that it provides an effective
 
and
broad level
 
of challenge and oversight of the
areas within
 
its remit. During the year, the
Committee
 
took on
oversight of Conduct and
Compliance
 
matters
, following re-allocation of
the responsibilities from
 
the Reputation
Committee.
 
 
fy2019arbplcp36i0.jpg fy2019arbplcp36i1.jpg
 
27
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
DIRECTORS’
 
REPORT,
 
BOARD RISK
 
COMMITTEE
 
REPORT
 
Effective
 
risk management:
designed
 
to identify, assess
and control
 
our risks
 
Following
 
the consolidation of the
membership
 
of the Committee with the
BBPLC risk committee,
 
coverage of
BBPLC matters within
 
concurrent
meetings
 
was
 
considered
 
appropriate,
noting
 
that it will benefit from further
embedment.
 
Looking ahead
In 2020, the
 
Committee will
 
continue to
focus on the impact
 
of the external
environment
 
on the Group’s risk
 
profile,
particularly
 
as
 
the negotiations on the
future trade relationship
 
with the EU
progress and the
 
broader geopolitical
context evolves
 
in the run up to the US
presidential
 
election.
 
Tim Breedon
Chair, Board
 
Risk Committee
 
 
12
 
February 2020
Committee
 
meetings
During 2019,
 
the Committee met nine times
and the chart opposite
 
shows
 
how it allocated
its time.
 
Two of the meetings were held at
Barclays’ New York offices.
 
Attendance
 
by
members at Committee
 
meetings
 
is shown on
this page. Committee
 
meetings were attended
by representatives from management,
including
 
the Group Chief Executive Officer,
Group Finance
 
Director, Group Chief Internal
Auditor,
 
Group Chief Risk
 
Officer,
 
Group
Treasurer, Group
 
Chief Compliance
 
Officer
and Group General
 
Counsel, as
 
well as
representatives from the
 
businesses
 
and
other representatives
 
from the Risk
 
function.
The lead
 
audit engagement partner of KPMG,
Michelle
 
Hinchliffe, also attended Committee
meetings.
 
The Committee held a number of
separate private
 
sessions
 
with the Group
Chief Risk Officer and
 
Group Chief
Compliance
 
Officer, which were not attended
by management.
 
Committee
 
role and
responsibilities
The Committee
 
is responsible for:
 
■ Recommending
 
to the Board the Group’s
risk appetite
 
for financial, operational and
legal
 
risk;
 
■ Monitoring
 
financial, operational and legal
risk appetite,
 
including setting limits for
individual
 
types
 
of risk, e.g. credit, market
and funding
 
risk;
 
■ Mon
 
itoring the Group’s financial,
operational
 
and legal risk
 
profile;
■ Commissioning,
 
receiving and considering
reports on key financial
 
operational and
legal
 
risk
 
issues;
 
■ Providing
 
input from a financial and
operational
 
risk
 
perspective to the
Remuneration
 
Committee to assist
 
in its
deliberations
 
relating to incentive
packages; and
 
■ Oversight
 
of conduct and
 
compliance.
 
 
 
 
 
 
 
 
 
 
 
28
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
 
Primary activities
The Committee
 
has diligently discharged its responsibilities in 2019, reviewing Group exposures in the context of the current
 
and emerging risks
facing
 
Barclays. It has sought to promote a strong culture of disciplined
 
risk
 
management.
Area of focus
Matter addressed
Role of the Committee
Conclusion/action
 
taken
Risk appetite and
stress testing
 
i.e. the
 
level of
risk
 
the
Group
chooses to take
in
pursuit of its
business
objectives,
including
 
testing
whether the
Group’s
financial
position and
risk
profile
 
provide
sufficient
resilience to
withstand the
impact
of severe
economic
scenarios.
The risk context to
the MTP,
 
the
financial
 
parameters
and constraints and
mandate
 
and scale
limits
 
for specific
business risk
exposures; the
Group’s internal
stress testing
exercises, including
scenario selection
and financial
constraints, stress
testing themes
 
and
the results and
implications of
stress tests,
including
 
those run
by the BoE.
■ To
 
advise the Board
 
on the
appropriate
 
risk
 
appetite
 
and
tolerance
 
for the principal risks,
including
 
the proposed overall
Group risk appetite
 
and limits;
 
■ To
 
discuss and agree stress loss
and mandate
 
and scale limits, for
Credit risk, Market risk and
Treasury and Capital
 
risk;
 
■ To
 
consider and approve
 
internal
stress test themes and the
financial
 
constraints and
scenarios for stress testing risk
appetite
 
for the MTP;
■ To
 
evaluate
 
the results of the
BoE’s annual
 
cyclical stress
 
test
and the BoE’s Biennial
Exploratory
 
Scenario; and
 
■ To
 
consider the
 
Federal
 
Reserve
Board’s feedback
 
of the Barclays
US LLC’s Comprehensive
Capital
 
Analysis and Review
(CCAR) following
 
the submission
of the CCAR stress test results.
The Committee
 
reviewed and recommended the
proposed risk appetite
 
to the Board for approval. It
discussed and approved
 
the 2019 mandate and scale
limits
 
for the Group, which
 
included changes
 
to A-level
stress loss limits.
 
The Committee
 
reviewed proposed enhancements to
the Group’s stress testing processes and
 
models. It
also attended
 
a stress
 
test briefing
 
providing additional
background and
 
context to aid the review and approval
of various stress tests.
The Committee
 
reviewed and approved the scenarios
for, and the financial
 
results of, the MTP internal stress
test exercise, and on the
 
basis that the results
remained
 
within the Group’s
 
risk appetite
 
constraints,
subsequently
 
recommended
 
the MTP to the Board for
approval.
 
It gave particular attention to the
 
severity of
the internal
 
stress
 
test scenario, as well as the
application
 
of “perfect foresight” methodology through
the test.
 
The Committee
 
evaluated the results of the 2018
Annual
 
Cyclical Scenario, which included increased
focus on strategic manageme
 
nt actions,
 
and approved
the 2019
 
submission to the BoE. Similarly,
 
the
Committee
 
approved Barclays’ initial Biennial
Exploratory
 
Scenario submission to the BoE.
 
The Committee
 
received updates on the 2019 CCAR
submission, and reviewed
 
the feedback from the
Federal
 
Reserve Board following the
 
release of the
results.
 
 
 
 
 
 
 
 
29
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
DIRECTORS’
 
REPORT,
 
BOARD RISK
 
COMMITTEE
 
REPORT
 
Effective
 
risk management:
designed
 
to identify, assess
and control
 
our risks
 
Area of focus
Matter addressed
Role of the Committee
Conclusion/action
 
taken
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.
■ To
 
review, on a regular
 
basis,
capital
 
performance against plan,
tracking the capital
 
trajectory,
any challenges
 
and
opportunities,
 
and regulatory
policy
 
developments;
■ To
 
assess on a regular basis
liquidity
 
performance against
both internal
 
and regulatory
requirements; and
 
■ To
 
monitor capital
 
and funding
requirements.
The Committee
 
examined and supported the forecast
capital
 
and funding trajectory and the actions
 
identified
by management
 
to manage the Group’s capital
position,
 
taking into account the potential impact of
macroeconomic
 
factors.
The Committee
 
considered and approved the Group’s
capital
 
adequacy assessment,
 
together
 
with the
methodologies
 
and results of the reverse
 
stress test
for submission of the 2019 ICAAP,
 
as
 
well as
approving
 
the Group’s 2019 ILAAP. Committee
members also attended
 
an ICAAP and ILAAP briefing
to further support their review
 
and approval
 
of the
submissions. The
 
Committee evaluated regulatory
feedback on the ICAAP
 
and ILAAP
 
and oversaw
 
the
continued
 
improvement of the processes.
 
The Committee
 
reviewed and agreed with
management’s approach
 
to an out-of-cycle refresh of
the Group’s 2018 ICAAP following
 
an increase to PPI
provisioning.
 
The Committee
 
reviewed and scrutinised the Group
Recovery Plan,
 
which forms a part of the Group’s
capital
 
and liquidity risk
 
management
 
framework, and
confirmed
 
that it was
 
fit for purpose, ahead
 
of its
presentation
 
to the Board for approval.
 
The Committee
 
approved risk
 
appetite
 
constraints in
relation
 
to capital and funding which require capital
and liquidity
 
ratios to
 
remain
 
at a level where all
internal
 
and regulatory requirements, and all
obligations
 
as
 
they fall
 
due can be met under stress.
Political and
economic risk
 
i.e. the
 
impact on
the
Group’s risk
profile
 
of
political
and economic
developments and
macroeconomic
conditions.
The potential
 
impact
on the Group’s risk
profile
 
of geopolitical
developments,
 
as
well as continuing
 
to
monitor
 
the political
and economic
impact
 
of Brexit
scenarios.
■ To
 
review and discuss plans for
the impacts of Brexit
 
under
various withdrawal
 
scenarios;
 
■ To
 
consider trends in the UK and
US economies;
 
■ To
 
assess the transmission
effects of Chinese/US trade
tensions and monitor
 
the impacts
of slowing growth in
 
China;
 
and
 
■ To
 
review exposures to
emerging
 
markets
 
as a result of
volatility
 
in these markets
 
arising
from the impact
 
of global political
and economic
 
events.
The Committee
 
monitored the potential risk
 
impacts of
Brexit, giving
 
particular consideration to the impact risk
of an exit without
 
an agreement in place. It received
updates on, and
 
oversaw management’s preparations
for, Brexit from
 
a risk perspective, review
 
ing in
particular
 
any potential impact to the capital and
liquidity
 
positions.
The Committee
 
monitored the Group’s performance in
light
 
of a backdrop of uncertain global political and
economic
 
conditions, with particular focus on Barclays’
European
 
exposures.
 
Other key material
 
risk
 
themes discussed and
monitored
 
by the Committee included rising global
debt and
 
the response of Central Banks, the low rates
environment
 
and potential for weakness
 
in US
consumer credit.
 
The Committee
 
received updates on
 
the progress
 
of
the global
 
transition to alternative risk
 
free reference
rates including
 
on preparations by the LIBOR
Transition
 
Programme to manage and mitigate the
financial
 
and non-financial risks
 
associated with the
transition.
 
 
 
 
 
 
 
30
 
Barclays PLC
 
2019 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;
levels of UK
consumer
indebtedness; and
the performance
 
of
the UK and US
cards businesses,
including
 
levels of
impairment.
■ To
 
assess conditions in the UK
property market and monitor
signs of stress;
 
■ To
 
monitor how management
was tracking and
 
responding to
persistent rising levels of
consumer indebtedness,
particularly
 
unsecured credit in
both the UK and US;
■ To
 
review leveraged
 
finance
portfolios
 
in order to assess
these were within
 
risk
 
appetite
and manageable
 
limits;
 
and
 
■ To
 
review business development
activities in
 
the CIB.
The Committee
 
continued to iterate the need to ensure
appropriate
 
credit selection and discipline when
selecting
 
business, and the importance of consumer
profiling
 
to achieve improved risk
 
selection.
 
It
encouraged
 
management to consider the impact of all
associated risks.
 
The Committee
 
oversaw improvements to the control
environment
 
in the US cards
 
business, and received
updates on the impacts of US economic
 
conditions on
the portfolio.
The Committee
 
was
 
updated
 
on programmes initiated
to assist customers to meet their
 
contractual
 
credit
obligations
 
in the UK including the
 
review of practices
in relation
 
to customer affordability and persistent debt.
The Committee
 
also reviewed the procedures
implemented
 
to manage corporate exposure to UK
sectors primarily
 
driven by consumer spending.
 
The Committee
 
received an update on the leveraged
finance
 
business,
 
which continues to be one
 
of the
largest businesses within
 
the Investment Bank, noting
that portfolios
 
were within
 
appetite and that
management
 
had a strong focus on regulatory
compliance
 
in this
 
area. The
 
Committee also received
updates on the structured finance
 
business, noting the
growth in this activity
 
and the fact that exposures
remained
 
within appetite.
Operational
 
risk
i.e. costs arising
from
human
factors,
inadequate
processes
and
systems or
external
 
events.
The Group’s
operational
 
risk
capital
 
requirements
and any material
changes to the
Group’s operational
risk profile
 
and
performance
 
of
specific operational
risks against agreed
risk appetite.
■ To
 
track operational
 
risk
 
key
indicators;
 
■ To
 
consider specific
 
areas of
operational
 
risks,
 
including
 
fraud,
conduct
 
risk, cyber
 
risk,
execution
 
risk,
 
technology
 
and
data, including
 
the controls that
had been
 
put in place for
managing
 
and avoiding such
risks; and
 
■ To
 
review Barclays’ approach
to scenario analyses as a risk
management
 
tool and assess
a range of SSAs which had
 
been
created to support assessments
and management
 
of tail risk
within
 
the business,
 
stress
testing and
 
risk
 
tolerance.
The Committee
 
continued to focus its
 
attention
 
on the
financial
 
and capital impacts of
 
operational risk.
 
The Committee
 
approved and recommended the 2019
Operational
 
Risk
 
Tolerance
 
Statement to the Board,
which included
 
financial loss
 
appetites for fraud and
transaction
 
operations for the first
 
time.
 
The Committee
 
used SSAs to
 
evaluate
 
operational
risks that might
 
arise in extreme but plausible
scenarios. They heard
 
updates on SSAs, including,
those in relation
 
to unauthorised trading and supplier
risk, and requested
 
that SSAs continue
 
to be
presented in
 
2020, specifically those in
 
relation to data
privacy and misuse.
 
 
 
 
 
 
 
 
31
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
DIRECTORS’
 
REPORT:
 
BOARD
 
RISK COMMITTEE
 
REPORT
Effective
 
risk management:
designed
 
to identify, assess
and control
 
our risks
 
Area of focus
Matter addressed
Role of the Committee
Conclusion/action
 
taken
Model risk
 
i.e. the
 
risk
 
of the
potential
 
adverse
consequences
from
financial
assessments
or
decisions based
on
incorrect or
misused
model
outputs and
reports.
Model
 
risk
governance.
■ To
 
evaluate
 
the appropriateness
of the Model
 
risk
 
management
framework, and monitor
 
progress
on the implementation
 
of an
enhanced
 
modelling framework,
including
 
receiving updates on
findings in
 
relation
 
to specific
modelling
 
processes.
The Committee
 
reviewed and approved the Model
Risk Tolerance
 
Criteria for 2019, which included CCAR
models at the
 
Committee’s request. The Committee
maintained
 
oversight of Model risk
 
and in particular
monitored
 
planned improvements to Barclays’ Model
risk management
 
framework
 
and ongoing upgrade
plans. The
 
Committee monitored progress to ensure
that the scope of Model
 
risk
 
management
implementation
 
was
 
expanded
 
to bring into
governance
 
non
 
-modelled methods
 
used in a number
of large model
 
frameworks.
 
The Committee
 
also maintained oversight of the
models used in the
 
2019 CCAR, ICAAP and ILAAP
submissions, and related
 
stress
 
test processes to
ensure they were materially
 
brought into governance
by management.
 
The Committee recognised the
added
 
value that stronger model gove
 
rnance
 
had on
the quality
 
of these
 
submissions.
 
The Committee
 
sought, and were provided with,
assurance from the Independent
 
Validation Unit of the
validation
 
of models in relation to specific processes,
including
 
ICAAP and ILAAP.
Risk framework
and
 
governance
The frameworks,
policies and
 
tools in
place
 
to support
effective
 
risk
management
 
and
oversight.
■ To
 
track the progress of
significant
 
risk
 
management
projects, including
 
progress
 
on
achieving
 
compliance with the
Basel Committee
 
for Banking
Supervision
 
(BCBS239) risk
 
data
aggregation
 
principles and the
RCSA process across the
Group;
■ To
 
assess risk management
matters raised by Barclays’
regulators and
 
the actions
being
 
taken by management
to respond; and
 
■ To
 
review the design
 
of the
ERMF.
The Committee
 
monitored the delivery of an action
plan
 
created by management
 
to review areas
 
identified
for potential
 
improvement identified by the
independent
 
assessment
 
of the design and
effectiveness of the Risk function
 
completed in 2018.
 
The annual
 
update to the ERMF was
 
recommended
 
to
the Board by the Committee.
 
The Committee
discussed and approved
 
an annual refresh of the
Principal
 
Risk
 
Frameworks.
 
The Committee
 
reviewed the results of the 2018
RCSAs across the Group and
 
recognised that its
output
 
was
 
extremely
 
useful to inform internal
processes, but also to facilitate
 
helpful dialogue with
the regulator.
 
The Committee
 
monitored management’s progress
 
in
achieving
 
compliance with all aspects of BCBS239,
and received
 
updates on the level of implementation
throughout
 
the year recognising the progress
 
made
towards achieving
 
full compliance by the end of 2020.
 
In relation
 
to climate change, the Committee received
an update
 
on the associated financial and operational
risks and endorsed management’s
 
app
 
roach to the
management
 
of those risks,
 
which included
 
the
establishment
 
of a Climate Change Financial Risk
 
and
Operational
 
Risk
 
Policy
 
and the inclusion of climate
change
 
in the ERMF and
 
principal risk
 
frameworks.
Remuneration
The scope of any
risk adjustments to
be taken into
account
 
by the
Board
Remuneration
Committee
 
when
making
remuneration
decisions for 2019.
■ To
 
debate
 
the Risk
 
function’s
view of performance,
 
making
a recommendation
 
to the
Remuneration
 
Committee on the
financial
 
and operational risk
factors to be taken into
account
 
in remuneration
decisions for 2019.
The Committee
 
discussed the report of the Group
Chief Risk Officer and
 
considered,
 
and reported to the
Remuneration
 
Committee on, the proposal put forward
in relatio
 
n
 
to the impact of relevant risk
 
factors in
determining
 
2019 remuneration.
 
 
 
 
32
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
 
Area of focus
Matter addressed
Role of the Committee
Conclusion/action
 
taken
Conduct Risk*
 
i.e. the
 
risk
 
of
detriment
 
from
the
inappropriate
supply of
financial
 
services.
Conduct robust
reviews of any
current and
emerging
 
risks
arising from the
inappropriate
provision
 
of financial
services, including
instances of wilful
negligent
misconduct.
■ To
 
receive updates from
management
 
on Conduct risk
and consider performance
against key Conduct risk
indicators, and
 
the status of
initiatives in
 
place to address
those risks to further strengthen
the culture
 
of the business;
 
■ To
 
review the effectiveness of
the Conduct
 
risk
 
framework and
approve any
 
amendments to it;
and
 
■ Reviewed
 
the Compliance
function’s annual
 
compliance
plan.
The Committee
 
accepted oversight of Conduct risk
following
 
the disbanding of the Reputation Committee
in September
 
2019. Since then the Committee has
received
 
a deep dive on Conduct risk
 
which provided a
detailed
 
overview of recent developments made in the
area as well as an update
 
on the current Conduct risk
environment,
 
and proposed areas of focus
 
for the
future.
 
The Committee
 
approved the revised Conduct risk
management
 
framework
 
which provided
 
greater clarity
on roles and responsibilities in
 
relation
 
to Conduct risk
compared
 
to previous versions.
 
The Committee
 
also
approved
 
the annual compliance
 
plan which contained
key initiatives which
 
would be
 
implemented in 2020.
*
 
The Risk Committee remit extended to
 
include the oversight
 
of Conduct risk
 
and Compliance
 
on 25 September
 
2019, following
 
the disbanding
 
of the Reputation
Committee.
 
 
33
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
DIRECTORS’
 
REPORT
 
How
 
we comply
 
 
Board leadership and company
purpose
 
Role
 
of the Board
As highlighted
 
earlier in this
 
report,
our governance
 
is structured to
 
deliver
 
an
effective
 
and entrepreneurial board which:
 
 
■ Is
 
effective
 
in providing challenge, advice
and support to management;
 
■ Provides
 
checks and balances and
encourages constructive
 
challenge;
 
■ Drives informed,
 
collaborative and
accountable
 
decision-making; and
■ Creates
 
long
 
-term sustainable value for our
shareholders, having
 
regard to our other
stakeholders.
 
Culture
 
The Barclays Way
sets the framework for
achieving
 
a dynamic and positive culture.
The Board
 
supports
The Barclays Way
 
and the
Barclays Purpose and Values.
 
It promotes
personal accountabili
 
ty and leadership and
monitors our culture
 
to satisfy itself as
 
to the
alignment
 
of Barclays’ culture to its purpose,
values and strategy.
 
See page
 
91
 
for more
details.
 
Our “whistleblowing
 
policy” enables employees
to raise any matters of concern anonymously
and is embedded
 
into our business.
 
For more
detail
 
please refer to page 16
 
of the Audit
Committee
 
Report.
 
Relations with
 
Shareholders
and
 
Stakeholders
The Board
 
recognises the importance of
listening
 
to, and understanding the views
 
of,
our shareholders and stakeholders in order
to inform
 
the Board’s decision
 
-making.
Our comprehensive
 
Investor Relations
engagement
 
helps
 
us
 
to understand
investor views about
 
Barclays, which are
communicated
 
regularly to the Board,
and our Chairman
 
engages with shareholders
on governance
 
and related matters.
Our shareholder communication
 
guidelines
are available
 
on our website at
home.barclays/investorrelations
. Our
approach
 
to stakeholde
 
r
 
engagement is
described on pages 14 to 17 in
 
the Strategic
Report available
 
at
home.barclays/annualreport
.
Institutional investors
 
Our engagement
 
with institutional investors
increased throughout
 
the year as compared
to prior years.
 
In 2019, the
 
Directors, in conjunction with the
senior executive
 
team and Investor Relations
colleagues,
 
participated in investor meetings,
seminars and conferences across many
locations, reflecting
 
the diverse
 
nature of
our equity
 
and debt
 
institutional ownership. We
held
 
conference calls/webcasts for our
quarterly
 
results briefings and an in
 
-person
presentation
 
of our 2018 full year results for
both our equity
 
and fixed income investors.
 
During 2019,
 
discussions
 
with investors
included,
 
but were not limi
 
ted to:
 
 
■ Introducing
 
our new Group Chairman, Nigel
Higgins;
 
■ Addressing
 
shareholder
 
queries relating to
the requisitioned
 
resolution at the AGM to
appoint
 
Mr. Edward Bramson as
 
a Director
of the Company;
 
■ The
 
continued digitisation of Barclays
and the value
 
being created by BX in
improving
 
the efficiency of our cost
 
base;
■ Topics
 
including
 
risk
 
management
 
and
steps taken to mitigate
 
the potential impact
from Brexit, as well as ESG factors, our CIB
strategy, and
 
valuation
 
and capital levels;
and
 
■ Corporate
 
governance
 
policy and practice.
 
Private
 
shareholders
 
During 2019,
 
we continued to communicate
with our private
 
shareholders through our
shareholder
 
mailings and via the information
available
 
on our website and through our AGM.
Shareholders can also choose to sign up to
Shareview
 
so
 
that they receive
 
information
about Barclays PLC and
 
their shareholding
directly
 
by email. We continue to endeavour
to trace shareholders who did not
 
take up their
share entitlement
 
following the Rights
 
Issue in
September
 
2013, and offer a Share Dealing
Service aimed
 
at shareholders with relatively
small shareholdings for whom it
 
might
otherwise be uneconomi
 
cal to deal in Barclays
shares.
 
 
 
34
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Our
 
AGM
 
The Board
 
and the senior executive team
consider our AGM as a key date for
shareholder
 
engagement, particularly with
 
our
private shareholders. A number
 
of Directors,
including
 
the Chairman,
 
are available for
informal
 
discussion
 
before or after the meeting.
 
All of the
 
resolutions proposed by the Board at
the 2019
 
AGM were considered
 
on a poll and
were passed with votes ‘For’ ranging
 
from
70.79%
 
to 99.87%
 
of the total votes cast.
Resolution
 
24 of the AGM was a requisitioned
resolution
 
submitted by Sherborne Investors
Management
 
LP to appoint Mr. Edward
Bramson as a Director of the Company
 
and the
Board recommended
 
shareholders to vote
against it.
 
The resolution was considered on a
poll
 
and was
 
not passed, with votes ‘Against’
being
 
87.21% of the total votes cast.
 
At the 2019 AGM,
 
the vote on the 2018
Directors’ Remuneration
 
Report (Resolution 2)
was passed with 70.79
 
%
 
of votes cast
 
in
favour. For further information
 
on Barclays’
response to the significant
 
vote against the
2018 Directors’ Remuneration
 
Report, please
see page 80
 
.
 
The Board
 
has decided to hold the 2020 AGM
in Glasgow and
 
thereafter expects to alternate
AGM venues between
 
London and a venue
other than
 
London where we have a significant
business or customer presence. The
 
2020
AGM will
 
be held on 7 May 2020 at 11:00am
 
at
the Scottish Events Campus (SEC) in
Glasgow, Scotland.
 
Stakeholder engagement
 
The Board
 
continues to seek
 
to understand
all stakeholders’ views, and the impact
 
of
 
our
behaviour
 
and business
 
on customers and
clients, colleagues,
 
suppliers, communities and
society more broadly.
 
Accordingly, the Board
monitors key indicators across areas such as
culture,
 
citizenship, conduct,
 
and customer and
client
 
satisfaction on an
 
ongoing basis. In
2019, we built
 
on conversations
 
started at the
AGM to engage
 
in a continuing dialogue with
NGOs and other
 
interest groups, to improve
our understanding
 
of emerging and existing
environmental
 
and societal topics. We
 
will
publish
 
the Barclays ESG Report in March
2020, which
 
will be made available on our
website at
home.barclays/annualreport
.
 
Throughout
 
2019, we have engaged with these
stakeholders through participation
 
in forums
and roundtables
 
and joined industry, sector
and topic
 
debates and this will continue in
2020.
 
Colleague
 
engagement
 
The Group
 
has a long-standing commitment to
the importance
 
and value of colleague
engagement.
 
Our colleagues drive our
success. You
 
can read more about
 
our
commitment
 
to colleagues and our workforce
engagement
 
in the Our People and culture
section on page
 
s
 
83 to 86.
 
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,
and this ensures that
 
the influence
 
of third
parties does not compromise
 
the independent
judgement
 
of the Board. Directors
 
are required
to declare
 
any potential or actual
 
conflicts
 
of
interest that could
 
interfere with their ability to
act in the best interests of the Group.
 
The
Company
 
Secretary maintains a conflicts
register, which
 
is a record of actual and
potential
 
conflicts, together with any Board
authorisation
 
of the conflict. The authorisations
are for an indefinite
 
period but are reviewed
annually
 
by the Nominations Committee, which
also considers the effectiveness of the process
for authori
 
sing Directors’ conflicts of interest.
The Board
 
retains the power to vary or
terminate
 
these authorisations at any time.
 
Division of
 
Responsibilities
 
 
Roles on
 
the Board
Executive
 
and Non
 
-Executive Directors
share the same duties. However,
 
in line with
the principles
 
of the Code, a clear division
of responsibilities
 
has been established.
The Chairman
 
is responsible for:
 
 
■ Leading
 
the Board and its
 
overall
effectiveness;
 
■ Demonstrating
 
objective judgement;
 
■ Promoting
 
a culture of openness
 
and
constructive challenge
 
and debate between
all
 
Directors;
 
■ Facilitating
 
constructive board relations
and the effective
 
contribution of all Non-
Executive
 
Directors; and
 
■ Ensurin
 
g
 
Directors receive accurate,
clear and timely
 
information.
Responsibility
 
for the day-to-day management
of the Group is delegated
 
to the Group Chief
Executive
 
Officer who is supported in this role
by the ExCo. Further information
 
on the
membership
 
of the ExCo can be found on page
6.
 
As a Board we have set out our expectations of
each Director in
 
Barclays’
Charter of
Expectations
. This includes
 
role profiles and
the behaviours and
 
competencies required for
each role on the
 
Board, namely the Chairman,
Deputy Chairman
 
(to the extent one is
required),
 
SID, Non-Executive Directors,
Executive
 
Directors and Committee Chairs.
Pursuant to the
Charter of Expectations
, Non-
Executive
 
Directors provide effective oversight
and scrutiny,
 
strategic guidance
 
and
constructive challenge,
 
whilst holding the
Executive
 
Directors to account against their
agreed performance
 
objectives. The Non-
Executive
 
Directors, led by the Nominations
Committee,
 
have primary responsibility
for the appointment
 
and removal of the
Executive
 
Directors.
 
The SID provides a sounding
 
board for the
Chairman,
 
acts as
 
an intermediary
 
for the other
Directors when necessary,
 
and is available
 
to
sharehold
 
ers
 
if they have concerns that
 
have
not been
 
addressed through the
 
normal
channels.
 
The
Charter of Expectations
is reviewed
annually
 
to ensure it remains relevant,
and accurately
 
reflects the requirements
of the Code and the
 
Regulations, and
industry best practice. A copy of the
Charter of Expectations
can be found at
home.barclays/corporategovernance
.
 
Information
 
provided
 
to the Board
It is the responsibility
 
of the Chairman,
as set out in our Charter of Expectations,
to ensure that Board agendas
 
are focused on
key strategy, risk,
 
performance
 
and other value
creation
 
issues,
 
and that members
 
of
the Board receive
 
timely and high-quality
information
 
to enable them to make sound
decisions and promote
 
the success
 
of the
Company.
 
Working in collaboration with
the Chairman,
 
the Company Secretary is
responsible for ensuring
 
good governance and
information
 
flow, to ensure an effective Board.
 
Throughout
 
the year, both the Executive
Directors and senior executives
 
keep the
Board informed
 
of key
 
business developments
through
 
regular updates. These are in
addition
 
to the presentations that the Board
and Board Committees receive
 
as
 
part of
their formal
 
meetings. Directors
 
are able to
seek independent
 
and professional advice
at Barclays’ expense, if required,
 
to enable
them to fulfil
 
their obligations as
 
members
of the Board.
 
 
 
 
 
 
 
 
 
 
 
fy2019arbplcp44i0.jpg
 
35
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
DIRECTORS’
 
REPORT
 
How
 
we comply
 
 
Attendance
 
Directors are expected
 
to attend every Board meeting. In 2019, attendance was very
 
strong both
 
at scheduled
 
and additional meetings
 
(including
those called
 
at short notice), reflected in the table below.
 
The Chairman also met privately with the Non-Executive Directors ahead of three Board
meetings.
 
If, owing to excep
 
tional 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. In addition, the SID met the other Non-Executive Directors individually,
 
without the Chairman, to
appraise the Chairman’s performance,
 
the details
 
of which are included
 
on page 24.
 
Board attendance
 
in 2019*
Independent/Executive
Scheduled
 
meetings
eligible
 
to
attend
Scheduled
meetings
attended
%
attendance
Additional
meetings
eligible
 
to
attend
Additional
meetings
attended
Chairman
 
 
 
 
 
 
Nigel
 
Higgins
on appointment
6
6
100%
0
0
Executive
 
Directors
 
 
 
 
 
 
Jes Staley
Executive
 
Director
7
7
100%
1
1
Tushar Morzaria
Executive
 
Director
7
7
100%
1
1
 
Non-executive
 
Directors
 
 
 
 
 
 
Mike Ashley
Independent
7
7
100%
1
1
Tim
 
Breedon
Independent
7
7
100%
1
1
Sir Ian Cheshire
Independent
7
7
100%
1
1
Mary Anne Citrino
Independent
7
7
100%
1
1
Dawn Fitzpatrick
Independent
3
3
100%
0
0
Mary Francis
Independent
7
7
100%
1
1
Crawford Gillies
Senior
 
Independent Director
7
7
100%
1
1
Matthew
 
Lester
Independent
7
7
100%
1
1
Diane Schueneman
Independent
7
7
100%
1
1
 
Former Chairman
 
 
 
 
 
 
John McFarlane
on appointment
2
3
100%
1
1
 
Former Directors
 
 
 
 
 
 
Sir Gerry Grimstone
Independent
1
1
100%
0
0
Reuben
 
Jeffery
Independent
2
2
100%
1
1
Dambisa Moyo
Independent
2
2
100%
1
1
Mike Turner
Independent
2
2
100%
1
1
 
Secretary
 
 
 
 
 
 
Stephen
 
Shapiro
 
7
7
100%
1
1
 
*
 
Mohamed A. El-Erian and
 
Brian Gilvary did not
 
join the Board until
 
2020.
 
 
As required by the Code, the Chairman
 
was independent
 
on appointment
 
Board Committee
 
Cross
 
membership
 
The table
 
below shows
 
the number
 
of cross-membership of our Non-Executive Directors across
 
our Board Committees
 
as
 
at 31 December 2019
 
.
 
 
 
 
 
 
 
 
 
 
 
 
 
36
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Composition of
 
the Board
 
In line
 
with the requirements of the Code,
a majority
 
of the Board is comprised of
independent
 
Non-Executive Directors. We
consider the independence
 
of our Non-
Executive
 
Directors annually,
 
having regard to
the independence
 
criteria set
 
out in the Code.
As part of this process, the Board keeps under
review the length
 
of tenure of all Directors,
which can affect
 
independence. The
independence
 
of Tim Breedon, Mike Ashley
and Crawford Gillies
 
– all of whom
 
have served
(or will
 
have by the time of the 2020 AGM) on
the Board for more than
 
six years –
 
was
subjected
 
to a more rigorous review as
recommended
 
by the Code. The Board
remains satisfied
 
that the lengths of their
tenure have
 
no impact on their respective
levels of independence
 
or the effectiveness of
their contributions.
 
During 2019, the previous
Chairman
 
and the following Non-Executive
Directors stepped down
 
from the Board.
 
None
of these Directors raised any concerns about
the operation
 
of the Board management:
 
 
■ John
 
McFarlane
 
■ Dambisa
 
Moyo
 
■ Reuben
 
Jeffery
 
■ Mike
 
Turner
 
■ Sir Gerry
 
Grimstone
 
■ Matthew
 
Lester
 
The Nominations
 
Committee Report describes
the renewal
 
of the Board in
 
2019, and steps
taken to further strengthen the
 
Board.
 
Time commitment
 
All potential
 
new Directors
 
are asked
to disclose their other
 
significant commitments.
The Nominations
 
Committee then takes this
into account
 
when considering a proposed
appointment
 
to ensure that Directors
 
can
discharge their
 
responsibilities to Barclays
effectively.
 
This means not only attending and
preparing
 
for formal Board and Committee
meetings,
 
but also making time to understand
the business, and to undertake
 
training. As
stated in our
Charter of Expectations
, the time
commitment
 
is agreed with each Non-
Executive
 
Director on an individual basis. In
addition,
 
all Directors
 
must seek approval
before accepting
 
any significant new
commitment.
 
Set out below is
 
the average
 
time
commitment
 
expected for the role of Non-
Executive
 
Directors and the other Non-
Executive
 
positions on the Board.
 
Following
 
careful review, the expected
 
time
commitments for Non-Executive
 
Directors,
 
and
for the Chairs of the Audit
 
and Risk
Committees, were increased
 
as
 
set out below.
Time commitment
 
 
Role
Expected
 
time
commitment (increased
during
 
the year)
Chairman
Equivalent
 
to up to 80% of
a full time
 
position.
Senior
Independent
Director
As required to fulfil
 
the
role.
Non-
Executive
Director
35–
 
40 days per year
(membership
 
of one Board
Committee
 
included,
increasing
 
to 50 days a
year if a member
 
of two
Board Committees).
 
This
expectation
 
was
 
increased
from 30 days and 40 days
respectively.
Committee
Chairs
At least 80 days per year
(including
 
Non-Executive
Director time
 
commitment)
for Risk and Audit
Committee
 
Chairs,
increased from 60
 
days,
and at least 60 days for
the Remuneration
Committee
 
Chair.
 
Where circumstances require
 
it, all Directors
are expected
 
to commit additional
 
time as
necessary to their work on the Board.
 
The
Company
 
Secretary maintains a record of each
Director’s commitments. For the year ended
 
31
December 2019
 
and as at the date of
publication,
 
the Board is satisfied that none of
the Directors is over-committed
 
and that each
of the Directors allocates
 
sufficient time
 
to his
or her role in order to discharge
 
their
responsibilities
 
effectively.
Composition, succession
and evaluation
 
The Company
 
has a Nominations
 
Committee,
the purpose and activities of which
 
are
contained
 
in the Nominations Committee
Report on page
 
s
 
20 to 24.
 
Board
 
appointments
 
All appointments
 
to the Board and
 
senior
management
 
are viewed through a diversity
lens and are based on merit
 
and objective
criteria,
 
which focus on the skills and
experience
 
required for the Board’s
effectiveness and the delivery
 
of the Group
strategy. Board appointments
 
are made
following
 
a rigorous and transparent process
facilitated
 
by the Nominations Committee, with
the aid of an external
 
search consultancy firm.
You
 
can read more about
 
the work
 
of the
Nominations
 
Committee on pages 20 to 24.
 
Diversity across the Group remains
 
a key area
of focus. For more detail
 
on our actions
 
to
incre
 
ase diversity please see pages 28 to 31 in
the Strategic
 
Report available at
home.barclays/annualreport
.
 
The Nominations
 
Committee regularly
reviews the composition
 
of the Board,
Board Committees
 
and the ExCo. It frequently
considers the skills required
 
for the Board, its
Committees and
 
the ExCo, identifying the core
competencies,
 
diversity and experience
required.
 
This, along with the annual
evaluation,
 
helps to refresh
 
the thinking
 
on
Board, Committee
 
and ExCo composition and
to determine
 
a timeline for proposed new
appointments.
 
For the Board, it is standard
practice
 
to appoint
 
any new Non-Executive
Director or Chairman
 
for an initial three
 
-year
term, subject to annual
 
re-election at the AGM,
which may be extended
 
for up to a further
three-year term. As such, Non-Executive
Directors typically
 
serve up to a
 
total
 
of six
years.
 
All Directors are subject to election
 
or re-
election
 
each year by shareholders at
the AGM.
 
Each year we carry out an effectiveness review
in order to evaluate
 
our performance as
 
a
Board, as well
 
as
 
the performance
 
of each
of the Board Committees
 
and individual
Directors. More information
 
on the 2019 Board
evaluation
 
and effectiveness
 
review can be
found on
 
page
 
s
 
23 to 24.
 
 
 
 
 
37
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
DIRECTORS’
 
REPORT
 
How
 
we comply
 
Our biographies containing
 
our relevant skills
and experience,
 
Board Committee
memberships
 
and other principal appointments
can be found
 
on pages 3 to 5.
 
Details of
changes to the Board
 
in 2019
 
and year to date
are disclosed on page
 
s
 
7 and 8.
 
The service contracts for the Executive
Directors and the letters of appointment
 
for the
Chairman
 
and Non
 
-Executive Directors
 
are
available
 
for inspection at our registered office
and at our AGM.
 
Induction
 
On appointment
 
to the Board, all Directors
receive a comprehensive
 
induction that is
tailored
 
to the new Director’s
 
individual
requirements. The
 
induction schedule is
designed
 
to provide the new Director with
an understanding
 
of how the Group works
 
and
the key issues that it faces. The
 
Company
Secretary consults the Chairman
 
when
designing
 
an induction schedule, giving
consideration
 
to the particular needs of the
new Director. When a Director is joining
 
a
Board Committee,
 
the schedule includes an
induction
 
to the operation of that committee.
 
Following
 
their appointment, Dawn Fitzpatrick,
Mohamed
 
A. El-Erian and Brian Gilvary are
receiving
 
such an induction. They have met or
will
 
meet with the Company
 
Secretary, the
current Non-Executive
 
Directors,
 
members of
the ExCo and certain
 
other senior executives,
as part of that process.
 
Training and
 
development
 
In order to continue
 
to contribute effectively to
Board and Board
 
Committee meetings,
Directors are regularly
 
provided with the
opportunity
 
to take part in ongoing training and
development
 
and can also request specific
training
 
as
 
required. In 2019, Directors
received
 
ongoing training i
 
n
 
relation to legal
and regulatory
 
developments in the form of
regular briefings
 
and the Board has enhanced
this proposition
 
with bi-annual training sessions
intended
 
to deepen and broaden the Board’s
understanding
 
in some of the more complex
and technical
 
areas of the business.
 
Each of
these training
 
events typically comprises
 
four
topics.
Audit, Risk and Internal
 
Control
 
Accountability
Internal
 
governance processes
 
have been
developed
 
to ensure the effective operation of
the individual
 
boards and board committees of
each of BPLC, BBUKPLC
 
and BBPLC
respectively,
 
in recognition of the fact that this
is key to the development
 
and execution of the
Group’s strategy. Generally,
 
there is one set of
rules for the Group. Group
 
-wide frameworks,
policies and
 
standards are required to be
adopted
 
throughout the Group unless
 
local
laws or regulations (or the ring
 
-fencing
obligations
 
applicable
 
to BBUKPLC) require
otherwise, or the ExCo decides otherwise
 
in a
particular
 
instance.
 
The Company
 
has an Audit Committee and a
Risk Committee.
 
The purposes and activities of
the Audit
 
and Risk
 
Committees are contained
within
 
their respective reports on pages 11 and
25
 
respectively.
 
Internal
 
and
 
external audit
 
functions
The Board
 
together with the Audit Committee
is responsible for ensuring
 
the independence
and effectiveness of the internal
 
and external
audit
 
functions. For
 
this reason, the Audit
Committee
 
members
 
met regularly
 
with the
Group Chief
 
Internal Auditor and external audit
partner
 
,
 
without
 
management present. The
appoi
 
ntment and removal of the Group Chief
Internal
 
Auditor is
 
a matter reserved to the
Audit
 
Committee and the appointment,
 
and
removal
 
,
 
of the external auditors, is a
 
matter
reserved to the Board.
 
Neither task is
delegated
 
to management. This is
 
explained
 
in
detail
 
on pages 11 to 17
 
of the Audit
Committee
 
report.
 
Company’s position
 
and
 
prospects
The Board,
 
together with the Audit Committee,
is responsible for ensuring
 
the integrity of
this Annual
 
Report and that the financial
statements as a whole present a fair,
 
balanced
and understandable
 
assessment
 
of the Group
and the Company’s
 
performance,
 
position and
prospects. This is explained
 
in detail on pages
11 to 17 of the Audit
 
Committee report.
Risk management
 
and
 
internal
control
The Directors are responsibl
 
e
 
for ensuring that
management
 
maintains an effective system
of risk management
 
and internal control and for
assessing its effectiveness. Such a system is
designed
 
to identify,
 
evaluate and manage,
rather than eliminate,
 
the risk
 
of failure
 
to
achieve
 
business objectives and can only
provide
 
reasonable and
 
not absolute
assurance against material
 
misstatement
or loss.
 
The Group
 
is committed to operating within
 
a
strong system of internal
 
control. Barclays has
an overarching
 
framework
 
that sets out the
approach
 
of the Group to internal governance,
The Barclays Guide
. This
 
establishes the
mechanisms,
 
principles and processes through
which management
 
implements the strategy
set by the Board.
 
Processes are in place
 
for identifying,
evaluating
 
and managing the Principal Risks
facing
 
the Group in accordance with
 
the ‘
Guidance
 
on Risk
 
Management,
 
Internal
Control and
 
Related Financial and Business
Reporting
 
published by the FRC. A key
component
 
of The Barclays Guide is the
ERMF. The
 
purpose of the ERMF is to identify
and set minimum
 
requirements in respect of
the main
 
risks
 
to the strategic
 
objectives of the
Group. There
 
are eight Principal Risks
 
under
the ERMF: Credit risk, Market risk, Treasury
and capital
 
risk,
 
Operational
 
risk,
 
Model
 
risk,
Reputation
 
risk,
 
Conduct risk and
 
Legal
 
risk.
The system of risk management
 
and internal
control is set out in the
 
risk
 
frameworks relating
to each of our eight
 
Principal Risks and the
Barclays Control Framework, which details
requirements for the delivery
 
of control
responsibilities.
 
Group-wide frameworks,
policies and
 
standards enable Barclays to meet
regulators’ expectations
 
relating to internal
control and
 
assurance.
 
 
 
 
38
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Effectiveness
 
of
 
internal controls
Key controls are assessed on a regular basis
for both design and
 
operating effectiveness.
Issues arising out
 
of these assessments,
where appropriate,
 
are reported to the Audit
Committee.
 
You
 
can read more about the work
of the Audit
 
Committee on pages 11 to 19
 
.
 
The Audit
 
Committee also reviews
 
annually
 
the
risk management
 
and internal control system,
which includes
 
the ERMF.
 
It has concluded
that, throughout
 
the year ended 31 December
2019 and
 
to date, the Group has operated a
sound system of internal
 
control that provides
reasonable
 
assurance of financial and
operational
 
controls
 
and compliance
 
with laws
and regulations. For more details on
 
that
evaluation
 
and its conclusions please see
pages 11 to 19
 
.
 
The review
 
of the effectiveness of the system
of risk management
 
and internal control is
achieved
 
through reviewing the effectiveness
of the frameworks, principles and
 
processes
contained
 
within The Barclays Guide, the
ERMF and the Barclays Control
 
Framework.
 
Regular
 
reports are made to the Risk
Committee
 
and the Board covering significant
risks, measurement
 
methodologies and
appropriate
 
risk
 
appetite
 
for the Group. The
Audit
 
Committee oversees the control
environment
 
(and remediation of related
issues), and assesses the adequacy
 
of credit
impairment.
 
Further
 
details of risk
 
management
procedures and potential
 
risk
 
factors are given
in the Risk review and risk management
sections on pages 87 to 170.
 
Controls over
 
financial reporting
 
A framework of disclosure controls and
procedures is in place
 
to support the approval
of the financial
 
statements of the Group.
Specific
 
governance committees are
responsible for examining
 
the financial reports
and disclosures to ensure that they
 
have been
subject to adequate
 
verification and comply
with applicable
 
standards
 
and legislation.
 
These committees
 
report their conclusions
to the Audit
 
Committee, which debates its
conclusions and
 
provides further challenge.
Finally,
 
the Board scrutinises
 
and appr
 
oves
results announcements and
 
the Annual Report,
and ensures that appropriate
 
disclosures
 
have
been made.
 
This
 
governance
 
process
 
ensures
that both
 
management and
 
the Board are given
sufficient
 
opportunity to debate and challenge
the financial
 
statements of the Group and other
significant
 
disclosures before they are made
public.
Management’s report
 
on internal
control over
 
financial reporting
 
Management
 
is responsible for establishing
and maintaining
 
adequate internal control over
financial
 
reporting under
 
the supervision of the
principal
 
executive and financial officers, to
provide
 
reasonable assurance regarding the
reliability
 
of financial reporting and the
preparation
 
of financial statements,
in accordance
 
with International Financial
Reporting
 
Standard
 
s
 
(IFRS). Internal control
over financial
 
reporting includes policies and
procedures that pertain
 
to the maintenance
of records that, in reasonable
 
detail:
 
■ Accurately
 
and fairly reflect transactions
and dispositions
 
of assets;
 
■ Provide
 
reasonable assurances that
transactions are recorded as necessary to
permit
 
preparation of financial statements in
accordance
 
with IFRS and that receipts and
expenditures are being
 
made only in
accordance
 
with authorisations of
management
 
and the respective Directors;
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
 
cond
 
itions, or
 
that
the degree
 
of compliance with the
 
policies
or procedures may deteriorate.
 
Management
 
has assessed
 
the internal
 
control
over financial
 
reporting as
 
of 31 December
2019.
 
In making its assessment, management
utilised
 
the criteria set out in the 2013 COSO
framework and concluded
 
that, based on its
assessment, the internal
 
control over financial
reporting
 
was
 
effective
 
as
 
of 31 December
2019.
 
Our independent
 
registered public accounting
firm has issued a report on the Group’s internal
control
 
over financial
 
reporting, which is
 
set out
on page
 
s
 
201
 
to 204.
 
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
 
regulator
 
s
is provided
 
under Supervision and Regulation
in the Risk review section on pages 171 to 177
 
.
Changes
 
in internal
 
control
over financial
 
reporting
 
There have
 
been no changes that occurred
during
 
the period covered by this report, which
have materially
 
affected or are reasonably
likely to materially
 
affect the Group’s internal
control over financial
 
reporting.
 
Remuneration
 
The Company
 
has a Remuneration Committee,
the purpose and activities of which
 
are
described in
 
the Remuneration Committee
reports on pages 44 to 82.
 
The Board
 
has delegated responsibility
for the consideration
 
and approval of
the remuneration
 
arrangements
 
of the
Chairman,
 
the Executive Directors, other
senior executives and
 
certain
 
Group
employees to the Remuneration
 
Committee.
The Remuneration
 
Committee, when
considering
 
the remuneration policies and
practices, seek to ensure that they support the
Company’s strategy and promote
 
the long
 
-term
success of the business and that
 
they are
aligned
 
to the successful delivery of the
Group’s strategy. All
 
execut
 
ive and senior
management
 
remuneration policies be
developed
 
in accordance with the Group’s
formal
 
and transparent
 
procedures
 
(ensuring
that no Director is involved
 
in deciding his/her
own remuneration
 
outcome) and having regard
to workforce remuneration
 
and related policies
and the alignment
 
of incentives
 
and rewards
with culture.
 
All Remuneration Committee
members demonstrate
 
independent judgement
and discretion
 
when determining and
approving
 
remuneration outcomes. The Board
as a whole,
 
with the Non
 
-Executive Directors
abstaining,
 
considers annually the fees paid to
Non-Executive
 
Directors.
 
Information
 
on the
activities of the Remuneration
 
Committee in
2019 can be found
 
in the Remuneration Report
on pages 44 to 82.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
39
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
DIRECTORS’
 
REPORT
 
Other
 
statutory
 
information
 
 
The Directors present their
report together with
 
the audited
accounts for the year ended 31
December 2019.
 
 
Other information
 
that is relevant to the
Directors’ Report, and which
 
is incorporated
by reference into
 
this report, can be located
as follows:
 
Page
Remuneration
 
policy, including
details
 
of the remuneration of
each Director and
 
Directors’
interests in shares
51
Corporate governance
 
report
2
Risk review
87
 
Disclosures required pursuant
 
to Large
and Medium
 
-sized Companies
 
and Groups
(Accounts and Reports) Regulations
 
2008
as updated
 
by Companies (Miscellaneous
Reporting)
 
Regulations 2018 can be found
on the following
 
pages:
 
Page
Engagement
 
with employees
(Sch. 7, para 11 and
 
11A
2008/2018
 
Regs.)
83-86
Policy
 
concerning the employment
of disabled
 
persons
(Sch. 7, para 10 2008 Regs)
93
Engagement
 
with suppliers,
customers and others in a
business relationship
(Sch. 7, para 11B 2008/2018
Regs)
40
Financial
 
instruments
(Sch. 7, para 6 2008 Regs)
235
Hedge accounting
 
policy
(Sch. 7, para 6 2008 Regs)
239
 
Disclosures required pursuant
 
to Listing
Rule 9.8.4R
 
can be found on the following
pages:
 
Page
Long
 
-term incentive schemes
54
Waiver of Director emoluments
82
Allotment
 
for cash
 
of equity
 
securities
274
Waiver of dividends
39
 
 
 
 
 
 
 
 
 
 
 
Profit and dividends
 
Statutory
 
profit after tax for 2019 was £3,354m
 
(2018: £2,583m).
 
The 2019 full year dividend
of 6.0p
 
per share will be paid
 
on 3 April 2020 to
shareholders whose names are on the
Register of Members at the close of business
on 28 February 2020.
 
With the 2019 half year
dividend
 
totalling 3.0p per ordinary share, paid
in September
 
2019, the total distribution for
2019 is 9.0p
 
(2018: 6.5p)
 
per ordinary share.
The half
 
year and full year dividends for 2019
amounted
 
to £1,201
 
m
 
(2018: £768m).
 
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 2019
 
was
 
£1.58m (2018:
£0.85m).
The Company
 
understands the importance of
delivering
 
attractive cash returns
 
to
shareholders. The
 
Company is therefore
committ
 
ed to maintaining an appropriate
balance
 
between total cash returns
 
to
shareholders, investment
 
in the business,
 
and
maintaining
 
a strong capital position. Going
forward, the Company
 
intends to pay a
progressive ordinary dividend
 
taking into
account
 
these objectives, and
 
the earnings
outlook of the
 
Group. It is also the Board’s
intention
 
to supplement the ordinary dividends
with additional
 
cash returns,
 
including
 
share
buy backs, to shareholders as and when
appropriate.
 
The Board
 
notes that in determining any
proposed distributions
 
to shareholders,
the Board will
 
consider the expectation
of servicing more senior securities.
 
Board of Directors
 
The names
 
of the current Directors of
Barclays PLC, along
 
with their biographical
details,
 
are set
 
out on pages 3 to
 
5
 
and are
incorporated
 
into this report by
 
reference.
Changes to Directors during
 
2019 are set out
below.
 
Name
Role
Effective
date of
appointment/
resignation
Nigel
Higgins
Non-Executive
Director &
Chairman
Appointed
1 March 2019
John
McFarlane
Chairman
Resigned
2 May 2019
Sir Gerry
Grimstone
Non-Executive
Director
Resigned
28 February
2019
Reuben
Jeffery
Non-Executive
Director
Resigned
2 May 2019
Dambisa
Moyo
Non-Executive
Director
Resigned
2 May 2019
Mike
Turner
Non-Executive
Director
Resigned
2 May 2019
Dawn
Fitzpatrick
Non-Executive
Director
Appointed
25 September
2019
 
 
 
 
 
 
 
40
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Appointment and retirement
of Directors
 
The appointment
 
and retirement of Directors is
governed
 
by the Company’s Articl
 
es
 
of
Association
 
,
 
the Code, the
 
Companies
 
Act
2006 and
 
related legislation.
 
The Articles
 
may only
 
be amended by a special
resolution
 
of the shareholders. The Board has
the power to appoint
 
additional Directors or
 
to
fill
 
a casual vacancy amongst the Directors.
Any such Director holds office
 
only until the
next AGM and
 
may offer himself/herself
 
for re-
election.
 
Consistent with the recommendation
in the Code,
 
all Directors will stand for election
or re-election
 
at the 2020 AGM.
 
Directors’ indemnities
 
Qualifying
 
third party indemnity provisions
(as defined
 
by section 234 of the Comp
 
anies
Act 2006) were in force during
 
the course of
the financial
 
year ended 31 December 2019 for
the benefit
 
of the then Directors
 
and, at the
date of this report, are in force for the benefit
 
of
the Directors in relation
 
to certain losses
 
and
liabilities
 
which they may incur (or have
incurred) in
 
connection with
 
their duties,
powers or office.
 
In addition, the 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 2019
 
for the benefit of the then
Directors, and at the
 
date of this report are
in force for the benefit
 
of directors of
 
Barclays
Pension Funds Trustees Limited
 
as
 
Trustee
of the Barclays Bank UK Retirement
 
Fund.
The directors of the Trustee
 
are indemnified
against liability
 
incurred in connection with that
company’s activities
 
as
 
Trustee of the Barclays
Bank UK Retirement
 
Fund.
Similarly,
 
qualifying pension scheme
indemnities
 
were in force during 2019 for
the benefit
 
of directors of
 
Barclays Capital
International
 
Pension Scheme (No.1), and
Barclays PLC Funded Unapproved
 
Retirement
Benefi
 
ts
 
Scheme. The directors of the Trustee
are indemnified
 
against liability incurred in
connection
 
with that company’s activities
as Trustee of the schemes above.
 
Political donations
 
The Group
 
did not give any
 
money for political
purposes in the UK, the rest
 
of the EU or
outside of the
 
EU, nor did it make any political
donations to political
 
parties
 
or other political
organisations, or to any independent
 
election
candidates, or incur any political
 
expenditure
during
 
the year.
 
In accordance
 
with the US Federal Election
Campaign
 
Act, Barclays provides
administrative
 
support to a federal Political
Action
 
Committee (PAC) in the
 
US funded by
the voluntary
 
political contributions of eligible
employees. The
 
PAC is not controlled by
Barclays and all
 
decisions regarding the
amounts and
 
recipients of contributions are
directed
 
by a steering committee comprising
employees eligible
 
to contribute to the PAC.
Contributions
 
to political organisations reported
by the PAC during
 
the calendar
 
year
 
2019
totalled
 
$46,000 (2018: $140,000).
 
Country-
 
by-country reporting
 
The Capital
 
Requirements (Country-by-country
reporting)
 
Regulations 2013 require the
Company
 
to publish additional information in
respect of the year ended
 
31 December 2019.
This infor
 
mation is available on the Barclays
website:
home.barclays/annualreport
.
 
Managing our supply chain
14,000
 
companies from more than 26 countries
supply Barclays across a broad range of
products and services. Nearly 90% of our third
party spend is concentrated
 
in the UK and US.
 
Our supply base is diverse, including
 
start-ups,
small and
 
medium
 
-sized businesses,
businesses owned,
 
controlled and
 
operated by
under
 
-represented segments of local societies
as well as multinational
 
corporations. Many of
our
 
suppliers have their
 
own extensive supply
chains.
 
Our engagement
 
with suppliers
 
is important.
The Directors have regard,
 
via management
oversight, to the need
 
to foster business
relationships with
 
suppliers and, as
 
such,
engage
 
with them to ensure adherence to the
Barclays’ Supplier
 
Code of Conduct and
Supply
 
Control obligations which cover our
expectations of suppliers
 
.
.
 
Adherence
 
is confirmed through pre
 
-contract
attestation.
 
Further, Barclays PLC is
 
a
signatory to the Prompt
 
Payment Code in the
UK, committing
 
to pay our suppliers within
clearly
 
defined terms. In 2019, we achiev
 
ed
85% (2018: 82.1%)
 
on-time payment by value
to our suppliers, meeting
 
our public
commitment
 
to the suppliers of 85%.
 
Environment
 
Banks have a direct
 
environmental and social
impact
 
through their operational footprint, as
well as indirectly
 
in the way that they mobilise
capital,
 
advise clients
 
and develop
 
products.
Are aim is to help facilitate
 
the transition to less
carbon intensive
 
sources
 
of energy,
 
while
supporting
 
economic development and growth
in society by helping
 
to ensure the world’s
energy need
 
s
 
are met responsibly.
 
Barclays invests in improving
 
the energy
efficiency
 
of our operational footprint and
offsets the emissions remaining
 
through the
purchase of carbon credits. In 2019
 
we set
 
a
80% reduction
 
target from our combined scope
1&2 emissions aligned
 
to Science Based
Target
 
methodology by 2025, and
 
committed
 
to
procure 100% renewable
 
electricity for all
operational
 
needs by 2030 with an interim goal
of 90% by 2025. At the end
 
of 2019 we have
achieved
 
a 53% emissions
 
reduction and
 
are
currently procuring
 
60% of our electricity
through
 
renewable means. We also have a
long
 
-standing commitment to managing the
environmental
 
and social risks
 
associated with
our lending
 
practices, which is embedded into
our risk processes. A governance
 
structure is
in place
 
to facilitate clear dialogue across
 
the
business and with suppliers around
 
issues
 
of
potential
 
environmental and social risk.
 
We have disclosed
 
global greenhouse gas
emissions (GHG) that we are responsible
for as set out by the Companies Act 2006
(Strategic
 
Report and Directors’ Report)
Regulations
 
2013.
 
We will provide additional
disclosure on (i) financing
 
solutions for the
lower carbon economy,
 
(ii) environmental risk
management
 
and (iii) management of our
carbon and environmental
 
footprint in the
Strategic
 
Report
 
and in Barclays ESG Report
which will
 
both be available on our website at
home.barclays
 
/annualreport
in March 2020.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
41
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
DIRECTORS’
 
REPORT
 
Other
 
statutory
 
information
 
Current
 
Reporting
 
Year
a
2019
Previous
 
Reporting
 
Year
2018
U
K &
Offshore
Global
Green
House
Gas
Emissions
UK &
Offshore
Global
Green
House
Gas
Emissions
Global Green House Gas (GHG) Emissions
b
 
 
 
 
Total
 
CO
2
e (tonnes)
146,873
278,156
164,197
298,227
Scope 1 CO
2
e emissions (tonnes)
c
17,760
24,276
17,576
25,868
Scope 2 CO
2
e emissions (tonnes)
d
99,276
185,743
116,409
203,126
Scope 3 CO
2
e emissions (tonnes)
e
29,837
68,137
30,212
69,233
Intensity Ratio
 
 
 
 
Total
 
Full Time Employees (FTE)
47,800
80,800
49,000
83,500
Total
 
CO
2
e per FTE (tonnes)
f
3.07
3.44
3.35
3.57
Market based
 
emissions
 
 
 
 
Scope 2 CO
2
e market based emissions (tonnes)
d
7,464
110,071
142,107
260,731
Total
 
gross
 
Scope 1 & 2 (market based) emissions (tonnes)
25,224
134,347
159,683
286,599
Energy consumption
 
used to calculate above emissions (kWh)
g
439,840,511
686,138,107
449,546,050
698,527,190
 
Notes
a
 
The carbon reporting year for our
 
GHG emissions
 
is 1 October to
 
30 September. The
 
carbon reporting year
 
is not fully aligned
 
to the financial
 
reporting year covered
by the Directors’ report. Details of our
 
approach to assurance
 
over the data will
 
be included in the
 
2019 Barclays
 
ESG report due be
 
released in
 
March 2020.
 
b
 
The methodology used to calculate our
 
GHG is the
 
Greenhouse Gas Protocol.
 
A Corporate
 
Accounting and
 
Reporting
 
Standard Revised
 
Edition, defined
 
by the World
Resources
 
Institute/World
 
Business Council
 
for Sustainable
 
Development
 
(ERI/WBCSD).
 
We have adopted
 
the operational
 
control approach
 
on reporting
 
boundaries
to define our reporting boundary. Where properties
 
are covered
 
by Barclays’ consolidated
 
financial statements
 
but are leased
 
to tenants,
 
these emissions
 
are not
included in the Group GHG calculations.
 
Where Barclays
 
is responsible
 
for the utility costs,
 
these emissions
 
are included. We
 
continuously
 
review and update
 
our
performance data based on updated
 
carbon emission
 
factors, improvements
 
in data
 
quality and updates
 
to estimates
 
previously applied.
 
For 2019 we
 
have applied
the latest emission factors available
 
at the time
 
of reporting. Where
 
our performance
 
has changed by more
 
than 1%
 
we have restated the
 
balances and baseline.
 
2018
emissions
 
have been
 
updated to reflect
 
additional consumption
 
data which
 
was not available
 
at the time
 
of reporting.
 
The previously reported
 
figure was
 
292,151
tCO
2
e.
 
c
 
Scope 1 covers direct combustion
 
of fuels and company
 
owned vehicles
 
(from UK only, which
 
is the most material
 
contributor).
 
Fugitive emissions
 
reported in
 
Scope
 
1
cover
 
emissions from UK,
 
Americas,
 
Asia Pacific,
 
India and
 
Europe.
 
d
 
Scope 2 covers emissions from electricity
 
and steam purchased
 
for own use.
 
Market based emissions
 
have been
 
reported for
 
2018 and 2019.
 
We have used a
 
zero
emission factor where we have renewable
 
contracts already
 
in place in the
 
UK, US and Continental
 
Europe.
 
e
 
Scope 3 covers indirect emissions
 
from business
 
travel (global flights
 
and ground transport
 
from the
 
UK, USA and India.
 
USA and India
 
ground transport
 
covers
onwards car hire only which has been
 
provided directly by
 
the supplier).
 
Ground transportation
 
data (excluding
 
Scope 1
 
company cars)
 
covers only countries
 
where
robust data is available directly from the
 
supplier.
f
 
Intensity
 
ratio calculations
 
have been
 
calculated using location
 
based emission
 
factors only.
 
g
 
Energy consumption data is captured
 
through utility billing;
 
meter reads
 
or estimates. In 2019,
 
we have reduced
 
our energy
 
consumption
 
by 1.8% versus
 
2018. We
continue to work on improving the operational
 
efficiency
 
of our property portfolio
 
and in 2019
 
conducted a
 
number of projects globally
 
which
 
have achieved
 
a total
energy reduction of 2GWH’s since implementation,
 
enough energy
 
to boil 13 million
 
kettles. In 2019
 
we have conducted
 
a number
 
of LED installations
 
across our
 
sites
in the USA, India and in the UK, saving
 
490 MWh. We
 
also saved
 
180 MWh of electricity
 
globally through
 
our switch off
 
campaign
 
as part of Earth Hour
 
2019. Across
a number of our large buildings we
 
have conducted
 
improvements to the
 
building management
 
systems to ensure
 
efficient
 
plant run times
 
and aligning heating
 
and air
conditioning to the occupancy of our
 
buildings,
 
saving 1,300 MWh.
 
Globally we
 
have conducted end
 
of life asset
 
replacement installing
 
more energy efficient
 
plants
 
in
our buildings and achieving a 200MWh
 
saving. Finally,
 
we have continued
 
with Server Decommissioning
 
in the UK and completed
 
cold aisle containment
 
as well as
LED lighting retrofits at our Cranford
 
data centre
 
in the USA saving
 
circa 260MWh.
 
Research and development
 
In the ordinary
 
course of business, the Group
develops
 
new products and services in each
of its business divisions.
 
Share capital
 
Share capital
 
structure
 
The Company
 
has ordinary shares
 
in issue.
The Articles
 
also allow for the issuance of
sterling,
 
US dollar,
 
euro and yen preference
shares (preference
 
shares). No
 
preference
shares have been
 
issued as
 
at11
 
February
2020 (the latest
 
practicable date for inclusion in
this report). Ordinary shares therefore
represent 100% of the total
 
issued share
capital
 
as
 
at 31 December 2019 and
 
as
 
at 11
 
February 2020
 
(the latest practicable
 
date for
inclusion
 
in this report).
 
Details of the movement
 
in ordinary share
capital
 
during the year can be found in Note 28
on page 274
 
.
 
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
unle
 
ss
 
the Board otherwise
 
determines.
 
 
 
 
 
 
 
 
42
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
If any member,
 
or any other person appearing
to be interested
 
in any of the Company’s
ordinary shares, is served with a notice
 
under
section 793 of the
 
Companies Act 2006 and
does not supply the Company
 
with the
information
 
required in the notice, then the
Board, in
 
its absolute discretion,
 
may direct
that member
 
shall not be entitled to attend or
vote at any meeting
 
of the Company. The
Board may further
 
direct that
 
if the shares
 
of
the defaulting
 
member represent 0.25%
or more of the issued shares of the relevant
class, that dividends
 
or other monies payable
on those shares shall be retained
 
by the
Company
 
until the
 
direction ceases
 
to have
effect and
 
that no transfer of those shares shall
be registered (other than
 
certain specified
‘excepted
 
transfers’). A
 
direction
 
ceases
 
to
have effect
 
seven days
 
after the Company
 
has
received
 
the information requested, or when
the Company
 
is notified that an excepted
transfer of all
 
of the relevant shares to a third
party has occurred, or as the Board otherwise
determines.
 
Transfers
 
Ordinary shares may be held
 
in either
certificated
 
or uncertificated form.
Certificated
 
ordinary shares
 
may be transferred
in writing
 
in any usual or other form approved
by the Company
 
Secretary and executed by or
on behalf
 
of the transferor. Transfers of
uncertificated
 
ordinary shares
 
must be made in
accordan
 
ce with the Companies Act 2006 and
CREST Regulations.
 
The Board
 
is not bound to register a transfer of
partly
 
-paid ordinary shares
 
or fully
 
-paid shares
in exceptional
 
circumstances approved by the
FCA. The
 
Board may also decline
 
to register
an instrument
 
of transfer of certificated ordinary
shares unless it is (i) duly stamped,
 
deposited
at the prescribed place
 
and accompanied by
the share certificate(s) and such other
evidence
 
as
 
reasonably
 
required by the Board
to evidence
 
right to transfer, (ii) it is in
 
respect
of one class of shares only,
 
and (iii) it is in
favour of a single transferee
 
or not more than
four joint
 
transferees (except in the case of
executors or trustees of a member).
 
In accordance
 
with the provisions of section 84
of the Small
 
Business,
 
Enterprise and
Employment
 
Act 2015, preference shares
 
may
only be issued in registered
 
form. Preference
shares shall be transferred in
 
writing
 
in any
usual or other form approved
 
by the Company
Secretary and executed
 
by or on behalf of the
transferor. The
 
Company’s registrar shall
register such transfers of preference
 
shares
 
by
making the
 
appropriate entries in the register of
preference
 
shares.
 
Each preference
 
share
shall confer,
 
in the event of a winding
 
up or
 
any
return of capital
 
(other than, unless
 
otherwise
provided
 
by their terms of issue, a
 
redemption
or purchase by the Company
 
of any of its
issued shares, or a reduction
 
of
share capital),
 
the right to receive out of the
surplus assets of the Company
 
available for
distribution,
 
and in prio
 
rity to the holders
 
of the
ordinary shares and any other
 
lower ranking
shares in the Company,
 
and pari passu
 
with
any other class of preference
 
shares of similar
ranking, repayment
 
of the amount paid up or
treated as paid up
 
in respect of the nominal
value
 
of the preference share together with any
premium
 
which was
 
paid
 
or treated as paid
when the preference
 
share was
 
issued in
addition
 
to an amount equal to accrued and
unpaid
 
dividends.
 
Variation of
 
rights
 
The rights attached
 
to any class
 
of shares may
be varied either
 
with the consent in writing of
the holders of at least 75% in
 
nominal
 
value
of the issued shares of that class, or with the
sanction of a special
 
resolution passed at a
separate meeting
 
of the holders
 
of the shares
of that class. The rights of shares shall not
(unless expressly provided
 
by the rights
attached
 
to such shares)
 
be deemed
 
varied by
the creation
 
of further shares
 
ranking equally
with them
 
or subsequent to them.
 
Limitations on foreign
 
shareholders
 
There are no restrictions imposed
 
by the
Articles or (subject to the effect
 
of any
economic
 
sanctions that may be in force from
time
 
to time) by current UK laws which relate
only to non
 
-residents of the UK and which limit
the rights of such non
 
-residents to hold or
(when entitled
 
to
 
do so)
 
vote the
ordinary shares.
 
Exercisability of
 
rights under
an employee
 
share scheme
 
Employee
 
Benefit Trusts (EBTs) operate
in connection
 
with certain of the Group’s
Employee
 
Share Plans (Plans). The trustees of
the EBTs
 
may exercise all
 
rights attached to
the shares in accordance
 
with their fiduciary
duties other than
 
as
 
specifically
 
restricted
in the relevant
 
Plan governing documents.
The trustees of the EBTs have
 
informed
 
the
Company
 
that their normal policy is to abstain
from voting
 
in respect of the Barclays shares
held
 
in trust. The trustees of the Global
Sharepurchase
 
EBT and
 
UK Sharepurchase
EBTs may
 
vote in respect of Barclays shares
held
 
in the EBTs, but
 
only as instructed by
participants in
 
those Plans in respect of
their partnership
 
shares
 
and (when vested)
matching
 
and dividend shares.
 
The trustees
will
 
not otherwise vote in respect of shares held
in the Sharepurchase
 
EBTs.
 
Special rights
 
There are no persons holding
 
securities that
carry special rights with
 
regard to the control of
the company.
Major shareholders
 
Major shareholders do not have
 
different
 
voting
rights from those of other shareholders.
Information
 
provided to the Company by
substantial
 
shareholders pursuant to the FCA’s
Disclosure Guidance
 
and Transparency Rules
are publi
 
shed via a Regulatory Information
Service and
 
is available on the
 
Company’s
website. As at 31 December
 
2019,
 
the
Company
 
had been notified under Rule 5 of
the Disclosure Guidance
 
and Transparency
Rules of the following
 
holdings of voting rights
in its shares.
 
Person
interested
Number of
Barclays
 
Shares
% of total
voting
 
rights
attaching
to issued
share
capital
a
Nature of
holding
(direct or
indirect)
BlackRock
Inc
b
1,039,595,156
6.02
indirect
Qatar
Holding
LLC
c
1,017,455,690
5.87
direct
Sherborne
Investors
d
943,949,089
5.48
indirect
The Capital
Group
Companies
Inc
e
855,511,38
 
5
4.96
indirect
 
Notes
a
 
The percentage of voting rights detailed
 
above was
calculated at the time of the relevant disclosures
made in accordance with Rule 5
 
of the Disclosure
Guidance and Transparency Rules.
 
b
 
Total shown includes 6,950,721 contracts for
difference to which voting rights are attached.
 
Part
of the holding is held as American
 
Depositary
Receipts. On 4 February 2020, Blackrock
 
Inc
disclosed by way of Schedule 13G filed
 
with the
Securities Exchange Commission
 
beneficial
ownership of 1,149,011,610 ordinary shares of
 
the
Company,
 
representing
 
6.6% of that
 
class of
shares.
c
 
Qatar Holding LLC is wholly-owned by
Qatar Investment Authority.
 
d
 
We understand from disclosures that
 
the
Sherborne shares are held via three funds
ultimately
 
controlled
 
by Edward Bramson
 
and
Stephen Welker in their capacity as managing
directors of Sherborne Investors Management
 
GP,
LLC (Sherborne Management GP),
 
and Sherborne
Investors GP,
 
LLC. Sherborne
 
Management GP
 
is
the general partner of Sherborne Investors
Management LP (Sherborne Investors)
 
which is the
investment manager of each of the three
 
funds
beneficially interested in the Sherborne
 
shares
being Whistle Investors LLC, Whistle
 
Investors II
LLC and Whistle Investors III LLC. Amendment
No.2 to a Schedule 13D filing, filed
 
on 7 November
2019, also disclosed that certain funded
 
derivative
transactions,
 
which
 
were used to purchase
505,086,254 of such shares, have been
 
extended
to expire on various dates during the period
beginning 14 December 2021 (previously
 
21
October 2019) and ending 22
 
July 2022 (previously
16 March 2021).
 
e
 
The Capital Group Companies Inc
 
(CG) holds its
shares via
 
CG Management
 
companies.
 
Part of the
CG holding is held as American Depositary
Receipts.
 
 
43
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
DIRECTORS’
 
REPORT
Other
 
statutory
 
information
 
Between
 
31 December 2019
 
and 11 February
2020 (the latest
 
practicable date for inclusion
in this report), the Company
 
was
 
notified
 
that
Capital
 
Group Companies Inc, now holds
863,929,297
 
Barclays shares,
 
representing
4.99% of the total
 
voting right attached to the
shares and that
 
Norges Bank
 
now holds
525,031,736
 
Barclays shares,
 
representing
3.03% of the total
 
voting rights attached to the
shares.
 
Powers of Directors to
 
issue or
buy back the Company’s
 
shares
The powers of the Directors are determined
by the Companies
 
Act 2006 and the Articles.
The Directors are authorised
 
to issue and
allot
 
shares
 
and to buy back shares subject
to annual
 
shareholder approval at the AGM.
Such authorities
 
were granted by shareholders
at the 2019 AGM.
 
It will be proposed at the
2020 AGM
 
that the Directors be granted new
authorities to allot
 
and buy back shares.
 
Repurchase of shares
The Company
 
did not repurchase any of its
ordinary shares during
 
2019 (2018: none).
As at 11
 
February 2020
 
(the latest practicable
date for inclusion
 
in this report) the Company
had an unexpired
 
authority to repurchase
ordinary shares up to a maximum
 
of 1,714m
ordinary shares.
 
Distributable reserves
As at 31 December
 
2019, the distributable
reserves of Barclays PLC were £22,457m.
 
Change of control
There are no significant
 
agreements
 
to which
the Company
 
is a
 
party that are affected
 
by
a change of control
 
of the Company following
a takeover bid. There
 
are no agreements
between
 
the Company and
 
its
 
Directors or
employees providing
 
for compensation for loss
of office
 
or employment that occurs because of
a takeover bid.
 
Disclosure of information
to the Auditor
Each Director confirms that,
 
so
 
far as he/she is
aware, there is no relevant
 
audit information
 
of
which the Company’s
 
auditors are unaware
and that each
 
of the Directors has
 
taken all the
steps that he/she ought
 
to have taken as
a Director to make himself/herself
 
aware of
any relevant
 
audit information and to establish
that the Company’s
 
auditors are aware of that
information.
 
This confirmation is given
pursuant to section 418
 
of the Companies Act
2006 and
 
should be interpreted in accordance
with and subject
 
to those provisions.
Directors’ responsibilities
The following
 
statement, which should be read
in conjunction
 
with the report of the
independent
 
registered public accounting firm
set out on page
 
s
 
201
 
to 204,
 
is made with a
view to distinguishing
 
for shareholders the
respective responsibilities
 
of the Directors
and of the auditors
 
in relation to the accounts.
 
Going concern
The Group’s business activities,
 
financial
position,
 
capital, factors likely to affect its
future development
 
and performance and its
objectives and
 
policies in managing the
financial
 
risks
 
to which it is exposed are
discussed in the Risk Review and
 
Risk
Management
 
sections.
 
The Directors considered
 
it appropriate to
prepare the financial
 
statements
 
on a going
concern basis.
 
In preparing
 
each of the Group and Company
financial
 
statements,
 
the Directors are required
to:
 
■ Assess the
 
Group and Company’s
 
ability to
continue
 
as
 
a going
 
concern, disclosing, as
applicable,
 
matters related to going
concern; and
 
■ Use
 
the going
 
concern basis
 
of accounting
unless they either
 
intend to liquidate the
Group or the Company
 
or to cease
operations,
 
or have no realistic alternative
but to do so.
 
 
Preparation
 
of
 
accounts
The Directors are required
 
by the Companies
Act 2006 to prepare
 
Group and Company
accounts for each financial
 
year and, with
regards to Group accounts, in
 
accordan
 
ce
 
with
Article
 
4 of the IAS Regulation. The Directors
have prepared
 
Group and Company accounts
in accordance
 
with IFRS as
 
adopted
 
by the
EU. Under the Companies
 
Act 2006,
the Directors must not approve
 
the accounts
unless they are satisfied that
 
they give
 
a true
and fair view of the
 
state of affairs of the Group
and the Company
 
and of their profit or loss
 
for
that period.
 
The Directors consider that,
 
in preparing
the financial
 
statements the Group and the
Company
 
have used appropriate accounting
policies, supported
 
by reasonable judgements
and estimates,
 
and that all
 
accounting
standards which they
 
consider to be applicable
have been
 
followed.
 
The Directors are satisfied that the
 
Annual
Report and Financial
 
Statements, taken as
 
a
whole,
 
are fair, balanced
 
and understandable,
and provide
 
the information necessary for
shareholders to assess the Group
 
and the
Company’s position
 
and performance,
business model
 
and strategy.
Directors are responsible for such internal
control as they determine
 
is necessary
 
to
enable
 
the preparation of financial statements
that are free from material
 
misstatement,
whether due to fraud
 
or error.
 
Directors’ responsibility statement
The Directors have responsibility
 
for ensuring
that the Company
 
and the Group keep
accounting
 
records which disclose with
reasonable
 
accuracy the financial position of
the Company
 
and the Group and which enable
them to ensure that the
 
accounts comply with
the Companies Act 2006.
 
The Directors are also responsible for
preparing
 
a Strategic Report, Directors’
Report, Directors’ Remuneration
 
Report and
Corporate Governance
 
Statement in
accordance
 
with applicable law and
regulations.
 
The Directors are responsible for the
maintenance
 
and integrity of the Annual
Report and Financial
 
Statements as
 
they
appear on the
 
Company’s website. Legislation
in the UK governing
 
the preparation and
dissemination
 
of financial statements may
differ from
 
legislation in
 
other jurisdictions.
 
The Directors have a general
 
responsibility for
taking such steps as are reasonably
 
open to
them to safeguard
 
the assets
 
of the Group and
to prevent and
 
detect fraud
 
and other
irregularities.
 
The Directors, whose names and functions
 
are
set out on pages 3 to 5,
 
confirm
 
to the best of
their knowledge
 
that:
 
(a)
 
the financial
 
statements, prepared in
accordance
 
with the applicable set of
accounting
 
standards, give a true and fair
view of the assets, liabilities,
 
financial
position
 
and profit or loss
 
of the Company
and the undertakings included
 
in the
consolidation
 
taken as
 
a whole; and
 
(b)
 
the management
 
report, on pages 6 to 42
in the Strategic
 
Report available at
home.barclays/annualreport
 
includes a
fair review of the development
 
and
performance
 
of the business
 
and the
position
 
of the Company and the
undertakings included
 
in the consolidation
taken as a whole,
 
together with a
description
 
of the principal risks
and uncertainties that
 
they face.
 
 
By order of the Board
 
 
 
Stephen Shapiro
 
Company Secretary
 
12 February 2020
 
Registered in
 
England
 
.
Company
 
No. 48839
 
 
 
 
 
 
 
 
 
 
 
 
 
fy2019arbplcp53i0.jpg
 
44
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
REMUNERATION
 
REPORT
Annual
 
statement
 
from the
 
Chairman
of the
 
Board Remuneration
 
Committee
 
Contents
 
 
Page
Annual
 
statement
44
Group-wide
 
remuneration philosophy
49
Remuneration
 
policy for all
employees
51
Directors’ remuneration
 
policy
52
Annual
 
report on Directors’
remuneration
63
 
Remuneration
 
Committee
 
members
 
 
Meetings attended/
Chairman
eligible to attend
Crawford Gillies
5/5
Members
 
Tim
 
Breedon
5/5
Mary Francis
5/5
Dambisa Moyo
(1 Jan 2019
 
- 2
 
May 2019)
2/2
 
Dear Fellow
 
Shareholders
I am pleased
 
to present the Directors’
Remuneration
 
Report for 2019. The
Committee
 
has had many important matters to
consider during
 
the year. Barclays’ Fair Pay
agenda
 
continues to play an important role in
guiding
 
the Committee in its decision
 
-making,
and we are proud to publish
 
our second Fair
Pay Report. We are also publishing
 
a separate
Pay Gaps Report, so that our pay gaps are
explained
 
as
 
clearly
 
as
 
possible.
 
As part of this report we are introducing
 
our
new Directors’ Remunerat
 
ion Policy (“DRP”)
for shareholders to consider as part of voting
at the 2020
 
Annual General Meeting
 
(“AGM”)
in May.
 
The current DRP was approved
by shareholders in 2017.
 
A summary of the
changes proposed is included
 
in this
statement,
 
and the full policy is detailed
on pages 52 to 62
 
of this report.
 
We also met with
 
multiple shareholders
following
 
the voting outcome on the Directors’
Remuneration
 
Report (Resolution 2) at the
2019 AGM.
 
The engagement was
constructive, and
 
helped to clarify the reasons
for the outcome
 
of the vote. Following the
engagement,
 
we published a statement setting
out our response to the voting
 
outcome. The
statement
 
is set out on page 80
 
.
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair Pay and
 
Pay Gaps Reports
 
We have continued
 
to evolve our Fair Pay
agenda
 
during 2019,
 
and are pleased to
publish
 
our second Fair Pay Report, reporting
our progress against
 
our five themes.
 
This year we have also
 
published a
 
Pay Gaps
Report, including
 
both our
 
Gender Pay Gap
results and
 
our Ethnicity Pay
 
Gap disclosure,
which we are making
 
for the second year on a
voluntary
 
basis.
 
 
Our stakeholders
One of the key principles
 
of our remuneration
philosophy
 
is that stakeholder views
 
are
considered
 
when we design remuneration
policies and
 
determine pay outcomes. In
practice,
 
this means listening to and engaging
with our stakeholders, including
 
our
shareholders, employees
 
and regulators, as
well as considering
 
broader societal factors.
 
Our Fair Pay agenda
 
helps us to engage with
different
 
stakeholders
 
on pay. Key highlights
for 2019 include
 
the agreement of a new one
year pay deal
 
with Unite,
 
with an above
inflation
 
budget of 2.75%, and with higher
increases for the most junior
 
entry grades. We
have also started to expand
 
globally
 
our UK
living
 
wage commitment by working with the
Fair Wage Network. Separately,
 
the
Committee
 
has focused on reviewing wider
workforce polic
 
ies
 
as well as their pay
outcomes in
 
more detail. We have a strong
partnership
 
with Unite
 
in the UK, and actively
engage
 
with Works
 
Councils in
 
other locations.
 
We discussed our new plans for the DRP with
major shareholders. The
 
discussions
 
were
informative
 
and productive, and we thank our
shareholders for their willingness to engage.
The main
 
change, aligned with our Fair Pay
agenda,
 
is a
 
reduction in
 
pension allowance
for the Executive
 
Directors. This voluntary
change
 
by the Executive Directors is set out in
more detail
 
on page 47.
 
While we have
 
considered
 
alternative variable
pay structures for the Executive
 
Directors, we
cannot see a superior acceptable
 
approach
and so have decided
 
to retain the existing
structure. We will
 
keep this under review as
market practice develops.
 
 
 
 
 
 
 
 
fy2019arbplcp54i0.jpg
 
45
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
REMUNERATION
 
REPORT
Annual
 
statement:
Summary
 
of 2019
 
pay outcomes
 
 
Performance and pay
Rewarding
 
sustainable performance is a
crucial
 
aspect of our remuneration philosophy
and so the Committee
 
spent considerable time
understanding
 
performance. While it was
another
 
challenging year with global
macroeconomic
 
and political uncertainties at
play
 
,
 
profit before tax excluding litigation
 
and
conduct
 
(PBT) is up 9% from 2018. Group
return on tangible
 
equity excluding litigation
and conduct
 
(RoTE) is 9.0%, in line with our
target for 2019,
 
and costs
 
are also in line
 
with
our 2019 guidance
 
of less
 
than £13.6bn. Our
capital
 
position is strong,
 
with a CET1 ratio
 
of
13.8%. The
 
Committee recognises that
significant
 
progress
 
on financial
 
performance
has now been achieved
 
over a sustained
period.
 
Non-financial
 
performance has also been
strong. Customer and client
 
outcomes are
positive,
 
with improvements in Net Promoter
Score® (NPS) for Barclays UK and
Barclaycard,
 
and an increase in the take-up of
mobile
 
banking. Complaints in Barclays UK
are down 8% from 2018,
 
though we recognise
we need
 
to go further and fa
 
ster. Our
employee
 
engagement survey score
 
is down
slightly
 
on 2018, driven by various factors
including
 
the tools and resources
 
available
 
to
employees. This
 
is already an area of
management
 
focus and investment for the
Group. Considering
 
our broader impact
 
on
Society,
 
global carbon emissions are down by
53%, and we have helped
 
over 2m people
improve
 
their employability skills through
LifeSkills.
 
Over the years, we have considered
 
the
appropriate
 
balance between returns to
shareholders and rewarding
 
employees. This
year, the Committee
 
has approved an
incentive
 
pool of £1,490m, down 10% from
2018.
 
After much deliberation, we feel
 
that this
outcome
 
strikes
 
the right balance
 
between our
shareholders and our employees,
 
enabling us
to further improve
 
returns to our shareholders
while
 
also maintaining a competitve pay
opportunity
 
for our wider workforce.
 
Executive
 
Director remuneration
outcomes
The annual
 
incentive outcomes
 
for Jes Staley
and Tushar Morzaria
 
are assessed
 
with
reference to a set framework against pre-
determined
 
financial, strategic and personal
measures and objectives.
 
For 2019,
performance
 
against the financial objectives
(representing
 
60% of the overall
 
measures)
has been very strong, with targets exceeded.
Strategic
 
and personal performance has also
been strong – full
 
details of this assessment
are set out on pages 63 to 68.
 
Using the framework, the annual
 
bonus
outcomes for Jes Staley
 
and Tushar Morzaria
were 83.3% and 84.3%
 
of maximum
respectively.
 
The Committee considered these
outcomes in
 
the
 
context of pay outcomes for
the wider workforce for 2019.
 
As part of its deliberations,
 
the Committee
noted that
 
the outcomes for the Executive
Directors were increasing
 
at a time when
 
the
overall
 
incentive pool was
 
decreasing.
 
While
recognising
 
that th
 
is
 
is not an unusual
outcome
 
given the structured formulaic
approach
 
applied to Executive Directors’
incentives (e.g. in
 
2018,
 
Executive Directors
outcomes were down slightly,
 
while the overall
incentive
 
pool was up), the Committee
determined
 
that for 2019 it would be
appropriate
 
to apply a discretionary reduction
to the formulaic
 
Executive Directors’ outcome
in line
 
with the broader pool reduction.
Applying
 
the 10% discretionary reduction
results in a bonus outcome
 
of 75.0% for Jes
Staley
 
and 75.9% for Tushar Morzaria.
 
Separately,
 
the Committee decided to make
an award under the 2020
 
-2022 Long Term
Incentive
 
Plan (LTIP) cycle to both Executive
Directors with a face value
 
at grant of 120% of
Total
 
fixed pay, reflective
 
of the strong
 
2019
performance.
 
The outcome
 
of the 2017-2019 LTIP
 
which is
due to vest in June
 
2020 is set out on pages
68 to 72.
 
Looking ahead
We will
 
continue to focus on our Fair Pay
agenda
 
during 2020, including reviewing living
wages for locations
 
outside of the UK, US and
India.
 
We will also look to further our work on
pay simplification,
 
and will continue to engage
with our shareholders and
 
other stakeholders
on pay.
 
 
 
 
 
Crawford Gillies
 
Chairman,
Board Remuneration
 
Committee
 
February 2020
fy2019arbplcp55i0.jpg
 
46
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
 
 
 
 
fy2019arbplcp56i0.jpg
 
47
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
Annual
 
statement:
Key changes
 
to the
 
DRP
 
Directors’ Remuneration Policy
Barclays’ policy
 
on remuneration
 
for the Directors
 
was last reviewed in 2016, and
 
approved by 97.91% of the shareholder vote at the May 2017
AGM.
 
Overall,
 
the current DRP has served
 
its purpose, enabling
 
the Committee to deploy remuneration in a manner consistent with our philosophy, while
recognising
 
that the Committee is unable to change some aspects of the policy (e.g. because of regulatory requirements).
 
The review
 
of the DRP by the Committee
 
has provided an opportunity to consider the policy against the Fair Pay agenda and the most recent
guidance
 
from shareholders
 
and proxy agencies.
 
Following
 
engagement
 
with major shareholders,
 
the Investment
 
Association, ISS and Glass
 
Lewis, the key changes proposed are set out below.
 
 
 
What are the key
 
changes to the DRP?
 
Key changes
Fixed Pay
In line
 
with the approach outlined at the start of the last DRP, the Committee
 
has reviewed its
 
approach
 
to Fixed Pay for the
Executive
 
Directors. Consequently,
 
having taken into account a number of factors,
 
the following
 
Fixed Pay increases
 
are
proposed:
CEO:
An increase of 2.1%, resulting
 
in proposed Fixed Pay of £2,400,000
Jes Staley joined
 
Barclays in December 2015, and this is
 
the first Fixed Pay increase proposed
 
since that time. His increase is
below the
 
average increase for UK employees, for the 2019/20 annual pay review.
Group Finance
 
Director (GFD):
An increase of 4.5%, resulting
 
in proposed Fixed Pay of £1,725,000
Since the
 
last DRP, Tushar Morzaria
 
has taken on additional responsibilities as
 
a result of our new legal
 
entity structure. He
oversees additional
 
complexities associated with capital management
 
and financial reporting post ring-fencing and the
establishment
 
of the US
 
Intermediate
 
Holding Company. In addition, he has taken accountability for Group Strategy.
 
This
 
is the
first increase for Tushar Morzaria
 
proposed since the last DRP was approved i
 
n
 
2017.
We will
 
continue to deliver Fixed Pay 50% in cash and 50% in shares (delivered quarterly and
 
subject to a holding period with
restrictions lifting
 
over a period of five years). Going forward, it is intended that Fixed Pay for the Executive
 
Directors
 
is reviewed
annually,
 
to align with the employee review cycle, and enhance transparency.
Wider workforce context
The average
 
annual increase for Fixed Pay for UK employees is
 
2.7%, with differentiation
 
within that based on a number of
factors. We
 
agreed a one
 
-year pay deal with Unite, covering c.45,000 UK employees at junior and middle
 
management levels
with a fixed
 
pay increase budget
 
of 2.75%. Over the term of the prior DRP, the average
 
cumulative increase provided to the UK
wider workforce was 10%.
Pension
In our new policy,
 
our Executive Directors have volunteered to reduce their contractual
 
pension allowance to 5% of Fixed Pay
(equivalent
 
to 10% of Fixed cash)
 
– a decrease of £276,000
 
for the CEO and a decrease of
 
£113,750
 
for the GFD.
Wider workforce context
For comparison,
 
we operate two pension plans in the UK, Afterwork,
 
a contributory
 
legacy cash balance defined benefit plan
(effective
 
employer contribution cost of 21.2% of salary), and the Barclays Pension Savings Plan, a defined contribution
 
plan for
new joiners (current employer
 
contribution rate of 10% of salary).
The Committee
 
also reviewed the pension arrangements for the wider workforce. The outcome of this review was to change the
employer
 
contribution rate from 10% to 12% for our most junior employees (c.17,500 employees). This will be implemented during
2020.
In addition,
 
the following actions have already been taken to further improve pensionable pay.
 
We have rolled
 
all fixed and permanent allowances into pensionable pay; and
 
 
In BUK, we have transferred a material
 
portion of bonus opportunity into salary for customer facing staff (c.19,500
employees) further increasing
 
pensionable pay.
Our policy
 
on pension
 
for any new Executive Director will also be changed to align with the revised approach for existing
Executive
 
Directors.
 
 
 
 
 
fy2019arbplcp57i1.jpg fy2019arbplcp57i0.jpg
 
48
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
What are the key
 
changes to the DRP?
continued
 
Key changes
Variable pay
Going
 
forward we will express the variable pay opportunity as a proportion of Fixed Pay,
 
excluding pension.
This presentational
 
change is required as variable pay opportunity is currently presented as a multiple of Total
 
fixed pay (i.e.
Fixed Pay and
 
pension). This approach was initially adopted to clearly demonstrate compliance
 
with the regulatory 2:1 regime
(which classifies pension
 
as
 
fixed remuneration
 
for 2:1 purposes).
 
Without
 
making this change,
 
there would be an unintended
reduction
 
in the maximum variable pay opportunity for the Executive Directors.
This new way of expressing the variable
 
pay opportunity does not affect regulatory compliance.
The maximum
 
variable pay opportunity will therefore be 233% of Fixed Pay for the CEO and 224
 
%
 
for the GFD. The
apportionment
 
between annual bonus
 
and LTIP
 
(currently 40:60) will be maintained, resulting in a maximum annual bonus
opportunity
 
of 93% for the CEO and 90% for the GFD and a maximum LTIP
 
opportunity of 140% and 134% respectively.
 
The diagrams below
 
illustrate the maintenance of the variable pay opportunity based on the current level of Fixed Pay.
 
 
 
Shareholding
requirements
In line
 
with best practice guidance, post-termination shareholding requirements will be increased to align with
 
requirements
during
 
employment. Unvested shares (net of tax) may contribute
 
to meeting this
 
post-termination
 
requirement provided that
there are no outstanding
 
performance conditions.
Shareholding
 
requirements during employment remain unchanged, although going forward we will express
 
them as a
proportion
 
of Fixed Pay only, in line with our approach to variable pay.
 
This also ensures
 
that our shareholding
 
requirements
are not reduced
 
because of the change to pension
 
allowance.
The requirement
 
during employment will therefore be: 233% of Fixed Pay for the CEO and 224% of Fixed Pay for the GFD.
 
 
 
 
Summary
Overall,
 
under the new policy,
 
the net outcome across
 
Fixed Pay and
 
pension
 
is a
 
reduction of £226,000
 
for the CEO and £38,750 for the GFD.
Maximum
 
total compensation is down 2% for the CEO and up 2% for the GFD.
 
 
 
 
 
 
 
 
 
 
49
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
Group-wide
 
remuneration
 
philosophy
 
Remuneration philosophy
While “fairness” has been a consideration
 
and focus when making pay decisions at Barclays for
 
many years, we reported on our approach
 
to pay
fairness for the first time
 
in 2018, when we published our Fair Pay agenda as part of the 2017 Annual Report.
 
Given the importance of
 
our Fair Pay
agenda,
 
we have now formally included “fairness”
 
in our Remuneration
 
Philosophy. Similarly,
 
we have incorporated our long held view with regards
to the need to consider
 
the perspectives of all of our stakeholders, not just investors.
 
To
 
attract and retain
 
the people who can best deliver for our customers and clients, we must pay fairly and appropriately
 
– balancing the interests
 
of
all our stakeholders. Our policies
 
and practices reward sustainable performance
 
in line with our values
 
and risk
 
expectations.
 
They are fair,
transparent and
 
as
 
simple
 
as
 
possible.
 
This is our remuneration
 
philosophy. It’s how we
 
have continued
 
to make remuneration decisions and set remuneration policies during 2019, and it
applies
 
to all of our employees globally
 
,
 
as
 
well as our Executive
 
Directors.
Barclays’ remuneration philosophy
Attract and retain
 
talent
 
needed
 
to
deliver
 
Barclays’ strategy
Long
 
-term success
 
depends on the
 
talent of our employees. This means attracting
 
and retaining
an appropriate
 
range of talent to deliver against our strategy, and paying
 
the right amount for
that talent
Align pay with
 
investor
 
and
 
other
stakeholder interests
Remuneration
 
should be designed with appropriate consideration of the views, rights and
interests of stakeholders. This means listening
 
to our shareholders, other investors, regulators,
government,
 
customers
 
and employees and ensuring
 
their views
 
are appropriately
 
considered in
remuneration
 
decision-making
Reward
 
sustainable performance
Sustainable
 
performance means making a positive contribution to stakeholders, in both the short
and longer
 
term, playing a valuable role in society
Support Barclays’
 
Values and
 
culture
Results must be achieved
 
in a manner consistent with our Values. Our Values and
 
culture
should
drive the way that business is conducted
Align with risk appetite,
 
risk exposure
and
 
conduct expectations
Designed to reward employees
 
for achieving results in line with the
 
Bank’s
 
risk appetite
 
and
conduct
 
expectations
Be fair, transparent
 
and
 
as simple as
possible
We are committed
 
to ensuring pay is fair, simple and transparent for all our stakeholders. This
means all
 
employees and stakeholders should understand how we reward our employees and
fairness should be a lens through
 
which we make remuneration decisions
 
Review of
 
wider workforce policies, practices and pay
 
outcomes
During 2019,
 
the Committee formalised its approach to ensuring consideration of wider workforce interests
 
in remuneration,
 
reviewing both
remuneration
 
policies, practices and pay outcomes for
 
the wider workforce.
 
Wider workforce remuneration
 
policies were
 
reviewed
 
against
 
the following criteria:
 
 
■ The
 
Remuneration
 
Philosophy;
■ Barclays’ Fair Pay agenda;
■ Barclays’ purpose,
 
values, conduct
 
expectations and supporting long
 
-term success;
 
and
■ Executive
 
Director and senior management remuneration policies.
 
The policies were found
 
to be well
 
-aligned
 
with the criteria. The Remuneration Philosophy principles are reflected in the policies, while the themes
of our Fair Pay agenda
 
are embedded in
 
our practices. Barclays’
 
purpose, values, conduct
 
expectations and long-term success
 
are supported by
our approach
 
to performance management and
 
remuneration. Remuneration is also adjusted to take
 
account
 
of risk
 
and conduct
 
matters.
 
Wider workforce policies are also well
 
aligned with those for the Executive Directors and senior management, including the
 
setting of Fixed Pay
using market benchmarks and the determination
 
and delivery of annual discretionary incentives. Where differences occur, they are based on
policies that
 
reflect senior management’s ability
 
to influence overall business
 
outcomes (e.g. greater
 
portion of pay delivered through variable pay)
and align
 
senior colleagues
 
more closely with
 
shareholders
 
such as the delivery of some Fixed
 
Pay in shares, delivery of a high proportion of
incentives in
 
shares and the use of LTIP for the Executive
 
Directors.
 
As outlined
 
earlier,
 
the Executive Directors
 
have voluntarily
 
decided to reduce their contractual pension allowance to 5% of Fixed Pay (equivalent to
10% of Fixed cash).
 
The Committee
 
took both top
 
-down and bottom-up approaches
 
to the review of pensions, agreeing
 
to reduce the pension allowance for Executive
Directors, and also reviewing
 
the offering for the wider workforce. As
 
a result, we are enhancing
 
the employer pension contribution for c.17,500 UK
employees, i
 
ncreasing from 10% to 12%, as outlined on page 51.
 
The Committee
 
also reviewed the 2019 remuneration outcomes for the wider workforce, in particular in
 
comparison with senior management
outcomes. The
 
Committee satisfied itself that there was
 
appropriate
 
alignment. The Committee Chairman provides updates to the Board on these
matters following
 
each meeting.
 
fy2019arbplcp59i0.jpg
 
50
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Be fair, transparent and as simple as
 
possible
Paying
 
fairly and transparently is a key
 
priority
 
at Barclays and updating
 
the Remuneration Philosophy to formalise the link to the Fair Pay agenda
indicates our ongoing
 
commitment to this. The Fair Pay agenda brings together the five themes which explain how we think about fair pay at
Barclays.
 
Last year we published
 
our first standalone Fair Pay Report, which set out both our achievements and future priorities. In this year’s report, we
provide
 
an update on our progress, and details of our next prioritie
 
s.
 
We use our Fair Pay Report to engage
 
our employees on pay, explaining our
approach
 
to fair pay,
 
including the alignment of the Executive Directors’ and employee pay.
 
The infographic
 
below highlights our 2019 achievements. We encourage you to read the full Fair Pay Report and a separate Pay Gaps Report,
setting out our mandatory
 
UK Gender Pay Gap disclosure and voluntary Ethnicity Pay Gap disclosure, which can
 
both be found on
home.barclays/annualreport.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
51
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
Remuneration
 
policy
 
for all
 
employees
 
As outlined
 
on page 49,
 
Barclays has
 
a clearly articulated
 
Remuneration Philosophy. This continues to drive our thinking in how we structure and
determine
 
remuneration for all employees from the most senior (e.g. our Executive
 
Directors)
 
to our new apprentices and
 
graduates. This year we
reviewed
 
our remuneration policies and practices for alignment
 
with the Directors’ Remuneration Policy and approaches for senior management,
the long
 
-term success
 
of Barclays and the Fair Pay agenda.
 
We continue
 
to ensure that we comply with all prevailing regulation. We identify individuals who may expose Barclays to material risk,
 
and pay them
in a way which encourages
 
alignment of their interests and Barclays. Further information
 
in relation to Material Risk
 
Taker
 
s
 
(“MRTs”) is set
 
out in
Appendix
 
E of the Barclays
 
PLC Pillar 3 Report.
 
The table
 
below provides
 
a summary of the remuneration
 
approach for employees below the Board, alongside changes made during 2019.
 
Remuneration
 
features
Changes
 
in 2019
Salary
Salaries reflect
 
individuals’ skills
 
and experience
 
and are reviewed
annually.
 
They are increased
 
where justified by role change, increased responsibility
or a change
 
in the appropriate market rate. Salaries may also be
increased in
 
line with local statutory requirements and in line
 
with union
and works council
 
commitments.
 
We have been
 
a real living wage employer in the UK since 2013.
Across the UK, the roll
 
-in of permanent
allowances to salary has increased
 
the
pensionable
 
salary for c.21,000 UK employees.
 
We have introduced
 
a minimum wage of $15
per hour in the US, and have
 
engaged
 
the Fair
Wage Network to further expand
 
our living
wage coverage
 
to India, covering 93%
 
of our
population
 
globally with “living wage” initiatives.
 
For c.19,500
 
customer-facing staff in Barclays
UK, we have rebalanced
 
pay (more fixed, less
variable)
 
meaning the amount delivered as
pensionable
 
salary has
 
been further
 
increased.
Role
 
Based
Pay (RBP)
A small number
 
of senior employees (c.1% UK employees) receive a class
of fixed pay called
 
RBP to recognise the seniority, scale and
 
complexity of
their role.
 
This may change where justified by role or responsibility change
or a change
 
in the appropriate market rate.
No change
Pension and
benefits
The provision
 
of a competitive package of benefits is
 
important
 
to
attracting
 
and retaining the talented staff needed to deliver Barclays’
strategy. Employees
 
have access
 
to a range of country
 
-specific company-
funded
 
benefits, including pension schemes, healthcare, life
 
assurance
and Barclays’ share plans as well
 
as
 
other voluntary
 
employee funded
benefits.
 
The cost of providing these benefits is
 
defined
 
and controlled.
The employer
 
pension contribution is set
 
to
increase from 10% to 12% for c.17,500
 
UK
junior
 
employees, remaining at 10% for more
senior employees.
Annual bonus
Annual
 
bonuses
 
incentivise
 
and reward the achievement of Group,
business and individual
 
objectives, and reward employees for
demonstrating
 
individual behaviours in line with Barclays’ Values. All
employees are considered,
 
subject to eligibility criteria.
 
For senior employees,
 
an appropriate proportion of their incentive
 
amount
is deferred to future
 
years. Deferred bonuses are
 
generally
 
delivered in
equal
 
portions as
 
deferred cash and shares. They are subject
 
to either a 3,
5 or 7-year deferral
 
period
 
(and further holding periods of six
 
or 12 months
for deferrals in shares) in line
 
with regulatory requirements.
 
Consistent with regulation,
 
the remuneration of MRTs is subject to the 2:1
maximum
 
ratio of variable to fixed remuneration.
A new reward strategy for BUK has aligned
 
a
portion
 
of incentives for all front
 
-office Barclays
UK employees,
 
measuring success against the
same customer-focused metric
 
for all.
Share plans
We encourage
 
wider employee share ownership through the all-employee
share plans.
99% (2018: 98%) of the
 
global
 
employee
population
 
is eligible to participate.
Performance
management
Performance
 
assessment
 
is based on “what” is achieved
 
in relation to
individual,
 
team and business
 
objectives, as well as “how” this is achieved
in the context
 
of Barclays’ Values. Both elements are assessed
independently
 
of each other with no requirement to have an overall rating.
This reinforces the equal
 
importance of the “what” and “how”.
No change
Risk and
conduct
Risk and conduct
 
events are taken seriously at Barclays and the
Committee
 
ensures
 
that there are in
 
year adjustments, malus or clawback
applied
 
to individual remuneration, where appropriate.
 
In addition
 
to individual adjustments, the Committee considers collective
adjustment
 
to the incentive pool for risk
 
and conduct
 
.
For 2019,
 
the impact of collective adjustments
is a reduction
 
of c.£160m.
 
More information
 
on our approach to Performance Management, and Risk
 
and Conduct
 
are set
 
out in Appendix
 
E of the Barclays
 
PLC 2019 Pillar 3
Report, which can
 
be found
 
on home.barclays/annualreport.
 
 
 
 
 
 
 
 
 
 
 
fy2019arbplcp61i0.jpg
 
52
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
Directors’
 
remuneration
 
policy
 
 
 
Remuneration
 
policy – Executive
 
Directors
 
Element and purpose
Operation
Maximum value
 
and
performance measures
Fixed Pay
 
To
 
reward skills and
experience
 
appropriate for the
scale, complexity
 
and
responsibilities
 
of the role and
to provide
 
the basis for a
competitive
 
remuneration
package
Fixed Pay is determined
 
based on the individual’s role, skills
 
and
experience
 
with reference to market practice and market data (on which
the Committee
 
receives independent advice).
 
Executive
 
Directors’ total compensation is benchmarked against
comparable
 
roles in the following banks:
 
Bank of America, BNP Paribas,
Citigroup,
 
Credit Suisse,
 
Deutsche Bank, HSBC, JP Morgan
 
Chase & Co,
Lloyds, Morgan
 
Stanley, Standard
 
Chartered and UBS. The Committee
may amend
 
the list of comparator companies to ensure it remains relevant
to Barclays or if circumstances make this necessary (for example,
 
as
 
a
result of takeovers or mergers).
 
50% of Fixed Pay is delivered
 
in cash
 
(paid monthly), and
 
50% is
delivered
 
in shares.
 
The shares are delivered
 
quarterly and are subject to
a holding
 
period with restrictions lifting over five years
 
(20% each year).
As the Executive
 
Directors beneficially own the shares, they will be
entitled
 
to any dividends paid on those shares.
 
Risk and conduct
 
adjustment, malus and clawback provisions do not apply
to Fixed Pay.
Fixed Pay for Executive
 
Directors
 
is
set within
 
the benchmark range
determined
 
by the Committee
taking into
 
account their skills
experience
 
and performance.
 
The Fixed
 
Pay is £2,400,000 for
Jes Staley (Group
 
Chief Executive)
and £1,725,000
 
for Tushar
Morzaria
 
(Group Finance Director).
Increases will
 
normally
 
be aligned
to the annual
 
increase for UK
employees, and
 
will take into
account changes
 
in responsibilities
and market conditions.
 
There are
no performance
 
measures.
Pension
To
 
enable
 
Executive Directors
to build
 
long-term retirement
savings
Executive
 
Directors receive an annual cash allowance in lieu of
participation
 
in a pension arrangement.
 
Risk and conduct
 
adjustments, malus and clawback provisions do not
apply
 
to pension.
The maximum
 
annual cash
allowance
 
is 5% of
 
Fixed Pay
(equivalent
 
to 10% of fixed cash).
 
There are no performance
measures.
Benefits
 
To
 
provide
 
a competitive and
cost effective
 
benefits
package
appropriate
 
to the
role
and location
Executive
 
Directors’ benefits provision includes, but is
 
not restricted to,
private medical
 
cover, annual health check, life and ill health income
protection,
 
and use
 
of a Company vehicle and driver when
 
required for
business purposes (including
 
any tax liabilities that may arise from this
benefit).
 
Relocation:
 
If an Executive Director were to relocate to perform their role,
additional
 
support would be provided for a defined and limited period
of time in
 
line with Barclays’ general employee mobility policy including,
but not restricted to, the
 
provision
 
of temporary accommodation, tax
advice,
 
home leave related
 
costs,
 
payme
 
nt of removal costs
 
and
relocation
 
flights for
 
the Executive
 
Director, spouse and children. Barclays
will
 
pay the Executive
 
Director’s
 
tax on the relocation
 
costs
 
but will
 
not tax
equalise
 
and will also not pay the tax on any other employment income.
The maximum
 
value of benefits
is determined
 
by the nature of
the benefit
 
itself and costs
 
of
provision
 
may depend on
 
external
factors, e.g. insurance
 
costs.
 
 
 
 
 
 
53
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
Directors’
 
remuneration
 
policy
 
Element and purpose
Operation
Maximum value
 
and
performance measures
Annual bonus
 
To
 
reward delivery
 
of
short-
term financial
 
targets
set each
year, the individual
performance
 
of the Executive
Directors in achieving
 
those
targets, and their
 
contribution
to delivering
 
Barclays’
strategic objectives.
Delivery in
 
part in shares
with holding
 
period increases
alignment
 
with shareholders.
Deferred bonuses
encourage
 
longer term
focus and retention
Determination of annual bonus
 
Individual
 
bonuses
 
are entirely
 
discretionary and decisions are
 
based on
the Committee’s judgement
 
of Executive Directors’
 
performance
 
in the
year, measured
 
against Group
 
and personal objectives.
Delivery
 
structure
 
Annual
 
bonuses
 
are delivered
 
as
 
a combination
 
of cash and shares,
a proportion
 
of which may be deferred and/or subject to a holding period.
Deferral proportions and
 
vesting profiles will be structured so that,
in combination
 
with any LTIP
 
award, the proportion of variable pay that is
deferred is no less than that require
 
d
 
by regulations (currently 60%).
 
Deferred bonuses are granted
 
by the Committee (or an authorised sub-
committee)
 
at its discretion, subject to the relevant plan rules as amended
from time
 
to time.
 
The number
 
of deferred bonus shares
 
to be awarded will
 
be based on
a share price discounted
 
by reference to an expected dividend yield over
the vesting period,
 
where dividend equivalents cannot be awarded due to
regulations.
 
In such circumstances, the Committee has discretion to
reduce (not increase) the number
 
of shares
 
that vest if actual
 
dividends
paid
 
over the period are materially lower
 
than the original dividend
assumption.
 
A notional
 
discount may be applied to the deferred bonus awards for
 
the
purposes of calculating
 
the 2:1 cap to the extent this is permitted by
regulations
 
(currently a discount
 
is permitted on up to 25% of variable pay
where the conditions
 
for applying such a discount are met).
 
Timing of receipt
 
Non-deferred
 
cash components of any bonus are paid following
the performance
 
year to which they relate, normally in March. Non-
deferred share bonuses are also awarded
 
normally
 
in March and are
subject to a holding
 
period (after the payment of tax) in line with
regulations
 
and with release no faster than permitted
 
by regulations
(currently 1 year).
 
Deferred share bonuses are structured so that no deferred
 
shares
 
vest
faster than permitted
 
by regulations. Vesting is also subject to the
provisions of the plan
 
rules including employment and the malus and
clawback provisions. Any shares that vest are subject to an additional
holding
 
period (after payment of tax) in line with regulations and with
release no faster than permitted
 
by regulations (currently 1 year).
 
Risk and conduct
 
adjustment, malus and clawback provisions apply
to any bonus awards, as set out on page
 
55.
The maximum
 
annual bonus
opportunity
 
is 93% of Fixed Pay
(cash and shares) for the CEO and
90% of Fixed Pay (cash and
shares) for the GFD.
 
The Committee
 
will consider
the previously
 
disclosed financial
and non
 
-financial (including risk-
related
 
measures and personal
objectives) measures in
determining
 
the annual bonus for
the Executive
 
Directors.
 
Financial
factors will
 
guide at least 60% of
the bonus opportunity.
 
Any bonus is discretionary
 
and any
amount
 
may be awarded from zero
to the maximum
 
value.
 
The Committee
 
has the discretion
to vary the measures and their
respective weightings
 
within
each category.
 
The measures
and weightings
 
will be disclosed
annually
 
as
 
part of the Annual
Report on Directors’ remuneration,
at the beginning
 
of the performance
year (typically
 
February).
 
 
 
 
 
 
54
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Element and purpose
Operation
Maximum value
 
and
performance measures
Long
 
Term Incentive
Plan (LTIP)
 
award
 
To
 
incentivise
 
execution
of Barclays’ strategy over
a multi
 
-year period.
Long
 
-term performance
measurement,
 
deferral and
holding
 
periods encourage
a long
 
-term view and align
Executive
 
Directors’ interests
with those of shareholders.
Malus and clawback
provisions
discourage
excessive risk-
taking and
inappropriate
behaviours.
Determination of LTIP award
 
LTIP
 
awards are made by the Committee following
 
discussion of
recommendations made
 
by the Chairman (for the Group Chief
Executive’s LTIP
 
award) and by the Group Chief Executive (for other
Executive
 
Directors’ LTIP awards) based on satisfactory performance
over the prior year.
 
Delivery
 
structure
LTIP
 
awards are granted subject to the plan
 
rules
 
and are satisfied in
Barclays’ shares (although
 
they may be satisfied in other instruments as
may be required
 
by regulation).
 
LTIP
 
awards are structured
 
so that
 
when combined
 
with the annual
bonus the proportion
 
of variable pay that is deferred is no less
 
than
that required
 
by regulations (currently 60%).
 
For each award, forward
 
-looking performance measures are set
 
at grant
and there is no retesting allowed
 
of those conditions. The Committee
has, within
 
the parameters set
 
out across, the flexibility
 
to vary the
weighting
 
of performance measures and calibration for each award prior
to its grant.
 
The Committee
 
has discretion, and in li
 
ne with the plan rules
 
approved by
shareholders, in exceptional
 
circumstances
 
to amend
 
targets, measures,
or the number
 
of awards if an event happens (for
 
example,
 
a major
transaction) that,
 
in the opinion of the Committee, causes the original
targets or measures to be no longer
 
appropriate or such adjustment to be
reasonable.
 
The Committee also has the discretion to reduce the vesting
of any award, including
 
to nil, if it deems that the outcome is not
consistent with performance
 
delivered.
 
The number
 
of shares
 
to be awarded will
 
be based on a share
 
price
discounted
 
by reference to an expected dividend yield over the vesting
period,
 
where dividend equivalents cannot be awarded due to
regulations.
 
In such circumstances, the Committee has discretion to
reduce (not increase) the number
 
of shares
 
that vest if actual
 
dividends
paid
 
over the period are materially lower
 
than the original dividend
assumption.
 
A notional
 
discount may be applied to LTIP
 
awards for
 
the purposes
of calculating
 
the 2:1 cap to the extent this is permitted by regulations
(currently a discount
 
is permitted
 
on up to 25% of variable pay where the
conditions
 
for applying
 
such a discount are met).
 
Timing of receipt
 
Barclays LTIP
 
awards are structured so that no award vests before the
third anniversary
 
of grant and an award vests no faster than permitted
 
by
regulations
 
(currently in five equal
 
tranches with the first tranche vesting
on or around
 
the third anniversary of grant and the last tranche vesting
on or around
 
the seventh anniversary of
 
the grant date).
 
Any shares
 
that
vest are subject to an additional
 
holding period (after payment of tax) in
line
 
with regulations, with restrictions lifting no faster than permitted by
regulations
 
(currently 1 year).
Malus and clawback
 
provisions apply
 
to LTIP awards, as
 
set out on page
55.
The maximum
 
annual LTIP
award for the CEO is 140% of
Fixed Pay (cash and shares) and
134% of Fixed
 
Pay (cash and
shares for the GFD.
 
Vesting
 
is dependent on
performance
 
measures
and service.
 
Forward-looking
 
performance
measures will
 
be based on
financial
 
performance and other
long
 
-term strategic measures. The
Committee
 
has discretion
to change
 
the weightings but
financial
 
measures
 
will
 
be at least
70% of the total
 
opportunity.
 
Measures and weightings will
be set in advance
 
of each grant.
The threshold
 
and maximum level
of performance
 
for each financial
performance
 
measure will be
disclosed annually
 
as
 
part of
the Annual
 
Report on Directors’
remuneration.
 
Straight-line vesting
applies
 
between threshold and
maximum
 
for the financial
measures with no more
 
than 25%
vesting at threshold
 
performance.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
55
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
Directors’
 
remuneration
 
policy
 
Element and purpose
Operation
Maximum value
 
and
performance measures
Risk and conduct
adjustment, malus
and
 
clawback
Malus and clawback
provisions
discourage
excessive risk-
taking and
inappropriate
behaviours
 
Any bonus or LTIP
 
awarded is subject to malus and clawback provisions.
 
The malus
 
provisions enable the Committee to reduce
 
the amount
of unvested bonus or LTIP
 
(including
 
to nil) prior to vesting in specified
circumstances, including,
 
but not limited to:
 
■ a participant
 
deliberately misleading Barclays, the market and/or
shareholders in relation
 
to the financial performance of the Barclays
Group
 
■ a participant
 
causing harm to Barclays’ reputation or where his/her
actions have amounted
 
to misconduct, incompetence or negligence
■ a material
 
restatement of the financial statements
 
of the Barclays
Group or any subsidiary, or the Group
 
or any business unit suffering
 
a
material
 
downturn in its financial performance
 
■ a material
 
failure of risk
 
management
 
in the Barclays
 
Group
 
■ a significant
 
deterioration in the financial health of the Barclays Group.
 
The clawback provisions
 
enable amounts to be recovered after they
 
have
vested (for a period of seven years from grant/10
 
years in circumstances
where a relevant
 
investigation is ongoing
 
at the end of the initial seven
year period) where (i) a participant’s actions
 
or omissions have amounted
to misbehaviour
 
or materi
 
al error
 
and/or (ii) Barclays or the relevant
business unit has suffered a material
 
failure of risk
 
management.
All employee share
 
plans
 
To
 
provide
 
an opportunity
for Executive
 
Directors to
voluntarily
 
invest in the
Company
 
through UK HMRC
employee
 
tax advantaged
share schemes
Executive
 
Directors are entitled to participate in:
 
(i) Barclays Sharesave under
 
which they can make monthly savings out
of post-tax pay over a period
 
of three or five years linked to the grant of
an option
 
over Barclays’ shares
 
which can be at a discount
 
of up to 20%
on the share price set at the start.
 
(ii) Barclays Sharepurchase
 
under which
 
they can make contributions
(monthly
 
or lump sum) out of pre-tax pay (if based in the UK) which are
used to acquire
 
Barclays’ shares.
(i) Savings between
 
£5 and the
maximum
 
set by
 
Barclays (which
will
 
be no more than the HMRC
maximum)
 
per month. There are
no performance
 
measures.
 
(ii) Contributions
 
of between
 
£10
and the maximum
 
set by
 
Barclays
(which will
 
be no more than the
HMRC maximum)
 
per tax year
which Barclays may match
 
up to
HMRC maximum
 
(current match is
£600). There
 
are no performance
measures.
Outside appointments
To
 
encourage
 
self-
development
Executive
 
Directors may accept one Non
 
-Executive
 
Director Board
appointment
 
in another listed company.
 
The Chairman’s approval
 
must
 
be sought before
 
accepting an
appointment.
 
Fees may be retained by the Executive Director. Neither
of the Executive
 
Directors currently hold an outside appointment.
Not applicable.
 
 
 
 
 
 
 
56
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Element and purpose
Operation
Maximum value
 
and
performance measures
Shareholding
requirement
To
 
further enhance
 
the
alignment
 
of shareholders’
and Executive
 
Directors’
interests in long
 
-term
value
 
creation
 
Executive
 
Directors have a contractual obligation to build up a shareholding
equivalent
 
to the maximum variable pay opportunity within five years
 
from the
date of appointment
 
as
 
Executive
 
Director, i.e.:
■ Group
 
Chief Executive:
 
233% of Fixed Pay
 
■ Group
 
Finance
 
Director: 224% of Fixed Pay
 
Executive
 
Directors will have a reasonable period to build up to this
requirement
 
again if it is not met because of a significant share price
depreciation.
 
Executive
 
Directors also have a contractual obligation to maintain their
shareholding
 
for two years
 
following
 
the last day of active service as
 
follows:
 
(i)
 
if the Executive
 
Director has
 
been employed
 
for more than five years:
233% of Fixed
 
Pay for the CEO and 224% of Fixed
 
Pay for the GFD; or
 
(ii)
 
if the Executive
 
Director has
 
been em
 
ployed for less
 
than five
 
years:
either
 
(a)
 
grow their holding
 
to the pro-rated requirement if the pro-rated
requirement
 
has not been met. Directors would only be allowed to
sell shares to pay for tax liabilities
 
which crystallise when deferred
awards vest on or after termination;
 
or
 
(b)
 
if the pro-rated requirement
 
has been exceeded, Executive Directors
would be
 
allowed
 
to sell shares
 
above this requirement
 
and also sell
shares to pay for tax liabilities which
 
crystallise when deferred awards
vest on or after termination.
 
Shares that count toward
 
s
 
the requirement
 
are beneficially owned shares
including
 
any vested share awards
 
subject only
 
to holding periods (including
vested LTIPs, vested deferred
 
share bonuses, Fixed pay shares, and any
legacy
 
RBP shares). Shares
 
from unvested deferred
 
share bonuses
 
and
unvested LTIPs
 
do not count towards the requirement
 
during employment,
but will
 
count towards post-termination requirements (net of tax) provided that
there are no remaining
 
untested performance conditions.
Barclays’ shares worth a
minimum
 
of 233% of Fixed Pay
for the CEO and 224%
 
of Fixed
Pay for the GFD must be held
within
 
five years, as
 
well as for
two years post-termination
(or pro-rata thereof) commencing
from last day in office.
 
Performance measures and targets
The Committee
 
selects financial performance measures which are fundamental to delivery against the Bank’s
 
strategy and
 
are considered to be the
most important
 
financial measures used
 
by the Executive
 
Directors
 
to oversee the direction
 
of the business.
 
The non
 
-financial performa
 
nce
measures and sources of data are chosen to represent key indicators
 
of sustainable performance, aligned with
 
strategy and culture, that are
robustly monitored
 
and reported on to management. The measures are determined in consultation with major shareholders.
 
Financial
 
targets
 
are set
 
to be stretching
 
but achievable and
 
are aligned to enhancing shareholder value. In respect of the LTIP,
 
the financial
measures, weightings
 
and targets will be disclosed at the start of the relevant
 
performance period. In respect of the annual bonus, the financial
measures and weightings will
 
be disclosed at the start
 
of the relevant
 
performance year. The Committee is of the opinion that the financial targets
for the annual
 
bonus are commercially sensitive in respect of the Company and that it would be detrimental to disclose details at the start
 
of the
relevant
 
performance year. Performance
 
against the targets will be disclosed at the end of the relevant performance year in that year’s
remuneration
 
report, subject to commercial sensitivity no longer remaining.
 
The Performance
 
Measurement Framework assesses
 
progress against
 
our key
 
strategic and non
 
-financial goals. The evaluation will focus on key
performance
 
measures
 
with a detailed
 
retrospective disclosure on progress
 
throughout
 
the period against each category, together with supporting
rationale
 
for payments.
 
 
57
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
Directors’
 
remuneration
 
policy
 
Alignment between
 
the Executive
 
Directors’ remuneration policy and all
 
employees policy of
 
the Group
 
The structure of remunerati
 
on packages
 
for Executive
 
Directors
 
is closely aligned
 
with that for the broader employee population. Employees receive
salary, pension
 
and benefits and
 
are eligible to be considered for a bonus and to participate in all
 
-employee
 
share plans. The broader employee
population
 
typically does not have a contractual limit on the quantum of remuneration and does not receive Role Based Pay (“RBP”) which is paid
only to some, but not
 
all, MRTs
 
and other senior employees.
 
As with Executive
 
Directors, variable pay for the broader employee population is performance based. Variable
 
pay for Executive Directors and the
broader employee
 
population is subject to deferral requirements. Executive Directors
 
and other MRTs
 
are subject to deferral
 
at a minimum rate of
40% (for variable
 
pay of less
 
than £500,000)
 
or 60% (for variable pay between £500,000 and £1,000,000). For non
 
-MRTs, bonuses in excess
 
of
£65,000
 
are currently subject to a graduated level of deferral. The terms of deferred bonus awards
 
for Executive
 
Directors and the wider employee
population
 
are broadly the same, in particular the vesting of all deferred bonuses is subject to service and malus conditions. The broader employee
population
 
does not participate in the Barclays LTIP.
 
While we have
 
not sought employee
 
views
 
on the DRP, we have considered
 
all employee policies when reviewing the DRP and have explained the
DRP changes in our Fair Pay Report.
 
How shareholder views
 
are taken into account
 
by the Committee
 
in setting the policy
 
We recognise
 
that remuneratio
 
n
 
is an area of particular interest to shareholders and that in setting and considering changes to remuneration,
 
it is
important
 
that we listen to and take
 
into account
 
their views. Accordingly, a series of meetings are held each year with major shareholde
 
rs
 
and
shareholder
 
representative groups. The Committee Chairman attended these meetings, accompanied
 
by senior Barclays’
 
employees (including
 
the
Group Reward and Performance
 
Director and the Group Company Secretary).
 
In developing
 
the new policy, we con
 
sulted shareholders during 2019. The Committee notes that shareholder views on some matters are not
always unanimous;
 
however,
 
the interactions are constructive and insightful. The engagement is meaningful and helpful
 
to the Committee in its
work and contr
 
ibutes directly to the
 
decisions
 
made by the
 
Committee.
 
Discretion
 
In addition
 
to the various operational discretions that the Committee can exercise in the performance of its duties (including those discretions set out
in the Company’s share plans), the Committee
 
reserves
 
the right to make either minor
 
or administrative amendments to the policy to benefit its
operation
 
or to make more material amendments
 
in order to comply with
 
new laws, regulations
 
and/or regulatory guidance.
 
The Committee would
only exe
 
rcise this right if it believed it was in the best interests
 
of the Company
 
to do so
 
and where it is not possible, practicable
 
or proportionate to
seek or await
 
shareholder approval
 
in General Meeting.
 
Provisions of previous policy
 
which
 
will
 
continue to apply
 
For the avoidance
 
of doubt, any awards granted under the previous directors’ remuneration policy which have not yet vested shall continue to be
capable
 
of vesting on their normal vesting schedule.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
58
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Executive
 
Directors’ policy
 
on recruitment
Barclays operates in a highly
 
specialised sector and many of its competitors for
 
talent
 
are outside of the UK. The Committee’s
 
approach
 
to
remuneration
 
on recruitment is to pay the amount necessary
 
to attract the best candidates to the role.
 
Approval
 
of the remuneration packages offered on appointment to any new Executive Director is a specific requirement
 
of the Committee’s Terms
of Reference.
 
The terms of such packages must be approved by the Committee in
 
consultation with the Chairman and (except for the
 
terms
 
of his
own remuneration)
 
the Group Chief Executive.
 
Any new Executive
 
Director’s package would include the same elements as
 
those of the existing
 
Executive Directors, as shown
 
below.
 
Element and purpose
Commentary
Maximum value
Fixed Pay
Determined
 
by skills,
experience,
 
market
practice,
market conditions
and ability
to recruit.
Determined
 
by skills
 
and experience
 
appropriate for the
scale, complexity
 
and responsibilities of the role, and by
market practice, market conditions and
 
ability to recruit.
 
In line
 
with financial regulations, Fixed Pay is a derivative
of total
 
compensation.
 
Executive Directors’
 
total
compensation
 
is benchmarked against comparable roles
in the following
 
banks: Bank
 
of America,
 
BNP Paribas,
Citigroup,
 
Credit Suisse,
 
Deutsche Bank, HSBC, JP
Morgan
 
Chase & Co,
 
Lloyds, Morgan
 
Stanley, Standard
Chartered and
 
UBS. The Committee may amend the
 
list
of comparator
 
companies to ensure it remains relevant to
Barclays or if circumstances make this necessary (for
example,
 
as
 
a result of takeovers or
 
mergers).
As determined
 
by the Committee with reference
to these factors. Fixed Pay will
 
only exceed amounts
paid
 
to current Executive Directors, as considered
reasonable
 
by the Committee, by reference to
these factors.
Once ap
 
pointed, increases will normally be aligned
to the annual
 
increase for UK
 
employees, and
 
will
take into
 
account cha
 
nges
 
in responsibilities and
market conditions.
Pension
In line
 
with policy
In line
 
with policy
Benefits
In line
 
with policy
In line
 
with policy
Annual bonus
In line
 
with policy
In line
 
with policy
Long
 
Term Incentive
Plan
(LTIP) award
In line
 
with policy
In line
 
with policy
Buy-out
The Committee
 
can consider buying out forfeited bonus
opportunity
 
or incentive awards that the new Executive
Director has forfeited
 
as
 
a result of accepting the
appointment
 
with Barclays, subject to proof of forfeiture
where applicable.
 
As required by the PRA Remuneration
 
Rules, any award
made
 
to compensate for forfeited
 
remuneration from the
new Executive
 
Director’s previous employment may not
be more generous than,
 
and must mirror as
 
far as
possible the expected
 
value, timing and form of delivery
of, the terms of the forfeited
 
remuneration and must be in
the best long
 
-term interests
 
of Barclays. Barclays’
deferral
 
policy shall
 
however apply as
 
a minimum
 
to any
buy-out of annual
 
bonus opportunity.
The value
 
of any buy-out is not included within the
maximum
 
incentive levels above since it relates to a
buy-out of forfeited
 
bonus opportunity or incentive
awards from a previous employer.
 
Where a senior executive
 
is promoted to the Board, his
 
or her existing contractual
 
commitments agreed prior to his
 
or her appointment
 
may still be
honoured
 
in accordance with the terms of the relevant commitment, including vesting of any pre-existing deferred bonus or long
 
-term incentive
awards.
 
 
 
 
 
 
 
 
 
 
 
 
 
59
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
Directors’
 
remuneration
 
policy
 
Executive
 
Directors’ policy
 
on payment
 
for loss of
 
office (including
 
or following
 
a takeover)
 
The Committee’s approach
 
to payments in the event of termination is to take
 
account
 
of the individual circumstances including the
 
reason for
termination,
 
individual performance, contractual obligations and the terms of the deferred bonus plans and LTIPs in
 
which the Executive Director
participates.
 
Provisions relating to Executive
 
Directors’ termination
 
 
Standard
 
provision
Commentary
Maximum value
Notice periods
 
in
Executive Directors’
service
 
contracts
For existing
 
Executive Directors, 12 months’ notice
 
from
the Company
 
and six months’ notice from the Executive
Director.
 
For new Executive
 
Director hires, six
 
months’ notice
 
from
the Company
 
and six months’ notice from the Executive
Director.
Executive
 
Directors may be required to work
 
during
the notice
 
period or may be placed on garden leave
or, if not required
 
to work
 
the full
 
notice period,
 
may
be provided
 
with pay in lieu of notice (subject to
mitigation
 
where relevant).
Pay during
 
notice
period
 
or payment in
lieu of
 
notice per
service
 
contracts
Fixed Pay payable
 
and continuation of pension allowance
and other contractual
 
benefits while an employee during
notice
 
period.
Fixed Pay delivered
 
in cash
 
is payable
 
in phased
instalments
 
(or lump sum) and subject to mitigation
if paid
 
in instalments and Executive Director obt
 
ains
alternative
 
employment during the notice period or
while
 
on garden leave.
Fixed Pay delivered
 
in shares
 
is delivered
 
on the
next quarterly
 
delivery date and is pro-rated for the
number
 
of days from the start
 
of the relevant
 
quarter
to the termination
 
date. Where Barclays elects to
terminate
 
the employment with immediate effect by
making a payment
 
in lieu of notice, the Executive
Director will
 
not receive any shares that would
otherwise have been
 
payable during the period for
which the payment
 
in lieu is
 
made
 
(unless
 
required
otherwise by regulations
 
or local law).
In the event of termination
 
for gross
 
misconduct
neither
 
notice nor payment in lieu of notice is given.
Treatment
 
of
annual
 
bonus
on termination
No automatic
 
entitlement to bonus on termination, but
may be considered
 
at the Committee’s discretion, pro-
rated for service, and subject to performance
 
measures
being
 
met.
 
No bonus would
 
be payable in the case of gross
misconduct
 
or resignation.
 
 
 
 
 
 
 
 
 
 
 
60
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Standard
 
provision
Commentary
Maximum value
Treatment
 
of
unvested
 
deferred
bonus awards
In the case of death
 
or if the Executive Director is an
‘eligible
 
leaver’ the Executive Director would continue to
be eligible
 
to be considered for unvested portions of
deferred awards, subject to the rules of the relevant
 
plan,
unless the Committee
 
determines otherwise in
exceptional
 
circumstances.
 
‘Eligible leaver’ is defined as
leaving
 
due to injury, disability or ill health, retirement,
redundancy,
 
the business
 
or company which
 
employs the
Executive
 
Director ceasing to be part of the Group or the
employer
 
terminating employment, other than in
circumstances which amount
 
to gross
 
misconduct
 
or
dismissal for cause. In addition,
 
the Committee will apply
its discretion
 
to treat resignation on or after the fifth
anniversary of the date
 
of grant as ‘eligible leaver’ status.
Outstanding
 
deferred bonus awards
 
would lapse
 
if the
Executive
 
Director leaves by reason of resignation prior
 
to
fifth anniversary,
 
is terminated for gross misconduct or
cause, or is otherwise not designated
 
an ‘eligible leaver’.
 
Deferred awards are subject to malus
 
provisions which
enable
 
the Committee to reduce the vesting level of
deferred bonuses (including
 
to nil) and once vested are
subject to clawback provisions (as describe
 
d
 
above).
In the event of a takeover or other major
 
corporate event,
the Committee
 
has absolute discretion to determine
whether all
 
outstanding awards would vest early or
whether they should
 
continue in the same or revised form
following
 
the change of control. The Committee may also
determine
 
that participants may exchange existing
awards for awards over shares in an
 
acquiring
 
company
with the agreement
 
of that company.
In an ‘eligible
 
leaver’ situation, deferred bonus
awards may be considered
 
for release in full on the
scheduled
 
release dates unless
 
the Committee
determines otherwise
 
in exceptional circumstances.
On death,
 
awards are accelerated
 
and released in
full.
 
After release, the shares
 
are subject to an
additional
 
holding period to the extent required by
regulations
 
(currently a minimum 12 month
 
holding
period
 
applies).
Treatment
 
of
unvested
 
awards
under
 
the LTIP
In the case of death
 
or if the Executive Director is an
‘eligible
 
leaver’ the Executive Director would continue to
be entitled
 
to be considered for an award. ‘Eligible leaver’
is defined
 
as
 
leaving
 
due to injury, disability or ill health,
retirement,
 
redundancy, the business or
 
company
 
which
employs the
 
Executive Director ceasing to be part of the
Group or for any other reason if the
 
Committee decides at
its discretion.
 
In addition, the Committee will apply its
discretion
 
to treat resignation on or after the
fifth anniversary of the date
 
of grant as ‘eligible leaver’
status. Outstanding
 
unvested awards under the LTIP
would lapse
 
if the
 
Executive Director leaves by reason of
resignation
 
prior to fifth anniversary, is terminated for
gross misconduct,
 
or is
 
otherwise not designated
 
an
‘eligible
 
leaver’.
Awards are subject to malus provisions which
 
enable
 
the
Committee
 
to reduce the vesting
 
level of awards
(including
 
to nil) and once vested, awards are subject to
clawback provisions (as described above).
In the event of a takeover or other major
 
corporate event
(but excluding
 
an internal reorganisation of the Group),
the Committee
 
has absolute discretion to determine
whether all
 
outstanding awards vest
 
subject to the
achievement
 
of any performance conditions.
 
The
Committee
 
has discretion to apply a pro-rata reduction to
reflect the
 
unexpired
 
part of the vesting period. The
Committee
 
may also determine that participants
may exchange
 
awards for
 
awards over shares in an
acquiring
 
company with the agreement of that company.
In the event of an internal
 
reorganisation, the Committee
may determine
 
that outstanding awards will be
exchanged
 
for equivalent awards in another company.
In an ‘eligible
 
leaver’ situation awards may be
considered
 
for release on the scheduled release
date. On death,
 
awards are accelerated. In both
cases, awards are pro-rated for time
 
(over the whole
performance
 
period, including the assessment
period
 
prior to grant) and performance, subject to
the Committee’s discretion
 
to determine otherwise,
in accordance
 
with the plan rules, as
 
amended
 
from
time
 
to time. After release, the shares are
 
subject to
an additional
 
holding period to the extent required
 
by
regulations
 
(currently a minimum 12 month
 
holding
period
 
applies).
 
 
 
 
 
 
 
 
 
 
fy2019arbplcp70i0.jpg
 
61
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
Directors’
 
remuneration
 
policy
 
Standard
 
provision
Commentary
Maximum value
Repatriation
Except in the
 
case of gross misconduct or resignation,
where an Executive
 
Director has been relocated at the
commencement
 
of employment, the Company may pay
for the Executive
 
Director’s repatriation costs
 
in line
 
with
Barclays’ general
 
employee mobility
 
policy including
temporary
 
accommodation, payment of remo
 
val costs
and relocation
 
flights for
 
the Executive
 
Director, spouse
and children.
 
The Company will pay the Executive
Director’s tax on the relocation
 
costs
 
but will
 
not tax
equalise
 
and will also not pay tax on his or her other
income
 
relating to the termi
 
nation of employment.
Other
Except in the
 
case of gross misconduct or resignation,
the Company
 
may pay for the Executive Director’s legal
fees and tax advice
 
relating to the termination of
employment
 
and provide outplacement services. The
Company
 
may pay the Executive Director’s tax on these
particular
 
costs.
 
Illustrative scenarios for Executive
 
Directors’ remuneration
The charts below show the potential
 
value of the current Executive Directors’
 
2020 total
 
remuneration in three main scenarios: ‘Minimum’ (i.e. Fixed
Pay, Pension
 
and benefits), ‘Mid
 
-point’ (i.e. Fixed Pay, Pension, benefits and 50% of the maximum variable pay that may
 
be awarded) and
‘Maximum’
 
(i.e. Fixed Pay, Pension, benefits and the maximum variable pay that may be
 
awarded). For the purposes
 
of these charts, the value of
benefits
 
is based on an estimated annual
 
value for 2020 regular contractual benefits.
 
Additional
 
ad hoc benefits
 
may arise, for example,
 
overseas
relocation
 
of Executive Directors, but will always be provided in line with the DRP.
 
 
A significant
 
proportion of the potential remuneration of the Executive Directors is
 
variable
 
and is therefore performance related. It is also subject to
deferral,
 
additional holding periods, malus and clawback. In line
 
with the new reporting requirements,
 
we have provided an indication of the
maximum
 
remuneration receivable, assuming share price appreciation of 50% on the LTIP.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
62
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Remuneration
 
policy – Non-Executive
 
Directors
 
Element and purpose
Operation
Maximum value
Fees
Reflect individual
 
responsibilities
and membership
 
of Board
Committees and
 
are set
 
to
attract
Non-Executive
 
Directors
who
have relevant
 
skills
 
and
experience
 
to oversee the
implementation
 
of our strategy
 
Fees are set at a level
 
which
reflects the role, responsibilities
and time
 
commitment which
are expected
 
from the Chairman
and Non
 
-Executive Directors
The Chairman
 
is paid an all
 
-inclusive
 
fee for all Board
responsibilities.
 
The Chairman has a
 
time
commitment
 
equivalent of up to 80% of a full
 
-time
role. The
 
other Non-Executive Directors receive a
basic Board fee, with
 
additional fees payable where
individuals
 
serve as
 
a member
 
or Chairman
 
of a
Committee
 
of the Board.
Fees are periodically
 
reviewed by the Board.
Some Non
 
-Executive Directors may also receive fees
as directors of subsidiary companies
 
of Barclays
PLC. In the case of certain
 
subsidiary appointments,
such additional
 
remuneration is
 
approved
 
by the
Barclays PLC Board Remuneration
 
Committee.
Fees are reviewed against
 
those for Non-
 
Executive
Directors in companies
 
of similar size and complexity.
Othe
 
r
 
than in exceptional
 
circumstances, fees will not
increase by more than
 
20% above the current fee
levels during
 
this
 
policy
 
period.
Benefits
To
 
provide
 
a competitive and
cost effective
 
benefits package
appropriate
 
to the role
and location
The Chairman
 
is provided with private medical cover subject to the terms of the Barclays’ scheme rules from
time
 
to time, and is provided with
 
the use
 
of a Company vehicle and
 
driver when required for business
purposes (including
 
settlement of any tax liabilities
 
that may arise from this benefit).
Benefits which
 
are minor in nature and in any event do not exceed a cost of £500 may be provided to Non-
Executive
 
Directors in specific circumstances.
Non-Executive
 
Directors
 
are not eligible
 
to join Barclays’
 
pension plans.
Expenses
The Chairman
 
and Non-Executive Directors are reimbursed for any reasonable and appropriate expenses
incurred for business reasons. Any tax that arises on these reimbursed
 
expenses is
 
paid
 
by Barclays.
Bonus and
 
share plans
The Chairman
 
may be invited to participate in Sharesave, an HMRC employee tax advantaged
 
share scheme,
due to the level
 
of his time commitment to the role. The Chairman is not eligible to participate in any other
Barclays’ cash, share or long
 
-term incentive
 
plans.
All other
 
Non-Executive Directors are not eligible to participate in
 
Barclays’
 
cash, share
 
or long
 
-term incentive
plans.
Shareholding
requirements
Chairman:
 
£100,000 (Non-Executive Directors: £30,000) gross
 
before deduction
 
of tax and other statutory
deductions per annum
 
of each Non-Executive Director’s
 
basic fee is used to purchase Barclays’ shares which
are retained
 
on the Non-Executive Director’s
 
behalf
 
until they retire from the Board.
Notice and
 
termination
provisions
Each non
 
-executive Director’s
 
appointment
 
is for
 
an initial
 
three year term, renewable at Barclays’
 
discretion
for a further term of three years thereafter
 
and subject to annual
 
re-election by shareholders. Non-Executive
Directors appointed
 
beyond six
 
years will be at the discretion of the Board
 
Nominations
 
Committee.
Notice period
 
Chairman:
 
Six months from the Company (six
 
months from the Chairman).
Termination payment policy
The Chairman’s appointment
 
may be terminated by Barclays on six
 
months’ notice
 
or immediately in
which case six months’ fees are payable
 
in instalments at the times they would have been received had the
appointment
 
continued, but subject to mitigation if he or she
 
were to obtain
 
alterna
 
tive employment. No
continuing
 
payments of fees
 
(or benefits) are due if a Non-Executive
 
Director is not re-elected by shareholders
at the Barclays AGM.
 
In accordance
 
with the policy table above,
 
any new Chairman would be paid an all-inclusive fee only and any new Non-Executive Director would be
paid
 
a basic fee for their appointment
 
as
 
a Non-Executive Director, plus fees for their participation
 
on and/or chairing of any Board committees, time
apportioned
 
in the first year
 
as
 
necessary. No sign
 
-on payments are offered
 
to Non-Executive Directors.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
63
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
Annual
 
report on
 
Directors’
 
remuneration
 
This section explains
 
how our Directors’ remuneration policy was implemented
 
for 2019.
 
Executive
 
Directors
 
 
Executive
 
Directors: Single total figure for 2019 remuneration
 
(audited)
 
The following
 
table shows
 
a single
 
total figure for 2019 remuneration in respect of qualifying
 
service for each Executive Director together with
comparative
 
figures for 2018.
 
1) Fixed Pay
£000
2) Pension
£000
3) Taxable
benefits
£000
Total
Fixed
Pay
£000
4) Annual
bonus
£000
5) LTIP
£000
6) Reduction
of unvested
deferred awards
£000
Total
Variable
Pay
£000
Total
£000
Jes Staley
2019
2,350
396
58
2,804
1,647
1,478
a
3,125
5,929
 
2018
2,350
396
55
2,801
1,061
(500)
d
561
3,362
Tushar Morzaria
2019
1,650
200
53
1,903
1,123
942
a
2,065
3,968
 
2018
1,650
200
49
1,899
729
845
b,c
1,574
3,473
 
Notes
a
 
The LTIP amounts
 
include a
 
14% share price
 
depreciation
 
between date
 
of grant and
 
vesting date (based
 
on Q4 2019
 
average price)
b
 
The LTIP amount includes a 4% share price
 
depreciation
 
between date
 
of grant and
 
vesting date
 
c
 
LTIP and dividend equivalent figures for 2018
 
have been
 
adjusted to reflect
 
the share price
 
on the date
 
of vesting (1.60p)
 
rather than the Q4
 
2018 average
 
price and
additional dividend paid in February
 
2019.
d
 
As previously disclosed, malus was
 
applied to Jes Staley’s
 
2016 variable
 
compensation.
 
Additional information in respect of
 
each element
 
of pay for the
 
Executive
 
Directors (audited)
1) Fixed Pay
Fixed Pay is delivered
 
50% in cash and 50% in shares
 
(subject to a five
 
-year holding period lifting pro rata).
 
2) Pension
 
Executive
 
Directors are paid cash in lieu of pension contributions. The pension cash allowance in
 
2019 was
 
£396,000
 
for Jes
 
Staley
 
and £200,000
for Tushar Morzaria.
 
No other benefits were received by the Executive Directors from any Barclays’ pension
 
plan.
 
3) Taxable benefits
 
Taxable
 
benefits
 
include
 
private medical cover, life assurance, income protection, tax advice, car allowance and
 
the use
 
of a Company vehicle and
driver when required
 
for business
 
purposes.
 
4) Annual bonus
 
The bonus amount
 
included in the single total figure is the value awarded or scheduled to be awarded in Q1 following the financial year to which it
relates. The
 
Committee considered
 
the Executive Directors’
 
performance against the
 
financial (60% weighting) and strategic non
 
-financial (20%
weighting)
 
performance measures which had been set to reflect company
 
priorities
 
for 2019. Perform
 
ance
 
against their individual personal
objectives (20% weighting)
 
was
 
assessed on an individual
 
basis.
 
The approach
 
taken to assessing
 
financial
 
performance against each of the financial measures was
 
based on a straight
 
-line outcome between 20%
for threshold performance
 
and 100% applicable to each measure for achievement of maximum performance. A summary of the assessment
 
is
provided
 
in the following table:
 
 
2019 Outcome
 
Threshold
Maximum
2019
Jes
Tushar
Performance measure
Weighting
(20%)
(100%)
Actual
Staley
Morzaria
Profit before
 
tax excluding L&C and other
material
 
items
a
with CET1 ratio underpin
50%
£5.5bn
£6.3bn
£6.2bn
45.3%
45.3%
Cost: income
 
ratio excluding L&C and other
material
 
items
10%
64.6%
62.2%
62.8%
8.0%
8.0%
Strategic
20%
Performance
 
against strategic measures, organised
around three
 
main categories Customers
 
and Clients,
Colleagues
 
and Society.
14%
14%
Personal
20%
Individual
 
performance against each of the Executive
Directors’ personal objectives
 
assessed
 
by the
Committee.
16%
17%
Total
83.3%
84.3%
Final outcome following Remuneration Committee discretion
75.0%
75.9%
 
Note
 
a
 
No other material items in 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
64
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
Strategic
 
(20% weighting)
Progress in relation
 
to each of the strategic measures, organised around three main categories, was
 
assessed by the Committee.
 
Within each of
the three categories, the
 
overall outcome was assessed based on the following scale: 0% to 1% Behind track on most measures, 1.5% to 3%
Slightly
 
behind track on most
 
measures, 3.5% to 5.5%
 
On track or slightly
 
ahead of track for
 
most measures, and 6% or 7% Ahead of track on most
measures. On this basis, the Committee
 
agreed an overall outcome of 14% out of a maximum of 20%. The detail supporting this assessment
 
is
provided
 
in the table below:
 
Customers and
 
Clients
Measure
Criteria
Performance
Commentary
Outcome
Net Promoter
Scores® (NPS)
Barclays UK: +18
Barclaycard
 
UK:
+10
Barclays UK: +18 (+17 in 2018
 
and
+14 in 2017)
 
Barclaycard
 
UK: +11(+9 in
 
2017/18)
 
Further positive
 
progress
 
made in
 
Barclays UK
 
 
Barclaycard
 
UK progressed
 
significantly
On track
Global
 
Markets
ranking
Continued
improvement
6
th
(up from 7
th
in 2018)
 
In FY2019,
 
Barclays increased its market share
across Global
 
Markets
 
and gained
 
a rank
 
to #6
globally
 
from #7 in FY18 per Coalition
Institutional
 
Client Analytics (
Source: Coalition
FY19 vs FY18 Preliminary Competitor
 
Analysis.
Market share represents Barclays’
 
share of the
total
 
industry revenue
 
pool)
On track
UK and US
investment
banking
 
division
ranking
5th
5th, improving
 
one rank
 
on 2018
 
Ongoing
 
progress
 
in gaining
 
fee share and
revenue in
 
both Advisory and Equity
Underwriting
 
(Dealogic)
On track
Complaints
Down 10%
excluding
 
PPI in
Barclays UK
Down 8% excluding
 
PPI in Barclays
UK
 
Continued
 
reduction in customer pain points,
leading
 
to a significant reduction in complaint
volumes,
 
just below target
 
level
Slightly
behind
track
Lending
 
volumes
£25.5bn
 
completed
mortgages
£25.5bn
 
completed mortgages
(£23bn+
 
in 2018)
 
Achieved
 
desired lending volumes despite
challenging
 
environment
On track
Digital
Increase digitally
active customers
Barclays UK: 11.4m
 
digitally active
customers (10.8m
 
in 2018)
 
Consumer, cards and
 
payments:
71% (2018: 66%)
 
The Barclays App
 
is the most used
 
mobile
banking
 
app in UK
Ahead
 
of
track
Total Customers and Clients : 4.5%
Colleagues
Measure
Criteria
Performance
Commentary
Outcome
Diversity
28% women
 
in
senior leadership
 
by
2021
25% in 2019,
 
increasing one
percentage
 
point from 2018 and
two points from 2017
 
Percentage
 
of women on Board at 33%, in line
with 2020
 
target
 
 
34% female
 
graduate hires
 
 
Awards include
 
The Times Top
 
50 Employers
for Women, Stonewall
 
Top Global
 
Employer for
LGBT colleagues
 
and the National Organization
on Disability
 
Leading Disability Employer’s
 
Seal
(US)
On track
Inclusion
Performance
assessed in light
 
of
broader context
80% of respondents in our Your
View survey would
 
recommend
Barclays as a good
 
place
 
to work
85% said they felt
 
included in
 
their
team
 
‘Inclusion’
 
was
 
in the top 6 terms used by
colleagues
 
to describe Barclays in our Your
View survey
On track
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
65
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
Annual
 
report on
Directors’
 
remuneration
 
Colleagues
Measure
Criteria
Performance
Commentary
Outcome
Engagement
Performance
assessed in light
 
of
broader context
Overall
 
engagement score from
Your View
 
survey 77%, down 2%
from 2018
 
80% would
 
recommend Barclays
as a good
 
place
 
to work
 
While
 
a small decline is not what we want to
see, this reduction
 
in a challenging year is
driven by lower scores relating
 
to tools and
resources, an area of significant
 
ongoing
focus and investment
 
 
Other indicators were very positive,
 
for
example,
 
86% of colleagues
 
are proud of our
contribution
 
to the community and society
 
 
The ‘supporting
 
wellbeing’ category also
received
 
positive feedback, with 74% saying
that Barclays supports employee
 
efforts to
enhance
 
their wellbeing, and 80% that
managers also support these efforts
Behind
 
track
Conduct and
culture
Performance
assessed in light
 
of
broader context
92% of employees in
 
Your View
Survey believe
 
that they and their
teams demonstrate
 
the values
 
87% of colleagues
 
believe strongly
in the goals and
 
objectives of
Barclays
 
The top
 
ten terms used by colleagues in the
Your View
 
survey to describe Barclays are all
positive,
 
with the number one term being
‘customer satisfaction’. We also have three
new entries which are ‘inclusion’,
 
‘personal
accountability’
 
and ‘ethical’
 
 
89% of employees beli
 
eve that
 
Barclays is
focused on good
 
customer and client
outcomes
On track
Total Colleagues
 
: 3.5%
Society
Measure
Criteria
Performance
Commentary
Outcome
Environmental
 
and
social financing
£150bn
 
by 2025
£34.8bn
 
(£28.5bn in 2018)
 
Good progress toward our environmental
 
and
social financing
 
commitment
 
 
Environmental
 
financing grew by 45% year-
on-year to a total
 
of £7.8bn
 
(2017: £5.3bn).
On track
Global
 
carbon
emissions
reduction
80% reduction
 
by
2025
53% reduction
 
against the 2018
baseline
 
Performance
 
driven by the purchase of
renewable
 
energy contracts across
 
our
operations
 
in the UK & Europe and
 
is in line
with our RE100 commitment.
Ahead
 
of
track
LifeSkills
10 million
 
people
upskilled
 
2018
 
-2022,
2 million
 
in 2019
2.3m
 
Good progress towards 2022
 
target
Ahead
 
of
track
Connect with
 
Work
250,000
 
people
placed
 
into work
2018
 
-2022, 62,500
 
in
2019
66,000
 
people helped into work
 
Connec
 
t
 
with Work supports people
 
who face
barriers getting
 
into work
Ahead
 
of
track
Unreasonable
Impact
(partnership with
the Unreasonable
Group)
Support
 
250
businesses solving
social and
environmental
challenges
 
(2016-
2022)
124 growth
 
-stage ventures had
joined
 
the programme by end 2019
 
The programme
 
provides advice and guidance
from a community
 
of world-class
 
mentors and
industry specialists, including
 
Barclays
colleagues.
Ahead
 
of
track
Building
 
Thriving
Local
 
economies
2022 target
 
of four
pilot
 
studies
Three pilots launched
 
2018-2019
 
On track to deliver
 
against 2022 target
On track
Total Society : 6.0%
Overall
 
(out
 
of a maximum possible 20%) : 14.0%
 
Further details
 
on the Performance
 
Measurement Framework
 
can be found
 
on pages18 and 19 in the Strategic Report available at:
home.barclays/annualreport
.
 
 
 
 
 
 
 
 
 
 
 
 
66
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Individual
 
outcomes including assessment
 
of personal objectives
Individual
 
performance against each of the Executive Directors’ personal objectives (20% weighting overall) was
 
assessed by the Committee
(objectives
 
as
 
set out on page
 
121 of the 2018 Annual Report).
 
The below
 
summarises
 
their performance
 
against the shared personal objectives.
 
Shared objectives
 
for Jes Staley and
Tushar Morzaria
Outcomes
Continue
 
to deliver improving shareholder
returns, whilst retaining
 
the focus
 
on delivering
the 2019
 
and 2020 external targets and
specifically
 
profitability of the CIB.
 
Strong financial
 
improvements delivered, 2019 RoTE in line with target of 9.0%, while CET1
increased to 13.8%
 
 
Continued
 
progress
 
towards target of cost: income
 
ratio below 60%, reducing 3 percentage
points over the year from 66% to 63%
 
 
Material
 
improvement to CIB profitability, with PBT increasing 15%
 
 
Returns to shareholders also significantly
 
increased, with total dividend for 2019 of 9p - up
from 6.5p in
 
2018
Identify
 
opportunities for
 
further cost
efficiencies, enabling
 
reinvestment into
strategic priorities
 
Cost guidance
 
of below £13.6bn delivered in 2019
 
 
Significant
 
cost focus,
 
with numerous
 
actions taken to drive efficiencies to create capacity for
reinvestment
 
 
Reinvestment
 
has been focussed in areas such
 
as our long
 
-term technology strategy
(including
 
our focus on ‘becoming more digital’) as
 
well as material
 
growth initiatives in our
businesses
 
 
We invested
 
nearly twice
 
as
 
much last year in building
 
the Barclays
 
of the future as the year
before
Leverage
 
the new Barclays Execution Services
platform
 
to drive our technology agenda across
operating
 
businesses
 
to improve
 
customer and
client
 
experience and enhance value
 
The Barclays Execution
 
Services platform has helped us to reduce duplication, simplify our
operating
 
environment and re-engineer our processes.
 
 
Changing
 
our businesses
 
to work in a more efficient
 
way has
 
enabled a renewed
 
focus on our
customers and clients
 
and how we serve
 
them
 
 
Examples
 
include Corporate
 
Banking, where over 80% of our corporate clients are using our
single digital
 
platform and our retail businesses,
 
where 91% of customer transactions are now
automated
 
across
 
all our channels
 
 
This also extends to investment
 
in continuing to protect our customers’
 
data, and
 
ensuring
that our businesses are better controlled
 
and more resilient, so
 
things are less likely to go
wrong for our customers and clients
Respond to emerging
 
Brexit decisions,
managing
 
risks
 
appropriately
 
for the Group,
while
 
continuing to support our customers and
clients in
 
the UK.
 
Risks associated with Brexit
 
have been proactively managed, with
 
the Bank fully prepared for
different
 
potential scenarios
 
 
Barclays Bank Ireland
 
fully established and prepared to transact across
 
European
 
client base
 
 
UK customer and client
 
service maintained throughout Brexit preparatory work
In addition
 
to the shared personal objectives described above, the table below summarises Jes
 
Staley’s performance
 
against the objectives specific
to him.
Jes Staley’s
 
objectives
Outcomes
Oversee the effective
 
management of the risk
and controls agenda,
 
including cyber risks
 
Jes has overseen the effective
 
management of the risk
 
and controls agenda.
 
In particular, his
ongoing
 
focus
 
on the Barclays Improved Controls Enhancement
 
Programme (BICEP) has
delivered
 
significant improvements
 
in the control environment
 
and is close to conclusion
 
 
There has also been a dramatic
 
year on year reduction in more impactful controls-related
issues, with a corresponding
 
improvement in performance assessments
 
in internal
 
audits
 
 
From a cyber perspective,
 
the result of a recent CapGemini Cyber Security Maturity
Assessment was Barclays’ highest score in four years
Further improve
 
customer and client
satisfaction,
 
with continued
 
focus
 
on complaint
reduction
 
Jes has worked with the Board to ensure that
 
focussing on customers and clients is a key
strategic pillar
 
for the Group. This focus has
 
led to a number
 
of process
 
improvements
 
while
designing
 
our business
 
around what our customers want and how they would
 
like to achieve it
 
 
Jes has also personally
 
increased his client
 
engagement substantially compared with 2018
 
 
He has continued
 
to personally focus on reducing customer complaints volumes, and has
overseen a further reduction
 
in 2019 of 8% (excluding PPI), on top of the 9% reduction in
2018
 
 
 
 
 
 
 
 
 
 
 
67
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
Annual
 
report on
Directors’
 
remuneration
 
Jes Staley’s
 
objectives
Outcomes
Develop
 
further a high performing culture in
line
 
with our Values, continuing
 
to focus on
employee
 
engagement; the talent pipeline for
Group, Business and Functional
 
Executive
Committees with
 
a particular emphasis on
improving
 
the percentage of women in senior
leadership
 
roles
 
As outlined
 
in the 2018 Fair Pay Report, Jes took
 
accountability
 
for increasing female
representation
 
in January 2019
 
 
He also personally
 
launched a set of 2019 specific initiatives aiming to make the biggest
difference
 
most quickly to the proportion of women in senior leadership positions. The
outcome
 
has been an improvement to 25% (2018: 24%), with steady progress
 
made towards
the 2021
 
target
 
 
Significant
 
progress
 
has been made
 
in succession
 
planning
 
and the talent pipeline. There are
now succession plans in place
 
for all businesses
 
and functions.
 
Additionally Jes restructured
the Group Executive
 
Committee to ensure closer business
 
focus
 
 
Employee
 
engagement has remained an important focus of Jes
 
and the Executive
 
Committee.
As noted in
 
the non
 
-financial assessment,
 
despite some very positive
 
indicators the overall
engagement
 
score reduced slightly based primarily on views
 
relating
 
to tools and resources.
Investment
 
in technology
 
is underway to address
 
these issues.
Effectively
 
manage relationships
 
with key
external
 
stakeholders and society more
broadly.
 
Jes has dedicated
 
a significant amount of time to actively engaging with external stakeholders
including
 
regulators, the government and investors
 
 
The impact
 
Jes
 
has had on society more broadly
 
has also been very positive across
 
a large
number
 
of areas. Examples include
 
Barclays becoming a founding member of the UN
Principles for Responsible
 
Banking, as well as being recognised in Fortune Magazine’s 2018
Change
 
the World List for the first time for positive
 
social impact connected to core business
strategy
 
 
Overall,
 
external relationships have been effectively managed by Jes, with positive
 
feedback
received,
 
in particular in relation to the delivery and execut
 
ion of the bank’s
 
strategy
 
Recognising
 
his very strong
 
performance
 
against both his individual and shared personal objectives during 2019, the Committee assessed
 
that an
outcome
 
of 16% out of a maximum of 20% was
 
appropriate.
 
The Committee
 
reflected on the aggregate outcome for Jes Staley under the formulaic components of the annual
 
bonus framework.
 
The Committee
 
noted that the formulaic outcome of 83.3% was supported by very strong
 
delivery
 
against both the financial and
 
non-financial
performance
 
measures.
 
In finalising
 
the outcome, the Committee considered all relevant factors, including outcomes for the wider workforce. It
noted that
 
overall bonus pool was
 
down 10%. It also observed that the
 
linkage between Executive Director outcomes and those of the wider
workforce is not always correlated,
 
e.g. in 2018 the executive bonus outcomes were slightly down based on their performance against plan
 
targets,
while
 
the overall bonus pool increased. Recognising the
 
different basis of approaches, the Committee reflected on the appropriate final bonus
outcome
 
for the Executive Directors. It decided that to increase alignment with the wider workforce, a discretionary reduction would be applied to
the formulaic
 
outcomes for
 
both Executive
 
Directors in line with the reduction to the overall incentive pool, i.e. a reduction of 10%. On that basis the
outcome
 
for Jes
 
Staley
 
is a
 
bonus of 75.0% or £1,647,000
 
(of which 76% will be deferred under the Share Value Plan).
 
The table
 
below summarises
 
Tushar Morzaria’s performanc
 
e
 
against the objectives specific to him. In addition to his performance against the
objectives below,
 
Tushar successfully led a significant project with the UK regulators to change the capital calculation basis. Additionally,
 
he led the
successful complet
 
ion of the external stress
 
tests run by the Bank of England,
 
the European Banking Authority and the Federal Reserve
 
(CCAR).
He also continues to oversee the significant
 
additional reporting, capital and liquidity management requirements under the new subsidiary entity
structure (following
 
the establishment of the ring-fenced bank and the US Intermediate Holding Com
 
pany). During 2019, Tushar became
accountable
 
for overseeing the Strategy function
 
,
 
and led the enhanced reviews of strategy by the Board.
 
Tushar Morzaria’s
 
objectives
Outcomes
Demonstrate effective
 
management of external
relationships,
 
particularly regulators and
investors
 
Feedback continues
 
to indicate that external relationships have been managed
 
very
effectively,
 
including both with regulators and investors
 
 
Tushar has been
 
appointed
 
by the Bank
 
of England
 
to Chair the Sterling Risk
 
Free Reference
Rates Working Group, which
 
demonstrates his ongoing
 
positive external impact
Oversee the effective
 
management of the risk
and controls agenda
 
in Group Finance, Tax
and Treasury
 
The Risk and Controls agenda
 
in Group Finance, Tax
 
and Treasury remains an area of focus,
with progress made in
 
particular in the Treasury function
 
 
While
 
progress
 
has been made,
 
there is still more work to do to ensure
 
our rigorous control
environment
 
enables us
 
to deliver
 
the right outcome for all stakeholders
Progress finance
 
transformation programme
and drive benefits
 
across Group Finance, Tax
and Treasury
 
The transformation
 
programme is complete, with the new operating model fully embedded
across the whole
 
function,
 
including Group Finance, Tax and Treasury
 
 
Benefits have
 
included the creation of additional capacity,
 
enabling enhanced focus on
process and technology
 
improvements,
 
e.g. the financial
 
planning and related stress
 
testing
processes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
68
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Tushar Morzaria’s
 
objectives
Outcomes
Continue
 
to develop talent base, employee
engagement
 
and gender diversity in Group
Finance,
 
Tax
 
and Treasury.
 
Strong progress has been
 
made on
 
the talent pipeline within the Finance function, combining
strategic external
 
hiring with internal talent development. The leadership succession pipeline has
been significantly
 
enhanced, in particular with female talent
 
Gender diversity
 
has also been increased outside of the management team,
 
with a 2% increase
in senior women
 
across the function
 
(at 26% before transfers)
 
Levels of employee
 
engagement have increased by 1% to 76% in the Your View
 
employee
survey
 
The Committee
 
also recognised Tushar Morzaria’s very strong performance against both his individual and
 
shared personal objectives during 2019,
assessing that an outcome
 
of 17% out of a maximum of 20% was
 
appropriate.
 
In aggregate, this results
 
in an overa
 
ll formulaic outcome for Tushar
of 84.3%. On the
 
same basis
 
as described
 
above,
 
the Committee decided that to increase alignment with the wider workforce,
 
a 10% reduction
would be
 
applied to this outcome. On that basis the outcome
 
for Tushar Morzaria is a bonus 75.9% or £1,123,000 (of which 64% will be deferred
under the Share
 
Value
 
Plan).
 
In line
 
with the DRP,
 
and due to the regulations prohibiting dividend equivalents being
 
paid on unvested deferred share awards,
 
the number of
shares awarded to each
 
Executive Director under the Share Value
 
Plan will be calculated using a share
 
price at the date
 
of award, discounted to
reflect the
 
absence of dividend
 
equivalents
 
during
 
the vesting period. The valuation will be aligned to IFRS 2, with the market expectations
 
of
dividends during
 
the deferral period being assessed
 
by an independent
 
adviser. These shares
 
will
 
vest in two equal tranches on the first and
second anniversary (subject to the rules of the Share
 
Value
 
Plan as amended from time to time). All shares
 
(whether deferred
 
or not) are subject to
a further one
 
-year holding
 
period from the point of release. 2019 bonuses
 
are subject to clawback provisions and,
 
additionally, unvested deferred
2019 bonuses are subject to malus
 
provisions which enable the
 
Committee to reduce the vesting level of deferred bonuses
 
(including
 
to nil).
 
5) LTIP
The LTIP
 
amount included in the single total figure is the value of the amount scheduled to be released in relation to the LTIP
 
award granted in
2017 in
 
respect of the performance period
 
2017-2019 (by reference to Q4 2019 average share price). Release is
 
dependent
 
on, among other
things, performance
 
over the period from 1 January 2017 to 31 December 2019 with straight-line vesting applied between the threshold and
maximum
 
points. The performance achieved against the performance targets is
 
as follows:
 
Performance measure
Weighting
Threshold
Maximum vesting
Actual
% of award
vesting
Average return
on tangible
equity
(RoTE) excluding
material
 
items
a
25%
6.25% of award vests for RoTE
excluding
 
material items of 7.5%
RoTE excluding
 
material items of 9.5%
7.7%
8.1%
 
CET1 ratio
 
had to remain at or above
 
an acceptable level for any of this element
to vest. As CET1 was at or above the
 
end
 
-state target in each year of the period,
this element
 
will vest as
 
indicated.
 
CET1 ratio
 
as
 
at
 
31 December
 
2019
25%
6.25% of award vests for CET1 ratio
100 basis points above
 
the
mandatory
 
distribution restrictions
(MDR) hurdle
 
(12.1% as at 31
December 2019)
CET1 ratio
 
200 basis points above the
MDR hurdle
13.8%
19.4%
 
Cost: income
 
ratio
excluding
 
material
items
a
20%
5% of award vests for average
 
cost:
income
 
ratio of 63%
Average cost: income
 
ratio of 58%
66%
0.0%
 
Risk Scorecard
15%
The Risk Scorecard captures a range of risks and is aligned
 
with the annual
incentive
 
risk
 
alignment
 
framework
 
reviewed
 
with the regulators. The current
framework measures performance
 
against three broad categories – Capital and
Liquidity,
 
Control Environment and Conduct – using a combination of
quantitative
 
and qualitative metrics.
11.0%
Strategic
non
 
-financial
15%
Performance
 
is measured against the strategic non-financial measures. The
Committee
 
determined the percentage of the award that may vest between 0%
and 15%. The
 
measures
 
are organised around
 
three equally weighted
categories:
 
Customers and Clients, Colleag
 
ues
 
and Society.
10.0%
Total
100%
48.5%
Final outcome approved
 
by
 
the Remuneration Committee
48.5%
 
Note
 
a
 
Material items include impairment
 
and loss on
 
sale of BAGL
 
and the impact
 
of the re-measurement
 
of US deferred tax
 
assets
 
in 2017, and litigation
 
and conduct
 
in
2017, 2018 and 2019
 
(including PPI and settlement
 
with regard to
 
RMBS).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
69
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
Annual
 
report on
Directors’
 
remuneration
 
A summary of the Committee’s assessment against
 
the Risk Scorecard performance measure over the three year performance period
 
is provided
below.
 
Each category is equally weighted at 5%.
 
Category
 
Performance
Outcome
Capital and
Liquidity
Group CET1% grew
 
from
 
12.4% to 13.8%
 
over the period, and
 
remained comfortably
 
above the regulatory
 
minimum throughout.
Stress test results showed continued improvement
 
over the period.
 
In 2017, the
 
Bank of England
 
recognised
 
that the increases
 
in
CET1 capital and in Tier
 
1 leverage ratios over the year
 
were sufficient for
 
it to meet the
 
systemic reference
 
points in the test.
 
Barclays
passed the 2018 and 2019 tests.
4.0%
 
Our liquidity risk appetite measure
 
and the Liquidity
 
Coverage Ratio remained
 
above targets.
Controls
The Barclays Internal Control Enhancement
 
Programme
 
(BICEP)
 
was launched
 
in 2017 to transform
 
the bank’s
 
approach to the
 
control
environment.
 
As at the end
 
of 2019, 99%
 
of BICEP
 
milestones
 
had been achieved.
4.0%
The Bank has now transitioned to a
 
‘business as usual’
 
environment.
 
The Barclays Control
 
Framework
 
has been implemented,
enhancing visibility on controls and
 
risks. Assessments
 
of the control
 
environment
 
have continued
 
to improve, reflecting
 
continued
focus
 
on identifying
 
and resolving
 
control issues.
Conduct
Conduct remains a key focus for
 
Barclays. Senior-level
 
conduct breaches
 
are viewed as
 
a proxy for a
 
good culture led
 
‘from the top’.
Breaches remained low throughout the
 
period.
3.0%
 
Conduct Profiles across the Group showed
 
a positive trend
 
over the period,
 
particularly in
 
Culture and Strategy,
 
although a
 
need for
continued focus remains.
Total
15%
11.0%
 
A summary of the Committee’s assessment against
 
the Strategic non
 
-financial performance measures
 
over the three year performance
 
period is
provided
 
below. Each
 
category is
 
equally
 
weighted at 5%.
 
Category
 
Criteria
Performance
Outcome
Customers
and clients
Barclays
 
NPS®
 
Barclaycard NPS®
Improve
 
NPS scores improved consistently year
 
on year, with substantial
 
improvement
 
in particular
in Barclays
 
NPS, up from
 
+10 in 2016
 
to +18 in
 
2019. Barclaycard
 
has increased
 
from +9 to
+11 over the period
3.5%
Markets ranking
Banking UK+US
ranking
Improve
 
Barclays’
 
Markets
 
ranking improved
 
from 8th globally
 
in 2017 to 6th
 
in 2019
(Source:
Coalition FY19
 
Preliminary
 
Competitor
 
Analytics.
 
Analysis is
 
based on Barclays’
 
internal
business structure and internal revenues)
Following our shift in strategy in
 
the Investment
 
Bank, Banking
 
rankings initially
 
dropped one
place from
 
5th to 6th in
 
2017, before improving
 
to 5th in
 
2019 (Dealogic)
 
Digitally
 
active
customers
Barclays
 
App
users
Become more
digital
20% increase in digitally active users
 
over the period,
 
steady progress
 
each year.
Barclays
 
App was the
 
most used banking
 
app in the UK
 
and named Best Mobile
 
Banking
app in 2018
 
YOY
 
complaints
reduction (ex PPI)
Reduce
complaints
 
Solid progress in Complaints reduction
 
in Barclays
 
UK, averaging
 
10%pa over
 
the period,
while recognizing
 
there is still more to do.
 
Collegues
% of senior women
2021 target of
28%
Women in senior leadership increased from
 
22% in 2016
 
to 25% in 2019,
 
making steady
progress towards the 2021 target
 
of 28%
2.5%
Engagement score
(Your
 
view survey)
 
Maintain
engagement at
healthy
 
levels
Engagement scores averaged 78% over
 
the period
 
and were
 
consistently above
 
the 2016
level (75%), despite significant organisational
 
change. More
 
positive movement
 
would have
been desirable. There is ongoing
 
focus and investment
 
spend to improve
 
technology and
processes
 
to support
 
colleagues
 
in their work
‘Is it safe
 
to speak
up at Barclays’
Improve
 
from
2016 (81%)
 
Favourable
 
and increasing
 
in 2017 and
 
2018. The 2019
 
score was down
 
on 2018. The
average over the period was 83%, two
 
points higher
 
than in 2016
 
Barclays
 
is
focused
 
on good
customer
 
and
client outcomes’
Improve
 
from
2016 (83%)
 
The percentage of employees agreeing
 
that Barclays
 
is focused on
 
achieving good
customer
 
and client outcomes
 
was at or above
 
88% throughout the
 
period (above
 
the 2016
level of
 
83%).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
70
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Category
 
Criteria
Performance
Outcome
Society
Environmental
and social
financing
Facilitate
£150bn
 
over
2018
 
-25
£95bn
 
of environmental
 
and social financing was
 
facilitated
 
over the period (of which
£63bn
 
in 2018 and 2019)
 
,
 
exceeding annual targets. We have seen good growth
across our product set in all
 
our businesses
 
including
 
the investment, corporate and
retail
 
bank
4%
 
People
upskilled
Upskill 10m
from 2018
 
-22
6.5m people
 
were upskilled through our LifeSkills programme (of which 4.6 million in
2018 and
 
2019)
 
,
 
consistently exceeding annual targets
 
and making
 
good progress
towards our aspiration
 
of helping 10m people by 2022
 
Carbon
emissions
reduction
30% by 2018
 
80% by 2025
Carbon emissions reduced
 
by 38% by 2018 (over 2015 baseline), exceeding
 
the
original
 
2018 target (-30%). Further year-on
 
-year
 
reduction of 53% in 2019, making
very good
 
progress
 
towards the new target of 80%
 
reduction vs 2018 baseline
 
by
2025.
 
Total
15%
 
10.0%
 
The LTIP
 
award is also subject to a discretionary underpin whereby the Committee must be satisfied with the underlying financial health of the
Group. The
 
Committee was satisfied that this underpin was met, and accordingly determined
 
that the award should vest
 
at 48.5% of the maximum
number
 
of shares under the total
 
award, to be released in five equal tranches annually, starting from June 2020. After release, the shares are
subject to an additional
 
six month holding period.
 
Outstanding LTIP
 
awards
 
LTIP
 
awards granted during 2018
The performance
 
measures
 
for the awards made under
 
the 2018-2020 LTIP cycle are as follows:
 
Performance measure
Weighting
Threshold
Maximum vesting
Average return
 
on
tangible
 
equity (RoTE)
excluding
 
material
items
50%
10% of award vests for RoTE of 7.75%
RoTE of 10.25%
(based on an assumed CET1
 
ratio at the target of c.13.5%)
Vesting
 
of this element
 
will depend on CET1 levels during the performance period:
if CET1 goes below
 
the MDR hurdle
 
(12.1% as
 
at 31 December 2019) in
 
any year of the period, no part
of the RoTE element
 
will vest
if CET1 goes below
 
the MDR hurdle
 
+150bps
 
but remains above the
 
hurdle during the period, the
Committee
 
will exercise its
 
discretion
 
to determine what portion of the RoTE element should vest, based
on the causes of the CET1 reduction.
Average cost: income
ratio excluding
 
material
items
20%
4% of award vests for average
 
cost: income ratio of 62.5%
Average cost: income
 
ratio of 58%
Risk Scorecard
15%
The Risk Scorecard captures a range of risks and is aligned
 
with the annual incentive risk
 
alignment
framework reviewed with
 
the regulators. The
 
current framework
 
measures performance
 
against three broad
categories – Capital
 
and Liquidity, Control Environment
 
and Conduct – using a combination of quantitative
and qualitative
 
metrics. The framework may be updated from time to time in line with the
 
Group’s
 
risk
strategy. Specific
 
targets
 
within
 
each of the categories are
 
deemed to be commercially sensitive.
Retrospective disclosure
 
will
 
be made in the 2020 Remuneration Report, subject to commercial sensitivity no
longer
 
remaining.
Strategic
non
-
financial
15%
The evaluation
 
will focus
 
on key performance measures from the Performance Measurement Framework,
with a detailed
 
retrospective narrative on progress
 
throughout
 
the period against each category. Performance
against the
 
strategic non
 
-financial measures
 
will
 
be assessed
 
by the Committee
 
to determine th
 
e
 
percentage
of the award that may vest between
 
0% and 15%. The measures are organised around
 
three main
categories:
 
Customers and Clients, Colleagues and Society.
 
Each of the three main categories has equal
weighting.
 
Measures
 
will
 
likely include, but wil
 
l
 
not be limited to, the following:
Customers and Clients:
 
NPS for consumer businesses, client rankings and market shares for the CIB,
complaints
 
performance and volume of lending provided to customers and clients
Colleagues:
 
Diversity and Inclusion
 
statistics (including women in senior leadership), Employee
sustainable
 
engagement survey scores
 
and conduct
 
and culture measures
Society:
 
Delivery against our Shared Growth Ambition, Colleague engagement in Citizenship
 
activities
and external
 
benchmarks
 
and surveys.
 
Straight
 
-line vesting applies
 
between
 
the threshold and maximum points in respect of the financial measures.
 
 
 
 
 
 
 
 
 
 
 
 
 
71
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
Annual
 
report on
Directors’
 
remuneration
 
LTIP
 
awards granted during 2019
An award was made
 
to Jes
 
Staley
 
and Tushar Morzaria
 
on 8 March 2019 under the 2019-2021 LTIP at a share price of £1.2288,
 
which has been
discounted
 
to reflect the absence of dividend equivalents during the vesting period, in accordance with our DRP.
 
This is the price used to calculate
the number
 
of shares
 
below.
 
% of Total
fixed pay
Number of
shares
Face value
at grant
Performance
period
Jes Staley
120%
2,681,618
3,295,200
2019
 
-2021
Tushar Morzaria
120%
1,806,625
2,220,000
2019
 
-2021
 
The performance
 
measures
 
for the 2019
 
-2021 LTIP awards are as follows:
 
Performance measure
Weighting
Threshold
Maximum vesting
Average return
 
on
tangible
 
equity (RoTE)
ex litigation
 
and
conduct
 
and other
material
 
items
50%
10% of award vests for RoTE of 8.5%
(based on an assumed CET1
 
ratio at the target of c.13.5%)
RoTE of 10.5%
Vesting
 
of this element
 
will depend on CET1 levels during the performance period:
if CET1 goes below
 
the MDR hurdle
 
(12.1% as
 
at 31 December 2019) in
 
any year of the performance
period,
 
no part of the RoTE element will vest
if CET1 goes below
 
the target (c.13.5%) but remains above the hurdle
 
during the year, the Committee
will
 
exercise its discretion to determine
 
what portion of the RoTE element should vest, based on the
causes of the CET1
 
reduction.
2021 Cost: income
ratio ex litigation
 
and
conduct
 
and other
material
 
items
20%
4% of award vests for cost: income
 
ratio of 60%
Cost: income
 
ratio of 58.5%
Risk Scorecard
15%
The Risk Scorecard captures a range of risks and is aligned
 
with the annual incentive risk
 
alignment
framework shared with the regulators. The
 
current framework
 
measures performance
 
against three broad
categories – Capital
 
and Liquidity, Control Environment
 
and Conduct – using a combination of quantitative
and qualitative
 
metrics. The framework may be updated from time to time in line with the
 
Group’s
 
risk
strategy. Specific
 
targets
 
within
 
each of the categories are
 
deemed to be commercially sensitive.
Retrospective disclosur
 
e
 
will
 
be made in the 2021 Remuneration Report, subject to commercial sensitivity
no longer
 
remaining.
Strategic
non
 
-financial
15%
The evaluation
 
will focus
 
on key performance measures from the Performance Measurement Framework,
with a detailed
 
retrospective narrative on progress
 
throughout
 
the period against each category.
Performance
 
against the strategic non-financial measures will be assessed
 
by the Committee
 
to determine
the percentage
 
of the award that may vest between 0% and 15%. The measures are
 
organised
 
around
three main
 
categories: Customers
 
and Clients,
 
Colleagues and Society. Each
 
of the three main categories
has equal
 
weighting. Measures
 
will
 
likely include, but not be limited to, the following:
Customers and Clients:
 
NPS for consumer businesses, Client rankings and market shares for the
Corporate and
 
Investment
 
Bank,
 
complaints performance and volume of lending provided to customers
and clients
Colleagues:
 
Diversity and Inclusion
 
statistics (including women in senior leadership), Employee
sustainable
 
engagement survey scores
 
and conduct
 
and culture measures
Society:
 
Delivery against our Shared Growth Ambition, Colleague engagement in Citizenship
 
activities
and external
 
benchmarks
 
and surveys.
 
Straight
 
-line vesting applies
 
between
 
the threshold and maximum points in respect of the financial measures.
 
 
 
 
 
 
 
 
 
72
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
LTIP awards
 
to be
 
granted
 
during
 
2020
The Committee
 
decided to make an award under the 2020-2022 LTIP
 
cycle to Jes Staley and Tushar Morzaria (based on their performance
in 2019) with
 
a face value at grant of 120%
 
of their respective Total fixed pay at 31 December 2019.
 
The key objective
 
of the LTIP is to incentivise the Executive Directors to deliver on the
 
long-term strategy. The LTIP
 
should support a competitive
pay package for achieving
 
good performance, while the calibration maximum should incentivise a stretch level of performance without encouraging
excessive risk-taking.
 
In its deliberations
 
on the threshold and maximums for the LTIP
 
financial measures,
 
the Committee
 
considered progress
 
against the
 
external
targets. The Committee
 
increased the threshold for the RoTE measure from 8.5% to 9.0%.
 
The 2020
 
-2022 LTIP award will be subject to the following forward-looking performance measures.
 
Performance measure
Weighting
Threshold
Maximum vesting
Average return
 
on
tangible
 
equity (RoTE)
ex litigation
 
and
conduct
 
and other
material
 
items
50%
10% of award vests for RoTE of 9.0%
RoTE of 10.5%
(based on an assumed CET1
 
ratio at the target of c.13.5%)
Vesting
 
of this element
 
will depend on CET1 levels during the performance period:
in line
 
with regulatory requirements, if the CET1 ratio goes below the MDR hurdle during the
performance
 
period, the Committee will consider what part, if any,
 
of this
 
element should
 
vest.
Average cost: income
ratio ex litigation
 
and
conduct
 
and other
material
 
items
20%
4% of award vests for cost: income
 
ratio of 60%
Cost: income
 
ratio of 58.5%
Risk Scorecard
15%
The Risk Scorecard captures a range of risks and is aligned
 
with the annual incentive risk
 
alignment
framework shared with the regulators. The
 
current framework measures
 
performance
 
against three broad
categories – Capital
 
and Liquidity, Control Environment
 
and Conduct – using a combination of quantitative
and qualitative
 
metrics. The framework may be updated from time to time in line with the
 
Group’s
 
risk
strategy. Specific
 
targets
 
within
 
each of the categories are
 
deemed to be commercially sensitive.
Retrospective disclosure
 
will
 
be made in the 2022 Remuneration Report, subject to commercial sensitivity
no longer
 
remaining.
Strategic
 
non
 
-financial
15%
The evaluation
 
will focus
 
on key performance measures from the Performance Measurement Framework,
with a detailed
 
retrospective narrative on progress
 
throughout
 
the year against each category. Performance
against the
 
strategic non
 
-financial measures
 
will
 
be assessed
 
by the Committee
 
to determine the
percentage
 
of the award that may vest between 0% and 15%. The measures are
 
organise
 
d
 
around three
main
 
categories: Customer and Client, Colleagues and Society.
 
Each of the three main categories has
 
equal
weighting.
 
Measures
 
will
 
likely include, but not be limited to, the following:
Customers & Clients:
 
Improve Net Promoter Score
 
s,
 
Reduce UK customer complaints, Increase digital
engagement,
 
Maintain client rankings and increase market shares within CIB
Colleagues:
 
Continue
 
to increase the % of women in leadership roles, Maintain engagement at healthy
levels, Improve
 
key
 
metrics from 2019,
 
including Enable scores
Society:
 
Grow social and environmental financing, Reduce carbon footprint and increase use of
renewable
 
energy, Continue investing in our communities
 
 
 
 
 
fy2019arbplcp82i0.jpg
 
73
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
Annual
 
report on
Directors’
 
remuneration
 
 
Executive
 
Directors: Statement
 
of implementation
 
of remuneration
 
policy in 2020
The following
 
chart provides an illustrative indication of how 2020 remuneration will be delivered to the Executive Directors.
 
 
 
2020 Annual bonus performance measures
Performance
 
measures
 
with appropriately
 
stretching targets have been selected to cover a range of financial and non
 
-financial goals
 
that support
the key strategic objectives
 
of the Company.
 
The performance measures
 
and weightings are shown below.
 
Financial
 
(60% weighting)
 
A performance
 
target
range has been set for
each financial
 
measure
 
Profit before
 
tax excluding litigation and conduct and other material items (50% weighting).
Payout of this element
 
will depend on the CET1 ratio during the performance year:
 
in line
 
with regulatory requirements, if the CET1 ratio goes below the MDR hurdle during the performance year,
the Committee
 
will consider what part if any of this element should pay out.
 
Cost: income
 
ratio excluding litigation and conduct and other material items (10% weighting).
Strategic non-
financial
(20% weighting
)
The evaluation
 
will focus
 
on key performance measures from the Performance Measurement Framework, with a
detailed
 
retrospective narrative on progress
 
throughout
 
the year against each category. Performance against the
strategic non
 
-financial measures will be assessed
 
by the Committee
 
to determine the percentage of the award that
may vest between
 
0% and 20%. The measures are organised around three main categories: Customer and Client,
Colleagues
 
and Society.
 
Each of the three main categories has
 
equal
 
weighting. Measures
 
will
 
likely include, but not
be limited
 
to, the following:
 
Customers & Clients:
 
Improve Net Promoter Score
 
s,
 
Reduce UK customer complaints, Increase digital
engagement,
 
Maintain client rankings and increase market shares within CIB
 
 
Colleagues:
 
Continue to increase the % of women in leadership roles, Maintain engagement at healthy
 
levels,
Improve key metrics from 201
 
9, including scores
 
relating
 
to tools and resources
 
Society:
 
Grow social and environmental financing, Reduce carbon footprint and increase use of renewable
 
energy,
Continue
 
investing in our communities
 
 
 
 
 
 
 
 
 
 
 
 
fy2019arbplcp83i0.jpg
 
74
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Personal
 
(20% weighting)
The Executive
 
Directors have the following joint personal objectives for
 
2020:
 
 
Continue
 
to deliver improving shareholder returns, including a focus on delivering a RoTE improvement versus
2019
 
Maintain
 
robust capital ratios
 
across the Group and within
 
the main operating entities
 
 
Seek opportunities
 
for further cost efficiencies, enabling
 
reinvestment into strategic priorities and growth
initiatives
 
Continue
 
to drive our technology agenda across
 
the Group, to support improving
 
customer and client
experience
 
Continue
 
to focus on external societal and environmental stewardship
Jes Staley
Oversee the effective
 
management of the risk and controls agenda, including cyber risks
 
Ensure continued
 
focus on customer and client outcomes, in particular further reductions in complaints
 
Continue
 
to develop a high performing culture in line with our Values, with a focus on employee
 
engagement,
succession planning,
 
talent and diversity
 
Drive growth in fee
 
-based, technology
 
-led annuity businesses
 
with lower capital
 
intensity
 
Effectively
 
manage relationships
 
with all
 
external stakeholders
Tushar Morzaria
Continue
 
to optimise financial management and reporting (particularly through technolog
 
y) to drive benefits
across the Group
 
Further improve
 
capital productivity through enhancing capital allocation and the measurement of capital
 
returns
 
Oversee the effective
 
management of the risk and controls agenda in Group Finance, Strategy,
 
Tax
 
and
Treasury
 
Continue
 
to focus on employee engagement, talent and diversity in Group Finance, Strategy, Tax
 
and Treasury
 
Effectively
 
manage relationships
 
with key stakeholders including
 
regulators and investors
 
Additional
 
remuneration
 
disclosures
 
Group performance graph and Group
 
CEO remuneration
The performance
 
graph below illustrates the performance of Barclays over the financial years from 2009 to 2019 in terms of total shareholder
return compared
 
with that of the companies comprising the FTSE 100 index. The index has been selected because it represents a cross-section
of leading
 
UK companies.
 
 
 
The table
 
below presents
 
the single
 
figure for remuneration and annual incentive and long
 
-term incentive plan outcomes
 
for the Group Chief
 
Executive
 
over the past 10 years.
 
Year
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Group Chief Executive
John
Varley
Robert
Diamond
Robert
Diamond
Antony
Jenkins
Antony
Jenkins
Antony
Jenkins
Antony
Jenkins
John
McFarlane
Jes
Staley
Jes
Staley
Jes
Staley
Jes
Staley
Jes
Staley
Single
 
total remuneration figure CEO
4,567
11,070
a
1,892
 
529
1,602
5,467
c
3,399
305
277
4,233
3,873
3,362
5,929
Annual
 
bonus award as
 
a % of
maximum
100%
80%
0%
0%
0%
57%
48%
N/A
N/A
60%
48.5%
48.3%
75.0%
Long
 
-term incentive plan vesting as
a % of maximum
16%
N/A
b
0%
N/A
b
N/A
b
30%
39%
N/A
b
N/A
b
N/A
b
N/A
b
N/A
b
48.5%
 
Notes
a
 
This figure
includes
 
£5,745k tax equalisation
 
as set out
 
in the 2011 Remuneration
 
Report. Robert
 
Diamond was tax
 
equalised on
 
tax above
 
the UK rate where
 
that
could not be offset by a double tax treaty.
b
 
Not a participant in a long-term incentive
 
award which
 
vested in
 
the period.
c
 
Antony
 
Jenkins’ 2014
 
pay is higher
 
than in earlier years
 
since he declined a
 
bonus in
 
2012 and 2013
 
and did not have
 
LTIP vesting in
 
those years.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
75
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
Annual
 
report on
Directors’
 
remuneration
 
Group Chief Executive
 
Pay ratio
The table
 
below shows
 
the ratios of the Group Chief
 
Executive’s total remuneration to the remuneration of UK employees since 2017. The change
in the pay ratios for 2019
 
is explained
 
in more detail below.
 
 
Option
25th percentile
Median
75th percentile
2019
A
213 x
140 x
77 x
2018
A
126 x
85 x
45 x
2017
A
153 x
106 x
54 x
 
The regulations
 
provide
 
three options
 
which may be used to calculate
 
the pay for the employees at the 25th percentile, median and 75th percentile.
We have used Option
 
A, following guidance issued by some
 
proxy advisers and institutional
 
shareholders.
 
Option
 
A calculates pay for all
employees on the
 
same basis
 
as the single figure
 
for remuneration calculated for Executive Directors. The period for which employee pay has been
calculated
 
under Option A is the 2019 calendar year.
 
The CEO pay ratios published in 2017 and 2018 were calculated using the year end salary
and bonus for the relevant
 
performance year only. These have now been recalculated using
 
Option A methodology.
 
The single
 
figure for remuneration for each employee includes earned salary and allowances, annual incentive awarded for the 2019 calendar year,
and an estimate
 
of pension and benefits for
 
2019. Other
 
elements of pay such as
 
overtime
 
and shift allowances have been excluded on the basis
that they are not compa
 
rable with the pay structure
 
for the CEO. The estimate of pension
 
for each employee is based on 10% of salary, given that
this is the percentage
 
currently available to new hires in the UK. The estimate of benefits is
 
based on the cost of core benefits
 
avai
 
lable at each
Corporate Grade,
 
being private medical insurance, income protection
 
and life assurance. The pay for part-time employees has
 
been grossed-up to
1 FTE.
 
The pay at each
 
quartile is set
 
out in the table
 
below:
 
 
25th percentile
Median
75th percentile
 
Total pay
Of which is salary
Total pay
Of which is salary
Total pay
Of which is salary
2019
27,875
23,000
42,362
34,432
77,488
61,158
2018
26,587
21,624
39,390
31,461
74,685
57,466
2017
25,341
20,223
36,568
28,978
71,628
55,000
 
The pay ratios have
 
increased between
 
2018 and 2019, due to an increase in the CEO single figure of remuneration, though employee pay at the
LQ, median
 
and UQ has
 
also increased (up 5%, 8% and 4% respectively).
 
The CEO single
 
figure of remuneration for 2019 is increased significantly,
 
largely as
 
a result of two exceptional
 
circumstances:
 
 
Due to the long
 
-term nature of LTIP awards, the CEO has not received any vesting
 
LTIP for his first four years of
 
service at Barclays. He will
receive an LTIP
 
payout for the first time in respect of 2019. This forms
 
part of his remuneration
 
package, as approved by shareholders. In 2019
the LTIP
 
vested at 48.5% of maximum. Going
 
forward, any change in LTIP will be as a result
 
of changes in the amount
 
vesting, rather than
entitlement
 
to receive an award.
 
 
In 2018, there
 
was
 
a reduction
 
of £500,000 applied to the single figure of remuneration as a
 
result of malus adjustment
 
made to the CEO’s
2016 incentive
 
award during 2018. This decreased the CEO pay ratio in 2018.
 
Excluding
 
these items, the median pay ratios would be 105x in 2019 and 98x in 2018.
 
The annual
 
bonus for
 
the CEO has also increased during
 
2019, while the overall incentive pool has decreased. While recognising that this was not
an unusual
 
occurrence, given
 
the structured formulaic approach applied to Executive Directors’
 
incentives (e.g. in
 
2018, Executive Directors’
outcomes were down slightly
 
on 2017 and the overall incentive pool was
 
up over the same period),
 
the Remuneration Committee reduced the
formulaic
 
bonus outcome against pre-determined performance measures
 
by 10%.
 
Over the period
 
2017 to 2019, median employee
 
pay has
 
gone up from
 
£36,568 in 2017 to £42,362 in 2019, up almost 16%. This is
 
aligned
 
with the
CEO increase over the same period,
 
excluding the LTIP
 
(up 15%).
 
Barclays remuneration
 
philosophy is set
 
out earlier
 
in this report, and all remuneration decisions for Executive Directors and the wider workforce are
made within
 
this framework. The CEO pay ratio is one of the outcomes of these decisions, which are explained
 
in more detail in the Chairman’s
statement.
 
 
 
 
 
 
 
 
 
 
 
 
fy2019arbplcp85i0.jpg
 
76
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Total
 
remuneration of the employees
 
in the Barclays
 
Group
The table
 
shows
 
the number
 
of employees in the Barclays Group as
 
at 31 December 2018
 
and 2019 in bands by
 
reference to total
 
remuneration.
Total
 
remuneration comprises salary, RBP, other
 
allowances, bonus and the value
 
at award of LTIP awards.
 
Barclays is a global
 
business.
 
Of those employees
 
earning above £1m in total
 
remuneration for 2019 in the table below, 56% are based in the US,
36% in the UK and 8% in the
 
rest
 
of the world.
 
Number
 
of employees
Remuneration band
2019
2018
£0 to £25,000
26,706
31,846
£25,001
 
to £50,000
26,989
25,770
£50,001
 
to £100,000
18,266
18,478
£100,001
 
to £250,000
11,428
10,804
£250,001
 
to £500,000
2,259
2,197
£500,001
 
to £1,000,000
884
916
£1,000,001
 
to £2,000,000
290
306
£2,000,001
 
to £3,000,000
68
82
£3,000,001
 
to £4,000,000
23
19
£4,000,001
 
to £5,000,000
5
6
£5,000,001
 
to £6,000,000
11
11
Above £6,000,000
2
6
 
Percentage change in Group Chief Executive’s
 
remuneration
The table
 
below shows
 
how the percentage
 
change in the Group Chief Executive’s salary, benefits and bonus between
 
2018 and 2019 compared
with the percentage
 
change in the average of each of those components of pay for UK
 
based employees.
 
We have chosen UK based employees
 
as
 
the comparator
 
group as it is
 
the most representative
 
for pay structure comparisons.
 
Fixed Pay
Benefits
Annual
bonus
2019
Group CEO
0%
5%
55%
Average
 
employee
5%
0%
-12%
 
The percentage
 
change in the average fixed pay and the average annual bonus for
 
UK employees
 
is impacted by the rebalancing
 
of a proportion of
annual
 
bonus into fixed pay for c.19,500 customer facing staff in Barclays UK. Without this rebalancing, the percentage change is +4%
 
for fixed
pay and -10%
 
for annual
 
bonus. While the average bonus is
 
down by 10%, junior
 
populations have been protected in line with our Fair Pay
agenda.
 
Relative importance of spend on
 
pay
A year on year comparison
 
of Group compensation costs
 
and distributions
 
to shareholders are shown
 
below.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
77
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
Annual
 
report on
Directors’
 
remuneration
 
Chairman
 
and Non-Executive
 
Directors
Remuneration
 
for Non-Executive Directors reflects their responsibilities, time commitment and the level of fees paid to Non-Executive Directors
of comparable
 
major UK companies.
 
Non-Executive
 
Directors
 
are reimbursed expenses that are incurred
 
for business
 
reasons. Any tax that arises on these reimbursed expenses
is paid
 
by Barclays.
 
Chairman and Non-Executive
 
Directors: Single total figure
 
for 2019 fees
 
(audited)
 
Fees
Benefits
Total
2019
£000
2018
£000
2019
£000
2018
£000
2019
£000
2018
£000
Chairman
Nigel
 
Higgins
a
541
3
544
John McFarlane
b
272
800
6
1
278
801
Non-Executive
 
Directors
Mike Ashley
c, d, e
222
215
222
215
Tim
 
Breedon
d, e
238
225
238
225
Sir Ian Cheshire
f
480
480
480
480
Mary Anne Citrino
d
113
39
113
39
Dawn Fitzpatrick
d, g
29
29
Mary Francis
d, h
155
154
155
154
Crawford Gillies
231
222
231
222
Sir Gerry Grimstone
i
80
498
80
498
Reuben
 
Jeffery III
j
41
120
41
120
Matthew
 
Lester
k
143
135
143
135
Dambisa Moyo
j
46
135
46
135
Diane Schueneman
d, l
377
337
377
337
Mike Turner
j
36
105
36
105
Total
3,004
3,465
9
1
3,013
3,466
 
Notes
 
a
 
Nigel Higgins joined the Board as
 
a Non-Executive
 
Director on
 
1 March 2019
 
and assumed
 
the role of
 
Chairman with effect
 
from the
 
conclusion of the
 
2019 AGM
 
on
2 May 2019. Nigel Higgins was paid
 
an annual fee of
 
£80,000 for the period
 
from 1 March
 
2019 to 2 May
 
2019, and an all-inclusive
 
annual fee of
 
£800,000 with
 
effect
from
 
3 May 2019. He was
 
provided with
 
private
 
medical cover and
 
the use of a
 
Company vehicle
 
and driver
 
when required
 
for business
 
purposes during 2019.
 
He
does not receive a fee in respect
 
of his role as Chairman
 
of Barclays Bank
 
PLC.
 
b
 
John McFarlane retired from the
 
Board with effect
 
from the conclusion
 
of the AGM on
 
2 May 2019.
 
c
 
Mike Ashley was a member of the
 
Board Reputation
 
Committee until
 
25 September
 
2019, when the Committee
 
was disbanded. His
 
additional fee
 
in respect of
 
the
Board Reputation Committee is therefore
 
pro-rated for the
 
period of his
 
service in
 
2019.
 
d
 
These Non-Executive Directors were
 
appointed to the Board
 
of Barclays Bank PLC
 
from 25 September
 
2019. They receive
 
an additional
 
annual fee of
 
£30,000, paid
by Barclays Bank PLC in respect
 
of this appointment
 
(pro-rata for
 
2019). From
 
25 September 2019,
 
all Non-Executive
 
Directors
 
of Barclays Bank
 
PLC are also
Directors
 
of Barclays PLC.
 
Until that date,
 
Non-Executive Directors
 
of Barclays Bank
 
PLC served
 
only on that Board
 
and received
 
a base fee of
 
£75,000 in respect
 
of
that role.
e
 
With effect from 25 September 2019 these
 
Non-Executive Directors
 
received a fee of
 
£20,000 for their
 
services to Barclays
 
Capital
 
Securities Limited
 
(pro-rata for
2019).
 
f
 
Sir Ian Cheshire’s figures include fees of £400,000
 
for his role
 
as Chairman
 
of Barclays Bank
 
UK PLC.
 
g
 
Dawn Fitzpatrick joined the Board as
 
a Non-Executive
 
Director with
 
effect from 25
 
September
 
2019. Her fees
 
are pro-rated
 
for the period
 
of her appointment
 
during
2019.
 
h
 
Mary Francis
 
was the
 
Chair of the Board
 
Reputation
 
Committee until 25
 
September
 
2019, when
 
the Committee was
 
disbanded.
 
Her additional fee
 
in respect of
 
the
Board Reputation Committee is therefore
 
pro-rated for the
 
period of her service
 
in 2019.
 
i
 
Sir Gerry Grimstone retired from the Board
 
with effect from
 
28 February 2019.
 
His fee is
 
pro-rated for the period
 
of his service and
 
includes
 
an annual fee of £400,000
for his role as the Chairman of Barclays
 
Bank PLC.
 
j
 
These Non-Executive Directors retired
 
from the Board with
 
effect
 
from 2 May 2019.
 
k
 
Matthew Lester retired from the Board
 
with effect from
 
1 January 2020.
 
l
 
Diane Schueneman is Chair of Barclays
 
Execution Services
 
Limited (the Group
 
Service Company)
 
and is a member
 
of the Barclays US
 
LLC (the US Intermediate
Holding Company) Board. The 2019
 
figure includes
 
fees of £70,000
 
for her
 
role on the Barclays
 
Execution Services
 
Limited Board
 
and $210k (£164k)
 
for her
 
role on
the Barclays US LLC Board.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
78
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Chairman and Non-Executive
 
Directors: Statement of implementation
 
of remuneration
 
policy in
 
2020
Fees for the Chairman
 
and Non
 
-Executive Directors
 
for 2020 are shown below.
 
The Board approved increases to the fees for Board members, the
Chair of the Audit
 
and Risk
 
Committees and
 
the members of the Board Risk
 
Committee
 
to take effect from1 January 2020
 
.
 
These increases
 
were
made in
 
line with policy and following careful review of time spent on Board and Committee matters, to
 
reflect increased time
 
commitment and
responsibilities
 
.
 
The basic Board fee was last revised in 2011.
 
1 January 2020
1 January 2019
£000
£000
Chairman
a
800
800
Board member
90
80
Additional responsibilities
Senior
 
Independent Director
36
36
Chairman
 
of Board Audit or Risk
 
Committee
80
70
Chairman
 
of Board Remuneration Committee
70
70
Chairman
 
of Board Reputation Committee
50
Membership
 
of Board Audit or Remuneration Committee
30
30
Membership
 
of Board Risk
 
Committee
30
25
Membership
 
of Board Nominations Committee
15
15
Membership
 
of Board Reputation Committee
25
 
Notes
 
a
 
The Chairman does not receive any fees
 
in addition
 
to the Chairman
 
fees.
 
Directors’ shareholdings
 
and share
 
interests
 
Interests in
 
Barclays PLC
 
shares (audited)
The table
 
below shows
 
shares owned beneficially
 
by all the Directors
 
(including
 
any shares
 
owned beneficially
 
by their connected persons) and
shares over which Executive
 
Directors
 
hold
 
awards, which are subject to either deferral terms and/or performance measures. The shares shown
below that
 
are subject to
 
performance measures are the maximum number of shares
 
that may be released.
 
 
 
Unvested
Total as at
31 December 2019
(or date of retirement
from the Board, if earlier)
 
Owned
outright
 
as at
31 December 2019
(or date of
retirement
from the Board, if
earlier)
Subject to
performance
measures
Not subject
 
to
performance
measures
Total as at
11 February
2020
Executive
 
Directors
 
 
 
 
 
Jes Staley
5,284,924
6,221,464
999,491
12,505,879
12,505,879
Tushar Morzaria
3,603,326
4,130,048
638,569
8,371,943
8,371,943
Chairman
Nigel
 
Higgins
1,010,092
1,010,092
1,010,092
John McFarlane
119,279
119,279
Non-Executive
 
Directors
Mike Ashley
130,858
130,858
130,858
Tim
 
Breedon
112,475
112,475
112,475
Sir Ian Cheshire
103,530
103,530
103,530
Mary Anne Citrino
13,700
13,700
13,700
Dawn Fitzpatrick
909,000
909,000
909,000
Mary Francis
33,251
33,251
33,251
Crawford Gillies
127,463
127,463
127,463
Sir Gerry Grimstone
125,643
125,643
Reuben
 
Jeffery III
308,553
308,553
Matthew
 
Lester
29,222
29,222
Dambisa Moyo
73,977
73,977
Diane Schueneman
56,477
56,477
56,477
Mike Turner
71,947
71,947
 
 
 
 
 
 
fy2019arbplcp88i0.jpg
 
79
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
Annual
 
report on
Directors’
 
remuneration
 
 
Executive
 
Directors’ shareholdings and share interests
 
(audited)
The chart below
 
shows
 
the value
 
of Barclays’ shares held beneficially by Jes Staley and
 
Tushar Morzaria as
 
at 11
 
February 2020 that
 
count
towards the shareholding
 
requirement of, as
 
a minimum,
 
Barclays’
 
shares
 
worth 200%
 
of Total
 
fixed pay (Fixed Pay and pension). The current
Executive
 
Directors have five years from their respective date of appointment to meet this requirement. At close of business on 11
 
February 2020,
the market value
 
of Barclays’ ordinary shares was
 
£1.79
 
.
 
 
 
Service
 
contracts and
 
letters of
 
appointment
All Executive
 
Directors have a service contract, whereas all Non
 
-Executive Directors
 
have a letter
 
of appointment. Copies of the service contracts
and letters of appointment
 
are available for inspection at the Company’s registered office. The effective dates of the current Directors’
appointments
 
disclosed in their service contracts or letters of appointment
 
are shown in the table below.
 
As stated in the letters of appointment,
 
the Chairman and Non-Executive Directors
 
are appointed for an initial
 
term of three years and are subject
to annual
 
re-election by shareholders. On expiry of the initial term and subject to the needs of the Board, Non
 
-Executive Directors
 
may be invited
to serve a further three years. Non-Executive
 
Directors
 
appointed
 
beyond six years
 
will
 
be at the discretion of the Board Nominations Committee.
 
Effective
 
date of appointment
Chairman
Nigel
 
Higgins
1 March 2019 (Non
 
-Executive Director),
2 May 2019 (Chairman)
Executive
 
Directors
Jes Staley
1 December 2015
Tushar Morzaria
15 October 2013
Non-Executive
 
Directors
Mike Ashley
18 September
 
2013
Tim
 
Breedon
1 November 2012
Sir Ian Cheshire
3 April 2017
Mary Anne Citrino
25 July 2018
Mohamed
 
A El-Erian
1 January 2020
Dawn Fitzpatrick
25 September
 
2019
Mary Francis
1 October 2016
Crawford Gillies
1 May 2014
Dr Brian Gilvary
1 February 2020
Diane Schueneman
25 June 2015
 
Payments
 
to former Directors
 
(audited)
 
Former Group Finance Director: Chris
 
Lucas
In 2019, Chris Lucas continued
 
to be eligible to receive life assurance
 
cover, private
 
medical cover and payments under the Executive Income
Protection
 
Plan (EIPP). Full details of
 
his eligibility
 
under the EIPP were disclosed in the 2013 Directors’
 
Remuneration
 
Report (page 115
 
of the
2013 Annual
 
Report). Chris Lucas
 
did not receive
 
any other payment or benefit in 2019.
 
Former Chairman: John
 
McFarlane
John McFarlane
 
stepped down as
 
Chairman on 2 May 2019.
 
In accordance with his letter of appointment John McFarlane continued to receive
monthly
 
payments equivalent to his monthly fees until 7 November 2019 (being the date his notice period would have ended
 
). These
 
payments
were made in
 
monthly cash instalments and were subject to mitigation in
 
the event that he obtained alternative employment and/or
appointments.
 
He also received benefits in accordance with his appointment
 
letter for the same period.
 
Former
 
Non-Executive:
 
Sir Gerry Grimstone
Sir Gerry Grimstone
 
stepped down as Non-Executive Director
 
of Barclays PLC
 
and Chairman
 
of Barclays Bank
 
PLC on 28 February 2019.
 
In
relation
 
to his
 
role as Chairman of Barclays Bank PLC and under
 
the terms of his appoi
 
ntment
 
letter, a payment of six months’ fees was
 
paid
 
to him
in lieu
 
of notice in March 2019. No payment in lieu of notice was made in relation to his role as Director of Barclays PLC.
 
 
 
 
 
fy2019arbplcp89i0.jpg
 
80
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Former Non-Executive:
 
Reuben Jeffery III
Reuben
 
Jeffery III was appointed as a member of the
 
Barclays US
 
LLC (the US Intermediate
 
Holding Com
 
pany)
 
Board on 15 October 2019. He
received
 
fees of $150,000 per annum
 
for his role on the Barclays LLC Board, pro-rated for his period of service in 2019.
 
AGM Statement
At the 2019 AGM,
 
the vote on the 2018 Directors’ Remuneration Report (Resolution 2) was
 
passed with 70.79%
 
of votes cast
 
in favour.
 
We
describe below
 
what we have done to identify and address the concerns of shareholders who voted against this resolution
 
last
 
year.
 
 
We offered
 
to engage with
 
those of
 
our top 30 shareholders who voted against Resolution
 
2, or who withheld their vote in relation to it, and were
able
 
to meet with
 
a significant proportion of those shareholders. We
 
understand from
 
those shareholders who we
 
have spoken to that they voted
against Resolution
 
2 because of concerns over the malus adjustment applied in relation to the 2016 incentive award for the Group
 
CEO, particularly
in light
 
of the penalty levied against the company by the New York Department
 
for Financial Services (“NYDFS”).
 
 
Having reflected
 
on the views
 
expressed by the relevant
 
shareholders,
 
and as discussed with them during engagement,
 
we are satisfied that the
malus adjustment
 
was
 
appropriate.
 
However, in light of the feedback from our shareholders, we acknowledge th
 
at we
 
could
 
have provided further
information
 
regarding the factors the Board and Remuneration Committee took into account. In particular,
 
this could have addressed the fact that no
material
 
new facts
 
came to light
 
through the investigations conducted by the regulators that had not been taken into account by the Board in its
determination
 
of the appropriate malus
 
adjustment,
 
and the fact that the NYDFS penalty was directed against the bank in relation to failings in its
controls, and not
 
against the individ
 
ual in question.
 
 
We will
 
take this into account in all of our external disclosures going forward, to ensure that we provide all of the
 
information needed to properly
explain
 
our decisions.
 
Previous
 
AGM voting outcomes
 
For
% of votes cast
Against
% of votes cast
Withheld
Shareholder
 
votes on remuneration
Number
Number
Number
Vote on
 
the 2018
 
Remuneration Report
70.79%
29.21%
 
at the 2019 AGM
8,849,675,682
3,652,341,337
477,285,142
Vote on
 
the Directors’ Remuneration
 
Policy
97.91%
2.09%
 
at the 2017 AGM
12,062,616,141
257,416,828
51,369,054
 
At the AGM held
 
on 24 April 2014, 96.02% (10,364,453,159 votes) of shareholders of Barclays PLC
 
voted for the resolution
 
in respect of a
 
fixed
to variable
 
remuneration ratio of 1:2 for ‘Remuneration Code Staff ’ (now known
 
as MRTs).
 
On 14 December 2017,
 
the Board of Barclays
 
PLC
as shareholder of Barclays Bank PLC approved
 
the resolution that Barclays Bank PLC and any of its current and future subsidiaries be authorised
to apply
 
a ratio of the fixed to variable components of total remuneration
 
of their MRTs that exceeds 1:1, provided
 
the ratio does
 
not exceed
 
1:2.
On 15 November 2018,
 
the Board of Barclays PLC
 
as shareholder of Barclays Bank UK PLC approved an
 
equivalent resolution in relation to MRTs
withi
 
n
 
Barclays Bank UK PLC
 
and any of its subsidiaries.
 
Barclays
 
Board Remuneration
 
Committee
The Board
 
Remuneration Committee is responsible for overseeing Barclays’ remuneration
 
as
 
described in
 
more detail below.
 
Terms of Reference
The role
 
of the Committee is to:
 
<
 
set the overarching
 
principles and parameters of remuneration policy across
 
the Group;
 
<
 
consider and approve
 
the remuneration arrangements of (i)
 
the Chairman,
 
(ii) the Executive Directors, (iii) members of the Barclays Group
Executive
 
Committee and any other senior executives specified by the Committee from time to time, and (iv) all other Group employees whose
total
 
annual compensation
 
exceeds an amount determined by the Committee from time to time (currently £2m); and
 
 
<
 
exercise oversight for remuneration
 
issues.
 
The Committee
 
considers the overarching objectives, principles and parameters of remuneration policy across the Group to ensure it is
 
adopting
a coherent approach
 
in respect of all employees. In discharging this responsibility the Committee seeks
 
to ensure that the
 
policy is fair and
transparent, avoids
 
complexity and
 
assesses,
 
among
 
other things, the impact of pay arrangements in supporting the Group’s culture, values and
strategy and on all
 
elements of risk
 
manag
 
ement. The Committee also approves incentive pools for each of the Group, Barclays Bank PLC,
Barclays Bank UK PLC and operations
 
and functions, periodically
 
reviews
 
(at least annually)
 
all material matters of retirement benefit design and
governance,
 
and exercises
 
judgement
 
in the application of remuneration policies to promote the long
 
-term success
 
of the Group for the benefit
 
of
shareholders. The
 
Committee and its members work
 
as necessary with other
 
Board Committees, and
 
is authorised to select and appoint its own
advisers as required.
 
 
81
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
Annual
 
report on
Directors’
 
remuneration
 
Remuneration Committee in
 
2019
The performance
 
of the Committee was
 
assessed internally
 
as
 
part of the annual
 
effectiveness review of the Board of Barclays PLC. In line with the
approach
 
adopted for all Board committees in 2019,
 
the process
 
involved
 
completion of a tailored questionnaire by Committee members
 
and
standing
 
attendees.
 
The results confirm
 
that the Committee is operating
 
effectively. The Committee continues to be well
 
constituted and provides an effective level of
challenge
 
and oversight of the areas within its
 
remit. Consideration
 
will be given to adding an additional member of the Committee following the
departure
 
of Dr
 
Dambisa Moyo
 
earlier in the
 
year.
 
The Committee’s focus has moved
 
towards oversight of an existing
 
and effective policy and management system, having addressed a number of
important
 
remuneration related issues
 
in prior years.
 
The Committee’s interaction
 
with the Board, Board Committees and senior management is considered effective.
 
In response to a
 
request to provide
feedback on interaction
 
with subsidiary committees, the Committee’s interaction with the
 
principal subsidiary remuneration committees was
 
also
considered
 
effective,
 
and in line with regulatory requirements.
 
Advisers to the
 
Remuneration Committee
The Committee
 
appointed PricewaterhouseCoopers (PwC)
 
as the independent
 
adviser in October 2017. The Committee is
 
satisfied that the
 
advice
provided
 
by PwC to
 
the Committee
 
is independent and objective. PwC is
 
a signatory to the voluntary
 
UK Code of Conduct for executive
remuneration
 
consultants.
 
PwC was paid £112,000
 
(excluding VAT) for their advice
 
to the Committee in 2019
 
relating to the Executive Directors (either exclusively or along
with other employees within
 
the Committee’s Terms of Reference).
 
In addition to advising the Committee, PwC provided unrelated consulting
advice
 
to the Group in respect of strategic advice
 
on business,
 
operational
 
models and cost,
 
corporate taxation,
 
climate-related financial
disclosures, data
 
strategy, technology
 
consulting and internal audit.
 
Throughout
 
2019, Willis Towers Watson (WTW) continued
 
to provide the Committee with market data on
 
compensation when considering incentive
levels and
 
remuneration
 
packages.
 
WTW were paid £66,000
 
(excluding VAT)
 
in fees for
 
their services. In addition
 
to the services provided to the
Committee,
 
WTW also provides pensions and benefits advice, insurance brokerage and pensions advice and administration
 
services
 
to the
Barclays Bank UK Retirement
 
Fund.
 
In the course of its deliberations,
 
the Committee
 
also considers
 
the views of the Group Chief Executive,
 
the Group Human Resources Director
and the Group
 
Reward and Performance
 
Director. The Group Finance Director and the Chief Risk
 
Officer provide
 
regular updates on Group and
business financial
 
performance and risk
 
profiles respectively.
 
No Barclays’ employee
 
or Director participates in discussions with, or decisions of, the Committee relating to his or her own
 
remuneration.
No other advisers provided
 
services
 
to the Committee
 
in the year.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
82
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Remuneration Committee activity
 
in 2019
The following
 
provides
 
a summary of the Committee’s activity
 
during 2019 and at the January and February 2020 meetings at which 2019
remuneration
 
decisions
 
were finalised.
 
The Committee is also provided with updates at each scheduled meeting on: operation of the Committee’s
Control Framework on hiring,
 
retention and termination, headcount and employee attrition, and extant LTIP performance.
 
 
 
January
February
June
October
December
January
February
 
 
2019
2019
2019
2019
2019
2020
2020
Overall
remuneration
Incentive
 
funding proposals including
risk adjustments
l
l
 
l
l
l
l
2018 Remuneration
 
Report
 
l
 
 
 
 
 
Group fixed
 
pay budgets
l
l
 
 
l
l
l
Finance
 
and Risk
 
updates
l
l
 
l
l
l
l
Incentive
 
funding approach
 
 
l
 
 
 
 
Barclays’ Fair Pay agenda
 
and Report
 
l
l
l
l
 
l
2019 Remuneration
 
Report
 
 
 
 
l
 
l
Wider workforce considerations
 
 
l
l
l
l
l
Executive
Directors’ and
senior executives’
remuneration
Executive
 
Directors’ and senior executives’ bonus
outcomes
l
l
 
 
l
l
l
Review of Directors’ Remuneration
 
Policy
 
 
l
l
l
l
l
Annual
 
bonus and LTIP
 
performance measures
and target
 
calibration
l
l
 
 
l
 
l
Governance
Regulatory
 
and stakeholder matters
l
l
l
l
l
l
l
Discussion with independent
 
advisor
 
l
l
l
l
l
l
Remuneration
 
Review Panel update
 
l
 
l
 
 
l
Review of Committee
 
effectiveness
 
l
 
 
 
 
l
 
There were two additional
 
Remuneration Committee meetings during the course of 2019. The Committee met on 25 March 2019 and on 31 May
2019 to consider
 
leadership changes across
 
the organisation.
fy2019arbplcp92i0.jpg fy2019arbplcp92i1.jpg
 
83
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Our people
 
and culture
 
 
 
We believe that the culture of Barclays is
built and shaped by the thousands of
professionals around the world who serve
our customers and clients with a shared
purpose and values.
 
 
 
Our people
 
make a critical difference to our
success, and our investment
 
in them protects
and strengthens our culture.
 
We increasingly
 
draw on the latest thinking
from behavioural
 
science and data science to
identify
 
what’s most
 
likely to be effective in
hiring,
 
developing and engaging our people,
and then
 
track
 
effectiveness over time.
 
We’re
also starting to use the same data
 
-driven
approach
 
to give us a much more accurate
picture of how people
 
progress
 
through
 
our
organisation.
 
Hiring the best people
 
We continue
 
to focus
 
on hiring
 
people with
the skills that will
 
help us accelerate the
digital
 
transformation of our organisation, as
well as adapt more
 
quickly to the changing
needs of our customers and clients.
 
We have increased
 
hiring across
 
our core
strategic locations
 
globally.
 
Building a
modern,
 
scale presence in a smaller number
of sites enables us to make signifi
 
cant
investments in
 
the workplace that would
 
not
otherwise be possible.
 
The transition to
having
 
more of our people work
 
from these
strategic sites means change
 
for our existing
colleagues.
 
We recognise the disruption that
this can create and we are managi
 
ng the
impacts thoughtfully.
 
Within
 
BX, we continue to rebalance
 
the mix
of contractors and permanent
 
colleagues,
 
so
that more people
 
work
 
directly
 
for us.
 
We
believe
 
this
 
is a
 
competitive
 
advantage and
further strengthens our culture.
 
 
People
 
with different
perspectives
 
and
 
life
experiences
 
make our
organisation
 
stronger.
 
We want to hire from
 
within
 
and are
increasingly
 
using data and analytics to
identify
 
and support high performers and
potential
 
future leaders
 
– particularly
 
from
those groups that are currently
underrepresented
 
amongst our
 
senior
colleagues.
 
34% of our vacancies were filled
by internal
 
candidates during 2019.
Just under 900 graduates joined
 
us
 
in 2019,
enabling
 
us
 
to develop our pipeline
 
of future
leaders in
 
-house. The percentage of
graduate
 
female hires was
 
34%. We also
provided
 
over 300 people with the
opportunity
 
to complete a structured
apprenticeship.
 
We have continued
 
to put additional effort
into supporting
 
people who have been in
the armed
 
forces to find a career at
Barclays, through
 
the ‘After’ programme.
We have also supported
 
those returning to
the workforce after a career break, through
our ‘Encore’ programme.
 
People
 
with different perspectives and life
experiences
 
make our organisation
 
stronger.
We are committed
 
to attracting, developing
and retaining
 
a diverse
 
and inclusive
workforce, and providing
 
equal opportunities.
 
We aim
 
to make sure
 
our hiring
 
is as
 
diverse
as possible. Our policies require
 
us
 
to give
full
 
and fair consideration to all populations
based on their aptitudes
 
and abilities. We’re
using data and
 
analytics to better understand
how we can improve
 
our hiring process.
 
We recognise
 
the importance of measuring
progress around
 
our gender diversity agenda
and believe
 
that setting targets is
 
an effective
way to do this. We’ve set ourselves a target
of 28% female
 
Managing Directors
 
and
Directors by the end of 2021,
 
and have
signed up to the Ha
 
mpton
 
Alexander targets
of 33% female
 
representation on each of our
Board
 
s
 
and Group Executive
 
Committee and
their direct
 
reports by the end of 2020. We
continue
 
to report on our results
 
as
 
part of
the Hampton
 
Alexander Review and HM
Treasury Women in
 
Fina
 
nce Charter.
 
fy2019arbplcp93i0.jpg
 
84
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Developing talent for the future
 
We operate
 
in a highly
 
-regulated
environment,
 
so
 
it’s critical to our success
that our people
 
understand the rules that
govern how we operate.
 
We invested £36m
in training
 
last year to ensure we
 
get this
right.
 
A wide range of development
 
opportunities
are available
 
to help all our people build
their career,
 
delivered
 
both in-person and
through
 
our new digital learning
 
platform,
Learning
 
Lab, which is making
development
 
more available than ever.
 
We also launched
 
two new flagship
leadership
 
development programmes during
2019. This
 
is a
 
significant
 
investment in our
future leaders,
 
driven by our core belief that
quality
 
leadership makes
 
a difference
 
to our
success. We track the progression of people
that have partic
 
ipated in these programmes
to see how effective
 
they are.
 
We remain
 
committed to closing pay gaps at
Barclays; the difference
 
in seniority between
male
 
and female colleagues, and between
BAME and
 
non
 
-BAME colleagues. You can
find out
 
more about this in our Pay Gaps
Report, available
 
at barclays.com.
 
Colleague engagement
 
We have an established
 
approach to
engaging
 
colleagues which includes the
majority
 
of recommended actions by
 
the
UK’s Financial
 
Reporting Council (FRC),
 
and
is in line
 
with new governance requirements
in 2019.
 
This ensures
 
that we understand
their perspective,
 
take it into account in our
decision
 
making at the
 
most
 
senior level,
and share with them
 
our strategy and
progress.
 
That extends
 
to those who work
 
for us
indirectly
 
as
 
well,
 
such as contractors,
although
 
in a more limited way.
 
In 2020, our
supplier
 
code of conduct will require
organisations with
 
more than
 
250 employees
to demonstrate
 
that they have an effective
workforce engagement
 
approach of their
own.
 
It’s important
 
to us
 
that our Board
members are engaged
 
with our people –
directly,
 
and indirectly through our
management
 
team.
 
We regularly
 
report on our
colleague
 
engagement activity to
our Boards.
 
Together
 
with direct engagement, this
comprehensive
 
reporting approach and
dedicated
 
time at board meetings helps
our Board take the issues of interest to our
colleagues
 
into account
 
in their decision
making.
 
This has enabled
 
them to confirm that our
workforce engagement
 
approach is
effective.
 
Listening to our people
 
Our regular colleague
 
survey formally
captures the views of all
 
our people and is a
key part of how we track colleague
engagement.
 
Our overall engagement score
reduced slightly
 
to 77% in 2019, but 80% of
our colleagues
 
would still recommend
Barcla
 
ys
 
as a good
 
place
 
to work.
 
Our
colleagues
 
also shared that 79% of them
 
feel
it’s safe to speak up to share their views.
 
89% of colleagues
 
told us they believe
Barclays is focused on achieving
 
good
customer and client
 
outcomes and 86%
said they are proud of the contribution
Barclays makes to the community
 
and
society.
 
Only 61% of our people
 
said the stress
 
levels
at work are manageable,
 
and 53% believe
that we have been
 
successful
 
in eliminating
obstacles to efficiency.
 
Improving these
scores is a key prio
 
rity and we are working
on the underlying
 
problems.
 
The results from the survey are an important
part of the conversations our leaders have
about
 
how we run the business,
 
and it’s a
specific focus for our Executive
 
Committee
and our Board. The
 
Executive Committee
holds a dedicated
 
town hall for colleagues
each year specifically
 
to talk about their
feedback and
 
the actions we’re taking in
response and there are many
 
follow up
communications and
 
action plans built
across the Group.
 
We monitor
 
our culture across
 
the
organisation,
 
and in individual business
areas, through
 
culture dashboards. These
combine
 
colleague survey
 
data with
 
other
metrics about
 
our business, so
 
that we can
see the effect
 
our people’s engagement
 
has
on our performance,
 
and on the continued
strength of our culture.
 
82% of our people
have heard
 
or read senior leaders talking
about
 
the character and
 
culture of Barclays.
 
fy2019arbplcp94i0.jpg fy2019arbplcp94i0.gif fy2019arbplcp94i0.gif
 
85
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Keeping our people informed
 
In
 
addition
 
to
 
these
 
data
 
sources,
 
our
leaders, including
 
our Board, engage face to
face
 
with
 
colleagues
 
locally
 
to
 
hear
 
what
they think.
 
That might
 
be through site visits, large-scale
town halls, training
 
and development
activity,
 
mentoring, informal breakfast
sessions, committee
 
membership, diversity
and wellbeing
 
programmes, or focus
 
and
consultative
 
groups.
 
We make sure we’re regularly
 
keepin
 
g
everyone up to date
 
on the strategy,
performance
 
and progress
 
of the
organisation
 
through a strategically-
coordinated,
 
multi-
 
channel approach across
a combination
 
of leader-led engagement,
and digital
 
and print communication,
including
 
blogs, vlogs and podcasts.
 
We also engage
 
with our people
collectively
 
through a strong and effective
partnership
 
with Unite, as well as the
Barclays Group European
 
Forum, which
represents all
 
colleagues within the
European
 
Union.
 
These
 
conversations
 
help
 
us
 
to
 
deliver
thi
 
ngs like a collective pay
 
deal for our
 
Unite
covered colleagues,
 
who represent 84%
 
of
our
 
UK-based
 
colleagues,
 
as well
 
as more
complex
 
business
 
change
 
and
 
our
 
long-
term focus on colleague
 
wellbeing.
 
We regularly
 
brief our union partners on the
strategy and progress of the business and
seek their input
 
on ways
 
in which we can
improve
 
the colleague experience of working
for Barclays. The collective
 
bargaining
coverage of Unite
 
in the UK represents
c.52% of our global
 
workforce.
 
When we make significant
 
changes to our
business, they can affect
 
our people and
 
can
mean that
 
redundancies are necessary.
 
We
consult in detail
 
with colleague
representatives on major
 
change
programmes affecting
 
our people. We do this
to help us minimise
 
compulsory job losses
wherever possible, including
 
through
voluntary
 
redundancy and redeployment.
 
 
 
 
We are
 
committed
 
to
paying
 
people fairly
 
in a way
 
that
balances
 
the needs
 
of
all our stakeholders.
 
Our people policies
 
Another way we shape the culture
 
of our
organisation
 
is through our people policies,
which are reviewed
 
regularly,
 
including by
our Board.
 
Our policies
 
are designed to provide equal
opportunities and
 
create an inclusive
culture,
 
in line with our values and in
support of our long
 
-term success.
 
They
also reflect relevant
 
employment law,
including
 
the provisions of the Universal
Declaration
 
of Human Rights and ILO
Declaration
 
on Fundamental Principles and
Rights at Work.
 
We expect our people
 
to treat each other
with dignity
 
and respect, and do not tolerate
discrimi
 
nation, bullying, harassment or
victimisation
 
on any grounds.
 
We are committed
 
to paying our people fairly
and equitably
 
relative to their role, skills,
experience
 
and performance – in a way that
balances
 
the needs of all
 
our stakeholders.
That means
 
our remuneration policies reward
sustainable
 
performance that’s in line with
our purpose and values, as well as our risk
expectations.
 
You
 
can find more information
in our Fair Pay Report, available
 
on
barclays.com.
 
We encourage
 
our people to benefit
from Barclays’ performance
 
by enrolling
in our share plans, further
 
strengthening
their commitment
 
to the organisation.
 
The Directors’ Remuneration
 
Report sets
 
out
updates on remuneration
 
outcomes and
developments during
 
2019. It also explains
our plans for 2020, i
 
ncluding our proposed
new Directors’ Remuneration
 
Policy, which
will
 
be subject to a vote at the next AGM.
 
fy2019arbplcp95i0.jpg
 
86
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Building a
 
supportive culture
 
Diversity of thought
 
and experience works
best when everyone
 
feels included. People
who feel they
 
can be themselves at work
are happier
 
and more productive, so we
believe
 
that creating an inclusive and
diverse culture
 
isn’t just the right thing to do,
but is also best for our business.
 
We focus on five areas: disability,
 
gender,
LGBT+,
 
multicultural, and multigenerational.
Each of these is represented and
championed
 
by a senior leader, and
embedded
 
deeply into the organisation
through
 
colleague
 
networks
 
organised
 
by
our people
 
and funded by Barclays.
 
Our networks provide
 
colleagues with
valuable
 
support and advice, create
development
 
opportunities, and raise
awareness of issues and challenges.
 
Our
networks also influence
 
our people policies,
teaching
 
us
 
how we need to adapt
 
to give
our people
 
the support they need to
succeed. 85% of our colleagues
 
say
 
that
they feel
 
included within their teams.
 
Our policies
 
require managers to give full and
fair consideration
 
to those with a disability on
the basis of their aptitudes
 
and abilities; both
when hiring
 
and through ongoing people
management,
 
as
 
well as ensuring
opportunities for training,
 
career development
and promotion
 
are available to all. As
 
part of
the UK government
 
Disability Confident
scheme, we encourage
 
applications from
people
 
with a disability, or a physical or
mental
 
health condition.
 
We encourage
 
everyone working at Barclays,
or thinking
 
about joining us, to tell us
 
what
support and adjustments
 
they need to be
their best at work. We’re working hard to
make the processes that support this more
effective,
 
recognising that at times getting the
support colleagues
 
need can be slow.
 
We track the ever-changing
 
composition of
our people
 
through online dashboards, to
make sure that our senior leaders
understand
 
the diverse makeup and
 
needs
of the organisation
 
they lead. We’re also an
inaugural
 
signatory of the UK’s
 
Race at
Work Charter.
 
Through
 
our BeWell programme, we provide
expert advice
 
and guidance on the practical
steps colleagues can take to look after their
physical and
 
mental health. In 2020, our
Mental
 
Health Awareness
 
training
 
will
become
 
mandatory for all colleagues. We
were one of the first businesses to sign up to
the Men
 
tal Health at Work
 
Commitment.
 
74%
of colleagues
 
say
 
that Barclays supports
employee
 
efforts to enhance their wellbeing.
 
The tools to succeed
 
We provide
 
tools, programmes and support
that enable
 
colleagues to balance their work
life
 
with their personal commitments,
supporting
 
career development opportunities
at each life
 
stage.
 
We offer enhanced
 
maternity, paternity,
adoption
 
and shared parental
entitlements.
 
We’re continuing
 
to shape a more agile,
technology
 
-led culture through dynamic
working, so that we can meet our
people’s desire to work more flexibly.
88% of colleagues
 
say
 
they are able
 
to
work dynamically
 
and this is
 
one of the
biggest drivers for overall
 
engagement,
with more favourable
 
scores
 
across all
questions.
 
However, our people
 
also told us
 
that we
need to invest more
 
in the technology and
services we use internally.
 
Only 56% of
people
 
said they have the work
 
tools and
resources they need
 
to achieve excellent
performance
 
and this is
 
a reduction
 
year over
year. We’ve made
 
significant progress
particularly
 
in our new strategic campus sites,
but we
 
need to get the
 
balance right between
required
 
investment and cost discipline focus
in order to effectively
 
balance the needs of all
of our stakeholder groups.
 
We’re replacing
 
the old devices that we know
our people
 
can find frustrating, and we’re
updating
 
our software and connectivity so
that getting
 
work
 
done is easier. We’ve
 
also
invested in
 
the technology
 
support we
provide
 
to our people, so that when things do
go wrong, we can put them
 
right more
quickly.
 
Over the next few years, our focus will
 
be on
enabling
 
much greater collaboration, right
across the organisation,
 
so
 
that we can
unlock the power of the connections
 
between
our people.
 
 
 
 
 
 
 
 
 
 
Risk review
Content
 
 
87
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
The management of risk is a critical underpinning to the execution of Barclays’
 
strategy.
 
The
material risks and uncertainties the Group faces across
 
its business and portfolios are key areas of
management focus.
Barclays’ risk disclosures are provided
 
in the Annual Report and in the Barclays PLC Pillar 3 Report 2019.
Risk
 
management strategy
Annual
Report
Pillar 3
Report
Overview of Barclays’ approach
 
to risk
management. A detailed overview
 
together
with more
 
specific information on policies that
the Group determines to be of particular
significance in the current
 
operating
environment
 
can be found in the Barclays PLC
Pillar 3 Report
 
2019
 
or at Barclays.com.
 
Enterprise Risk Management Framework
 
(ERMF)
 
Segregation of duties – the “Three Lines of Defence” model
 
Principal risks
 
Risk appetite for the principal risks
 
Risk committees
 
Frameworks, policies and standards
 
Assurance
 
Effectiveness of risk management
 
arrangements
 
Learning from
 
our mistakes
 
Barclays’ risk culture
 
Group
 
-wide risk management tools
 
Risk management in the setting of strategy
90
90
90
90
91
n/a
n/a
n/a
n/a
98
n/a
n/a
149
149
149
150
151
151
151
152
152
152
152
156
Material existing
 
and emerging
 
risks
Insight into the level of risk across our
 
business
and portfolios, the material existing and
emerging
 
risks and uncertainties
 
we face and
the key areas of management
 
focus.
 
Material existing and emerging
 
risks potentially impacting more
than one principal risk
92
n/a
 
Credit risk
95
n/a
 
Market risk
96
n/a
 
Treasury
 
and capital risk
 
96
n/a
 
Operational risk
 
97
n/a
 
Model risk
98
n/a
 
Conduct risk
 
98
n/a
 
Reputation risk
99
n/a
 
Legal risk and legal, competition and regulatory
 
matters
99
n/a
Climate
 
change risk management
Overview of Barclays’ approach
 
to managing
climate change risk.
 
Overview, organisation and
 
structure
 
Risk management policy
101
101
n/a
n/a
Principal risk
 
management
Barclays’ approach
 
to risk management for
each principal risk with focus on organisation
and structure and roles and responsibilities.
 
Credit risk management
102
157
 
Management of credit risk mitigation techniques and counterparty
credit risk
n/a
175
 
Market risk management
103
178
 
Management of securitisation exposures
n/a
187
 
Treasury
 
and capital risk management
104
191
 
Operational risk management
105
198
 
Model risk management
106
202
 
Conduct risk management
106
205
 
Reputation risk management
107
207
 
Legal risk management
107
209
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Content
 
 
88
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
Risk
 
performance
Annual
Report
Pillar 3
Report
Credit risk:
 
The risk of loss to the Group
 
from
the failure of clients, customers or
counterparties, including sovereigns,
 
to fully
hono
 
ur their obligations to the Group,
 
including
the whole and timely payment of principal,
interest, collateral and other receivables.
 
Credit risk overview and
 
summary of performance
109
n/a
 
Maximum exposure
 
and effects of netting, collateral and risk
transfer
109
n/a
 
Expected Credit Losses
112
n/a
 
Movements in gross exposure
 
and impairment allowance including
provisions for loan
 
commitments and financial guarantees
115
n/a
 
Management adjustments to models for impairment
120
n/a
 
Measurement uncertainty and sensitivity analysis
121
n/a
 
Analysis of the concentration
 
of credit risk
 
The Group’s
 
approach
 
to management and representation of credit
quality
 
Analysis of specific portfolios and asset types
127
129
133
n/a
n/a
n/a
 
Forbearance
136
n/a
 
Analysis of debt securities
138
n/a
 
Analysis of derivatives
139
n/a
Market risk:
 
The risk of a loss arising from
potential adverse changes in the value of the
Group
 
’s assets
 
and liabilities from fluctuation in
market variables including, but not limited to,
interest rates, foreign
 
exchange, equity prices,
commodity prices, credit spreads, implied
volatilities and asset correlations.
 
Market risk overview
 
and summary of performance
 
Balance sheet view of trading
 
and banking books
 
Review of management
 
measures
 
Review of regulatory
 
measures
 
141
n/a
141
n/a
122
123
124
125
Treasury and capital risk – Liquidity:
 
The risk that the Group
 
is unable to meet its
contractual or contingent
 
obligations or that it
does not have the appropriate
 
amount, tenor
and composition of funding
 
and liquidity to
support its assets.
 
Liquidity risk overview and summary
 
of performance
 
Liquidity risk stress testing
 
Liquidity pool
 
Funding structure
 
and funding relationships
 
Contractual maturity of financial assets and liabilities
 
Asset encumbrance
145
145
147
148
151
n/a
n/a
n/a
n/a
n/a
n/a
220
Treasury and capital risk – Capital:
 
The risk that the Group
 
has an insufficient level
or composition of capital to support its normal
business activities and to meet its regulatory
capital requirements under
 
normal operating
environments
 
or stressed conditions (both
actual and as defined for internal planning
 
or
regulatory testing purposes). This also includes
the risk from the Group
 
’s pension plans.
 
Capital risk overview and
 
summary of performance
 
Regulatory minimum
 
capital and leverage requirements
 
Analysis of capital resources
 
Analysis of risk weighted assets
 
Analysis of leverage ratio and exposures
 
Minimum requirement
 
for own funds and
 
eligible liabilities
 
Foreign
 
exchange risk
 
Pension risk review
155
155
157
159
160
161
162
163
n/a
8
18
26
31
n/a
42
43
Treasury and capital risk – Interest rate risk in
the banking book:
The risk that the Group
 
is
exposed to capital or income volatility because
of a mismatch between the interest rate
exposures of its (non
 
-traded) assets and
liabilities.
 
Interest rate risk in the banking book
 
overview and
 
summary of
performance
 
Net interest income sensitivity
 
Analysis of equity sensitivity
 
Volatility of the fair value
 
through
 
other comprehensive income
(FVOCI) portfolio
 
in the liquidity
 
pool
165
165
166
166
44
44
45
46
Operational risk:
The risk of loss to the Group
from inadequate or
 
failed processes or systems,
human factors or due to external events (for
example fraud) where
 
the root cause is
 
not due
to credit or market
 
risks.
 
Operational risk overview
 
and summary of performance
 
Operational risk profile
167
167
144
146
Model risk:
The risk of the potential adverse
consequences from
 
financial assessments
 
or
decisions based on incorrect
 
or misused model
outputs and reports.
 
Model risk overview
 
and summary of performance
170
n/a
Conduct risk:
The risk of detriment to
customers, clients, market integrity,
 
effective
competition or Barclays from
 
the inappropriate
supply of financial services, including instances
of wilful or negligent misconduct.
 
Conduct risk overview and summary
 
of performance
170
n/a
Reputation risk:
The risk that an action,
transaction, investment, event, decision, or
business relationship will reduce trust in the
Group’s
 
integrity and/or competence.
 
Reputation risk overview
 
and summary of performance
170
n/a
 
 
 
 
 
 
 
 
Risk review
Content
 
 
89
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
 
 
Annual
Report
Pillar 3
Report
Legal risk:
The risk of loss or imposition of
penalties, damages or fines from the failure of
the Group to meet its legal obligations
including regulatory
 
or contractual
requirements.
 
Legal risk overview and summary
 
of performance
170
n/a
Supervision and
 
regulation
The Group’s
 
operations, including its overseas
offices, subsidiaries and associates, are subject
to a significant body of rules and regulations.
 
Supervision of the Group
 
Global regulatory
 
developments
 
Financial regulatory
 
framework
171
171
172
n/a
n/a
n/a
Pillar 3
 
Report
Contains extensive information
 
on risk as well
as capital management.
 
Summary of risk and capital profile
 
Notes on basis of preparation
 
Scope of application of Basel rules
n/a
n/a
n/a
3
5
6
Risk and capital position
 
review:
Provides a
detailed breakdown
 
of Barclays’ regulatory
capital adequacy and how
 
this relates to
Barclays’ risk management
.
 
Group
 
capital resources, requirements, leverage and
 
liquidity
 
Analysis of credit risk
 
Analysis of counterparty
 
credit risk
 
Analysis of market risk
 
Analysis of securitisation exposures
 
Analysis of operational risk
n/a
n/a
n/a
n/a
n/a
n/a
16
48
104
122
129
144
 
Risk review
Risk management
Barclays’ risk management
 
strategy
 
90
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
Barclays’ risk
 
management
 
strategy
 
This section introduces the Group’s
 
approach
 
to managing and identifying risks, and for fostering a strong risk culture.
 
Enterprise Risk Management Framework (ERMF)
The ERMF sets the strategic approach
 
for risk management by defining
 
standards, objectives and responsibilities
 
for all areas of the Group.
 
It is then
approved
 
by the Barclays PLC Board
 
on recommendation
 
of the Group Chief Risk
 
Officer. It supports senior management
 
in effective risk
management and developing
 
a strong risk culture.
 
The ERMF sets out:
 
 
Segregation of duties: The ERMF defines a Three Lines of Defence model
 
 
Principal risks faced by the Group.
 
This list guides the organisation of the risk management function, and the identification, management and
reporting
 
of risks.
 
 
Risk appetite requirements
 
.
 
This helps define the level of risk we are willing to undertake in our business.
 
 
Roles and responsibilities for risk management:
 
The ERMF sets out the accountabilities of the Group CEO and other senior managers, as well as
Barclays PLC
 
committees
 
The ERMF is complemented
 
by frameworks,
 
policies and standards which are
 
mainly aligned to individual principal risks:
 
 
Frameworks cover
 
the management approach for
 
a collection of related activities
 
and define the associated policies used to govern
 
them.
 
 
Policies set out principles and other core
 
requirements
 
for the activities of
 
the Group
 
.
 
Policies describe “what” must be done.
 
 
Standards set out the key control objectives that describe how
 
the requirements set out in the policy are met, and who needs to carry them out.
Standards describe “how” controls should be undertaken.
 
Segregation of duties - the "Three Lines of Defence" model
 
The ERMF sets out a clear lines of defence model. All colleagues are responsible for
 
understanding
 
and managing risks within the context of
 
their
individual roles and responsibilities, as set out below:
 
 
First line comprises all employees engaged
 
in the revenue generating
 
and client facing areas of the
 
Group
 
and all associated support functions,
including Finance, Treasury,
 
and Human Resources. The first line is responsible for identifying and managing
 
the risks they generate, establishing
a control
 
framework,
 
and escalating risk
 
events to Risk and Compliance.
 
 
Second line is comprised of the Risk and Compliance functions. The role of the second line is to establish the limits, rules and
 
constraints under
which first line activities shall be performed,
 
consistent with
 
the risk appetite of the Group
 
,
 
and to monitor the performance
 
of the first
 
line
against these limits and constraints. Note that limits for
 
a number of first line activities, related to operational risk, will be set by the first line and
overseen by
 
the Chief Controls Office. These will remain subject to supervision by
 
the second line.
 
 
Third line of defence is Internal Audit, who are responsible
 
for providing
 
independent assurance over the effectiveness of governance,
 
risk
management and control
 
over current, systemic and evolving risks.
 
 
The Legal function provides support
 
to all
 
areas of the bank
 
and is not formally part of any of the three lines. However
 
,
 
it is subject to second line
oversight.
 
Principal
 
risks
The ERMF identifies eight principal risks and sets out associated responsibilities an
 
d
 
expectations around risk management standards.
 
Each of the principal risks is overseen
 
by an accountable executive within the Group
 
who is responsible for the framework, policies and standards
that detail the related requirements.
 
Risk reports to executive and Board
 
committees are clearly organised by p
 
rincipal risk. In addition, certain risks
span more than one principal
 
risk; these are also subject to the ERMF and are reported
 
to executive and Board
 
committees.
 
Risk appetite for the principal risks
 
Risk appetite is defined as the level of risk which the Group’s
 
businesses are prepared
 
to accept in the
 
conduct of their activities. It sets the ‘tone
from the top’ and provides
 
a basis for ongoing
 
dialogue between management and Board
 
with respect to the
 
Group’s
 
current and
 
evolving risk
profile, allowing strategic and financial decisions to be made on
 
an informed basis.
 
Risk appetite is approved
 
by the Barclays PLC Board
 
and disseminated across legal
 
entities. Total Group
 
risk appetite
 
is supported
 
by limits
 
to
control exposures
 
and activities that have material concentration risk implications.
 
fy2019arbplcp101i0.jpg
 
Risk review
Risk management
Barclays’ risk management
 
strategy
 
91
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Risk committees
 
Various
 
committees also fulfil important roles and responsibilities. Barclays business level product/risk
 
type committees consider risk matters
relevant to their business, and escalate as required
 
to the Group Risk Committee (GRC), whose Chairman, in turn, escalates to the Barclays PLC
Board
 
Committees and the Barclays PLC Board.
 
In addition to setting the risk appetite of the Group,
 
the Board is responsible for approving
 
the ERMF, and reviewing all reputation risk matters. It
receives regular information
 
on the risk profile of the bank, and has ultimate responsibility for risk appetite and capital plans.
 
Further
 
,
 
there are three Board
 
-level committees which oversee the application of the ERMF and implementation of key
 
aspects. Membership of
these committees is comprised
 
solely of non-executive directors providing
 
independent oversight and challenge. These are detailed below:
 
 
The Barclays PLC
 
Board
 
Risk Committee
 
(BRC): The BRC monitors
 
the Group’s risk profile against the agreed appetite. Where
 
actual performance
differs from
 
expectations, the actions taken by management are reviewed
 
to ascertain that the
 
BRC is comfortable
 
with them. The BRC also
reviews certain key risk methodologies,
 
the effectiveness of risk management,
 
and the Group’s risk profile,
 
including the material issues affecting
each business portfolio and forward
 
risk trends.
 
The committee also commissions in-depth analyses of significant risk topics, which are
presented by the Group
 
CRO or senior risk managers.
 
 
The Barclays PLC
 
Board
 
Audit Committee (BAC): The BAC receives regular
 
reports on the effectiveness of internal control systems, quarterly
reports on material control issues of significance, and quarterly papers
 
on accounting
 
judgements (including impairment). It also receives a half-
yearly review of the adequacy
 
of impairment allowances, which it reviews relative to the risk inherent in the portfolios, the business environment,
Barclays policies and methodologies.
 
 
The Barclays PLC
 
Board
 
Remuneration
 
Committee (RemCo): The RemCo receives a report
 
on risk management performance and risk profile, and
proposals on ex-ante and ex-post risk adjustments to variable remuneration.
 
These inputs are considered in the setting of performance
incentives.
 
The terms of reference
 
and additional details on membership and activities
 
for each of the principal
 
Board
 
committees are available from the
corporate
 
governance section of the Barclays website at: home.barclays/about
 
-barclays/barclays
 
-corporate-governance.html.
 
The Group
 
Risk Committee (GRC) is the most senior executive body responsible for
 
reviewing and monitoring
 
the risk profile of the
 
Group.
 
This
includes coverage
 
of all principal risks, and any other material risks, to which the Group
 
is exposed. The GRC reviews and recommends
 
the
proposed
 
risk appetite
 
and relative limits to the BRC. The committee covers
 
all business units and legal entities with the Group
 
and incorporates
specific coverage
 
of Barclays Bank Group.
 
Barclays’ risk culture
Risk culture can be defined as the norms, attitudes and
 
behaviours related to risk awareness, risk taking and risk
 
management.
 
This is reflected in
how the Group
 
identifies, escalates and manages risk
 
matters.
 
Barclays is committed
 
to maintaining a robust risk culture in which:
 
 
management expect, model and reward
 
the right behaviours from
 
a risk
 
and control perspective;
 
 
colleagues identify, manage and
 
escalate risk and control matters, and meet their responsibilities around
 
risk management.
 
Specifically, all employees
 
regardless of their positions, functions or
 
locations must play their part in the Group’s
 
risk management. Employees are
required
 
to be familiar with risk
 
management policies which are
 
relevant to their responsibilities, know how
 
to escalate actual or potential risk
issues, and have a role-appropriate
 
level of awareness of the risk management process as defined by the ERMF.
 
Our Code of Conduct – the Barclays Way
 
Globally,
 
all colleagues must attest to the “Barclays Way”,
 
our Code of Conduct, and
 
comply with all frameworks, policies and standards applicable
to their roles. The Code of Conduct outlines the purpose
 
and values which govern
 
our “Barclays Way” of working
 
across our business globally. It
constitutes a reference
 
point covering
 
the aspects
 
of colleagues’ working relationships, with other Barclays employees,
 
customers and clients,
governments
 
and regulators, business partners, suppliers, competitors and the broader
 
community.
 
Risk review
 
Material existing
 
and
 
emerging risks
92
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
Material existing
 
and emerging
 
risks
 
to
 
the Group’s
 
future performance
 
The Group
 
has identified
 
a broad
 
range of risks to which its businesses
 
are exposed.
 
Material risks are those to which senior management
 
pay
particular attention and
 
which could cause the delivery of the Group’s strategy,
 
results of operations, financial condition and/or
 
prospects to differ
materially from expectations. Emerging risks are those which have
 
unknown
 
components, the impact of which could crystallise over a longer time
period. In addition, certain other factors beyond
 
the Group’s control,
 
including escalation of terrorism or global conflicts, natural disasters,
 
epidemic
outbreaks and similar events, although
 
not detailed below, could have a similar impact on the Group.
 
Material existing
 
and emerging
 
risks
 
potentially
 
impacting
 
more
 
than one
 
principal
 
risk
i)
 
Business
 
conditions, general economy and geopolitical
 
issues
 
The Group’s
 
operations are subject to potentially unfavourable
 
global and local economic and market conditions, as well as geopolitical
developments, which may have
 
a material effect on the Group’s
 
business, results of operations, financial condition and prospects.
A deterioration in global or local economic
 
and market conditions may lead to (among
 
other things): (i) deteriorating business, consumer or
investor confidence and
 
lower levels of fixed asset investment and productivity
 
growth, which
 
in turn may lead to lower client activity, including
lower demand
 
for borrowing
 
from creditworthy customers; (ii) higher default rates, delinquencies, write-offs and impairment charges as borrowers
struggle with the burden
 
of additional debt; (iii)
 
subdued asset prices and payment patterns, including
 
the value of any collateral held by
 
the Group;
(iv) mark-to-market losses in trading portfolios resulting from
 
changes in factors such as credit ratings, share prices and solvency of counterparties;
and (v) revisions to calculated expected credit losses (ECLs) leading to increases in impairmen
 
t
 
allowances. In addition, the Group’s
 
ability to
borrow
 
from other financial institutions
 
or raise funding from
 
external investors may be affected by deteriorating economic
 
conditions and market
disruption.
 
Geopolitical events may lead to further financial
 
instability and affect economic growth.
 
In particular:
 
In
 
the UK,
 
the decision to leave the European
 
Union (EU)
 
may give rise to further economic and political consequences including
 
for investment
and market confidence in the UK and the remainder
 
of EU.
 
See “(ii) Process of UK withdrawal from
 
the EU”
 
below for further
 
details.
 
A significant proportion
 
of the Group’s portfolio
 
is located
 
in the US, including a major credit card portfolio
 
and a range of corporate and
investment banking
 
exposures. The possibility of significant continued changes in US policy in certain sectors (including trade, healthcare and
commodities), may have an impact
 
on the Group’s associated portfolios. Stress in
 
the US economy,
 
weakening GDP and the associated exchange
rate fluctuations, heightened
 
trade tensions (such as the current dispute between the US and China),
 
an unexpected
 
rise in unemployment
and/or an increase in interest rates could
 
lead to increased levels of impairment, resulting in a negative impact on
 
the Group’s profitability.
 
Global GDP growth
 
weakened in 2019,
 
as elevated
 
policy uncertainty weighed on
 
manufacturing
 
activity
 
and investment. As a result, a number of
central banks, most notably the Federal
 
Reserve and European
 
Central Bank (ECB), pursued monetary
 
easing. Growth is expected to stabilise
 
in
2020,
 
but macroeconomic
 
risks remain skewed to the
 
downside, while concerns around
 
the efficacy of existing
 
policy tools to counter
 
these risks
persist. An escalation in geopolitical tensions, increased use of protectionist measures
 
or a disorderly withdrawal
 
from the EU may negatively
impact the Group’s
 
business in the affected regions.
 
In China the pace of credit growth
 
remains a concern, given the high level of leverage and despite government
 
and regulatory
 
action. A stronger
than expected slowdown
 
could result if authorities fail to appropriately
 
manage growth
 
during the transition from manufacturing towards
services and the end of the investment and credit-led bo
 
om. Deterioration in emerging
 
markets could affect the Group if it results in
 
higher
impairment charges via sovereign
 
or counterparty
 
defaults.
ii)
 
Process of UK withdrawal from the EU
 
The manner
 
in which
 
the UK
 
withdraws
 
from
 
the EU
 
will likely have
 
a marked
 
impact on
 
general
 
economic
 
conditions in
 
the UK and the EU. The
UK’s future
 
relationship with
 
the EU
 
and its trading
 
relationships with the
 
rest of the world could take a number of years to resolve. This may lead to
a prolonged
 
period
 
of uncertainty, unstable economic conditions
 
and market volatility, including fluctuations in
 
interest rates
 
and foreign
 
exchange
rates.
Whilst the exact impact of
 
the UK’s withdrawal
 
from
 
the EU is
 
unknown,
 
the Group continues to monitor
 
the risks
 
that may have a more immediate
impact for its business, including
 
,
 
but not limited to:
 
 
Market volatility, including
 
in currencies and interest rates, might increase which could
 
have an impact on the value of the Group’s
 
trading book
positions.
 
 
Credit spreads could
 
widen leading to reduced
 
investor appetite for the Group’s debt securities. This could negatively impact the Group’s
 
cost of
and/or access to funding. In
 
addition, market and interest rate volatility could affect the underlying
 
value of
 
assets in the banking book and
securities held by the Group
 
for liquidity purposes.
 
A credit rating agency downgrade
 
applied directly to the Group, or indirectly as a result of a credit rating agency downgrade
 
to the UK
Government,
 
could significantly increase the Group’s cost of and/or
 
reduce its access to funding, widen credit spreads and materially adversely
affect the Group’s
 
interest margins and liquidity position.
 
A UK recession with lower
 
growth, higher
 
unemployment and falling UK property
 
prices could lead to
 
increased impairments in relation to a
number
 
of the Group’s portfolios, including, but not limited to, its UK mortgage
 
portfolio, UK unsecured
 
lending portfolio (including credit cards)
and its commercial real estate exposures.
 
The ability to attract, or prevent
 
the departure of, qualified and skilled employees may be
 
impacted by the UK’s and the EU’s future approach
 
to
the EU freedom
 
of movement and immigration
 
from the EU countries and this
 
may impact the Group’s
 
access to the EU talent pool.
 
 
A disorderly exit from the EU may
 
put a strain on the capabilities of the Group’s
 
systems, increasing the risk of failure of those systems and
potentially resulting in losses and reputational damage for
 
the Group.
 
 
Changes to current EU ‘Passporting’ rights may require
 
further adjustment to the current model for
 
the Group’s cross
 
-border banking
 
operation
which could increase operational
 
complexity and/or costs for the Group.
 
Risk review
 
Material existing
 
and
 
emerging risks
93
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
The legal framework
 
within which the Group operates could
 
change and become more uncertain if the UK takes
 
steps to replace or repeal
 
certain
laws currently
 
in force, which are based on EU legislation and regulation
 
(including EU regulation
 
of the banking sector) following its withdrawal
from the EU. Certainty around
 
the ability
 
to maintain existing contracts, enforceability of certain
 
legal obligations and uncertainty around
 
the
jurisdiction of the UK courts may be affected
 
until the impacts of the loss of the current legal and regulatory
 
arrangements between the UK and
EU and the enforceability of UK judgements
 
across the EU are fully known.
 
Should the UK see reduced
 
access to
 
financial markets infrastructures
 
(including exchanges, central counterparties
 
and payments services, or
other support services provided
 
by third party suppliers
 
)
 
service provision for
 
clients
 
could be impacted,
 
likely resulting in reduced market share
and revenue
 
and increased operating
 
costs for the Group.
iii)
 
The impact of interest rate changes on the Group’s profitability
 
Any changes to interest rates are
 
significant for the Group,
 
especially given the uncertainty as to the direction of interest rates and the pace at
which interest rates may change
 
particularly in the Group’s main markets of the UK and the US.
 
A continued period
 
of low interest rates and flat yield curves, including any further cuts, may affect and
 
continue to put pressure on the Group’s
 
net
interest margins (the difference
 
between its lending income and borrowing
 
costs) and could adversely affect the profitability
 
and prospects of the
Group.
However,
 
whilst interest rate rises could positively impact the Group’s
 
profitability as retail and corporate
 
business income increases due to margin
de-compression,
 
further increases in interest rates, if larger or
 
more
 
frequent than expected, could lead to generally weaker
 
than expected growth,
reduced
 
business confidence and higher unemployment,
 
which in turn could cause stress in
 
the lending portfolio and underwriting
 
activity
 
of the
Group.
 
Resultant higher credit losses driving an increased impairment charge
 
would most notably impact retail unsecured portfolios and
 
wholesale
non-investment grade
 
lending and could have
 
a material
 
effect on the Group’s business, results of operations, financial condition
 
and prospects.
In addition, changes in interest rates could have
 
an adverse impact on the value of the securities held in the Group’s
 
liquid asset portfolio.
Consequently, this could create more
 
volatility than expected through
 
the Group’s FVOCI reserves.
iv)
 
The competitive environments of the banking and financial services industry
The Group’s
 
businesses are conducted in competitive environments
 
(in particular, in the UK and US), with increased competition scrutiny, and the
Group’s
 
financial performance depends
 
upon the Group’s ability to respond effectively to competitive pressures whether
 
due to competitor
behaviour,
 
new entrants to the market, consumer demand,
 
technological changes or otherwise.
This competitive environment,
 
and the Group’s response
 
to it, may have a material adverse effect on the Group’s
 
ability to maintain existing or
capture additional market share, business, results of operations, financial
 
condition and prospects.
v)
 
Regulatory change agenda and impact on business
 
model
 
The Group
 
remains subject to ongoing significant levels of regulatory change
 
and scrutiny in many of the countries in which it operates (including,
in particular,
 
the UK and the US). As a result, regulatory risk will remain a focus for
 
senior management. Furthermore,
 
a more intensive regulatory
approach
 
and enhanced requirements together with the potential lack of international regulatory co-
 
ordination as enhanced supervisory standards
are developed
 
and implemented may adversely affect the Group’s
 
business, capital and risk management strategies and/or
 
may result in the Group
deciding to modify its legal entity, capital and funding
 
structures and business mix, or to exit certain business activities altogether or not to expand
in areas despite otherwise attractive potential.
There are several significant pieces of legislation
 
and areas of focus which will require
 
significant management attention, cost and resource,
including:
 
Changes in prudential requirements
 
may impact minimum requirements
 
for own funds and
 
eligible liabilities
 
(MREL) (including requirements
 
for
internal MREL), leverage, liquidity or
 
funding requirements, applicable buffers
 
and/or add
 
-ons to
 
such minimum requirements and risk weighted
assets calculation methodologies all as may be set by international, EU or
 
national authorities. Such or similar changes to prudential requirements
or additional supervisory and prudential
 
expectations, either individually
 
or in aggregate, may result in, among
 
other things, a need for further
management actions to
 
meet the changed requirements, such as:
 
-
 
increasing capital, MREL or liquidity resources, reducing
 
leverage and risk weighted assets;
 
-
 
restricting distributions on capital instruments;
 
-
 
modifying the terms of outstanding capital instruments;
 
-
 
modifying legal entity structure (including
 
with regard to issuance and deployment
 
of capital,
 
MREL and funding);
 
-
 
changing the Group’s
 
business mix
 
or exiting other businesses;
 
-
 
and/or undertaking
 
other actions to strengthen the Group’s position.
 
The derivatives market has been
 
the subject of particular focus for regulators
 
in recent years across the G20 countries and beyond,
 
with
regulations introduced
 
which require
 
the reporting and clearing of standardised over the counter (OTC)
 
derivatives and the mandatory margining
of non-cleared
 
OTC derivatives. These regulations
 
may increase costs for
 
market participants, as well as reduce liquidity in the derivatives
markets. More broadly,
 
changes to the regulatory framework
 
(in particular, the review of the second Markets in
 
Financial Instruments Directive
and the implementation of the Benchmarks Regulation)
 
could entail significant costs for market participants and may have a significant impact
on certain markets in which the Group
 
operates.
 
The Group
 
and certain of its members are subject to supervisory stress testing exercises in a number
 
of jurisdictions.
 
These exercises currently
include the programmes
 
of the BoE, the European Banking Authority
 
(EBA),
 
the Federal Deposit Insurance Corporation
 
(FDIC)
 
and the Federal
Reserve Bank (FRB)
 
.
 
Failure to meet the requirements
 
of regulatory stress tests, or the failure by regulators
 
to approve
 
the stress
 
test results and
capital plans of the Group,
 
could result in the Group or cert
 
ain of its members being required
 
to enhance their capital position,
 
limit capital
distributions or position additional capital in specific subsidiaries.
For further
 
details
 
on the regulatory
 
supervision of, and regulations applicable to, the Group, see Supervision and regulation
 
on pages 171
 
to 177
 
.
 
Risk review
 
Material existing
 
and
 
emerging risks
94
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
vi)
 
The impact of climate change on the Group’s business
The risks associated with climate change are subject to rapidly increasing societal, regulatory
 
and political focus, both in
 
the UK and internationally.
Embedding
 
climate risk into the
 
Group’s
 
risk framework
 
in line with
 
regulatory
 
expectations, and adapting the Group’s operations and
 
business
strategy to address both the financial risks resulting from:
 
(i) the physical risk of climate change; and (ii) the risk from the transition to a low carbon
economy
 
,
 
could have a significant impact on the Group’s
 
business.
Physical risks from
 
climate change arise from a number of factors and relate to specific weather events and longer
 
-term shifts
 
in the climate.
 
The
nature and timing of extreme weather events
 
are uncertain but they are increasing in frequency
 
and their impact on the economy is predicted to be
more acute in the future. The potential impact on the economy
 
includes, but is not limited to, lower GDP growth,
 
higher unemployment and
significant changes in asset prices and profitability of industries. Damage to the properties
 
and operations of borrowers
 
could impair asset values
and the creditworthiness of customers leading to increased default rates,
 
delinquencies, write-offs and impairment charges in the Group’s
portfolios.
 
In addition, the Group’s
 
premises and resilience may also suffer physical damage due
 
to weather events leading to increased costs for
the Group.
As the economy
 
transitions to
 
a low-carbon
 
economy,
 
financial institutions
 
such as the Group
 
may face significant
 
and rapid development
 
s
 
in
stakeholder expectations, policy, law
 
and regulation which could
 
impact the lending activities
 
the Group
 
under
 
takes,
 
as well
 
as the risks associated
with its lending portfolios,
 
and the value of the Group’s
 
financial assets.
 
As sentiment towards
 
climate change shifts and societal preferences
change, the Group
 
may face greater scrutiny of the type of business it conducts, adverse media coverage
 
and reputational damage, which may in
turn impact customer demand
 
for the Group's
 
products, returns on certain business activities
 
and the value of certain assets and
 
trading positions
resulting in impairment charges.
 
In addition, the impacts of physical and transition climate risks can lead
 
to second order
 
connected risks, which have the potential to affect the
Group’s
 
retail and wholesale portfolios. The impacts of climate change may increase losses
 
for those sectors sensitive to the effects of physical and
transition risks. Any subsequent increase in defaults
 
and rising unemployment
 
could create recessionary pressures, which
 
may lead to wider
deterioration in the creditworthiness of the Group’s
 
clients, higher ECLs, and increased charge
 
-offs and defaults among retail customers.
If the Group
 
does not adequately embed risks associated
 
with climate change into its risk framework
 
to appropriately measure, manage
 
and
disclose the various financial and operational risks it faces as a result of climate change, or
 
fails to adapt its strategy and business model to the
changing regulatory
 
requirements and market expectations on a timely basis, it may have a material and adverse impact on the Group’s
 
level of
business growth,
 
competitiveness, profitability, capital requirements,
 
cost of funding, and financial condition.
For further
 
details
 
on the Group’s
 
approach
 
to climate
 
change, see page 101
 
of climate change risk management.
 
vii)
 
Impact of benchmark interest rate reforms on the Group
For several years, global
 
regulators and central banks have
 
been driving international efforts to reform
 
key benchmark
 
interest rates
 
and indices,
such as the London
 
Interbank
 
Offered Rate (“LIBOR”), which are used to determine the amounts payable under
 
a wide range of transactions and
make them more
 
reliable and robust. This has resulted in significant changes to the methodology
 
and operation
 
of certain benchmarks and indices,
the adoption of alternative “risk-free” reference
 
rates and the proposed discontinuation of certain reference
 
rates (including LIBOR), with further
changes anticipated.
Uncertainty as to the nature of such potential changes, the availability
 
and/or suitability of alternative “risk-free” reference
 
rates and other reforms
may adversely affect a
 
broad
 
range of transactions (including any
 
securities,
 
loans and derivatives which use LIBOR to determine
 
the amount of
interest paya
 
ble that are included in the Group’s financial assets and
 
liabilities) that use these reference rates and indices and introduce
 
a number of
risks for the Group,
 
including, but not limited to:
 
Conduct risk:
 
in undertaking actions to transition away from
 
using certain reference rates (including
 
LIBOR), the Group faces conduct risks,
which may lead to customer complaints, regulatory
 
sanctions or reputational impact if the Group is (i) considered to be undertak
 
ing market
activities that are manipulative or
 
create a false or misleading impression, (ii) misusing sensitive information
 
or not identifying or appropriately
managing or
 
mitigating conflicts
 
of interest, (iii) providing
 
customers with inadequate advice, misleading information, unsuitable products or
unacceptable service, (iv) not taking an appropriate
 
or consistent response to remediation activity or customer complaints, (v) providing
regulators with inaccurate regulatory
 
reporting
 
or (vi) colluding or inappropriately sharing information with competitors;
 
Financial risks:
 
the valuation of certain of the Group’s financial assets and liabilities may change. Moreover,
 
transitioning to alternative “risk-free”
reference
 
rates may impact the ability of members of
 
the Group
 
to calculate
 
and model amounts receivable by
 
them on certain financial assets
and determine the amounts payable on
 
certain financial liabilities (such as debt securities issued by them) because currently alternative “risk-
free” reference rates (such as the
 
Sterling Overnight Index Average
 
(SONIA) and the Secured Overnight Financing Rate (SOFR)) are look-back
rates whereas term rates (such
 
as LIBOR) allow borrowers
 
to calculate
 
at the
 
start of any interest period
 
exactly how much is payable at the end
of such interest period. This may have
 
a material adverse effect on the Group’s
 
cashflows;
 
Pricing
 
risk:
 
changes to existing reference rates and indices, discontinuation of any reference
 
rate or indices and transition to alternative “risk-
free” reference rates may
 
impact the pricing mechanisms used by the Gr
 
oup on certain transactions;
 
Operational risk:
 
changes to existing reference
 
rates and indices,
 
discontinuation of any reference
 
rate or index and transition to alternative “risk-
free” reference rates may
 
require
 
changes to the Group’s IT systems, trade reporting
 
infrastructure, operational
 
processes,
 
and controls. In
addition, if any reference
 
rate or index (such as LIBOR) is no longer available to calculate amounts payable,
 
the Group may
 
incur additional
expenses in amending documentation
 
for new and existing transactions and/or effecting the transition from the original reference
 
rate or index
to a new reference
 
rate or index; and
 
Accounting risk:
an inability to apply hedge accounting in accordance
 
with IFRS could lead to increased volatility
 
in the Group’s
 
financial results
and performance.
 
Any of these factors may have a
 
material adverse effect on
 
the Group’s business, results of operations, financial condition
 
and prospects.
For further
 
details
 
on the impacts of benchmark
 
interest rate reforms on the Group,
 
see Note 14 on pages 236
 
to 243
 
.
 
Risk review
 
Material existing
 
and
 
emerging risks
95
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
viii)
 
Holding
 
company structure of Barclays PLC
 
and its dependency on distributions
 
from its subsidiaries
Barclays PLC
 
is a holding company
 
and its
 
principal sources of income are, and are expected
 
to continue to be, distributions (in the form of
dividends and interest payments)
 
from operating
 
subsidiaries which also
 
hold the principal assets of the Group.
 
As a separate legal entity, Barclays
PLC relies on such distributions in order
 
to be able to meet its obligations
 
as they fall due (including
 
its
 
payment obligations with respect to its debt
securities) and to create distributable reserves for payment
 
of dividends to ordinary
 
shareholders.
 
The ability of Barclays PLC’s subsidiaries to pay dividends and
 
interest and Barclays PLC’s ability
 
to receive such distributions from its investments in
its subsidiaries and other entities will be subject not only to such subsidiaries’ and other
 
entities' financial performance
 
but also to applicable
 
local
laws and other restrictions. These laws and restrictions
 
could limit the payment of dividends and distributions to Barclays PLC by
 
its subsidiaries
and any other entities in which it holds an investment
 
from time to time, which could restrict Barclays PLC’s ability to
 
meet its obligations and/or to
pay dividends to ordinary
 
shareholders.
ix)
 
Application
 
of resolution measures and stabilisation
 
powers under the Banking Act
Under the Banking
 
Act 2009, as amended, (the “Banking Act”) substantial powers are granted
 
to the Bank of England (or, in certain circumstances,
HM Treasury), in consultation with the PRA,
 
the FCA and HM Treasury, as appropriate,
 
as part of a special resolution regime (the “SRR”). These
powers enable the relevant UK resolution
 
authority to implement resolution measures and stabilisation options with respect to a UK bank
 
or
investment firm and certain of its affiliates (currently
 
including Barclays PLC) (each
 
a “relevant entity”) in circumstances in which the relevant UK
resolution authority is satisfied that the resolution conditions are met. The SRR consists of
 
five stabilisation options: (i) private sector transfer of all
or part of the business or shares of the relevant entity,
 
(ii) transfer of all or part of the business of the relevant entity
 
to a “bridge bank” established
by the Bank of England, (iii) transfer to
 
an asset management vehicle wholly or partly owned
 
by HM Treasury
 
or the Bank of England, (iv) the
cancellation or transfer of the relevant entities' equity and write-
 
down or
 
conversion
 
of the relevant entity’s
 
capital instruments and liabilities (the
bail-in tool) and (v)
 
temporary
 
public ownership (i.e. nationalisation).
 
In addition, the relevant UK resolution
 
authority may, in certain circumstances, in accordance
 
with the Banking Act require the permanent
 
write-
down or
 
conversion
 
into equity of any outstanding tier 1 capital
 
instruments and tier 2 capital instruments prior
 
to the exercise of any stabilisation
option (including
 
the bail-in tool), which may lead to the cancellation, transfer or dilution of Barclays PLC’s ordinary
 
share capital.
Shareholders should
 
assume that, in
 
a resolution situation, public financial support
 
will only be available to a relevant entity as a last resort after the
relevant UK resolution authorities have
 
assessed and used, to the maximum extent practicable, the resolution tools,
 
including the bail-in tool (the
Bank of England’s preferred
 
approach
 
for the resolution of the Group is a
 
bail-in strategy with a single point of entry at Barclays PLC). The exercise
of any of such powers
 
under the Banking
 
Act or any suggestion of any such exercise could materially adversely affect the value of Barclays PLC
ordinary
 
shares and could lead to shareholders losing some or all of their investment.
In addition, any safeguards within the Banking
 
Act (such as the ‘no creditor worse off' principle
 
)
 
may not result in compensation to shareholders
that is equivalent to the full losses incurred
 
by them in the resolution and there can be no assurance that shareholders would
 
recover
 
such
compensation promptly.
Material existing
 
and emerging
 
risks
 
impacting
 
individual
 
principal risks
i)
 
Credit risk
 
Credit risk is the risk of loss to the Group
 
from the failure of clients, customers or counterparties, including sovereigns,
 
to fully honour their
obligations to members of the Group,
 
including the whole and timely payment of principal, interest, collateral and other
 
receivables.
a)
 
Impairment
The introduction
 
of the impairment requirements of IFRS 9
Financial Instruments
,
 
resulted in impairment loss allowances that are recognised
earlier, on a more
 
forward
 
-looking basis
 
and on a broader
 
scope of financial instruments,
 
and may continue to have a material impact on the
Group’s
 
business, results of operations, financial condition and prospects.
Measurement involves complex
 
judgement and impairment
 
charges could be volatile, particularly under
 
stressed conditions. Unsecured products
with longer
 
expected lives, such
 
as credit cards, are the most impacted. Taking
 
into account the transitional regime, the capital treatment on the
increased reserves has the potential to adversely impact
 
the Group’s regulatory
 
capital ratios.
In addition, the move from incurred
 
losses
 
to ECLs has the potential to impact the Group’s
 
performance
 
under stressed economic conditions or
regulatory
 
stress tests. For more information,
 
refer to Note 1
 
on pages 214
 
to 222.
b)
 
Specific sectors and concentrations
The Group
 
is subject to risks
 
arising from changes in credit quality and recovery
 
rates
 
of loans and advances due from borrowers
 
and
counterparties in any specific portfolio.
 
Any deterioration
 
in credit quality could lead to lower recoverability and highe
 
r
 
impairment in a specific
sector.
 
The following are areas of uncertainties to the Group’s
 
portfolio which could
 
have a material impact on performance:
 
UK retail, hospitality & leisure
 
.
Softening demand, rising costs and a structural shift to online shopping is fuelling pressure on the UK High Street
and other sectors heavily reliant on consumer
 
discretionary spending
 
.
 
As these
 
sectors continue to reposition themselves,
 
the trend represents a
potential risk in the Group’s UK
 
corporate
 
portfolio from
 
the perspective of the its
 
interactions with both retailers and their landlords.
 
Consumer affordability
 
has remained a key area of focus, particularly in unsecured
 
lending. Macroeconomic
 
factors, such as
 
rising
unemployment,
 
that impact a customer’s ability
 
to service unsecured
 
debt payments could lead to increased arrears in unsecured
 
products.
 
UK real estate market.
UK property
 
represents a significant portion of the overall Group retail and corporate
 
credit exposure. In 2019,
 
property
price growth
 
across the UK has slowed, particularly in London
 
and the South East
 
where the Group’s
 
exposure has high concentration.
 
The Group
is at risk of increased impairment from
 
a material fall in property prices.
 
Leverage finance underwriting.
The
 
Group
 
takes on sub-investment grade underwriting exposure, including
 
single name risk,
 
particularly in the
US and Europe. The Group
 
is exposed to credit events
 
and market volatility during
 
the underwriting period. Any
 
adverse events during this period
may potentially result in loss for the
 
Group,
 
or an increased capital requirement should
 
there be a need to hold the exposure for an extended
period.
 
Risk review
 
Material existing
 
and
 
emerging risks
96
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Italian mortgage portfolio.
 
The Group
 
is exposed to a
 
decline in the Italian economic environment
 
through a mortgage
 
portfolio in run-off and
positions to wholesale customers. Growth
 
in the Italian economy remained
 
weak in 2019
 
and should the economy deteriorate further,
 
there
could be a material adverse effect on
 
the Group’s results including,
 
but not limited to, increased credit losses and higher
 
impairment charges.
The Group
 
also has
 
large individual exposures to single name counterparties,
 
both in its lending activities and in its
 
financial services and trading
activities, including transactions in derivatives and transactions
 
with brokers, central clearing houses, dealers, other banks, mutual and hedge
 
funds
and other institutional clients. The default of such counterparties
 
could
 
have a significant impact on the carrying value of these assets. In addition,
where such counterparty
 
risk has
 
been mitigated by taking collateral, credit risk may remain high if
 
the collateral held cannot be realised, or has to
be liquidated at prices which are insufficient to recover
 
the full
 
amount of the loan or derivative exposure.
 
Any such defaults could have a material
adverse effect on the Group’s
 
results due to, for example, increased credit losses and higher
 
impairment charges.
For further
 
details
 
on the Group’s
 
approach
 
to credit risk,
 
see credit risk management on pages 102
 
to 103
 
and credit risk performance on pages
109
 
to 139
 
.
ii)
 
Market risk
 
Market risk is the risk of loss arising from potential adverse change
 
in the value of the Group’s
 
assets and liabilities from fluctuation in market
variables including, but not limited to, interest rates, foreign
 
exchange, equity prices, commodity prices, credit spreads, implied volatilities and asset
correlations.
 
A broadening
 
in trade tensions between the US
 
and its major trading partners, slowing global
 
growth
 
and political concerns in the US and Europe
(including Brexit)
 
are some of the factors that could heighten market risks for the Group’s
 
portfolios. In addition, the Group’s trading
 
business is
generally exposed to a prolonged
 
period of elevated asset
 
price volatility,
 
particularly if it negatively affects the depth of marketplace liquidity.
 
Such
a scenario could impact the Group’s
 
ability to execute client trades and may also result in lower
 
client flow-driven income and/or
 
market-based
losses on its existing portfolio of market risks. These can include having
 
to absorb higher
 
hedging costs from rebalancing risks that need to be
managed dynamically as market levels and their associated volatilities change.
It is difficult to predict changes in market conditions, and such changes could
 
have a material adverse effect on
 
the Group’s business, results of
operations, financial condition and
 
prospects.
 
For further
 
details
 
on the Group’s
 
approach
 
to market risk,
 
see market risk management on pages 103
 
to 104
 
and market risk performance
 
on
pages 14
 
0
 
to 142
 
.
iii)
 
Treasury and capital risk
 
There are three primary
 
types of treasury and capital
 
risk faced by the
 
Group:
a) Liquidity
 
risk
 
Liquidity risk
 
is the risk that the Group
 
is unable to meet its
 
contractual or contingent
 
obligations or that it does not have the appropriate amount,
tenor and composition of funding
 
and liquidity to support its
 
assets. This could cause the Group
 
to fail
 
to meet regulatory
 
liquidity standards or be
unable to support day
 
-to-day banking
 
activities.
 
Key liquidity risks that the Group
 
faces include:
 
The stability of the Group’s current funding profile:
 
In
 
particular, that part
 
which is based on accounts and deposits payable on demand
 
or at
short notice, could be affected by
 
the Group failing to preserve the current
 
level of customer and investor confidence. The Group
 
also regularly
accesses the money and capital markets to provide
 
short-term and long
 
-term funding to support its operations. Several factors,
 
including
adverse macroeconomic
 
conditions, adverse outcomes in conduct and legal, competition and regulatory matters and loss of confidence by
investors, counterparties
 
and/or customers in the Group,
 
can affect the ability of
 
the Group
 
to access
 
the capital markets and/or
 
the cost and
other terms upon which
 
the Group is able to obtain market funding
.
 
 
Credit rating changes and the impact on funding costs
: Rating agencies
 
regularly review
 
credit ratings given to Barclays PLC
 
and certain
members of the Group.
 
Credit ratings are based on a number of factors, including some which are not within the Group’s
 
control (such as
political and regulatory
 
developments, changes in rating methodologies, macro
 
-economic conditions and the sovereign credit ratings of the
countries in which the Group operates
 
).
Whilst the impact of a credit rating change will depend
 
on a number of factors (including
 
the type of issuance
 
and prevailing market conditions),
any reductions in a credit rating
 
(in particular, any downgrade
 
below investment grade)
 
may affect the Group’s access to the
 
money or capital
markets and/or
 
terms on which the Group is able to obtain market funding, increase costs of funding and credit spreads, reduce
 
the size
 
of the
Group’s
 
deposit base, trigger additional collateral or other requirements
 
in derivative contracts and other secured funding
 
arrangements or limit
the range of counterparties who
 
are willing to enter into transactions with the Group. Any
 
of these factors
 
could have a material adverse effect
 
on
the Group’s business, results of
 
operations, financial condition and prospects.
b) Capital risk
 
Capital risk is the risk that the Group
 
has an insufficient level or composition of capital to support its normal business activities and to meet its
regulatory
 
capital requirements under
 
normal operating environments or
 
stressed conditions (both actual and as
 
defined for internal planning or
regulatory
 
stress testing purposes). This includes the risk from the Group’s pension plans. Key capital risks
 
that the Group faces include:
 
Failure to meet prudential capital requirements
: This could lead to the Group being unable to support
 
some or all of its
 
business activities, a
failure to pass regulatory
 
stress
 
tests, increased cost of funding
 
due to deterioration in investor appetite or credit ratings, restrictions on
distributions including the ability to meet dividend
 
targets, and/or the need to take additional measures to strengthen the Group's
 
capital or
leverage position.
 
Adverse changes in FX rates impacting
 
capital ratios
: The Group has capital resources, risk weighted assets and leverage exposures
denominated in foreign
 
currencies. Changes in foreign
 
currency exchange rates may adversely impact the Sterling equivalent value of these
items. As a result, the Group’s
 
regulatory
 
capital ratios
 
are sensitive to
 
foreign currency
 
movements. Failure to appropriately manage the Group’s
balance sheet to take account of foreign
 
currency
 
movements could result in an adverse impact on the Group’s regulatory
 
capital and leverage
ratios.
 
Risk review
 
Material existing
 
and
 
emerging risks
97
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Adverse movements in the pension fund
:
 
Adverse movements
 
in pension assets and liabilities for defined benefit pension schemes could
 
result
in deficits on a funding and/or
 
accounting basis. This could lead to
 
the Group making
 
substantial additional contributions to its pension plans
and/or a deterioration
 
in its capital position.
 
Under IAS 19,
 
the liabilities discount rate is derived from
 
the yields
 
of high quality corporate
 
bonds.
 
Therefore,
 
the valuation of the Group’
 
s
 
defined benefits schemes would be adversely affected by a prolonged
 
fall in
 
the discount rate due to a
persistent low interest rate and/or
 
credit spread environment. Inflation is another significant risk driver to the pension fund as the liabilities are
adversely impacted by an increase
 
in long-term inflation expectations.
c)
 
Interest rate risk in the banking book
 
Interest rate risk in the banking book
 
is the risk
 
that the Group
 
is exposed to capital or income volatility because of a
 
mismatch between the interest
rate exposures of its (non
 
-traded) assets and liabilities. The Group’s hedge
 
programmes for
 
interest rate risk
 
in the banking book rely on
behavioural
 
assumptions and, as a result, the success of the hedging strategy cannot be guaranteed.
 
A potential mismatch
 
in the balance or
duration of the hedge assumptions could lead to earnings deterioration. A decline in interest
 
rates in G3 currencies may
 
also compress net interest
margin on retail portfolios. In addition, the Group’s
 
liquidity pool is exposed to potential capital and/or income volatility due to movements in
market rates and prices.
 
For further
 
details
 
on the Group’s
 
approach
 
to treasury and capital risk,
 
see treasury and capital risk management on pages 104
 
to 105
 
and treasury
and capital risk performance
 
on pages 145 to 166
 
.
iv)
 
Operational risk
 
Operational risk is the risk of loss to the Group
 
from inadequate or
 
failed processes or systems,
 
human factors or due to external events where
 
the
root cause is not due to credit or market risks. Examples include:
 
a)
 
Operational resilience
The loss of or disruption to business processing is a material inherent
 
risk within the Group and across the financial services industry,
 
whether
arising through
 
impacts on the Group’s technology
 
systems,
 
real estate services including its retail branch
 
network, or availability of personnel or
services supplied by third parties. Failure
 
to build resilience and recovery
 
capabilities
 
into business processes or into the services of technology,
 
real
estate or suppliers on which the Group’s
 
business processes depend, may result in significant customer detriment, costs to reimburse losses
incurred
 
by the Group’s
 
customers, and reputational damage.
b)
 
Cyber threats
 
The frequency
 
of cyber-attacks continues to grow and
 
is a
 
global threat that is inherent
 
across all industries.
 
The financial sector remains a primary
target for cyber criminals, hostile nation states, opportunists and
 
hacktivists and there is an increasing level of sophistication in criminal hacking for
the purpose of stealing money,
 
stealing, destroying
 
or manipulating data (including customer
 
data) and/or disrupting operations, where multiple
threats exist including threats arising from
 
malicious emails, distributed denial of service (DDoS) attacks, payment
 
system compromises, insider
attackers, supply
 
chain and vulnerability exploitation. Cyber events have a compounding
 
impact on services and customers, e.g.
 
data breaches in
social networking
 
sites,
 
retail companies and payments
 
networks.
 
Any failure in the Group’s
 
cyber-
 
security policies,
 
procedures
 
or controls and/or its IT systems,
 
may result in significant financial losses, major
business disruption, inability to deliver customer services, or loss of data or
 
other sensitive information (including
 
as a
 
result of an outage) and may
cause associated reputational damage. Any
 
of these factors could increase costs (including, but not limited to, costs relating to notification of, or
compensation for customers)
 
or may affect the Group’s ability to retain
 
and attract customers. Regulators in the UK, US and Europe
 
continue to
recognise cyber
 
-security as an
 
increasing systemic risk to the financial sector and have highlighted
 
the need for financial institutions to improve
their monitoring and
 
control of, and resilience (particularly of critical services) to cyber-attacks, and to provide
 
timely notification of them,
 
as
appropriate. Given
 
the Group’s reliance on
 
technology,
 
a cyber-attack could have a material adverse effect on its business, results of
 
operations,
financial condition and prospects.
For further
 
details
 
on the Group’s
 
approach
 
to cyber threats, see
 
operational risk performance
 
on pages 167
 
to 169
 
.
c)
 
New and emergent technology
Technological
 
advancements present opportunities
 
to develop new and innovative
 
ways of doing business across the Group, with new solutions
being developed
 
both in-house and in association with third-party companies. Introducing
 
new forms of technology, however,
 
also has
 
the
potential to increase inherent risk. Failure to
 
evaluate, actively manage and closely monitor risk exposure
 
during all phases of business development
could introduce
 
new vulnerabilities and security flaws and have a material adverse effect on the Group’s
 
business, results of operations, financial
condition and prospects
 
.
d)
 
External fraud
 
The level and nature of fraud
 
threats continues to evolve, particularly with the increasing use of digital products
 
and the greater functionality
available online. Criminals continue to adapt their techniques and are
 
increasingly focused on targeting
 
customers and clients through ever more
sophisticated methods of social engineering. External data breaches also provide
 
criminals with the
 
opportunity
 
to exploit the
 
growing
 
levels of
compromised
 
data. These
 
fraud threats could lead to customer detriment, loss of business, missed business opportunity
 
and reputational damage,
all of which could have a material adverse effect
 
on the Group’s
 
business, results of operations, financial condition and prospects. Furthermore,
recent changes in the regulatory landscape has seen increased levels of liability being
 
taken by the Group
 
as part of a voluntary code in the UK to
provide
 
additional protection to customers and clients who are victims of Authorised Push Payment scams.
 
e)
 
Data management and information protection
 
The Group
 
holds and processes large volumes of data, including personally identifiable information, intellectual property,
 
and financial data.
 
The
General Data Protection
 
Regulation (GDPR) has strengthened
 
the data protection rights of customers and increased the accountability of the
 
Group
in its management of such data. Failure to accurately collect and maintain
 
this data, protect it from breaches
 
of confidentiality and interference
with its availability exposes the Group
 
to the risk
 
of loss or unavailability of data (including
 
customer data discussed under “vi) Conduct risk, c)
Data protection and privacy”
 
below) or
 
data integrity issues.
 
Any of these failures could
 
have a material adverse effect on the Group’s
 
business,
results of operations, financial condition and prospects.
 
f)
 
Algorithmic
 
trading
In some areas of the investment banking
 
business, trading algorithms are used to price and risk manage client and principal transactions. An
algorithmic error
 
could result in erroneous
 
or duplicated transactions,
 
a system outage, or impact the Group’s pricing
 
abilities, which could have a
material adverse effect on
 
the Group’s business, results of operations, financial condition
 
and prospects and reputation
 
.
 
 
Risk review
 
Material existing
 
and
 
emerging risks
98
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
g)
 
Processing
 
error
 
As a large, complex financial institution, the Group
 
faces the
 
risk of material errors
 
in existing
 
operational processes,
 
or from new
 
processes as a
result of on-going
 
change activity, including payments and client transactions. Material operational or
 
payment errors
 
could disadvantage the
Group’s
 
customers, clients or counterparties and could
 
have a material adverse effect on the Group’s business, results of operations, financial
condition and prospects
 
.
h)
 
Supplier
 
exposure
 
The Group
 
depends on suppliers for the provision
 
of many of its
 
services and the development of technology.
 
Whilst
 
the Group depends
 
on
suppliers, it remains fully accountable for
 
any risk arising from the actions of suppliers. The dependency
 
on suppliers and sub-contracting of
outsourced
 
services introduces concentration risk where
 
the failure of specific
 
suppliers could have
 
an impact on the Group’s ability to continue to
provide
 
material services to its customers. Failure to adequately manage supplier risk could have a material adverse effect
 
on the Group’s business,
results of operations, financial condition and prospects.
 
i)
 
Critical accounting estimates and judgements
The preparation
 
of financial statements in accordance with IFRS requires the use of estimates. It also requires management
 
to exercise judgement
in applying relevant accounting
 
policies. The key areas involving a higher degree
 
of judgement or complexity,
 
or areas where assumptions are
significant to the consolidated and individual financial statements, include credit impairme
 
nt charges for amortised cost assets, taxes, fair value of
financial instruments, pensions and post-retirement benefits, and provisions
 
including conduct
 
and legal, competition and regulatory matters.
There is a risk that if the judgement exercised, or the estimates or assumptions
 
used, subsequently turn out to be incorrect, this could result in
material losses to the Group, beyond
 
what was anticipated
 
or provided
 
for.
 
Further development of standards and interpretations under IFRS could
also materially impact the financial results, condition and
 
prospects of the Group. For
 
further details on the accounting estimates and policies, see
the Notes to the audited financial statements on pages 214
 
to 298.
 
j)
 
Tax risk
The Group
 
is required to comply with the domestic and international tax laws and practice of all countries in which it has business operations.
There is a risk that the Group
 
could suffer losses due to additional tax charges, other financial costs or reputational damage as a result of failing to
comply with such laws and practice, or by
 
failing to manage its tax affairs in an appropriate
 
manner,
 
with much of this
 
risk attributable to the
international structure of the Group.
 
In addition, increasing reporting
 
and disclosure requirements around the world and the digitisation of the
administration of tax has potential to increase the Group’s
 
tax compliance obligations further.
k)
 
Ability to hire and retain appropriately qualified employees
As a regulated financial institution, the Group
 
requires diversified and specialist skilled colleagues. The Group’s ability to attract, develop
 
and retain
a diverse mix of talent is key to the delivery of its core business
 
activity and strategy. This
 
is impacted by a range of external and internal factors,
such as the UK’s decision to leave the EU and the enhanced
 
individual accountability applicable to the banking industry.
 
Failure to attract or prevent
the departure of appropriately
 
qualified and skilled
 
employees could have
 
a material adverse effect on the Group’s
 
business, results of operations,
financial condition and prospects
 
.
 
Additionally, this may result in disruption to service
 
which could in turn lead to disenfranchising certain customer
groups, customer
 
detriment and reputational damage.
For further
 
details
 
on the Group’s
 
approach
 
to operational risk, see
 
operational risk management on pages 105
 
to 106
 
and operational risk
performance
 
on pages 167
 
to 169.
v)
 
Model risk
 
Model risk is the risk of potential adverse consequences
 
from financial assessments or decisions based on incorrect or misused model outputs and
reports. The Group
 
relies on models to support a broad range
 
of business and risk
 
management activities, including informing business decisions
and strategies, measuring
 
and limiting risk, valuing exposures (including the calculation of impairment), conducting
 
stress
 
testing, assessing capital
adequacy,
 
supporting
 
new business acceptance and risk and reward evaluation, managing client assets, and meeting reporting
 
requirements.
Models are, by their nature, imperfect
 
and incomplete representations of reality because they rely on assumptions
 
and inputs, and so they may be
subject to errors affecting the accuracy
 
of their outputs. For instance, the quality of the data used in models across the Group
 
has a material impact
on the accuracy and completeness of its risk and financial metrics. Models may also be misused. Model errors
 
or misuse may result in (among
other things) the Group
 
making inappropriate business decisions and/or inaccuracies or errors
 
being identified in the Group’s risk management
and regulatory
 
reporting
 
processes.
 
This could result in significant financial loss, imposition of additional capital requirements, enhanced
 
regulatory
supervision and reputational damage, all of which could
 
have a material adverse effect on the Group’s
 
business, results of operations, financial
condition and prospects.
 
For further
 
details
 
on the Group’s
 
approach
 
to model risk, see
 
model risk management on page 106
 
and model risk performance on page
 
170.
vi)
 
Conduct risk
 
Conduct risk is the risk of detriment to customers, clients, market integrity,
 
effective competition or
 
the Group from
 
the inappropriate supply of
financial services, including instances of wilful or negligent misconduct. This risk could
 
manifest itself in a variety of ways:
a)
 
Employee misconduct
The Group’s
 
businesses are exposed to risk from potential non
 
-compliance with its
 
policies and instances of wilful and negligent misconduct by
employees, all of which
 
could result in enforcement action or reputational
 
harm. It is
 
not always possible to deter employee
 
misconduct, and the
precautions we take to prevent
 
and detect this activity may not always be effective. Employee
 
misconduct could have
 
a material
 
adverse effect on
the Group’s customers, clients, market integrity
 
as well as reputation, financial condition and prospects.
b)
 
Product governance and life cycle
The ongoing
 
review, management
 
and governance
 
of new and amended products has
 
come under
 
increasing regulatory focus (for example, the
recast of the Markets in Financial Instruments Directive
 
and guidance in relation to the adoption of the EU Benchmarks
 
Regulation) and the Group
expects this to continue. The following could
 
lead to poor customer outcomes: (i) ineffective product
 
governance, including
 
design, approval and
review of products, and (ii) inappropriate
 
controls over
 
internal and third party sales channels
 
and post sales services, such as complaints handling,
collections and recoveries.
 
The Group
 
is at
 
risk of financial loss and reputational damage as a result.
 
Risk review
 
Material existing
 
and
 
emerging risks
99
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
c)
 
Financial crime
The Group
 
may be adversely affected if it fails to effectively mitigate the
 
risk that third parties or its employees facilitate,
 
or that its products and
services are used to facilitate, financial crime (money
 
laundering, terrorist financing and proliferation
 
financing, breaches of economic and financial
sanctions, bribery and
 
corruption,
 
and the facilitation
 
of tax evasion). UK and US regulations covering
 
financial institutions
 
continue to focus on
combating financial crime. Failure
 
to comply may lead to enforcement
 
action by the Group’s regulators,
 
including severe penalties, which may have
a material adverse effect on the Group’s
 
business, financial condition and prospects.
d)
 
Data protection and privacy
Proper
 
handling of personal data is critical
 
to sustaining long
 
-term relationships with our customers and clients and complying with privacy laws
and regulations.
 
Failure to protect
 
personal data can lead to potential detriment to our customers and clients, reputational damage
 
,
 
enforcement
action and financial loss, which may be substantial (see “iv) Operational
 
risk, (e) Data management and information protection”
 
above).
e)
 
Regulatory focus on culture and accountability
Regulators around
 
the world continue to emphasise the importance of culture and personal accountability and enforce
 
the adoption of adequate
internal reporting
 
and whistleblowing procedures
 
to help to promote appropriate conduct and drive
 
positive
 
outcomes for customers, colleagues,
clients and markets. The requirements
 
and expectations of the UK Senior Managers Regime, Certification Regime and Conduct Rules have driven
additional accountabilities for individuals across the Group
 
with an increased
 
focus on governance
 
and rigour. Failure to meet these
 
requirements
and expectations may lead to regulatory
 
sanctions, both for the individuals and the Group.
For further
 
details
 
on the Group’s
 
approach
 
to conduct risk,
 
see conduct risk management on page
 
s
 
106
 
and 107
 
and conduct risk
 
performance
 
on
pages 17
 
0.
vii)
 
Reputation risk
 
Reputation risk is the risk that an action, transaction, investment,
 
event, decision or business relationship will reduce
 
trust in the
 
Group’s
 
integrity
and/or competence.
 
Any material lapse in standards of integrity,
 
compliance, customer service or operating
 
efficiency may represent a potential reputation risk.
Stakeholder expectations constantly evolve,
 
and so reputation risk is dynamic and varies between geographical
 
regions, groups
 
and individuals. A
risk arising in one business area can have an
 
adverse effect upon
 
the Group’s overall
 
reputation and any one
 
transaction, investment or event (in
the perception of key stakeholders) can reduce
 
trust in the Group’s integrity and competence.
 
The
 
Group’s
 
association with sensitive topics and
sectors has been, and in some instances continues to be, an area of concern
 
for stakeholders, including (i) the financing of, and investments in,
businesses which operate in sectors that are sensitive
 
because of their relative carbon
 
intensity
 
or local environmental impact; (ii)
 
potential
association with human rights violations (including combating
 
modern
 
slavery) in the Group’s operations or supply chain and by
 
clients
 
and
customers; and (iii) the financing of businesses which manufacture
 
and export military and riot control goods
 
and services.
Reputation risk could also arise from
 
negative public opinion about
 
the actual,
 
or perceived,
 
manner in which the Group
 
conducts its
 
business
activities, or the Group’s
 
financial performance, as well as actual or perceived practices in banking
 
and the financial services industry generally.
Modern
 
technologies, in particular online social media channels and other broadcast tools that facilitate communication with large audiences in
short time frames and with minimal costs, may significantly enhance
 
and accelerate the distribution and effect of damaging
 
information and
allegations. Negative public opinion
 
may adversely affect the Group’s
 
ability to retain and attract customers, in particular,
 
corporate
 
and retail
depositors, and to retain and motivate staff, and could
 
have a material adverse effect on
 
the Group’s
 
business, results of operations, financial
condition and prospects.
In addition to the above, reputation
 
risk has
 
the potential to arise from
 
operational issues or conduct matters which cause detriment to customers,
clients, market integrity,
 
effective competition or
 
the Group (see “iv) Operational risk” above).
 
For furth
 
er details
 
on the Group’s
 
approach
 
to reputation risk, see
 
reputation risk management on page
 
107
 
and reputation risk performance on
page 170
 
.
viii)
 
Legal risk and legal, competition and regulatory matters
 
The Group
 
conducts activities in a
 
highly regulated global market
 
which exposes it and its employees to legal risk arising from
 
(i) the multitude of
laws and regulations that apply to the businesses it operates, which are highly
 
dynamic,
 
may vary between jurisdictions, and are
 
often unclear in
their application to particular circumstances especially in new and
 
emerging
 
areas; and (ii) the
 
diversified and evolving nature of the Group’s
businesses and business practices. In each case, this exposes the Group
 
and its employees to the risk of loss or the imposition of penalties,
damages or fines from
 
the failure of members of the Group to meet their respective legal obligations, including legal or contractual
 
requirements.
Legal risk may arise in relation to a n
 
umber of the risk factors identified above, including (without limitation) as a result of (i) the UK’s withdrawal
from the EU, (ii) benchmark
 
reform, (iii) the regulatory
 
change agenda, and (iv) rapidly evolving
 
rules
 
and regulations in relation to data protection,
privacy and cyber
 
-security.
A breach of applicable legislation and/or
 
regulations by the Group
 
or its employees could result in criminal prosecution, regulatory censure,
potentially significant fines and other sanctions in the jurisdictions in which the Group
 
operates. Where clients,
 
customers or other third parties are
harmed by
 
the Group’s conduct,
 
this may also give rise
 
to civil legal proceedings,
 
including class actions. Other legal disputes
 
may also arise
between the Group
 
and third parties relating to matters such as breaches or enforcement
 
of legal rights or obligations arising under contracts,
statutes or common
 
law. Adverse findings in any such matters may result in
 
the Group being
 
liable to
 
third parties or may
 
result in the Group’s
rights not being enforced
 
as intended.
Details of legal, competition and regulatory
 
matters to which the Group is currently exposed are set out in Note 26.
 
In addition to matters
specifically described in Note 26
 
,
 
the Group is engaged in various other
 
legal proceedings which arise in the ordinary course
 
of business.
 
The Group
is also subject to requests for
 
information, investigations and other reviews by regulators, governmental
 
and other public bodies in connection with
business activities in which the Group
 
is,
 
or has been, engaged.
 
Risk review
 
Material existing
 
and
 
emerging risks
100
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
The outcome of legal, competition and regulatory
 
matters, both those to which the Group is currently exposed
 
and any others which may arise in
the future, is difficult to predict. In connection
 
with such matters, the Group
 
may incur significant expense, regardless of the ultimate outcome, and
any such matters could expose
 
the Group to any of the following outcomes
 
:
 
substantial monetary damages, settlements and/or
 
fines;
 
remediation
of affected customers and clients; other penalties and injunctive relief;
 
additional litigation; criminal prosecution; the loss of any existing agreed
protection from
 
prosecution; regula
 
tory restrictions on the Group’s business operations including the withdrawal of authorisations; increased
regulatory
 
compliance requirements or
 
changes to laws or regulations; suspension of operations; public reprimands; loss of significant assets or
business; a negative effect on the Group’s
 
reputation; loss of confidence by
 
investors, counterparties, clients and/or customers; risk of credit rating
agency downgrades;
 
potential negative impact on the availability and/or cost of funding and liquidity; and/or
 
dismissal
 
or resignation of key
individuals. In light of the uncertainties involved
 
in legal, competition and regulatory
 
matters, there can be no assurance that the outcome of a
particular matter or matters
 
will not have a material adverse effect on the Group’s
 
business, results of operations, financial condition and prospects.
fy2019arbplcp111i1.jpg fy2019arbplcp111i0.jpg
 
Risk review
Climate
 
change
 
risk management
 
101
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Climate
 
change risk management
 
Overview
 
The Group
 
has a longstanding commitment to Environmental Risk Management (ERM) and its approach,
 
aided by regulatory
 
initiatives,
 
has
continued to evolve
 
,
 
incorporating
 
climate change in recent years as
 
the understanding of associated risks has grown.
 
In 2018,
 
a dedicated
Sustainability team was created to consider
 
how the Group
 
approaches wider sustainability and ESG
 
matters, working
 
closely with the ERM
function.
In 2019,
 
the Group published
 
an Energy & Climate Change Statement
 
(
https://home.barclays/statements/barclays-energy-and-climate-change-
statement
) which articulates our
 
focus on three areas: financing growth
 
of renewables and bu
 
sinesses
 
addressing environmental
 
challenges; taking
a responsible approach
 
to financing energy sources with a greater carbon
 
intensity;
 
and reducing
 
our own carbon footprint. It is
 
supported by
 
an
internal standard containing guidelines for restricting or
 
supporting
 
financing activities
 
in carbon
 
-intensive energy sectors, as
 
well as enhanced
 
due
diligence requirements for
 
environmentally or
 
socially sensitive
 
sectors.
For more
 
detail on how climate change risks arise and their impact on the Group, refer
 
to material existing and emerging risks on page 92
 
.
Organisation and structure
 
On behalf of the Board, the BRC reviews
 
and approves
 
the Group’s approach
 
to managing the financial
 
and operational risks associated with
climate change.
 
Broadly,
 
climate change matters are co-ordinated
 
by the Sustainability team, including reputation risks linked to the Group’s financial and societal
impact. In 2019,
 
reputation risk became the responsibility of the
 
Board, where
 
the most material issues facing the Group are escalated to and
directly handled by the Board.
 
Risk management – Policy
 
In 2019,
 
the Group published
 
a
‘Climate Change
 
Financial Risk and Operational Risk Policy’
. This
 
introduced
 
climate change as
 
an overarching
 
risk
impacting certain principal risks: credit risk, market
 
risk, treasury & capital risk and operational
 
risk. The policy is jointly owned by the relevant
Principal Risk Leads with oversight by
 
the BRC.
 
Each relevant Principal Risk Lead has developed
 
a methodology and
 
implementation plan for quantifying climate change risk.
 
 
Risk re
 
view
Principal risk
 
management
 
102
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Credit
 
risk
 
management (audited)
 
The risk of loss to the Group
 
from the failure of clients, customers or counterparties, including sovereigns,
 
to fully honour their obligations to the
Group
 
,
 
including the whole and timely payment of principal, interest, collateral and other
 
receivables.
 
Overview
The credit risk that the Group
 
faces arises from wholesale and retail loans and advances together with the counterparty
 
credit risk arising from
derivative contracts with clients; trading
 
activities, including: debt securities, settlement balances with market counterparties, FVOCI assets and
reverse repurchase
 
loans.
 
Credit risk management objectives are to:
 
maintain a framework
 
of controls to oversee credit risk;
 
identify, assess and measure credit
 
risk clearly and accurately across the Group
 
and within each separate business, from the level of individual
facilities up to the total portfolio;
 
control and plan credit risk taking in line with external stakeholder
 
expectations and avoiding undesirable
 
concentrations;
 
monitor credit risk and adherence
 
to agreed controls
 
.
Organisation, roles and responsibilities
The first line of defence has primary
 
responsibility for managing credit risk within the risk appetite and limits set by the Risk function, supported by
a defined set of policies, standards and controls. In the entities, business risk committees
 
(attended by the first line) monitor
 
and review the credit
risk profile of each business unit where the most material issues are escalated
 
to the Retail Credit Risk Management
 
Committee, Wholesale Credit
Risk Management Committee and Group
 
Risk Committee.
Wholesale and retail portfolios are managed
 
separately to reflect the differing nature of the assets; wholesale balances tend to be larger
 
and are
managed on an individual basis, while retail balances are greater
 
in number but lesser in value and are, therefore,
 
managed in aggregated
segments.
 
The responsibilities of the credit risk management teams in the businesses, the
 
sanctioning team and other shared services include: sanctioning
new credit agreements (principally
 
wholesale); setting strategies for approval
 
of transactions (principally retail); setting risk appetite; monitoring
risk against limits and other parameters;
 
maintaining robust processes, data gathering, quality, storage and
 
reporting
 
methods for effective credit
risk management; performing
 
effective turnaround and
 
workout scenarios for wholesale portfolios via dedicated restructuring and recoveries
teams; maintaining robust collections and recovery
 
processes/units for retail portfolios; and review and validation of credit risk measurement
models. The credit risk management teams in each legal entity are accountable
 
to the relevant Legal Entity CRO, who reports
 
to the Group CRO.
For wholesale portfolios,
 
credit risk managers are organised
 
in sanctioning teams by geograp
 
hy, industry and/or product.
 
In wholesale portfolios,
credit risk approval
 
is undertaken by experienced
 
credit risk professionals operating within a clearly defined delegated authority framework, with
only the most senior credit officers assigned the
 
higher
 
levels of
 
delegated authority. The largest
 
credit exposures, which are outside the Risk
Sanctioning Unit or Risk Distribution Committee authority,
 
require
 
the support of a legal entity Senior Credit Officer. For
 
exposures in excess of the
legal entity Senior Credit Officer’s authority,
 
approval
 
by Group
 
Senior Credit Officer/Board Risk Committee is also required. The Group
 
Credit Risk
Committee, attended by
 
legal entity Senior Credit Officers,
 
provides a formal mechanism for
 
the Group Senior
 
Credit Officer
 
to exercise the highest
level of credit authority over
 
the most material Group single name exposures.
 
Credit risk mitigation
The Group
 
employs a range of techniques and strategies to actively mitigate credit risks. These can broadly
 
be divided into three
 
types:
 
 
netting and set-off
 
collateral
 
risk transfer.
Netting and set-off
 
Credit risk exposures can be reduced
 
by applying netting and
 
set-off. For derivative transactions, the Group’s
 
normal practice is, on a legal entity
basis, to enter into standard master agreements with counterparties
 
(e.g. ISDAs). These master agreements typically allow for
 
netting of credit risk
exposure to a counterparty
 
resulting from derivative transactions against the obligations to the counterparty
 
in the event of default, and so produce
a lower
 
net credit exposure. These agreements may also reduce settlement exposure
 
(e.g. for foreign
 
exchange transactions) by allowing
 
payments
on the same day in the same currency
 
to be set-off against
 
one another.
Collateral
 
The Group
 
has the ability to
 
call on collateral in the event of default of the
 
counterparty,
 
comprising:
 
 
home loans:
 
a fixed charge
 
over residential property
 
in the form of houses, flats
 
and other dwellings;
 
wholesale lending:
 
a fixed charge over
 
commercial property and other ph
 
ysical
 
assets,
 
in various forms;
 
other retail lending:
 
includes charges
 
over motor
 
vehicles
 
and other physical assets; second lien
 
charges over
 
residential property
 
;
 
and finance
lease receivables;
 
derivatives:
 
the Group
 
also often seeks
 
to enter into a margin agreement
 
(e.g. Credit Support Annex)
 
with counterparties with which the
 
Group
has master netting agreements
 
in place. These annexes to master agreements provide
 
a mechanism for further reducing
 
credit risk,
 
whereby
collateral (margin)
 
is posted on a
 
regular basis (typically daily) to collateralise the mark to market exp
 
osure of a derivative portfolio
 
measured on
a net basis;
 
reverse repurchase agreements:
 
collateral typically comprises highly liquid securities which have been
 
legally transferred
 
to the Group subject to
an agreement to
 
return them for
 
a fixed price; and
 
financial guarantees and similar
 
off-balance sheet
 
commitments:
 
cash collateral may be held against these arrangements
 
.
 
 
Risk review
Principal risk
 
management
 
103
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Risk transfer
 
A range of instruments including guarantees, credit insurance, credit
 
derivatives and securitisation can be used to transfer
 
credit risk from one
counterparty
 
to another. These mitigate credit risk in two main ways:
 
if the risk is transferred to a counterparty
 
which is more creditworthy
 
than the original counterparty, then overall
 
credit risk is
 
reduced
 
where recourse
 
to
 
the first counterparty remains, both counterparties must default before a loss materialises. This is less likely than the default of
either counterparty
 
individually so credit risk
 
is reduced.
Detailed policies are in place to appropriately
 
recognise and record
 
credit risk mitigation.
 
For more
 
information, refer
 
to pages 175
 
to 177
 
the
Barclays PLC
 
Pillar 3 Report 2019
 
(unaudited).
Governance and oversight of ECLs under IFRS 9
The Group’s
 
organisational structure and internal governance
 
processes oversee the estimation of
 
ECL across several areas, including: i) setting
requirements in policy,
 
including key assumptions and the application of key judgements; ii) the design and execut
 
ion of models; and iii) review of
ECL results.
 
i)
 
Impairment policy requirements
 
are set and reviewed regularly,
 
at a
 
minimum annually, to maintain adherence
 
to accounting standards. Key
judgements inherent in policy, including
 
the estimated life of revolving
 
credit facilities
 
and the quantitative criteria for assessing
 
the significant
increase in credit risk (SICR),
 
are separately supported
 
by analytical study. In particular, the quantitative
 
thresholds used for assessing SICR are
subject to a number
 
of internal validation criteria,
 
particularly in retail portfolios where
 
thresholds decrease as the origination PD of each facility
increases. Key policy requirements
 
are also typically aligned to the Group’s credit risk management strategy and practices,
 
for example, wholesale
customers that are risk managed
 
on an individual basis are assessed for ECL on an individual basis upon entering Stage 3; furthermore,
 
key
internal risk management indicators of high risk are used to set SICR policy, for
 
example, retail customers identified as High Risk Management
Accounts are automatically deemed to have
 
met the SICR criteria.
ii)
 
ECL is estimated in line with internal policy requirements using models which are validated by a
 
qualified independent party to the model
development area, the Independent
 
Validation Unit (IVU),
 
before first use
 
and at a minimum annually thereafter. Each model is designated an
owner who
 
is responsible for:
 
Model maintenance: monitoring
 
of model performance including
 
backtesting by comparing predicted ECL
 
versus flow into stage
 
3 and
coverage
 
ratios; proposing material changes for independent
 
IVU approval; and recalibrating
 
model parameters on more timely data;
 
and
 
 
Proposing
 
post-model adjustments (PMA) to address model weaknesses or to account for situations where known or
 
expected risk factors and
information have not been
 
considered in the modelling process. Each PMA
 
above an absolute and relative threshold is approved
 
by the IVU for
a set time period
 
(usually a maximum of six months) together with a plan for remediation where related to a model deficiency.
 
The most
material PMAs are also approved
 
by the CRO.
 
Models must also assess ECL across a range of future
 
economic conditions. These economic
 
scenarios are generated via an independent model
and ultimately set by the Senior Scenario Review Committee.
 
Economic scenarios are regenerated
 
at a
 
minimum annually, to align with the
Group’s
 
medium term planning exercise, but also if the external consensus of the UK or
 
US economy materially worsen. Each model used in the
estimation of ECL, including key inputs, are governed
 
by a series of
 
internal controls, which include
 
the validation of completeness and accuracy
of data in golden source
 
systems, documented data transformations and documented
 
lineage of data transfers
 
between systems.
 
iii)
 
The Group
 
Impairment Committee, formed
 
of members from both Finance and Risk and attended by both the Group
 
Finance Director and the
Group
 
CRO,
 
is responsible for overseeing
 
impairment policy and practice across the Group
 
and will approve impairment
 
results.
 
Reported results
and key messages are communicated
 
to the BAC,
 
which has an oversight role and provides
 
challenge of key assumptions, including the basis of
the scenarios adopted. Impairment
 
results are then factored into management decision making, including but not limited to, business planning,
risk appetite setting and portfolio
 
management.
Market risk
 
management
 
(audited)
The risk of loss arising from potential adverse changes
 
in the value of the Group’s assets and liabilities from fluctuation in market variables
including, but not limited to, interest rates, foreign
 
exchange, equity prices, commodity prices, credit spreads, implied volatilities and asset
correlations.
 
Overview
Market risk arises primarily
 
as a result of client facilitation in wholesale markets, involving
 
market making activities, risk management solutions and
execution of syndications. Upon
 
execution of a trade with a client, the Group will look to hedge against the risk of the trade moving
 
in an adverse
direction. Mismatches between client transactions and
 
hedges result in market risk due to changes in asset prices, volatility or
 
correlations.
 
Organisation, roles and responsibilitie
 
s
 
Market risk in the businesses resides primarily in Barclays
 
International and Treasury.
 
These businesses have the mandate to assume market risk.
The front office and Treasury
 
trading desks are responsible for managing
 
market risk on a day-to-day basis, where they are required
 
to understand
and adhere to all limits applicable to their businesses. The Market Risk team support
 
the trading desks with the day-
 
to-day limit management of
market risk exposures through
 
governance processes which are
 
outlined in supporting market risk policies and standards.
Market risk oversight and challenge
 
is provided
 
by business committees and Group committ
 
ees, including the Market Risk Committee.
 
 
The objectives of market risk management
 
are to:
 
 
identify, understand
 
and control market risk by robust
 
measurement, limit setting, reporting
 
and oversight
 
facilitate business growth
 
within a controlled and transparent risk management framework
 
control market risk in the businesses according
 
to the allocated
 
appetite.
To meet the above
 
objectives, a governance
 
structure is in place
 
to manage these risks consistent with the ERMF.
 
 
 
Risk re
 
view
Principal risk
 
management
 
104
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
The BRC recommends
 
market risk
 
appetite to the Board for
 
their approval. The Market Risk Principal Risk Lead (PR Lead)
 
is responsible for the
Market Risk Control
 
Framework
 
and, under delegated authority from the Group CRO, agrees with the business CROs a limit framework within the
context of the approv
 
ed market risk appetite.
The Market Risk Committee approves
 
and makes recommendations
 
concerning the group
 
-wide market risk profile. This
 
includes overseeing the
operation of the Market Risk Framework
 
and associated standards and policies; reviewing market or regulatory
 
issues
 
and limits and utilisation. The
committee is chaired
 
by the PR Lead and attendees include the business heads of market risk and business aligned market risk managers.
The head of each business is accountable for all market risks associated with its activities, while the head
 
of the market risk team covering
 
each
business is responsible for implementing the risk control
 
framework
 
for market risk.
For more
 
information on market risk management
 
,
 
refer to the Barclays PLC Pillar 3 Report 2019
 
(unaudited)
 
.
Management value at risk (VaR)
VaR is an estimate of the
 
potential loss arising from unfavourable
 
market movements if the current positions were to be held unchanged
 
for one
business day. For
 
internal market risk management purposes, a historical simulation methodology
 
with a two-year equally weighted historical
period, at the 95% confidence
 
level is used for all trading books and some banking
 
books.
In some instances, historical data is not available for particular
 
market risk factors for the entire look
 
-back period, for
 
example, complete historical
data would not be available for an equity security
 
following an initial public offering. In these cases, market risk managers
 
will proxy
 
the unavailable
market risk factor data with available data
 
for a related market risk factor.
Limits are applied at the total level as well as by
 
risk factor type, which are then cascaded down
 
to particular trading desks and businesses by the
market risk management function.
See page 141
 
for a review of management VaR
 
in 2019.
Treasury and capital
 
risk
 
management
This comprises:
 
Liquidity risk:
The risk that the Group is unable to meet its contractual or contingent
 
obligations or that it
 
does not have the appropriate
 
amount,
tenor and composition of funding
 
and liquidity to support its
 
assets.
 
Capital risk:
The risk that the Group
 
has an insufficient level or composition of capital to support its normal business activities and to meet its
regu
 
latory capital requirements under normal
 
operating environments or stressed conditions (both actual and as defined for internal planning or
regulatory
 
testing purposes). This also includes the risk from the Group
 
’s pension plans.
 
Interest rate risk in the banking book:
The risk that the Group
 
is exposed to capital
 
or income volatility because of a mismatch between
 
the
interest rate exposures of its (non
 
traded) assets
 
and liabilities.
 
The Treasury
 
function manages treasury and capital risk exposure on
 
a day-to-day basis with the Group
 
Treasury
 
Committee acting as
 
the principal
management body.
 
The Treasury
 
and Capital Risk
 
function is responsible for oversight
 
and provide
 
insight into key capital,
 
liquidity,
 
interest rate
risk in
 
the banking
 
book (IRRBB) and
 
pension risk management activities.
Liquidity risk management (audited)
Overview
The efficient management of liquidity is essential to Group
 
in order to retain the confidence of the financial markets and maintain the sustainability
of the business. The liquidity risk control framework
 
is used
 
to manage all liquidity risk exposures under
 
both BAU
 
and stressed conditions. The
framework
 
is designed to maintain liquidity resources that are sufficient in amount, quality and funding tenor
 
profile to support the liquidity risk
appetite as expressed by the Barclays PLC
 
Board. The liquidity risk appetite is monitored
 
against both internal and regulatory liquidity metrics.
 
Organisation, roles and responsibilities
Treasury
 
has the primary responsibility for managing
 
liquidity risk
 
within the set risk appetite. Both Risk and Treasury
 
contribute to the production
of the Internal Liquidity Adequacy
 
Assessment
 
Process (ILAAP)
 
.
 
The Treasury
 
and Capital Risk
 
function is responsible for the management
 
and
governance
 
of the liquidity
 
risk mandate, as defined by the Board.
 
The liquidity risk control framework
 
is designed to deliver the
 
appropriate
 
term and structure of funding, consistent with the liquidity risk appetite
set by the Board.
 
The control framework
 
incorporates a
 
range of ongoing
 
business management tools to
 
monitor,
 
limit
 
and stress test the Group’s
balance sheet, contingent liabilities and the recovery
 
plan. Limit
 
setting and transfer pricing
 
are tools that are designed to control the level of
liquidity risk taken and drive the appropriate
 
mix of funds. Together,
 
these tools reduce the likelihood that a liquidity stress event could lead to an
inability to meet Group’
 
s
 
obligations as they fall due.
The Board
 
approves
 
the Group funding plan, internal stress tests,
 
regulatory
 
stress test results, and recovery
 
plan. The Group Treasury
 
Committee
is responsible for monitoring
 
and managing liquidity risk in line
 
with the Group’s
 
funding management
 
objectives, funding plan and risk framework.
The Treasury
 
and Capital Risk Committee monitors and reviews the liquidity risk profile and control
 
environment,
 
providing
 
second line
 
oversight of
the management of liquidity risk. The BRC reviews the risk profile, and
 
annually reviews risk appetite
 
and the impact of stress scenarios on the
Group
 
funding plan/forecast in order
 
to agree the Group’s projected funding abilities.
Capital risk management (audited)
Overview
Capital risk is managed through
 
ongoing monitoring and management of the capital position,
 
regular stress testing and a robust capital
governance
 
framework. The
 
objectives of the framework are to maintain adequate capital for the Group and legal entities to withstand the
 
impact
of the risks that may arise under
 
normal and stressed conditions, and maintain adequate capital to cover current
 
and forecast business needs and
associated risks to provide
 
a viable and sustainable business offering.
 
 
Risk review
Principal risk
 
management
 
105
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Organisation, roles and responsibilities
Treasury
 
has the primary responsibility for managing
 
and monitoring capital. The Treasury and Capital Risk function provides oversight
 
of capital
risk and is an independent risk function that reports to the Group
 
CRO. Production
 
of the Barclays PLC Internal Capital
 
Adequacy
 
Assessment
Process (ICAAP)
 
is the
 
responsibility of Treasury.
Capital risk management is underpinned
 
by a control framework
 
and policy. The capital management strategy, outlined in the Group and legal
entity capital plans, is developed in alignment with the control
 
framework
 
and policy for capital risk,
 
and is implemented consistently in order to
deliver on the Group’s
 
objectives.
The Board
 
approves
 
the Group capital plan, internal stress tests and results of regulatory stress tests, and the Group recovery
 
plan. The Group
Treasury
 
Committee is responsible for monitoring
 
and managing capital risk in line with
 
the Group’s
 
capital management objectives, capital plan
and risk frameworks.
 
The Treasury
 
and Capital Risk
 
Committee monitors and
 
reviews the capital risk profile and control environment
 
,
 
providing
second line oversight of the management
 
of capital risk. The BRC reviews the risk profile, and annually reviews risk appetite and the impact of
stress scenarios on the Group
 
capital plan/forecast in order
 
to agree the Group’s projected
 
capital adequacy.
 
Local management assures compliance with an entity’s minimum regulatory
 
capital requirements by reporting
 
to local Asset
 
and Liability
Committees (ALCOs) with oversight
 
by the Group
 
Treasury
 
Committee, as
 
required.
 
In 2019,
 
Barclays complied with
 
all regulatory minimum capital
requirements.
Pension risk
The Group
 
maintains a
 
number
 
of defined benefit pension schemes for past and current employees. The ability of schemes to meet pension
payments is achieved with investments
 
and contributions.
 
Pension risk arises because the market value
 
of pension fund assets might decline; investment returns might reduce;
 
or the estimated
 
value of
pension liabilities might increase. The Group
 
monitors the pension risks arising from its defined benefit pension schemes and works with Trustees
to address shortfalls. In these circumstances, the Group
 
could be required
 
or might choose to make extra contributions to the pension fund. The
Group’s
 
main defined benefit scheme was closed to new entrants in 2012
.
 
Interest rate risk in the banking book management (IRRBB)
Overview
Interest rate risk in the banking book
 
is driven by customer deposit taking and lending activities, investments in the liquid asset portfolio
 
and
funding activities. As per the Group’s policy
 
to remain within the defined risk appetite, businesses and Treasury
 
execute hedging strategies to
mitigate the risks. However,
 
the Group remains susceptible to interest rate risk and other
 
non-traded
 
market risks from key sources:
 
 
Interest rate and repricing risk:
 
the risk that net interest income could be adversely impacted by
 
a change in interest rates, differences in the
timing of interest rate changes between assets and liabilities,
 
and other constraints on interest rate changes as per p
 
roduct terms and conditions.
 
Customer behavioural risk:
the risk that net interest income could be adversely impacted by
 
the discretion that customers and counterparties
may have in respect of being
 
able to vary their contractual obligations with Barclays. This risk is often
 
referred
 
to by industry regulators as
‘embedded
 
option risk’.
 
 
Investment risks
 
in the liquid asset portfolio:
the risk that
 
the fair value of assets held in the liquid asset portfolio
 
and associated risk
management portfolios could
 
be adversely impacted by market volatility, creating
 
volatility in capital directly.
 
Organisation, roles and responsibilities
 
The entity ALCOs, together with the Group
 
Treasury
 
Committee, are responsible for monitoring
 
and managing IRRBB risk in
 
line with the Group’s
management objectives and risk frameworks.
 
The GRC and Treasury
 
and Capital Risk
 
Committee monitors and
 
reviews the IRRBB risk profile and
control environment,
 
providing second
 
line oversight of the management of IRRBB. The BRC reviews the interest rate risk profile, including annual
review of the risk appetite and the impact of stress
 
scenarios on the interest rate risk of the Group’s
 
banking books.
 
In addition, the Group’s IRRBB
 
policy sets out the processes and key controls required
 
to identify all IRRBB risks
 
arising from banking
 
book
operations, to monitor the risk exposures via a set of metrics with a frequency
 
in line with
 
the risk management horizon,
 
and to manage these risks
within agreed
 
risk appetite
 
and limits.
 
Operational risk
 
management
The risk of loss to the Group
 
from inadequate or
 
failed processes or systems,
 
human factors or due to external events (for
 
example fraud) where
the root cause is not due to credit or market risks.
 
Overview
The management of operational
 
risk has three key objectives:
 
 
deliver an operational risk capability owned
 
and used by business leaders to enable sound risk decisions over the long term;
 
provide
 
the frameworks, policies and standards to enable management to meet their risk management responsibi
 
lities while
 
the second line of
defence provides
 
robust, independent, and
 
effective oversight and challenge; and
 
deliver a consistent and aggregated
 
measurement of operational risk that will
 
provide
 
clear and relevant insights, so that the right management
actions can be taken to keep the operational risk profile
 
consistent with the Group’s
 
strategy, the stated risk appetite and stakeholder needs.
The Group
 
operates within a system of internal controls that enables business to be transacted and risk taken without exposing it to unacceptable
potential losses or reputational damages.
Organisation, roles and responsibilities
The prime responsibility for the management
 
of operational risk and the compliance with control requirements
 
rests within
 
the business and
functional units where the risk arises. The operational risk profile and control
 
environment
 
is reviewed by management through
 
business risk
committees and control
 
committees. Legal entities, businesses and functions are required
 
to report their operational
 
risks on both a regular and an
event-driven
 
basis. The reports include a profile of the material risks that may threaten the achievement of their objectives and
 
the effectiveness of
key controls, operational risk events and a review
 
of scenarios.
 
 
 
 
Risk re
 
view
Principal risk
 
management
 
106
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
The Group
 
Head of Operational Risk
 
is responsible for
 
establishing, owning and maintaining an appropriate
 
group-
 
wide Operational Risk
Management Framework
 
and for overseeing
 
the portfolio of operational risk across the
 
Group.
 
Operational Risk Management (ORM) acts in a second line of d
 
efence capacity, and is responsible for defining
 
and overseeing
 
the implementation
of the framework
 
and monitoring
 
the Group’s operational risk profile. ORM alerts
 
management when risk levels exceed acceptable tolerance in
order
 
to drive timely decision making and actions by the first line of defence.
 
Operational risk issues escalated from these meetings are considered
through
 
the second line of defence review meetings. Depending on their nature, the outputs of these meetings are presented to the operational risk
profile forum, the BRC or the BAC. In addition, specific reports
 
are prepared
 
by Operational Risk on a regular basis for the GRC and the BRC.
 
Operational risk categories
 
Operational risks are grouped
 
into risk categories to
 
support effective
 
risk management, measurement and reporting.
 
These comprise:
 
Data
Management & Information
 
Risk;
 
Financial Reporting
 
Risk;
 
Fraud Risk;
 
Payments Process Risk;
 
People Risk;
 
Premises Risk;
 
Physical Security Risk;
Supplier Risk;
 
Tax
 
Risk;
 
Technology
 
Risk;
 
Transaction Operations Risk
 
and Execution Risk.
 
In addition to the above, operational
 
risk encompasses risks associated with prudential regulation. This includes the risk of failing to: adhere to
prudential regulatory
 
requirements, provide
 
regulatory submissions; or monitor and manage adherence
 
to new prudential regulatory requirements.
Enterprise risk themes
Barclays also recognises that there
 
are certain threats/risk drivers that are more
 
thematic and have the potential to impact the
 
Group’s
 
strategic
objectives. These are Enterprise Risk Themes which require
 
an overarching
 
and integrated risk management approach. The Group’s
 
enterprise risk
themes include Cyber,
 
Data, and Resilience.
 
For definitions of the Group’s
 
operational risk categories and enterprise risk themes, refer to pages 198
 
to 201 of the Barclays PLC Pillar 3 Report
2019.
Model risk
 
management
The risk of the potential adverse consequences from
 
financial assessments
 
or decisions based on incorrect
 
or misused model outputs and reports.
Overview
The Group
 
uses models to
 
support a broad
 
range of activities, including informing business decisions and strategies, measuring and limiting risk,
valuing exposures, conducting
 
stress
 
testing, assessing capital adequacy, managing
 
client assets, and meeting reporting
 
requirements.
 
Since models are imperfect and incomplete representations
 
of reality, they may be subject to errors
 
affecting the accuracy
 
of their output. Model
errors and
 
misuse are the
 
primary sources of model
 
risk.
Organisation,
 
roles and responsibilities
 
The Group
 
has a dedicated Model Risk Management (MRM) function that consists of two main units: the Independent Validation
 
Unit (IVU),
responsible for model validation and approval,
 
and Model Governance
 
and Controls (MGC), covering model risk governance, controls and reporting,
including
 
ownership of model
 
risk policy and the model inventory.
 
The model risk management framework
 
consists
 
of the model risk policy and standards. The policy prescribes
 
Group
 
-wide, end-to-end
requirements for
 
the identification, measurement and management of model risk, covering
 
model documentation, development, implementation,
monitoring, annual review,
 
independent validation and approval,
 
change and reporting processes. The policy is supported by global standards
covering
 
model inventory,
 
documentation, validation, complexity and materiality, testing and monitoring, overlays, risk appetite, as well as vendor
models and stress testing challenger
 
models.
The function reports to the Group
 
CRO and operates a global framework. Implementation of best practice standards is a central objective of the
Group.
 
The key model risk management
 
activities include:
 
 
Correctly identifying models across all relevant areas of
 
the Group, and recordin
 
g
 
models in
 
the Group Models Database (GMD), the Group
 
-wide
model inventory.
 
Enforcing
 
that every model has a model owner who is accountable for the model. The model owner
 
must sign off models prior to submission to
IVU for
 
validation and maintain that the model presented to IVU is and remains fit for purpose.
 
Overseeing that every model is subject to validation and approval
 
by IVU, prior
 
to being implemented and on a continual basis.
 
Defining model risk appetite in terms of risk tolerance, and qualitative metrics which are used to track
 
and report
 
model risk.
Conduct risk
 
management
The risk of detriment to customers, clients, market integrity, effective
 
competition or Barclays from
 
the inappropriate supply of financial services,
including instances of wilful or negligent misconduct.
Overview
The Group
 
defines,
 
manages and mitigates
 
conduct risk
 
with the objective of providing
 
good customer
 
and client outcomes,
 
protecting market integrity
and promoting effective competition.
Product
 
Lifecycle, Culture
 
and Strategy and
 
Financial Crime
 
are the risk categories
 
under the
 
Group definition
 
of conduct risk.
 
Organisation, roles and responsibilities
The governance of conduct risk within the
 
Group is
 
fulfilled through
 
management
 
committees
 
and forums operated by
 
the first
 
and second lines
 
of
defence with clear escalation
 
and reporting lines
 
to the Board.
The Group
 
Risk Committee
 
is the
 
most senior executive
 
body responsible
 
for reviewing
 
and monitoring
 
the effectiveness
 
of the Group’s management
 
of
conduct risk.
The Conduct Risk Management Framework
 
(CRMF)
 
outlines
 
how the Group manages
 
and measures its
 
conduct risk profile.
 
 
 
 
Risk review
Principal risk
 
management
 
107
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Senior managers have accountability
 
for managing conduct
 
risk in their
 
areas of responsibility.
 
This is
 
expressed in their Statements
 
of Responsibilities.
The primary responsibility for managing
 
conduct risk
 
sits
 
with the business
 
where the risk arises.
 
The first line
 
business control committees
 
provide
oversight of controls relating to conduct
 
risk.
 
The Group
 
Chief Compliance
 
Officer
 
is responsible
 
for owning and maintaining
 
an appropriate
 
group-wide CRMF. This
 
includes defining and
 
owning
the relevant conduct risk policies
 
and oversight of
 
the implementation
 
of controls
 
to manage and
 
escalate
 
the risk.
The Group
 
and the Barclays
 
UK Risk Committees
 
are the primary
 
second line
 
governance committees
 
for oversight of conduct
 
risk profile
 
and
implementation of the CRMF. The responsibilities
 
of these risk
 
committees in relation to the
 
trading
 
entities
 
includes the identification
 
and discussion
 
of
any emerging
 
conduct risks
 
exposures which have
 
been identified.
 
Reputation risk
 
management
The risk that an action, transaction, investment, event, decision, or business relationsh
 
ip will reduce trust in the Group
 
’s integrity
 
and/or
competence.
 
Overview
A reduction of trust in the Group’s
 
integrity and competence may reduce
 
the attractiveness
 
of the Group
 
to stakeholders and could lead to negative
publicity,
 
loss of revenue, regulatory
 
or legislative action, loss of existing and potential
 
client business, reduced
 
workforce morale
 
and difficulties
 
in
recruiting talent. Ultimately it may destroy shareholder
 
value.
 
Organisation, roles and responsibilities
The GRC is
 
the most senior executive
 
body responsible
 
for reviewing
 
and monitoring
 
the effectiveness
 
of the Group’s management
 
of reputation
 
risk.
 
The Group
 
Chief
 
Compliance
 
Officer
 
is accountable
 
for developing
 
a Reputation
 
Risk Management
 
Framework
 
(RRMF),
 
and the
 
Head of
 
Corporate
Relations is
 
responsible for developing
 
a reputation
 
risk
 
policy and
 
associated standards,
 
including
 
tolerances
 
against
 
which data
 
is monitored,
 
reported
on and escalated, as
 
required. The
 
RRMF sets
 
out what
 
is required
 
to
 
manage reputation
 
risk across
 
the Group.
 
The primary responsibility
 
for identifying
 
and managing
 
reputation
 
risk
 
and adherence
 
to the control
 
requirements
 
sits
 
with the business
 
and support
functions where the risk
 
arises.
Barclays Bank Group and Barclays
 
Bank UK Group
 
are required
 
to operate
 
within established
 
reputation
 
risk appetite,
 
and their
 
component
 
businesses
prepare
 
reports
 
for their
 
respective
 
Risk and Board
 
Risk Committees
 
highlighting
 
their
 
most
 
significant
 
current and
 
potential
 
reputation
 
risks
 
and issues
and how they are being managed.
 
These reports
 
are a key internal
 
source of
 
information for
 
the
 
quarterly
 
reputation
 
risk reports
 
which are
 
prepared for
the GRC and the Board.
Legal risk
 
management
 
The risk of loss or imposition of penalties, damages or fines from the failure of the Group
 
to meet its legal obligations including regulatory
 
or
contractual requirements.
Overview
 
The Group
 
has no tolerance for wilful breaches of laws, regulations or other
 
legal obligations. However, the multitude of laws and
 
regulations
across the globe are highly
 
dynamic and their application to particular circumstances is often unclear; this results in a level of inherent legal risk, for
which the Group
 
has limited tolerance.
 
Organisation, roles and responsibilities
 
The Group’s
 
businesses and functions have primary responsibility for identifying, managing
 
and escalating legal risk in their area as well as
responsibility for adherence
 
to minimum control requirements.
 
The Legal Function organisation and coverage
 
model aligns expertise to
 
businesses, functions, products, activities and geographic
 
locations so that
the Group receives legal support from
 
appropriate
 
legal professionals. The senior management of the Legal
 
Function oversees, monitors and
challenges legal risk across the Group.
 
The Legal Function does not sit
 
in any of the three
 
lines of defence but supports them all.
The Grou
 
p
 
General Counsel is responsible for maintaining an appropriate Group
 
-wide legal risk
 
management framework. This includes defining the
relevant legal risk policies and oversight
 
of the implementation of controls to manage and escalate legal risk.
 
The legal risk profile and control environment
 
is reviewed by management through
 
business risk
 
committees and control committees. The Group
Risk Committee is the most senior executive body
 
responsible for reviewing
 
and monitoring
 
the effectiveness of
 
risk management across the
Group.
 
Escalation paths from this committee exist to the Barclays PLC Board
 
Risk Committee.
 
 
 
 
 
 
 
 
Risk review
Risk performance
Credit risk
 
 
108
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Summary of
 
contents
Page
Credit risk represents a significant risk and
 
mainly arises
from exposure
 
to wholesale and retail
 
loans and
advances together with the counterparty
 
credit risk
arising from derivative contracts entered
 
into with
clients.
 
Credit risk overview and
 
summary of performance
 
Maximum exposure
 
and effects of netting, collateral and risk transfer
109
109
This section outlines the expected credit loss
allowances, the movements in
 
allowances during the
period, material management adjustments to model
output and measurement uncertainty
 
and sensitivity
analysis.
 
Expected Credit Losses
-
 
Loans and advances at amortised cost by stage
-
 
Loans and advances at amortised cost by product
-
 
Movement in gross exposure
 
and impairment allowance for
 
loans and
advances at amortised cost
-
 
Stage 2 decomposition
-
 
Stage 3 decomposition
 
Management adjustments to models for impairment
 
Measurement uncertainty and sensitivity analysis
112
112
114
115
119
119
120
121
The Group
 
reviews and monitors risk concentrations in
a variety of ways. This section outlines performance
against key concentration
 
risks.
 
Analysis of the concentration
 
of credit risk
-
 
Geographic
 
concentrations
-
 
Industry concentrations
 
Approach
 
to management and representation of credit quality
-
 
Asset credit quality
-
 
Debt securities
-
 
Balance sheet credit quality
-
 
Credit exposures by internal PD grade
127
127
127
129
129
129
129
131
Credit risk monitors exposure
 
performance
 
across a
range of significant portfolios.
 
Analysis of specific portfolios and asset types
-
 
Secured home
 
loans
-
 
Credit cards, unsecured
 
loans and other retail lending
-
 
Exposure to UK commercial
 
real estate
133
133
134
135
The Group
 
monitors exposures to assets where there is
a heightened
 
likelihood of default and assets where an
actual default has occurred.
 
From time to time,
suspension of certain aspects of client credit
agreements are agreed,
 
generally during
 
temporary
periods of financial difficulties where
 
the Group is
confident that the client will be able to remedy
 
the
suspension. This section outlines the current exposure
to assets with this treatment.
 
Forbearance
-
 
Retail forbearance
 
programmes
-
 
Wholesale forbearance
 
programmes
136
137
138
This section provides an analysis of credit risk on
 
debt
securities and derivatives.
 
Analysis of debt securities
 
Analysis of derivatives
138
139
 
 
 
Risk review
Risk performance
Credit risk
 
 
109
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
All disclosures in this section (pages 109
 
to 139)
 
are unaudited unless otherwise stated.
Overview
Credit risk represents a significant risk to the Group
 
and mainly arises from exposure
 
to wholesale and retail
 
loans and advances together
 
with the
counterparty
 
credit risk arising from derivative contracts entered into with clients.
Credit risk disclosures include many
 
of the recommendations of the Taskforce
 
on Disclosures about Expected Credit Losses (DECL) and it is
expected that relevant disclosures will continue
 
to be developed in future periods.
Further detail can be found in the Financial statements section in Note 7 Credit impairment
 
charges. Descriptions of terminology can be found
 
in
the glossary, available
 
at home.barclays/annualreport.
Summary of
 
performance
 
in the
 
period
Credit impairment charges increased to £1,912m
 
(2018:
 
£1,468m). The 2019
 
charge includes the impact of macroeconomic
 
scenario updates and
an overall reduction
 
in unsecured gross exposures.
 
Prior year
 
comparatives included the impact of favourable macroecon
 
omic scenario updates
and a £150m
 
charge regarding
 
the anticipated economic uncertainty in the UK.
 
The Group
 
loan loss rate
 
was 55bps (2018:
 
44bps).
Refer to the credit risk management
 
section on pages 102
 
and 103
 
for details of governance, policies and procedures.
Key metrics
Reduction in impairment allowances
 
of
£411m
 
Impairment allowances on
 
loans and advances at amortised cost, including off
 
-balance sheet elements of the allowance, decreased by
£411m
 
to £6,630m
 
(2018:
 
£7,
 
041m). The decrease is driven by Barclays UK £300m,
 
Barclays International £92m and
 
Head Office £19m. Refer to
the Expected Credit Losses section on page 112
 
for further details.
 
Maximum exposure
 
and effects
 
of netting,
 
collateral
 
and risk
 
transfer
Basis of preparation
The following tables present a reconciliation between the
 
maximum exposure
 
and its
 
net exposure to credit risk, reflecting the financial effects
 
of
risk mitigation reducing the exposure.
 
For financial assets recognised
 
on the balance sheet, maximum exposure to credit risk represents the balance sheet carrying
 
value after allowance
for impairment. For
 
off-balance sheet guarantees, the maximum exposure
 
is the
 
maximum amount that the Group
 
would have to pay
 
if the
guarantees were to be called upon.
 
For loan commitments and other
 
credit related commitments that are irrevocable over
 
the life
 
of the respective
facilities, the maximum exposure
 
is the full amount of the committed facilities.
 
This and subsequent analyses of credit risk exclude other
 
financial assets not subject to credit risk, mainly equity securities.
 
The Group
 
mitigates
 
the credit risk to which it is exposed through
 
netting and set-off, collateral and risk transfer.
 
Further detail on the Group’s
policies to each of these forms of credit enha
 
ncement is presented on pages 175
 
to 177
 
of the Barclays PLC Pillar 3 Report 2019
 
(unaudited)
 
.
 
Overview
As at 31 December
 
2019,
 
the Group’s net exposure
 
to credit risk,
 
after taking into account credit risk mitigation, decreased 0.9% to £800.3
 
bn.
Overall, the extent to which the Group
 
holds mitigation against
 
its total exposure
 
remained unchanged
 
at 43% (2018:
 
43%).
 
Of the unmitigated on balance sheet exposure, a significant portion
 
relates to cash held at central banks, cash collateral and settlement balances,
and debt securities issued by governments
 
all of
 
which are considered
 
to be lower risk.
 
The decrease in the Group’s
 
net exposure to credit risk is
due to decreases in cash held at central banks and trading
 
portfolio assets, offset by increases in cash collateral and settlement balances,
 
financial
assets at fair value through
 
other comprehensive income
 
and off balance sheet loan commitments.
 
Trading
 
portfolio liability positions, which to a
significant extent economically hedge
 
trading portfolio
 
assets
 
but which are not held specifically for
 
risk management purposes, are excluded
 
from
the analysis. The credit quality of counterparties to derivatives, financial investments
 
and wholesale loan assets are predominantly
 
investment
grade. Further
 
analysis
 
on the credit quality of assets is presented
 
on pages 129
 
to 131
 
.
 
Collateral obtained
Where collateral has been obtained in the event of default, the Group
 
does not, ordinarily, use such assets for its own operations
 
and they are
usually sold on a timely basis. The carrying
 
value of assets held by the Group as at 31
 
December 2019,
 
as a
 
result of the enforcement of collateral,
was £6m
 
(2018:
 
£6m).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Credit risk
 
 
110
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Maximum exposure and effects of netting, collateral and risk transfer (audited)
Maximum
exposure
Netting and
set-off
Cash
collateral
Non-cash
collateral
Risk transfer
Net exposure
As at 31 December 2019
£m
£m
£m
£m
£m
£m
On-balance sheet:
Cash and balances at central banks
150,258
-
-
-
-
150,258
Cash collateral and settlement balances
83,256
-
-
-
-
83,256
Loans and advances at amortised cost:
Home loans
154,479
-
(294)
(153,939)
(70)
176
Credit cards, unsecured
 
loans and other retail lending
55,296
-
(778)
(5,283)
(258)
48,977
Wholesale loans
129,340
(7,636)
(148)
(39,981)
(12,071)
69,504
Total loans and advances at amortised cost
339,115
(7,636)
(1,220)
(199,203)
(12,399)
118,657
Of which credit
 
-impaired
 
(Stage 3):
Home loans
1,809
-
(2)
(1,785)
(14)
8
Credit cards, unsecured loans
 
and other retail lending
1,074
-
(12)
(250)
(2)
810
Wholesale loans
1,812
-
(9)
(909)
(20)
874
Total
 
credit
 
-impaired loans and advances at amortised cost
4,695
-
(23)
(2,944)
(36)
1,692
Reverse repurchase agreements and other similar
 
secured lending
3,379
-
-
(3,379)
-
-
Trading portfolio
 
assets:
Debt securities
52,739
-
-
(423)
-
52,316
Traded
 
loans
5,378
-
-
(134)
-
5,244
Total trading portfolio assets
58,117
-
-
(557)
-
57,560
Financial assets at fair value through the income statement:
Loans and advances
22,692
-
(14)
(16,580)
(57)
6,041
Debt securities
5,249
-
-
-
-
5,249
Reverse repurchase
 
agreements
96,887
-
(1,132)
(95,736)
-
19
Other financial assets
763
-
-
-
-
763
Total financial assets at fair value through the income statement
125,591
-
(1,146)
(112,316)
(57)
12,072
Derivative financial instruments
229,236
(175,998)
(33,411)
(5,511)
(5,564)
8,752
Financial assets at fair value through other comprehensive
 
income
64,727
-
-
(305)
(1,051)
63,371
Other assets
1,375
-
-
-
-
1,375
Total on-balance sheet
1,055,054
(183,634)
(35,777)
(321,271)
(19,071)
495,301
Off-balance sheet:
Contingent liabilities
24,527
-
(400)
(4,412)
(159)
19,556
Loan commitments
334,455
-
(84)
(47,008)
(1,950)
285,413
Total off-balance sheet
358,982
-
(484)
(51,420)
(2,109)
304,969
Total
 
1,414,036
(183,634)
(36,261)
(372,691)
(21,180)
800,270
 
Off-balance sheet exposures are shown
 
gross of provisions of £322m
 
(2018:
 
£271m). See Note 25 for further
 
details.
 
In addition to the above, the Group
 
holds forward
 
starting reverse repos with notional contract amounts of £31.1
 
bn (2018: £35.5bn). The balances
are fully collateralised.
 
 
For further
 
information on credit risk mitigation techniques, refer to page 102
 
within the Credit risk management section.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Credit risk
 
 
111
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Maximum exposure and effects of netting, collateral and risk transfer (audited)
Maximum
exposure
Netting and
set-off
Cash
collateral
Non-cash
collateral
Risk transfer
Net exposure
As at 31 December 2018
£m
£m
£m
£m
£m
£m
On-balance sheet:
Cash and balances at central banks
177,069
-
-
-
-
177,069
Cash collateral and settlement balances
77,222
-
-
-
-
77,222
Loans and advances at amortised cost:
Home loans
150,284
-
(295)
(149,679)
(132)
178
Credit cards, unsecured
 
loans and other retail lending
56,431
-
(725)
(5,608)
(451)
49,647
Wholesale loans
119,691
(7,550)
(65)
(41,042)
(4,454)
66,580
Total loans and advances at amortised cost
326,406
(7,550)
(1,085)
(196,329)
(5,037)
116,405
Of which credit
 
-impaired
 
(Stage 3):
Home loans
2,125
-
(3)
(2,083)
(31)
8
Credit cards, unsecured loans and other retail
 
lending
1,249
-
(6)
(232)
(38)
973
Wholesale loans
1,762
-
-
(895)
(17)
850
Total
 
credit
 
-impaired loans and advances at amortised cost
5,136
-
(9)
(3,210)
(86)
1,831
Reverse repurchase agreements and other similar
 
secured lending
2,308
-
(17)
(2,261)
-
30
Trading portfolio
 
assets:
Debt securities
57,283
-
-
(451)
-
56,832
Traded
 
loans
7,234
-
-
(154)
-
7,080
Total trading portfolio assets
64,517
-
-
(605)
-
63,912
Financial assets at fair value through the income statement:
Loans and advances
19,524
-
(11)
(11,782)
(89)
7,642
Debt securities
4,522
-
-
(445)
-
4,077
Reverse repurchase
 
agreements
119,041
-
(2,996)
(115,601)
-
444
Other financial assets
542
-
-
-
-
542
Total financial assets at fair value through the income statement
143,629
-
(3,007)
(127,828)
(89)
12,705
Derivative financial instruments
222,538
(172,001)
(31,402)
(5,502)
(4,712)
8,921
Financial assets at fair value through other comprehensive
 
income
51,694
-
-
-
(399)
51,295
Other assets
1,006
-
-
-
-
1,006
Total on-balance sheet
1,066,389
(179,551)
(35,511)
(332,525)
(10,237)
508,565
Off-balance sheet:
Contingent liabilities
20,303
-
(399)
(1,418)
(190)
18,296
Loan commitments
324,223
-
(124)
(42,117)
(1,395)
280,587
Total off-balance sheet
344,526
-
(523)
(43,535)
(1,585)
298,883
Total
 
1,410,915
(179,551)
(36,034)
(376,060)
(11,822)
807,448
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Credit risk
 
 
112
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Expected Credit
 
Losses
 
Loans and advances at amortised cost by stage
The table below presents an analysis of loans and advances at amortised cost by
 
gross exposure, impairment
 
allowance, coverage
 
ratio and
impairment charge
 
by stage allocation and business segment as at 31 December
 
2019
 
.
 
Also included are off-balance sheet loan commitments and
financial guarantee contracts by
 
gross exposure
 
and impairment allowance and coverage
 
ratio by stage allocation as
 
at 31 December
 
2019.
 
 
Impairment allowance
 
under IFRS 9 considers both the drawn
 
and the undrawn counterparty exposure.
 
For retail portfolios, the total
 
impairment
allowance is allocated to the drawn
 
exposure to the extent that the allowance does not exceed the exposure
 
as ECL is
 
not reported
 
separately. Any
excess is reported
 
on the liability side of the
 
balance sheet as a provision.
 
For wholesale portfolios, the impairment allowance on the undrawn
exposure is reported
 
on the liability side of the
 
balance sheet as a provision.
 
 
Loans and advances at amortised cost by stage (audited)
Gross exposure
Impairment allowance
Net
exposure
Stage 1
Stage 2
 
Stage 3
Total
Stage 1
Stage 2
 
Stage 3
Total
As at 31 December 2019
£m
£m
£m
£m
£m
£m
£m
£m
£m
Barclays UK
143,097
23,198
2,446
168,741
198
1,277
974
2,449
166,292
Barclays International
27,886
4,026
1,875
33,787
352
774
1,359
2,485
31,302
Head Office
4,803
500
826
6,129
5
36
305
346
5,783
Total Barclays Group retail
175,786
27,724
5,147
208,657
555
2,087
2,638
5,280
203,377
Barclays UK
27,891
2,397
1,124
31,412
16
38
108
162
31,250
Barclays International
a
92,615
8,113
1,615
102,343
136
248
447
831
101,512
Head Office
2,974
-
37
3,011
-
-
35
35
2,976
Total Barclays Group wholesale
123,480
10,510
2,776
136,766
152
286
590
1,028
135,738
Total loans and advances at
amortised cost
299,266
38,234
7,923
345,423
707
2,373
3,228
6,308
339,115
Off-balance sheet loan commitments
and financial guarantee contracts
b
321,140
19,185
935
341,260
97
170
55
322
340,938
Total
c
620,406
57,419
8,858
686,683
804
2,543
3,283
6,630
680,053
Loan impairment charge
and loan loss
 
rate
Coverage ratio
 
Loan
impairment
charge
Loan loss
rate
Stage 1
Stage 2
 
Stage 3
Total
As at 31 December 2019
%
%
%
%
£m
bps
Barclays UK
0.1
5.5
39.8
1.5
661
39
Barclays International
1.3
19.2
72.5
7.4
999
296
Head Office
0.1
7.2
36.9
5.6
27
44
Total Barclays Group retail
0.3
7.5
51.3
2.5
1,687
81
Barclays UK
0.1
1.6
9.6
0.5
33
11
Barclays International
a
0.1
3.1
27.7
0.8
113
11
Head Office
 
-
 
 
-
 
94.6
1.2
-
-
Total Barclays Group wholesale
0.1
2.7
21.3
0.8
146
11
Total loans and advances at
amortised cost
0.2
6.2
40.7
1.8
1,833
53
Off-balance sheet loan commitments
and financial guarantee contracts
b
-
0.9
5.9
0.1
71
Other financial assets subject to
impairment
c
8
Total
d
0.1
4.4
37.1
1.0
1,912
 
Notes
a
 
Includes
 
Wealth and
 
Private Banking
 
exposures measured
 
on an individual customer exposure
 
basis.
 
b
 
Excludes
 
loan commitments
 
and financial
 
guarantees
 
of £17.7bn carried at fair
 
value.
c
 
Other financial
 
assets subject
 
to impairment not included
 
in the table above include cash
 
collateral and settlement
 
balances, financial assets
 
at fair value through other
comprehensive
 
income and other
 
assets.
 
These have a total gross exposure
 
of £149.3bn and impairment
 
allowance of £24m.
 
This
 
comprises £12m
 
ECL on £148.5bn Stage 1
assets,
 
£2m
 
on £0.8bn Stage 2 fair value
 
through other
 
comprehensive
 
income assets
 
cash collateral and
 
settlement assets and £10m on £10m
 
Stage 3 other assets.
d
 
The loan loss
 
rate is 55bps after
 
applying
 
the total impairment charge
 
of £1,912m.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Credit risk
 
 
113
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Loans and advances at amortised cost by stage (audited)
Gross exposure
Impairment
 
allowance
Net
exposure
Stage 1
Stage 2
 
Stage 3
Total
Stage 1
Stage 2
 
Stage 3
Total
As at 31 December 2018
£m
£m
£m
£m
£m
£m
£m
£m
£m
Barclays UK
134,911
25,279
3,040
163,230
183
1,389
1,152
2,724
160,506
Barclays International
26,714
4,634
1,830
33,178
352
965
1,315
2,632
30,546
Head Office
6,510
636
938
8,084
9
47
306
362
7,722
Total Barclays Group retail
168,135
30,549
5,808
204,492
544
2,401
2,773
5,718
198,774
Barclays UK
22,824
4,144
1,272
28,240
16
70
117
203
28,037
Barclays International
a
87,344
8,754
1,382
97,480
128
244
439
811
96,669
Head Office
2,923
-
41
2,964
-
-
38
38
2,926
Total Barclays Group wholesale
113,091
12,898
2,695
128,684
144
314
594
1,052
127,632
Total loans and advances at
amortised cost
281,226
43,447
8,503
333,176
688
2,715
3,367
6,770
326,406
Off-balance sheet loan commitments
and financial guarantee contracts
b
309,989
22,126
684
332,799
99
150
22
271
332,528
Total
c
591,215
65,573
9,187
665,975
787
2,865
3,389
7,041
658,934
Loan impairment
 
charge
and loan loss
 
rate
Coverage ratio
 
Loan
impairment
charge
Loan loss
rate
Stage 1
Stage 2
 
Stage 3
Total
As at 31 December 2018
%
%
%
%
£m
bps
Barclays UK
0.1
5.5
37.9
1.7
830
51
Barclays International
1.3
20.8
71.9
7.9
844
254
Head Office
0.1
7.4
32.6
4.5
15
19
Total Barclays Group retail
0.3
7.9
47.7
2.8
1,689
83
Barclays UK
0.1
1.7
9.2
0.7
74
26
Barclays International
a
0.1
2.8
31.8
0.8
(142)
-
Head Office
-
-
92.7
1.3
(31)
-
Total Barclays Group wholesale
0.1
2.4
22.0
0.8
(99)
-
Total loans and advances at
amortised cost
0.2
6.2
39.6
2.0
1,590
48
Off-balance sheet loan commitments
and financial guarantee contracts
b
-
0.7
3.2
0.1
(125)
Other financial assets subject to
impairment
c
3
Total
d
0.1
4.4
36.9
1.1
1,468
 
Notes
a
 
Included
 
in the
 
above analysis are
 
Wealth and Private
 
Banking exposures
 
measured on an individual customer exposure
 
basis.
b
 
Excludes
 
loan commitments
 
and financial
 
guarantees
 
of £11.7bn carried at fair
 
value.
c
 
Other financial
 
assets subject
 
to impairment not included
 
in the table above include cash
 
collateral and settlement
 
balances, financial assets
 
at fair value through other
comprehensive
 
income and other
 
assets.
 
These have a total gross exposure
 
of £129.9bn
 
and impairment
 
allowance of £12m. This
 
comprises £10m ECL on £129.3bn Stage 1
assets
 
and £2m on £0.6bn Stage 2 fair
 
value through
 
other comprehensive
 
income assets.
d
 
The loan loss
 
rate is 44bps after
 
applying
 
the total impairment
 
charge of £1,468m.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Credit risk
 
 
114
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Loans and advances at amortised cost by product (audited)
 
The
 
table
 
below
 
presents
 
a
 
breakdown
 
of
 
loans
 
and
 
advances
 
at amortised
 
cost
 
and
 
the
 
impairment
 
allowance
 
with stage allocation by
 
asset
classification.
 
 
Loans and advances at amortised cost by product
(audited)
Stage 2
As at 31 December 2019
Stage 1
Not past due
<=30 days
past due
>30 days past
due
Total
Stage 3
Total
Gross exposure
£m
£m
£m
£m
£m
£m
£m
Home loans
135,713
14,733
1,585
725
17,043
2,155
154,911
Credit cards, unsecured
 
loans and other retail lending
46,012
9,759
496
504
10,759
3,409
60,180
Wholesale loans
 
117,541
9,374
374
684
10,432
2,359
130,332
Total
299,266
33,866
2,455
1,913
38,234
7,923
345,423
Impairment allowance
Home loans
22
37
14
13
64
346
432
Credit cards, unsecured
 
loans and other retail lending
542
1,597
159
251
2,007
2,335
4,884
Wholesale loans
 
143
284
9
9
302
547
992
Total
707
1,918
182
273
2,373
3,228
6,308
Net exposure
Home loans
135,691
14,696
1,571
712
16,979
1,809
154,479
Credit cards, unsecured
 
loans and other retail lending
45,470
8,162
337
253
8,752
1,074
55,296
Wholesale loans
 
117,398
9,090
365
675
10,130
1,812
129,340
Total
298,559
31,948
2,273
1,640
35,861
4,695
339,115
Coverage ratio
%
%
%
%
%
%
%
Home loans
-
0.3
0.9
1.8
0.4
16.1
0.3
Credit cards, unsecured
 
loans and other retail lending
1.2
16.4
32.1
49.8
18.7
68.5
8.1
Wholesale loans
 
0.1
3.0
2.4
1.3
2.9
23.2
0.8
Total
0.2
5.7
7.4
14.3
6.2
40.7
1.8
As at 31 December 2018
Gross exposure
£m
£m
£m
£m
£m
£m
£m
Home loans
130,066
15,672
1,672
862
18,206
2,476
150,748
Credit cards, unsecured
 
loans and other retail lending
45,785
11,262
530
437
12,229
3,760
61,774
Wholesale loans
 
105,375
12,177
360
475
13,012
2,267
120,654
Total
281,226
39,111
2,562
1,774
43,447
8,503
333,176
Impairment allowance
Home loans
31
56
13
13
82
351
464
Credit cards, unsecured
 
loans and other retail lending
528
1,895
169
240
2,304
2,511
5,343
Wholesale loans
 
129
300
16
13
329
505
963
Total
688
2,251
198
266
2,715
3,367
6,770
Net exposure
Home loans
130,035
15,616
1,659
849
18,124
2,125
150,284
Credit cards, unsecured
 
loans and other retail lending
45,257
9,367
361
197
9,925
1,249
56,431
Wholesale loans
 
105,246
11,877
344
462
12,683
1,762
119,691
Total
280,538
36,860
2,364
1,508
40,732
5,136
326,406
Coverage ratio
%
%
%
%
%
%
%
Home loans
-
0.4
0.8
1.5
0.5
14.2
0.3
Credit cards, unsecured
 
loans and other retail lending
1.2
16.8
31.9
54.9
18.8
66.8
8.6
Wholesale loans
 
0.1
2.5
4.4
2.7
2.5
22.3
0.8
Total
0.2
5.8
7.7
15.0
6.2
39.6
2.0
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Credit risk
 
 
115
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Movement in
 
gross
 
exposures and
 
impairment
 
allowance
 
including
 
provisions for
 
loan
 
commitments
 
and financial
guarantees
The following tables present a reconciliation of
 
the opening to the closing balance of the exposure
 
and impairment allowance. An explanation of
the terms: 12-month
 
ECL,
 
lifetime ECL and credit-impaired is included
 
on page 225
 
.
 
The disclosure has been enhanced in 2019
 
to provide further
granularity by
 
product. Transfers
 
between stages in the
 
tables have
 
been reflected as if they had taken place at the beginning
 
of the year. The
movements are measured
 
over a 12
 
-month period.
 
 
Loans and advances at amortised cost (audited)
Stage 1
Stage 2
Stage 3
Total
Gross
exposure
ECL
Gross
exposure
ECL
Gross
exposure
ECL
Gross
exposure
ECL
£m
£m
£m
£m
£m
£m
£m
£m
Home loans
As at 1 January 2019
130,066
31
18,206
82
2,476
351
150,748
464
Transfers from
 
Stage 1 to Stage 2
(9,051)
(1)
9,051
1
-
-
-
-
Transfers from
 
Stage 2 to Stage 1
8,000
28
(8,000)
(28)
-
-
-
-
Transfers to
 
Stage 3
(199)
-
(510)
(15)
709
15
-
-
Transfers from
 
Stage 3
43
2
294
3
(337)
(5)
-
-
Business activity in the year
24,935
3
734
2
3
-
25,672
5
Changes to models used for calculation
a
-
-
-
-
-
-
-
-
Net drawdowns,
 
repayments, net re-
measurement and movements due
 
to
exposure and risk parameter
 
changes
(6,931)
(38)
(843)
27
(214)
24
(7,988)
13
Final repayments
(10,427)
(2)
(1,827)
(4)
(454)
(13)
(12,708)
(19)
Disposals
b
(723)
(1)
(62)
(4)
(2)
-
(787)
(5)
Write-offs
c
-
-
-
-
(26)
(26)
(26)
(26)
As at 31 December 2019
d
135,713
22
17,043
64
2,155
346
154,911
432
Credit cards, unsecured loans and other retail lending
As at 1 January 2019
45,785
528
12,229
2,304
3,760
2,511
61,774
5,343
Transfers from
 
Stage 1 to Stage 2
(3,604)
(72)
3,604
72
-
-
-
-
Transfers from
 
Stage 2 to Stage 1
4,522
701
(4,522)
(701)
-
-
-
-
Transfers to
 
Stage 3
(857)
(21)
(1,264)
(448)
2,121
469
-
-
Transfers from
 
Stage 3
144
103
28
14
(172)
(117)
-
-
Business activity in the year
9,664
120
704
123
89
39
10,457
282
Changes to models used for calculation
a
-
16
-
(110)
-
(7)
-
(101)
Net drawdowns,
 
repayments, net re-
measurement and movements due
 
to
exposure and risk parameter
 
changes
(5,975)
(779)
351
806
373
1,836
(5,251)
1,863
Final repayments
(3,667)
(54)
(371)
(53)
(290)
(74)
(4,328)
(181)
Disposals
b
-
-
-
-
(777)
(627)
(777)
(627)
Write-offs
c
-
-
-
-
(1,695)
(1,695)
(1,695)
(1,695)
As at 31 December 2019
d
46,012
542
10,759
2,007
3,409
2,335
60,180
4,884
Wholesale loans
As at 1 January 2019
105,375
129
13,012
329
2,267
505
120,654
963
Transfers from
 
Stage 1 to Stage 2
(3,419)
(11)
3,419
11
-
-
-
-
Transfers from
 
Stage 2 to Stage 1
5,213
84
(5,213)
(84)
-
-
-
-
Transfers to
 
Stage 3
(501)
(2)
(650)
(19)
1,151
21
-
-
Transfers from
 
Stage 3
473
35
205
25
(678)
(60)
-
-
Business activity in the year
40,837
51
1,757
27
31
-
42,625
78
Changes to models used for calculation
a
-
(9)
-
(19)
-
-
-
(28)
Net drawdowns,
 
repayments, net re-
measurement and movements due
 
to
exposure and risk parameter
 
changes
5,929
(104)
321
85
122
334
6,372
315
Final repayments
(34,081)
(30)
(2,419)
(53)
(372)
(91)
(36,872)
(174)
Disposals
b
(2,285)
-
-
-
-
-
(2,285)
-
Write-offs
c
-
-
-
-
(162)
(162)
(162)
(162)
As at 31 December 2019
d
117,541
143
10,432
302
2,359
547
130,332
992
 
Notes
a
 
Changes to models used for
 
calculation
 
include
 
a £101m movement in
 
Credit cards,
 
unsecured
 
loans and
 
other
 
retail lending
 
and a £28m
 
movement in
 
Wholesale
 
loans. These
 
reflect
methodology changes made
 
during
 
the year. Barclays
 
continually
 
review
 
the output
 
of models
 
to determine
 
accuracy
 
of the
 
ECL
 
calculation
 
including
 
review of
 
model monitoring,
 
external
benchmarking and experience
 
of model
 
operation over
 
an extended
 
period of
 
time.
 
This ensures
 
that the models
 
used
 
continue
 
to reflect
 
the risks
 
inherent
 
across the
 
businesses.
b
 
The £787m movement of gross
 
loans
 
and advances
 
disposed of
 
across Home
 
loans
 
relates to
 
the sale
 
of a portfolio
 
of mortgages
 
from the
 
Italian loan
 
book.
 
The £777m
 
disposal
 
reported
within
 
Credit cards,
 
unsecured
 
loans and
 
other
 
retail lending
 
portfolio
 
relates to
 
debt sales
 
undertaken
 
during
 
the year. Finally,
 
disposals
 
of £2,285m
 
within
 
Wholesale
 
loans relate
 
to the
 
sale of
debt securities as part
 
of the Group’s
 
Treasury operations.
c
 
In 2019, gross write-offs amounted
 
to £1,883m
 
(2018: £1,891m) and post
 
write-off
 
recoveries
 
amounted
 
to £124m
 
(2018: £195m). Net write-offs
 
represent
 
gross write-offs
 
less post
 
write-off
recoveries and amounted
 
to £1,759m
 
(2018: £1,696m).
d
 
Other financial assets
 
subject
 
to impairment
 
not included
 
in the table
 
above include
 
cash collateral
 
and settlement
 
balances,
 
financial
 
assets
 
at fair
 
value through
 
other
 
comprehensive
 
income
and other
 
assets.
 
These have
 
a total
 
gross exposure
 
of £149.3bn (December
 
2018: £129.9bn)
 
and impairment
 
allowance
 
of £24m (December
 
2018: £12m). This
 
comprises
 
£12m ECL
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Credit risk
 
 
116
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
(December 2018: £10m) on £148.5bn
 
Stage 1 assets
 
(December
 
2018: £129.3bn),
 
£2m (December
 
2018: £2m) on
 
£0.8bn
 
Stage
 
2 fair
 
value through
 
other
 
comprehensive
 
income
 
assets, cash
collateral and settlement
 
assets
 
(December
 
2018: £0.6bn)
 
and £10m (December
 
2018: £nil)
 
on £10m Stage
 
3 other assets
 
(December
 
2018: £nil).
 
Reconciliation of ECL movement to impairment charge/(release) for the period
£m
Home loans
(1)
Credit cards, unsecured loans and
 
other retail lending
1,863
Wholesale loans
191
ECL movement excluding assets derecognised
 
due to disposals and write-offs
2,053
Post write-off
 
recoveries
(124)
Exchange and other
 
adjustments
a
(96)
Impairment charge
 
on loan commitments and financial guarantees
71
Impairment charge
 
on other financial assets
b
8
Income statement charge for the period
1,912
 
Notes
a
 
Includes
 
foreign exchange
 
and interest
 
and fees in suspense.
b
 
Other financial
 
assets subject
 
to impairment not included
 
in the table above include cash
 
collateral and settlement
 
balances, financial assets
 
at fair value through other
comprehensive
 
income and other
 
assets.
 
These have a total gross exposure
 
of £149.3bn (December 2018: £129.9bn)
 
and impairment
 
allowance of £24m (December 2018:
£12m).
 
This
 
comprises
 
£12m ECL (December 2018: £10m)
 
on £148.5bn
 
Stage 1 assets
 
(December 2018: £129.3bn),
 
£2m (December 2018:
 
£2m) on £0.8bn
 
Stage 2 fair value
through other
 
comprehensive
 
income assets,
 
cash collateral and settlement
 
assets (December 2018: £0.6bn) and £10m (December
 
2018:
 
£nil) on
 
£10m Stage 3 other assets
(December 2018:
 
£nil)
 
Loan commitments and financial guarantees (audited)
Stage 1
Stage 2
Stage 3
Total
Gross
exposure
ECL
Gross
exposure
ECL
Gross
exposure
ECL
Gross
exposure
ECL
£m
£m
£m
£m
£m
£m
£m
£m
Home loans
As at 1 January 2019
6,948
-
546
-
13
-
7,507
-
Net transfers between stages
(39)
-
47
-
(8)
-
-
-
Business activity in the year
2,848
-
-
-
-
-
2,848
-
Net drawdowns,
 
repayments, net re-
measurement and movement
 
due to exposure
and risk parameter
 
changes
1
-
(40)
-
-
-
(39)
-
Final repayments
(216)
-
(53)
-
(1)
-
(270)
-
As at 31 December 2019
9,542
-
500
-
4
-
10,046
-
Credit cards, unsecured loans and other retail lending
As at 1 January 2019
124,611
41
9,016
65
267
20
133,894
126
Net transfers between stages
117
44
(1,082)
(43)
965
(1)
-
-
Business activity in the year
14,619
2
218
1
6
6
14,843
9
Net drawdowns,
 
repayments, net re-
measurement and movement
 
due to exposure
and risk parameter
 
changes
(1,151)
(48)
(1,172)
54
(874)
(9)
(3,197)
(3)
Final repayments
(12,437)
(4)
(742)
(6)
(114)
(2)
(13,293)
(12)
As at 31 December 2019
125,759
35
6,238
71
250
14
132,247
120
Wholesale loans
As at 1 January 2019
178,430
58
12,564
85
404
2
191,398
145
Net transfers between stages
(875)
7
580
(8)
295
1
-
-
Business activity in the year
53,685
22
2,779
22
16
-
56,480
44
Net drawdowns,
 
repayments, net re-
measurement and movement
 
due to exposure
and risk parameter
 
changes
(487)
(1)
1,190
36
232
41
935
76
Final repayments
(44,914)
(24)
(4,666)
(36)
(266)
(3)
(49,846)
(63)
As at 31 December 2019
185,839
62
12,447
99
681
41
198,967
202
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Credit risk
 
 
117
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Gross exposure for loans and advances at amortised cost (audited)
Stage 1
Stage 2
Stage 3
Total
£m
£m
£m
£m
As at 1 January 2018
265,617
49,592
9,081
324,290
Net transfers between stages
1,385
(3,602)
2,217
-
Business activity in the year
74,419
2,680
374
77,473
- of which: Barclays
 
UK
29,467
1,493
326
31,286
- of which: Barclays
 
International
42,346
1,164
44
43,554
Net drawdowns
 
and repayments
(13,140)
136
162
(12,842)
- of which: Barclays
 
UK
(10,269)
(980)
(322)
(11,571)
- of which: Barclays
 
International
(1,305)
1,348
561
604
Final repayments
(41,946)
(5,359)
(1,071)
(48,376)
- of which: Barclays
 
UK
(11,728)
(1,753)
(478)
(13,959)
- of which: Barclays
 
International
(29,421)
(3,520)
(549)
(33,490)
Disposals
(5,109)
-
(369)
(5,478)
Write-offs
-
-
(1,891)
(1,891)
As at 31 December 2018
a
281,226
43,447
8,503
333,176
 
Impairment allowance on loans and advances at amortised cost (audited)
Stage 1
Stage 2
Stage 3
Total
£m
£m
£m
£m
As at 1 January 2018
608
3,112
3,382
7,102
Net transfers between stages
798
(1,182)
384
-
Business activity in the year
223
173
95
491
Net re-measurement
 
and movement due
 
to exposure and risk
parameter changes
(865)
638
1,918
1,691
UK economic uncertainty
 
adjustment
-
150
-
150
Final repayments
(76)
(176)
(152)
(404)
Disposals
-
-
(369)
(369)
Write-offs
-
-
(1,891)
(1,891)
As at 31 December 2018
a
688
2,715
3,367
6,770
Reconciliation of ECL movement to impairment charge/(release) for the period
ECL movement excluding
 
assets derecognised due to disposals and
write-offs
1,928
Post write-off
 
recoveries
(195)
Exchange and other
 
adjustments
(143)
Impairment release on loan commitments and financial guarantees
b
(125)
Impairment charge
 
on other financial assets
3
Income statement charge/(release) for the period
1,468
 
Notes
a
 
Other financial
 
assets subject
 
to impairment not included
 
in the table above include cash
 
collateral and settlement
 
balances, financial assets
 
at fair value through other
comprehensive
 
income and other
 
assets.
 
These have a total gross exposure
 
of £129.9bn (1 January 2018: £128.1bn)
 
and impairment
 
allowance of £12m (1 January
 
2018: £9m).
This
 
comprises
 
£10m ECL on £129.3bn Stage 1 assets
 
and £2m on £0.6bn Stage 2 fair
 
value through
 
other comprehensive
 
income assets.
b
 
Impairment
 
release of £
 
125m
 
on loan commitments
 
and financial
 
guarantees
 
represents reduction in
 
impairment allowance
 
of £149m
 
partially
 
offset
 
by exchange and other
adjustments
 
of £24m.
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Credit risk
 
 
118
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Gross exposure for loan commitments and financial guarantees (audited)
Stage 1
Stage 2
Stage 3
Total
£m
£m
£m
£m
As at 1 January 2018
275,364
38,867
1,442
315,673
Net transfers between stages
13,521
(13,552)
31
-
Business activity in the year
65,404
811
-
66,215
Net drawdowns
 
and repayments
(14,491)
4,298
(473)
(10,666)
Final repayments
(29,809)
(8,298)
(316)
(38,423)
As at 31 December 2018
309,989
22,126
684
332,799
 
Provision
 
on loan commitments and financial guarantees (audited)
Stage 1
Stage 2
Stage 3
Total
£m
£m
£m
£m
As at 1 January 2018
133
259
28
420
Net transfers between stages
42
(43)
1
-
Business activity in the year
18
-
-
18
Net remeasurement
 
and movement due
 
to exposure and risk
parameter changes
(79)
(22)
44
(57)
Final repayments
(15)
(44)
(51)
(110)
As at 31 December 2018
99
150
22
271
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Credit risk
 
 
119
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Stage
 
2 decomposition
 
Loans and advances at amortised cost
a
2019
2018
Gross exposure
Impairment
allowance
Gross exposure
Impairment
allowance
As at 31 December
£m
 
£m
£m
 
£m
Quantitative test
24,034
2,059
30,665
2,506
Qualitative test
12,733
278
12,206
183
30 days past due backstop
1,467
36
576
26
Total Stage 2
38,234
2,373
43,447
2,715
 
Note
a
 
Where balances satisfy
 
more than one of the
 
above three criteria
 
for determining a significant
 
increase in credit risk,
 
the corresponding gross exposure
 
and ECL has been assigned
in order of categories
 
presented.
 
Stage 2 exposures are predominantly
 
identified using quantitative
 
tests where the lifetime PD has deteriorated
 
more than a pre-
 
determined amount
since origination. This is augmented by inclusion of accounts meeting the designated
 
high risk criteria (including watchlist) for the portfolio under
the qualitative test. Qualitative tests predominantly
 
include £9.3bn
 
in Barclays UK of which £7.4bn
 
relates to
 
UK Home Finance, £1.1bn
 
relates to
Business Banking and £0.4bn
 
relates to
 
Barclaycard
 
UK. A further £3.4bn
 
relates to
 
Barclays International of which £1.7bn
 
relates to
 
Corporate
 
and
Investment Bank, £0.9bn
 
relates to Barclaycard
 
International and £0.7bn
 
relates to
 
Private Bank.
 
A small number of other
 
accounts (2% of impairment allowances and 4% of gross exposure)
 
are included in Stage 2. These accounts are not
otherwise identified by the quantitative or qualitative tests but are more
 
than 30 days past due. The percentage
 
triggered
 
by these backstop criteria
is a measure of the effectiveness of the
 
Stage 2 criteria in identifying deterioration prior to delinquency
 
.
 
These balances include items in the
Corporate
 
and Investment Bank for reasons
 
such as outstanding interest and fees rather than principal balances.
For further
 
detail on the three criteria for determining a significant increase in credit risk required
 
for Stage 2 classification, refer to Note 7 on page
225
 
.
 
Stage
 
3 decomposition
 
Loans and advances at amortised cost
2019
2018
Gross exposure
Impairment
allowance
Gross exposure
Impairment
allowance
As at 31 December
£m
 
£m
£m
 
£m
Exposures not charged
 
-off including within cure period
a
3,540
857
4,589
916
Exposures individually assessed or in recovery
 
book
b
4,383
2,371
3,914
2,451
Total Stage 3
7,923
3,228
8,503
3,367
 
Notes
a
 
Includes
 
£2.5bn of gross exposure
 
in a cure
 
period that must remain
 
in Stage 3 for a minimum of 12 months before moving to Stage
 
2.
b
 
Exposures
 
individually
 
assessed or in recovery
 
book
 
cannot cure
 
out of Stage 3.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Credit risk
 
 
120
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Management adjustments
 
to
 
models
 
for impairment
 
(audited)
Management adjustments to impairment models are applied in order
 
to factor in certain conditions or changes in policy that are not fully
incorporated
 
into the impairment models, or to reflect additional
 
facts and circumstances at the period
 
end. Management adjustments are
reviewed and incorporated
 
into future model development where applicable.
Total management
 
adjustments to impairment allowance are presented b
 
y
 
product
 
below.
 
Management adjustments to models for impairment
 
(audited)
a
2019
2018
Management
adjustments
 
to
impairment
allowances
Proportion
 
of
total impairment
allowances
Management
adjustments
 
to
impairment
allowances
Proportion of total
impairment
allowances
As at 31 December
£m
%
£m
%
Home loans
57
13.2
59
12.7
Credit cards, unsecured
 
loans and other retail lending
308
6.3
385
7.2
Wholesale loans
(25)
(2.5)
(6)
(0.6)
Total
340
5.4
438
6.5
 
Note
a
 
Positive values
 
relate to an increase
 
in impairment
 
allowance.
Home loans:
 
The low average LTV
 
nature of the UK Home Loans portfolio means that modelled ECL estimates are low in all but the most severe
economic scenarios. An adjustment is held to maintain an appropriate
 
level of ECL.
Credit cards, unsecured loans
 
and other retail lending:
 
Management adjustments primarily relate to UK Cards where model
 
adjustments have
been made to maintain adequacy
 
of Loss Given Default and Probability of Default estimates.
Following recent
 
portfolio analysis and industry benchmarking,
 
releases were applied to the
 
UK cards and US card
 
s
 
portfolios
 
to account for
changes in the modelled lifetime of credit cards in
 
Stage 2.
 
These adjustments will be removed
 
once updates to the model have been incorporated
 
.
A £100m
 
ECL adjustment
 
is held in UK Cards for the anticipated impact of
 
economic uncertainty in the UK, first taken in December
 
2018
 
and
retained as at 2019
 
year-end.
Wholesale loans:
Adjustments include a release in Investment Bank to reduce
 
inappropriate
 
ECL sensitivity
 
to a macroeconomic
 
variable and model
adjustments in Corporate
 
and Investment Bank related to Probability of Default at origination and Loss Given Default floors.
A £50m ECL adjustment is held in Corporate and Investment
 
Bank for the anticipated impact of economic
 
uncertainty in the UK, first taken in
December 2018
 
and retained as at
 
2019
 
year-end.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Credit risk
 
 
121
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Measurement
 
uncertainty
 
and sensitivity
 
analysis
 
 
The measurement of ECL involves complexity and judgement, including
 
estimation of probabilities of default (PD), loss given default (LGD), a range
of unbiased future economic
 
scenarios, estimation of expected lives, estimation of exposures at default (EAD) and assessing significant increases in
credit risk.
 
 
The Group
 
uses a
 
five-scenario model to calculate ECL. An external consensus forecast is
 
assembled from key sources, including HM Treasury
(short and medium term forecasts)
 
,
 
Bloomberg
 
(based on median of economic forecasts) and the Urban
 
Land Institute (for US House Prices),
which forms the Baseline scenario. In addition, two adverse scenarios
 
(Downside 1 and Downside
 
2) and two favourable
 
scenarios (Upside 1 and
Upside 2) are derived, with associated probability
 
weightings. The adverse scenarios are calibrated to a similar severity to internal stress
 
tests,
whilst also considering IFRS 9 specific sensitivities and non
 
-linearity. Downside 2 is benchmarked
 
to the Bank of England’s annual cyclical
 
scenarios
and to the most severe scenario from Moody’s inventory,
 
but is not designed to be the same. The favourable scenarios are calibrated to be
symmetric to the adverse scenarios, subject to a ceiling calibrated to relevant
 
recent favourable
 
benchmark
 
scenarios. All
 
scenarios are regenerated
at a minimum annually. The scenarios include
 
eight economic variables, (GDP,
 
unemployment,
 
House Price Index (HPI)
 
and base rates
 
in both the
UK and US markets), and expanded
 
variables using statistical
 
models based on
 
historical correlations. The upside and downside shocks are
designed to evolve over
 
a five-year stress horizon,
 
with all five scenarios converging
 
to a steady
 
state after approximately eight years.
 
 
Scenario weights (audited)
 
The methodology
 
for estimating probability weights for each of the scenarios involves a comparison
 
of the distribution of key historical UK and US
macroeconomic
 
variables against the
 
forecast paths of the five scenarios. The methodology
 
works such that the Baseline (reflecting current
consensus outlook) has the highest weight and the weights of adverse and favourable
 
scenarios depend on the deviation from
 
the Baseline;
 
the
further from
 
the Baseline,
 
the smaller the weight. This is
 
reflected in the table below where the probability weights of the
 
scenarios as of 31
December 2019
 
are shown. A single set
 
of five scenarios is used across all portfolios and all five weights are normalised
 
to equate to 100%. The
same scenarios and weights that are used in the estimation of expected credit losses are
 
also used for Barclays internal planning purposes.
 
The
impacts across the portfolios are different
 
because of the sensitivities of each of the portfolios to specific macroeconomic
 
variables, for example,
mortgages are highly sensitive to house prices and base ra
 
tes, credit cards and unsecured
 
consumer loans are highly sensitive to unemployment.
 
 
The tables below show the macroeconomic
 
variables for each scenario and their respective scenario weights. Macroeconomic
 
variables are
presented using the most relevant basis for each variable.
 
5-year average
 
tables and movement over time graphs provide
 
additional transparency.
 
 
Scenario probability
 
weighting (audited)
Upside 2
Upside 1
Baseline
Downside
 
1
Downside
 
2
 
%
 
%
 
%
 
%
 
%
As at 31 December 2019
Scenario probability weighting
10.1
23.1
40.8
22.7
3.3
As at 31 December 2018
Scenario probability weighting
9.0
24.0
41.0
23.0
3.0
 
The weights of Upside 2 and Downside
 
2 have increased slightly reflecting the small decrease in dispersion in the scenarios. The impact on
 
ECL is
immaterial.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Credit risk
 
 
122
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Macroeconomic variables
 
used in the calculation of ECL
 
(specific bases)
a
 
(audited)
Upside 2
Upside 1
Baseline
Downside
 
1
Downside
 
2
 
%
 
%
 
%
 
%
 
%
As at 31 December 2019
UK GDP
b
4.2
2.9
1.6
0.2
(4.7)
UK unemployment
c
3.4
3.8
4.2
5.7
8.7
UK HPI
d
46.0
32.0
3.1
(8.2)
(32.4)
UK bank rate
c
0.5
0.5
0.7
2.8
4.0
US GDP
b
4.2
3.3
1.9
0.4
(3.4)
US unemployment
c
3.0
3.5
3.9
5.3
8.5
US HPI
d
37.1
23.3
3.0
0.5
(19.8)
US federal funds rate
c
1.5
1.5
1.7
3.0
3.5
As at 31 December 2018
UK GDP
b
4.5
3.1
1.7
0.3
(4.1)
UK unemployment
c
3.4
3.9
4.3
5.7
8.8
UK HPI
d
46.4
32.6
3.2
(0.5)
(32.1)
UK bank rate
c
0.8
0.8
1.0
2.5
4.0
US GDP
b
4.8
3.7
2.1
0.4
(3.3)
US unemployment
c
3.0
3.4
3.7
5.2
8.4
US HPI
d
36.9
30.2
4.1
-
(17.4)
US federal funds rate
c
2.3
2.3
2.7
3.0
3.5
 
Macroeconomic variables
 
used in the calculation of ECL
 
(5-year averages)
a
 
(audited)
Upside 2
Upside 1
Baseline
Downside
 
1
Downside
 
2
 
%
 
%
 
%
 
%
 
%
As at 31 December 2019
UK GDP
3.2
2.4
1.6
0.8
(0.7)
UK unemployment
3.5
3.9
4.2
5.4
7.7
UK HPI
7.9
5.7
3.1
(1.1)
(6.5)
UK bank rate
0.5
0.5
0.7
2.5
3.7
US GDP
3.5
2.8
1.9
1.0
(0.5)
US unemployment
3.1
3.6
3.9
5.0
7.5
US HPI
6.5
4.3
3.0
1.3
(3.7)
US federal funds rate
1.6
1.7
1.7
2.9
3.4
As at 31 December 2018
UK GDP
3.4
2.6
1.7
0.9
(0.6)
UK unemployment
3.7
4.0
4.3
5.1
7.9
UK HPI
7.9
5.8
3.2
0.9
(6.4)
UK bank rate
0.8
0.8
1.0
2.3
3.7
US GDP
3.7
3.0
2.1
1.1
(0.5)
US unemployment
3.1
3.5
3.7
4.7
7.4
US HPI
6.5
5.4
4.1
2.4
(2.6)
US federal funds rate
2.3
2.3
2.7
3.0
3.4
 
Notes
 
a
 
UK GDP
 
= Real
 
GDP growth
 
seasonally
 
adjusted;
 
UK unemployment
 
= UK unemployment
 
rate 16-year+; UK HPI = Halifax
 
All Houses,
 
All Buyers
 
Index; US GDP = Real GDP growth
seasonally adjusted;
 
US unemployment
 
= US civilian unemployment
 
rate 16-year+; US HPI = FHFA house
 
price index.
b
 
Highest
 
annual
 
growth in Upside
 
scenarios; 5-year average in Baseline;
 
lowest annual growth in
 
Downside scenarios.
c
 
Lowest yearly average
 
in Upside
 
scenarios;
 
5-year average in Baseline;
 
highest yearly average
 
in Downside scenarios.
d
 
Cumulative
 
growth (trough-to-peak) in
 
Upside
 
scenarios;
 
5-year average in Baseline;
 
cumulative fall (peak
 
-to-trough) in Downside
 
scenarios.
 
Over the year,
 
the macroeconomic
 
baseline variables have worsened in the US, in part due to the trade dispute with China. Baseline expectations for
the US federal funds rate have also moved
 
lower from
 
2.7% to 1.7% averaged
 
over the first five years.
 
Macroeconomic
 
baseline variables in
 
the UK
have remained
 
fairly flat with a small decrease in bank rates driven
 
by market expectations of lower interest rates in the
 
next few years. The other
scenarios are generally unchanged
 
from 2018,
 
with the exception of UK HPI in the Downside 1 scenario where the cumulative fall in house prices
now represents a more
 
severe fall of 8.2% versus 0.5% in 2018.
 
 
fy2019arbplcp133i3.jpg fy2019arbplcp133i2.jpg fy2019arbplcp133i1.jpg fy2019arbplcp133i0.jpg
 
Risk review
Risk performance
Credit risk
 
 
123
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
The graphs below
 
plot the historical data for GDP growth rate and unemployment
 
rate in the UK and US as
 
well as the forecasted data under
 
each
of the five scenarios.
 
 
 
 
ECL under 100% weighted scenarios
 
for modelled portfolios
 
(audited)
The table below shows the ECL assuming scenarios have been
 
100%
 
weighted. Model exposures are allocated to a stage based on the individual
scenario rather than through
 
a probability-weighted
 
approach as required for Barclays reported
 
impairment allowances. As
 
a result, it is not
possible to back solve to the final reported
 
weighted ECL from the individual scenarios as
 
a balance may be assigned
 
to a different stage dependen
 
t
on the scenario. Model exposure uses exposure
 
at default (EAD) values and is not directly comparable
 
to gross exposure used in prior
 
disclosures.
For Credit cards, unsecured
 
loans and other retail lending, an average EAD measure is used (12
 
month or lifetime, depending
 
on stage allocation in
each scenario). Therefore,
 
the model exposure movement
 
into Stage 2 is
 
higher than the corresponding
 
Stage 1 reduction.
All ECL using a Model is included, with the exception of Treasury
 
assets (£9m of ECL),
 
providing
 
additional coverage
 
as compared to the 2018
 
year-
end disclosure.
 
Non-modelled
 
exposures and management
 
adjustments are excluded. Management adjustments can be found on page 120
 
.
 
The
prior year
 
comparative includ
 
es key principal portfolios amounting to circa
 
80% of total impairment allowance.
Model Exposures allocated to Stage 3 do not change in any of the scenarios as the transition criteria
 
relies only on observable
 
evidence of default as
at 31 December
 
2019
 
and not on macroeconomic scenarios.
The Downside 2 scenario represents a severe global recession
 
with substantial falls in both UK and US GDP.
 
Unemployment
 
in both markets rises
towards 9% and there are
 
substantial falls in asset prices including h
 
ousing.
Under the Downside 2
 
scenario, model exposure
 
moves between stages as
 
the economic
 
environment
 
weakens. This can be seen
 
in the movement
of £29bn
 
of model exposure into Stage 2 between the Weighted and Downside
 
2 scenario. ECL increases in Stage 2 predominantly due to
unsecured
 
portfolios as economic conditions deteriorate.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Credit risk
 
 
124
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Scenarios
As at 31 December 2019
Weighted
Upside 2
Upside 1
Baseline
Downside
 
1
Downside
 
2
Stage 1 Model Exposure (£m)
Home loans
137,929
139,574
138,992
138,249
136,454
132,505
Credit cards, unsecured
 
loans and other retail lending
68,619
69,190
69,012
68,388
68,309
67,015
Wholesale loans
160,544
162,717
162,058
161,111
157,720
143,323
Stage 1 Model ECL (£m)
Home loans
6
4
5
5
7
19
Credit cards, unsecured
 
loans and other retail lending
505
490
495
495
511
528
Wholesale loans
209
162
174
188
271
297
Stage 1 Coverage (%)
Home loans
-
-
-
-
-
-
Credit cards, unsecured
 
loans and other retail lending
0.7
0.7
0.7
0.7
0.7
0.8
Wholesale loans
0.1
0.1
0.1
0.1
0.2
0.2
Stage 2 Model Exposure (£m)
Home loans
16,889
15,245
15,826
16,570
18,364
22,314
Credit cards, unsecured
 
loans and other retail lending
13,406
11,449
12,108
13,075
15,663
19,615
Wholesale loans
15,947
13,773
14,433
15,380
18,770
33,168
Stage 2 Model ECL (£m)
Home loans
41
33
34
36
47
170
Credit cards, unsecured
 
loans and other retail lending
1,844
1,412
1,562
1,771
2,384
4,285
Wholesale loans
414
285
323
374
579
1,427
Stage 2 Coverage (%)
Home loans
0.2
0.2
0.2
0.2
0.3
0.8
Credit cards, unsecured
 
loans and other retail lending
13.8
12.3
12.9
13.5
15.2
21.8
Wholesale loans
2.6
2.1
2.2
2.4
3.1
4.3
Stage 3 Model Exposure (£m)
Home loans
1,670
1,670
1,670
1,670
1,670
1,670
Credit cards, unsecured
 
loans and other retail lending
3,008
3,008
3,008
3,008
3,008
3,008
Wholesale loans
a
1,489
1,489
1,489
1,489
1,489
1,489
Stage 3 Model ECL (£m)
Home loans
268
262
264
266
272
316
Credit cards, unsecured
 
loans and other retail lending
2,198
2,154
2,174
2,195
2,235
2,292
Wholesale loans
a
118
111
114
117
127
128
Stage 3 Coverage (%)
Home loans
16.0
15.7
15.8
15.9
16.3
18.9
Credit cards, unsecured
 
loans and other retail lending
73.1
71.6
72.3
73.0
74.3
76.2
Wholesale loans
a
7.9
7.4
7.6
7.9
8.5
8.6
Total Model ECL (£m)
Home loans
315
299
303
307
326
505
Credit cards, unsecured
 
loans and other retail lending
4,547
4,056
4,231
4,461
5,130
7,105
Wholesale loans
a
741
558
611
679
977
1,852
 
Note
a
 
Material wholesale loan
 
defaults
 
are individually
 
assessed across different
 
recovery strategies.
 
As a result, ECL of £419m is
 
reported
 
as non-modelled in
 
the table below.
 
Reconciliation to total ECL
£m
Total model
 
ECL
5,603
ECL from non
 
-modelled, individually assessed,
 
and other
adjustments
687
ECL from management adjustments
340
Total ECL
6,630
 
Risk review
Risk performance
Credit risk
 
 
125
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
The total weighted ECL represents a 3% uplift from the Baseline ECL, largely driven
 
by credit card losses which have
 
more linear loss profiles than
UK home loans and wholesale loan positions.
 
Home loans:
 
Total weighted
 
ECL of £315m
 
represents a 2% increase over the Baseline ECL (£307m),
 
and coverage ratios remain steady across the
Upside scenarios, Baseline and Downside
 
1 scenario. However,
 
total ECL increases in the Downside 2 scenario to £506m, driven
 
by a significant fall
in UK HPI (32.4%)
 
reflecting the non-linearity of the UK portfolio.
 
 
Credit cards, unsecured loans
 
and other retail lending:
 
Total weighted ECL of £4,547m
 
represents a 2% increase over the Baseline ECL (£4,461m)
reflecting the range
 
of economic scenarios used, mainly impacted by Unemployment.
 
Total ECL increases to £7,105m
 
under the Downside 2
scenario, mainly driven
 
by Stage 2, where coverage
 
rates increase to 21.8% from a weighted scenario approach
 
of 13.8
 
%
 
and circa £6bn increase
in model exposure that meets the Significant Increase
 
in Credit Risk criteria and transitions from Stage 1 to Stage 2.
 
Wholesale loans:
 
Total weighted ECL of £741m
 
represents a 9% increase over the Baseline ECL (£679m)
 
reflecting the range of economic
scenarios used, with exposures in the Investment Bank particularly
 
sensitive to the Downside 2 scenario.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Credit risk
 
 
126
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Scenarios
As at 31 December 2018
Weighted
Upside
 
2
Upside
 
1
Baseline
Downside
 
1
Downside
 
2
Stage 1 Gross Exposure (£m)
Home loans
115,573
116,814
116,402
115,924
114,858
109,305
Credit cards, unsecured
 
loans and other retail lending
30,494
32,104
31,082
30,536
29,846
24,884
Wholesale loans
80,835
81,346
81,180
80,941
80,517
73,715
Stage 1 ECL (£m)
Home loans
1
-
-
-
1
9
Credit cards, unsecured
 
loans and other retail lending
355
304
343
351
365
388
Wholesale loans
175
161
163
162
203
242
Stage 1 Coverage (%)
Home loans
-
-
-
-
-
-
Credit cards, unsecured
 
loans and other retail lending
1.2
0.9
1.1
1.1
1.2
1.6
Wholesale loans
0.2
0.2
0.2
0.2
0.3
0.3
Stage 2 Gross Exposure (£m)
Home loans
17,455
16,214
16,627
17,105
18,170
23,724
Credit cards, unsecured
 
loans and other retail lending
10,943
9,334
10,355
10,902
11,591
16,553
Wholesale loans
11,377
10,866
11,031
11,271
11,694
18,496
Stage 2 ECL (£m)
Home loans
7
1
1
3
7
172
Credit cards, unsecured
 
loans and other retail lending
2,013
1,569
1,779
1,969
2,331
4,366
Wholesale loans
323
277
290
302
397
813
Stage 2 Coverage (%)
Home loans
-
-
-
-
-
0.7
Credit cards, unsecured
 
loans and other retail lending
18.4
16.8
17.2
18.1
20.1
26.4
Wholesale loans
2.8
2.5
2.6
2.7
3.4
4.4
Stage 3 Gross Exposure (£m)
Home loans
1,104
1,104
1,104
1,104
1,104
1,104
Credit cards, unsecured
 
loans and other retail lending
2,999
2,999
2,999
2,999
2,999
2,999
Wholesale loans
a
1,165
n/a
n/a
1,165
n/a
n/a
Stage 3 ECL (£m)
Home loans
6
3
4
5
7
27
Credit cards, unsecured
 
loans and other retail lending
2,200
2,154
2,174
2,199
2,234
2,297
Wholesale loans
a
333
n/a
n/a
323
n/a
n/a
Stage 3 Coverage (%)
Home loans
0.5
0.3
0.4
0.5
0.7
2.4
Credit cards, unsecured
 
loans and other retail lending
73.4
71.8
72.5
73.3
74.5
76.6
Wholesale loans
a
28.6
n/a
n/a
27.7
n/a
n/a
Total ECL (£m)
Home loans
14
4
5
8
15
208
Credit cards, unsecured
 
loans and other retail lending
4,568
4,027
4,296
4,519
4,930
7,051
Wholesale loans
a
831
n/a
n/a
787
n/a
n/a
 
Note
a
 
Material corporate loan
 
defaults
 
are individually
 
assessed across different
 
recovery strategies
 
which are
 
impacted by the macroeconomic variables. As
 
a result,
 
only the Baseline
scenario is
 
shown together
 
with the
 
weighted estimate
 
which reflects alternative
 
recovery paths.
 
Staging sensitivity
 
(audited)
An increase of 1% (£3,454m)
 
of total
 
gross exposure
 
into Stage 2 (from Stage 1), would result in an increase in ECL impairment allowance of
£207m
 
based on applying the difference
 
in Stage 2 and Stage
 
1 average impairment
 
coverage
 
ratios to the
 
movement in gross exposure
 
(refer to
Loans and advances at amortised cost by product
 
on page 114).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Credit risk
 
 
127
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Analysis of
 
the concentration
 
of credit
 
risk
A concentration of credit risk exists when a number
 
of counterparties are located in a common geographical
 
region or are engaged in similar
activities and have similar economic
 
characteristics that would cause their ability to meet contractual obligations to be similarly affected by
changes in economic or
 
other conditions. The Group
 
implements limits
 
on concentrations in order
 
to mitigate
 
the risk. The analyses of credit risk
concentrations presented
 
below are based on the location of the counterparty
 
or customer or
 
the industry in which they are engaged. Further detail
on the Group
 
policies with
 
regard
 
to managing concentration
 
risk is
 
presented on page
 
159
 
of Barclays PLC Pillar 3 Report 2019
 
(unaudited).
 
Geographic concentrations
As at 31 December
 
2019
 
,
 
the geographic concentration of the Group’s
 
assets
 
remained broadly
 
consistent with
 
2018
 
.
 
Exposure is concentrated in
the UK 40% (2018:
 
41
 
%), in the
 
Americas 34% (2018:
 
34%) and Europe 20% (2018
 
:
 
21%).
 
Credit risk concentrations by geography (audited)
United
Kingdom
Americas
Europe
Asia
Africa and
Middle East
Total
£m
£m
£m
£m
£m
£m
As at 31 December 2019
On-balance sheet:
Cash and balances at central banks
51,477
28,273
54,632
15,130
746
150,258
Cash collateral and settlement balances
27,431
23,595
26,008
5,385
837
83,256
Loans and advances at amortised cost
257,459
46,569
25,599
6,275
3,213
339,115
Reverse repurchase
 
agreements and other similar secured lending
1,005
15
1,056
470
833
3,379
Trading
 
portfolio assets
11,550
27,621
13,397
4,786
763
58,117
Financial assets at fair value through
 
the income statement
29,001
70,849
11,286
12,534
1,921
125,591
Derivative financial instruments
69,844
63,344
83,165
11,189
1,694
229,236
Financial assets at fair value through
 
other comprehensive income
9,444
23,052
24,443
7,665
123
64,727
Other assets
1,170
126
79
-
-
1,375
Total on-balance sheet
458,595
283,267
239,628
63,434
10,130
1,055,054
Off-balance sheet:
Contingent liabilities
7,539
10,839
3,862
1,562
726
24,528
Loan commitments
105,350
188,108
36,033
3,166
1,797
334,454
Total off-balance sheet
112,889
198,947
39,895
4,728
2,523
358,982
Total
571,484
482,214
279,523
68,162
12,653
1,414,036
As at 31 December 2018
On-balance sheet:
Cash and balances at central banks
64,343
36,045
66,887
9,076
718
177,069
Cash collateral and settlement balances
27,418
22,184
22,316
4,928
376
77,222
Loans and advances at amortised cost
240,116
49,592
27,913
5,371
3,414
326,406
Reverse repurchase
 
agreements and other similar secured lending
724
68
113
83
1,320
2,308
Trading
 
portfolio assets
12,444
34,369
13,375
3,616
713
64,517
Financial assets at fair value through
 
the income statement
33,842
73,489
20,984
13,556
1,758
143,629
Derivative financial instruments
69,798
58,699
80,003
12,172
1,866
222,538
Financial investments - debt securities
11,494
13,953
23,298
2,786
163
51,694
Other assets
780
100
125
 
-
 
1
1,006
Total on-balance sheet
460,959
288,499
255,014
51,588
10,329
1,066,389
Off-balance sheet:
Contingent liabilities
5,910
8,996
3,572
1,289
536
20,303
Loan commitments
108,506
175,995
34,524
3,346
1,852
324,223
Total off-balance sheet
114,416
184,991
38,096
4,635
2,388
344,526
Total
575,375
473,490
293,110
56,223
12,717
1,410,915
 
Industry concentrations
The concentration
 
of the Group’s assets by industry remained broadly
 
consistent year on year. As at 31 December
 
2019
 
,
 
total assets
 
concentrated
in banks and other financial institutions was 36%
 
(2018
 
:
 
36%), predominantly within derivative financial
 
instruments. The proportion
 
of the overall
balance concentrated
 
in governments and
 
central banks was 19% (2018
 
:
 
20%), cards, unsecured loans and other
 
personal lending was 13%
(2018
 
:
 
13%) and
 
in home loans remained stable at
 
12
 
%
 
(2018
 
:
 
11%).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Credit risk
 
 
128
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Credit risk concentrations by industry (audited)
Banks
Other
financial
insti-
tutions
Manu-
facturing
Const
 
-
ruction
and
 
property
Govern-
ment and
central
bank
Energy
and
water
Whole-
sale
and retail
distri-
bution
 
and
leisure
Business
and other
services
Home
loans
Cards,
 
unsecured
loans and
 
other
personal
 
lending
Other
Total
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
As at 31 December 2019
On-balance sheet:
Cash and balances at
central banks
7
73
-
-
150,178
-
-
-
-
-
-
150,258
Cash collateral and
settlement balances
 
16,599
55,262
516
64
9,251
536
51
642
-
-
335
83,256
Loans and advances at
amortised cost
8,788
20,473
8,323
24,403
23,847
5,346
10,031
17,125
154,479
55,232
11,068
339,115
Reverse repurchase
agreements and other
similar secured lending
1,172
2,134
-
-
73
-
-
-
-
-
-
3,379
Trading
 
portfolio assets
2,872
9,049
2,787
1,053
33,092
2,996
842
3,158
-
-
2,268
58,117
Financial assets at fair
value through
 
the income
statement
10,747
97,849
634
6,909
5,353
45
 
-
 
3,569
358
 
-
 
127
125,591
Derivative financial
instruments
125,323
83,285
2,049
2,273
7,811
3,077
562
1,520
-
2
3,334
229,236
Financial assets at fair
value through
 
other
comprehensive
 
income
18,596
4,370
-
286
40,763
-
-
430
-
-
282
64,727
Other assets
897
322
1
5
2
7
2
109
-
18
12
1,375
Total on-balance sheet
185,001
272,817
14,310
34,993
270,370
12,007
11,488
26,553
154,837
55,252
17,426
1,055,054
Off-balance sheet:
Contingent liabilities
1,250
8,043
3,549
703
1,981
3,318
1,072
2,831
-
109
1,671
24,527
Loan commitments
1,909
47,815
42,148
14,358
1,704
29,877
14,711
22,932
10,060
124,841
24,100
334,455
Total off-balance sheet
3,159
55,858
45,697
15,061
3,685
33,195
15,783
25,763
10,060
124,950
25,771
358,982
Total
188,160
328,675
60,007
50,054
274,055
45,202
27,271
52,316
164,897
180,202
43,197
1,414,036
As at 31 December 2018
On-balance sheet:
Cash and balances at
central banks
-
 
-
 
-
 
-
 
177,069
-
 
-
 
-
 
-
 
-
 
-
 
177,069
Cash collateral and
settlement balances
17,341
48,398
498
75
9,235
386
223
717
-
 
-
 
349
77,222
Loans and advances at
amortised cost
9,478
18,653
8,775
23,565
12,764
5,515
11,609
19,716
150,284
55,298
10,749
326,406
Reverse repurchase
agreements and other
similar secured lending
1,368
865
-
 
37
38
-
 
-
 
-
 
-
 
-
 
-
 
2,308
Trading
 
portfolio assets
3,500
9,550
3,825
897
34,968
4,202
1,202
3,481
-
 
-
 
2,892
64,517
Financial assets at fair
value through
 
the income
statement
30,374
96,378
-
 
8,914
5,331
32
13
2,178
405
-
 
4
143,629
Derivative financial
instruments
123,769
80,376
2,390
1,993
5,987
2,791
486
2,004
-
 
-
 
2,742
222,538
Financial investments -
debt securities
12,135
2,250
-
 
200
36,973
-
 
-
 
136
-
 
-
 
-
 
51,694
Other assets
580
426
-
 
-
 
-
 
-
 
-
 
-
 
-
 
-
 
-
 
1,006
Total on-balance sheet
198,545
256,896
15,488
35,681
282,365
12,926
13,533
28,232
150,689
55,298
16,736
1,066,389
Off-balance sheet:
Contingent liabilities
939
3,840
3,470
626
1,890
3,491
952
3,455
-
 
116
1,524
20,303
Loan commitments
1,267
42,890
39,978
14,362
1,629
26,519
14,566
22,142
8,900
126,640
25,330
324,223
Total off-balance sheet
2,206
46,730
43,448
14,988
3,519
30,010
15,518
25,597
8,900
126,756
26,854
344,526
Total
200,751
303,626
58,936
50,669
285,884
42,936
29,051
53,829
159,589
182,054
43,590
1,410,915
 
 
 
 
 
 
 
Risk review
Risk performance
Credit risk
 
 
129
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
The approach
 
to
 
management and
 
representation
 
of credit
 
quality
Asset credit quality
 
The credit quality distribution is based on the IFRS 9 12
 
-month probability of default (PD) at the reporting date to ensure comparability with other
ECL disclosures on pages 112
 
to 119.
The following internal measures are used
 
to determine credit quality for loans:
Default Grade
Retail and Wholesale
 
lending
Probability
 
of default
Credit Quality Description
1-3
0.0 to <0.05%
Strong
4-5
 
0.05 to <0.15%
6-8
 
0.15
 
to <0.30%
9-11
 
0.30 to <0.60%
12
 
-14
0.60 to <2.15%
Satisfactory
15
 
-19
19
 
2.15
 
to <10%
10 to <11.35%
20-
 
21
11.35
 
to <100
 
%
Higher Risk
22
100%
Credit Impaired
 
For retail clients, a range
 
of analytical tools is used to derive the probability of default of clients at inception and on an ongoing
 
basis.
 
For loans that are not past due, these descriptions can be summarised as follows:
Strong:
 
there is a very high
 
likelihood of the asset being recovered
 
in full.
Satisfactory:
 
while there is a high likelihood that the asset will be recovered
 
and therefore,
 
of no cause for concern to the Group, the asset may not
be collateralised, or may
 
relate to unsecured retail facilities. At the lower end
 
of this grade there are customers that are being more
 
carefully
monitored, for
 
example, corporate
 
customers which are indicating some evidence of deterioration, mortgages with a high loan to value, and
unsecured
 
retail loans operating outside normal product
 
guidelines.
Higher risk:
 
there is concern
 
over the obligor’s ability to make payments when due. However,
 
these have not yet converted
 
to actual delinquency.
There may also be doubts
 
over the value of collateral or security provided. However,
 
the borrower
 
or counterparty is continuing to make payments
when due and is expected to settle all outstanding amounts of principal and interest.
Loans that are past due are monitore
 
d
 
closely, with impairment allowances raised as appropriate
 
and in line with the Group’s impairment policies.
 
Debt securities
For assets held at fair value, the carrying
 
value on the balance sheet will include, among other things, the credit risk of the issuer.
 
Most listed and
some unlisted securities are rated by external
 
rating agencies. The Group mainly uses external credit ratings provided
 
by Standard & Poor’s,
 
Fitch or
Moody’s.
 
Where such ratings are not available
 
or are not current,
 
the Group will use its own internal ratings for the securities.
 
Balance sheet credit quality
The following tables present the credit quality of the
 
Group
 
’s assets
 
exposed to credit risk.
Overview
As at 31 December
 
2019,
 
the ratio of the Group’s on-balance
 
sheet assets
 
classified as strong (0.0 to <0.60%)
 
remained stable at 86%
 
(2018:
 
86%)
of total assets exposed to credit risk.
Further analysis of debt securities by issuer and issuer type and netting and collateral
 
arrangements on
 
derivative financial instruments is presented
on pages 138
 
and 139
 
respectively.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Credit risk
 
 
130
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Balance sheet credit quality (audited)
PD range
Total
PD range
Total
0.0 to
<0.60%
0.60 to
<11.35%
11.35
 
to
100%
0.0 to
<0.60%
0.60 to
<11.35%
11.35
 
to
100%
£m
£m
£m
£m
%
%
%
%
As at 31 December 2019
Cash and balances at central banks
150,258
-
-
150,258
100
-
-
100
Cash collateral and settlement balances
73,122
10,134
-
83,256
88
12
-
100
Loans and advances at amortised cost:
Home loans
146,269
5,775
2,435
154,479
94
4
2
100
Credit cards, unsecured
 
and other retail
lending
20,750
31,425
3,121
55,296
38
56
6
100
Wholesale loans
97,854
28,150
3,336
129,340
75
22
3
100
Total loans and advances at amortised cost
264,873
65,350
8,892
339,115
78
19
3
100
Reverse repurchase agreements and other
similar
 
secured lending
3,290
89
-
3,379
97
3
-
100
Trading portfolio
 
assets:
Debt securities
49,117
3,479
143
52,739
93
7
-
100
Traded
 
loans
864
3,219
1,295
5,378
16
60
24
100
Total trading portfolio assets
49,981
6,698
1,438
58,117
86
12
2
100
Financial assets at fair value through the
income statement:
Loans and advances
14,467
7,993
232
22,692
64
35
1
100
Debt securities
4,806
413
30
5,249
91
8
1
100
Reverse repurchase
 
agreements
62,475
34,232
180
96,887
65
35
-
100
Other financial assets
757
6
-
763
99
1
-
100
Total financial assets at fair value through the
income statement
82,505
42,644
442
125,591
66
34
-
100
Derivative financial instruments
216,103
13,012
121
229,236
94
6
-
100
Financial assets at fair value through other
comprehensive income
64,727
-
-
64,727
100
-
-
100
Other assets
1,242
133
-
1,375
90
10
-
100
Total on-balance sheet
906,101
138,060
10,893
1,055,054
86
13
1
100
As at 31 December 2018
Cash and balances at central banks
177,069
-
-
177,069
100
-
-
100
Cash collateral and settlement balances
70,455
6,763
4
77,222
91
9
-
100
Loans and advances at amortised cost:
Home loans
137,449
9,701
3,134
150,284
92
6
2
100
Credit cards, unsecured
 
and other retail
lending
21,786
31,664
2,981
56,431
39
56
5
100
Wholesale loans
86,271
30,108
3,312
119,691
72
25
3
100
Total loans and advances at amortised cost
245,506
71,473
9,427
326,406
75
22
3
100
Reverse repurchase agreements and other
similar
 
secured lending
1,820
444
44
2,308
79
19
2
100
Trading portfolio
 
assets:
Debt securities
51,896
4,998
389
57,283
90
9
1
100
Traded
 
loans
1,903
4,368
963
7,234
27
60
13
100
Total trading portfolio assets
53,799
9,366
1,352
64,517
83
15
2
100
Financial assets at fair value through the
income statement:
Loans and advances
13,177
6,295
52
19,524
68
32
-
100
Debt securities
4,380
81
61
4,522
97
2
1
100
Reverse repurchase
 
agreements
85,887
31,813
1,341
119,041
72
27
1
100
Other financial assets
524
18
-
542
97
3
-
100
Total financial assets at fair value through the
income statement
103,968
38,207
1,454
143,629
72
27
1
100
Derivative financial instruments
211,695
10,791
52
222,538
95
5
-
100
Financial assets at fair value through other
comprehensive income
51,546
148
-
51,694
100
-
-
100
Other assets
723
283
-
1,006
72
28
-
100
Total on-balance sheet
916,581
137,475
12,333
1,066,389
86
13
1
100
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Credit risk
 
 
131
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Credit exposures by internal PD grade
The below tables represents credit risk
 
profile by PD grade
 
for loans and advances at amortised cost, contingent liabilities and loan commitments.
 
Stage 1 higher risk assets, presented gross of associated collateral held,
 
are of weaker credit quality but have not significantly deteriorated
 
since
origination. Examples would include leveraged
 
corporate
 
loans or non-
 
prime credit
 
cards.
 
IFRS 9 Stage 1 and Stage 2 classification is not dependent solely on the absolute probability
 
of default but on elements that determine a Significant
Increase in Credit Risk (see Note 7 on page 225
 
), including relative movement in probability
 
of default since
 
initial recognition.
 
There is therefore no
direct relationship between credit quality and
 
IFRS 9 stage classification.
 
 
Credit risk profile by internal PD grade for loans and advances at amortised cost (audited)
Gross carrying amount
Allowance for ECL
Net
exposure
Coverage
ratio
Grading
PD range
Credit quality
description
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
%
£m
£m
£m
£m
£m
£m
£m
£m
£m
%
As at 31 December 2019
1-3
0.0 to <0.05%
Strong
91,993
1,615
-
93,608
13
13
-
26
93,582
-
4-5
0.05 to <0.15%
Strong
92,668
7,704
-
100,372
12
12
-
24
100,348
-
6-8
0.15
 
to <0.30%
Strong
29,187
4,444
-
33,631
23
5
-
28
33,603
0.1
9-11
0.30 to <0.60%
Strong
34,515
2,932
-
37,447
91
16
-
107
37,340
0.3
12
 
-14
0.60 to <2.15%
Satisfactory
35,690
4,341
-
40,031
210
187
-
397
39,634
1.0
15
 
-19
2.15
 
to <10%
Satisfactory
9,041
9,190
-
18,231
232
981
-
1,213
17,018
6.7
19
10 to <11.35%
Satisfactory
5,235
3,629
-
8,864
62
104
-
166
8,698
1.9
20-
 
21
11.35
 
to <100%
Higher Risk
937
4,379
-
5,316
64
1,055
-
1,119
4,197
21.0
22
100%
Credit Impaired
-
-
7,923
7,923
-
-
3,228
3,228
4,695
40.7
Total
299,266
38,234
7,923
345,423
707
2,373
3,228
6,308
339,115
1.8
As at 31 December 2018
1-3
0.0 to <0.05%
Strong
69,216
1,413
-
70,629
26
21
-
47
70,582
0.1
4-5
0.05 to <0.15%
Strong
72,460
3,142
-
75,602
6
13
-
19
75,583
-
6-8
0.15
 
to <0.30%
Strong
47,172
4,728
-
51,900
37
13
-
50
51,850
0.1
9-11
0.30 to <0.60%
Strong
43,315
4,273
-
47,588
77
20
-
97
47,491
0.2
12
 
-14
0.60 to <2.15%
Satisfactory
38,831
9,561
-
48,392
255
339
-
594
47,798
1.2
15
 
-19
2.15
 
to <10%
Satisfactory
6,920
8,806
-
15,726
202
992
-
1,194
14,532
7.6
19
10 to <11.35%
Satisfactory
2,979
6,401
-
9,380
51
186
-
237
9,143
2.5
20-
 
21
11.35
 
to <100%
Higher Risk
333
5,123
-
5,456
34
1,131
-
1,165
4,291
21.4
22
100%
Credit Impaired
-
-
8,503
8,503
-
-
3,367
3,367
5,136
39.6
Total
281,226
43,447
8,503
333,176
688
2,715
3,367
6,770
326,406
2.0
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Credit risk
 
 
132
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Credit risk profile by internal PD grade for contingent liabilities
 
(audited)
a
Gross carrying amount
Allowance for ECL
Net
exposure
Coverage
ratio
Grading
PD range
Credit quality
description
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
%
£m
£m
£m
£m
£m
£m
£m
£m
£m
%
As at 31 December 2019
1-3
0.0 to <0.05%
Strong
6,947
118
-
7,065
3
-
-
3
7,062
-
4-5
0.05 to <0.15%
Strong
4,199
40
-
4,239
1
-
-
1
4,238
-
6-8
0.15
 
to <0.30%
Strong
2,953
103
-
3,056
1
-
-
1
3,055
-
9-11
0.30 to <0.60%
Strong
4,551
136
-
4,687
2
2
-
4
4,683
0.1
12
 
-14
0.60 to <2.15%
Satisfactory
2,529
654
-
3,183
7
8
-
15
3,168
0.5
15
 
-19
2.15
 
to <10%
Satisfactory
663
244
-
907
4
8
-
12
895
1.3
19
10 to <11.35%
Satisfactory
421
172
-
593
9
9
-
18
575
3.0
20-
 
21
11.35
 
to <100%
Higher Risk
117
282
-
399
-
30
-
30
369
7.5
22
100%
Credit Impaired
-
-
355
355
-
-
5
5
350
1.4
Total
22,380
1,749
355
24,484
27
57
5
89
24,395
0.4
As at 31 December 2018
1-3
0.0 to <0.05%
Strong
6,674
37
-
6,711
3
-
-
3
6,708
-
4-5
0.05 to <0.15%
Strong
3,687
129
-
3,816
1
-
-
1
3,815
-
6-8
0.15
 
to <0.30%
Strong
1,433
55
-
1,488
1
-
-
1
1,487
0.1
9-11
0.30 to <0.60%
Strong
3,206
222
-
3,428
1
3
-
4
3,424
0.1
12
 
-14
0.60 to <2.15%
Satisfactory
2,543
509
-
3,052
3
6
-
9
3,043
0.3
15
 
-19
2.15
 
to <10%
Satisfactory
464
252
-
716
1
3
-
4
712
0.6
19
10 to <11.35%
Satisfactory
534
203
-
737
6
5
-
11
726
1.5
20-
 
21
11.35
 
to <100%
Higher Risk
49
228
-
277
-
10
-
10
267
3.6
22
100%
Credit Impaired
-
-
74
74
-
-
2
2
72
2.7
Total
18,590
1,635
74
20,299
16
27
2
45
20,254
0.2
 
Credit risk profile by internal PD grade for loan commitments (audited)
a
Gross carrying amount
Allowance for ECL
Net
exposure
Coverage
ratio
Grading
PD range
Credit quality
description
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
%
£m
£m
£m
£m
£m
£m
£m
£m
£m
%
As at 31 December 2019
1-3
0.0 to <0.05%
Strong
85,908
1,025
-
86,933
2
1
-
3
86,930
-
4-5
0.05 to <0.15%
Strong
70,112
1,889
-
72,001
5
1
-
6
71,995
-
6-8
0.15
 
to <0.30%
Strong
53,340
1,019
-
54,359
8
1
-
9
54,350
-
9-11
0.30 to <0.60%
Strong
44,097
1,592
-
45,689
13
1
-
14
45,675
-
12
 
-14
0.60 to <2.15%
Satisfactory
36,112
3,955
-
40,067
30
26
-
56
40,011
0.1
15
 
-19
2.15
 
to <10%
Satisfactory
4,913
3,857
-
8,770
8
55
-
63
8,707
0.7
19
10 to <11.35%
Satisfactory
3,662
2,106
-
5,768
4
7
-
11
5,757
0.2
20-
 
21
11.35
 
to <100%
Higher Risk
616
1,993
-
2,609
-
21
-
21
2,588
0.8
22
100%
Credit Impaired
-
-
580
580
-
-
50
50
530
8.6
Total
298,760
17,436
580
316,776
70
113
50
233
316,543
0.1
As at 31 December 2018
1-3
0.0 to <0.05%
Strong
80,971
1,636
-
82,607
3
2
-
5
82,602
-
4-5
0.05 to <0.15%
Strong
54,239
1,498
-
55,737
3
1
-
4
55,733
-
6-8
0.15
 
to <0.30%
Strong
36,714
823
-
37,537
4
1
-
5
37,532
-
9-11
0.30 to <0.60%
Strong
34,587
1,483
-
36,070
11
1
-
12
36,058
-
12
 
-14
0.60 to <2.15%
Satisfactory
62,217
4,142
-
66,359
32
12
-
44
66,315
0.1
15
 
-19
2.15
 
to <10%
Satisfactory
20,824
6,645
-
27,469
26
44
-
70
27,399
0.3
19
10 to <11.35%
Satisfactory
1,100
1,019
-
2,119
1
24
-
25
2,094
1.2
20-
 
21
11.35
 
to <100%
Higher Risk
747
3,245
-
3,992
3
38
-
41
3,951
1.0
22
100%
Credit Impaired
-
-
610
610
-
-
20
20
590
3.3
Total
291,399
20,491
610
312,500
83
123
20
226
312,274
0.1
 
Note
a
 
Excludes
 
loan commitments
 
and financial
 
guarantees
 
of £17.7bn (2018: £11.7bn)
 
carried at
 
fair value
 
.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Credit risk
 
 
133
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Analysis of
 
specific portfolios
 
and asset
 
types
This section provides an analysis of principal
 
portfolios and businesses, in particular,
 
home loans, credit cards, unsecured
 
loans and other retail
lending.
Secured home loans
The UK home loans portfolio
 
comprises first lien
 
home loans and accounts for 92
 
%
 
(2018:
 
91
 
%) of the Group’s total
 
home loan balances.
 
Home loans principal
 
portfolios
a
Barclays UK
As at 31 December
2019
2018
Gross loans and advances (£m)
143,259
136,517
90 day arrears
 
rate, excluding recovery
 
book (%)
0.2
0.2
Annualised gross charge
 
-off rates - 180 days past due (%)
0.6
0.7
Recovery
 
book proportion
 
of outstanding balances (%)
0.5
0.6
Recovery
 
book impairment coverage
 
ratio (%)
5.3
2.9
 
Note
a
 
2018
 
metrics
 
have been restated
 
to align with the
 
current methodology for the classification
 
of delinquent balances
 
and the inclusion of past maturity
 
balances.
Within the UK home loans portfolio:
 
Gross loans and advances increased
 
by £6.7bn
 
(4.9%) following
 
increases across both Residential
 
(3.0%) and Buy
 
to Let (BTL)
 
(17.6%).
 
 
Owner-occupied
 
interest-only home loans comprised 23.4%
 
(2018: 26.3%)
 
of total
 
balances.
 
The average balance
 
weighted LTV
 
on owner
 
occupied loans increased to 50.2% (2018:
 
47.9%)
 
with average completion LTVs remaining
 
higher
than for the existing portfolio.
 
BTL home loans comprised
 
13.6% (2018:
 
12.1%) of total balances. The average balance weighted LTV
 
increased to 56.5% (2018:
 
55.4%) driven
by average
 
completion LTVs
 
remaining higher
 
than for the existing book.
 
Home loans principal
 
portfolios
 
- distribution of
 
balances by LTV
a
Distribution
 
of balances
Distribution
 
of impairment allowance
Coverage ratio
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Barclays UK
%
%
%
%
%
%
%
%
%
%
%
%
As at 31 December 2019
<=75%
76.0
10.7
0.7
87.4
4.2
15.4
28.5
48.1
-
0.1
2.2
-
>75% and <=90%
10.4
0.7
-
11.1
2.7
11.5
12.6
26.8
-
0.9
19.7
0.1
>90% and <=100%
1.3
0.1
-
1.4
0.8
2.5
4.9
8.2
-
1.8
54.4
0.3
>100%
0.1
-
-
0.1
0.2
4.1
12.6
16.9
0.2
8.7
107.4
9.0
As at 31 December 2018
<=75%
77.9
11.9
0.8
90.6
3.3
26.7
20.9
50.9
-
0.1
1.3
-
>75% and <=90%
8.0
0.6
-
8.6
1.6
11.8
8.7
22.1
-
1.0
12.7
0.1
>90% and <=100%
0.6
0.1
-
0.7
0.3
3.0
4.4
7.7
-
1.7
44.5
0.5
>100%
-
0.1
-
0.1
-
10.0
9.3
19.3
-
5.9
88.5
10.8
Note
a
 
Portfolio marked to market
 
based on the
 
most updated
 
valuation including recovery book balances. Updated
 
valuations reflect the application of the
 
latest HPI available as at 31
December 2019.
 
Home loans principal
 
portfolios
 
- average
 
LTV
a
Barclays UK
As at 31 December
2019
2018
Overall portfolio LTV(%):
Balance weighted
51.1
48.8
Valuation weighted
37.3
35.8
For >100% LTVs:
Balances (£m)
160
150
Marked to market collateral (£m)
140
132
Average
 
LTV: balance weighted (%)
133.5
136.3
Average
 
LTV: valuation weighted (%)
119.7
119.5
Balances in recovery
 
book (%)
10.0
7.7
 
Note
 
a
 
2018
 
metrics
 
have been restated
 
to align with the
 
current methodology for the classification
 
of delinquent balances
 
and the inclusion of past maturity
 
balances.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Credit risk
 
 
134
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Home loans principal
 
portfolios
 
- new lending
Barclays UK
As at 31 December
2019
2018
New bookings (£m)
25,530
23,473
New home loan proportion
 
above >90% LTV
 
(%)
4.2
1.8
Average
 
LTV on new
 
home loans: balance weighted (%)
67.9
65.4
Average
 
LTV on new
 
home loans: valuation weighted (%)
60.0
57.4
 
The value of new bookings
 
increased across both the owner
 
-occupied and BTL portfolios, 9.2% and 6.5% respectively. High LTV
 
lending booked
 
in
2019
 
increased driven by
 
market conditions.
 
Head Office:
Italian home loans and advances at amortised cost reduced
 
to £6.0bn (2018:
 
£7.9bn)
 
and continue to run-off since new bookings
ceased in 2016.
 
The portfolio is secured on residential property
 
with an average balance weighted mark
 
to market LTV of 64.4%
 
(2018:
 
61.8%).
 
90-
day arrears increased
 
to 1.8% (2018:
 
1.4%), a function of the balance reduction
 
associated with
 
the sale of £787
 
m
 
assets in Q3 2019, gross
charge
 
-off rates remained stable at 0.8% (2018:
 
0.8%).
 
 
Credit cards, unsecured loans
 
and other retail lending
The principal portfolios listed below accounted
 
for 87
 
%
 
(2018:
 
87%) of the Group’s total credit cards, unsecured loans and other
 
retail lending.
 
Credit cards, unsecured loans and other retail lending
 
principal
 
portfolios
Gross loans
 
and
advances
30 day arrears,
excluding
recovery book
90 day arrears,
excluding
recovery book
Annualised gross
write-off rate
Annualised net
write-off rate
£m
%
%
%
%
As at 31 December 2019
Barclays UK
UK cards
16,457
1.7
0.8
1.6
1.6
UK personal loans
6,139
2.1
1.0
3.2
2.9
Barclays International
US cards
22,041
2.7
1.4
4.5
4.4
Barclays partner finance
4,134
0.9
0.3
1.7
1.7
Germany consumer
 
lending
3,558
1.7
0.7
2.1
1.3
As at 31 December 2018
Barclays UK
UK cards
17,285
1.8
0.9
1.9
1.5
UK personal loans
6,335
2.3
1.1
1.9
1.5
Barclays International
US cards
22,178
2.7
1.4
3.6
3.4
Barclays partner finance
4,216
1.1
0.4
1.7
1.7
Germany consumer
 
lending
3,400
1.9
0.8
2.7
2.0
 
UK cards:
Following the
 
introduction
 
of payment reminders
 
both 30 and 90 day arrears rates reduced
 
by 0.1%. The annualised gross write-off rate
reduced
 
to 1.6% (2018:
 
1.9%), reflecting lower levels of delinquency and contractual
 
charge-offs through 2019,
 
albeit with
 
increased debt sales
from the recovery
 
book.
UK personal loans:
30 and 90 day
 
arrears rates reduced
 
by 0.2% and 0.1%
 
respectively reflecting a
 
continued improvement
 
in lending quality over
the past 2 years, coupled
 
with improvements in collections effectiveness. Write-off
 
rates increased significantly reflecting higher
 
charge
 
-offs in
2018.
US cards:
30 and 90
 
-day arrears rates remained
 
stable.
 
The annualised gross and net write-off rates increased to 4.5%
 
(2018:
 
3.6%) and 4.4%
(2018:
 
3.4%) respectively primarily
 
driven by
 
an increase in charge-offs in 2018.
 
The percentage of write-offs to charge-offs has been stable year
on
 
year.
Barclays partner finance:
Improvement
 
in 30 and 90 days arrears was driven by better
 
arrears management
 
and improved customer selection.
Annualised write-off rates remained
 
flat.
Germany consumer lending:
Improvement
 
in 30 and 90 days arrears
 
was driven by better collections performance
 
across all
 
products. The
annualised gross write-off rate has shown slight improvement
 
and is in
 
line with the expectations.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Credit risk
 
 
135
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Exposure to UK commercial
 
real estate
 
(CRE)
The UK CRE portfolio includes property
 
investment, development, trading and house
 
builders but excludes social housing and contractors.
 
 
UK CRE summary
2019
2018
As at 31 December
UK CRE loans and advances (£m)
9,051
8,576
Stage 3 balances (£m)
254
267
Stage 3 balances as % of UK CRE balances (%)
2.8
3.1
Impairment allowances (£m)
52
49
Stage 3 coverage
 
ratio (%)
7.5
8.8
Total collateral
 
(£m)
a
26,876
26,508
 
Twelve months ended 31 December
Impairment charge
 
(£m)
6
(15)
 
Note
a
 
Based
 
on the most recent
 
valuation
 
assessment.
 
Maturity analysis of exposure to UK CRE
Contractual maturity
 
of UK CRE loans and
 
advances at amortised
 
cost
Stage 3
balances
Not more than
six months
Over six
months
 
but not
more than one
year
Over one year
but not
 
more
than two
 
years
Over two years
but not
 
more
than five years
Over five years
but not
 
more
than ten years
Over ten years
Total loans
 
and
advances
As at 31 December
£m
£m
£m
£m
£m
£m
£m
£m
2019
254
146
111
377
3,088
3,687
1,388
9,051
2018
267
100
134
492
3,569
2,778
1,236
8,576
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Credit risk
 
 
136
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Forbearance
Forbearance
 
measures consist of
 
concessions towards a debtor
 
that is experiencing or about to experience
 
difficulties
 
in meeting their financial
commitments (‘financial difficulties’).
 
Analysis of forbearance programmes
Gross balances
Impairment allowances
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
£m
£m
£m
£m
£m
£m
£m
£m
As at 31 December 2019
Barclays UK
-
147
298
445
-
35
92
127
Barclays International
2
225
227
1
158
159
Head Office
-
130
130
-
8
8
Total retail
149
653
802
-
36
258
294
Barclays UK
-
47
449
496
-
4
31
35
Barclays International
-
918
1,016
1,934
-
37
226
263
Head Office
-
-
-
-
-
-
-
-
Total wholesale
965
1,465
2,430
41
257
298
Group total
1,114
2,118
3,232
-
77
515
592
As at 31 December 2018
Barclays UK
a
-
173
349
522
-
33
139
172
Barclays International
-
2
231
233
-
1
165
166
Head Office
-
-
165
165
-
-
10
10
Total retail
-
175
745
920
-
34
314
348
Barclays UK
-
56
615
671
-
9
36
45
Barclays International
-
1,088
1,196
2,284
-
40
201
241
Head Office
-
-
-
-
-
-
-
-
Total wholesale
-
1,144
1,811
2,955
-
49
237
286
Group total
-
1,319
2,556
3,875
-
83
551
634
 
Note
a
 
2018
 
metrics
 
have been restated
 
to exclude
 
up to date, paying customers
 
classified as Stage 1.
Balances on fo
 
rbearance
 
programmes decreased 17
 
%
 
driven by better portfolio
 
performance.
Retail balances on forbearance
 
reduced 13%
 
to £0.8bn, reflecting a decrease in Barclays UK and Head Office.
Wholesale balances on forbearance
 
fell to
 
£2.4bn
 
(2018:
 
£3.0bn) with lower exposure
 
in Corporate Bank and SME
 
of £211m
 
and £171m
respectively.
 
Impairment allowances rose to £298m
 
(2018:
 
£286m) following a small
 
number
 
of material single
 
name charges in the year.
 
Barclays
International accounted
 
for 80% of wholesale forbearance
 
with corporate cases representing 72% of all forborne
 
balances.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Credit risk
 
 
137
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Retail forbearance programmes
Forbearance
 
on the Group’s principal
 
retail portfolios is
 
presented below.
 
The principal portfolios account
 
for 100
 
%
 
(201
 
8:
 
100%) of total retail
forbearance
 
balances.
 
Analysis of key portfolios
 
in forbearance programmes
Gross balances on
forbearance
programmes
Marked to
market LTV of
forbearance
balances:
balance
weighted
Marked to
market LTV of
forbearance
balances:
valuation
weighted
Impairment
allowances
marked against
balances on
forbearance
programmes
Total balances
on forbearance
programmes
coverage ratio
Total
% of gross
retail loans
and
advances
£m
%
%
%
£m
%
As at 31 December 2019
Barclays UK
UK home loans
137
0.1
42.7
31.0
-
-
UK cards
254
1.5
n/a
n/a
97
38.2
UK personal loans
54
0.9
n/a
n/a
30
55.3
Barclays International
US cards
183
0.8
n/a
n/a
131
71.6
Barclays partner
 
finance
3
0.1
n/a
n/a
2
66.7
Germany consumer
 
lending
37
1.0
n/a
n/a
23
60.9
Head Office
Italian home loans
130
2.2
60.6
44.9
8
5.9
As at 31 December 2018
Barclays UK
UK home loans
a
182
0.1
41.3
29.9
-
-
UK cards
a
279
1.6
n/a
n/a
121
43.4
UK personal loans
62
1.0
n/a
n/a
51
82.3
Barclays International
US cards
177
0.8
n/a
n/a
131
74.0
Barclays partner finance
6
0.1
n/a
n/a
4
66.7
Germany consumer
 
lending
46
1.3
n/a
n/a
28
60.9
Head Office
Italian home loans
165
2.1
59.5
46.6
10
6.1
 
Note
a
 
2018
 
metrics
 
have been restated
 
to exclude
 
up to date, paying customers
 
classified as Stage 1.
UK home loans:
Forbearance
 
balances reduced to £137
 
m
 
(2018:
 
£182
 
m) due to a
 
reduction in volumes of entries into collections and new
forbearance
 
plans.
 
UK cards:
Forbearance
 
balances decreased in line with the reduction in delinquent balances.
UK personal loans:
Forbearance
 
balances decreased in line with the
 
reduction in delinquent
 
balances.
 
US cards:
Forbearance
 
balances increased to £183m
 
(2018:
 
£177m)
 
in line with
 
book size but as
 
a percentage
 
of total
 
balance remained low
(<1%). Lower
 
coverage
 
was driven by favourable
 
macroeconomic conditions.
 
Barclays partner finance:
The reduction
 
in forbearance
 
balances was mainly driven by the rundown of the motor business over the course
 
of 2019.
 
Germany consumer lending:
Improved
 
performance and higher quality bookings led to fewer accounts moving
 
into forbearance.
Italian home loans:
Forbearance
 
balances reduced
 
to £130m (2018:
 
£165m), due to an asset
 
sale in Q3 2019.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Credit risk
 
 
138
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Wholesale forbearance programmes
The tables below detail balance information
 
for wholesale forbearance
 
cases.
 
Analysis of wholesale
 
balances in forbearance programmes
Gross balances on
 
forbearance
programmes
Impairment
allowances
marked against
balances on
forbearance
programmes
Total balances on
forbearance
programmes
coverage ratio
Total balances
% of gross
wholesale loans
and
 
advances
£m
%
£m
%
As at 31 December 2019
Barclays UK
496
1.6
35
7.1
Barclays International
1,934
1.9
263
13.6
Total
2,430
1.8
298
12.3
As at 31 December 2018
Barclays UK
671
2.4
45
6.7
Barclays International
2,284
2.3
241
10.6
Total
2,955
2.3
286
9.7
 
Analysis
 
of debt securities
Debt securities include government
 
securities
 
held as part of the Group
 
’s treasury management portfolio for liquidity and regulatory
 
purposes,
 
and
are for use on a continuing
 
basis in
 
the activities of the Group
 
.
 
The following tables provide
 
an analysis of debt securities held by the Group
 
for trading and
 
investment purposes by issuer type,
 
and where the
Group
 
held government securities exceeding 10%
 
of shareholders’ equity.
 
Further information
 
on the credit quality of debt securities is presented on pages 129 to 130
 
.
 
 
Debt securities
2019
2018
As at 31 December
£m
%
£m
%
Of which issued by:
 
Governments
 
and other public bodies
91,058
65.1
76,646
64.6
Corporate
 
and other issuers
39,231
28.1
30,767
26.0
US agency
4,480
3.2
7,014
5.9
Mortgage and asset backed securities
5,084
3.6
4,143
3.5
Total
139,853
100.0
118,570
100.0
 
Government securities
2019
2018
Fair value
Fair value
As at 31 December
£m
£m
United States
32,145
31,199
United Kingdom
28,010
19,555
Japan
6,679
1,249
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Credit risk
 
 
139
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Analysis
 
of derivatives
 
The tables below set out the fair values of the derivative
 
assets together with the value of those assets subject to enforceable
 
counterparty
 
netting
arrangements for
 
which the Group
 
holds offsetting liabilities and eligible
 
collateral.
 
Derivative assets (audited)
2019
2018
Balance sheet
assets
 
Counterparty
netting
Net
exposure
Balance sheet
assets
 
Counterparty
netting
Net
exposure
As at 31 December
£m
£m
£m
£m
£m
£m
Foreign
 
exchange
56,606
44,284
12,322
64,188
50,189
13,999
Interest rate
142,468
106,589
35,879
125,272
95,572
29,700
Credit derivatives
8,215
6,589
1,626
10,755
8,450
2,305
Equity and stock index
20,806
17,517
3,289
20,882
16,653
4,229
Commodity derivatives
1,141
1,019
122
1,441
1,137
304
Total derivative assets
229,236
175,998
53,238
222,538
172,001
50,537
Cash collateral held
33,411
31,402
Net exposure less collateral
19,827
19,135
 
Derivative asset exposures would
 
be £209
 
bn (2018:
 
£203bn) lower than reported under IFRS if netting were permitted for
 
assets and liabilities
 
with
the same counterparty
 
or for which the Group
 
holds cash collateral.
 
Similarly, derivative liabilities would
 
be £212bn
 
(2018:
 
£202bn) lower
 
reflecting
counterparty
 
netting and collateral placed. In addition, non-cash collateral of £6bn (2018:
 
£6bn) was held in respect of derivative assets. The Group
received collateral from clients in support
 
of over the counter
 
derivative transactions. These transactions are generally undertaken under
International Swaps and Derivative Association
 
(ISDA) agreements
 
governed
 
by either UK or New York law.
 
The table below sets out the fair value and notional amounts of OTC
 
derivative instruments by type of
 
collateral arrangement.
 
 
Derivatives by collateral arrangement
2019
2018
Notional contract
amount
Fair value
Notional contract
amount
Fair value
Assets
Liabilities
Assets
Liabilities
£m
£m
£m
£m
£m
£m
Unilateral in favour of Barclays
Foreign
 
exchange
32,441
398
(422)
22,639
473
(369)
Interest rate
5,202
859
(13)
4,762
769
(25)
Credit derivatives
338
3
(1)
54
1
-
 
Equity and stock index
158
5
(27)
107
17
-
 
Total unilateral in favour of Barclays
38,139
1,265
(463)
27,562
1,260
(394)
Unilateral in favour of counterparty
Foreign
 
exchange
11,230
424
(1,206)
14,221
530
(1,641)
Interest rate
44,360
3,094
(4,210)
64,504
2,925
(4,090)
Credit derivatives
116
-
 
(1)
78
1
(3)
Equity and stock index
494
298
(40)
714
242
(31)
Total unilateral in favour of counterparty
56,200
3,816
(5,457)
79,517
3,698
(5,765)
Bilateral arrangement
Foreign
 
exchange
4,484,380
51,571
(51,001)
4,788,711
58,772
(56,392)
Interest rate
12,303,652
131,700
(128,096)
9,699,149
116,712
(114,091)
Credit derivatives
390,790
5,034
(4,923)
380,546
6,339
(5,002)
Equity and stock index
210,267
8,925
(11,178)
177,496
7,984
(8,494)
Commodity derivatives
7,269
294
(210)
9,635
492
(330)
Total bilateral arrangement
17,396,358
197,524
(195,408)
15,055,537
190,299
(184,309)
Uncollateralised
 
derivatives
Foreign
 
exchange
379,741
4,117
(4,216)
371,158
4,243
(5,495)
Interest rate
284,168
4,697
(1,668)
205,050
3,454
(1,138)
Credit derivatives
8,142
216
(474)
5,830
234
(234)
Equity and stock index
21,131
1,400
(4,540)
12,179
1,468
(3,305)
Commodity derivatives
58
9
(46)
121
29
(78)
Total uncollateralised derivatives
693,240
10,439
(10,944)
594,338
9,428
(10,250)
Total OTC derivative assets/(liabilities)
18,183,937
213,044
(212,272)
15,756,954
204,685
(200,718)
 
 
 
 
Risk review
Risk performance
Market risk
 
 
140
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Summary of
 
contents
Page
Outlines key measures used to summarise the market
risk profile of the bank such as value at risk (VaR).
 
Market risk overview
 
and summary of performance
141
The Group
 
discloses
 
details on management
 
measures
of market risk. Total management
 
VaR includes all
trading positions and is presented on a diversified basis
by risk factor.
This section also outlines the macroeconomic
conditions modelled as part of the Group’s
 
risk
management framework.
 
Traded
 
market risk
 
Review of management
 
measures
-
 
The daily average, maximum
 
and minimum values of management VaR
-
 
Business scenario stresses
141
141
141
142
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Market risk
 
 
141
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
All disclosures in
 
this section
 
(pages 141 to 142) are
 
unaudited
 
unless
 
otherwise stated.
 
Overview
 
This section contains key statistics describing
 
the market risk profile of the Group. The market r
 
isk management section on page 104 provides
 
a
description of management VaR
 
.
Measures of
 
market
 
risk
 
in the
 
Group and accounting
 
measures
Traded
 
market risk measures such as VaR and
 
balance sheet exposure measures have fundamental differences:
 
balance sheet measures show accruals-based balances
 
or marked
 
to market values as at the reporting date;
 
VaR measures also take
 
account of current
 
marked to market values, but in addition hedging effects between positions are considered;
 
market risk measures are expressed in
 
terms of changes in value or volatilities as opposed
 
to static values.
For these reasons, it is not possible to present direct
 
reconciliations of traded market
 
risk and accounting
 
measures.
Summary of
 
performance
 
in the
 
period
Overall, the Group
 
has maintained a
 
steady market risk profile. Average
 
management VaR
 
increased by 10%
 
to £23m in 2019
 
(2018: £21m) and
remained relatively stable during
 
the period. The increase in average management
 
VaR in 2019
 
was driven by a small increase
 
in equity risk and
credit risk, partially offset by a
 
slight decrease in interest rate risk compared
 
to 2018.
 
Traded market
 
risk
 
review
Review of management measures
The following disclosures provide
 
details on management measures of market risk. Refer to the market risk
 
management section on pages 179
 
to
186
 
of the Barclays PLC Pillar 3 Report 2019
 
(unaudited)
 
for more detail on management measures and the differences when compared
 
to
regulatory
 
measures.
The table below shows the total management VaR
 
on a diversified basis by risk factor.
 
To
 
tal management VaR includes all trading positions in CIB
and Treasury
 
and it is calculated with a one-day holding
 
period.
Limits are applied against each risk factor VaR
 
as well as total management VaR, which are then cascaded further
 
by risk managers to each
business.
The daily average, maximum and minimum
 
values of management VaR
 
Management VaR (95%, one day) (audited)
 
2019
2018
Average
High
b
Low
b
Average
High
b
Low
b
For the year ended 31 December
a
£m
£m
£m
£m
£m
£m
Credit risk
 
12
17
8
11
16
8
Interest rate risk
 
6
11
3
8
19
3
Equity risk
 
10
22
5
7
14
4
Basis risk
 
8
11
6
6
8
4
Spread risk
 
4
5
3
6
9
3
Foreign
 
exchange risk
 
3
5
2
3
7
2
Commodity risk
 
1
2
-
1
2
-
Inflation risk
 
2
3
1
3
4
2
Diversification effect
b
(23)
n/a
n/a
(24)
n/a
n/a
Total management VaR
23
29
17
21
27
15
 
Notes
a
 
Excludes
 
BAGL from 23 July 2018.
b
 
Diversification
 
effects
 
recognise that forecast losses
 
from different
 
assets or businesses are unlikely
 
to occur concurrently,
 
hence the expected
 
aggregate loss is lower than
 
the
sum of the
 
expected
 
losses from each area.
 
Historical
 
correlations between
 
losses are taken
 
into account in making these
 
assessments. The high and
 
low VaR figures
 
reported for
each category did
 
not necessarily
 
occur on the same
 
day as the high and
 
low VaR reported
 
as a whole. Consequently,
 
a diversification effect
 
balance for the
 
high and low VaR
figures
 
would not be meaningful
 
and is
 
therefore omitted
 
from the above table.
 
 
 
fy2019arbplcp94i0.gif fy2019arbplcp152i1.gif
 
 
 
 
Risk review
Risk performance
Market risk
 
 
0
20
40
60
Jan 2018
Jan 2019
Dec 2019
142
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Group Management VaR
a
 
(£m)
 
 
 
Note
 
a
 
Excludes
 
BAGL from 23 July 2018.
 
 
Business
 
scenario stresses
As part of the Group’s
 
risk management framework, on
 
a regular basis the performance of the trading business in hypothetical scenarios
characterised by severe macroeconomic
 
conditions is modelled. Up to seven global scenarios are modelled on a regular basis, for example,
 
a
sharp deterioration in liquidity,
 
a slowdown in the global economy,
 
global recession, and a sharp increase in economic
 
growth.
In 2019,
 
the scenario analyses
 
showed that the largest market risk
 
related impacts would be due
 
to a severe deterioration in financial liquidity and a
global recession.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Treasury and
 
Capital risk
 
143
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Summary of
 
contents
Page
Liquidity
 
risk
 
performance
The risk that the firm is unable to meet its contractual or
contingent obligations or that it does not have the
appropriate
 
amount, tenor and composition of funding
and liquidity to support its assets.
 
This section provides an overview
 
of the Group’s
liquidity risk.
 
Liquidity overview
 
and summary of performance
 
Liquidity risk stress testing
-
 
Liquidity risk appetite
-
 
Liquidity regulation
-
 
Liquidity coverage
 
ratio
145
145
145
146
146
The liquidity pool is held unencumbered
 
and is intended
to offset stress outflows.
 
Liquidity pool
-
 
Composition of the liquidity pool
-
 
Liquidity pool by
 
currency
-
 
Management of the liquidity pool
-
 
Contingent liquidity
147
147
147
147
147
The basis for sound liquidity risk management
 
is a
funding structure
 
that reduces the probability of a
liquidity stress leading to an inability to meet funding
obligations as they fall due.
 
Funding structure
 
and funding relationships
-
 
Deposit funding
-
 
Wholesale funding
148
148
148
Provides details on the contractual maturity of all
financial instruments and other assets and liabilities.
 
Contractual maturity of financial assets and liabilities
151
Capital
 
risk
 
performance
Capital risk is the risk that the firm has an insufficient
level or composition
 
of capital to support its
 
normal
business activities and to meet its regulatory
 
capital
requirements under
 
normal operating environments or
stressed conditions (both actual and as defined for
internal planning or regulatory
 
testing purposes). This
also includes the risk from the firm’s pension plans.
This section details the Group’s capital position
providing
 
information on both
 
capital resources and
capital requirements. It also provides
 
details of the
leverage ratios and exposures.
 
Capital risk overview and summary
 
of performance
 
Regulatory minimum
 
capital and leverage requ
 
irements
-
 
Capital
-
 
Leverage
155
155
155
156
This section outlines the Group’s
 
capital ratios, capital
composition, and provides
 
information on significant
movements in CET1 capital during
 
the year.
 
Analysis of capital resources
-
 
Capital ratios
-
 
Capital resources
-
 
Movement in CET1 capital
157
157
157
165
This section outlines risk weighted assets by risk type,
business and macro drivers.
 
Analysis of risk weighted assets
-
 
Risk weighted assets by risk type and business
-
 
Movement analysis of risk weighted assets
166
166
166
This section outlines the Group’s
 
leverage ratios,
leverage exposure
 
composition, and provides
information on significant movements in the IFRS and
leverage balance sheet.
 
Analysis of leverage ratios and exposures
-
 
Leverage ratios and exposures
167
167
This section outlines the Group’s
 
Minimum requirement
for own funds and
 
Eligible Liabilities
 
(MREL) position
and ratios.
 
Minimum Requirement
 
for own funds and
 
Eligible Liabilities
 
168
The Group
 
discloses
 
the two sources of foreign
exchange risk that it is exposed to.
 
Foreign
 
exchange risk
-
 
Transactional foreign
 
currency
 
exposure
-
 
Translational foreign
 
exchange exposure
-
 
Functional currency
 
of operations
169
169
169
169
A review focusing on the UK retirement
 
fund, which
represents the majority of the Group’s
 
total retirement
benefit obligation.
 
Pension risk review
-
 
Assets and liabilities
-
 
IAS 19 position
-
 
Risk measurement
170
170
171
171
Interest rate
 
risk
 
in the
 
banking book
 
performance
 
 
 
Risk review
Risk performance
Treasury and
 
Capital risk
 
144
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
A description of the non
 
-traded market risk framework
is provided.
The Group
 
discloses
 
a sensitivity analysis on pre
 
-tax net
interest income for non
 
-trading financial assets and
liabilities. The analysis is carried out by
 
business unit
and currency.
The Group
 
measures some non-traded
 
market risks,
 
in
particular prepayment,
 
recruitment, and residual risk
using an economic capital methodology.
The Group
 
discloses
 
the overall impact of a parallel
 
shift
in interest rates on other comprehensive
 
income and
cash flow hedges.
The Group
 
measures the volatility of the value of the
FVOCI instruments in the liquidity pool through
 
non-
traded market risk VaR.
 
Interest rate risk in the banking book
 
overview and
 
summary of
performance
 
Net interest income sensitivity
-
 
by business unit
-
 
by currency
 
Analysis of equity sensitivity
 
 
Volatility of the FVOCI portfolio
 
in the liquidity pool
172
172
172
173
173
173
 
 
 
Risk review
Risk performance
Treasury and
 
Capital risk
 
145
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Liquidity
 
risk
All disclosures in this section (pages 152
 
to 161
 
)
 
are unaudited unless otherwise stated.
Overview
The Group
 
has a comprehensive key risk control framework
 
for managing the Group’s liquidity risk.
 
The Liquidity Framework
 
meets the
 
PRA’s
standards and is designed to maintain liquidity resources
 
that are sufficient in amount and quality, and a funding
 
profile that is appropriate to meet
the liquidity risk appetite. The Liquidity Framework
 
is delivered via a
 
combination of policy formation, review
 
and governance,
 
analysis,
 
stress
testing, limit setting and monitoring.
This section provides an analysis of the Group
 
’s:
 
(i) summary of performance,
 
(ii) liquidity risk
 
stress testing, iii) liquidity pool, (iv) funding
 
structure
and funding relationships, (v) credit ratings, and (vi) contractual maturity of
 
financial assets and liabilities.
 
For further
 
detail on liquidity
 
risk governance
 
and framework
 
,
 
refer to page 192
 
to 194 of the Barclays PLC Pillar 3 Report 2019
 
(unaudited).
 
Summary of
 
performance
The liquidity pool at £211
 
bn (December
 
2018:
 
£227
 
bn) reflects the
 
Group’s
 
prudent approach to liquidity management. The Liquidity Coverage
Ratio (LCR) remained well above
 
the 100% regulatory
 
requirement at 160
 
%
 
(December 2018
 
:
 
169
 
%),
 
equivalent to a surplus of £78bn (December
2018
 
:
 
£90bn)
 
.
 
The liquidity pool, LCR and surplus have been managed down through
 
the course of the year, supporting
 
increased business
 
funding
requirements while maintaining a prudent
 
liquidity position.
During the year,
 
the Group issued £8.6bn
 
of minimum requirement
 
for own funds and eligible liabilities
 
(MREL) instruments in a range of tenors
and currencies.
Barclays Bank PLC
 
continued to issue in the shorter-term markets and Barclays Bank UK PLC issued in the
 
shorter-term and
 
secured markets,
helping to maintain their stable and diversified funding bases.
 
The Group
 
has continued to reduce its reliance on short-term wholesale funding, where
 
the proportion maturin
 
g
 
in less
 
than 1 year fell to 28%
(December
 
2018:
 
30%)
 
.
 
Key metrics
Liquidity Coverage Ratio
160% (2018:
 
169%)
 
Liquidity
 
risk
 
stress testing
 
Under the Liquidity Framework,
 
the Group has established a liquidity risk appetite (LRA) together with the appropriate
 
limits
 
for the management
 
of
the liquidity risk. This is the level of liquidity risk the Group
 
chooses to take in
 
pursuit of its business objectives and in meeting its regulatory
obligations. The Group
 
sets
 
its internal liquidity risk appetite (LRA) based on internal liquidity risk assessments and
 
,
 
external regulatory
requirements namely the CRR (as amended by
 
CRR II) Liquidity Coverage Ratio (LCR).
Liquidity risk appetite
 
The liquidity risk assessment measures the potential contractual and contingent
 
stress outflows under a range of stress scenarios, which are then
used to determine the size of the liquidity pool that is immediately available to meet
 
anticipated outflows should a stress occur.
 
As part of the LRA,
 
the Group runs
 
three short-term liquidity stress
 
scenarios, aligned to the PRA’s
 
prescribed
 
stresses:
 
 
90 day market
 
-wide stress event
 
30 day Barclays
 
-specific stress event
 
combined 30
 
day market-wide and Barclays
 
-specific stress
 
event
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Treasury and
 
Capital risk
 
146
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Key LRA assumptions
For the year ended 31 December 2019
Drivers of Liquidity
 
Risk
LRA Combined
 
stress – key assumptions
Wholesale Secured and Unsecured
Funding Risk
- Zero rollover
 
of maturing wholesale unsecured funding
- Loss of repo
 
capacity on non-
 
extremely liquid repos at contractual maturity date
- Roll of repo for
 
extremely liquid repo at wider haircut at contractual maturity date
- Withdrawal of contractual buyback
 
obligations, excess client
 
futures margin,
 
Prime Brokerage
 
(PB)
client cash and overlifts
- Haircuts applied to the market value of marketable assets held in the liquidity
 
buffer
Retail and Corporate Funding Risk
- Retail and Corporate
 
deposit outflows as
 
counterparties seek to diversify their
 
deposit balances
Intraday Liquidity Risk
- Liquidity held to meet increased intraday liquidity usage due
 
to payment and receipts volatility, loss
of unsecured credit lines and haircuts applied to collateral values
 
used to back secured creditlines, in
a stress
Intra-Group Liquidity Risk
- Liquidity support for
 
material subsidiaries. Surplus liquidity held within
 
certain subsidiaries is not
taken as a benefit to the wider Group
Cross-Currency Liquidity
 
Risk
- Deterioration in FX market capacity that may result
 
in restriction in net currency
 
positions
Off-Balance Sheet Liquidity Risk
- Drawdown
 
on committed facilities based on facility and counterparty
 
type
 
- Collateral outflows due to a two-notch credit rating
 
downgrade
 
- Increase in the Group's
 
initial margin requirement
 
across all
 
major exchanges
 
- Variation margin
 
outflows from collateralised risk positions
- Outflow of collateral owing but not called
 
- Loss of internal sources of funding within the PB synthetics business
Franchise-Viability
 
Risk
- Liquidity held to enable the firm to meet select non-contractual
 
obligations to ensure market
confidence in the firm is maintained, including debt buy
 
-backs, swap tear-ups and incresed prime
brokerage
 
margin debits
Funding Concentration Risk
- Liquidity held against largest wholesale funding counterparty
 
refusing to roll
 
As at 31 December
 
2019
 
,
 
the Group held eligible liquid assets well
 
in excess of 100%
 
of net stress outflows of the 30 day combined
 
scenario, which
has the highest net outflows of the three short-
 
term liquidity stress scenarios.
 
 
The Group
 
also runs a long term liquidity
 
stress test, which measures the anticipated outflows over
 
a 12-month
 
market-wide scenario. As at 31
December 2019,
 
the Group remained compliant with this internal metric.
 
 
Liquidity regulation
 
The Group
 
monitors its position
 
against the CRR (as amended by
 
CRR II) Liquidity Coverage Ratio and the Net Stable Funding Ratio (NSFR).
 
 
The LCR is designed to promote
 
short-term resilience of a bank’s liquidity risk profile by holding sufficient High Quality Liquid Assets to survive an
acute stress scenario lasting for 30
 
days. The NSFR has been developed
 
to promote a sustainable maturity structure of assets and liabilities.
 
 
In June 2019,
 
the EBA published CRR II which defined the final rules
 
and minimum requirements
 
for the NSFR.
 
Barclays expects to be compliant
with these requirement
 
s
 
when they become effective in June 2021.
 
Liquidity coverage ratio
 
The external LCR requirement
 
is prescribed by the regulator
 
taking into account the relative stability of
 
different sources of
 
funding and potential
incremental funding requirements
 
in a stress.
 
 
2019
2018
As at 31 December
£bn
£bn
Eligible liquidity buffer
206
219
Net stress outflows
(128)
(129)
Surplus
78
90
Liquidity coverage
 
ratio
160%
169%
 
As part of the LRA, Barclays also establishes the minimum LCR
 
limit. The Group
 
plans to maintain
 
its surplus to the internal and regulatory
 
stress
requirements at an efficient
 
level, while continuously assessing risks to market funding conditions and
 
its liquidity position and taking actions to
manage the size of the liquidity pool as appropriate.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Treasury and
 
Capital risk
 
147
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Liquidity
 
pool
 
The Group
 
liquidity pool as at 31 December 2019
 
was £211bn
 
(2018: £227
 
bn). During 2019,
 
the month-end liquidity pool ranged from £211
 
bn to
£256bn
 
(2018:
 
£207bn
 
to £243bn), and the month-end average balance was £235
 
bn (2018: £2
 
25bn). The liquidity
 
pool is held unencumbered and
is intended
 
to offset stress outflows. It comprises the following cash
 
and unencumbered
 
assets.
 
Composition
 
of the
 
Group liquidity pool
 
as at
 
31 December 2019
Liquidity pool
Liquidity pool
 
of which CRR LCR eligible
c
2018
Cash
Level 1
Level 2A
Liquidity
 
pool
£bn
£bn
£bn
£bn
£bn
Cash and deposits with central banks
a
153
150
-
-
181
Government bonds
b
AAA to AA-
31
-
26
-
27
BBB+ to BBB
 
-
5
-
4
2
4
Other LCR Ineligible Government
 
bonds
-
-
-
-
1
Total government bonds
36
-
30
2
32
Other
 
Goverment
 
Guaranteed Issuers, PSEs and GSEs
 
9
-
8
1
6
International Organisations and MDBs
7
-
7
-
5
Covered
 
bonds
 
6
-
5
-
3
Other
-
-
-
-
-
Total other
22
-
20
1
14
Total as at 31 December 2019
211
150
50
3
227
Total as at
 
31 December
 
2018
227
176
40
1
 
Notes
a
 
Includes
 
cash held
 
at central banks and surplus
 
cash at central banks related
 
to payment
 
schemes. Of which over 98%
 
(2018: over
 
99%) was placed
 
with the
 
Bank of England,
 
US
Federal
 
Reserve,
 
European Central
 
Bank, Bank of Japan
 
and Swiss National Bank.
b
 
Of which
 
over 67%
 
(2018:
 
over 71%) comprised
 
UK, US, French,
 
German, Swiss and
 
Dutch
 
securities.
c
 
The LCR eligible liquidity
 
pool is adjusted
 
for trapped liquidity and
 
other regulatory deductions. It also incorporates
 
other CRR (as amended by CRR II) qualif
 
ying assets that are
 
not
eligible under
 
Barclays’
 
internal risk appetite.
 
The Group
 
liquidity pool is
 
well diversified by major currency
 
and the Group
 
monitors LRA stress
 
scenarios for major currencies.
 
Liquidity pool
 
by currency
USD
EUR
GBP
Other
 
Total
£bn
£bn
£bn
£bn
£bn
Liquidity pool
 
as at
 
31 December 2019
52
42
67
50
211
Liquidity pool as at 31 December
 
2018
57
64
76
30
227
 
Management of the liquidity
 
pool
The composition of the liquidity pool is subject to limits set by the Board
 
and the independent liquidity risk, credit risk and market risk functions. In
addition, the investment of the liquidity pool is monitored
 
for concentration
 
risk by issuer, currency
 
and asset
 
type. Given the returns generated by
these highly liquid assets, the risk and reward
 
profile is continuously managed.
 
As at 31 December
 
2019,
 
67%
 
(2018:
 
70%) of the liquidity
 
pool was located in Barclays Bank PLC, 20
 
%
 
(2018:
 
20%) in Barclays Bank UK
 
PLC and
6%
 
(2018:
 
2%) in Barclays Bank Ireland
 
PLC. The residual portion of the liquidity pool is held outside of these entities, predominantly in the US
subsidiaries, to meet entity-specific stress outflows and local regu
 
latory requirements. To
 
the extent the
 
use of this portion of the liquidity pool
 
is
restricted due to local regulatory
 
requirements, it is assumed to be unavailable to the rest of the Group
 
in calculating the
 
LCR.
 
Contingent liquidity
In addition to the Group
 
liquidity pool, the Group has access to
 
other unencumbered
 
assets
 
which provide
 
a source of contingent liquidity.
While these are not relied on in the Group’s
 
LRA, a portion of these assets may be monetised in a stress to generate liquidity through
 
their use as
collateral for secured
 
funding or
 
through outright sale.
 
In a Barclays-specific, market-wide or
 
combined liquidity stress, liquidity available via market sources
 
could be severely disrupted. In circumstances
where market liquidity is unavailable or
 
available only at significantly elevated prices, the Group
 
could generate liquidity via central bank facilities.
The Group
 
maintains a
 
significant amount
 
of collateral positioned at central banks.
 
For more
 
detail on the Group’s other unencu
 
mbered assets,
 
see pages 221
 
to 222 of the Barclays PLC Pillar 3 Report
 
2019
 
(unaudited).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Treasury and
 
Capital risk
 
148
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Funding structure
 
and funding
 
relationships
 
The basis for sound liquidity risk management
 
is a funding structure that reduces the probability of a liquidity stress leading to an inability to meet
funding obligations as they fall due. The Group’s
 
overall funding
 
strategy is
 
to develop
 
a diversified funding base (geographically,
 
by type and by
counterparty)
 
and maintain access
 
to a variety of alternative funding source
 
s, to
 
provide
 
protection against unexpected fluctuations, while
minimising the cost of funding.
 
Within this, the Group
 
aims to
 
align the sources and uses of funding. As such, retail and corporate
 
loans and advances are largely funded by
deposits in the relevant entities,
 
with the surplus primarily funding
 
the liquidity pool. The majority of
 
reverse repurchase
 
agreements are matched
by repurchase
 
agreements. Derivative liabilities and assets are largely matched. A substantial proportion
 
of balance sheet derivative positions
qualify for counterparty
 
netting and the remaining portions
 
are largely offset when netted against cash collateral received and paid. Wholesale debt
and equity is used to fund residual assets.
 
These funding relationships are summarised below:
 
2019
2018
2019
2018
Assets
£bn
£bn
Liabilities
£bn
£bn
Loans and advances at amortised cost
339
327
Deposits at amortised cost
416
395
Group
 
liquidity pool
211
227
<1 Year
 
wholesale funding
41
47
>1 Year
 
wholesale funding
106
107
Reverse repurchase
 
agreements, trading portfolio
assets, cash collateral and settlement balances
298
303
Repurchase agreements, trading
 
portfolio liabilities,
cash collateral and settlement balances
247
262
Derivative financial instruments
229
223
Derivative financial instruments
229
220
Other assets
a
63
53
Other liabilities
35
38
Equity
66
64
Total assets
1,140
1,133
Total liabilities
1,140
1,133
 
Note
a
 
Other assets
 
include fair
 
value assets that are not part
 
of reverse
 
repurchase agreements
 
or trading portfolio assets,
 
and other asset
 
categories.
 
Deposit funding (audited)
2019
2018
Funding of loans and advances
Loans and
advances at
amortised cost
Deposits
 
at
amortised cost
Loan: deposit
ratio
a
Loan: deposit
ratio
As at 31 December 2019
£bn
£bn
%
%
Barclays UK
198
206
96%
96%
Barclays International
133
210
63%
65%
Head Office
8
-
Barclays Group
339
416
82%
83%
 
Note
a
 
The loan: deposit
 
ratio is calculated
 
as loans and advances
 
at amortised cost divided by deposits
 
at amortised cost.
 
As at 31 December
 
2019,
 
£181
 
bn (2018: £172
 
bn) of total
 
customer deposits were insured through
 
the UK Financial Services
 
Compensation
Scheme (FSCS) and other similar schemes. In addition to these customer deposits £4bn
 
(2018:
 
£5bn) of other liabilities
 
are insured by other
governments.
 
Contractually current accounts are
 
repayable
 
on demand and
 
savings accounts at
 
short notice. In practice, their observed maturity is typically
longer than their contractual maturity. Similarly,
 
repayment
 
profiles of certain types of assets e.g. mortgages, overdrafts
 
and credit card lending,
differ from their contractual
 
profiles. The Group therefore
 
assesses
 
the behavioural
 
maturity of both customer assets and liabilities
 
to identify
structural balance sheet funding
 
gaps. In doing so, it applies quantitative modelling and qualitative assessments which take into account
 
historical
experience, current
 
customer composition, and macroeconomic projections.
 
The Group’s
 
broad
 
base of customers, numerically and by
 
depositor type, helps protect against unexpected fluctuations in balances and hence
provide
 
s
 
a stable funding base for the Group’s
 
operations and liquidity needs.
 
Wholesale funding
 
Barclays Bank Gro
 
up and Barclays Bank UK Group
 
maintain access
 
to a variety of sources of wholesale funds in major currencies, including
 
those
available from term investors across
 
a variety of distribution channels and geographies,
 
short-term funding
 
markets and repo markets.
 
 
Barclays Bank Group
 
has direct access to US, European and Asian capital markets through
 
its
 
global investment banking operations
 
and to long-
term investors through
 
its
 
clients worldwide. Key sources
 
of wholesale funding include money markets, certificates of deposit, commercial paper,
medium term issuances (including structured
 
notes) and securitisations.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Treasury and
 
Capital risk
 
149
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Key sources of wholesale funding
 
for Barclays Bank UK Group
 
include money markets, certificates
 
of deposit, commercial pa
 
per,
 
covered
 
bonds and
other securitisations.
 
The Group
 
expects to continue issuing
 
public wholesale debt from Barclays PLC
 
(the Parent company),
 
in order to maintain compliance with
indicative MREL requirements and
 
maintain a stable and diverse funding base by type, currency
 
and market.
 
As at 31 December
 
2019
 
,
 
the Group’s total wholesale funding outstanding (excluding
 
repurchase agreements) was £147.1bn
 
(2018:
 
£154.0
 
bn), of
which £19.6
 
bn (2018
 
:
 
£22.5bn) was secured funding and £127.5
 
bn (2018:
 
£131.5bn)
 
unsecured funding. Unsecured funding includes £51.1bn
(2018
 
:
 
£47.3
 
bn) of privately placed senior unsecured notes issued through
 
a variety of distribution channels including intermediaries and private
banks.
 
During the year,
 
the Group issued £8.6bn
 
of minimum requirement
 
for own funds and eligible liabilities
 
(MREL) instruments from Barclays PLC
 
(the
Parent company)
 
in a range of different currencies
 
and tenors.
 
Barclays Bank PLC continued
 
to issue
 
in the shorter-
 
term markets and Barclays Bank
UK PLC issued in the shorter
 
-term and secured markets, helping to maintain their stable and diversified funding
 
bases.
 
 
As at 31 December
 
2019
 
,
 
wholesale funding of £40.6
 
bn (2018
 
:
 
£46.7bn)
 
matures in less
 
than one year, of which £16.3
 
bn
 
(2018
 
:
 
£19.1
 
bn) relates
to term funding. Although
 
not a requirement, the liquidity pool exceeded the wholesale funding matur
 
ing in less
 
than one year by £170
 
bn (2018
 
:
£180
 
bn).
 
Barclays Bank Group
 
and Barclays Bank UK Group
 
also support various central bank monetary initiatives
 
including participation in the Bank of
England’s Term Funding
 
Scheme. These are reported under
 
‘repurchase agreements and other similar secured borrowing’ on the balance sheet.
 
Maturity profile of wholesale funding
a,b
<1
 
month
1-3
months
3-6
months
6-12
months
<1
 
year
1-2
 
years
2-3
 
years
3-4
 
years
4-5
 
years
>5 years
Total
£bn
£bn
£bn
£bn
£bn
£bn
£bn
£bn
£bn
£bn
£bn
Barclays PLC (the Parent company)
Senior unsecured
 
(Public benchmark)
 
-
 
 
-
 
0.8
0.3
1.1
4.2
0.9
8.2
4.5
14.2
33.1
Senior unsecured
 
(Privately placed)
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 
0.2
 
-
 
0.1
0.1
0.5
0.9
Subordinated
 
liabilities
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 
1.0
6.7
7.7
Barclays Bank PLC (including
subsidiaries)
Certificates of deposit and commercial
paper
1.1
4.2
3.6
7.3
16.2
0.9
0.5
0.1
 
-
 
 
-
 
17.7
Asset backed commercial paper
1.6
4.9
0.7
 
-
 
7.2
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 
7.2
Senior unsecured
 
(Public benchmark)
0.6
 
-
 
 
-
 
 
-
 
0.6
2.9
0.1
 
-
 
1.1
0.3
5.0
Senior unsecured
 
(Privately placed)
c
1.1
1.5
2.4
5.9
10.9
5.7
4.8
3.9
4.0
20.9
50.2
Asset backed securities
 
-
 
0.4
0.6
 
-
 
1.0
 
-
 
0.2
0.6
0.9
2.1
4.8
Subordinated
 
liabilities
 
-
 
0.2
0.1
0.9
1.2
5.0
3.3
0.1
 
-
 
0.9
10.5
Other
0.1
 
-
 
 
-
 
 
-
 
0.1
 
-
 
 
-
 
0.3
 
-
 
1.2
1.6
Barclays Bank UK PLC (including
subsidiaries)
Certificates of deposit and commercial
paper
 
-
 
0.4
0.2
0.2
0.8
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 
0.8
Covered
 
bonds
 
-
 
 
-
 
1.0
 
-
 
1.0
0.9
2.3
1.8
 
-
 
1.1
7.1
Asset backed securities
 
-
 
 
-
 
 
-
 
0.5
0.5
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 
0.5
Total as at 31 December 2019
4.5
11.6
9.4
15.1
40.6
19.8
12.1
15.1
11.6
47.9
147.1
Of which secured
1.6
5.3
2.3
0.5
9.7
0.9
2.5
2.4
0.9
3.2
19.6
Of which unsecured
2.9
6.3
7.1
14.6
30.9
18.9
9.6
12.7
10.7
44.7
127.5
Total as at
 
31 December
 
2018
2.5
15.9
8.2
20.1
46.7
16.7
16.8
10.4
13.2
50.2
154.0
Of which secured
2.0
3.7
1.1
3.6
10.4
2.7
1.2
2.6
1.9
3.7
22.5
Of which unsecured
0.5
12.2
7.1
16.5
36.3
14.0
15.6
7.8
11.3
46.5
131.5
 
Notes
a
 
The composition
 
of wholesale funds
 
comprises
 
the balance sheet reported
 
financial liabilities at fair
 
value, debt securities in
 
issue and subordinated liabilities. It
 
does not include
participation
 
in the
 
central bank facilities
 
reported
 
within repurchase agreements
 
and other similar secured
 
borrowing.
b
 
Term funding
 
comprises
 
public benchmark and privately
 
placed senior unsecured
 
notes, covered bonds,
 
asset-backed securities
 
and subordinated debt where
 
the original maturity
of the instrument
 
was more than
 
one year.
c
 
Includes
 
structured
 
notes of £42.9bn, of which £8.3bn matures
 
within
 
one year.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Treasury and
 
Capital risk
 
150
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Currency composition
 
of wholesale debt
As at 31 December
 
2019
 
,
 
the proportion of wholesale funding by
 
major currencies was
 
as follows:
 
Currency composition
 
of wholesale funding
USD
EUR
GBP
Other
%
%
%
%
Certificates of deposit and commercial
 
paper
63
28
8
1
Asset backed commercial paper
85
8
7
-
Senior unsecured
 
(Public benchmark)
48
4
43
5
Senior unsecured
 
(Privately placed)
60
18
10
12
Covered
 
bonds / Asset backed securities
45
27
28
-
Subordinated
 
liabilities
55
27
16
2
Total as at 31 December 2019
60
22
13
5
Total as at
 
31 December
 
2018
53
27
13
7
 
To manage
 
cross currency
 
refinancing risk,
 
the Group manages to foreign
 
exchange cash flow limits,
 
which limit risk at specific maturities.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Treasury and
 
Capital risk
 
151
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Contractual maturity
 
of financial
 
assets
 
and liabilities
 
The table below provides
 
detail on the contractual maturity of
 
all financial instruments and other assets and liabilities. Derivatives
 
(other than those
designated in a hedging
 
relationship) and trading portfolio
 
assets
 
and liabilities are included in the ‘on
 
demand’ column
 
at their fair
 
value. Liquidity
risk on these items is not managed on
 
the basis of contractual maturity since they are not held for settlement according
 
to such maturity and will
frequently be settled before
 
contractual maturity at fair value. Derivatives designated in a hedging
 
relationship are included according
 
to their
contractual maturity.
 
Contractual maturity of financial assets and liabilities
 
(audited)
As at
31 December 2019
On
demand
Not more
than three
months
Over three
months
 
but
not more
than six
months
Over six
months
 
but
not more
than nine
months
Over nine
months
 
but
not more
than one
year
Over one
year
 
but not
more than
two years
Over two
years but
not more
than three
years
Over three
years but
not more
than five
years
Over five
years but
not more
than ten
years
Over ten
years
Total
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
Assets
Cash and
 
balances
 
at
central banks
149,383
766
109
-
-
-
-
-
-
-
150,258
Cash collateral
 
and
settlement
 
balances
2,022
81,231
3
-
-
-
-
-
-
-
83,256
Loans
 
and advances
 
at
amortised
 
cost
14,824
10,944
13,108
7,738
7,031
21,771
22,478
37,408
40,702
163,111
339,115
Reverse
 
repurchase
agreements
 
and other
similar secured
 
lending
13
3,097
-
-
-
77
190
-
-
2
3,379
Trading
 
portfolio
 
assets
114,195
-
-
-
-
-
-
-
-
-
114,195
Financial
 
assets
 
at fair
value
 
through
 
the
income statement
14,279
89,355
13,979
3,443
1,317
1,664
512
953
2,302
5,282
133,086
Derivative
 
financial
instruments
229,063
30
-
-
-
7
24
9
79
24
229,236
Financial
 
assets
 
at fair
value
 
through
 
other
comprehensive
 
income
-
6,694
3,241
1,164
1,159
7,711
6,521
11,896
21,195
6,169
65,750
Other
 
financial assets
895
441
25
-
14
-
-
-
-
-
1,375
Total financial
 
assets
524,674
192,558
30,465
12,345
9,521
31,230
29,725
50,266
64,278
174,588
1,119,650
Other assets
20,579
Total
 
assets
1,140,229
Liabilities
Deposits
 
at amortised
cost
348,337
42,357
10,671
3,861
4,067
3,935
930
530
545
554
415,787
Cash collateral
 
and
settlement
 
balances
3,053
64,275
13
-
-
-
-
-
-
-
67,341
Repurchase
 
agreements
and other
 
similar
secured
 
borrowing
7
2,755
10
-
-
10,007
1,201
470
-
67
14,517
Debt securities
 
in issue
-
12,795
6,560
4,147
3,123
8,387
3,325
18,189
14,342
5,501
76,369
Subordinated
 
liabilities
-
207
78
75
832
4,979
3,266
1,075
5,979
1,665
18,156
Trading
 
portfolio
liabilities
36,916
-
-
-
-
-
-
-
-
-
36,916
Financial
 
liabilities
designated
 
at fair
 
value
13,952
127,939
10,890
6,519
3,798
6,981
6,235
7,706
7,127
13,179
204,326
Derivative
 
financial
instruments
228,617
1
-
8
-
36
42
42
88
370
229,204
Other
 
financial liabilities
251
2,361
55
52
50
1,110
138
242
351
409
5,019
Total financial
 
liabilities
631,133
252,690
28,277
14,662
11,870
35,435
15,137
28,254
28,432
21,745
1,067,635
Other liabilities
6,934
Total liabilities
1,074,569
Cumulative
 
liquidity
gap
(106,459)
(166,591)
(164,403)
(166,720)
(169,069)
(173,274)
(158,686)
(136,674)
(100,828)
52,015
65,660
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Treasury and
 
Capital risk
 
152
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Contractual maturity of financial assets and liabilities
 
(audited)
As at
31 December 2018
On
demand
Not more
than three
months
Over three
months but
not more
than six
months
Over six
months but
not more
than nine
months
Over nine
months but
not more
than one
year
Over one
year
 
but not
more than
two years
Over two
years but
not more
than three
years
Over three
years but
not more
than five
years
Over five
years but
not more
than ten
years
Over ten
years
Total
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
Assets
Cash and
 
balances
 
at
central banks
175,534
1,353
118
-
64
-
-
-
-
-
177,069
Cash collateral
 
and
settlement
 
balances
2,389
74,786
19
-
22
2
-
4
-
-
77,222
Loans
 
and advances
 
at
amortised
 
cost
12,506
11,171
7,938
5,416
7,072
26,336
25,559
39,604
48,606
142,198
326,406
Reverse
 
repurchase
agreements
 
and other
similar secured
 
lending
31
1,245
-
-
-
586
446
-
-
-
2,308
Trading
 
portfolio
 
assets
104,187
-
-
-
-
-
-
-
-
-
104,187
Financial
 
assets
 
at fair
value
 
through
 
the
income statement
13,606
112,297
7,174
3,124
2,312
4,677
165
311
829
5,153
149,648
Derivative
 
financial
instruments
222,384
-
6
1
4
14
11
11
86
21
222,538
Financial
 
assets
 
at fair
value
 
through
 
other
comprehensive
 
income
11
3,120
2,784
1,696
2,719
6,080
2,765
7,818
18,659
7,164
52,816
Other
 
financial assets
761
182
56
-
7
-
-
-
-
-
1,006
Total financial
 
assets
531,409
204,154
18,095
10,237
12,200
37,695
28,946
47,748
68,180
154,536
1,113,200
Other assets
20,083
Total assets
1,133,283
Liabilities
Deposits
 
at amortised
cost
342,967
30,029
7,282
3,672
3,237
3,983
2,053
520
349
746
394,838
Cash collateral
 
and
settlement
 
balances
3,542
63,973
5
2
-
-
-
-
-
-
67,522
Repurchase
 
agreements
and other
 
similar secured
borrowing
1,331
5,542
-
-
-
3
10,017
1,201
484
-
18,578
Debt securities
 
in issue
26
14,779
5,937
5,159
7,686
6,984
6,248
12,988
15,812
6,667
82,286
Subordinated
 
liabilities
-
306
-
78
45
860
5,156
3,387
6,968
3,759
20,559
Trading
 
portfolio
liabilities
37,882
-
-
-
-
-
-
-
-
-
37,882
Financial
 
liabilities
designated
 
at fair
 
value
14,280
143,635
6,809
9,051
3,577
10,383
5,689
7,116
4,415
11,879
216,834
Derivative
 
financial
instruments
219,578
9
-
-
-
3
3
3
3
44
219,643
Other
 
financial liabilities
277
2,984
-
-
-
554
-
-
-
-
3,815
Total financial
 
liabilities
619,883
261,257
20,033
17,962
14,545
22,770
29,166
25,215
28,031
23,095
1,061,957
Other liabilities
7,547
Total liabilities
1,069,504
Cumulative
 
liquidity
 
gap
(88,474)
(145,577)
(147,515)
(155,240)
(157,585)
(142,660)
(142,880)
(120,347)
(80,198)
51,243
63,779
 
Expected maturity date may differ from
 
the contractual dates, to account for:
 
 
trading portfolio
 
assets and liabilities and derivative financial instruments, which may not be held to maturity as part of the Group’s
 
trading
strategies
 
corporate
 
and retail deposits, reported under
 
deposits
 
at amortised cost, are repayable on demand
 
or at short notice on a contractual basis. In
practice, their behavioural
 
maturity is
 
typically longer than their contractual maturity, and
 
therefore
 
these deposits provide stable funding for the
Group’s
 
operations and liquidity needs because of the broad
 
base of customers, both numerically and by depositor type
 
loans to corporate
 
and retail customers, which are included within loans and advances at amortised cost and financial assets at fair value, may be
repaid earlier in line with terms and conditions of the contract
 
debt securities in issue, subordinated liabilities, and financial liabilities designated at fair value, may
 
include early redemption
 
features.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Treasury and
 
Capital risk
 
153
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Contractual maturity of financial liabilities
 
on an undiscounted basis
 
The table below presents the cash flows payable
 
by the Group
 
under financial liabilities
 
by remaining
 
contractual maturities at the balance sheet
date. The amounts disclosed in the table are the contractual
 
undiscounted cash flows of all financial liabilities (i.e. nominal values).
 
The balances in the below table do not agree
 
directly to the balances in the consolidated balance sheet as the table incorporates
 
all cash
 
flows, on
an undiscounted basis, related to both principal as well
 
as those associated with all future coupon
 
payments.
 
Derivative financial instruments held for trading
 
and trading portfolio
 
liabilities
 
are included in the on demand column
 
at their fair
 
value.
 
Contractual maturity of financial liabilities
 
- undiscounted (audited)
On
demand
Not more
than three
months
Over three
months
 
but
not more
than six
months
Over six
months
 
but
not more
than one
year
Over one
year
 
but not
more than
three years
Over three
years but
not more
than five
years
Over five
years but
not more
than ten
years
Over ten
years
Total
£m
£m
£m
£m
£m
£m
£m
£m
£m
As at 31 December 2019
Deposits at amortised cost
348,337
42,369
10,682
7,946
4,869
532
554
595
415,884
Cash collateral and settlement
balances
3,053
64,297
13
-
-
-
-
-
67,363
Repurchase agreements
 
and
other similar secured borrowing
7
2,758
10
-
11,300
485
-
149
14,709
Debt securities in issue
-
12,850
6,589
7,305
12,330
19,132
16,657
9,398
84,261
Subordinated
 
liabilities
-
207
78
950
9,822
1,286
7,192
3,025
22,560
Trading
 
portfolio liabilities
36,916
-
-
-
-
-
-
-
36,916
Financial liabilities designated at
fair value
13,952
128,064
11,020
10,609
13,507
8,054
7,519
19,392
212,117
Derivative financial instruments
228,617
2
-
8
80
45
99
378
229,229
Other financial liabilities
251
2,372
65
126
1,337
351
565
448
5,515
Total financial liabilities
631,133
252,919
28,457
26,944
53,245
29,885
32,586
33,385
1,088,554
As at 31 December 2018
Deposits at amortised cost
342,967
30,047
7,295
6,924
6,069
546
412
816
395,076
Cash collateral and settlement
balances
3,542
63,985
5
2
-
-
-
-
67,534
Repurchase agreements
 
and
other similar secured borrowing
1,331
5,542
-
-
10,238
1,243
486
-
18,840
Debt securities in issue
26
14,810
5,976
12,914
13,849
13,351
17,639
10,254
88,819
Subordinated
 
liabilities
-
306
-
123
6,147
3,568
7,917
4,413
22,474
Trading
 
portfolio liabilities
37,882
-
-
-
-
-
-
-
37,882
Financial liabilities designated at
fair value
14,280
143,766
6,948
12,732
16,546
7,679
5,008
17,621
224,580
Derivative financial instruments
219,578
12
-
-
6
3
4
59
219,662
Other financial liabilities
277
2,984
-
-
554
-
-
-
3,815
Total financial liabilities
619,883
261,452
20,224
32,695
53,409
26,390
31,466
33,163
1,078,682
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Treasury and
 
Capital risk
 
154
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Maturity of off-balance sheet commitments received and given
The table below presents the maturity split of the Group’s
 
off-balance sheet commitments received and given at the balance sheet date.
 
The
amounts disclosed in the table are the undiscounted
 
cash flows (i.e. nominal values) on the basis of earliest opportunity at which they are available.
 
Maturity analysis of off-balance sheet commitments received (audited)
On
demand
Not more
than three
months
Over three
months
 
but
not more
than six
months
Over six
months
 
but
not more
than nine
months
Over nine
months
 
but
not more
than one
year
Over one
year but
not more
than two
years
Over two
years but
not more
than three
years
Over three
years but
not more
than five
years
Over five
years but
not more
than ten
years
Over ten
years
Total
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
As at 31 December 2019
Guarantees, letters of
credit and credit
insurance
13,091
106
22
81
-
11
12
21
12
34
13,390
Other commitments
received
91
-
-
-
-
-
-
-
-
-
91
Total off-balance sheet
commitments received
13,182
106
22
81
-
11
12
21
12
34
13,481
As at 31 December 2018
Guarantees, letters of
credit and credit
insurance
6,288
110
20
13
16
65
10
33
10
5
6,570
Other commitments
received
93
42
-
-
-
-
-
-
-
-
135
Total off-balance sheet
commitments received
6,381
152
20
13
16
65
10
33
10
5
6,705
 
Maturity analysis of off-balance sheet commitments given (audited)
On
demand
Not more
than three
months
Over three
months
 
but
not more
than six
months
Over six
months
 
but
not more
than nine
months
Over nine
months
 
but
not more
than one
year
Over one
year but
not more
than two
years
Over two
years but
not more
than three
years
Over three
years but
not more
than five
years
Over five
years but
not more
than ten
years
Over ten
years
Total
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
As at 31 December
2019
Contingent liabilities
23,586
366
86
125
140
143
42
28
3
8
24,527
Documentary credits and
other short-term trade
related transactions
1,287
3
1
-
-
-
-
-
-
-
1,291
Standby facilities, credit
lines and other
commitments
328,623
1,133
792
973
639
269
98
273
139
225
333,164
Total off-balance sheet
commitments given
353,496
1,502
879
1,098
779
412
140
301
142
233
358,982
As at 31 December
2018
Contingent liabilities
16,344
1,102
553
145
170
415
435
641
319
179
20,303
Documentary credits and
other short-term trade
related transactions
70
1,263
325
55
14
11
3
-
-
-
1,741
Standby facilities, credit
lines and other
commitments
317,257
1,734
1,311
397
667
311
257
424
19
105
322,482
Total off-balance sheet
commitments given
333,671
4,099
2,189
597
851
737
695
1,065
338
284
344,526
 
 
 
 
 
 
Risk review
Risk performance
Treasury and
 
Capital risk
 
155
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Capital
 
risk
All disclosures in this section (pages 162
 
to 171
 
)
 
are unaudited unless otherwise stated.
Overvie
 
w
 
The CET1 ratio, among
 
other metrics, is a measure of the capital strength and resilience of Barclays. Maintenance of our
 
capital resources is vital in
order
 
to meet the
 
overall capital requirement,
 
and to cover the Group’s
 
current and
 
forecast business needs,
 
and associated risks in order to provide
a viable and sustainable business offering.
 
This section provides an overview
 
of the Group’s: (i) CET1 capital,
 
leverage and own
 
funds and eligible liabilities requirements; (ii) capital resources;
(iii) risk weighted assets (RWAs);
 
(iv) leverage ratios and exposures; and (v) own
 
funds and eligible liabilities.
More details on monitoring
 
and managing capital risk may be found in the risk management sections on pages 194
 
to 196 of the Barclays PLC Pillar
3 Report 201
 
9
 
(unaudited)
 
.
Summary of
 
performance
 
in the
 
period
The Group
 
continues to be in excess of overall capital requirements, minimum leverage
 
requirements and
 
minimum requirements for own funds
and eligible liabilities (MREL).
The CET1 ratio ended
 
the year at 13.8%
 
(December
 
201
 
8:
 
13.2
 
%).
CET1 capital decreased by £0.3bn
 
to £40.8bn. This was driven by underlying
 
profit generation of £5.0bn offset by dividends paid and foreseen
 
of
£2.4bn,
 
the additional provision for PPI
 
of £1.4bn,
 
pension deficit reduction contribution payments of £0.5bn, a decrease in the currency
 
translation
reserve of £0.5bn
 
mainly driven by the depreciation
 
of period end USD against GBP and a loss on the
 
redemption
 
of Additional Tier 1 (AT1)
securities of £0.4bn
 
.
RWAs
 
decreased by £16.8bn
 
to £295.1bn
 
primarily driven by the reduction in the Group’s operational
 
risk RWAs as well as the depreciation of
period end USD against GBP.
The average UK
 
leverage ratio remained
 
stable at 4.5% (December 2018:
 
4.5%) primarily driven by a net increase in AT1 capital, offset by a modest
increase in leverage exposure
 
to £1,143bn
 
(December 2018: £1,110bn).
 
The UK leverage rat
 
io remained stable at
 
5.1% (December
 
2018: 5.1%)
 
.
 
 
Key metrics
Common Equity Tier 1 ratio
13.8%
Average UK leverage ratio
4.5%
UK leverage ratio
5.1%
Own funds and eligible
 
liabilities ratio
32.8%
 
Overall capital
 
requirements
The Group’s
 
Overall Capital Requirement
 
for CET1 is 12.1% comprising
 
a 4.5% Pillar 1 minimum, a
 
2.5% Capital Conservation
 
Buffer (CCB), a 1.5%
Global Systemically Important
 
Institution (G-SII) buffer,
 
a 3.0% Pillar 2A requirement and
 
a 0.6% Countercyclical Capital
 
Buffer (CCyB).
The Group’s
 
CCyB
 
is based on the buffer rate applicable for each jurisdiction
 
in which the Group has exposures. On 28 November
 
2018, the
Financial Policy Committee
 
(FPC) set the CCyB rate for UK exposures
 
at 1%. The buffer rates set by other national authorities for non
 
-UK exposures
are not currently material. Overall,
 
this results in a 0.6% CCyB for the Group for
 
Q419.
 
On 16 December
 
2019, the FPC announced its intention to
increase the CCyB rate for
 
UK exposures from
 
1% to 2%. This
 
will take effect from
 
December 2020
 
and
 
based on current UK exposures, is expected
to increase the Group’s
 
CCyB to approximately 1.1%.
The Group
 
’s
 
Pillar 2A requirement
 
as per the PRA’s Individual Capital Requirement
 
is 5.4%
 
of which at least 56.25%
 
needs to be met with
 
CET1
capital,
 
equating to approximately 3
 
.0%
 
of RWAs. Certain
 
elements of the Pillar 2A requirement
 
are a fixed quantum whilst others are a
 
proportion
of RWAs,
 
based on a point in time assessment. The Pillar 2A requirement
 
is subject
 
to at least annual review.
On 27 June 2019,
 
CRR II came into force amending CRR. As an amending regulation, the existing provisions of CRR
 
apply unless they are amended
by CRR II.
 
Certain provisions took immediate effect and
 
these primarily relate to MREL. Amendments within the capital risk section include changes to
qualifying criteria for CET1, AT1
 
and Tier 2 instruments, the inclusion of additional holdings eligible for deduction, an amendment
 
to the treatment
 
Risk review
Risk performance
Treasury and
 
Capital risk
 
156
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
of deferred
 
tax assets and the introduction of requirements for
 
MREL. Grandfathering and
 
transitional provisions relating to MREL have also been
introduced.
 
Other CRR II amendments are expected to take effect from 28 June
 
2021.
 
Certain aspects of CRR II are dependent
 
on final technical standards to
 
be issued by the European
 
Banking Authority (EBA) and adopted by
 
the
European
 
Commission as
 
well as UK implementation of the rules. The disclosures in the following
 
section reflect Barclays’ interpretation of the
current rules and guidance.
 
Minimum leverage
 
ratio
 
requirements
 
The Group
 
is subject to a
 
leverage ratio requirement
 
of 4.0% as at 31 December 2019.
 
This comprises the 3.25% minimum requirement, a G-SII
additional leverage ratio buffer
 
(G-SII ALRB) of 0.53%
 
and a countercyclical leverage ratio buffer
 
(CCLB) of 0.2%. Although the leverage ratio is
expressed in terms of Tier 1 (T1)
 
capital, 75% of the minimum requirement,
 
equating to 2.4375%,
 
needs to be met with
 
CET1 capital. In addition,
the G-SII ALRB and CCLB must be covered
 
solely with
 
CET1 capital.
 
The CET1 capital held against the 0.53%
 
G-SII ALRB was £6.0bn
 
and against
the 0.2% CCLB was £2.3bn.
 
 
MREL
 
The Group
 
is required to meet the higher of: (i) the MREL set by the Bank of England; and (ii) the requirements in CRR II, both of which have RWA
and leverage based requirements.
 
MREL is subject to phased implementation and will be fully implemented by 1 January
 
2022,
 
at which time
 
the
Group’s
 
indicative MREL is expected to be two times the sum of its Pillar 1 and Pillar 2A requirements,
 
as set by the Bank of England. In addition,
CET1 capital cannot be counted towards
 
both MREL and the capital buffers, meaning that the buffers will effectively be applied
 
above both
 
the
Pillar 1 and Pillar 2A requirements
 
relating to own funds and eligible liabilities. The Bank of England will review the MREL calibration by the end of
2020,
 
including assessing the proposal for Pillar 2A recapitalisation, which may drive
 
a different 1 January 2022
 
MREL than currently proposed.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Treasury and
 
Capital risk
 
157
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Capital
 
resources
 
Capital ratios
a,b,c
As at 31 December
2019
2018
CET1
13.8%
13.2%
Tier 1 (T1)
17.7%
17.0%
Total regulatory
 
capital
21.6%
20.7%
Capital resources (audited)
2019
2018
As at 31 December
£bn
£bn
Total equity excluding
 
non-controlling
 
interests per the balance
 
sheet
64.4
62.6
Less: other equity instruments (recognised
 
as AT1 capital)
(10.9)
(9.6)
Adjustment to retained earnings for
 
foreseeable dividends
(1.1)
(0.7)
Other regulatory adjustments and deductions
Additional value adjustments (PVA)
(1.7)
(1.7)
Goodwill and intangible assets
(8.1)
(8.0)
Deferred tax assets that rely on future profitability
 
excluding temporary
 
differences
(0.5)
(0.5)
Fair value reserves related to
 
gains or losses on cash flow hedges
(1.0)
(0.7)
Gains or losses on liabilities at fair value resulting from own
 
credit
0.3
(0.1)
Defined benefit pension fund assets
(1.6)
(1.3)
Direct and indirect holdings by an institution of own
 
CET1 instruments
(0.1)
(0.1)
Adjustment under IFRS 9 transitional arrangements
1.1
1.3
Other regulatory adjustments
(0.1)
-
CET1 capital
40.8
41.1
AT1 capital
 
Capital instruments and related share premium accounts
10.9
9.6
Qualifying AT1
 
capital (including minority interests) issued by subsidiaries
 
0.7
2.4
Other regulatory adjustments and deductions
(0.1)
(0.1)
AT1 capital
11.4
11.9
T1 capital
52.2
53.0
T2 capital
Capital instruments and related share premium
 
accounts
7.7
6.6
Qualifying T2 capital (including minority
 
interests) issued by subsidiaries
4.0
5.3
Other regulatory adjustments and deductions
(0.3)
(0.3)
Total regulatory capital
63.6
64.6
 
Notes
a
 
CET1, T1 and
 
T2 capital, and
 
RWAs are
 
calculated
 
applying the transitional
 
arrangements of the
 
CRR as amended by CRR II applicable as
 
at the reporting date. This
 
includes IFRS 9
transitional
 
arrangements
 
and the grandfathering
 
of CRR and CRR II non-compliant capital
 
instruments.
 
b
 
The fully
 
loaded CET1 ratio,
 
as is relevant
 
for assessing against the
 
conversion trigger in Barclays
 
PLC AT1 securities, was
 
13.5%, with £39.7bn of CET1 capital and £
 
295.0bn
 
of RWAs calculated
 
without applying
 
the transitional
 
arrangements of the CRR as amended
 
by CRR II applicable as at the
 
reporting date.
c
 
The Group’
 
s
 
CET1 ratio, as is
 
relevant
 
for assessing
 
against the conversion
 
trigger in Barclays
 
Bank PLC T2 Contingent Capital
 
Notes, was 13.8%. For this calculation
 
CET1 capital
and RWAs
 
are calculated
 
applying
 
the transitional arrangements
 
under the CRR, including the IFRS 9 transitional
 
arrangements. The benefit
 
of the Financial Services Authority
(FSA) October 2012
 
interpretation
 
of the transitional
 
provisions, relating to the
 
implementation of CRD IV, expired
 
in December 2017.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Treasury and
 
Capital risk
 
158
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Movement in CET1 capital
2019
£bn
Opening balance as at 1 January
41.1
Profit for the period attributable to equity holders
3.3
Own credit relating to derivative liabilities
0.1
Dividends paid and foreseen
(2.4)
Increase in retained regulatory capital generated from earnings
1.0
Net impact of share schemes
0.3
Fair value through
 
other comprehensive income reserve
0.1
Currency
 
translation reserve
(0.5)
Other reserves
(0.4)
Decrease in other qualifying reserves
(0.5)
Pension remeasurements
 
within reserves
(0.2)
Defined benefit pension fund asset deduction
(0.3)
Net impact of pensions
(0.5)
Goodwill and intangible assets
(0.1)
Adjustment under IFRS 9 transitional arrangements
(0.2)
Decrease in regulatory capital due to adjustments and deductions
(0.3)
Closing
 
balance as at
 
31 December
40.8
 
CET1 capital decreased £0.3bn
 
to £40.8bn
 
(December 2018:
 
£41.1bn).
 
 
£3.3bn
 
of capital generated
 
from profits was partially offset
 
by £2.4bn
 
of regulatory dividends
 
paid and foreseen including
 
£0.8bn of AT1
 
coupons
paid. Other movements in the period
 
were:
 
 
A £0.5bn decrease
 
in the currency translation reserve mainly driven
 
by the depreciation of period
 
end USD against GBP
 
A £0.5bn decrease
 
as a result of movements relating to pensions, largely due to deficit contribution
 
payments of £0.25bn
 
in April 2019 and
September 2019
 
A £0.4bn
 
loss on the
 
redemption
 
of AT1 securities
 
 
A £0.2bn decrease
 
in the IFRS
 
9 transitional add back primarily due to the
 
change in the phasing of transitional relief from
 
95% in 2018
 
to 85% in
2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Treasury and
 
Capital risk
 
159
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Risk
 
weighted assets
Risk weighted assets (RWAs) by risk type and business
Credit risk
Counterparty
 
credit risk
Market risk
Operational
risk
Total RWAs
Std
IRB
Std
IRB
Settlement Risk
CVA
Std
IMA
As at 31 December 2019
£bn
£bn
£bn
£bn
£bn
£bn
£bn
£bn
£bn
£bn
Barclays UK
5.2
57.5
0.2
 
-
 
 
-
 
 
-
 
0.2
 
-
 
11.8
74.9
Corporate
 
and Investment Bank
25.7
62.1
12.1
16.9
0.3
2.5
12.8
17.6
21.5
171.5
Consumer, Cards and
 
Payments
27.2
2.7
0.1
 
-
 
 
-
 
 
-
 
 
-
 
0.1
7.6
37.7
Barclays International
52.9
64.8
12.2
16.9
0.3
2.5
12.8
17.7
29.1
209.2
Head Office
5.1
5.8
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 
0.1
11.0
Barclays Group
63.2
128.1
12.4
16.9
0.3
2.5
13.0
17.7
41.0
295.1
As at 31 December 2018
Barclays UK
3.3
59.7
0.2
-
-
0.1
0.1
-
11.8
75.2
Corporate
 
and Investment Bank
26.1
64.8
9.8
14.9
0.2
3.3
13.9
16.2
21.7
170.9
Consumer, Cards and
 
Payments
29.5
2.2
0.1
0.1
-
-
-
0.6
7.3
39.8
Barclays International
55.6
67.0
9.9
15.0
0.2
3.3
13.9
16.8
29.0
210.7
Head Office
4.3
5.8
-
-
-
-
-
-
15.9
26.0
Barclays Group
63.2
132.5
10.1
15.0
0.2
3.4
14.0
16.8
56.7
311.9
 
Movement analysis of risk weighted assets
Credit risk
 
Counterparty
 
credit risk
Market risk
Operational risk
Total RWAs
Risk weighted assets
£bn
£bn
£bn
£bn
£bn
As at 31 December 2018
195.6
28.8
30.8
56.7
311.9
Book size
-
3.9
(1.0)
(1.5)
1.4
Acquisitions and disposals
(0.8)
-
-
-
(0.8)
Book quality
(2.9)
0.3
-
-
(2.6)
Model updates
1.5
0.5
-
-
2.0
Methodology
 
and policy
0.8
(1.4)
0.9
(14.2)
(13.9)
Foreign
 
exchange movement
a
(2.9)
-
-
-
(2.9)
As at 31 December 2019
191.3
32.1
30.7
41.0
295.1
 
Note
a
 
Foreign
 
exchange movement
 
does not include
 
foreign exchange
 
for counterparty
 
credit risk or market
 
risk.
 
RWAs
 
decreased £16.8bn
 
to £295.1
 
bn:
 
 
‘Book size’ increased RWAs
 
£1.4
 
bn primarily due to an increase in trading activity, offset by
 
a decrease in operational risk as per the standardised
approach
 
 
‘Book quality’ decreased RWAs
 
£2.6bn primarily
 
due to changes in risk profile
 
‘Model updates’ increased RWAs
 
£2.0bn primarily
 
due to the recalibration of modelled wholesale RWAs
 
‘Methodology
 
and Policy’ decreased RWAs
 
£13.9
 
bn primarily due to removal of the operational risk floor
 
‘Foreign exchange
 
movements’ decreased RWAs
 
by £2.9bn
 
primarily due to the depreciation of period
 
end USD against
 
GBP
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Treasury and
 
Capital risk
 
160
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Leverage ratios
 
and exposures
 
The Group
 
is required to disclose an average UK leverage ratio which
 
is based on capital on the last day of each month in the quarter and
 
an
exposure measure
 
for each day in the quarter.
 
The Group
 
is also
 
required
 
to disclose
 
a UK leverage
 
ratio based on capital and
 
exposure on
 
the last
day of the quarter.
 
Both approaches
 
exclude qualifying claims on central banks from the leverage exposures.
 
Leverage ratios
a,b
2019
2018
As at 31 December
£bn
£bn
Average UK leverage ratio
4.5%
4.5%
Average
 
T1 capital
c
51.8
50.5
Average
 
UK leverage exposure
1,143
1,110
UK leverage ratio
5.1%
5.1%
CET1 capital
40.8
41.1
AT1 capital
10.7
9.5
T1 capital
c
51.6
50.6
UK leverage exposure
1,008
999
UK leverage exposure
2019
2018
As at 31 December
£bn
£bn
Accounting assets
Derivative financial instruments
229
223
Derivative cash collateral
57
48
Securities financing transactions (SFTs)
d
111
130
Loans and advances and other assets
d
743
732
Total IFRS assets
1,140
1,133
Regulatory consolidation
 
adjustments
(1)
(2)
Derivatives adjustments
Derivatives netting
(207)
(202)
Adjustments to cash collateral
(48)
(42)
Net written credit protection
14
19
Potential future exposure
 
(PFE) on derivatives
119
123
Total derivatives adjustments
(122)
(102)
SFTs adjustments
18
17
Regulatory deductions and other adjustments
(12)
(11)
Weighted off-balance sheet commitments
105
108
Qualifying central bank claims
(120)
(144)
UK leverage exposure
b
1,008
999
 
Notes
a
 
Fully loaded
 
average UK leverage ratio was
 
4.4%,
 
with £50.7bn of T1 capital
 
and £1,142
 
bn of leverage
 
exposure.
 
Fully loaded
 
UK leverage ratio was 5.0%, with
 
£50.4bn of T1
capital and
 
£1,007bn of leverage exposure.
 
Fully loaded
 
UK leverage ratios
 
are calculated
 
without applying the
 
transitional arrangements
 
of the CRR as amended by CRR II
applicable as
 
at the reporting
 
date.
 
b
 
Capital and
 
leverage measures
 
are calculated
 
applying the transitional
 
arrangements of the
 
CRR as amended by CRR II applicable
 
as at the reporting date
 
.
c
 
The T1 capital
 
is calculated
 
in line with the PRA Handbook.
d
 
Comparative numbers
 
have been revised
 
to reflect
 
the allocation of margin
 
lending from Loans and
 
advances and other assets
 
to SFTs.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Treasury and
 
Capital risk
 
161
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
The averag
 
e
 
UK leverage ratio remained
 
stable at 4.5%
 
(December
 
2018:
 
4.5%). T1 capital increased £1.4bn
 
to £51.8b
 
n, which included a net
increase in AT1
 
capital, partially offset by
 
a modest increase in exposure of £33bn
 
to £1,143
 
bn primarily
 
driven by
 
SFTs and Weighted off-balance
sheet commitments.
 
The UK leverage ratio also remained
 
stable at 5.1%
 
(December
 
2018:
 
5.1%). T1 capital increased £1.0bn
 
to £51.6
 
bn, which included a net increase
in AT1 capital. The UK leverage
 
exposure increased
 
£9bn to £1,008
 
bn primarily
 
driven by
 
Loans and advances and other assets.
 
 
The difference between
 
the average UK leverage
 
ratio and the UK leverage ratio was primarily driven by
 
lower trading
 
portfolio assets,
 
settlement
exposures and SFT exposures at quarter
 
end.
 
The Group
 
also discloses a CRR
 
leverage ratio
a
 
within its additional regulatory
 
disclosures prepared
 
in accordance with EBA guidelines on disclosure
under Part
 
Eight of the CRR (see
 
Barclays
 
PLC Pillar 3 Report 2019
 
(unaudited)
 
,
 
due to be published on 13 February 2020
 
and which will be
available at home.barclays/annualreport).
 
Note
a
 
CRR leverage ratio as amended
 
by CRR II applicable as
 
at the reporting
 
date.
 
Minimum requirement
 
for own
 
funds and
 
eligible
 
liabilities
 
CRR
 
II
 
requirements
 
relating
 
to
 
own
 
funds
 
and
 
eligible
 
liabilities came into
 
effect
 
from
 
27
 
June
 
2019.
 
Eligible liabilities have
 
been
 
calculated
reflecting the
 
Group’s
 
interpretation
 
of the
 
current
 
rules and
 
guidance.
 
Certain aspects of CRR II
 
are dependen
 
t
 
on final technical standards to
 
be
issued by the EBA and adopted by
 
the European Commission as well as UK implementation of the rules.
 
 
 
Own funds and eligible
 
liabilities ratios
a
As at 31 December
2019
2018
c
CET1 capital
13.8%
13.2%
AT1 capital instruments and related share
 
premium accounts
b
3.6%
3.1%
T2 capital instruments and related share premium
 
accounts
b
2.5%
2.1%
Eligible liabilities
11.2%
9.7%
Total Barclays PLC (the Parent company) own funds and eligible
 
liabilities
31.2%
28.1%
Qualifying AT1
 
capital (including minority interests) issued by subsidiaries
0.2%
0.7%
Qualifying T2 capital (including minority
 
interests) issued by subsidiaries
1.3%
1.6%
Total own funds and eligible liabilities,
 
including eligible Barclays Bank PLC instruments
32.8%
30.5%
Own funds and eligible
 
liabilities
a
£bn
£bn
c
CET1 capital
40.8
41.1
AT1 capital instruments and related share
 
premium accounts
b
10.7
9.6
T2 capital instruments and related share premium
 
accounts
b
7.4
6.6
Eligible liabilities
33.0
30.4
Total Barclays PLC (the Parent company) own funds and eligible
 
liabilities
92.0
87.7
Qualifying AT1
 
capital (including minority interests) issued by subsidiaries
0.7
2.3
Qualifying T2 capital (including minority
 
interests) issued by subsidiaries
4.0
5.1
Total own funds and eligible liabilities,
 
including eligible Barclays Bank PLC instruments
96.7
95.1
Total RWAs
a
295.1
311.9
 
Notes
a
 
CET1, T1 and
 
T2 capital, and
 
RWAs are
 
calculated
 
applying the transitional
 
arrangements of the
 
CRR as amended by CRR II applicable as
 
at the reporting date. This
 
includes IFRS 9
transitional
 
arrangements
 
and the grandfathering
 
of CRR and CRR II non-compliant capital
 
instruments.
b
 
Includes
 
other AT1 capital
 
regulatory adjustments
 
and deductions of £0.1bn (included
 
in AT1 issued
 
by subsidiaries in December 2018: £0.1bn), and
 
other T2 credit
 
risk
adjustments
 
and deductions
 
of £0.2bn (included in T2 issued
 
by subsidiaries
 
in December 2018: £0.3bn).
c
 
The comparatives
 
are based on the
 
Bank of Englan
 
d's statement
 
of policy on MREL.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Treasury and
 
Capital risk
 
162
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Foreign exchange risk
 
(audited)
The Group
 
is exposed to two sources of foreign exchange risk.
 
a) Transactional foreign
 
currency exposure
 
Transactional foreign
 
currency
 
exposures represent exposure
 
on banking assets
 
and liabilities, denominated in currencies other than the functional
currency
 
of the transacting entity.
 
The Group’s
 
risk management policies are designed to prevent
 
the holding of significant open positions in foreign currencies outside the trading
portfolio managed
 
by Barclays International
 
which is monitored through
 
VaR.
 
Banking book
 
transactional foreign exchange
 
risk outside of
 
Barclays International is monitored on
 
a daily basis by the market risk function and
minimised by the businesses.
 
b) Translational foreign
 
exchange exposure
 
The Group’s
 
investments in overseas subsidiaries and branches
 
create capital resources denominated in foreign
 
currencies, principally USD and
EUR. Changes in the GBP value of the net investments
 
due to foreign currency
 
movements are captured in the currency translation reserve,
resulting in a movement in CET1 capital.
 
The Group’s
 
strategy is to minimise the volatility of the capital ratios caused by foreign
 
exchange movements,
 
by matching the CET1 capital
movements to the reva
 
luation of the Group’s foreign
 
currency
 
RWA exposures.
 
Functional currency of operations (audited)
Foreign
 
currency
net investments
Borrowings
which hedge the
net investments
Derivatives
which hedge the
net investments
Structural
currency
exposures pre-
economic
hedges
Economic
hedges
Remaining
structural
currency
exposures
£m
£m
£m
£m
£m
£m
As at 31 December 2019
USD
25,607
(10,048)
(1,111)
14,448
(5,339)
9,109
EUR
3,068
(3)
-
3,065
(1,122)
1,943
JPY
533
-
-
533
-
533
Other currencies
2,001
-
(34)
1,967
-
1,967
Total
31,209
(10,051)
(1,145)
20,013
(6,461)
13,552
As at 31 December 2018
USD
28,857
(12,322)
(2,931)
13,604
(4,827)
8,777
EUR
2,672
(3)
-
2,669
(2,146)
523
JPY
489
-
-
489
-
489
Other currencies
2,026
-
(37)
1,989
-
1,989
Total
34,044
(12,325)
(2,968)
18,751
(6,973)
11,778
 
Economic hedges
 
relate to exposures arising on foreign currency
 
denominated preference share and AT1 instruments. These are accounted for
 
at
historical cost under
 
IFRS and do not qualify as hedges for accounting purposes. The gain or loss arising from changes in the GBP value of these
instruments is recognised
 
on redemption
 
in retained earnings.
 
During 2019,
 
total structural currency exposure
 
net of hedging instruments increased by £1.8bn
 
to £13.6bn (2018:
 
£11.8bn). Foreign
 
currency
net investments decreased
 
by £2.8bn
 
to £31.2bn
 
(2018: £34.0bn) driven
 
predominantly by a £3.2bn decrease in USD offset
 
by a £0.
 
4bn increase in
EUR. The hedges associated with these investments decreased
 
by £4.1
 
bn to £11.2
 
bn (2018: £15.3bn).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Treasury and
 
Capital risk
 
1.1%
5.8%
13.6%
24.7%
29.9%
24.9%
0-10 Years
11-20
 
Years
21-30
 
Years
31-40
 
Years
41-50
 
Years
51 Years +
163
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Pension risk
 
review
The UK Retirement Fund (UKRF)
 
represents approximately
 
97% (2018:
 
97%) of the Group’s total retirement benefit obligations globally. As such
this risk review section focuses exclusively on
 
the UKRF. The UKRF is closed to new entrants and there is no
 
new final salary benefit being accrued.
Existing active members accrue
 
a combination
 
of a cash balance benefit
 
and a defined contribution
 
element. Pension risk arises as the
 
market value
of the pension fund assets may decline, investment
 
returns may reduce
 
or the estimated
 
value of the pension liabilities may increase.
Refer to page 196
 
of the Barclays PLC Pillar 3 Report 2019
 
(unaudited)
 
for more information on how
 
pension risk
 
is managed.
 
Assets
The Trustee Board
 
of the UKRF defines its overall long-term investment strategy with investments across a
 
broad
 
range of asset classes.
 
This
results in an appropriate
 
mix of return seeking assets as well as liability matching assets to better match future pension obligations. The two largest
market risks within the asset portfolio are interest
 
rates and equities. The split of scheme assets is shown within Note
 
33.
 
The fair value of the UKRF
assets was £31.4bn
 
as at
 
31 December
 
2019
 
(2018:
 
£29.0bn).
 
Liabilities
The UKRF retirement benefit obligations are a series of future cash
 
flows with relatively long duration.
 
On an IAS 19 basis these cash flows are
sensitive to changes in the expected long
 
-term price inflation rate (RPI) and the discount rate (GBP AA corporate
 
bond yield):
 
An increase in long
 
-term expected inflation corresponds
 
to an increase in liabilities;
 
A decrease in the discount rate corresponds
 
to an increase in liabilities.
Pension risk is generated
 
through
 
the Group’s defined benefit schemes and this
 
risk is set to reduce
 
over time as the main defined benefit scheme is
closed to new entrants. The chart below outlines the shape of the UKRF’s liability cash flow profile as at 31
 
December 2019
 
that takes
 
account of
the future inflation indexing of payments to beneficiaries. The majority
 
of the cash flows (approximately
 
93%) fall between 0 and 40 years
 
,
 
peaking
between 11
 
and 20 years and reducing
 
thereafter. The shape may vary depending
 
on changes to inflation
 
and longevity expectations and any
members who elect to transfer out. Transfers
 
out will bring forward
 
the liability
 
cash flows.
For more
 
detail on the UKRF’s financial and demographic
 
assumptions see
 
Note 33
 
to the financial statements.
 
Proportion
 
of liability cash flows
 
 
fy2019arbplcp174i0.jpg
 
Risk review
Risk performance
Treasury and
 
Capital risk
 
164
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
 
The graph
 
above shows the evolution of the UKRF’s net IAS 19 position over
 
the last two years. During 2019
 
the net improvement in the IAS 19
position was largely driven by
 
bank contributions. Credit spreads tightening during
 
the year had a negative impact which was broadly offset by
changes in other market levels, in particular equity prices and interest rates, and
 
updates to demographic
 
assumptions.
Refer to Note 33
 
for the sensitivity of the UKRF to changes in key assumptions.
 
Risk measurement
In line with Barclays’ risk management framework
 
the assets
 
and liabilities of the UKRF are modelled within a VaR
 
framework
 
to show the volatility
of the pension position at a total portfolio level. This enables the risks, diversification and
 
liability matching characteristics of the UKRF obligations
and investments to be adequately captured. VaR
 
is measured and monitored
 
on a monthly basis. Risks
 
are reviewed and
 
reported
 
regularly at
forums including
 
the Board Risk Committee, the Group
 
Risk Committee, the Pensions Management Group
 
and the Pension Executive Board.
 
The
VaR model takes into account
 
the valuation of the liabilities on an IAS 19 basis (see Note
 
33). The Trustee receives quarterly
 
VaR measures on a
funding basis.
The pension liability is also sensitive to post-retirement
 
mortality assumptions which are reviewed regularly.
 
See Note 33 for more details.
In addition, the impact of pension risk to the Group
 
is taken into account as part of the stress testing process. Stress testing is performed
 
internally
on at least an annual basis. The UKRF exposure
 
is also included
 
as part of regulatory
 
stress
 
tests.
 
Barclays defined benefit pension
 
schemes affects capital in two ways:
 
An IAS 19 deficit is treated as a liability on the
 
Group’s
 
balance sheet. Movement in a deficit due to remeasurements, including actuarial losses,
are recognised
 
immediately through Other Comprehensive
 
Income and as such reduces shareholders’ equity and CET1 capital.
 
An IAS 19 surplus
is treated as an asset on the balance sheet and increases shareholders’
 
equity; however,
 
it is deducted for the purposes
 
of determining CET1
capital.
 
In the Group’s statutory balance sheet an IAS
 
19 surplus or
 
deficit is partially offset by a deferred tax liability or asset respectively.
 
These may or
may not be recognised
 
for calculating CET1 capital depending
 
on the overall deferred
 
tax position of the
 
Group
 
at the
 
particular time.
Pension risk is taken into
 
account in the Pillar 2A capital assessment undertaken by the PRA at least annually. The Pillar
 
2A requirement
 
forms part
of the Group’s
 
Overall Capital Requirement for CET1 capital, Tier 1 capital and total capital. More detail on minimum
 
regulatory
 
requirements can
be found on
 
page 168
 
.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Treasury and
 
Capital risk
 
165
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Interest rate
 
risk
 
in the
 
banking book
All disclosures in this section (pages 165
 
to 166
 
)
 
are unaudited unless otherwise stated.
Overview
The treasury and capital risk framework covers interest rate sensitive
 
exposures held in the banking book, mostly relating to accrual accounted and
FVOCI instruments. The potential
 
volatility of net interest
 
income is measured by an Annual Earnings at Risk (AEaR) metric which is
 
monitored
regularly and reported
 
to senior management
 
and the Barclays PLC Board Risk
 
Committee as part of the
 
limit monitoring framework.
For further
 
detail on the interest rate risk in the banking book governance
 
and framework refer to pages 196
 
to 197 of the Barclays PLC Pillar 3
Report 2019
 
(unaudited).
Summary of
 
performance
 
in the
 
period
Annual Earnings at Risk
 
(AEaR), is a key measure of interest
 
rate risk in the banking book (IRRBB).
 
Key metrics
AEaR
+£45m
AEaR across the Group
 
from a positive 25bps shock to forward
 
interest rate curves.
 
 
Net interest
 
income sensitivity
The table below shows a sensitivity
 
analysis on pre-tax net interest income for non-traded financial assets
 
and liabilities,
 
including the effect of any
hedging. NII
 
sensitivity
 
uses the
 
Annual Earnings at Risk
 
(AEaR) metric as described on page 196 of the Barclays PLC Pillar 3 Report 2019
 
(unaudited).
Note that this metric
 
assumes an instantaneous parallel
 
change to forward
 
interest rate curves.
 
The model does not apply floors
 
to shocked market
rates, but does recognize
 
contractual product specific
 
interest rate floors where relevant. The main model assumptions
 
are: (i) one-year ahead time
horizon; (ii) balance sheet is
 
held constant; (iii)
 
balances are adjusted for assumed behavioural profiles (i.e. considers that
 
customers may prepay
 
the
mortgage
 
s
 
before the contractual maturity); and (iv) behavioural
 
assumptions are kept unchanged in
 
all rate
 
scenarios.
Net interest income sensitivity (AEaR) by business
 
unit
a,b,c,d
 
(audited)
Barclays UK
Barclays
International
Head Office
Total
£m
£m
£m
£m
As at 31 December 2019
+25bps
16
25
4
45
-25bps
(57)
(74)
(4)
(135)
As at 31 December 2018
+25bps
28
55
5
88
-25bps
(71)
(73)
(5)
(149)
 
Notes
a
 
Excludes
 
minor investment
 
banking business.
b
 
Expected
 
fixed
 
rate mortgage pipeline
 
completions
 
in Barclays
 
UK assumed to be consistent
 
with level and timing of pipeline hedging.
c
 
The Group’s
 
customer banking
 
book hedging activity
 
is risk
 
reducing from an
 
NII sensitivity
 
perspective. The hedges in place
 
remove interest
 
rate risk and smooth income over the
medium term.
 
The NII sensitivity
 
for the Group at 31 December 2019 without
 
hedging in
 
place for +/-25bp rate
 
shocks would
 
be £140m/£(229)m respectively.
d
 
NII sensitivity
 
for December 2018 restated
 
due to increased
 
portfolio coverage, primarily the
 
inclusion of the Treasury
 
portfolio.
 
NII asymmetry arises due to the current low
 
interest rate levels as some customer products
 
have embedded
 
floors.
 
NII sensitivity
 
to a +25bp
 
shock
to rates has decreased year
 
on year as a result of actions taken to reduce the exposure
 
to falling interest rates and increased bond holding
 
s
 
outright
in the liquidity pool.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk review
Risk performance
Treasury and
 
Capital risk
 
166
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Net interest income sensitivity (AEaR) by currency
a,b
 
(audited)
2019
2018
+25 basis
 
points
-25 basis
 
points
+25 basis points
-25 basis points
As at 31 December
£m
£m
£m
£m
GBP
38
 
(93)
56
 
(112)
USD
29
 
(32)
36
 
(37)
EUR
(10)
(20)
(5)
3
 
Other currencies
(12)
10
 
1
 
(3)
Total
45
 
(135)
88
 
(149)
 
 
Notes
a
 
Excludes
 
minor investment
 
bank businesses.
b
 
NII sensitivity
 
for December 2018 restated
 
due to increased
 
portfolio coverage,
 
primarily
 
the inclusion
 
of the Treasury portfolio.
 
Analysis of
 
equity
 
sensitivity
 
Equity sensitivity measures the overall impact
 
of a +/-
 
25bps movement
 
in interest rates on retained earnings, fair value through other
comprehensive
 
income (FVOCI), cash flow hedge reserves
 
and pensions. For non
 
-NII items
 
a DV01
 
metric is
 
used, which is an indicator of the shift
in value for a 1 basis point movement
 
in the yield curve.
 
Analysis of equity sensitivity
a
 
(audited)
2019
2018
+25 basis
points
-25 basis
points
+25 basis
points
-25 basis
points
As at 31 December
£m
£m
£m
£m
Net interest income
45
(135)
88
(149)
Taxation effects
 
on the above
(11)
34
(22)
37
Effect on profit for the year
34
(101)
66
(112)
As percentage of net profit after tax
1.0%
(3.0%)
2.6%
(4.4%)
Effect on profit for
 
the year (per above)
34
(101)
66
(112)
Fair value through
 
other comprehensive income reserve
(321)
329
(253)
260
Cash flow hedge reserve
(534)
534
(574)
574
Taxation effects
 
on the above
214
(216)
207
(209)
Effect on equity
(607)
546
(554)
513
As percentage of equity
(0.9%)
0.8%
(0.9%)
0.8%
 
Note
 
a
 
December 2018
 
sensitivities
 
restated due
 
to increased portfolio coverage, primarily
 
the inclusion of the
 
Treasury
 
portfolio.
Movements in the FVOCI reserve
 
impact CET1 capital. However,
 
movements in the cash flow hedge reserve and pensions remeasurement
 
reserve
recognised in FVOCI do
 
not affect CET1 capital.
 
 
Volatility
 
of the
 
FVOCI portfolio
 
in the
 
liquidity
 
pool
 
Changes in value of FVOCI exposures flow directly through capital
 
via the FVOCI reserve. The volatility
 
of the value of the
 
FVOCI investments in the
liquidity pool is
 
captured and
 
managed through a value measure rather than an earning
 
measure, i.e.
 
non-traded market risk VaR.
Although the underlying methodology to calculate the non-traded VaR is
 
identical to
 
the one used in traded management VaR,
 
the two measures
 
are
not directly comparable. The non-
 
traded VaR represents the
 
volatility
 
to capital
 
driven by
 
the FVOCI exposures. These exposures are in the
 
banking
book and do
 
not meet the criteria
 
for trading book treatment.
 
Analysis of volatility of the FVOCI portfolio in the liquidity
 
pool
2019
2018
Average
High
Low
Average
High
Low
For the year ended 31 December
£m
£m
£m
£m
£m
£m
Non-traded
 
market value at risk (daily, 95%)
45
53
35
45
61
32
 
DVaR trended
 
upwards
 
for the first three quarters of 2019
 
as outright duration and asset swap spread risk
 
increased. The liquidity pool de-
 
risked
substantially in early Q4, causing an associated reduction
 
in DVaR.
 
 
 
 
Risk review
Risk performance
Operational risk
 
167
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
All disclosures in this section are unaudited
 
unless otherwise stated.
Overview
Operational risks are inherent in the Group’s
 
business activities and it is not cost effective or possible to attempt to
 
eliminate all operational risks.
The Operational Risk Framework
 
is therefore focused on identifying operational
 
risks,
 
assessing them and
 
managing them within the Group’s
approved
 
risk appetite.
 
The Operational Risk principal risk comprises the following risks:
 
Data Management & Information
 
Risk;
 
Financial Reporting Risk; Fraud Risk;
Payments Process Risk;
 
People Risk; Premises Risk; Physical Security Risk; Supplier Risk;
 
Tax Risk; Technology
 
Risk;
 
Transaction Operations
 
Risk and
Execution Risk. The operational risk profile is also informed
 
by a number
 
of risk themes:
 
Cyber, Data, and Resilience. These
 
represent threats to the
Group
 
that extend across multiple risk
 
types, and therefore
 
require
 
an integrated risk management approach.
For definitions of these risks refer
 
to pages 199 to 200
 
of the Barclays PLC Pillar 3 Report 2019.
 
In order to provide complete coverage
 
of the
potential adverse impacts on
 
the Group arising from
 
operational risk, the operational risk taxonomy extends beyo
 
nd the risks
 
listed above to cover
operational risks associated with other
 
principal risks too.
This section provides an analysis of the Group’s
 
operational risk profile, including events above the Group’s
 
reportable
 
threshold, which have had
 
a
financial impact in 2019.
 
The Group’s
 
operational risk profile is informed by bottom
 
-up risk assessments
 
undertaken by
 
each business unit
 
and top-
down qualitative review by the
 
Operational Risk specialists for each risk type. Fraud, Transaction
 
Operations and Technol
 
ogy continue to be
highlighted as key operational
 
risk exposures.
 
For information
 
on conduct
 
risk events see
 
page 170
 
.
Summary of
 
performance
 
in the
 
period
During 2019,
 
total operational risk losses
a
 
decreased to £169m
 
(2018:
 
£230m) and the number of recorded events for 2019
 
(2,098) was at the
same level as 2018
 
(2,068). The total operational risk losses
 
for the year were mainly driven
 
by events falling within the Execution, Delivery
 
and
Process Management and External Fraud
 
categories, which tend to be high volume but low impact events.
Key metrics
84%
of the Group’s
 
net reportable operational
 
risk events had a
 
loss value of £50,000
 
or less
67%
of events by number
 
are due to external fraud
60%
of losses are from ev
 
ents aligned to Execution, Delivery and Process Management
 
Operational risk
 
profile
Within operational risk, there are a large number
 
of small
 
risk events.
 
In 2019,
 
84% (2018:
 
84%) of the Group’s reportable operational
 
risk events
by volume had
 
a value of less than £50,000 each.
 
Cumulatively, events under
 
this £50,000 threshold accounted
 
for only 19% (2018:
 
14%) of the
Group’s
 
total net operational risk losses.
 
A small proportion
 
of operational risk events have a material impact on the financial results of the Group.
The analysis below presents the Group’s
 
operational risk events by Basel event category:
 
 
 
 
 
 
 
 
 
 
 
 
 
fy2019arbplcp178i0.jpg
 
Risk review
Risk performance
Operational risk
 
168
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
 
Note
 
a
 
The data
 
disclosed
 
includes
 
operational risk losses for reportable
 
events having
 
impact of > £10,000 and excludes
 
events
 
that are conduct or legal risk,
 
aggregate and boundary
events.
 
A boundary event
 
is an operational
 
risk event that results
 
in a credit risk impact. Due to the
 
nature of risk events that
 
keep evolving, prior year losse
 
s
 
have been updated.
 
Execution, Delivery and Process Management impacts
 
decreased to £101m
 
(2018:
 
£130m)
 
and accounted for 60% (2018:
 
57%) of total
operational risk losses. The events in this category
 
are typical of the
 
banking industry as a whole where
 
high volumes of transactions are
processed on a daily basis, mapping
 
mainly to Barclays Transaction Operations risk type. The overall
 
frequency
 
of events in this
 
category
remained stable year
 
-on-year
 
at 28% of total
 
events by volume (2018:
 
31%).
 
External Fraud remains the category with the highest frequency
 
of events at 67% of total events in 2019
 
(2018:
 
62%). In this
 
category,
 
high
volume, low value events are driven
 
by transactional fraud often related to debit and credit card
 
usage. Ratio of losses in this category increased
to 28% of total 2019
 
losses (2018:
 
21%), driven
 
mainly by increased fraud attacks on the Group’s systems following implementation of Cheque
Imaging as part of the clearing process.
 
 
Business Disruption and System Failures
 
accounted for an increased
 
share at 11% of total impacts (2018:
 
6%), although actual losses
 
remained
broadly
 
stable at £18m (2018:
 
£14m)
 
and volume of events fell slightly to
 
86 (2018:
 
99).
 
Employment Practices and Workplace
 
Safety impacts show a significant decrease to £1m
 
(2018:
 
£35m) accounting for 0.4%
 
of total
 
operational
risk losses in 2019
 
(2018:
 
15%), while volume of events in this category also
 
decreased to 17
 
in 2019
 
(2018:
 
46). The 2018
 
loss was
 
mainly
incurred
 
from a low number
 
of events with significant
 
impacts (three single legacy events relating to closed businesses accounted
 
for 90% of
total impacts).
Investment continues to be made in improving
 
the control environment across the Group.
 
Particular areas of focus include new and enhanced
fraud prevention
 
systems
 
and tools to combat the increasing level of fraud
 
attempts being made and to minimise any disruption
 
to genuine
transactions. Fraud remains an industry wide threat and the
 
Group
 
continues to work closely with external partners on various preventio
 
n
initiatives.
 
Operational Resilience is a key
 
area of focus for the Group.
 
Disruption to our business activities is a material inherent risk within the Group
 
and
across the financial services industry,
 
whether arising through
 
impacts on our technology systems, our real estate services,
 
availability of personnel
or services supplied by third parties. Failure
 
to build resilience and recovery
 
capabilities
 
into our business activities may result in significant
customer detriment, costs to reimburse losses incurred
 
by the Group’s
 
customers, market impact and reputational damage. In common
 
with the
rest of the Financial Services industry, the
 
Group
 
expects continued regulatory
 
scrutiny in relation to resilience.
 
Technology,
 
resilience and cyber
security risks evolve rapidly
 
so the Group maintains continued focus and investment in our
 
control environment
 
to manage these risks,
 
and actively
partners with peers and relevant organisations to
 
understand and disrupt
 
threats originating outside the Group.
 
Risk review
Risk performance
Operational risk
 
169
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Cyber-attacks are a global threat
 
that are inherent across all industries. The financial sector remains a primary
 
target for cyber criminals, hostile
nation states, opportunists and hacktivists.
 
There are high levels of sophistication in criminal hacking for
 
the purpose of stealing money, stealing,
destroying or
 
manipulating data (including customer data) and/or
 
disrupting operations, where multiple threats exist
 
including threats arising from
malicious emails, distributed denial of service (DDoS) attacks,
 
payment system compromises,
 
insider attackers, supply chain and vulnerability
exploitation. Cyber events can have a compounding
 
impact on services and customers, e.g.
 
data breaches in social networking sites, retail
companies and payments networks.
 
The threat of cyber
 
-attack is recognised by the Group
 
along with the significant
 
potential impact on all areas of its business ranging
 
from
operational matters to its scrutiny
 
of its relationships with its suppliers, customers and other external stakeholders. Regulators in the UK, US
 
and
Europe
 
continue to focus on cyber
 
-security risk management in the financial
 
sector and have highlighted the need for
 
financial institutions to
improve
 
their monitoring and
 
control of, and resilience (particularly of critical services) to cyber-attacks, and to provide timely notification of them,
as appropriate. This has resulted in a number
 
of proposed laws, regulations and other requirements
 
that necessitate
 
implementation of a variety of
increased controls and enhancement
 
activities for regulated Group
 
entities.
 
These include, among
 
others, the adoption of cyber security policies
and procedures
 
meeting specified criteria,
 
minimum required
 
security measures, controls and procedures for
 
enhanced reporting and public
disclosures, compliance certification requirements, and other
 
cyber and information
 
risk governance measures. The Group
 
continues to
 
use an
intelligence-driven defence approach,
 
analysing external events for current and emerging
 
cyber threats which allows
 
the delivery of proactive
counter measures; the Group
 
also completes cyber threat scenarios and incident playbooks to assess our security posture
 
and business impacts
and runs an internal adversarial capability which simulates hackers to proactively
 
test controls and r
 
esponses. The increased control environment
will continue to enhance our
 
security posture and our ability to better protect the organisation and our
 
customers. Cyber-attacks however
 
are
increasingly sophisticated and there can be no assurance that the measures
 
implemented will be fully effective to prevent
 
or mitigate future
attacks, the consequences of which could
 
be significant to the Group. Furthermore,
 
such measures have resulted and will result
 
in increased
technology and
 
other costs in connection with cyber security mitigation
 
and compliance for the Group.
For further
 
information, refer
 
to operational risk management section (pages 105
 
-106).
 
Risk review
Risk performance
Model risk,
 
Conduct
 
risk,
 
Reputation risk and
 
Legal risk
 
 
170
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
All disclosures in this section are unaudited
 
unless otherwise stated.
Model risk
 
Since the inception of model risk as a principal risk, key achievements
 
to date include creating a complete model inventory
 
across the firm, roll out
of a robust Model Risk Management (MRM) framework
 
and the validation of all high material
 
models. In 2019
 
the framework and
 
governance of
model risk was further improved
 
by:
 
enhancing the Barclays PLC Board
 
oversight of model risk, through
 
the reporting of the model risk tolerance framework
 
and periodic updates to
the Barclays PLC Board
 
on the progress of the MRM implementation;
 
validating a third of the po
 
pulation of low material models;
 
strengthening the model inventory
 
identification process, including enhancing the model lifecycle technology platform
 
;
 
and
 
better alignment of documentation
 
requirements to model materiality.
In 2020
 
MRM will continue to focus on the validation of remaining low material models, bringing
 
95% of model risk into governance
 
as well
 
as
reviewing performance
 
monitoring of models already in governance to assess
 
their compliance with the framework.
Conduct risk
 
Barclays is committed
 
to continuing to drive the right culture throughout
 
all levels
 
of the organisation. The Group
 
will continue to enhance effective
management of conduct
 
risk and appropriately consider
 
the relevant tools, governance and management information
 
in decision-making
processes. Focus on management
 
of conduct risk is ongoing and amongst other
 
relevant business and control management information the
Trading
 
Entity Conduct Dashboards are a key component
 
of this.
 
The Group
 
continues to review the role and impact of conduct Risk Events and issues in the remuneration
 
process at both the individual and
business level.
Businesses have continued
 
to assess
 
the potential customer,
 
client and market impacts of strategic change. As part of the 2019
 
Medium-Term
Planning Process, associated Strategic Risk Assessment and Strategic Element of the Business Plan, material
 
conduct risks associated with
strategic and financial plans were assessed.
 
Throughout
 
2019, conduct risks were raised by each business area for consideration by
 
relevant Board
 
level committees.
 
The committees reviewed
the risks raised and whether management
 
’s proposed actions were appropriate to mitigate the risks effectively. The Board
 
received regular
 
updates
with regards
 
to key risks and issues including those relating to regulatory change
 
and the effectiveness of the control environment.
 
The Group
 
continued to incur costs in relation to litigation and conduct matters, refer to Note 26 Legal, competition and
 
regulatory
 
matters and
Note 24 Provisions, for
 
further details. Costs include customer redress and remediation, as well as fines and settlements. Resolution
 
of these
matters remains a necessary and important
 
part of delivering the Group’s
 
strategy and an ongoing
 
commitment to improve
 
oversight of culture
and conduct.
 
Barclays has operated
 
at the
 
overall
 
set tolerance for conduct
 
risk throughout 2019.
 
The tolerance adherence is assessed
 
by the business areas
through
 
Key Indicators which
 
are aggregated and provide
 
an overall rating which is
 
reported
 
to relevant Board
 
level committees.
 
This is supported
by additional tools such as the Risk and Control
 
Self-Assessment.
Reputation
 
risk
Barclays is committed to identifying reputation
 
risks and issues
 
as early as
 
possible and managing them
 
appropriately. At
 
a Group level throughout
2019,
 
reputation risks
 
and issues
 
were overseen by the Board Reputation
 
Committee (RepCo)
 
until September 2019 and
 
the Board thereafter
 
(refer to
the Board report on page 3 for further detail),
 
which reviews the processes
 
and policies by which Barclays
 
identifies
 
and manages reputation risk.
 
Within
the Barclays Bank UK Group and the Barclays
 
Bank Group reputation
 
risks and issues
 
were overseen by the respective
 
risk
 
and board risk committees.
The top live and emerging reputation
 
risks and issues
 
within the Barclays
 
Bank UK Group and
 
the Barclays Bank Group
 
are included
 
within
 
an over-
arching quarterly report at the
 
respective Board level.
RepCo and the Board reviewed risks
 
escalated by the businesses
 
and considered
 
whether management’s
 
proposed actions,
 
for example attaching
conditions to proposed client
 
transactions
 
or increased engagement
 
with impacted
 
stakeholders,
 
were appropriate
 
to mitigate
 
the risks
 
effectively.
RepCo and the Board also received regular updates
 
with regard to
 
key reputation
 
risks and issues,
 
including: legacy conduct
 
issues;
 
Barclays’ association
with sensitive
 
sectors; cyber and data security;
 
consumer and
 
household debt;
 
fraud and scams that
 
could impact Barclays
 
customers
 
and the resilience
of key Barclays systems
 
and processes.
The Group
 
continued to
 
incur costs
 
in relation to litigation
 
and conduct
 
matters, refer to Note
 
26 Legal,
 
competition and
 
regulatory matters
 
and Note
 
24
Provisions for further details.
 
Costs
 
include customer redress and remediation,
 
as well
 
as fines
 
and settlements.
 
Resolution of these matters
 
remains an
ongoing
 
commitment
 
to improve oversight of
 
culture and
 
conduct and
 
management
 
of reputation.
In 2019,
 
Corporate Relations
 
received 498 referrals
 
from across
 
the businesses
 
(486 referrals in 2018) for consideration.
 
These
 
referrals covered a
variety of potentially controversial
 
sectors and topics
 
including, but
 
not limited to,
 
environmental and
 
social risks.
As part of Barclays 2019 Medium Term Planning process,
 
material reputation
 
risks associated
 
with strategic and financial
 
plans were also
 
assessed.
Legal risk
 
The Group
 
remains committed to continuous improvements
 
to manage legal risk
 
effectively. A number
 
of enhancements have been implemented
during
 
2019,
 
including updating the Group framework for
 
managing legal risk
 
and associated policies as well as reviewing legal risk tolerances and
risk appetite. Updated legal risk mandatory
 
training was
 
also implemented across the Group,
 
reinforced
 
by ongoing engagement and education of
the Group’s businesses and functions.
Throughout
 
2019, the Group operated
 
within set
 
tolerances for legal risk. Tolerance
 
adherence
 
is assessed
 
through
 
key indicators, which are
reviewed through
 
the relevant risk and control committees. In addition to ongoing monitoring,
 
legal risk
 
controls are reviewed
 
and assessed
annually as part of the Risk and Control Self-Assessment process.
 
Risk review
Supervision and
 
regulation
 
171
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Supervision
 
of the
 
Barclays Group
 
The Barclays Group’s
 
operations, including its overseas branches, subsidiaries and
 
associates, are subject to a large number
 
of rules and regulations
that are a condition for authorisation to conduct
 
banking and financial services business in each of the jurisdictions in which the Barclays Group
operates. These apply to business operations, impact financial returns and
 
include capital, leverage and liquidity requirements, authorisation,
registration and reporting
 
requirements, restrictions on certain activities, conduct of business regulations and many others. Regulatory
developments impact the Barclays
 
Group
 
globally. We focus particularly on
 
EU, UK and US regulation due to the location of the Barclays Group’s
principal areas of business. Regulations elsewhere may also have
 
a significant impact on
 
the Barclays Group
 
due to the location of its
 
branches,
subsidiaries and, in some cases, clients. For more
 
information on the risks related to the supervision and regulation of the Barclays Group,
 
including
regulatory
 
change, see the Risk Factor entitled ‘Regulatory Change agenda and
 
impact on Business Model’ on page 93.
 
 
Supervision
 
in the UK and EU
 
The Barclays Group’s
 
operations in Europe
 
are authorised and regulated
 
by a combination of its UK home regulators and host regulators
 
in the
European
 
countries where the Barclays Group
 
operates. The impact
 
of the UK’s departure from
 
the EU in this respect and,
 
more broadly,
 
its
 
impact
on the UK domestic regulatory framework,
 
is yet
 
to be finally determined. In
 
the UK, day-to-day regulation
 
and supervision of the Barclays Group
 
is
divided between the Prudential Regulation Authority
 
(PRA) (a division of the Bank of England (BoE))
 
and the Financial Conduct Authority (FCA). In
addition, the Financial Policy Committee (FPC) of the
 
BoE has influence on the prudential requirements that may be imposed on the banking
system through
 
its
 
powers of direction
 
and recommendation.
 
 
Barclays Bank PLC
 
and Barclays Bank UK PLC are authorised
 
credit institutions and subject to prudential supervision by the PRA and subject to
conduct regulation
 
and supervision by the FCA. The Barclays Group
 
is also
 
subject to prudential supervision by
 
the PRA on a group
 
consolidated
basis. Barclays Capital Securities
 
Limited is authorised and supervised by
 
the PRA as a PRA-designated investment firm and subject to conduct
regulation and supervision by
 
the FCA. Barclays Services Limited is an appointed representative of Barclays Bank PLC
 
and Clydesdale Financial
Services Limited.
 
 
Barclays Bank Ireland
 
PLC is
 
licensed as a credit institution by the Central
 
Bank of Ireland (CBI)
 
and is designated as
 
a significant institution falling
under direct supervision
 
on a solo basis by the European Central Bank (ECB). Barclays Bank Ireland
 
PLC’s EU branches are supervised by the ECB
and are also subject to direct supervision for
 
local conduct purposes by
 
national supervisory authorities in the jurisdictions where they are
established.
 
 
The Barclays Group
 
is also subject to regulatory initiatives undertaken by the UK Pay
 
ment Systems Regulator (PSR), as a participant in payment
systems regulated by
 
the PSR.
 
The PRA’s continuing
 
supervision of the Barclays Group
 
is conducted through
 
a variety of regulatory tools, including the collection of information
by way of prudential returns
 
or cross-firm reviews, reports obtained
 
from skilled persons, regular supervisory
 
visits
 
to firms and regular
 
meetings
with management and
 
directors to discuss issues such as strategy, governance,
 
financial resilience,
 
operational resilience, risk management,
 
and
recovery
 
and resolution.
 
Parliament gave the
 
FCA a single strategic objective – to ensure that relevant markets
 
function well – and three operational
 
objectives: to protect
consumers, enhance market integrity and promote
 
competition. The FCA’s supervision of the UK firms in the Barclays Group
 
is carried out through
a combination
 
of proactive engagement,
 
regular thematic work and
 
project work based on the FCA’s sector assessments, which analyse the
different areas of the market
 
and the risks
 
that may lie ahead.
 
 
Both the PRA and the FCA apply standards that either anticipate or
 
go beyond
 
requirements established by global or EU standards, whether in
relation to capital, leverage and liquidity,
 
resolvability and resolution or
 
matters of conduct.
 
 
The FCA has focused on conduct
 
risk and on customer outcomes and will continue to do so. This has included a focus on the design and operation
of products, the behaviour
 
of customers and the operation of markets. The FCA is conducting on
 
-going work on fair pricing
 
in financial
 
services,
affordability and fair
 
treatment of vulnerable customers. These initiatives may impact
 
future revenues
 
and increase conduct costs and costs of
remediation.
 
 
The FCA and the PRA also apply the Senior Managers and
 
Certification Regime (the SMCR) which imposes a regulatory approval,
 
individual
accountability and fitness and propriety
 
framework
 
in respect of senior or key individuals within relevant firms.
 
 
Supervision
 
in the US
 
The Barclays Group’s
 
US activities and operations are subject to umbrella supervision
 
by the Board
 
of Governors of the Federal Reserve System
(FRB), as well as additional supervision, requirements
 
and restrictions imposed by other federal and
 
state regulators and self-regulatory
organisations (SROs). Barclays
 
PLC, Barclays Bank PLC and
 
its US branches and subsidiaries are subject to a comprehensive
 
regulatory
 
framework
involving numerous
 
statutes,
 
rules and regulations. In some cases, US requirements
 
may impose restrictions on the Barclays Group’s
 
global
activities, in addition to its activities in the US.
 
 
Barclays PLC, Barclays
 
Bank PLC and Barclays
 
US LLC (BUSL) are regulated
 
as bank holding companies (BHCs) by the FRB. BUSL is the Barclays
Group’s
 
top-tier US holding company
 
that holds substantially
 
all of the Barclays Group’s
 
US subsidiaries (including Barclays Capital Inc. and
Barclays Bank Delaware). BUSL is
 
subject to requirements in respect of capital adequacy,
 
capital planning and stress testing, risk management and
governance,
 
liquidity, leverage limits, large exposure
 
limits, activities
 
restrictions and financial regulatory
 
reporting.
 
Barclays Bank PLC’s US
branches are also subject to enhanced
 
prudential supervision requirements
 
relating to, among other things, liquidity and risk management.
 
 
Barclays PLC, Barclays
 
Bank PLC and BUSL have elected to be treated
 
as financial holding companies
 
(FHCs) under the Bank Holding Company
 
Act
of 1956.
 
FHC status allows these entities to engage in a variety of financial and related activities,
 
directly or
 
through
 
subsidiaries,
 
including
underwriting,
 
dealing and market making in securities. Failure to maintain FHC status could result in increasingly stringent penalties and ultimately,
in the closure or cessation of certain operations in the US.
 
 
 
Risk review
Supervision and
 
regulation
 
172
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
In addition to umbrella oversight
 
by the FRB, many of the Barclays Group’s
 
branches and subsidiaries are regulated by
 
additional authorities based
on the location or activities of those entities. The New York
 
and Florida branches
 
of Barclays Bank PLC are subject to supervision and regulation by,
respectively,
 
the New York State Department of Financial
 
Services (NYSDFS) and the Florida Office of Financial Regulation,
 
as well as the applicable
Federal Reserve Banks.
 
Barclays Bank Delaware,
 
a Delaware chartered commercial
 
bank, is subject to supervision and regulation by the Delaware
Office of the State Bank Commissioner,
 
the Federal Deposit Insurance
 
Corporation
 
(FDIC), and the Consumer Financial
 
Protection Bureau
 
(CFPB).
The deposits of Barclays Bank Delaware are insured
 
by the FDIC and Barclays
 
PLC, Barclays Bank PLC and
 
BUSL are required
 
to act as a
 
source of
strength for Barclays Bank Delaware.
 
This could, among
 
other things, require these entities to inject capital into Barclays Bank Delaware if it fails
 
to
meet applicable regulatory
 
capital requirements. Barclays Bank Delaware is subject to direct supervision and
 
regulation by the CFPB, which has the
authority to examine and take enforcement
 
action related to compliance with US federal consumer
 
financial laws and regulations.
 
The Barclays Group’s
 
US securities broker/dealer
 
and investment banking operations, primarily
 
conducted
 
through Barclays Capital
 
Inc., are also
subject to ongoing
 
supervision and regulation by
 
the Securities
 
and Exchange Commission
 
(SEC), the
 
Financial Industry Regulatory
 
Authority
(FINRA) and
 
other government
 
agencies and SROs
 
under US federal and
 
state
 
securities laws.
 
 
The Barclays Group’s
 
US commodity futures, commodity options and
 
swaps-related and client clearing operations are subject to ongoing
supervision and regulation by
 
the Commodity Futures Trading
 
Commission (CFTC), the
 
National Futures Association and other SROs. Barclays
Bank PLC is also a US registered swap dealer and is subject to the
 
FRB swaps rules with respect to margin and capital requirements.
 
 
Supervision
 
in Asia Pacific
 
The Barclays Group’s
 
operations in Asia Pacific are supervised and regulated by
 
a broad range
 
of national banking and financial services regulators.
 
 
Brexit
There remains much
 
uncertainty regarding
 
the state
 
of the future relationship between the UK and the EU and therefore
 
the potential impact
 
of the
UK's withdrawal from
 
the EU on the financial regulatory framework
 
in the UK. Following the UK’s withdrawal from the EU on 31
 
January 2020,
pursuant to the withdrawal agreement
 
negotiated between the UK and the EU in October 2019,
 
firms incorporated
 
and authorised in the UK are
able to continue to provide
 
services into the
 
EU27,
 
and firms incorporated
 
and authorised in the EU27 are able to continue to provide
 
services into
the UK in accordance
 
with the terms
 
of the withdrawal agreement for
 
the duration of the transition period
 
set out
 
in the agreement. Following
 
the
expiry of that transitional period
 
in December 2020,
 
the ability
 
of UK firms to access the EU market and vice versa would depend
 
upon the terms of
any future trade deal between the
 
UK and the EU, including whether such deal provides
 
for any access rights in respect of financial services. It
would also depend upon
 
whether the EU grants equivalence to the UK as a
 
third country
 
pursuant to equivalence regimes in existing EU financial
services legislation. If, after the expiry of the transitional period
 
in December 2020,
 
there is no deal or arrangement cover
 
ing financial
 
services in
place and assuming no third country
 
"equivalence"-based recognition in place, the Barclays Group
 
entities
 
in the UK would
 
no longer
 
be able to
access EU markets as they do today
 
.
 
As a result of the onshoring
 
of EU legislation
 
in the UK, UK firms would (at least initially) be subject to
substantially the same rules and regulations as before
 
Brexit. The UK may seek to make changes to these rules going
 
forward,
 
particularly in the
event of no deal or arrangement
 
covering financial services,
 
where they are not subject to any requirements
 
to maintain particular rules or
standards for equivalence purposes.
 
 
Financial regulatory framework
 
(a) Prudential regulation
 
Certain Basel III standards were implemented
 
in EU law through
 
the Capital
 
Requirements Regulation
 
(CRR) and the Capital Requirements Directive
IV (CRD IV). Beyond
 
the minimum standards required by CRD IV,
 
the PRA has expected the Barclays Group, in common
 
with other major UK banks
and building societies, to meet a 7% Common
 
Equity Tier 1 (CET1) ratio at the level of the consolidated group
 
since 1 January 2016.
 
 
Global systemically important banks (G-
 
SIBs), such as the Barclays Group,
 
are subject to a
 
number
 
of additional prudential requirements, including
the requirement to hold
 
additional loss-absorbing capacity and additional capital buffers above
 
the level required
 
by Basel III standards. The level of
the G-SIB buffer is set by the
 
Financial Stability Board (FSB) according
 
to a bank’s
 
systemic importance and can range
 
from 1% to 3.5% of risk-
weighted assets (RWAs).
 
The G-SIB buffer
 
must be met with CET1. In November
 
2019, the FSB published an update to its list of G-SIBs, maintaining
the 1.5% G-SIB buffer that
 
applies to the Barclays Group.
 
 
The Barclays Group
 
is also subject to a ‘combined
 
buffer requirement’
 
consisting of (i) a
 
capital conservation buffer,
 
and (ii) a countercyclical
capital buffer (CCyB). The CCyB is based on rates
 
determined by
 
the regulatory authorities in each jurisdiction in which the Barclays Group
maintains exposures. These rates may vary in
 
either direction. In December
 
2019,
 
the FPC raised the UK CCyB
 
rate from 1% to 2% with binding
effect from
 
December 2020.
 
 
The PRA requires
 
UK firms to hold additional capital to cover risks which the PRA assesses are not fully captured by
 
the Pillar 1 capital requirement.
The PRA sets this additional capital requirement
 
(Pillar 2A) at least annually, derived from each firm's individual capital guidance. Under
 
current
PRA rules, the Pillar 2A must be met with at least 56% CET1 capital and no more
 
than 25% tier 2 capital. In addition, the capital that firms use to
meet their minimum requirements
 
(Pillar 1 and Pillar 2A) cannot be counted
 
towards meeting the combined buffer
 
requirement.
 
The PRA may also impose a 'PRA buffer'
 
to cover risks over a forward
 
looking planning horizon, including
 
with regard to firm-specific stresses
 
or
management and governance
 
weaknesses.
 
If the PRA buffer is imposed on a specific firm, it must be met separately to the combined
 
buffer
requirement,
 
and must be met fully with CET1 capital.
 
The systemic risk buffer (which
 
can be set
 
between 0% and 3% of RWAs)
 
is a firm-specific buffer,
 
that is designed to increase the capacity of ring-
fenced bodies, such as Barclays Bank UK PLC,
 
to absorb stress, and which must be met solely with CET1 capital. The buffer rate applicable to
 
the
Barclays Group’s
 
ring-fenced
 
sub-group
 
is 1% of
 
RWAs. The systemic risk buffer
 
is now incorporated
 
in the calculation
 
of banks' stress test hurdle
rates, which are the target capital ratios
 
set
 
by the PRA, with a view to capturing
 
domestic as
 
well as global systemic
 
importance.
 
 
Final BCBS standards on counterparty
 
credit risk, leverage, large exposures and a Net Stable Funding
 
Ratio (NSFR) are being implemented under
 
EU
law via the Risk Reduc
 
tion Measures package, which was published in the Official Journal
 
in June 2019
 
and includes the
 
CRR II regulation, the CRD
V directive and the BRRD II directive.
 
 
Risk review
Supervision and
 
regulation
 
173
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
 
The BCBS’s finalisation of ‘Basel III – post-crisis regulatory reforms’
 
in December 2017,
 
among other things, eliminated model-based approaches for
certain categories of RWAs,
 
revised the standardised approach’s
 
risk weights for a variety of exposure
 
categories, replaced the four current
approaches
 
for operational risk (including
 
the advanced measurement approach)
 
with a single
 
standardised measurement approach,
 
established
72.5% of standardised approach
 
RWAs for exposure
 
categories as a
 
floor for RWAs
 
calculated under
 
advanced approaches
 
(referred to as the
‘output floor’), and for
 
G-SIBs introduced
 
a leverage ratio buffer in an amount equal to 50% of the applicable G-SIB buffer
 
used for RWA
 
purposes
(meaning, for the Barclays Group,
 
a leverage ratio buffer of 0.75%).
 
The majority of the final Basel III changes are due to be implemented
commencin
 
g
 
1 January 2022,
 
with a five-year phase-in period for the output floor,
 
although the precise timing as
 
it applies to the Barclays Group
depends on national and EU legislative processes. The new market risk framework,
 
including rules made as a result of the ‘fundamental review of
the trading book’, is expected to be implemented in
 
the UK first as a reporting requirement,
 
with further legislation needed to replace the existing,
binding market risk requirements.
 
 
In the US, in October 2019,
 
the FRB and other US regulatory agencies released final rules to tailor the applicability of prudential requirements
 
for
large domestic US banking
 
organisations, foreign banking
 
organisations and their intermediate holding companies (IHCs), including BUSL. In the
final rule, BUSL is a “Category III” IHC. BUSL is therefore
 
subject to full standardised liquidity requirements, including the liquidity coverage
 
ratio,
which has been implemented by the US regulatory
 
agencies, and the NSFR,
 
which has been proposed
 
by the US regulatory agencies but does not
have a clear timeframe for finalisation.
 
In June 2018
 
and October 2019,
 
the FRB finalised
 
rules regarding
 
single counterparty credit limits
 
(SCCL). The SCCL apply to the largest US BHCs
and foreign
 
banks’ (including the Barclays Group’s)
 
US operations. The SCCL
 
creates two separate
 
limits for foreign
 
banks, the first on combined US
operations (CUSO) and the second on the US IHC (BUSL). The SCCL for US BHCs, including BUSL, will go into effect
 
in 2020
 
and requires that
exposure to an unaffiliated counterparty
 
of BUSL not exceed 25% of BUSL’s tier 1 capital. With respect to the CUSO, the SCCL rule allows
certification to the FRB that a foreign bank
 
complies with comparable home
 
country regulation.
 
In November
 
2019, the FRB issued a proposal to extend by 18
 
months the initial compliance date for foreign
 
banks' CUSO to
 
allow the home
countries of foreign banks time to finalize comparable
 
home
 
country regulation. Under
 
the proposal, Barclays Bank PLC would not need to comply
with the CUSO requirement
 
until 1 July 2021.
 
In order to give the FRB time to
 
finalize the November
 
proposal, in December 2019
 
the FRB separately
granted Barclays
 
Bank PLC relief from the SCCL CUSO requirement
 
through a letter indicating that
 
Barclays
 
Bank PLC is not required
 
to provide the
CUSO certification until 1 July 2020.
 
Stress testing
 
The Barclays Group
 
and certain of its members are subject to supervisory stress testing exercises in a number
 
of jurisdictions,
 
designed to assess
the resilience of banks to adverse economic
 
or financial developments and ensure that they have robust, forward
 
-looking capital planning
processes that account for the risks associated with their business profile. Assessment by
 
regulators is on both
 
a quantitative and qualitative basis,
the latter focusing
 
on such elements as data provision, stress testing capability including model
 
risk management and internal management
processes and controls.
 
 
(b) Recovery and Resolution
 
Stabilisation and resolution framework
 
The 2014
 
Bank Recovery
 
and Resolution Directive (BRRD) established a framework for the recovery
 
and resolution of EU credit institutions
 
and
investment firms. Amendments
 
to BRRD (referred
 
to as
 
BRRD II) were
 
made via the finalisation
 
of the EU Risk Reduction Measures. Member
 
states
are required
 
to transpose BRRD II into national law by 28 December 2020
 
(subject to certain exceptions).
 
 
On 28 December 2017,
 
a related EU directive came into force harmonising the priority ranking
 
of unsecured debt instruments under national
insolvency laws. The directive
 
has been transposed into national law in the UK, dividing a financial institution’s non
 
-preferred
 
debts into three
classes in a descending ranking
 
order
 
(ordinary, secondary and tertiary non
 
-preferential debts).
 
 
UK resolution authorities are empowered
 
by law to intervene in and resolve a UK financial institution that is failing or likely to fail. The BoE (in
consultation with the PRA
 
and HM Treasury
 
as appropriate)
 
has several stabilisation options where a banking institution is
 
failing or likely to fail,
including, for example, to transfer some or
 
all of the securities or business of the bank to a commercial purchaser
 
or a ‘bridge bank’ owned
 
by the
BoE or to transfer the banking institution into
 
temporary
 
public ownership.
 
When exercising any of its stabilisation powers, the BoE must
 
generally
provide
 
that shareholders bear first losses, followed by creditors
 
in accordance with the priority of their claims in insolvency.
 
 
In order
 
to enable the exercise of its stabilisation powers, the BoE may impose a temporary
 
stay on the rights of
 
creditors to terminate, accelerate or
close out contracts, or override
 
events of default or termination rights that might otherwise be invoked as a result of a resolution action and modify
contractual arrangements
 
in certain circumstances (including a variation of the terms of any securities). In addition, the BoE has the power
 
to
override,
 
vary, or
 
impose conditions or contractual obligations between
 
a UK bank, its
 
holding company
 
and its
 
group
 
undertakings, in order to
enable any transferee or successor bank
 
to operate effectively after
 
any of the resolution tools have been applied. HM Treasury
 
may also amend the
law for the purpose
 
of enabling it to use its
 
powers under
 
this regime effectively, potentially with retrospective effect.
 
These powers
 
apply
regardless of any contractual restrictions
 
and compensation that may be payable.
 
 
In addition, the BoE is required
 
by law to permanently write-down,
 
or convert
 
into equity, tier 1 capital
 
instruments and tier 2 capital instruments at
the point of non
 
-viability of
 
the bank. This power
 
will be extended to include eligible liabilities (such as liabilities under MREL instruments (see TLAC
and MREL below)) once
 
BRRD II is implemented.
 
 
The BoE’s preferred
 
approach for
 
the resolution of the Barclays Group is a bail-in strategy
 
with a single point of entry at Barclays PLC.
 
Under such a
strategy, Barclays
 
PLC’s subsidiaries would remain operational
 
while Barclays PLC’s eligible liabilities would be
 
written down or
 
converted to equity
in order to recapitalise the Barclays
 
Group
 
and allow for the continued provision
 
of services and operations throughout the resolution. The order in
which the bail-in tool is applied reflects the hierarchy
 
of capital instruments. Accordingly,
 
the more subordinated
 
the claim,
 
the more likely losses
will be suffered.
 
 
Risk review
Supervision and
 
regulation
 
174
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
The PRA has made rules that require
 
authorised firms to draw up recover
 
y
 
plans and resolution packs, as
 
required
 
by the BRRD. Recovery
 
plans are
designed to outline credible actions that authorised firms could implement in the event of severe stress
 
in order to restore
 
their business to a stable
and sustainable condition. Removal of potential impediments to an
 
orderly
 
resolution of a banking group
 
or one or more of its subsidiaries
 
is
considered as part of the BoE’s and PRA’s
 
supervisory strategy for each firm, and the PRA can require
 
firms to make significant changes in order
 
to
enhance resolvability.
 
The Barclays Group
 
currently provides the PRA with a recovery
 
plan annually and with a resolution pack as
 
requested.
 
 
In July 2019,
 
the BoE and PRA published final policies on the Resolvability Assessment Framework (RAF), design
 
ed to increase transparency and
accountability and clarify the responsibilities on firms with respect to resolution. The RAF
 
consists of three components: (i) how the BoE will assess
resolvability; (ii) the requirement
 
for certain firms to perform an assessment of their preparations for resolution,
 
submit a report to the PRA and
publish a summary of their most recent report;
 
and (iii) the BoE’s publication of a statement concerning
 
the resolvability of each in-scope firm.
 
The
BoE will assess firms against three resolvability outcomes
 
they must meet by 2022:
 
(i) adequate financial resources; (ii) being able to continue to do
business through
 
resolution and restructuring;
 
and (iii) being able to communicate and coordinate within the firm and with authorities.
 
 
While regulators in many jurisdictions have
 
indicated a preference for
 
single point of entry resolution for the Barclays Group,
 
additional resolution
or bankruptcy
 
provisions may apply to certain Barclays Group
 
entities
 
or branches.
 
 
In the US, BUSL is subject to the Orderly Liquidation
 
Authority established by Title II of the Dodd-Frank Act, a regime for the orderly
 
liquidation of
systemically important financial institutions by the FDIC, as an
 
alternative to proceedings
 
under the US Bankruptcy
 
Code. In addition, the
 
licensing
authorities of each US branch of Barclays
 
Bank PLC and of Barclays Bank Delaware have
 
the authority to take possession of the business
 
and
property
 
of the applicable branch or entity they license and/or to revoke or suspend
 
such licence.
 
 
In the US, Title I of the DFA, as amended, and
 
the implementing regulations issued by the FRB and the FDIC require
 
each bank holding company
with assets of $250bn
 
or more, including those within the Barclays Group, to prepare
 
and submit a plan for the orderly resolution of subsidiaries
and operations in the event of future material financial distress or
 
failure. The Barclays Group’s
 
next submission of the US Resolution Plan in respect
of its US operations will be due on 1 July
 
2020.
 
 
Barclays Bank Ireland
 
PLC, as a significant institution under the Single Resolution Mechanism Regulation (SRMR), is subject to the
 
powers of the
Single Resolution Board
 
(SRB) as the Eurozone resolution authority.
 
The CBI and the ECB require Barclays Bank Ireland
 
PLC to submit a
 
standalone
BRRD-compliant recovery
 
plan on an annual basis.
 
The SRB has the power to require
 
data submissions
 
specific to Barclays Bank Ireland
 
PLC under
powers conferred
 
upon it by the BRRD and the SRMR.
 
The SRB will exercise these powers
 
to determine the optimal resolution strategy for Barclays
Bank Ireland PLC in the context of the BoE’s preferred
 
resolution strategy of single point of entry with
 
bail-in at Barclays PLC.
 
The SRB also has the
power
 
under the BRRD and the SRMR to develop a resolution plan for Barclays Bank Ireland
 
PLC.
 
TLAC and MREL
 
The BRRD requires competent
 
authorities to impose a Minimum Requirement for
 
own funds and Eligible Liabilities
 
(MREL) on financial institutions
to facilitate their orderly
 
resolution without broader
 
financial disruption or recourse to public funds. In November 2015,
 
the FSB finalised
 
its
proposals to enhance the loss-absorbing capacity of G-SIBs and set a new minimum
 
requirement
 
for ‘total loss-absorbing capacity’ (TLAC). The
FSB also published guiding
 
principles on internal TLAC in July 2017.
 
 
The EU is implementing the TLAC standard (including
 
internal TLAC) via the MREL requirement for
 
G-SIBs and the relevant amendments are
contained in the Risk Reduction
 
Measures package. Under the BoE’s 2018
 
statement
 
of policy on MREL, the BoE will set MREL for UK G
 
-SIBs as
necessary to implement the TLAC standard
 
and institution or group
 
-specific MREL
 
requirements will depend on
 
the preferred resolution strategy
for that institution or group.
 
Internal MREL for operating
 
subsidiaries will
 
be scaled within a 75-90% range
 
of the external requirement that would
apply to the subsidiary if it were a resolution entity.
 
The starting point for the scalar will be 90% for ring
 
-fenced bank sub
 
-groups.
 
The MREL requirements
 
are being phased in as from 1 January
 
2019. From
 
1 January 2020, G-
 
SIBs with resolution entities
 
incorporated
 
in the UK,
including the Barclays Group,
 
will be subject to an MREL requirement equivalent to the higher of: (i) the sum of two times the Pillar 1 requirement
and one times the Pillar 2A requirement;
 
or (ii) the higher of two times the
 
leverage ratio or 6% of leverage
 
exposures. The MREL requirements will
be fully implemented by 1 January
 
2022,
 
at which time
 
such G-SIBs will
 
be required
 
to meet an MREL equivalent to the higher of: (i) two times the
sum of their Pillar 1 and Pillar 2A requirements;
 
or (ii) the higher of two times their leverage ratio or 6.75%
 
of leverage exposures.
 
 
Barclays Bank Ireland
 
PLC is subject to the SRB’s MREL policy, as issued in
 
January 2019,
 
in respect of the internal
 
MREL that it will be required
 
to
issue to Barclays Bank Group.
 
The SRB’s MREL policy will be revised in the near future to reflect the implementation of the Risk Reduction Measures
package in the EU. The SRB’s current
 
calibration of MREL is two times the sum of: (i) the firm’s Pillar 1 requirement; (ii) its Pillar 2 requirement;
 
and
(iii) its combined buffer
 
requirement,
 
minus 125 basis points. The SRB’s
 
policy does not envisage the application
 
of any scalar in respect of the
internal MREL requirement.
 
 
In the US, the FRB’s TLAC rule
 
includes provisions that require BUSL to have: (i) a specified outstanding
 
amount of eligible long-term debt; (ii) a
specified outstanding amount of TLAC (consisting of common
 
and
 
preferred
 
equity regulatory capital plus
 
eligible long-term debt); and (iii) a
specified common
 
equity buffer.
 
In addition, the FRB’s TLAC rule prohibits BUSL, for so long as the Barclays Group’s
 
overall resolution plan treats
BUSL as a non
 
-resolution entity, from issuing TLAC to entities other than those within the Barclays
 
Group.
 
 
Bank Levy and FSCS
The BRRD requires EU member
 
states to
 
establish a pre-funded
 
resolution financing arrangement
 
with funding equal to 1% of covered
 
deposits
 
by
31 December
 
2024
 
to cover the costs of bank resolutions. The UK has implemented this requirement by way
 
of a tax
 
on the balance sheets of
banks known as the ‘Bank Levy’.
 
In addition, the UK has a statutory compensation fund
 
called the Financial Services Compensation Scheme (FSCS), which is funded by way of
annual levies on most financial services firms authorised under
 
FSMA.
 
 
(c) Structural reform
 
 
Risk review
Supervision and
 
regulation
 
175
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
In the UK, the Financial Services (Banking Reform)
 
Act 2013
 
put in place a
 
framework
 
for ring
 
-fencing certain operations of large banks and
secondary legislation passed in 2014
 
elaborated on the operation
 
and application of the
 
ring-fence. Ring
 
-fencing requires, among other things, the
separation of the retail and smaller deposit-taking business activities of UK banks into a legally
 
distinct, operationally separate and economically
independent entity, which is not permitted
 
to undertake
 
a range of activities.
 
 
US regulation places further
 
substantive limits on the activities that may be conducted
 
by banks and holding
 
companies, including foreign banking
organisations such as the Barclays Group.
 
The ‘Volcker
 
Rule’, which was part of the DFA and which came into effect in the
 
US in 2015,
 
prohibits
banking entities from undertaking
 
certain proprietary
 
trading activities
 
and limits
 
such entities’ ability to sponsor or
 
invest in certain private equity
funds and hedge funds (in each case broadly
 
defined). As required
 
by the rule, the Barclays Group has developed
 
and implemented an extensive
compliance and monitoring
 
programme
 
addressing proprietary trading and covered fund activities
 
(both inside and outside of the US). In August
2019
 
the Volcker
 
regulatory
 
agencies
 
finalised
 
amendments to the Volcker
 
Rule’s proprietary trading
 
provisions, which became effective on 1
January 2020
 
(with a mandatory compliance date of 1 January 2021). The amendments generally
 
provide greater flexibility for banking entities,
 
and
in particular for business units that operate
 
solely outside the US. The Volcker
 
Rule agencies have indicated that further changes are likely to be
proposed
 
in 2020
 
with regard to the Volcker covered
 
funds provisions.
 
(d) Market infrastructure regulation
 
In recent years, regulators as well
 
as global-standard setting bodies such as the International Organisation of Securities
 
Commissions (IOSCO) have
focused on improving
 
transparency
 
and reducing risk in
 
markets, particularly risks related to over
 
-the-counter (OTC)
 
transactions. This
 
focus has
resulted in a variety of new regulations across the
 
G20 countries and beyond
 
that require or encourage on
 
-venue trading, clearing, posting of
margin and disclosure of pre
 
-trade and post-trade information.
 
Some of the most
 
significant developments are described
 
below.
 
 
The European
 
Market Infrastructure
 
Regulation, as amended, (EMIR) has introduced
 
requirements designed to improve transparency
 
and reduce
the risks associated with the derivatives market, some of
 
which are
 
still to be fully implemented. EMIR has potential operational and financial
impacts on the Barclays Group,
 
including by imposing
 
new collateral requirements. Over the coming months, European
 
regulators will
 
undergo
 
a
review of the exchange
 
of collateral rules,
 
raising the possibility of some alterations to
 
the existing rules. European
 
regulators are also currently
consulting on details of the recent amendments to EMIR, which could potentially have a
 
significant impact on our clearing business.
 
CRD IV com
 
plements EMIR by applying higher
 
capital requirements for bilateral,
 
uncleared OTC derivative trades.
 
Lower capital requirements for
cleared derivative trades
 
are only available if the central counterparty
 
(CCP) through
 
which the trade is
 
cleared is recognised as a ‘qualifying central
counterparty’
 
(QCCP) which has been authorised or recognised
 
under EMIR.
 
 
The Markets in Financial Instruments Directive and Markets in Financial Instruments Regulation
 
(collectively referred
 
to as
 
MiFID II) have largely
been applicable since 3 January
 
2018.
 
MiFID II affects many of the investment markets in which the Barclays Group
 
operates, the instruments in
which it trades and the way it transacts with
 
market counterparties and other
 
customers. MiFID II is
 
currently underg
 
oing a review process in order
to determine those areas of the regulation
 
that require further amendment.
 
These amendments are being considered
 
particularly in light
 
of the EU’s
ongoing
 
focus on the development of a stronger
 
Capital
 
Markets Union.
 
 
As par
 
t
 
of the EU’s sustainable finance action plan, new regulatory requirements
 
are being introduced to provide
 
greater transparency on the
environmental
 
and social impact of financial investments. These include (i) the Regulation on Sustainability-Related Disclosures, which
 
introduces
disclosure obligations regarding
 
the way in which financial institutions integrate environmental, social and governance
 
factors in their investment
decisions, and (ii) the Taxonomy
 
Regulation, which provides
 
for a general framewor
 
k
 
for the development of an EU-wide classification
 
system for
environmentally sustainable economic
 
activities.
 
These new requirements
 
will have an impact on the Barclays Group
 
as an intermediary performing
investment services for
 
customers and investors.
 
 
The EU Benchmarks Regulation applies to the administration, contribution
 
and use of benchmarks within the EU. Financial institutions
 
within the
EU are prohibited
 
from using benchmarks
 
unless their administrators
 
are authorised, registered or
 
otherwise recognised
 
in the EU,
 
subject to
transitional provisions expiring
 
on 1 January
 
2022. The FCA has stated
 
that it does not intend to support
 
LIBOR after the end of 2021.
 
International
initiatives are therefore
 
underway
 
to develop alternative benchmarks and back
 
stop arrangements.
 
 
US regulators have imposed similar rules as the
 
EU with respect to the mandatory on
 
-venue trading
 
and clearing of certain derivatives, and post-
trade transparency,
 
as well as in relation to the margining
 
of OTC derivatives.
 
 
US regulators are continuing
 
to review and consider their rules with respect to their application on a cross-border
 
basis,
 
including with respect to
their registration requirements
 
in relation to non
 
-US swap dealers and security-based swap dealers. The regulators may adopt further
 
rules, or
provide
 
further guidance, regarding
 
cross-border applicability. In December 2017,
 
the CFTC and the
 
European
 
Commission recognised the trading
venues of each other’s jurisdiction to allow market participants
 
to comply with mandatory on
 
-venue trading
 
requirements while trading on certain
venues recognised
 
by the other jurisdiction. In April 2019,
 
the CFTC issued
 
temporary
 
relief that would permit trading venues
 
and market
participants located in the UK to continue to rely on this mutual recognition
 
framework
 
following a withdrawal of the UK from
 
the EU.
 
Certain participants in US swap markets are required
 
to register with the CFTC as ‘swap dealers’ or ‘major swap participants’ and/or,
 
following the
compliance date for relevant SEC rules, with the SEC as ‘security-based swap
 
dealers’ or ‘major security-based swap participants’.
 
Such registrants
are subject to CFTC, and will be subject to SEC, regulation
 
and oversight. Entities required
 
to register as
 
swap dealers are subject to business
conduct, recordkeeping
 
and reporting requirements under CFTC rules. Barclays Bank PLC is subject to regulation by the FRB, and has provisionally
registered with the CFTC as a swap dealer.
 
Accordingly,
 
Barclays Bank PLC is subject to CFTC rules on business conduct, record
 
-keeping and
reporting
 
and to FRB rules on capital
 
and margin.
 
 
The CFTC has approved
 
certain comparability determinations that permit substituted compliance with non-US regulatory
 
regimes for certain swap
regulations. Substituted compliance is permitted for
 
certain transaction-level requirements,
 
where applicable, only with respect to transactions
between a non-US swap dealer and a non
 
-US counterparty,
 
whereas entity-level determinations generally apply on an entity-wide basis regardless
of counterparty
 
status. In April 2019,
 
the CFTC issued temporary relief that would permit swap dealers located in the UK to continue to rely on
existing CFTC substituted compliance determinations with respect to EU requirements
 
in the event of a withdrawal of the UK from
 
the EU. In
 
Risk review
Supervision and
 
regulation
 
176
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
addition, the CFTC has issued guidance that would require
 
a non-US swap dealer to comply with certain CFTC rules in connection with transactions
that are “arranged,
 
negotiated or executed” from
 
the US. The CFTC
 
has provide
 
d
 
temporary
 
no-action relief from application of the guidance. In
December 2019
 
the CFTC proposed rules that would, for certain CFTC requirements, codify on a permanent
 
basis,
 
the temporary no
 
-action relief
for transactions that are arranged,
 
negotiated or executed in the US. The proposed
 
rules would also codify certain aspects
 
of the CFTC's current
cross-border
 
framework with respect to internal and external business
 
conduct requirements,
 
and it is expected that the CFTC will introduce
additional proposed
 
rules addressing mandatory
 
clearing, trading and reporting
 
requirements. In October 2017,
 
the CFTC issued
 
an order
permitting substituted compliance with EU margin
 
rules for certain uncleared derivatives. However,
 
as the Barclays Group
 
is subject to the margin
rules of the FRB, it will not benefit from the CFTC’s action unless the FRB takes a similar approach.
 
 
The SEC finalised the rules governing
 
security based swap dealer registration in 2015
 
but clarified that
 
registration timing is contingent
 
upon the
finalisation of certain additional rules under
 
Title VII of DFA.
 
In December
 
of 2019
 
the SEC
 
adopted a final cross-border
 
rule that, upon publication
in the federal register, will
 
trigger the timeline for security-based swap dealer registration, which will be required
 
18 months following
 
the effective
date of those rules, currently
 
expected in September 2021.
 
When security-based swap dealer registration
 
is required,
 
it is
 
anticipated that Barclays Bank PLC and/or
 
one or more
 
of its
 
affiliates will be required
to register in that capacity and thus will be required
 
to comply with the SEC’s
 
rules for security-
 
based swap dealers. These rules may impose costs
and other requirements
 
or restrictions that could impact our business. As with similar CFTC rules, substituted
 
compliance will be available for
certain security-based swap dealer requirements;
 
however,
 
the SEC
 
has not yet issued any comparability determinations, and the
 
ultimate scope
and applicability of such determinations remains unclear.
 
(e) Conduct, culture and other regulation
 
Conduct and culture
 
The PRA and FCA measures to increase the individual accountability of senior managers
 
and other covered
 
individuals in the
 
banking sector
include: the ‘Senior Managers Regime’, which
 
applies to
 
a limited number
 
of individuals with senior management responsibilities within a firm; the
‘Certification Regime’, which
 
is intended to assess and monitor the fitness and propriety
 
of a wider range of employees who
 
could pose a risk
 
of
significant harm to
 
the firm or its customers; and conduct rules that individuals subject to either regime must comply
 
with. From March 2017,
 
the
conduct rules have applied more
 
widely to other staff of firms within the scope of the regime, including the Barclays Group.
 
 
Our regulators have
 
also enhanced their focus on the promotion
 
of cultural values as a key
 
area for
 
banks, although they generally view the
responsibility for reforming
 
culture as primarily sitting with
 
the industry.
 
 
Data protection and PSD2
 
Most countries in which the Barclays Group
 
operates have comprehensive
 
laws governing
 
the collection and use of personal information.
Prominent
 
media reporting
 
of recent cyber
 
-security
 
breaches or data losses and the
 
significant penalties being handed down
 
by European privacy
regulators have heightened
 
interest in data privacy worldwide. The introduction
 
of the EU’s
 
General Data Protection Regulation (GDPR)
 
does not
significantly alter the core
 
principles established under the earlier Data Protection Directive, but it
 
creates a harmonised privacy
 
regime across
European
 
member states with
 
penalties up to the higher of 4% of global turnover
 
or €20
 
million. The GDPR also
 
institutes new mandatory breach
notification requirements,
 
enhances the rights of individual data subjects and introduces an accountability principle concerned
 
with openly
demonstrating compliance. The international nature
 
of our business and IT infrastructure means personal information
 
may be available in countries
other than from where
 
it originated. The
 
GDPR has extra-territorial effect where
 
a business established outside the EU is processing personal data
of individuals located in the EU (e.g. European
 
based customers or clients) and such processing relates to the offering of goods
 
or services to such
individuals, or the monitoring
 
of their behaviour in the EU.
 
 
In the United States, the California Consumer
 
Privacy Pro
 
tection Act (CCPA), effective 1 January 2020
 
requires companies that process information
regarding
 
California residents to
 
make new disclosures to consumers about
 
their data collection, use and sharing practices, allows consumers to
opt out of certain data sharing with third parties and provides
 
a new cause of action for data breaches. It remains unclear what modifications will
be made, if any,
 
to the CCPA and its regulations and how
 
these will be interpreted. The introduction of the CCPA has prompted
 
several other US
states to consider similar legislation. Elsewhere non
 
-EU countries such as Bermuda, Brazil, India, Cayman Islands, China, Guernsey,
 
Jersey, Isle of
Man, and Switzerland have introduced
 
or updated existing legislation,
 
or are considering
 
new laws, with
 
provisions that are either inspired by
 
the
GDPR or that otherwise provide enhanced
 
rights to data subjects.
 
 
The revised Payment Services
 
Directive (PSD2) introduces
 
additional security requirements when customers and clients are accessing account
 
s
 
or
making payments online. In August 2019,
 
the FCA agreed an 18
 
-month plan for firms to implement these requirements, referred
 
to as
 
Strong
Customer Authentication (SCA).
 
 
Cyber security and operational
 
resilience
 
Regulators in Europe
 
and the US continue to focus on cyber security risk management and organisational operational
 
resilience and overall
soundness across all financial services firms, with customer and
 
market expectations of continuous access to financial services at an all-time high.
 
This has a led to a number
 
of proposed
 
laws and changes to regulatory frameworks being
 
published, such as
 
the UK regulators’ proposals for
 
a new
operational resilience regime, that necessitate the
 
implementation of a variety of increased controls and enhancemen
 
t
 
activities for regulated
Barclays Group
 
entities. To comply with these new requirements, firms such as the Barclays
 
Group
 
have adopted or
 
will adopt a
 
variety of increased
controls and processes, including, among
 
others, the amendment of cyber security policies and procedures
 
to include specified criteria,
 
additional
security measures for enhanced
 
reporting
 
and public disclosures,
 
compliance certification requirements, operational
 
resilience and more advanced
recovery
 
solutions, as well as other cyber and information
 
risk governance measures. These increased controls will enhance industry
standardisation, expand
 
and enhance our
 
resilience capabilities
 
as well as increase our ability to protect and
 
maintain customer service during
potential disruptions. Such
 
measures are likely to result in increased technology
 
and compliance costs for the Barclays Group.
 
Sanctions and financial crime
 
The UK Bribery
 
Act 2010
 
introduced a new form of corporate criminal liability
 
focused broadly
 
on a company’s failure to prevent bribery
 
on its
behalf. The Criminal Finances Act 2017
 
introduced
 
new corporate criminal offences of failing to
 
prevent the facilitation of UK and overseas
 
tax
evasion. Both pieces of legislation have broad
 
application and in certain circumstances may have extra-territorial impact on entities, persons or
 
Risk review
Supervision and
 
regulation
 
177
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
activities located outside the UK, including Barclays PLC
 
and its subsidiaries. The UK Bribery Act requires
 
the Barclays Group
 
to have adequate
procedures
 
to prevent bribery which, due to the extra-terr
 
itorial nature of the Act,
 
makes this both complex
 
and costly. Additionally, the Criminal
Finances Act requires the Barclays Group
 
to have reasonable prevention
 
procedures in place to prevent the criminal facilitation of
 
tax evasion by
persons acting for, or
 
on behalf of, the Barclays Group.
 
 
In May 2018,
 
the Sanctions and Anti-Money Laundering Act became law in the UK. The Act allows for the adoption of an autonomous
 
UK
Sanctions regime, as well as a more
 
flexible licensing regime post-Brexit.
 
 
In July 2018,
 
the 5th EU Anti-Money Laundering
 
Directive entered into force. Amongst other things, the Directive introduces changes to the
Enhanced Due Diligence measures that are required
 
in respect of customer relationships or transactions involving high risk non-EU countries. EU
Member States are required
 
to implement the requirements of the Directive by January 2020.
 
The UK Government has confirmed
 
that it
 
will
implement the requirements
 
of the Directive, regardless of the outcome of Brexit, and on 10
 
January changes
 
to the UK Money Laundering
Regulations came into force.
 
 
In the US, the Bank Secrecy Act, the USA PATRIOT
 
Act 2001
 
and regulations thereunder
 
contain numerous anti-money laundering
 
and anti-
terrorist financing requirements
 
for financial institutions. In addition, the Barclays Group
 
is subject
 
to the US Foreign
 
Corrupt Practices Act, which
prohibits certain payments to foreign
 
officials, as well as rules and regulations relating to economic sanctions and embargo
 
programs administered
by the US government,
 
including the US Office of Foreign Assets Control and the US Department of State, which restrict certain business activities
with certain individuals, entities, groups,
 
countries and territories.
 
In some cases, US state and federal regulations
 
addressing sanctions, money laundering
 
and other financial crimes may impact entities, persons or
activities located outside the US, including Barc
 
lays PLC and its subsidiaries. The enforcement of these regulations has been a major focus of US
state and federal government
 
policy relating to financial institutions
 
in recent years, and failure
 
of a financial institution to ensure compliance could
have serious legal, financial and reputational consequences
 
for the institution.
 
 
 
Financial review
 
Contents
 
178
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
A review of the Group’s
 
performance, including the key performance
 
indicators, and the
contribution of each of our businesses to the overall performance
 
of the Group.
 
Financial review
Page
 
Key performance indicators
 
179
 
Consolidated summary income statement
 
 
181
 
Income statement
 
commentary
 
 
182
 
Consolidated summary balance sheet
 
183
 
Balance sheet commentary
 
184
 
Analysis of results by
 
business
185
 
Non-IFRS performance measures
193
 
 
 
 
 
 
Financial review
 
Key performance
 
indicators
 
179
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
In assessing the financial performance
 
of the Group, management uses a range of KPIs which focus on the Group’s
 
financial strength, the
 
delivery
of sustainable returns and
 
cost management. Barclays continues to target greater than 10% RoTE, excluding
 
litigation and conduct
 
.
 
However,
 
given
global macroeconomic
 
uncertainty and the current low interest rate environment, it has become more challenging
 
to achieve this
 
in 2020.
Notwithstanding these headwinds, the Group
 
believes it can achieve a meaningful improvement
 
in returns in 2020
 
.
 
Cost control remains a priority
and management continues to target a cost: income ratio of lower
 
than 60% over time.
 
Non-IFRS performance measures
The Group’s
 
management believes that the non-IFRS performance
 
measures included in this document provide valuable information to the readers
of the financial statements as they enable the reader to identify a more
 
consistent basis for comparing
 
the businesses’
 
performance
 
between
financial periods, and provide
 
more detail concerning
 
the elements
 
of performance which the managers of these businesses are most directly able
to influence or are relevant for an assessment of the Group.
 
They also reflect an
 
important aspect of the way
 
in which operating targets are defined
and performance
 
is monitored by management. However,
 
any non
 
-IFRS performance measures in this
 
document are
 
not a substitute for IFRS
measures and readers should consider
 
the IFRS measures as well. Refer to pages 193
 
to 199 for
 
further information
 
and calculations of non-IFRS
performance
 
measures included throughout this section,
 
and the most directly comparable
 
IFRS measures.
 
Definition
Why is it important
 
and how the
 
Group performed
Common Equity Tier 1 (CET1)
ratio
Capital requirements are part
of the regulatory
 
framework
governing
 
how banks and
depository institutions are
supervised. Capital ratios
express a bank’s capital as a
percentage of its RWAs
 
as
defined by the PRA.
CET1 ratio is a measure of
capital that is predominantly
common
 
equity defined by the
CRR, as amended by the CRR II
applicable as at the reporting
date.
The Group’s
 
capital management objective is to maximise shareholder
 
value by
prudently managing
 
the level and mix
 
of its capital to: ensure the Group and all
of its subsidiaries are appropriately
 
capitalised
 
relative to their regulatory
minimum and stressed capital requirements, support
 
the Group’s risk appetite,
growth
 
and strategic options, while
 
seeking to maintain a robust
 
credit
proposition for
 
the Group and its subsidiaries.
The CET1 ratio increased to 13.8%
 
(December 2018:
 
13.2%). CET1 capital
decreased by £0.3bn
 
to £40.8bn. This was driven by underlying
 
profit
generation of £5.0bn
 
offset by dividends paid and foreseen of £2.4bn,
 
the
additional provision for PPI
 
of £1.4bn,
 
pension deficit reduction contribution
payments of £0.5bn, a decrease in the currency
 
translation reserve of £0.5bn,
mainly driven by the depreciation
 
of period end USD against GBP, and
 
a loss on
the redemption of AT1
 
securities
 
of £0.4bn.
 
RWAs decreased by
 
£16.8bn
 
to
£295.1bn
 
primarily driven by
 
the reduction in the Group’s operational risk
RWAs, as
 
well as the depreciation of period
 
end USD against GBP.
Group
 
target: CET1 ratio of c.13.5%. Revised from
 
c.13.0%
 
during the period, to
reflect the removal of the operational risk
 
RWAs floor which increased
 
the CET1
ratio by c.60bps.
CET1
 
ratio
13.8%
2018:
 
13.2%
2017:
 
13.3%
Average UK leverage ratio
The ratio is calculated as the
average transitional Tier 1
capital divided by average
 
UK
leverage exposure.
 
The
average exposure
 
measure
excludes qualifying central
bank claims.
The leverage ratio is non
 
-risk based and is intended to act as a supplementary
measure to the risk-based capital metrics such as the CET1 ratio.
The average UK
 
leverage ratio remained
 
stable at 4.5% (2018:
 
4.5%) primarily
driven by
 
a net increase in AT1 capital, offset by a modest increase in leverage
exposure to £1,143bn
 
(2018:
 
£1,110bn).
Group
 
target: maintaining the UK leverage ratio above the expected minimum
requirement.
Average UK leverage
ratio
4.5%
2018:
 
4.5%
2017:
 
4.9%
 
 
 
 
 
 
 
Financial review
 
Key performance
 
indicators
 
180
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Definition
Why is it important
 
and how the
 
Group performed
Return
 
on average
shareholders’
 
equity
RoE is
 
calculated as
 
profit after
tax attributable
 
to ordinary
shareholders,
 
as a proportion
of average
 
shareholders’
 
equity
excluding
 
non-controlling
interests
 
and other
 
equity
instruments.
This measure
 
indicates the
 
return generated
 
by
 
the management
 
of the business
 
based
on shareholders’
 
equity.
 
RoE for
 
the Group
 
was
 
4.5% (2018:
 
3.1%).
Group RoE
4.5%
2018:
 
3.1%
2017:
 
(3.1%)
Return
 
on average tangible
shareholders’
 
equity
RoTE is
 
calculated
 
as profit
after tax
 
attributable
 
to
ordinary
 
shareholders,
 
as a
proportion
 
of average
shareholders’
 
equity excluding
non-controlling
 
interests
 
and
other equity
 
instruments
adjusted
 
for the deduction
 
of
intangible
 
assets
 
and goodwill.
This measure
 
indicates the
 
return generated
 
by
 
the management
 
of the business
 
based
on shareholders’
 
tangible
 
equity.
 
Achieving
 
a target RoTE
 
demonstrates
 
the
organisation's
 
ability to
 
execute
 
its strategy
 
and align
 
management's
 
interests
 
with the
shareholders'.
 
RoTE lies at
 
the heart
 
of the Group's
 
capital allocation
 
and performance
management
 
process.
 
RoTE for
 
the Group
 
was 5.3% (2018:
 
3.6%)
 
due to an
 
attributable
 
profit of
 
£2,461m
(2018:
 
£1,597m)
 
which included
 
charges
 
for litigation
 
and conduct
 
of £1.8bn,
 
reflecting
an additional
 
PPI provision.
RoTE for
 
the Group,
 
excluding litigation
 
and conduct,
 
increased
 
to 9.0%
 
(2018:
 
8.5%), in
line with
 
the 2019
 
target.
 
Based
 
on an average
 
target
 
CET1 ratio
 
of 13.2%,
 
RoTE
 
was
also 9%.
Group
 
target:
 
Group RoTE,
 
excluding
 
litigation and
 
conduct,
 
of greater
 
than 10%.
Group RoTE
5.3%
2018:
 
3.6%
2017:
 
(3.6%)
Group RoTE
 
excluding
litigation
 
and conduct
9.0%
2018:
 
8.5%
2017:
 
(1.2%)
Operating
 
expenses
Operating
 
expenses
 
excluding
litigation
 
and conduct.
Barclays
 
views operating
 
expenses
 
as a
 
key strategic
 
area for
 
banks;
 
those who actively
manage costs
 
and control
 
them effectively
 
will gain
 
a strong competitive
 
advantage.
Group
 
operating
 
expenses
 
were £13.6bn,
 
in line with
 
2019
 
guidance,
 
while total
operating
 
expenses
 
were £15.4bn
 
(2018:
 
£16.2bn).
Total operating
expenses
£15.4bn
2018:
 
£16.2bn
2017:
 
£15.5bn
Operating expenses
£13.6bn
2018:
 
£13.9bn
a
2017:
 
£14.2bn
Cost: income
 
ratio
Total
 
operating
 
expenses
divided
 
by total income.
This is a
 
measure
 
management
 
uses to assess
 
the productivity
 
of the business
operations.
 
Managing
 
the cost
 
base is
 
a key execution
 
priority for
 
management
 
and
includes
 
a review
 
of all categories
 
of discretionary
 
spending
 
and an analysis
 
of how we
can run the
 
business to
 
ensure
 
that costs
 
increase
 
at a slower
 
rate than
 
income.
 
 
The Group
 
cost: income
 
ratio, including
 
litigation and
 
conduct,
 
decreased
 
to 71% (2018:
77%)
 
due to increased
 
income
 
and favourable
 
total operating
 
expenses,
 
which included
an additional
 
PPI provision.
The Group
 
cost: income
 
ratio, excluding
 
litigation
 
and conduct,
 
decreased
 
to 63%
 
(2018:
66%)
 
as favourable
 
income
 
and cost
 
efficiencies
 
were partially
 
offset by
 
continued
investment.
 
Group
 
target:
 
a cost: income
 
ratio of below
 
60% over
 
time.
Cost:
 
income ratio
71%
2018:
 
77%
2017:
 
73%
Cost:
 
income ratio
excluding litigation
and conduct
63%
2018:
 
66%
2017:
 
68%
Note
a
 
Group operating expenses,
 
excluding
 
litigation and
 
conduct, and a GMP charge of £140m.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial review
 
Consolidated
 
summary
 
income statement
 
181
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
2019
2018
2017
2016
2015
For the year ended 31 December
£m
£m
£m
£m
£m
Continuing operations
Net interest income
9,407
9,062
9,845
10,537
10,608
Net fee, commission and other income
12,225
12,074
11,231
10,914
11,432
Total income
21,632
21,136
21,076
21,451
22,040
Credit impairment charges
(1,912)
(1,468)
(2,336)
(2,373)
(1,762)
Operating costs
(13,359)
(13,627)
(13,884)
(14,565)
(13,723)
UK bank levy
 
(226)
(269)
(365)
(410)
(426)
Operating expenses
 
(13,585)
(13,896)
(14,249)
(14,975)
(14,149)
GMP charge
 
-
 
(140)
-
-
-
Litigation and conduct
(1,849)
(2,207)
(1,207)
(1,363)
(4,387)
Total operating expenses
(15,434)
(16,243)
(15,456)
(16,338)
(18,536)
Other net income/(expenses)
71
69
257
490
(596)
Profit before tax
4,357
3,494
3,541
3,230
1,146
Tax charge
a
(1,003)
(911)
(2,066)
(865)
(1,079)
Profit after tax in respect of continuing
 
operations
3,354
2,583
1,475
2,365
67
(Loss)/profit after tax in respect of discontinued operation
-
-
(2,195)
591
626
Non-controlling
 
interests
 
in respect of continuing operations
(80)
(234)
(249)
(346)
(348)
Non-controlling
 
interests
 
in respect of discontinued operation
-
 
-
 
(140)
(402)
(324)
Other equity instrument holders
(813)
(752)
(639)
(457)
(345)
Attributable profit/(loss)
2,461
1,597
(1,748)
1,751
(324)
Selected financial statistics
Basic earnings/(loss) per share
14.3p
9.4p
(10.3p)
10.4p
(1.9p)
Diluted earnings/(loss) per share
14.1p
9.2p
(10.1p)
10.3p
(1.9p)
Dividend per ordinary
 
share
9.0p
6.5p
3.0p
4.5p
6.5p
Return on average
 
shareholders’ equity
4.5%
3.1%
(3.1%)
3.0%
(0.6%)
Return on average
 
tangible shareholders’ equity
5.3%
3.6%
(3.6%)
3.6%
(0.7%)
Cost: income ratio
71%
77%
73%
76%
84%
Return on average
 
total assets
0.19%
0.13%
(0.14%)
0.13%
(0.02%)
Dividend payout
 
ratio
b
49%
48%
(29%)
43%
(334%)
Average
 
total equity
 
to average
 
total assets
5.2%
5.2%
5.7%
5.3%
5.0%
Performance measures excluding litigation
 
and conduct
c
Profit before
 
tax
6,206
5,701
4,748
4,593
5,533
Attributable profit/(loss)
4,194
3,733
(598)
3,036
3,640
Return on average
 
tangible shareholders’ equity
9.0%
8.5%
(1.2%)
6.2%
7.6%
Cost: income ratio
63%
66%
68%
70%
64%
Notes
a
 
From 2019,
 
due to an
 
IAS 12 update,
 
the tax re
 
lief on payments
 
in relation to AT1 instruments
 
has been recognised in
 
the tax charge of the income statement,
 
whereas it was
previously
 
recorded
 
in retained
 
earnings. Comparatives have
 
been restated, reducing the
 
tax charge for 2018 by £211m,
 
2017
 
by £174m
 
,
 
2016 by £128m
 
and 2015 by
 
£70m.
 
This
change does not
 
impact earnings
 
per share
 
or return on average tangible shareholders’
 
equity.
 
Further detail can
 
be found in Note 1.
b
 
Total dividends
 
paid
 
to ordinary equity holders of the
 
parent during the year
 
divided by profit
 
after tax attributable to ordinary
 
equity holders of the
 
parent.
c
 
Refer
 
to pages 197 to 199
 
for further
 
information
 
and calculations
 
of performance measures
 
excluding litigation
 
and conduct.
 
The financial information above
 
is extracted from the published accounts. This information should be read
 
together with the information included
in the accompanying
 
consolidated financial statements.
 
Financial review
 
Income
 
statement
 
commentary
 
 
182
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
2019
 
compared
 
to 2018
RoE was 4.5% (2018:
 
3.1%). RoTE, excluding
 
litigation and conduct, increased to 9.0% (2018:
 
8.5%), in line with
 
the 2019
 
target. Statutory EPS
was 14.3p
 
(2018:
 
9.4p) and diluted EPS was 14.1p
 
(2018:
 
9.2p).
Profit before
 
tax was £4,357m
 
(2018:
 
£3,494m), including
 
an additional provision for PPI of £1,400m (2018:
 
£400m). Excluding litigation and
conduct, profit before
 
tax was
 
£6,206m
 
(2018:
 
£5,701m), with higher income and lower operating
 
expenses
 
partially offset by increased year-
 
on-
year credit impairment charges. The 4% appreciation
 
of average USD against GBP positively impacted income and profits and adversely
 
impacted
credit impairment charges and
 
operating expenses.
Total income
 
increased 2% to £21,632m.
 
Barclays UK income was stable, as ongoing margin
 
pressure and continued reduced
 
risk appetite
 
in UK
cards were offset by
 
mortgage and
 
deposit balance growth. Barclays
 
International income increased 5%, with CIB income up 5% and CC&P income
up 4%. Within CIB, Markets income increased due to continued
 
market share gains
a
, while Banking fees income was stable and a reduction in
Corporate
 
lending income was partially offset by an increase in Transaction
 
banking income. Higher
 
CC&P income reflected growth
 
in US co-
branded
 
cards and payments partnerships
 
.
Credit impairment charges increased to £1,912m
 
(2018:
 
£1,468m). The 2019
 
charge includes the impact of macroeconomic
 
scenario updates and
an overall reduction
 
in unsecured gross exposures.
 
Prior year
 
comparatives included the impact of favourable macroeconomic
 
scenario updates
and a £150m
 
charge regarding
 
the anticipated economic uncertainty in the UK.
Operating expenses decreased to £13,585m
 
(2018:
 
£13,896m)
 
in line with
 
2019
 
guidance, as
 
cost efficiencies were partially offset by co
 
ntinued
investment. Barclays UK and Barclays
 
International each generated
 
positive cost: income jaws, resulting in the Group
 
cost: income ratio, excluding
litigation and conduct, reducing
 
to 63% (2018:
 
66%).
Total operating
 
expenses of £15,434m
 
(2018:
 
£16,243m)
 
included litigation
 
and conduct charges
 
of £1,849m
 
(2018: £2,207m)
 
.
The effective tax rate was 23.0%
 
(2018:
 
26.1%). Excluding
 
litigation and conduct, the effective tax
 
rate was 18.0%
 
(2018:
 
17.2%).
 
The Group’s
effective tax rate for future
 
periods is expected to remain around
 
20%, excluding litigation and conduct
 
.
Attributable profit was £2,461m
 
(2018:
 
£1,597m)
 
,
 
generating an RoE of 4.5% (2018:
 
3.1%)
 
.
 
Excluding litigation and conduct, attributable profit
was £4,194m
 
(2018:
 
£3,733m), generating an RoTE of 9.0% (2018:
 
8.5%) and EPS of 24.4p
 
(2018: 21.9p)
 
.
 
Please refer to the Financial review section in the
 
Annual Report
 
on Form
 
20-
 
F
 
2018 for a comparative
 
discussion of 2018
 
financial results
compared
 
to 2017.
 
 
Note
a
 
Data Source: Coalition,
 
FY19 Preliminary
 
Competitor Analysis.
 
Market share
 
represents
 
Barclays share of the
 
total industry Revenue
 
Pool. Analysis is
 
based on Barclays
 
internal
business
 
structure
 
and internal revenues.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial review
 
Consolidated
 
summary
 
balance
 
sheet
 
183
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
2019
2018
2017
2016
2015
As at 31 December
£m
£m
£m
£m
£m
Assets
Cash and balances at central banks
 
150,258
177,069
171,082
102,353
49,711
Cash collateral and settlement balances
83,256
77,222
77,168
90,135
82,980
Loans and advances at amortised cost
339,115
326,406
324,048
345,900
357,586
Reverse repurchase
 
agreements and other similar secured lending
3,379
2,308
12,546
13,454
28,187
Trading
 
portfolio assets
114,195
104,187
113,760
80,240
77,348
Financial assets at fair value through
 
the income statement
133,086
149,648
116,281
78,608
76,830
Derivative financial instruments
229,236
222,538
237,669
346,626
327,709
Financial investments
-
 
-
 
58,915
63,317
90,267
Financial assets at fair value through
 
other comprehensive income
65,750
52,816
-
 
-
 
-
 
Assets included in disposal groups
 
classified
 
as held for sale
-
 
-
 
1,193
71,454
7,364
Other assets
21,954
21,089
20,586
21,039
22,030
Total assets
1,140,229
1,133,283
1,133,248
1,213,126
1,120,012
Liabilities
Deposits at amortised cost
415,787
394,838
398,701
390,744
390,307
Cash collateral and settlement balances
67,341
67,522
68,143
80,648
75,015
Repurchase agreements
 
and other similar secured borrowings
14,517
18,578
40,338
19,760
25,035
Debt securities in issue
a
76,369
82,286
73,314
75,932
69,150
Subordinated
 
liabilities
18,156
20,559
23,826
23,383
21,467
Trading
 
portfolio liabilities
 
36,916
37,882
37,351
34,687
33,967
Financial liabilities designated at fair value
204,326
216,834
173,718
96,031
91,745
Derivative financial instruments
229,204
219,643
238,345
340,487
324,252
Liabilities included in disposal groups classified as held for sale
-
 
-
 
-
 
65,292
5,997
Other liabilities
11,953
11,362
13,496
14,797
17,213
Total liabilities
1,074,569
1,069,504
1,067,232
1,141,761
1,054,148
Equity
Called up share capital and share premium
4,594
4,311
22,045
21,842
21,586
Other equity instruments
10,871
9,632
8,941
6,449
5,305
Other reserves
4,760
5,153
5,383
6,051
1,898
Retained earnings
 
44,204
43,460
27,536
30,531
31,021
Total equity excluding non
 
-controlling interests
64,429
62,556
63,905
64,873
59,810
Non-controlling
 
interests
1,231
1,223
2,111
6,492
6,054
Total equity
65,660
63,779
66,016
71,365
65,864
Total liabilities
 
and equity
1,140,229
1,133,283
1,133,248
1,213,126
1,120,012
Net asset value per ordinary
 
share
309p
309p
322p
344p
324p
Tangible net asset value per share
262p
262p
276p
290p
275p
Number of ordinary
 
shares of Barclays PLC (in millions)
17,322
17,133
17,060
16,963
16,805
Year
 
-end USD exchange rate
1.32
1.28
1.35
1.23
1.48
Year
 
-end EUR exchange rate
1.18
1.12
1.13
1.17
1.36
 
Note
a
 
Debt securities
 
in issue include
 
covered bonds
 
of £7.0bn (2018: £8.5bn).
 
Financial review
 
Balance
 
sheet
 
commentary
 
184
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Total assets
Total assets increased
 
£7bn to £1,140bn.
 
Cash and balances at central banks has decreased
 
by £27bn
 
to £150bn. The cash balance has reduced
 
as the
 
Group
 
actively managed the cash
component
 
of the liquidity
 
pool it holds to meet its funding and regulatory
 
requirements. This management has seen a
 
change in the composition
of the liquidity pool and an increase in the proportion
 
of debt securities
 
held within it. The change in holding of liquid debt securities can be seen
through
 
the increase in assets held at fair
 
value through
 
other comprehensive income of £13bn
 
to £66bn.
 
Cash collateral and settlement balances
 
increased by £6bn
 
to £83bn, primarily driven by
 
derivative fair value changes.
 
Loans and advances at amortised cost increased £13bn
 
to £339bn,
 
principally driven by a £6bn
 
increase in
 
mortgage lending
 
in Barclays UK and a
£3bn increase in debt securities held as part of Treasury.
 
Trading
 
portfolio assets increased £10bn
 
to £114bn
 
due to increased trading activity, principally relating to the Equities business.
 
Financial assets at fair value through
 
the income statement
 
decreased £17bn
 
to £133
 
bn as
 
a result of more capital-efficient secured lending within
Barclays International.
 
Derivative financial instrument assets increased £6bn
 
to £229bn, driven
 
by a decrease in major interest rate curves, partially
 
offset by a decrease
 
in
foreign exchange
 
volumes.
 
Total liabilities
Total liabilities increased £5bn
 
to £1,075bn.
 
Deposits at amortised cost increased £21bn
 
to £416bn
 
driven by increased deposit taking within
 
Personal and Business Banking and the
broadening
 
of the CIB business
 
across Europe.
 
Debt securities in issue decreased £6bn
 
to £76bn
 
due to the maturity of a
 
number
 
of issuances
 
which were not refinanced.
 
Financial liabilities designated at fair value decreased £13bn
 
to £204bn
 
as a
 
result of more capital-efficient secured lending within Barclays
International.
 
Derivative financial instruments liabilities increased £9bn
 
to £229bn, driven
 
by a decrease in major interest
 
rate curves, partially offset by a
 
decrease
in foreign exchange
 
volumes. This is consistent with the movement in derivative financial instrument assets.
 
Total shareholders’ equity
Total shareholders’
 
equity increased £1.8
 
bn to £64.4bn.
 
Share capital and share premium
 
increased £0.3bn
 
to £4.6bn as a result of shares
 
issued under
 
employee share schemes and the Scrip Dividend
Programme.
 
Other equity instruments increased £1.3bn
 
to £10.9bn
 
due to the issuance
 
of three AT1 instruments with principal amounts of $2.0bn,
 
£1.0bn
 
and
£1.0bn,
 
partially offset by redemptions with principa
 
l
 
amounts of $1.2bn,
 
€1.1bn
 
and £0.7bn. AT1 securities are perpetual subordinated
 
contingent
convertible securities structured
 
to qualify as AT1 instruments under prevailing
 
capital rules
 
applicable as at the relevant issue date.
 
The fair value through
 
other comprehensive income
 
reserve represents the unrealised change in the fair value through other
 
comprehensive
income investments since initial recognition.
 
The reserve remained
 
broadly
 
flat
 
at £0.2bn.
 
The cash flow hedging
 
reserve increased £0.3bn
 
to £1.0bn as a
 
result of the fair value movements on interest rate swaps held for hedging
purposes, as interest rate forward
 
curves flattened across major currencies.
 
The currency
 
translation reserve decreased £0.5bn
 
to £3.3bn due to strengthening of GBP against USD and EUR of 3% and 5% respectively, when
comparing
 
year end closing rates.
 
The own credit reserve
 
decreased £0.3bn
 
to £0.4bn
 
debit,
 
reflecting a tightening of Barclays’ credit spreads increasing the fair value of liabilities on
balance sheet.
 
Retained earnings increased £0.7bn
 
to £44.2bn
 
due to profits of £2.5bn, partially offset by dividends paid of £1.2bn, foreign
 
exchange impact on
redemption
 
of AT1 instruments of £0.4
 
bn and pension reserve
 
remeasurement of £0.2bn.
 
Net asset value per share was unchanged
 
at 309p (2018:
 
309p). Tangible
 
net asset
 
value per share was unchanged
 
at 262p (201
 
8:
 
262
 
p) as
 
14.3p
earnings per share were
 
offset by dividend payments of 7p per
 
share and net negative reserve movements of 7
 
p,
 
predo
 
minately in the
 
currency
translation reserve.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial review
 
Analysis
 
of results
 
by business
 
 
185
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Barclays
 
UK
 
2019
2018
2017
£m
£m
£m
Income statement information
Net interest income
5,888
6,028
6,086
Net fee, commission and other income
1,465
1,355
1,297
Total income
7,353
7,383
7,383
Credit impairment charges
(712)
(826)
(783)
Net operating income
6,641
6,557
6,600
Operating costs
 
(3,996)
(4,075)
(4,030)
UK bank levy
(41)
(46)
(59)
Operating expenses
(4,037)
(4,121)
(4,089)
Litigation and conduct
(1,582)
(483)
(759)
Total operating expenses
(5,619)
(4,604)
(4,848)
Other net income/(expenses)
-
3
(5)
Profit before tax
1,022
1,956
1,747
Attributable profit
a
281
1,198
893
Balance sheet information
Loans and advances to customers at amortised cost
£193.7bn
£187.6bn
£183.8bn
Total assets
£257.8bn
£249.7bn
£237.4bn
Customer deposits at amortised cost
£205.5bn
£197.3bn
£193.4bn
Loan: deposit ratio
96%
96%
95%
Risk weighted assets
£74.9bn
£75.2bn
£70.9bn
Period
 
end allocated tangible equity
£10.3bn
£10.2bn
£9.6bn
Key facts
Average
 
LTV of mortgage
 
portfolio
b
51%
49%
48%
Average
 
LTV of new mortgage
 
lending
b
68%
65%
64%
Number of branches
963
1,058
1,208
Mobile banking active customers
8.4m
7.3m
6.4m
30 day arrears
 
rate - Barclaycard
 
Consumer UK
1.7%
1.8%
1.8%
Number of employees
 
(full time
 
equivalent)
21,400
22,600
22,800
Performance measures
Return on average
 
allocated equity
2.0%
8.8%
6.6%
Return on average
 
allocated tangible equity
2.7%
11.9%
9.8%
Average
 
allocated equity
£13.9bn
£13.6bn
£13.6bn
Average
 
allocated tangible equity
£10.3bn
£10.0bn
£9.1bn
Cost: income ratio
76%
62%
66%
Loan loss rate (bps)
c
36
43
42
Net interest margin
 
3.09%
3.23%
3.49%
Performance measures excluding litigation
 
and conduct
d
Profit before
 
tax
2,604
2,439
2,506
Attributable profit
1,813
1,670
1,626
Return on average
 
allocated tangible equity
17.5%
16.7%
17.8%
Cost: income ratio
55%
56%
55%
 
Notes
a
 
From 2019,
 
due to an
 
IAS 12 update,
 
the tax relief
 
on payments
 
in relation to AT1 instruments
 
has been recognised in
 
the tax charge of the
 
income statement, whereas
 
it was
previously
 
recorded
 
in retained
 
earnings. Comparatives have
 
been restated. This
 
change does not impact
 
EPS or return on average tangible shareholders’
 
equity.
b
 
Average loan
 
to value of mortgages
 
is balance weighted
 
and reflects
 
both residential
 
and buy-to-let mortgage portfolios within
 
the Home Loans portfolio. The
 
prior period
 
has
been updated
 
to align to this
 
basis of preparation.
c
 
2017
 
comparative
 
calculation
 
based on gross loans
 
and advances
 
at amortised
 
cost before the balance sheet
 
presentation change and IAS 39 impairment
 
charge.
d
 
Refer
 
to pages 197 to 199 for further
 
information
 
and calculations
 
of performance measures
 
excluding litigation and
 
conduct.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial review
 
Analysis
 
of results
 
by business
 
 
186
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Analysis of Barclays UK
2019
2018
2017
£m
£m
£m
Analysis of total income
Personal Banking
4,009
4,006
4,214
Barclaycard
 
Consumer UK
1,992
2,104
1,977
Business Banking
1,352
1,273
1,192
Total income
7,353
7,383
7,383
Analysis of credit impairment charges
Personal Banking
(195)
(173)
(221)
Barclaycard
 
Consumer UK
(472)
(590)
(541)
Business Banking
(45)
(63)
(21)
Total credit impairment charges
(712)
(826)
(783)
Analysis of loans and advances to customers at amortised cost
Personal Banking
£151.9bn
£146.0bn
£141.3bn
Barclaycard
 
Consumer UK
£14.7bn
£15.3bn
£16.4bn
Business Banking
£27.1bn
£26.3bn
£26.1bn
Total loans and advances to customers at amortised cost
£193.7bn
£187.6bn
£183.8bn
Analysis of customer deposits
 
at amortised cost
Personal Banking
£159.2bn
£154.0bn
£153.1bn
Barclaycard
 
Consumer UK
-
-
-
Business Banking
£46.3bn
£43.3bn
£40.3bn
Total customer deposits at amortised cost
£205.5bn
£197.3bn
£193.4bn
 
 
2019 compared
 
to 2018
RoE was 2.0% (2018:
 
8.8%). Including
 
litigation and conduct charges of £1,582m (2018:
 
£483m), profit before tax was £1,022m
 
(2018:
 
£1,956m).
Profit before
 
tax, excluding litigation and conduct, increased 7% to £2,604m
 
and RoTE increased to 17.5%
 
(2018:
 
16.7%) reflecting the resilience
of the business in a challenging income
 
environment.
Total income
 
was stable at £7,353m
 
(2018:
 
£7,383m). A 2% reduction
 
in net interest
 
income to £5,888m
 
(resulting in a lower NIM of 3.09% (2018:
3.23%))
 
reflected higher refinancing
 
activity
 
by mortgage
 
customers, lower IEL balances in UK cards and the mix effect from growth
 
in secured
lending. Net fee, commission and other
 
income increased 8% to £1,465m,
 
due to increased debt sales
 
and the impact of treasury operations
 
.
Personal Banking
 
income was stable at £4,009m
 
(2018:
 
£4,006m),
 
reflecting ongoing mortgage margin pressure, offset by mortgage and
 
deposit
balance growth,
 
improved
 
deposit margins and treasury operations
 
.
 
Barclaycard Consumer
 
UK income decreased 5% to £1,992m reflecting a
continued reduced
 
risk appetite
 
and reduced
 
borrowing by
 
customers, which resulted in a lower level of IEL
 
balances, partially offset by
 
increased
debt sales.
 
Business Banking income increased
 
6% to £1,352m
 
driven by
 
deposit
 
growth, with improved
 
deposit
 
margins, and the non-recurrence
of client remediation in 2018
 
.
Credit impairment charges decreased
 
14% to £712m
 
reflecting the non-recurrence of a £100m
 
specific charge in Q418
 
relating to the impact of
anticipated economic
 
uncertainty in the UK. Unsecured gross exposures
 
were lower
 
as a
 
result of increased debt sales and an improved risk profile,
both principally in UK cards. The 30 and
 
90 day arrears
 
rates in UK cards decreased to 1.7% (Q418:
 
1.8%) and 0.8% (Q418:
 
0.9%) respectively.
Operating expenses decreased 2% to £4,037m
 
as cost efficiencies were partially offset by planned
 
investment and inflation. The cost: income ratio
was 76%
 
(2018:
 
62%). The cost: income ratio, excluding litigation and conduct, was 55% (2018:
 
56%).
Loans and advances to customers at amortised cost increased
 
3% to £193.7bn
 
reflecting £6.4
 
bn of mortgage growth.
Customer deposits at amortised cost increased 4% to £205.5bn
 
demonstrating franchise strength across both Personal
 
and Business Banking.
RWAs
 
were stable at £74.9bn
 
(2018:
 
£75.2bn)
 
as a
 
reduction in UK cards
 
(reflecting increased debt sales,
 
lower IEL balances and an improved
 
risk
profile) was offset
 
by growth
 
in mortgages.
 
Please refer to the Financial review section in the
 
Annual Report
 
on Form
 
20-
 
F
 
2018 for a comparative
 
discussion of 2018
 
financial results
compared
 
to 2017.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial review
 
Analysis
 
of results
 
by business
 
 
187
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Barclays
 
International
 
2019
2018
2017
£m
£m
£m
Income statement information
Net interest income
3,941
3,815
4,307
Net trading income
4,199
4,450
3,971
Net fee, commission and other income
6,535
5,761
6,104
Total income
14,675
14,026
14,382
Credit impairment charges
(1,173)
(658)
(1,506)
Net operating income
13,502
13,368
12,876
Operating costs
(9,163)
(9,324)
(9,321)
UK bank levy
 
(174)
(210)
(265)
Operating expenses
(9,337)
(9,534)
(9,586)
Litigation and conduct
(116)
(127)
(269)
Total operating expenses
(9,453)
(9,661)
(9,855)
Other net income
69
68
254
Profit before tax
4,118
3,775
3,275
Attributable profit
a
2,816
2,599
967
Balance sheet information
Loans and advances at amortised cost
£132.8bn
£127.2bn
£126.8bn
Trading
 
portfolio assets
£113.3bn
£104.0bn
£113.0bn
Derivative financial instrument assets
 
£228.9bn
£222.1bn
£236.2bn
Financial assets at fair value through
 
the income statement
£128.4bn
£144.7bn
£104.1bn
Cash collateral and settlement balances
£79.4bn
£74.3bn
£71.9bn
Other assets
£178.6bn
£189.8bn
£204.1bn
Total assets
£861.4bn
£862.1bn
£856.1bn
Deposits at amortised cost
£210.0bn
£197.2bn
£187.3bn
Derivative financial instrument liabilities
£228.9bn
£219.6bn
£237.8bn
Loan: deposit ratio
63%
65%
68%
Risk weighted assets
£209.2bn
£210.7bn
£210.3bn
Key facts
Number of employees
 
(full time
 
equivalent)
11,200
12,400
11,500
Performance measures
Return on average
 
allocated equity
8.7%
8.1%
3.2%
Return on average
 
allocated tangible equity
9.0%
8.4%
3.4%
Average
 
allocated equity
£32.2bn
£32.3bn
£30.5bn
Average
 
allocated tangible equity
£31.2bn
£31.0bn
£28.1bn
Cost: income ratio
64%
69%
69%
Loan loss rate (bps)
b
86
50
75
Net interest margin
4.07%
4.11%
4.16%
Performance measures excluding litigation
 
and conduct
c
Profit before
 
tax
4,234
3,902
3,544
Attributable profit
2,906
2,705
1,227
Return on average
 
allocated tangible equity
9.3%
8.7%
4.4%
Cost: income ratio
64%
68%
67%
 
Notes
a
 
From 2019,
 
due to an
 
IAS 12 update,
 
the tax relie
 
f
 
on payments
 
in relation to AT1 instruments
 
has been recognised in
 
the tax charge of the
 
income statement, whereas
 
it was
previously
 
recorded
 
in retained
 
earnings. Comparatives have
 
been restated. This
 
change does not impact
 
EPS or return on average tangible shareholders’
 
equity.
b
 
2017
 
comparative
 
calculation
 
based on gross loans
 
and advances
 
at amortised cost before the
 
balance sheet presentation
 
change and IAS 39 impairment charge
 
.
c
 
Refer
 
to pages 197 to 199
 
for further
 
information
 
and calculations
 
of performance measures
 
excluding litigation and
 
conduct.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial review
 
Analysis
 
of results
 
by business
 
 
188
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Analysis of Barclays International
2019
2018
2017
Corporate and Investment Bank
£m
£m
£m
Income statement information
FICC
3,364
2,863
2,875
Equities
1,887
2,037
1,629
Markets
5,251
4,900
4,504
Advisory
776
708
678
Equity capital markets
329
300
354
Debt capital markets
1,430
1,523
1,580
Banking fees
2,535
2,531
2,612
Corporate
 
lending
765
878
1,093
Transaction banking
1,680
1,627
1,629
Corporate
2,445
2,505
2,722
Other
a
-
(171)
40
Total income
10,231
9,765
9,878
Credit impairment (charges)/releases
(157)
150
(213)
Net operating income
10,074
9,915
9,665
Operating costs
(6,882)
(7,093)
(7,231)
UK bank levy
(156)
(188)
(244)
Operating expenses
(7,038)
(7,281)
(7,475)
Litigation and conduct
(109)
(68)
(267)
Total operating expenses
 
(7,147)
(7,349)
(7,742)
Other net income
28
27
133
Profit before tax
2,955
2,593
2,056
Attributable profit
b
1,980
1,781
269
Balance sheet
 
information
Loans and advances at amortised cost
£92.0bn
£86.4bn
£88.2bn
Trading
 
portfolio assets
£113.3bn
£104.0bn
£112.9bn
Derivative financial instrument assets
£228.8bn
£222.1bn
£236.1bn
Financial assets at fair value through
 
the income statement
£127.7bn
£144.2bn
£103.8bn
Cash collateral and settlement balances
£78.5bn
£73.4bn
£71.9bn
Other assets
£155.3bn
£160.4bn
£175.8bn
Total assets
£795.6bn
£790.5bn
£788.7bn
Deposits at amortised cost
£146.2bn
£136.3bn
£128.0bn
Derivative financial instrument liabilities
£228.9bn
£219.6bn
£237.7bn
Risk weighted assets
£171.5bn
£170.9bn
£176.2bn
Performance
 
measures
Return on average
 
allocated equity
7.6%
6.8%
1.1%
Return on average
 
allocated tangible equity
7.6%
6.9%
1.1%
Average
 
allocated equity
£25.9bn
£26.2bn
£24.9bn
Average
 
allocated tangible equity
£25.9bn
£26.0bn
£24.0bn
Cost: income ratio
70%
75%
78%
Performance
 
measures excluding
 
litigation and
 
conduct
c
Profit before
 
tax
3,064
2,661
2,323
Attributable profit
2,064
1,843
528
Return on average
 
allocated tangible equity
8.0%
7.1%
2.2%
Cost: income ratio
69%
75%
76%
 
Notes
a
 
From 2019,
 
treasury
 
items previously
 
included in Other have been allocated
 
to businesses.
b
 
From 2019, due
 
to an IAS 12 update,
 
the tax relief
 
on payments
 
in relation to AT1 instruments
 
has been recognised in the
 
tax charge of the income statement,
 
whereas it was
previously
 
recorded
 
in retained
 
earnings. Comparatives have
 
been restated. This
 
change does not impact
 
EPS or return on average tangible shareholders’
 
equity.
c
 
Refer
 
to pages 197 to 199
 
for further
 
information
 
and calculations
 
of performance measures
 
excluding litigation and
 
conduct.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial review
 
Analysis
 
of results
 
by business
 
 
189
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Analysis of Barclays International
2019
2018
2017
Consumer, Cards and Payments
£m
£m
£m
Income statement information
Net interest income
2,822
2,731
2,754
Net fee, commission, trading and other
 
income
 
1,622
1,530
1,750
Total income
4,444
4,261
4,504
Credit impairment charges
(1,016)
(808)
(1,293)
Net operating income
3,428
3,453
3,211
Operating costs
(2,281)
(2,231)
(2,090)
UK bank levy
(18)
(22)
(21)
Operating expenses
(2,299)
(2,253)
(2,111)
Litigation and conduct
(7)
(59)
(2)
Total operating expenses
(2,306)
(2,312)
(2,113)
Other net income
41
41
121
Profit before tax
1,163
1,182
1,219
Attributable profit
a
836
818
698
Balance sheet
 
information
Loans and advances at amortised cost
£40.8bn
£40.8bn
£38.6bn
Total assets
£65.8bn
£71.6bn
£67.4bn
Deposits at amortised cost
£63.8bn
£60.9bn
£59.3bn
Risk weighted assets
£37.7bn
£39.8bn
£34.1bn
Key facts
30 day arrears
 
rates - Barclaycard US
2.7%
2.7%
2.6%
US cards customer FICO score distribution
<660
14%
14%
15%
>660
86%
86%
85%
Total number
 
of Barclaycard
 
payments clients
c.376,000
c.374,000
c.366,000
Value of payments processed
b
£354bn
£344bn
£322bn
Performance
 
measures
Return on average
 
allocated equity
13.3%
13.5%
12.5%
Return on average
 
allocated tangible equity
15.8%
16.5%
16.7%
Average
 
allocated equity
£6.3bn
£6.1bn
£5.6bn
Average
 
allocated tangible equity
£5.3bn
£5.0bn
£4.2bn
Cost: income ratio
52%
54%
47%
Loan loss rate (bps)
c
234
185
321
Performance
 
measures excluding
 
litigation and
 
conduct
d
Profit before
 
tax
1,170
1,241
1,221
Attributable profit
842
862
699
Return on average
 
allocated tangible equity
15.9%
17.3%
16.8%
Cost: income ratio
52%
53%
47%
 
Notes
a
 
From 2019,
 
due to an
 
IAS 12 update,
 
the tax relief
 
on payments
 
in relation to AT1 instruments
 
has been recognised in
 
the tax charge of the income statement,
 
whereas it was
previously
 
recorded
 
in retained
 
earnings. Comparatives have
 
been restated. This
 
change does not impact
 
EPS or return on average tangible shareholders’
 
equity.
b
 
Includes
 
£272bn of merchant acquiring
 
payments
c
 
2017
 
comparative
 
calculation
 
based on gross loans
 
and advances
 
at amortised
 
cost before the balance sheet
 
presentation change and IAS 39 impairment
 
charge.
d
 
Refer
 
to pages 197 to 199
 
for more information
 
and calculations
 
of performance
 
measures excluding
 
litigation and
 
conduct.
 
Financial review
 
Analysis
 
of results
 
by business
 
 
190
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
2019 compared
 
to 2018
Profit before
 
tax was £4,118m.
 
RoE was 8.7% (2018:
 
8.1%), CIB RoE was 7.6%
 
(2018:
 
6.8%) and CC&P RoE was 13.3%
 
(2018
 
:
 
13.5%). Profit before
tax, excluding litigation and conduct,
 
increased 9% to £4,234m
 
with an RoTE of 9.3% (2018:
 
8.7%), reflecting returns in the CIB
 
of 8.0% (2018:
7.1%)
 
and CC&P of 15.9%
 
(2018:
 
17.3%)
 
.
The 4% appreciation of average
 
USD against GBP positively impacted income and profits, and adversely impacted credit impairment charges
 
and
operating expenses.
Total income
 
increased to £14,675m
 
(2018:
 
£14,026m)
 
.
CIB income increased 5% to £10,231m
 
.
 
Markets income increased 7% to £5,251m
 
reflecting further gains in market share
 
in a declining revenue
pool
a
.
FICC income increased 17%
 
to £3,364m
 
reflecting a strong performance in rates and growth
 
in securitised
 
products. Equities
 
income decreased
7% to £1,887m
 
driven by
 
equity derivatives, which were impacted by reduced
 
client activity.
 
Included
 
in Markets was a £180m
 
gain related to the
Tradeweb
 
position and a net loss of
 
£77m due to the impact of treasury
 
operations and hedgin
 
g
 
counterparty risk.
Banking fees income was stable at £2,535m.
 
The business continued to gain market
 
share in a declining fee pool
b
. Within Corporate, Transaction
banking income
 
increased 3% to £1,680m
 
reflecting growth
 
in deposits.
 
This was offset by a d
 
ecrease in Corporate lending
 
income to £765m
(2018:
 
£878m).
 
Excluding mark-to-market movements on loan hedges, Corporate lending
 
income was broadly stable.
CC&P income increased 4% to £4,444m
 
reflecting growth
 
in US co-branded cards and payments partnerships
 
.
Credit impairment charges increased to £1,173m
 
(2018:
 
£658m). CIB credit impairment charges increased to £157m
 
(2018:
 
release of £150m) due
to the non
 
-recurrence
 
of favourable macroeconomic scenario updates and single name recoveries
 
in 2018.
 
CC&P credit impairment charges
increased to £1,016m
 
(2018:
 
£808m)
 
,
 
reflecting the non-recurrence of favourable
 
US macroeconomic scenario updates in
 
2018
 
,
 
as well
 
as higher
unsecured
 
gross exposures due to balance growth
 
in cards.
 
Credit metrics remained stable,
 
with 30 and
 
90 day arrears
 
rates in US
 
cards of 2.7%
(Q418:
 
2.7%) and 1.4%
 
(Q418:
 
1.4%) respectively
 
.
Operating expenses decreased 2% to £9,337m.
 
CIB operating expenses decreased 3% to £7,038m
 
as cost
 
efficiencies were partially offset by
continued investment. CC&P operating
 
expenses increased 2% to £2,299m reflecting continued
 
investment.
Loans and advances increased £5.6bn
 
to £132.8bn
 
mainly due to an increase in debt securities.
Trading
 
portfolio assets increased £9.3bn to £1
 
13.3bn
 
due to increased
 
trading activity, principally relating to the Equities business.
Derivative financial instrument assets and liabilities increased £6.8bn
 
to £228.9bn
 
and £9.3bn to £228.9bn respectively driven by a decrease in
major interest rate curves, partially offset by
 
a decre
 
ase in
 
foreign exchange
 
volumes.
Financial assets at fair value through
 
the income statement
 
decreased £16.3bn
 
to £128.4bn
 
driven by a focus on capital-efficient secured financing.
Other assets decreased £11.2bn
 
to £178.6
 
bn predominantly
 
due to a reduction in cash at central banks
 
held as part of the liquidity pool.
Deposits at amortised cost increased £12.8bn
 
to £210.0bn due
 
to increased deposits within
 
CIB including the broadenin
 
g
 
of the business
 
across
Europe.
RWAs
 
decreased to £209.2bn
 
(December 2018:
 
£210.7bn) driven predominantly
 
by depreciation of USD against GBP.
 
Please refer to the Financial review section in the
 
Annual Report
 
on Form
 
20-
 
F
 
2018 for a comparative
 
discussion of 2018
 
financial results
compared
 
to 2017.
 
Notes
a
 
Data Source: Coalition,
 
FY19 Preliminary
 
Competitor Analysis.
 
Market share
 
represents
 
Barclays share of the
 
total industry Revenue
 
Pool. Analysis is
 
based on Barclays
 
internal
business
 
structure
 
and internal revenues.
b
 
Data Source: Dealogic, for
 
the period
 
covering 1 January to 31 December 2019.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial review
 
Analysis
 
of results
 
by business
 
 
191
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Head
 
Office
 
2019
2018
2017
£m
£m
£m
Income statement information
Net interest income
(422)
(781)
(435)
Net fee, commission and other income
26
508
276
Total income
 
(396)
(273)
(159)
Credit impairment (charges)/releases
(27)
16
(17)
Net operating expenses
(423)
(257)
(176)
Operating costs
(200)
(228)
(277)
UK bank levy
(11)
(13)
(41)
Operating expenses
(211)
(241)
(318)
GMP charge
 
-
(140)
-
Litigation and conduct
(151)
(1,597)
(151)
Total operating expenses
(362)
(1,978)
(469)
Other net income/(expenses)
2
(2)
(189)
Loss before tax
 
(783)
(2,237)
(834)
Attributable loss
a
(636)
(2,200)
(864)
Balance sheet information
Total assets
£21.0bn
£21.5bn
£39.7bn
Risk weighted assets
£11.0bn
£26.0bn
£31.8bn
Key facts
Number of employees
 
(full time
 
equivalent)
48,200
48,500
45,600
Performance measures
Average
 
allocated equity
£8.5bn
£6.2bn
£10.6bn
Average
 
allocated tangible equity
£5.1bn
£3.1bn
£9.3bn
Performance measures excluding litigation
 
and conduct
b
Loss before tax
(632)
(640)
(683)
Attributable loss
(525)
(642)
(727)
 
Notes
a
 
From 2019,
 
due to an
 
IAS 12 update,
 
the tax relief
 
on payments
 
in relation to AT1 instruments
 
has been recognised in
 
the tax charge of the
 
income statement, whereas
 
it was
previously
 
recorded
 
in retained
 
earnings. Comparatives have
 
been restated. This
 
change does not impact
 
EPS or return on average tangible shareholders’
 
equity.
b
 
Refer to pages
 
197 to 199 for more
 
information
 
and calculations
 
of performance
 
measures excluding litigation and
 
conduct.
 
 
2019
 
compared
 
to
 
2018
Including
 
litigation and conduct charges of £151m
 
(2018: £1,597m)
 
,
 
loss before tax was
 
£783m
 
(2018:
 
£2,237m)
 
,
 
which reflected the non-
recurrence
 
of the £1,420m
 
Residential Mortgage Backed
 
Securities settlement
 
in 2018.
 
Loss before tax, excluding litigation and conduct was
£632m
 
(2018:
 
£640m).
Total income
 
was an expense of £396m
 
(2018:
 
£273m)
 
,
 
which included the funding
 
costs of
 
legacy capital instruments, treasury items and hedge
accounting expenses, partially offset by
 
the recognition of dividends on
 
Barclays stake in Absa Group Limited. The increase in income expense was
mainly due to the non-
 
recurrence
 
of a £155m
 
one-off gain in 2018
 
from the settlement
 
of receivables relating to the Lehman Brothers
 
acquisition.
Average
 
allocated equity was £8.5bn (2018:
 
£6.2bn). Average allocated tangible equity increased to £5.1bn
 
(2018:
 
£3.1bn)
 
mainly due to excess
capital held in Head Office as a result of the Group’s
 
average CET1 ratio for
 
2019
 
being above the 13.0% used in the allocation of equity to the
businesses.
RWAs
 
decreased to £11.0bn
 
(December
 
2018: £26.0bn) mainly driven
 
by the removal of the Group’s operational
 
risk RWAs floor.
 
Please refer to the Financial review section in the
 
Annual Report
 
on Form
 
20-
 
F
 
2018 for a comparative
 
discussion of 2018
 
financial results
compared
 
to 2017.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial review
 
Analysis
 
of results
 
by business
 
 
192
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Barclays
 
Non-Core
 
2019
2018
2017
a
£m
£m
£m
Income statement information
Total income
-
-
(530)
Credit impairment charges
-
-
(30)
Net operating expenses
-
-
(560)
Operating costs
-
-
(256)
Litigation and conduct
-
-
(28)
Total operating expenses
-
-
(284)
Other net income
-
-
197
Loss before tax
-
-
(647)
Attributable loss
b
-
-
(409)
 
Notes
a
 
Represents
 
financial
 
results for the six months
 
ended 30 June 2017.
b
 
From 2019,
 
due to an
 
IAS 12 update,
 
the tax rel
 
ief on payments
 
in relation to AT1 instruments
 
has been recognised in
 
the tax charge of the income statement,
 
whereas it was
previously
 
recorded
 
in retained
 
earnings. Comparatives have
 
been restated. This
 
change does not impact
 
EPS or return on average tangible shareholders’
 
equity.
 
The Barclays Non
 
-Core segment was closed on 1 July 2017
 
with the residual assets and liabilities reintegrated into, and associated financial
performance
 
subsequently reported in, Barclays UK, Barclays International and Head Office. Financial results up until 3
 
0
 
June 2017
 
are reflected in
the Non-Core segment within the Group’s
 
results for the year ended 31
 
December 2017.
 
 
Discontinued
 
Operation:
 
Africa
 
Banking
 
2019
2018
2017
a
£m
£m
£m
Income statement information
Total income
 
-
-
1,786
Credit impairment charges
-
-
(177)
Net operating income
-
-
1,609
Operating expenses excluding UK bank
 
levy and impairment of Barclays' holding in BAGL
-
-
(1,130)
Other net income excluding
 
loss on sale of
 
BAGL
-
-
5
Profit before tax excluding impairment
 
of Barclays' holding in
 
BAGL and
 
loss on sale of BAGL
-
-
484
Impairment of Barclays'
 
holding in BAGL
-
-
(1,090)
Loss on sale of BAGL
-
-
(1,435)
Loss before tax
-
-
(2,041)
Tax charge
-
-
(154)
Loss after tax
 
-
-
(2,195)
Attributable loss
-
-
(2,335)
 
Note
a
 
The Africa
 
Banking income
 
statement
 
represents five
 
months of results as a discontinued
 
operation to 31 May 2017.
 
Following the reduction
 
of the Group’s interest in BAGL
 
in 2017,
 
Barclays’ remaining holding
 
of 14.9%, for the year ended
 
31 December 201
 
9
 
is
reported
 
as a
 
financial asset at fair value through
 
other comprehensive income in the Head Office segment, with Barclays’ share of Absa Group
Limited’s dividend recognised
 
in the Head Office
 
income statement.
Barclays’ shareholding
 
in Absa Group Limited of 14.9% is treated as a 250% risk weighted asset,
 
since the PRA agreed to Barclays fully
deconsolidating BAGL
 
for regulatory
 
reporting purposes,
 
effective 30 June 2018.
 
Barclays had been applying
 
proportional consolidation for
regulatory
 
purposes since Q2 2017.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial review
 
Non-IFRS
 
performance
 
measures
 
 
193
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
The Group’s
 
management believes that the non-IFRS performance
 
measures included in this document provide valuable information to the readers
of the financial statements as they enable the reader to identify a more
 
consistent basis for comparing
 
the businesses’
 
perform
 
ance between
financial periods, and provide
 
more detail concerning
 
the elements
 
of performance which the managers of these businesses are most directly able
to influence or are relevant for an assessment of the Group.
 
They also reflect an
 
important aspect of the way
 
in which operating targets are defined
and performance
 
is monitored by management.
However,
 
any non
 
-IFRS performance
 
measures in
 
this document are not a substitute for IFRS measures and readers should consider
 
the IFRS
measures as well.
 
Non-IFRS
 
performance measures glossary
 
Measure
Definition
Loan: deposit ratio
Loans and advances at amortised cost divided by
 
deposits at amortised cost. The components of the
calculation have been
 
included on page
 
148
 
.
Period end allocated tangible
equity
Allocated tangible equity is calculated as 13.0%
 
(201
 
8: 13.0%) of RWAs
 
for each business, adjusted
 
for
capital deductions, excluding goodwill
 
and intangible assets,
 
reflecting the assumptions the Group
 
uses for
capital planning purposes. Head Office allocated tangible equity repres
 
ents the
 
difference between
 
the
Group’s
 
tangible shareholders’ equity and the amounts allocated to businesses.
Average tangible shareholders’
equity
Calculated as the average of the previous
 
month’s period end
 
tangible equity and the current month’s
period end tangible equity.
 
The average tangible shareholders’
 
equity for the period is the average of the
monthly averages within that period.
Average allocated tangible
equity
Calculated as the average of the previous
 
month’s period end
 
allocated tangible equity and the current
month’s period end
 
allocated tangible equity. The average
 
allocated tangible equity for the period is the
average of the monthly averages
 
within that period.
Return on average tangible
shareholders’ equity
Statutory profit after tax attributable
 
to ordinary equity holders
 
of the parent, as a proportion
 
of average
shareholders’ equity excluding
 
non-controlling
 
interests
 
and other equity instruments adjusted for the
deduction of intangible assets and goodwill. The components
 
of the calculation have been included on
pages 196.
Return on average allocated
tangible equity
Statutory profit after tax attributable
 
to ordinary equity holders
 
of the parent, as a proportion
 
of average
allocated tangible equity. The components
 
of the calculation have been included on
 
page 195
 
.
Cost: income ratio
Total o
 
perating expenses divided by total income.
Loan loss rate
Quoted in basis points and represents total impairment charges
 
divided by gross loans and advances held
at amortised cost at the balance sheet date. The components
 
of the calculation have been included on
page 112.
Net interest margin
Net interest income divided
 
by the sum of average customer assets. The components
 
of the calculation
have been included
 
on page 194
 
.
Tangible net asset value
 
per share
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 199
 
.
Performance measures
excluding litigation
 
and
conduct
Calculated by excluding
 
litigation and conduct charges from
 
performance measures. The components of
the calculations have been included on
 
pages 197
 
to 199
 
.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial review
 
Non-IFRS
 
performance
 
measures
 
 
194
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Margins analysis
 
2019
2018
a
Net interest
income
Average
customer assets
Net interest
margin
Net interest
income
Average customer
assets
Net interest
margin
For the year ended 31 December
£m
£m
%
£m
£m
%
Barclays UK
5,888
190,849
3.09
6,028
186,881
3.23
Barclays International
b
4,021
98,824
4.07
3,966
96,434
4.11
Total Barclays UK and Barclays International
9,909
289,673
3.42
9,994
283,315
3.53
Other
c
(502)
(932)
Total Barclays Group
9,407
9,062
 
Notes
 
a
 
The Group’s
 
treasury
 
results are
 
reported
 
directly within Barclays UK and
 
Barclays International from Q218 following ring-fencing,
 
resulting
 
in gains and losses
 
made on certain
activities
 
being recognised as
 
Other income,
 
rather
 
than in Net interest income.
 
b
 
Barclays
 
International
 
margins include
 
interest earning lending balances within
 
the investment banking business.
 
c
 
Other includes
 
Head Office
 
and non-lending related investment
 
banking businesses
 
not included in Barclays International
 
margins.
 
 
The Group
 
net interest margin decreased 11
 
bps to 3.42
 
%
 
and Barclays UK net interest margin decreased 14bps
 
to 3.09%, primarily reflecting
increased refinancing
 
activity by mortgage
 
customers and competitive pressure, lower
 
IEL in UK cards and the mix effect
 
from growth
 
in secured
lending.
 
The Group
 
combined product and equity structural hedge
 
notional as at
 
31 December
 
2019
 
was £171bn,
 
with an average duration of 2.5 to 3
years. Group
 
net interest
 
income includes gross structural hedge contributions
 
of £1.8bn
 
(2018:
 
£1.7bn) and
 
net structural hedge contributions of
£0.5bn (2018:
 
£0.8bn). Gross structural hedge contributions represent the absolute level of
 
interest earned from
 
the fixed receipts on the basket of
swaps in the structural hedge, while the net
 
structural hedge contributions
 
represent the net interest earned on the difference between
 
the
structural hedge rate and prevailing
 
floating rates.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial review
 
Non-IFRS
 
performance
 
measures
 
 
195
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Returns
 
 
Return on average
 
tangible equity is calculated as profit for the period attributable to ordinary equity holders
 
of the parent divided by average
tangible equity for the period,
 
excluding non
 
-controlling and other equity interests
 
for businesses. Allocated tangible equity has been calculated as
13.0% (2018:
 
13.0%)
 
of RWAs for each business, adjusted for capital deductions, excluding goodwill and intangible assets, reflecting the
assumptions the Group
 
uses for capital planning purposes. Head Office average allocated tangible equity represents
 
the difference between the
Group’s
 
average tangible sharehold
 
ers’ equity and the amounts allocated
 
to businesses.
 
Profit/(loss)
attributable
 
to
ordinary equity
holders of
 
the
parent
Average
 
tangible
 
equity
Return on
average
tangible
 
equity
£m
£bn
%
For the year ended 31 December 2019
Barclays UK
281
10.3
2.7
 
Corporate
 
and Investment Bank
1,980
25.9
7.6
 
Consumer, Cards and
 
Payments
836
5.3
15.8
Barclays International
2,816
31.2
9.0
Head Office
(636)
5.1
n/m
Barclays Group
2,461
46.6
5.3
For the year ended 31 December 2018
Barclays UK
1,198
10.0
11.9
 
Corporate
 
and Investment Bank
1,781
26.0
6.9
 
Consumer, Cards and
 
Payments
818
5.0
16.5
Barclays International
2,599
31.0
8.4
Head Office
(2,200)
3.1
n/m
Barclays Group
1,597
44.1
3.6
For the year ended 31 December 2017
Barclays UK
893
9.1
9.8
 
Corporate
 
and Investment Bank
269
24.0
1.1
 
Consumer, Cards and
 
Payments
698
4.2
16.7
Barclays International
967
28.1
3.4
Head Office
a
(864)
9.3
n/m
Barclays Non
 
-Core
 
(409)
2.4
n/m
Africa Banking discontinued operation
a
(2,335)
n/m
n/m
Barclays Group
(1,748)
48.9
(3.6)
 
Note
 
a
 
Average allocated
 
tangible equity for Africa
 
Banking is
 
included
 
within Head Office.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial review
 
Non-IFRS
 
performance
 
measures
 
 
196
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Profit/(loss)
attributable
 
to
ordinary equity
holders of
 
the
parent
Average
 
 
equity
Return on
average
equity
£m
£bn
%
For the year ended 31 December 2019
Barclays UK
281
13.9
2.0
 
Corporate
 
and Investment Bank
1,980
25.9
7.6
 
Consumer, Cards and
 
Payments
836
6.3
13.3
Barclays International
2,816
32.2
8.7
Head Office
(636)
8.5
n/m
Barclays Group
2,461
54.6
4.5
For the year ended 31 December 2018
Barclays UK
1,198
13.6
8.8
 
Corporate
 
and Investment Bank
1,781
26.2
6.8
 
Consumer, Cards and
 
Payments
818
6.1
13.5
Barclays International
2,599
32.3
8.1
Head Office
(2,200)
6.2
n/m
Barclays Group
1,597
52.1
3.1
For the year ended 31 December 2017
Barclays UK
893
13.6
6.6
 
Corporate
 
and Investment Bank
269
24.9
1.1
 
Consumer, Cards and
 
Payments
698
5.6
12.5
Barclays International
967
30.5
3.2
Head Office
a
(864)
10.6
n/m
Barclays Non
 
-Core
 
(409)
2.4
n/m
Africa Banking discontinued operation
a
(2,335)
n/m
n/m
Barclays Group
(1,748)
57.1
(3.1)
 
Note
 
a
 
Average allocated
 
tangible equity for Africa
 
Banking is
 
included
 
within Head Office.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial review
 
Non-IFRS
 
performance
 
measures
 
 
197
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
Performance measures
 
excluding
 
litigation and conduct
For the year ended
 
31 December 2019
Barclays UK
Corporate and
Investment
Bank
Consumer,
Cards and
Payments
Barclays
International
Head Office
Barclays Group
Cost: income ratio
£m
£m
£m
£m
£m
£m
Total operating
 
expenses
(5,619)
(7,147)
(2,306)
(9,453)
(362)
(15,434)
Impact of litigation and conduct
1,582
109
7
116
151
1,849
Operating expenses
(4,037)
(7,038)
(2,299)
(9,337)
(211)
(13,585)
Total income
7,353
10,231
4,444
14,675
(396)
21,632
Cost: income ratio excluding litigation
 
and conduct
55%
69%
52%
64%
n/m
63%
Profit before tax
Profit/(loss) before tax
1,022
2,955
1,163
4,118
(783)
4,357
Impact of litigation and conduct
1,582
109
7
116
151
1,849
Profit/(loss)
 
before tax
 
excluding litigation
 
and conduct
2,604
3,064
1,170
4,234
(632)
6,206
Profit attributable to ordinary equity holders of the parent
Attributable profit/(loss)
281
1,980
836
2,816
(636)
2,461
Post-tax impact of litigation and
 
conduct
1,532
84
6
90
111
1,733
Profit/(loss)
 
attributable to ordinary equity holders of the
parent excluding litigation
 
and conduct
1,813
2,064
842
2,906
(525)
4,194
Return on average tangible shareholders'
 
equity
Average
 
shareholders'
 
equity
£13.9bn
£25.9bn
£6.3bn
£32.2bn
£8.5bn
£54.6bn
Goodwill and intangibles
(£3.6bn)
-
(£1.0bn)
(£1.0bn)
(£3.4bn)
(£8.0bn)
Average tangible shareholders'
 
equity
 
£10.3bn
£25.9bn
£5.3bn
£31.2bn
£5.1bn
£46.6bn
Return on average tangible shareholders'
 
equity excluding
litigation and conduct
17.5%
8.0%
15.9%
9.3%
n/m
9.0%
Basic earnings per ordinary
 
share
Basic weighted average
 
number
 
of shares
17,200m
Basic earnings per ordinary
 
share excluding litigation and
conduct
24.4p
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial review
 
Non-IFRS
 
performance
 
measures
 
 
198
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
For the year ended
 
31 December 2018
Barclays UK
Corporate and
Investment
Bank
Consumer,
Cards and
Payments
Barclays
International
Head Office
Barclays Group
Cost: income ratio
£m
£m
£m
£m
£m
£m
Total operating
 
expenses
(4,604)
(7,349)
(2,312)
(9,661)
(1,978)
(16,243)
Impact of litigation and conduct
483
68
59
127
1,597
2,207
Operating expenses
 
(4,121)
(7,281)
(2,253)
(9,534)
(381)
(14,036)
Total income
7,383
9,765
4,261
14,026
(273)
21,136
Cost: income ratio excluding litigation
 
and conduct
56%
75%
53%
68%
n/m
66%
Profit before tax
Profit/(loss) before tax
1,956
2,593
1,182
3,775
(2,237)
3,494
Impact of litigation and conduct
483
68
59
127
1,597
2,207
Profit/(loss)
 
before tax
 
excluding litigation
 
and conduct
2,439
2,661
1,241
3,902
(640)
5,701
Profit attributable to ordinary equity holders of the parent
Attributable profit/(loss)
1,198
1,781
818
2,599
(2,200)
1,597
Post-tax impact of litigation and
 
conduct
472
62
44
106
1,558
2,136
Profit/(loss)
 
attributable to ordinary equity holders of the
parent excluding litigation
 
and conduct
1,670
1,843
862
2,705
(642)
3,733
Return on average tangible shareholders'
 
equity
Average
 
shareholders' equity
£13.6bn
£26.2bn
£6.1bn
£32.3bn
£6.2bn
£52.1bn
Goodwill and intangibles
(£3.6bn)
(£0.2bn)
(£1.1bn)
(£1.3bn)
(£3.1bn)
(£8.0bn)
Average tangible shareholders'
 
equity
 
£10.0bn
£26.0bn
£5.0bn
£31.0bn
£3.1bn
£44.1bn
Return on average tangible shareholders'
 
equity excluding
litigation and conduct
16.7%
7.1%
17.3%
8.7%
n/m
8.5%
Basic earnings per ordinary
 
share
Basic weighted average
 
number
 
of shares
 
17,075m
Basic earnings per ordinary
 
share excluding litigation and
conduct
21.9p
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial review
 
Non-IFRS
 
performance
 
measures
 
 
199
 
Barclays PLC
 
2019 Annual Report on Form
 
20-F
 
For the year ended
 
31 December 2017
Barclays UK
Corporate and
Investment
Bank
Consumer,
Cards and
Payments
Barclays
International
Head Office
a
Barclays
Group
b
Cost: income ratio
£m
£m
£m
£m
£m
£m
Total operating
 
expenses
(4,848)
(7,742)
(2,113)
(9,855)
(469)
(15,456)
Impact of litigation and conduct
759
267
2
269
151
1,207
Operating expenses
 
(4,089)
(7,475)
(2,111)
(9,586)
(318)
(14,249)
Total income
7,383
9,878
4,504
14,382
(159)
21,076
Cost: income ratio excluding
 
litigation and conduct
55%
76%
47%
67%
n/m
68%
Profit before tax
Profit/(loss) before tax
1,747
2,056
1,219
3,275
(834)
3,541
Impact of litigation and conduct
759
267
2
269
151
1,207
Profit/(loss)
 
before tax
 
excluding litigation
 
and conduct
2,506
2,323
1,221
3,544
(683)
4,748
Profit attributable to ordinary equity holders of the parent
Attributable profit/(loss)
893
269
698
967
(864)
(1,748)
Post-tax impact of litigation and
 
conduct
733
259
1
260
137
1,150
Profit/(loss)
 
attributable to ordinary equity holders of the
parent excluding litigation
 
and conduct
1,626
528
699
1,227
(727)
(598)
Return on average tangible shareholders'
 
equity
Average
 
shareholders' equity
£13.6bn
£24.9bn
£5.6bn
£30.5bn
£10.6bn
£57.1bn
Goodwill and intangibles
(£4.4bn)
(£1.0bn)
(£1.4bn)
(£2.4bn)
(£1.4bn)
(£8.2bn)
Average tangible shareholders'
 
equity
£9.1bn
£24.0bn
£4.2bn
£28.1bn
£9.3bn
£48.9bn
Return on average tangible shareholders'
 
equity excluding
litigation and conduct
17.8%
2.2%
16.8%
4.4%
n/m
(1.2%)
Basic earnings per ordinary
 
share
Basic weighted average
 
number
 
of shares
 
16,996m
Basic earnings per ordinary
 
share excluding litigation and
conduct
(3.5p)
 
Notes
a
 
Average allocated
 
tangible equity for Africa
 
is included
 
within Head
 
Office.
b
 
Barclays
 
Group results
 
also included
 
Barclays Non-Core and the
 
Africa Banking discontinued
 
operation.
 
Tangible net asset value per
 
share
2019
2018
2017
£m
£m
£m
Total equity excluding
 
non-
 
controlling interests
64,429
62,556
63,905
Other equity instruments
(10,871)
(9,632)
(8,941)
Shareholders'
 
equity attributable to
 
ordinary shareholders
 
of the
 
parent
53,558
52,924
54,964
Goodwill and intangibles
(8,119)
(7,973)
(7,849)
Tangible shareholders'
 
equity attributable to
 
ordinary shareholders
 
of the
 
parent
45,439
44,951
47,115
Shares in issue
17,322m
17,133m
17,060m
Net asset value per share
309p
309p
322p
Tangible net asset value per share
262p
262p
276p
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial statements
 
 
 
200
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Detailed analysis of our financial statements, independently audited and providing in-
 
depth
disclosure on the financial performance of the Group.
 
 
Barclays has adopted
 
the British Bankers’ Association (BBA) Code for
 
Financial Reporting Disclosure as adopted by UK Finance in 2017
 
and has
prepared
 
the 2019
 
Annual Report in compliance with the BBA Code. Barclays is committed to continuously reflect the objectives of reporting set
out in the BBA Code.
 
 
 
Consolidated
 
financial
 
statements
Page
 
Note
 
Report of Independent
 
Registered Public Accounting Firm
201
n/a
 
Consolidated income statement
205
n/a
 
Consolidated statement of comprehensive income
206
n/a
 
Consolidated balance sheet
207
n/a
 
Consolidated statement of changes in equity
208
n/a
 
Consolidated cash flow
 
statement
210
n/a
 
Parent company accounts
211
n/a
Notes
 
to the financial
 
statements
 
Significant accounting policies
214
1
 
Performance/return
 
Segmental reporting
219
2
 
Net interest income
221
3
 
Net fee and commission income
221
4
 
Net trading income
224
5
 
Net investment income
224
6
 
Credit impairment charges
225
7
 
Operating expenses
229
8
 
Tax
230
9
 
Earnings per share
234
10
 
Dividends on ordinary
 
shares
234
11
Assets and liabilities
 
held at fair
 
value
 
Trading portfolio
235
12
 
Financial assets at fair value
 
through
 
the income statement
235
13
 
Derivative financial
 
instruments
236
14
 
Financial assets at fair value
 
through
 
other comprehensive income
244
15
 
Financial liabilities designated at
 
fair value
244
16
 
Fair value of
 
financial instruments
245
17
 
Offsetting financial assets and financial
 
liabilities
255
18
Assets at amortised cost and other
 
Loans and advances and deposits at amortised cost
257
19
investments
 
Property,
 
plant
 
and equipment
257
20
 
Leases
259
21
 
Goodwill and intangible
 
assets
262
22
Accruals, provisions, contingent
 
Other liabilities
265
23
liabilities
 
and legal proceedings
 
Provisions
265
24
 
Contingent liabilities
 
and commitments
267
25
 
Legal, competition and regulatory matters
268
26
Capital instruments, equity and
 
Subordinated liabilities
272
27
reserves
 
Ordinary shares, share premium and other equity
274
28
 
R
eserves
276
29
 
Non-controlling interests
276
30
Employee benefits
 
Staff costs
278
31
 
Share-based payments
279
32
 
Pensions and
 
post-retirement benefits
281
33
Scope of consolidation
 
Principal subsidiaries
286
34
 
Structured entities
287
35
 
Investments in associates
 
and joint ventures
290
36
 
S
ecuritisations
291
37
 
Assets pledged, collateral received and assets transferred
292
38
Other disclosure
 
matters
 
Related party transactions and Directors’ remuneration
294
39
 
Auditor’s remuneration
296
40
 
Discontinued operations and assets included
 
in disposal groups classified as
held for sale and associated liabilities
297
41
 
Barclays PLC
 
(the Parent company)
298
42
 
 
 
Report of Independent
 
Registered
 
Public
 
Accounting
 
Firm
 
 
 
 
201
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
To the Shareholders
 
and Board
 
of Directors Barclays PLC:
Opinions
 
on the Consolidated Financial
 
Statements and Internal Control over Financial Reporting
 
We have
 
audited the accompanying
 
consolidated balance sheets of Barclays PLC and subsidiaries (the Company)
 
as of December 31, 2019
 
and
2018,
 
the related consolidated income statements, consolidated statements of comprehensive income, consolidated
 
statements of changes in
equity,
 
and consolidated cash flow statements for each of the years in the three
 
-year period
 
ended December 31,
 
2019, and the related notes and
specific disclosures described
 
in Note 1 of the consolidated financial statements as being part of the consolidated financial statements (collectively,
the consolidated financial statements). We also have
 
audited the Company’s internal control
 
over financial reporting
 
as of December 31, 2019,
based on criteria established in
Internal Control – Integrated
 
Framework
 
(2013)
 
issued by the Committee of
 
Sponsoring
 
Organizations of the
Treadway
 
Commission.
 
In our opinion,
 
the consolidated financial statements referred to above
 
present fairly, in all material respects, the financial position of the Company
as of December 31,
 
2019
 
and 2018,
 
and the results of
 
its operations and its cash flows for each of the years in the three
 
-year period
 
ended
December 31,
 
2019,
 
in conformity with International Financial Reporting Standards, as issued by the International Accounting Standards Board.
Also in our opinion,
 
the Company maintained, in all material respects, effective internal control
 
over financial reporting
 
as of December 31, 2019
based on criteria established in
Internal Control – Integrated
 
Framework
 
(2013)
 
issued by the Committee of
 
Sponsoring
 
Organizations of the
Treadway
 
Commission.
Change in Accounting
 
Principle
 
The Group
 
changed its method of accounting for
 
financial instruments
 
in 2018
 
due to the adoption of International Financial Reporting Standard
 
9
Financial Instruments
.
 
Basis for Opinions
 
The Company’s management
 
is responsible for these consolidated financial statements, for maintaining effective internal control
 
over financial
reporting,
 
and for its assessment of the effectiveness of internal control over
 
financial reporting, included in the accompanying
Management’s
report
 
on internal control over financial reporting
. Our responsibility is to express an opinion on the Company’s
 
consolidated financial statements
and an opinion on the Company’s
 
internal control over
 
financial reporting based on our
 
audits.
 
We are a public accounting
 
firm registered with the
Public Company
 
Accounting
 
Oversight Board
 
(United States)
 
(PCAOB)
 
and are required
 
to be independent with respect to the
 
Company
 
in
accordance
 
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
 
Commission and the
PCAOB.
We conducted
 
our audits in accordance with the standards of the PCAOB. Those standards require
 
that we plan and perform the audits to obtain
reasonable assurance about whether
 
the consolidated financial statements are free of material misstatement, whether due to error
 
or fraud, and
whether effective
 
internal control over
 
financial reporting was maintained in all material respects.
 
Our audits of the consolidated financial statements included performing
 
procedures to assess
 
the risks of material misstatement of the
consolidated financial statements, whether due to error
 
or fraud, and performing procedures
 
that respond to those risks.
 
Such procedures
 
included
examining, on a test basis, evidence regarding
 
the amounts and disclosures in the
 
consolidated financial statements. Our audits also included
evaluating the accounting
 
principles used and significant estimates made by management, as well as evaluating the overall presentation of
 
the
consolidated financial statements. Our audit of internal control
 
over financial reporting
 
included obtaining an understanding
 
of internal control over
financial reporting,
 
assessing the risk that a
 
material weakness exists, and testing and evaluating the design and
 
operating effectiveness of internal
control based on
 
the assessed risk. Our audits also included performing
 
such other procedures as we considered necessary in the circumstances.
We believe that our
 
audits provide a reasonable basis for our
 
opinions.
Definition
 
and Limitations
 
of Internal Control over Financial Reporting
 
A company’s internal control
 
over financial reporting
 
is a
 
process designed to provide
 
reasonable assurance regarding
 
the reliability
 
of financial
reporting
 
and the preparation
 
of financial statements
 
for external purposes in accordance
 
with generally accepted accounting principles. A
company’s internal control
 
over financial reporting
 
includes those policies
 
and procedures
 
that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions
 
and dispositions of the assets of the company; (2)
 
provide
 
reasonable assurance that
transactions are recorded
 
as necessary to
 
permit prep
 
aration of financial statements in accordance with generally accepted accounting
 
principles,
and that receipts and expenditures of the company
 
are being made only in accordance
 
with authorizations of management and directors of the
company;
 
and (3) provide
 
reasonable assurance regarding prevention or
 
timely detection of
 
unauthorized
 
acquisition, use,
 
or disposition of the
company’s assets that could
 
have a material effect on the financial statements.
Because of its inherent limitations, internal control
 
over
 
financial reporting may not prevent
 
or detect misstatements.
 
Also, projections of any
evaluation of effectiveness to
 
future periods are subject to the risk that controls may become
 
inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures
 
may deteriorate.
Critical Audit Matters
 
The critical audit matters communicated below
 
are matters arising from the current period
 
audit of the consolidated financial
 
statements that were
communicated or
 
required
 
to be communicated to the audit
 
committee and that: (1) relate to accounts or disclosures that are material to the
consolidated financial statements and (2)
 
involved our
 
especially challenging, subjective,
 
or complex judgments. The communication
 
of critical
audit matters does not alter in any way
 
our opinion
 
on the consolidated financial statements, taken as a whole, and we are not, by communicating
the critical audit matters below,
 
providing
 
separate opinions on the critical audit
 
matters or on
 
the accounts or disclosures to which they relate.
1.
 
Assessment
 
of impairment allowance
 
for loans and advances at amortised cost, including off-balance sheet elements
 
 
Report of Independent
 
Registered
 
Public
 
Accounting
 
Firm
 
 
 
 
202
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
As discussed in the credit risk disclosures on pages 109
 
to 139
 
,
 
the Company’s impairment allowance for
 
loans and advances, including off-balance
sheet elements at amortised cost was £6.6bn
 
as at 31 December 2019.
 
We identified the assessment of impairment allowance
 
for loans and advances at amortised cost, including
 
off-balance sheet elements as a critical
audit matter because it involved
 
significant measurement uncertainty requiring
 
complex and subjective auditor judgement. Specifically, complex
and subjective auditor judgement
 
was required to assess the following:
 
Model estimations – Complex and subjective auditor judgement was applied to assess the Company’s modelled
 
estimations of Probabilities of
Default (“PD”), Loss Given Default (“LGD”), and Exposures
 
at Default (“EAD”) due to the inherently judgemental nature of these complex
 
models.
The PD models are the key drivers of the Company’s calculation
 
of impairment allowance for loans and advances at amortised cost, including
 
off-
balance sheet elements and also impact the staging of assets and as a result require
 
the most significant auditor judgement, especially for the UK
and US credit card, UK consumer
 
loans and corporate
 
portfolios considering the significance of these
 
portfolios.
 
 
Economic scenarios – Complex and subjective auditor judgement
 
was applied in assessing the economic scenarios used by the Company
 
and the
probability weightings applied to them especially when considering
 
the current uncertain economic
 
environment in the UK and US,
 
including the
manner in which the UK withdraws from
 
the European Union.
 
The most significant
 
key economic variables which
 
drive the ECL scenario
modelling are UK and US GDP,
 
unemployment
 
and house price indices, in particular with regard to the UK and US credit cards, UK mortgages, UK
consumer loans and corporate
 
portfolios.
 
 
Qualitative adjustments – Adjustments to the mod
 
el-driven impairment allowance
 
for loans and advances at amortised cost, including off-
balance sheet elements are raised by the
 
Company
 
to address known model limitations or emerging trends. These adjustments represent
approximately 5.4%
 
of the impairment allowance for loans and advances at amortised cost, including
 
off-balance sheet elements. Complex and
subjective auditor judgement
 
was applied in assessing qualitative adjustments to the model-driven impairment
 
allowance due to the inherent
estimation uncertainty associated with these adjustments, especially in relation to the UK and US credit card
 
and corporate
 
portfolios.
The primary procedures
 
we performed to address this
 
critical audit matter included the following:
 
We tested certain internal controls over
 
the Company’s process for estimating the impairment allowance for
 
loans and advances at amortised
cost, including off-balance
 
sheet elements, including controls relating to the (1) completeness and accuracy
 
of key inputs and assumptions
 
into
the impairment models, (2) application of the staging criteria, (3) validation, implementation and
 
model monitoring,
 
(4) authorisation and
calculation of qualitative adjustments, and (5) selection and implementation of significant
 
macro
 
-economic variables and the controls over
 
the
scenario selection and probabilities.
 
We involved
 
financial risk modelling professionals with specialised skills and knowledge, who
 
assisted in
 
the following
 
with a focus on the UK and
US credit cards, UK
 
consumer loans and corporate
 
portfolios:
-
 
evaluating the Company’s impairment
 
methodologies for
 
compliance with IFRS;
-
 
assessing the probability of default, loss given default
 
and exposure
 
at default
 
assumptions;
-
 
evaluating for a sample of models which
 
were
 
changed or
 
updated during the year as to
 
whether the changes were appropriate,
 
and
 
-
 
assessing, for a sample of material models, the model predictions
 
by comparing
 
them against
 
actual results and evaluating the resulting
differences.
 
In addition, we involved economic
 
professionals with specialised skills and knowledge, who
 
assisted
 
in:
-
 
assessing the Company’s methodology
 
for determining
 
the economic scenarios used and the probability weightings applied to them;
-
 
assessing key economic variables such as UK and
 
US GDP, unemployment
 
and house prices indices. This
 
included comparing
 
samples of
economic variables to third-party
 
sources as well as assessing the economic forecasts by comparing
 
the Company’s forecasts to our own
modelled forecasts. This was carried out with a focus on
 
the UK and US credit card, UK consumer
 
loans and corporate
 
portfolios, and
-
 
assessing the Company’s considerations of the impact of economic
 
uncertainty, including
 
the manner in which the UK withdraws from
 
the
European
 
Union, on the impairment allowance for
 
loans and advances at amortised cost, including off-balance sheet elements.
 
In addition, we performed
 
the following procedures:
-
 
selected a sample of key inputs and assumptions impacting the impairment allowance
 
for loans and advances at amortised cost, including
off-balance sheet elements calculations to assess the economic
 
forecasts, weightings, and PD assumptions applied; and
-
 
selected a sample of qualitative adjustments, considering
 
the size and complexity of the Company’s overlays, and assessed the adjustments
by challenging key assumptions, inspecting the
 
methodology
 
and tracing a sample of data
 
used back to source data.
2.
 
Assessment
 
of the Measurement of the Fair Value
 
of Certain Difficult
 
-to-Value Financial Instruments
As discussed in Note 17
 
to the Company’s consolidated financial statements, the balance of financial assets and liabilities recorded
 
at fair
 
value as
at December 31,
 
2019
 
was £542.3bn and £470.4bn,
 
respectively. Of these
 
amounts, Level 3 instruments (£18.7bn)
 
represented 2.6% of the
Company’s financial assets carried at fair value and 0.9% of the
 
Company’s financial liabilities carried at fair value. The Company
 
has Level 2
 
 
Report of Independent
 
Registered
 
Public
 
Accounting
 
Firm
 
 
 
 
203
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
financial assets at fair value of £432.9bn
 
and financial liabilities
 
at fair value of £439.7bn.
 
Included in these amounts are certain difficult-to-value
securities for which the Company
 
is required
 
to apply valuation techniques which often involve the exercise of significant judgement and the use of
assumptions and valuation models. Fair valu
 
es are generated
 
through
 
a combination of pricing inputs, valuation models and fair
 
value adjustments
(“FVA”),
 
including portfolio
 
-level FVAs related to credit and funding
 
(commonly
 
referred to as “XVAs”).
 
 
We identified the assessment of the measurement
 
of fair value for certain difficult-to-value financial instrument portfolios as a critical
 
audit matter.
This is because there was significant measurement
 
uncertainty associated with the fair value estimates of these instruments and subjective auditor
judgment was required
 
to evaluate the
 
pricing inputs, valuation models, FVAs,
 
and XVAs.
 
The primary procedures
 
we performed to address this
 
critical audit matter included the following:
 
We tested certain internal controls over
 
the Company’s proces
 
s
 
to measure fair value of these portfolios. This included
 
controls related to (1) the
independent price
 
verification (‘IPV’) of key market pricing
 
inputs, (2) the determination or calculation of FVAs, including
 
exit adjustments (to
mark the portfolio to bid or offer
 
prices), model shortcoming
 
reserves to address model limitations and XVAs and (3)
 
the validation,
implementation and usage of valuation models including assessment of the impact of model
 
limitations and assumptions.
 
 
For a subset of portfolios that are subject to collateralization,
 
we assessed the valuation methodology
 
for a sample of material
 
collateral disputes
where significant fair value differences
 
were identified with the market participant on the other
 
side of the trade;
 
We inspected significant gains and
 
losses on a sample of trade exits or restructurings
 
and evaluated whether these data points indicated
elements of fair value not incorporated
 
in the current valuation methodologies,
 
We inspected movements
 
in unobservable inputs throughout
 
the period to assess
 
whether any gain or
 
loss generated was appropriate, and
 
We involved
 
valuation professionals with specialised skills and knowledge who
 
assisted in
 
the following:
-
 
assessing the appropriateness of significant models and methodologies
 
used in calculating fair values, risk exposures and in calculating FVAs;
-
 
developing
 
an independent estimate of fair value for a sample of trades from the above portfolios and challenging
 
the Company where
 
their
valuations were outside our
 
tolerance.
3.
 
Evaluation
 
of payment protection insurance redress
 
provisions
As discussed in Note 24 to the consolidated financial statements, the Company
 
has recorded
 
a provision of £1.2bn against the cost of Payment
Protection Insurance
 
(“PPI”) redress costs. The calculation of the
 
provision for
 
PPI redress costs requires the Company
 
to make a number of key
assumptions regarding
 
the redress still to
 
be paid. The Company has developed
 
a model which calculates the proportion
 
of complaints, enquiries
and requests for infor
 
mation (“RFIs”) for which redress will be payable
 
and the associated redress cost.
 
 
We identified the evaluation of PPI
 
redress provisions as a critical audit matter because complex
 
and subjective auditor judgment was required
 
to
evaluate the key assumptions applied to estimate the redress
 
to be paid to customers.
 
Specifically, the proportion
 
of claims
 
for which redress will
be payable and average
 
claim redress payable were challenging
 
to test as minor changes to those assumptions has a significant effect on the
Company’s calculation of the provision. Additionally,
 
subjective auditor judgement
 
was required to evaluate the legal position of enquiries received
from the Official Receiver.
 
The primary procedures
 
we performed to address this
 
critical audit matter included the following:
 
 
We tested certain internal controls over
 
the Company’s PPI provisioning
 
process, including controls related to the capture of claims data, and the
developme
 
nt and application of key assumptions to estimate the redress payments to be made.
 
 
In addition, we evaluated the PPI redress
 
provision recorded
 
and disclosed by:
 
 
evaluating the key assumptions used, particularly those in relation
 
to claims volumes by assessing how historical data has been applied to the
claims still to be processed;
 
 
inspecting correspondence
 
with the Financial
 
Conduct Authority
 
(“FCA”) and
 
other regulators to identify any regulatory
 
observations on the PPI
redress provision. We also
 
made enquiries of the FCA discussing the nature of the matters
 
contained in regulatory
 
correspondence that could
materially affect the level of
 
provisions held;
 
 
assessing the sensitivity of the provision to variations
 
in key assumptions. We also considered
 
the appropriateness of the scenarios used to model
the potential range of outcomes. We also considered
 
the sensitivity of the provision to variations in redress assumptions by inspecting the
provision methodology
 
and challenging the key assumptions
 
using historically observed trends;
 
 
developing
 
an independent range
 
of potential future outcomes by developing scenarios using our own model and
 
used these to
 
assess the
appropriateness of the Company’s point estimate. We
 
developed a number
 
of these scenarios
 
using analysis of Barclays’ historical complaint
data; and
 
 
for enquiries from
 
the Official Receiver, enquiring
 
of the Company’s external legal counsel and inspecting legal reports and correspondence
 
from
the Official Receiver to
 
evaluate the legal basis for the judgement applied by
 
the Company.
 
 
 
Report of Independent
 
Registered
 
Public
 
Accounting
 
Firm
 
 
 
 
204
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
4.
 
Assessme
 
nt of liabilities for legal, competition
 
and regulatory matters
 
As discussed in note 24 of the consolidated financial statements, the
 
Company
 
has recorded
 
provisions of £376m
 
for legal, competition and
regulatory
 
matters.
 
We identified the assessment of liabilities for
 
legal, competition and regulatory
 
matters as
 
a critical audit matter due
 
to the significant subjective
auditor judgement involved
 
in assessing the
 
probability of a loss and in determining
 
a reliable estimate of such loss and due to the subjective nature
of assessing the audit evidence for key assumptions used in the provisions.
 
 
The primary procedures
 
we performed to address this
 
critical audit matter included the following:
 
 
Testing certain internal controls over
 
the Company’s legal, competition and regulatory
 
provisioning
 
process, including controls relating to
company’s review of the provisions
 
and disclosures based on their consideration
 
of information from
 
external and internal legal counsel;
 
 
Inspecting minutes of meetings involving
 
senior management and those charged
 
with governance and inspecting correspondence
 
with the
relevant regulatory
 
authorities to identify developments in legal, competition and regulatory
 
matters that
 
affect the recognition
 
or values of
provisions or disclosures;
 
For significant matters, inquiry
 
of the Company’s internal legal counsel to understand and challenge the basis of the Company’s
 
judgements and
assumptions through
 
inspection of relevant internal and external information, as deemed necessary.
 
 
For significant matters, inquiry
 
of external counsel and inspection of formal letters received from
 
external counsel, in order to understand and
challenge the Company’s judgements and assumptions on
 
the ultimate resolution of legal, competition and regulatory
 
matters; and
 
Based on our enquiries of internal and external legal counsel and information obtained
 
from our
 
other procedures, independently assessing
 
and
challenging the estimated value of the provisions.
 
/s/ KPMG LLP
 
We have
 
served as the Company’s auditor since 2017
 
London, United Kingdom
February
 
12, 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial
 
statements
Consolidated
 
income statement
 
 
 
205
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
2019
2018
a
2017
a
For the year ended 31 December
Notes
£m
£m
£m
Continuing operations
Interest income
3
15,456
14,541
13,631
Interest expense
3
(6,049)
(5,479)
(3,786)
Net interest income
9,407
9,062
9,845
Fee and commission income
4
9,122
8,893
8,751
Fee and commission expense
4
(2,362)
(2,084)
(1,937)
Net fee and commission
 
income
6,760
6,809
6,814
Net trading income
5
4,235
4,566
3,500
Net investment income
6
1,131
585
861
Other income
99
114
56
Total income
21,632
21,136
21,076
Credit impairment charges
7
(1,912)
(1,468)
(2,336)
Net operating income
19,720
19,668
18,740
Staff costs
31
(8,315)
(8,629)
(8,560)
Infrastructure
 
costs
8
(2,970)
(2,950)
(2,949)
Administration and general expenses
8
(2,300)
(2,457)
(2,740)
Provisions for litigation and conduct
8
(1,849)
(2,207)
(1,207)
Operating expenses
8
(15,434)
(16,243)
(15,456)
Share of post-tax results of associates and joint ventures
61
69
70
Profit on disposal of subsidiaries, associates and joint ventures
10
-
187
Profit before tax
 
4,357
3,494
3,541
Taxation
9
(1,003)
(911)
(2,066)
Profit after tax in respect of continuing operations
3,354
2,583
1,475
Loss after tax in respect of discontinued operation
-
-
(2,195)
Profit/(loss)
 
after
 
tax
3,354
2,583
(720)
Attributable to:
Equity holders of the parent
 
2,461
1,597
(1,748)
Other equity instrument holders
813
752
639
Total equity holders
 
of the parent
3,274
2,349
(1,109)
Non-controlling
 
interests
 
in respect of continuing operations
30
80
234
249
Non-controlling
 
interests
 
in respect of discontinued operation
30
-
-
140
Profit/(loss)
 
after
 
tax
3,354
2,583
(720)
Earnings per share
p
p
p
Basic earnings/(loss) per ordinary
 
share
10
14.3
9.4
(10.3)
Basic earnings per ordinary
 
share in respect of continuing operations
10
14.3
9.4
3.5
Basic loss per ordinary
 
share in respect of discontinued operation
10
-
-
(13.8)
Diluted earnings/(loss) per share
10
14.1
9.2
(10.1)
Diluted earnings per ordinary
 
share in respect of continuing operations
10
14.1
9.2
3.4
Diluted loss per ordinary
 
share in respect of discontinued operation
10
-
-
(13.5)
 
Note
a
 
From 2019,
 
due to an
 
IAS 12 update,
 
the tax relief
 
on payments
 
in relation to AT1 instruments
 
has been recognised in
 
the tax charge of the income statement,
 
whereas it was
previously
 
recorded
 
in retained
 
earnings. Comparatives have
 
been restated, reducing the
 
tax charge for 2018 by £211m
 
and 2017
 
by £174m.
 
This
 
change does not
 
impact EPS.
Further
 
detail can
 
be found in
 
Note 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial
 
statements
Consolidated
 
statement
 
of comprehensive
 
income
 
 
 
206
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
2019
2018
2017
For the year ended 31 December
£m
£m
£m
Profit/(loss)
 
after
 
tax
3,354
2,583
(720)
Profit after tax in respect of continuing operations
 
3,354
2,583
1,475
Loss after tax in respect of discontinued operation
-
-
(2,195)
Other comprehensive income/(loss)
 
that
 
may be recycled to profit or loss from continuing
operations:
Currency translation reserve
Currency
 
translation differences
a
(544)
834
(1,337)
Fair value through other comprehensive
 
income reserve movements relating to debt securities
b
Net gains/(losses) from changes
 
in fair value
2,901
(553)
-
Net (gains)/losses transferred
 
to net profit on disposal
(502)
48
-
Net losses due to impairment
1
4
-
Net (losses)/gains due to fair value hedging
(2,172)
236
-
Other movements
(5)
(26)
-
Tax
(57)
65
-
Cash flow hedging
 
reserve
Net gains/(losses) from changes
 
in fair value
724
(344)
(626)
Net gains transferred to net profit
(277)
(332)
(643)
Tax
(105)
175
321
Available for sale reserve
b
-
-
449
Other
16
30
(5)
Other comprehensive income/(loss)
 
that
 
may be recycled to profit or loss from continuing
operations
(20)
137
(1,841)
Other comprehensive income/(loss)
 
not recycled to profit or loss from continuing operations:
Retirement benefit remeasurements
(280)
412
115
Fair value through
 
other comprehensive income reserve movements relating to equity instruments
(95)
(260)
-
Own credit
(316)
77
(7)
Tax
150
(118)
(66)
Other comprehensive income/(loss)
 
not recycled to profit
 
or loss from continuing
 
operations
(541)
111
42
Other comprehensive income/(loss)
 
for the
 
year from continuing operations
(561)
248
(1,799)
Other comprehensive income
 
for the
 
year from discontinued
 
operation
-
-
1,301
Total comprehensive income/(loss)
 
for the
 
year:
Total comprehensive income/(loss)
 
for the
 
year,
 
net of tax from continuing operations
2,793
2,831
(324)
Total comprehensive loss
 
for the
 
year, net of tax from discontinued
 
operation
-
-
(894)
Total comprehensive income/(loss)
 
for the
 
year
2,793
2,831
(1,218)
Attributable to:
Equity holders of the parent
2,713
2,597
(1,575)
Non-controlling
 
interests
80
234
357
Total comprehensive income/(loss)
 
for the year
2,793
2,831
(1,218)
 
Notes
a
 
Includes
 
£15m gain (2018: £41m
 
loss; 2017:
 
£189m
 
loss)
 
on recycling of currency
 
translation
 
differences.
b
 
Following the
 
adoption of IFRS 9
Financial Instruments
 
on 1 January 2018,
 
the fair
 
value through
 
other comprehensive
 
income reserve
 
was introduced replacing the
 
available for
sale reserve.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial
 
statements
Consolidated
 
balance
 
sheet
 
 
 
207
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
2019
2018
As at 31 December
Notes
£m
£m
Assets
Cash and balances at central banks
150,258
177,069
Cash collateral and settlement balances
83,256
77,222
Loans and advances at amortised cost
19
339,115
326,406
Reverse repurchase
 
agreements and other similar secured lending
3,379
2,308
Trading
 
portfolio assets
12
114,195
104,187
Financial assets at fair value through
 
the income statement
13
133,086
149,648
Derivative financial instruments
 
14
229,236
222,538
Financial assets at fair value through
 
other comprehensive income
15
65,750
52,816
Investments in associates and joint ventures
36
721
762
Goodwill and intangible assets
22
8,119
7,973
Property,
 
plant and equipment
20
4,215
2,535
Current tax assets
9
412
798
Deferred tax assets
9
3,290
3,828
Retirement benefit assets
33
2,108
1,768
Other assets
3,089
3,425
Total assets
 
1,140,229
1,133,283
Liabilities
Deposits at amortised cost
19
415,787
394,838
Cash collateral and settlement balances
67,341
67,522
Repurchase agreements
 
and other similar secured borrowing
14,517
18,578
Debt securities in issue
76,369
82,286
Subordinated
 
liabilities
27
18,156
20,559
Trading
 
portfolio liabilities
12
36,916
37,882
Financial liabilities designated at fair value
16
204,326
216,834
Derivative financial instruments
14
229,204
219,643
Current tax liabilities
9
313
628
Deferred tax liabilities
9
23
51
Retirement benefit liabilities
33
348
315
Other liabilities
23
8,505
7,716
Provisions
24
2,764
2,652
Total liabilities
1,074,569
1,069,504
Equity
Called up share capital and share premium
28
4,594
4,311
Other equity instruments
28
10,871
9,632
Other reserves
29
4,760
5,153
Retained earnings
 
44,204
43,460
Total equity excluding
 
non-
 
controlling interests
64,429
62,556
Non-controlling
 
interests
30
1,231
1,223
Total equity
 
65,660
63,779
Total liabilities
 
and equity
 
1,140,229
1,133,283
 
The Board
 
of Directors approved
 
the financial
 
statements on pages 205 to 298
 
on 12 February
 
2020.
 
Nigel Higgins
Group
 
Chairman
 
James E Staley
Group
 
Chief Executive
 
Tushar Morzaria
Group
 
Finance Director
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial
 
statements
Consolidated
 
statement
 
of changes
 
in equity
 
 
208
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Called up
share capital
and share
premium
a
Other equity
instruments
a
Other
reserves
b
Retained
earnings
Total equity
excluding non-
controlling
interests
Non-
controlling
interests
Total equity
£m
£m
£m
£m
£m
£m
£m
Balance as at 1 January 2019
4,311
9,632
5,153
43,460
62,556
1,223
63,779
Profit after tax
-
813
-
2,461
3,274
80
3,354
Currency
 
translation movements
-
-
(544)
-
(544)
-
(544)
Fair value through
 
other comprehensive income
reserve
-
-
71
-
71
-
71
Cash flow hedges
-
-
342
-
342
-
342
Retirement benefit remeasurements
-
-
-
(194)
(194)
-
(194)
Own credit reserve
-
-
(252)
-
(252)
-
(252)
Other
-
-
-
16
16
-
16
Total comprehensive income for the year
-
813
(383)
2,283
2,713
80
2,793
Issue of new ordinary
 
shares
182
-
-
-
182
-
182
Issue of shares under employee
 
share schemes
101
-
-
478
579
-
579
Issue and exchange
 
of other equity instruments
-
1,238
-
(406)
832
-
832
Other equity instruments coupons paid
-
(813)
-
-
(813)
-
(813)
Redemption of preference
 
shares
-
-
-
-
-
-
-
Increase in treasury shares
-
-
(224)
-
(224)
-
(224)
Vesting of shares under
 
employee share
schemes
-
-
214
(404)
(190)
-
(190)
Dividends paid
-
-
-
(1,201)
(1,201)
(80)
(1,281)
Other reserve movements
-
1
-
(6)
(5)
8
3
Balance as at 31 December 2019
4,594
10,871
4,760
44,204
64,429
1,231
65,660
Balance as at 31 December 2017
22,045
8,941
5,383
27,536
63,905
2,111
66,016
Effects of changes in accounting
 
policies
c
-
-
(136)
(2,014)
(2,150)
-
(2,150)
Balance as at 1 January 2018
22,045
8,941
5,247
25,522
61,755
2,111
63,866
Profit after tax
d
-
752
-
1,597
2,349
234
2,583
Currency
 
translation movements
-
-
834
-
834
-
834
Fair value through
 
other comprehensive income
reserve
-
-
(486)
-
(486)
-
(486)
Cash flow hedges
-
-
(501)
-
(501)
-
(501)
Retirement benefit remeasurements
-
-
-
313
313
-
313
Own credit reserve
-
-
58
-
58
-
58
Other
-
-
-
30
30
-
30
Total comprehensive income
 
for the
 
year
-
752
(95)
1,940
2,597
234
2,831
Issue of new ordinary
 
shares
88
-
-
-
88
-
88
Issue of shares under employee
 
share schemes
51
-
-
449
500
-
500
Capital reorganisation
(17,873)
-
-
17,873
-
-
-
Issue and exchange
 
of other equity instruments
-
692
-
(308)
384
-
384
Other equity instruments coupons paid
d
-
(752)
-
-
(752)
-
(752)
Redemption of preference
 
shares
-
-
-
(732)
(732)
(1,309)
(2,041)
Debt to equity reclassification
e
-
-
-
-
-
419
419
Increase in treasury shares
-
-
(267)
-
(267)
-
(267)
Vesting of shares under
 
employee share
schemes
-
-
268
(499)
(231)
-
(231)
Dividends paid
-
-
-
(768)
(768)
(234)
(1,002)
Other reserve movements
-
(1)
-
(17)
(18)
2
(16)
Balance as at 31 December 2018
4,311
9,632
5,153
43,460
62,556
1,223
63,779
 
Notes
a
 
For further
 
details
 
refer to Note 28.
b
 
For further
 
details
 
refer to Note 29.
c
 
Effects
 
of changes in
 
accounting policy
 
relate to the adoption
 
of IFRS 9
Financial Instruments
 
and IFRS 15
Revenue from
 
Contracts with Customers
 
on 1 January
 
2018. The impact
of IFRS 15
Revenue from Contracts
 
with Customers
 
was an increase
 
to retained
 
earnings of £67m with the
 
remainder
 
due to the impact of IFRS 9
Financial Instruments
.
d
 
From 2019,
 
due to an
 
IAS 12 update,
 
the tax relief
 
on payments
 
in relation to equity instruments
 
has been recognised in
 
the tax charge of the
 
income statement, whereas
 
it was
previously
 
recorded
 
in retained
 
earnings. Comparatives have
 
been restated, increasing profit
 
after tax by £211m. Further
 
detail can
 
be found in Note 1.
e
 
Following a review
 
of subordinated
 
liabilities issued
 
by Barclays Bank
 
PLC, certain instruments
 
deemed to have characteristics
 
that qualify them as equity
 
have been reclassified.
 
 
 
 
 
 
 
 
 
 
Consolidated financial
 
statements
Consolidated
 
statement
 
of changes
 
in equity
 
 
209
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Called up
share
capital
and share
premium
a
Other
equity
instru-
ments
a
Other
reserves
b
Retained
earnings
Total
equity
excluding
non-
controlling
interests
Non-
controllin
g
interests
Total
equity
£m
£m
£m
£m
£m
£m
£m
Balance as at 31 December 2016
21,842
6,449
6,051
30,531
64,873
6,492
71,365
Effects of changes in accounting
 
policies
c
-
-
(175)
175
-
-
-
Balance as at 1 January 2017
21,842
6,449
5,876
30,706
64,873
6,492
71,365
Profit after tax
-
639
-
413
1,052
249
1,301
Currency
 
translation movements
-
-
(1,336)
-
(1,336)
(1)
(1,337)
Available for
 
sale investments
-
-
449
-
449
-
449
Cash flow hedges
-
-
(948)
-
(948)
-
(948)
Retirement benefit remeasurements
-
-
-
53
53
-
53
Own credit reserve
-
-
(11)
-
(11)
-
(11)
Other
-
-
-
(5)
(5)
-
(5)
Total comprehensive
 
income net of tax from continuing operations
-
639
(1,846)
461
(746)
248
(498)
Total comprehensive
 
income net of tax from discontinued operation
-
-
1,332
(2,335)
(1,003)
109
(894)
Total comprehensive income for the year
-
639
(514)
(1,874)
(1,749)
357
(1,392)
Issue of new ordinary
 
shares
117
-
-
-
117
-
117
Issue of shares under employee
 
share schemes
86
-
-
505
591
-
591
Issue and exchange
 
of other equity instruments
-
2,490
-
-
2,490
-
2,490
Other equity instruments coupons
 
paid
-
(639)
-
174
(465)
-
(465)
Redemption of preference
 
shares
-
-
-
(479)
(479)
(860)
(1,339)
Increase in treasury shares
-
-
(315)
-
(315)
-
(315)
Vesting of shares under
 
employee share schemes
-
-
329
(636)
(307)
-
(307)
Dividends paid
-
-
-
(509)
(509)
(415)
(924)
Net equity impact of partial BAGL disposal
-
-
-
(359)
(359)
(3,462)
(3,821)
Other reserve movements
-
2
7
8
17
(1)
16
Balance as at 31 December 2017
22,045
8,941
5,383
27,536
63,905
2,111
66,016
 
Notes
a
 
For further
 
details
 
refer to Note 28.
b
 
For further
 
details
 
refer to Note 29.
c
 
As a result
 
of the early adoption
 
of the own credit
 
provisions of IFRS 9 on 1 January 2017,
 
own credit
 
which was
 
previously
 
recorded
 
in the income statement
 
is now recognised
within
 
other comprehensive
 
income. The cumulative
 
unrealised own credit
 
net loss of £175m was therefore
 
reclassified
 
from retained earnings
 
to a separate
 
own credit
 
reserve,
within
 
other reserves.
 
During 2017, a £4m loss
 
(net of tax)
 
on own credit
 
was booked in the reserve.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated financial
 
statements
Consolidated
 
cash
 
flow statement
 
 
 
210
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
2019
2018
2017
For the year ended 31 December
Note
s
£m
£m
£m
Continuing operations
Reconciliation of profit before tax to net cash flows from operating activities:
Profit before tax
4,357
3,494
3,541
Adjustment for non-cash items:
Credit impairment charges
1,912
1,468
2,336
Depreciation, amortisation and impairment of property,
 
plant, equipment and intangibles
1,520
1,261
1,241
Other provisions, including pensions
2,336
2,594
1,875
Net loss/(profit) on disposal of investments and property,
 
plant and equipment
7
28
(325)
Other non-cash movements including
 
exchange rate movements
602
(4,366)
1,031
Changes in operating assets and liabilities:
Net increase in cash collateral and settlement balances
(7,091)
(574)
(3,713)
Net (increase)/decrease
 
in loans and advances to banks and customers
(14,275)
(10,602)
18,569
Net (increase)/decrease
 
in reverse repurchase
 
agreements and other similar lending
(1,071)
(1,711)
908
Net increase in deposits and debt securities in issue
11,038
23,969
5,339
Net (increase)/decrease
 
in repurchase agreements
 
and other similar borrowing
(4,061)
3,525
20,578
Net decrease/(increase)
 
in derivative financial instruments
2,863
(3,571)
6,815
Net (increase)/decrease
 
in trading assets
(10,008)
9,958
(33,492)
Net (decrease)/increase
 
in trading liabilities
(966)
531
2,664
Net decrease/(increase)
 
in financial
 
assets and liabilities at fair value through
 
the income statement
4,054
(12,686)
40,014
Net (increase)/decrease
 
in other assets
(412)
489
(3,775)
Net decrease in other liabilities
(2,872)
(4,755)
(2,187)
Corporate
 
income tax paid
9
(228)
(548)
(708)
Net cash from operating activities
(12,295)
8,504
60,711
Purchase of financial assets at fair value through
 
other comprehensive income
(92,365)
(106,669)
-
Purchase of available for
 
sale investments
-
-
(83,127)
Proceeds from
 
sale
 
or redemption
 
of financial assets
 
at fair value through
 
other comprehensive income
81,202
107,539
-
Proceeds from
 
sale
 
or redemption
 
of available for sale
 
investments
-
-
88,298
Purchase of property,
 
plant and equipment and intangibles
(1,793)
(1,402)
(1,456)
Proceeds from
 
sale
 
of property,
 
plant and equipment and intangibles
46
18
283
Disposal of discontinued operation, net of cash disposed
-
-
(1,060)
Disposal of subsidiaries, net of cash disposed
-
-
358
Other cash flows associated with investing activities
84
1,191
206
Net cash from investing activities
(12,826)
677
3,502
Dividends paid and other coupon
 
payments on equity instruments
(1,912)
(1,658)
(1,273)
Issuance of subordinated debt
27
1,352
221
3,041
Redemption of subordinated
 
debt
27
(3,248)
(3,246)
(1,378)
Issue of shares and other equity instruments
28
3,582
1,964
2,490
Repurchase of shares and other
 
equity instruments
(2,668)
(3,582)
(1,339)
Issuance of debt securities
a
3,994
-
-
Net purchase
 
of treasury shares
 
(410)
(486)
(580)
Net cash from financing activities
690
(6,787)
961
Effect of exchange rates on cash and cash equivalents
(3,347)
4,160
(4,773)
Net (decrease)/increase in cash and cash equivalents from continuing
 
operations
(27,778)
6,554
60,401
Net cash from discontinued
 
operation
-
-
101
Net (decrease)/increase in cash and cash equivalents
(27,778)
6,554
60,502
Cash and cash equivalents at beginning
 
of year
211,165
204,612
144,110
Cash and cash equivalents at end of year
183,387
211,166
204,612
Cash and cash equivalents comprise:
Cash and balances at central banks
150,258
177,069
171,082
Loans and advances to banks with original maturity less than three months
8,021
7,676
7,592
Cash collateral and settlement balances with banks with original maturity less than three months
24,628
25,504
25,228
Treasury
 
and other eligible bills with original maturity less than three months
480
917
682
Trading
 
portfolio assets with original maturity less than three months
-
-
28
183,387
211,166
204,612
Note
a
 
Issuance of debt securities
 
included
 
in financing
 
activities
 
relate to
 
instruments
 
that qualify
 
as eligible
 
liabilities
 
and satisfy
 
regulatory
 
requirements
 
for MREL
 
instruments
 
which came
 
into effect
during
 
2019.
 
Interest received was £34,016m (2018: £26,254m; 2017:
 
£21,784m)
 
and interest
 
paid was £23,186m (2018: £16,124m;
 
2017:
 
£10,310m).
 
The Group is required
 
to maintain balances with central banks and other
 
regulatory authorities
 
and these amounted
 
to £4,893m (2018: £4,717m;
 
2017: £3,360m).
 
For the purposes
 
of the cash flow statement,
 
cash comprises
 
cash on hand and demand deposits
 
and cash equivalents
 
comprise highly liquid
 
investments
 
that are
convertible into
 
cash with an insignificant risk of changes
 
in value with
 
original maturities
 
of three
 
months or less.
 
Repurchase
 
and reverse repurchase
 
agreements are
not considered to
 
be part of cash equivalents.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial statements
 
of Barclays PLC
Parent
 
company
 
accounts
 
 
 
211
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Statement of comprehensive income
2019
2018
a
2017
a
For the year ended 31 December
Notes
 
£m
£m
£m
Dividends received from
 
subsidiaries
42
1,560
15,360
674
Net interest income/(expense)
214
(101)
(10)
Other income
42
1,760
923
690
Operating expenses
(267)
(312)
(96)
Profit before tax
3,267
15,870
1,258
Taxation
(86)
79
12
Profit after tax
3,181
15,949
1,270
Other comprehensive
 
income
-
 
-
 
60
Total comprehensive income
3,181
15,949
1,330
Profit after tax attributable to:
Ordinary equity holders
2,368
15,197
631
Other equity instrument holders
813
752
639
Profit after tax
3,181
15,949
1,270
Total comprehensive
 
income attributable to:
Ordinary equity holders
2,368
15,197
691
Other equity instrument holders
813
752
639
Total comprehensive income
3,181
15,949
1,330
 
Note
a
 
From 2019,
 
due to an
 
IAS 12 update,
 
the tax relief
 
on payments
 
in relation to AT1 instruments
 
has been recognised in
 
the tax charge of the income statement,
 
whereas it was
previously
 
recorded
 
in retained
 
earnings. Comparatives have
 
been restated, reducing the
 
tax charge for 2018 by £143m
 
and 2017
 
by £123m. Further
 
detail can
 
be found in
 
Note 1.
 
For the year ended
 
31 December
 
201
 
9,
 
profit after tax was
 
£3,181m
 
(2018:
 
£15,949m)
 
and total comprehensive income was £3,181
 
m
 
(2018:
£15,949
 
m). Other comprehensive income of £60m
 
in 2017
 
related to the gain on available for sale
 
instruments. The Company
 
has 79 members of
staff (2018:
 
87).
 
Balance sheet
2019
2018
As at 31 December
Notes
 
£m
 
£m
 
Assets
Investment in subsidiaries
42
59,546
57,374
Loans and advances to subsidiaries
28,850
29,374
Financial assets at fair value through
 
the income statement
 
42
10,348
6,945
Derivative financial instruments
58
168
Other assets
2
115
Total assets
98,804
93,976
Liabilities
Deposits at amortised cost
500
576
Subordinated
 
liabilities
42
7,656
6,775
Debt securities in issue
42
30,564
32,373
Financial liabilities designated at fair value
42
3,498
-
 
Other liabilities
119
72
Total liabilities
42,337
39,796
Equity
Called up share capital
28
4,331
4,283
Share premium
 
account
28
263
28
Other equity instruments
28
10,865
9,633
Other reserves
394
394
Retained earnings
40,614
39,842
Total equity
56,467
54,180
Total liabilities
 
and equity
98,804
93,976
 
The financial statements on pages 211
 
to 213
 
and the accompanying
 
note on page 298 were approved by the Board
 
of Directors on 12 February
2020
 
and signed on its behalf by:
 
Nigel Higgins
 
James E Staley
 
Tushar Morzaria
Group
 
Chairman
 
Group
 
Chief Executive
 
Group
 
Finance Director
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial statements
 
of Barclays PLC
Parent
 
company
 
accounts
 
 
 
212
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Statement of changes in equity
 
Called up share
capital and
share premium
Other equity
instruments
Other reserves
a
Retained
earnings
Total equity
Notes
£m
£m
£m
£m
£m
Balance as at 1 January 2019
4,311
9,633
394
39,842
54,180
Profit after tax and other comprehensive
 
income
-
 
813
-
 
2,368
3,181
Issue of new ordinary
 
shares
182
-
 
-
 
-
 
182
Issue of shares under employee
 
share schemes
101
-
 
-
 
20
121
Issue and exchange
 
of other equity instruments
-
 
1,232
-
 
(396)
836
Vesting of shares under
 
employee share schemes
-
 
-
 
-
 
(19)
(19)
Dividends paid
11
-
 
-
 
-
 
(1,201)
(1,201)
Other equity instruments coupons paid
-
 
(813)
-
 
-
 
(813)
Other reserve movements
-
 
-
 
-
 
-
 
-
 
Balance as at 31 December 2019
4,594
10,865
394
40,614
56,467
Balance as at 31 December 2017
22,045
8,943
480
7,737
39,205
Effect of changes in accounting policies
-
 
-
 
(86)
97
11
Balance as at 1 January 2018
22,045
8,943
394
7,834
39,216
Profit after tax and other comprehensive
 
income
b
-
 
752
-
 
15,197
15,949
Issue of new ordinary
 
shares
88
-
 
-
 
-
 
88
Issue of shares under employee
 
share schemes
51
-
 
-
 
24
75
Issue and exchange
 
of other equity instruments
-
 
692
-
 
(308)
384
Vesting of shares under
 
employee share schemes
-
 
-
 
-
 
(23)
(23)
Dividends paid
11
-
 
-
 
-
 
(768)
(768)
Other equity instruments coupons paid
b
-
 
(752)
-
 
-
 
(752)
Capital reorganisation
(17,873)
-
 
-
 
17,873
-
 
Other reserve movements
-
 
(2)
-
 
13
11
Balance as at 31 December 2018
4,311
9,633
394
39,842
54,180
 
Statement of changes in equity
 
Called up
share capital
and share
premium
Other equity
instruments
Other
reserves
Retained
earnings
Total equity
Notes
£m
£m
£m
£m
£m
Balance as at 1 January 2017
21,842
6,453
420
7,607
36,322
Profit after tax and other comprehensive
 
income
-
 
639
60
508
1,207
Issue of new ordinary
 
shares
117
-
 
-
 
-
 
117
Issue of shares under employee
 
share schemes
86
-
 
-
 
27
113
Issue and exchange
 
of other equity instruments
-
 
2,490
-
 
-
 
2,490
Vesting of shares under
 
employee share schemes
-
 
-
 
-
 
(11)
(11)
Dividends paid
11
-
 
-
 
-
 
(509)
(509)
Other equity instruments coupons paid
-
 
(639)
-
 
123
(516)
Other reserve movements
-
 
-
 
-
 
(8)
(8)
Balance as at 31 December 2017
22,045
8,943
480
7,737
39,205
 
Notes
a
 
As a result
 
of the adoption
 
of IFRS 9 on 1 January 2018, the available
 
for sale reserve
 
of £86m has been transferred
 
to retained earnings.
b
 
From 2019,
 
due to an
 
IAS 12 update,
 
the tax relief
 
on payments
 
in relation to equity instruments
 
has been recognised in
 
the tax charge of the
 
income statement, whereas
 
it was
previously
 
recorded
 
in retained
 
earnings. Comparatives have
 
been restated, increasing profit
 
after tax by £143m. Further
 
detail can
 
be found in Note 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial statements
 
of Barclays PLC
Parent
 
company
 
accounts
 
 
 
213
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Cash flow statement
2019
2018
2017
For the year ended 31 December
£m
£m
£m
Reconciliation of profit before tax to net cash flows from operating activities:
Profit before
 
tax
3,267
15,870
1,258
Adjustment for non-cash items:
Dividends in specie
-
(14,294)
-
Other non-cash items
(582)
653
76
Changes in operating assets and liabilities
87
55
102
Net cash generated from operating activities
2,772
2,284
1,436
Capital contribution to and investment in subsidiary
(1,187)
(2,680)
(2,801)
Net cash used in investing activities
(1,187)
(2,680)
(2,801)
Issue of shares and other equity instruments
3,597
1,953
2,581
Redemption of other equity instruments
(2,668)
(1,532)
-
Net increase in loans and advances to subsidiaries of the Parent
(4,464)
(7,767)
(9,707)
Net increase in debt securities in issue
2,588
9,174
6,503
Proceeds of borrowings
 
and issuance of subordinated debt
1,194
-
3,019
Dividends paid
(1,019)
(680)
(392)
Coupons paid on other
 
equity instruments
(813)
(752)
(639)
Net cash generated from financing activities
(1,585)
396
1,365
Net increase in cash and cash equivalents
-
-
-
Cash and cash equivalents at beginning
 
of year
-
-
-
Cash and cash equivalents at end of year
-
-
-
Net cash generated from operating activities includes:
Dividends received
1,560
1,066
674
Interest received/(paid)
214
(101)
(10)
 
The Parent company’s
 
principal activity is to hold the investment in its wholly-owned
 
subsidiaries,
 
Barclays Bank PLC, Barclays
 
Bank UK PLC and
Barclays Execution Services Limited. Dividends received
 
are treated as operating income.
 
 
 
 
Notes
 
to the financial
 
statements
 
For the year
 
ended
 
31 December
 
2019
 
 
 
214
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
This section describes the Group’s
 
significant policies and critical accounting estimates that relate to the financial statements and notes as a whole.
If an accounting policy or a critical accounting
 
estimate relates to a particular note, the accounting policy and/or
 
critical accounting estimate
 
is
contained with the relevant note.
 
1 Significant accounting policies
1. Reporting entity
These financial statements are prepared
 
for Barclays PLC and its subsidiaries (the Group)
 
under Section 399 of the Companies Act 2006. The Group
is a major global financial services provider
 
engaged in retail banking, credit cards, wholesale banking, investment banking, wealth management
and investment management
 
services. In addition, separate financial statements have been presented for the holding
 
company.
 
2. Compliance with International Financial
 
Reporting Standards
The consolidated financial statements of the Group,
 
and the separate financial statements of Barclays
 
PLC, have been
 
prepared
 
in accordance with
International Financial Reporting Standards (IFRS)
 
and interpretations (IFRICs) issued by the Interpretations Committee, as published
 
by the
International Accounting
 
Standards Board
 
(IASB). They are also in
 
accordance
 
with IFRS and IFRIC interpretations endorsed by the European Union.
The principal accounting
 
policies applied in the preparation of the consolidated and separate financial statements are set out below, and in
 
the
relevant notes to the financial statements. These policies have been
 
consistently applied with the exception of the adoption of IFRS 16
Leases
, IFRIC
Interpretation 23
Uncertainty over Income
 
Tax
 
Treatments
, the amendments to
 
IAS 12
Income Taxes
, the amendments to
 
IAS 19
Employee
Benefits
, and
 
the amendments to IFRS 9, IAS 39 and IFRS 7 which were applied from
 
1 January 2019.
 
3. Basis of preparation
The consolidated and separate financial statements have been
 
prepared
 
under the historical cost convention modified to include the fair valuation
of investment property,
 
and particular financial instruments, to the extent required
 
or permitted under IFRS as set out in the
 
relevant accounting
policies. They are stated in millions of pounds
 
Sterling (£m), the functional currency of Barclays
 
PLC.
 
The
 
financial statements have been prepared
 
on a going concern basis,
 
in accordance with the Companies Act 2006
 
as applicable to
 
companies
using IFRS.
 
4. Accounting policies
The Group
 
prepares
 
financial statements
 
in accordance with IFRS. The Group
 
’s significant
 
accounting policies relating to specific financial
statement items, together with a description of the accounting
 
estimates and judgements that were critical to preparing
 
them, are set
 
out under
the relevant notes. Accounting
 
policies that affect the financial statements as a whole are set out below.
 
(i) Consolidation
 
The Group
 
applies IFRS 10
Consolidated financial statements
.
 
The consolidated financial statements combine
 
the financial
 
statements of Barclays
 
PLC and all its subsidiaries. Subsidiaries are entities over
 
which
Barclays PLC
 
has control. The Group
 
has control over
 
another entity when the Group
 
has all
 
of the following:
 
 
1) power
 
over the relevant activities of the investee, for example through
 
voting or other
 
rights
2) exposure
 
to, or rights to, variable returns from its involvement with the investee,
 
and
3) the ability to affect those returns through
 
its
 
power
 
over the investee.
 
The assessment of control is based on the consideration
 
of all facts and circumstances. The Group
 
reassesses whether it
 
controls an investee if
facts and circumstances indicate that there are changes to one or
 
more of the three elements of control.
 
Intra-group
 
transactions and balances are eliminated on consolidation. Consistent
 
accounting policies are used throughout
 
the Group for
 
the
purposes of the consolidation.
 
Changes in ownership interests in subsidiaries are accounted
 
for as equity transactions if they occur after control has already been obtained
 
and
they do not result in loss of control.
 
As the consolidated financial statements include partnerships
 
where the Group
 
member is a
 
partner,
 
advantage has been taken of the exemption
under Regulation
 
7 of the Partnership (Accounts)
 
Regulations 2008 with regard
 
to preparing and filing of individual
 
partnership financial
statements.
 
Details of the principal subsidiaries are given in Note 34.
 
(ii) Foreign currency translation
The Group
 
applies IAS 21
The Effects of Changes in Foreign Exchange Rates
. Transactions in
 
foreign currencies
 
are translated into Sterling
 
at the
rate ruling on the date of the transaction. Foreign
 
currency
 
monetary balances are translated into
 
Sterling at the period end exchange
 
rates.
Exchange gains and losses on such balances are taken to
 
the income statement.
 
Non-monetary
 
foreign currency balances are carried
 
at historical
transaction date exchange
 
rates.
 
 
The Group
 
’s foreign operations (including
 
subsidiaries,
 
joint ventures, associates and branches) based mainly outside the UK may have different
functional currencies. The functional currency
 
of
 
an operation is the currency of the main economy
 
to which it is
 
exposed.
 
 
 
Notes
 
to the financial
 
statements
 
For the year
 
ended
 
31 December
 
2019
 
 
 
215
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
1 Significant accounting policies
 
continued
 
Prior to consolidation (or
 
equity accounting) the assets
 
and liabilities of non
 
-Sterling operations are translated at the period end exchange
 
rate and
items of income, expense and other comprehensive
 
income are translated into Sterling at the rate on the date of the transactions. Exchange
differences arising
 
on the translation of foreign
 
operations are included
 
in currency
 
translation reserves within equity. These are transferred to the
income statement when the Group
 
disposes of the
 
entire interest in a foreign
 
operation, when partial disposal results in the loss of control of an
interest in a subsidiary,
 
when an investment previously accounted
 
for using the equity method is accounted for as a financial asset, or on the
disposal of an autonomous foreign
 
operation within a branch.
 
 
(iii) Financial assets and liabilities
 
The Group
 
applies IFRS 9
Financial Instruments
 
to the recognition,
 
classification and measurement, and derecognition
 
of financial assets
 
and
financial liabilities and the impairment of financial assets. The Group
 
applies the requirements of IAS 39
Financial Instruments: Recognition and
Measurement
 
for hedge accounting
 
purposes.
 
 
Recognition
The Group
 
recognises financial assets and liabilities when it becomes a party to the terms of the contract. Trade date or settlement date
 
accounting
is applied depending
 
on the classification
 
of the financial asset.
 
Classification and measurement
Financial assets are classified on the basis of two criteria:
 
i) the business model within which financial assets are managed, and
 
ii) their contractual cash flow characteristics (whether
 
the cash flows represent ‘solely payments of principal and interest’ (SPPI)).
 
The Group
 
assesses
 
the business model criteria at a portfolio level. Information
 
that is considered in determining the applicable business model
includes (i) policies and objectives for the relevant portfolio,
 
(ii) how the performa
 
nce and risks of the
 
portfolio are managed,
 
evaluated and
reported
 
to management, and (iii) the frequency, volume
 
and timing of sales in
 
prior periods, sales expectation for future
 
periods, and the reasons
for such sales.
 
The contractual cash flow charact
 
eristics of financial assets are assessed with reference
 
to whether the cash flows represent SPPI. In assessing
whether contractual cash flows are SPPI
 
compliant, interest is defined as consideration primarily for the time value of money and the credit risk
 
of
the principal outstanding. The time value of money
 
is defined as the
 
element of interest that provides
 
consideration only for
 
the passage of time
and not consideration for
 
other risks or costs associated with holding the financial asset. Terms that could change
 
the contractual cash flows so
that it would not meet the condition for SPPI
 
are considered, including:
 
(i) contingent and leverage
 
features, (ii) non-recourse arrangements and
(iii) features that could modify the time value of money.
 
Financial assets are measured at amortised cost if they are
 
held within a business model whose objective is to hold financial assets in order
 
to
collect contractual cash flows, and their contractual cash
 
flows represent SPPI.
 
Financial assets are measured at fair value through
 
other comprehensive income
 
if they are held within
 
a business model whose objective is
achieved by both
 
collecting contractual cash flows and selling financial assets, and their contractual cash flows represent
 
SPPI.
 
Other financial assets are
 
measured at fair value
 
through
 
profit and loss. There is
 
an option to make an irrevocable
 
election on initial recognition for
non traded equity investments to be measured
 
at fair value through
 
other comprehensive income,
 
in which case dividends are recognised in profit
or loss, but gains or losses are not reclassified to profit or
 
loss upon derecognition,
 
and the impairment requirements of IFRS 9 do not apply.
 
The accounting policy for
 
each type of financial
 
asset or liability is included
 
within the relevant note for the item. The Group’s
 
policies for
determining the fair values of the assets and liabilities are set
 
out in Note 17.
 
Derecognition
The Group
 
derecognises a financial asset, or a portion of a financial
 
asset, from
 
its balance sheet where the contractual rights to cash flows from
the asset have expired, or have
 
been transferred,
 
usually by sale, and with them either substantially all the risks and rewards
 
of the asset
 
or
significant risks and rewards, along with the
 
unconditional ability to sell
 
or pledge the asset.
 
Financial liabilities are de-
 
recognised when
 
the liability
 
has been settled, has expired
 
or has been extinguished. An exchange
 
of an existing
 
financial
liability for a new liability with the same lender
 
on substantially different terms – generally a difference of 10%
 
or more
 
in the present value of the
cash flows or a substantive qualitative amendment
 
– is accounted for as an extinguishment of the original financial liability and the recognition of a
new financial liability.
 
Transactions in which
 
the Group transfers assets and liabilities, portions of them, or
 
financial risks associated with them can be complex and it may
not be obvious whether
 
substantially all of the risks and rewards have been
 
transferred. It is often necessary to perform a quantitative analysis.
Such an analysis compares
 
the Group’s exposure
 
to variability in
 
asset cash flows before
 
the transfer with its retained exposure after the transfer.
 
A cash flow analysis of this nature may require
 
judgement. In particular,
 
it is
 
necessary to estimate the asset’s expected future cash flows as well as
potential variability around
 
this expectation.
 
The method of estimating expected future cash flows depends
 
on the nature of the asset, with market
and market-implied data used to the greatest extent possible. The potential
 
variability around
 
this expectation
 
is typically determined by stressing
underlying
 
parameters to create reasonable alternative upside and downside scenarios. Probabilities are then assigned to each scenario.
 
Stressed
parameters may include default rates,
 
loss severity, or
 
prepayment
 
rates.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
 
For the year
 
ended
 
31 December
 
2019
 
 
 
216
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
1 Significant accounting policies
 
continued
Accounting for reverse
 
repurchase and repurchase
 
agreements including other similar lending and borrowing
Reverse repurchase
 
agreements (and stock borrowing
 
or similar transaction) are a form of secured lending whereby
 
the Group provides a loan or
cash collateral in exchange
 
for the transfer of collateral, generally in the form of marketable securities subject to
 
an agreement to transfer the
securities back at a fixed price in the future. Repurchase
 
agreements are where
 
the Group obtains such loans or cash collateral, in exchange for the
transfer of collateral.
 
The Group
 
purchases (a reverse repurchase
 
agreement) or borrows securities subject
 
to a commitment to resell or return
 
them. The securities are
not included in the balance sheet as the Group
 
does not acquire the risks and rewards of ownership.
 
Consideration paid (or
 
cash collateral
provided)
 
is accounted for as a
 
loan asset at amortised cost, unless it is designated or mandatorily at fair value through
 
profit and loss.
 
 
The Group
 
may also sell (a
 
repurchase
 
agreement) or
 
lend securities
 
subject to a commitment to repurchase or
 
redeem them. The securities are
retained on the balance sheet as the Group
 
retains substantially
 
all the risks and rewards
 
of ownership. Consideration
 
received (or
 
cash collateral
provided)
 
is accounted for as a
 
financial liability at amortised cost, unless it is designated at fair value through
 
profit and loss.
 
 
(iv) Issued debt and equity instruments
 
The Group
 
applies IAS 32,
Financial Instruments: Presentation
, to determine
 
whether funding
 
is either
 
a financial liability (debt) or equity.
 
Issued financial instruments or their components
 
are classified as liabilities
 
if the contractual arrangement
 
results in
 
the Group having
 
an obligation
to either deliver cash or another
 
financial asset, or a variable number of equity shares, to the holder of the instrument. If this is not the case, the
instrument is generally an equity instrument and the proceeds
 
included in equity, net of transaction costs. Dividends and other returns
 
to equity
holders are recognised
 
when paid or declared
 
by the members at the
 
AGM and treated as a deduction from
 
equity.
 
Where issued financial instruments contain both liability and equity components,
 
these are accounted for separately. The fair value
 
of the debt is
estimated first and the balance of the proceeds
 
is included within equity.
 
5. New and amended standards and interpretations
 
The accounting policies adopted are consistent with those of the previous financial year,
 
with the exception of the adoption of IFRS 16
Leases
,
IFRIC Interpretation
 
23
Uncertainty over Income
 
Tax
 
Treatment
, the amendments to
 
IAS 12
Income Taxes
, the amendments to
 
IAS 19
Employee
Benefits,
and the amendments to IFRS 9, IAS 39 and IFRS 7 which were
 
applied from 1 January
 
2019.
 
IFRS 16 – Leases
IFRS 16
Leases
, which replaced
 
IAS 17
Leases
, does not result in a significant change to lessor accounting; however,
 
for lessee accounting there is
no longer
 
a distinction
 
between operating
 
and finance leases. Instead, the lessee is required to recognise
 
both a right of use (ROU) asset and lease
liability on-balance
 
sheet. There is a recognition exemption permitted
 
for leases with a term
 
of 12
 
months or less.
 
 
The Group
 
applied IFRS 16 on a modified retrospective
 
basis and took advantage of the option not to restate comparative periods. The Group
applied the following transition options available
 
under the modified retr
 
ospective approach:
 
 
To calculate the right of use asset equal to the
 
lease liability, adjusted for
 
prepaid or
 
accrued payments.
 
To rely on
 
the previous assessment of whether leases are onerous
 
in accordance with IAS 37
 
immediately before the date of initial
 
application as
an alternative to performing
 
an impairment review. The Group
 
adjusted the carrying amount of the ROU asset
 
at the date of initial application by
the previous carrying
 
amount of its onerous lease provision.
 
To apply the recognition
 
exception for leases with a term not exceeding 12
 
months.
 
To use hindsight
 
in determining the lease term if the contract contains options to extend or terminate the lease.
 
Upon adoption
 
of IFRS 16, the Group applied the transition option which permitted
 
the ROU asset to
 
equal the lease liability, adjusted
 
for prepaid
 
or
accrued prepayments.
 
This approach resulted in a lease liability of £1,696m
 
and an ROU asset
 
of £1,644m
 
being recognised
 
as at
 
1 January 2019.
The difference in the
 
lease liability and the ROU asset was a result of the following
 
adjustments:
 
an increase in the ROU asset as a result of rental prepayments
 
of £55m
 
,
 
and
 
a decrease in the ROU asset as a result of onerous
 
lease provisions previously recognised
 
of £64m, £40m
 
of rent free adjustments and £3m of
finance sublease arrangements.
 
The ROU asset was recorded
 
in property, plant and equipment
 
and the lease
 
liability within other liabilities.
 
 
When measuring lease liabilities, the Group
 
discounted lease payments using the incremental borrowing
 
rate at 1 January 2019. The weighted
average applied was 4.57%.
 
 
The following shows a reconciliation
 
between the operating lease commitments as at 31 December
 
2018
 
and the lease
 
liability recorded
 
as at
 
1
January 2019.
 
 
 
£m
Operating lease commitment as at 31 December 2018 as disclosed
 
in the Group consolidated financial statements
2,345
Impact of discounting using the Group’s
 
incremental borrowing
 
rate
(793)
Recognition exemption
 
for short term leases
(17)
Extension and termination options reasonably
 
certain to be exercised
161
Lease liability
 
recognised as at 1 January 2019
1,696
 
 
 
Notes
 
to the financial
 
statements
 
For the year
 
ended
 
31 December
 
2019
 
 
 
217
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
1 Significant accounting policies
 
continued
IFRIC Interpretation 23 – Uncertainty over Income Tax Treatment
IFRIC 23 clarifies the application of IAS 12 to accounting
 
for income tax treatments that have yet to be accepted by tax authorities, in scenarios
where it may be unclear
 
how tax law applies to a particular transaction or circumstance, or
 
whether a taxation authority will accept an entity’s tax
treatment. There was no significant effect
 
from the adoption of IFRIC 23
 
in relation to accounting for uncertain tax positions.
 
IAS 12 – Income Taxes – Amendments to IAS 12
The IASB amended IAS 12
 
in order to clarify the accounting treatment of the income tax consequences of dividends. As a result of the amendment,
the tax consequences of all payments on financial instruments that are classified as equity for
 
accounting purposes,
 
where those payments are
considered to be a distribution of profit, will b
 
e
 
included in, and will reduce, the income statement tax charge.
 
The amendments of IAS 12 were
applied to the income
 
tax consequences of dividends recognised
 
on or after the beginning of the earliest comparative period. This resulted in
reducing
 
the tax charge and increasing profit after tax for 2019
 
by £222m,
 
2018
 
by £211
 
m
 
and 2017
 
by £174m
 
.
 
This change does not impact
retained earnings or earnings
 
per share.
 
IAS 19 – Employee Benefits – Amendments to IAS 19
The IASB issued amendments to the guidance in IAS 19, Employee
 
Benefits, in connection with accounting for
 
plan amendments, curtailments and
settlements. There was
 
no significant effect from the adoption of the amendments to IAS 19.
 
 
IFRS 9, IAS 39 and IFRS 7 – Amendments relating
 
to Interest Rate Benchmark Reform
IFRS 9, IAS 39 and IFRS 7 were
 
amended in September 2019.
 
The amendments are effective for periods beginning
 
on or after 1 January 2020
 
with
earlier application permitted. Th
 
e
 
Group
 
elected to early adopt the amendments with
 
effect from
 
1 January 2019.
 
The amendments have been
endorsed by
 
the EU.
 
IFRS 9 allows companies when they first apply IFRS 9, to choose as an accounting
 
policy to continue to apply the hedge accounting requirements
of IAS 39. The Group
 
made the election to continue to apply the IAS 39 hedge accounting
 
requirements,
 
and consequently, the amendments to IAS
39 have been
 
adopted by the Group.
 
The objective of the amendments are to provide
 
temporary
 
exceptions from applying specific hedge accounting requirements during
 
the period of
uncertainty resulting from interest rate benchmark
 
reform. Each of the exceptions adopted by
 
the Group are described below.
 
 
Highly probable
 
requirement
When determining whether
 
a forecast transaction or cash flow is highly probable,
 
the Group assumes that the
 
interest rate benchmark
 
on which
the hedged cash flows are based is not altered as a result
 
of the reform. This amendment has also been applied when cash flows are still expected
to occur in respect of amounts remaining in the cash flow hedge
 
reserve.
 
 
Prospective assessments
When performing
 
prospective assessments, the
 
Group
 
assumes that the
 
interest rate benchmark
 
on which the hedged
 
risk and/or hedging
instrument are
 
based is not altered as a result of the interest
 
rate benchmark
 
reform.
 
 
Retrospective assessments
The Group
 
will not discontinue hedge accounting during
 
the period of IBOR-related uncertainty solely
 
because the retrospective effectiveness falls
outside the required
 
80-125%
 
range.
 
 
Hedge of a non-contractually specified benchmark
 
portion of an interest rate
The Group
 
only considers at inception of such a hedging relationship whether the separately identifiable requirement
 
is met.
 
The amendments to IFRS 7 require
 
certain disclosures to be made in the first period that the amendments to IFRS 9 or IAS 39 are adopted. Refer
 
to
Note 14 where
 
these disclosures have been included.
 
Future accounting developments
The following accounting
 
standards have been issued by the IASB but are not yet effective:
 
IFRS 17 – Insurance
 
contracts
In May 2017,
 
the IASB issued IFRS 17
Insurance Contracts
, a comprehensive
 
new accounting standard
 
for insurance contracts covering
 
recognition
and measurement, presentation and disclosure. Once effective,
 
IFRS 17 will replace IFRS 4
Insurance Contracts
 
that was issued in 2005.
 
IFRS 17 applies to all types of insurance
 
contracts (i.e. life, non
 
-life, direct insurance and re-insurance)
 
,
 
regardless of the type of entities that issue
them, as well as to certain guarantees and financial instruments with discretionary
 
participation features. A few scope exceptions will apply.
 
 
In June 2019,
 
the IASB published an exposure draft with proposed
 
amendments to IFRS
 
17.
 
The proposed
 
amendments
 
that are expected to be
relevant to the Group
 
are changes to the scoping of IFRS 17,
 
changes in the effective date of IFRS 17
 
and changes to IFRS 9 which were
consequential amendments as a result of IFRS 17.
 
The standard is currently
 
effective from 1 January
 
2021
 
,
 
although the amendments would change the effective date to 1 January 2022
 
,
 
and the
standard has not yet been endorsed
 
by the EU. The Group is currently assessing the expected impact of adopting this standard.
 
 
 
Notes
 
to the financial
 
statements
 
For the year
 
ended
 
31 December
 
2019
 
 
 
218
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
1 Significant accounting policies
 
continued
6. Critical accounting estimates and judgements
The preparation
 
of financial statements in accordance with IFRS requires the use of estimates. It also requires management
 
to exercise judgement
in applying the accounting policies. The key areas involving
 
a higher degree
 
of judgement or complexity, or areas where
 
assumptions are significant
to the consolidated and individual financial statements are highlighted
 
under the relevant note. Critical accounting estimates and judgements are
disclosed in:
 
 
Credit
 
impairment charges on
 
page 225
 
Tax on page 230
 
Fair value of financial instruments on page 245
 
Pensions and post-retirement ben
 
efits – obligations
 
on page 281
 
Provisions including
 
conduct and legal, competition and regulatory
 
matters on page 265
 
.
 
7.
 
Other disclosures
To improve
 
transparency
 
and ease of reference, by concentrating
 
related information in one place, certain disclosures required under
 
IFRS have
been included within the Risk review section as follows:
 
 
Credit risk on pages 102
 
to 103
 
and 109
 
to 139
 
Market risk on pages 103
 
to 104 and 140
 
to 142
 
Treasury
 
and capital risk – liquidity on pages 104 and 145
 
to 154
 
Treasury
 
and capital risk – capital on pages 104
 
and 155
 
to 164
 
.
 
These disclosures are covered
 
by the Audit opinion (included
 
on pages 201 to 204
 
)
 
where referenced as audited.
 
8. Parent company accounts
The Parent Company’s
 
financial statements on pages 211
 
to 213
 
also form part of the notes to the consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Performance/return
 
 
 
219
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
The notes included in this section focus on the results and performance
 
of the Group
 
.
 
Information on the income generated, expenditure incurred,
segmental performance,
 
tax, earnings per share and dividends are included here. For
 
further detail
 
on performan
 
ce,
 
see income statement
commentary within Financial review (unaudited)
 
on page 182
 
.
 
 
2 Segmental reporting
Presentation of segmental reporting
 
The Group’s
 
segmental reporting is in accordance with IFRS 8
Operating Segments
. Operating segments are reported
 
in a manner consistent with
the internal reporting
 
provided to the Executive Committee, which is responsible for allocating resources and assessing performance
 
of the
operating segments, and has been identified as the chief operating
 
decision maker. All transactions between business segments are conducted
 
on
an arm’s-length basis, with intra-segment revenue
 
and costs being eliminated in Head Office. Income
 
and expenses directly associated with each
segment are included in determining business segment performance.
 
 
The Group
 
is a
 
British universal bank and for
 
segmental reporting purposes
 
it defines
 
its two operating
 
divisions as Barclays UK and Barclays
International.
 
Barclays UK
 
which meets the banking needs of UK based retail customers and
 
small to medium sized enterprises, through
 
offering products
 
and
services. The division includes the UK Personal banking,
 
UK Business banking and the Barclaycard
 
consumer UK
 
businesses.
 
 
Barclays International
 
which delivers products and
 
services designed for our larger
 
corporate, wholesale and international banking clients. The
division includes the large UK Corporate
 
business; the international Corporate and Private Bank businesses; the Investment Bank; the international
Barclaycard
 
business; and Payments.
 
 
The below table also includes Head Office which comprises head
 
office, Barclays Execution Services FTE and legacy businesses.
 
Analysis of results by business
Barclays UK
 
Barclays
International
 
Head Office
Group results
£m
£m
£m
£m
For the year ended 31 December 2019
Total income
7,353
14,675
(396)
21,632
Credit impairment charges
(712)
(1,173)
(27)
(1,912)
Net operating income/(expenses)
6,641
13,502
(423)
19,720
Operating costs
(3,996)
(9,163)
(200)
(13,359)
UK bank levy
(41)
(174)
(11)
(226)
Litigation and conduct
(1,582)
(116)
(151)
(1,849)
Total operating expenses
(5,619)
(9,453)
(362)
(15,434)
Other net income
a
-
69
2
71
Profit/(loss)
 
before tax
 
1,022
4,118
(783)
4,357
Total assets (£bn)
257.8
861.4
21.0
1,140.2
Number of employees (full time equivalent)
21,400
11,200
48,200
80,800
Average number of employees (full time equivalent)
82,700
Barclays UK
 
Barclays
International
 
Head Office
Group results
£m
£m
£m
£m
For the year ended 31 December 2018
Total income
b
7,383
14,026
(273)
21,136
Credit impairment (charges)/releases
(826)
(658)
16
(1,468)
Net operating income/(expenses)
6,557
13,368
(257)
19,668
Operating costs
(4,075)
(9,324)
(228)
(13,627)
UK bank levy
(46)
(210)
(13)
(269)
GMP charge
-
-
(140)
(140)
Litigation and conduct
(483)
(127)
(1,597)
(2,207)
Total operating expenses
(4,604)
(9,661)
(1,978)
(16,243)
Other net income/(expenses)
a
3
68
(2)
69
Profit/(loss)
 
before tax
 
1,956
3,775
(2,237)
3,494
Total assets (£bn)
249.7
862.1
21.5
1,133.3
Number of employees (full time equivalent)
22,600
12,400
48,500
83,500
 
Notes
a
 
Other net
 
income/(expenses)
 
represents the
 
share of post-tax results
 
of associates and joint ventures,
 
profit (or loss) on disposal
 
of subsidiaries, associates
 
and joint ventures, and
gains on acquisitions.
b
 
During
 
2018, £351m
 
of certain
 
legacy capital instrument
 
funding costs were
 
charged to Head
 
Office, the impact of which
 
would have been materially
 
the same if
 
the charges had
been included
 
in full
 
year 2017.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Performance/return
 
 
 
220
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Analysis of results by business
Barclays UK
 
Barclays
International
 
Head
 
Office
a
Barclays
 
Non-Core
b
Group results
£m
£m
£m
£m
£m
For the year ended 31 December 2017
Total income
7,383
14,382
(159)
(530)
21,076
Credit impairment charges
(783)
(1,506)
(17)
(30)
(2,336)
Net operating income/(expenses)
6,600
12,876
(176)
(560)
18,740
Operating costs
(4,030)
(9,321)
(277)
(256)
(13,884)
UK bank levy
(59)
(265)
(41)
-
(365)
Litigation and conduct
(759)
(269)
(151)
(28)
(1,207)
Total operating expenses
(4,848)
(9,855)
(469)
(284)
(15,456)
Other net (expenses)/income
c
(5)
254
(189)
197
257
Profit/(loss)
 
before tax
 
from continuing
 
operations
1,747
3,275
(834)
(647)
3,541
Total assets (£bn)
237.4
856.1
39.7
-
1,133.2
Number of employees (full time equivalent)
 
22,800
 
11,500
 
45,600
 
-
 
 
79,900
 
Notes
a
 
The reintegration
 
of Non-Core assets on 1 July
 
2017 resulted
 
in the
 
transfer
 
of c.£9bn of assets into Head
 
Office relating to a portfolio of Italian
 
mortgages. The portfolio generated
a loss before tax of £37m
 
in the
 
second half
 
of the year and included
 
assets of £9bn as at
 
31 December 2017.
 
b
 
The Non-Core segment
 
was closed on 1 July
 
2017 with the
 
residual
 
assets and
 
liabilities reintegrated into, and
 
associated financial
 
performance subsequently
 
reported in, Barclays
UK, Barclays
 
International
 
and Head Office.
 
Financial results
 
up until 30 June
 
2017 are reflected
 
in the
 
Non-Core segment for 2017. Comparative
 
results
 
have not
 
been restated.
c
 
Other net
 
income/(expenses)
 
represents the
 
share of post-tax results
 
of associates and joint ventures,
 
profit (or loss) on disposal
 
of subsidiaries, associates
 
and joint ventures,
 
and gains
 
on acquisitions.
 
Income by geographic region
a
2019
2018
2017
For the year ended 31 December
£m
£m
£m
Continuing operations
United Kingdom
11,809
11,529
10,919
Europe
 
1,754
1,617
1,984
Americas
 
7,064
7,058
7,194
Africa and Middle East
59
43
137
Asia
 
946
889
842
Total
21,632
21,136
21,076
Income from individual
 
countries which represent more than 5% of total income
a
2019
2018
2017
For the year ended 31 December
£m
£m
£m
Continuing operations
United Kingdom
11,809
11,529
10,919
United States
 
6,939
6,911
7,049
 
Note
a
 
The geographical analysis
 
is now based on the
 
location of office
 
where the
 
transactions
 
are recorded, whereas
 
it was previously based
 
on counterparty
 
location. The new approach
is better
 
aligned to the
 
geographical view of the business
 
following the implem
 
entation of structural reform.
 
Prior year comparatives
 
have been restated.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Performance/return
 
 
 
221
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
3 Net interest income
Accounting for interest income and expenses
Interest income on loans and advances at amortised cost, and interest expense on
 
financial liabilities held at amortised cost, are calculated using
the effective
 
interest method which allocates interest, and direct and incremental
 
fees and costs, over the expected lives of the assets and liabilities.
 
The effective interest method
 
requires the Group
 
to estimate
 
future cash flows, in some cases
 
based on its experience of customers’ behaviour,
considering all contractual terms of the financial instrument, as well as the expected
 
lives of the assets and liabilities.
 
 
The Group
 
incurs certain costs to
 
originate credit card balances with the most significant being
 
co-brand
 
partner fees. To the extent these costs are
attributed to customers that continuously
 
carry an outstanding balance (revolvers),
 
they are capitalised
 
and subsequently included within the
calculation of the effective interest rate. They
 
are amortised to interest income
 
over the period
 
of expected repayment
 
of the originated balance.
Costs attributed to customers that settle their outstanding balances each
 
period (transactors)
 
are deferred
 
on the balance sheet as
 
a cost of
obtaining a contract and amortised to fee and commission expense over
 
the life of the customer relationship (refer
 
to Note 4). There are no other
individual estimates involved in the calculation of
 
effective interest rates that are material to
 
the results or financial position.
 
2019
2018
2017
£m
£m
£m
Cash and balances at central banks
1,091
1,123
583
Loans and advances at amortised cost
12,450
12,073
12,069
Financial investments
-
-
754
Fair value through
 
other comprehensive income
1,032
1,029
-
Other
 
883
316
225
Interest income
15,456
14,541
13,631
Deposits at amortised cost
(2,449)
(2,250)
(1,493)
Debt securities in issue
(1,906)
(1,677)
(915)
Subordinated
 
liabilities
(1,068)
(1,223)
(1,223)
Other
(626)
(329)
(155)
Interest expense
(6,049)
(5,479)
(3,786)
Net interest income
9,407
9,062
9,845
 
Interest income presented above
 
represents interest revenue calculated using the effective
 
interest method. Costs to originate credit card balances
of
 
£697
 
m
 
(2018:
 
£596m; 2017:
 
£497m)
 
have been amortised to interest
 
income during
 
the year. Interest income include
 
s
 
£48
 
m
 
(2018:
 
£53
 
m;
2017:
 
£48m)
 
accrued on impaired loans.
 
Other interest expense includes
 
£76m
 
relating to IFRS 16 lease interest expenses.
 
 
4 Net fee and commiss
 
ion income
Accounting for net fee and commission
 
income under IFRS 15 effective
 
from 1 January 2018
The Group
 
applies IFRS 15 Revenue from
 
Contracts with Customers.
 
The standard establishes a five-step
 
model governing
 
revenue recognition.
The five-step model requires
 
the Group to (i) identify the contract with the customer, (ii) identify each of the performance
 
obligations included in
the contract, (iii) determine the amount of consideration in the contract,
 
(iv) allocate the consideration to each of the identified performance
obligations and (v) recognise
 
revenue
 
as each performance obligation
 
is satisfied.
 
The Group
 
recognises fee and commission income charged
 
for services provided by the Group as the services are provided, for example on
completion of the underlying
 
transaction.
 
Accounting for net fee and commission
 
income under IAS 18 for 2017
The Group
 
applies IAS 18 Revenue. Fees and commissions charged
 
for services provided
 
or received
 
by the Group are recognised as the services
are provided,
 
for example on completion
 
of the underlying transaction.
 
Fee and commission income
 
is disaggregated below by fee types that reflect the nature of the services offered
 
across the Group and operating
segments, in accordance
 
with IFRS 15. It includes a total for fees in scope of IFRS 15.
 
Refer to Note 2 for
 
more de
 
tailed information about operating
segments.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Performance/return
 
 
 
222
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
2019
Barclays UK
Barclays
International
Head Office
Total
£m
£m
£m
£m
Fee type
Transactional
1,074
2,809
-
3,883
Advisory
177
903
-
1,080
Brokerage
 
and execution
208
1,131
-
1,339
Underwriting
 
and syndication
-
2,358
-
2,358
Other
92
242
12
346
Total revenue from contracts with customers
1,551
7,443
12
9,006
Other non-contract
 
fee income
-
116
-
116
Fee and commission
 
income
1,551
7,559
12
9,122
Fee and commission
 
expense
(365)
(1,990)
(7)
(2,362)
Net fee and commission
 
income
1,186
5,569
5
6,760
 
2018
Barclays UK
Barclays
International
Head Office
Total
£m
£m
£m
£m
Fee type
Transactional
1,102
2,614
-
3,716
Advisory
209
850
-
1,059
Brokerage
 
and execution
153
1,073
-
1,226
Underwriting
 
and syndication
-
2,462
-
2,462
Other
78
207
27
312
Total revenue from contracts with customers
1,542
7,206
27
8,775
Other non-contract
 
fee income
-
118
-
118
Fee and commission
 
income
1,542
7,324
27
8,893
Fee and commission
 
expense
(360)
(1,707)
(17)
(2,084)
Net fee and commission
 
income
1,182
5,617
10
6,809
 
2017
a
£m
Fee and commission
 
income
Banking, investment management
 
and credit related fees and commissions
8,622
Foreign
 
exchange commission
129
Fee and commission
 
income
8,751
Fee and commission
 
expense
(1,937)
Net fee and commission
 
income
6,814
 
Note
a
 
The Group elected
 
the cumulative
 
effect transition method
 
on adoption of IFRS 15 for 1 January
 
2018, and recognised
 
in retained
 
earnings
 
without restating comparative
 
periods.
The comparative
 
figures
 
for 2017 are reported
 
under
 
IAS 18.
 
Fee types
Transactional
 
Transactional fees are service
 
charges on deposit accounts, cash management services and transactional proces
 
sing fees including interchange
and merchant fee income generated
 
from credit and bank
 
card usage. Transaction and
 
processing fees are recognised at the point in
 
time the
transaction occurs or service is performed.
 
They include banking services such as Automated Teller Machine (ATM)
 
fees, wire transfer fees,
balance transfer fees,
 
overdraft
 
or late fees
 
and foreign
 
exchange fees, among others. Interchange
 
and merc
 
hant fees
 
are recognised
 
upon
settlement of the card transaction payment.
 
Barclays incurs certain card related costs including
 
those related to cardholder
 
reward
 
programmes and various payments made to co-brand
partners. To the extent cardholder
 
reward
 
programmes costs are attributed to customers that
 
settle their
 
outstanding balance each period
(transactors) they are expensed when incurred
 
and presented in fee and commission expense while costs
 
related to customers who continuously
carry an outstanding ba
 
lance (revolvers)
 
are included in the effective interest rate of the receivable (refer
 
to Note 3). Payments to partners for new
cardholder
 
account originations for transactor
 
accounts are deferred as costs
 
to obtain a contract under IFRS 15 w
 
hile those costs related
 
to
revolver
 
accounts are included in the effective interest rate of the receivable
 
(refer to Note 3). Those costs deferre
 
d
 
under IFRS 15
 
are capitalised
 
 
Notes
 
to the financial
 
statements
Performance/return
 
 
 
223
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
and amortised over the estimated cardholder
 
relationship. Payments to co-brand
 
partners based on revenue
 
sharing are presented as a
 
reduction
of fee and commission income while payments based on
 
profitability are presented in fee and commission expense.
 
Advisory
 
Advisory fees are generated from
 
wealth management services and investment banking
 
advisory services related to mergers, acquisitions and
financial restructurings. Wealth
 
management advisory fees primarily consists of asset-based fees for
 
advisory
 
accounts of wealth management
clients and are based on the market value of client assets.
 
They are earned over
 
the period the services are provided
 
and are generally recognised
quarterly when the market value of client assets is determined. Investment banking
 
advisory fees are recognised at the point in time when the
services related to the transaction have been completed
 
under the terms of the engagement. Investment banking
 
advisory costs are recognised as
incurred
 
in fee and commission expense if direct and incremental to the advisory services or otherwise recognised
 
in operating expenses.
 
Brok
 
erage
 
and execution
Brokerage
 
and execution fees are earned for executing
 
client transactions
 
with various exchanges and over
 
-the-counter markets and assisting
clients in clearing transactions. Brokerage
 
and execution fees are recognised at the point in time
 
the associated service has been completed
 
which
is generally the trade date of the transaction.
 
Underwriting and syndication
 
Underwriting
 
and syndication fees are earned for the distribution of client equity or debt securities and the arran
 
gement and administration of a
loan syndication. This includes commitment fees
 
to provide loan financing. Underwriting
 
fees are generally recognised on trade date if there is
 
no
remaining contingency,
 
such as the
 
transaction being conditional on the closing
 
of an acquisition or another
 
transaction. Underwriting
 
costs are
deferred
 
and recognised
 
in fee and commission expense when the associated
 
underwriting
 
fees are recorded.
 
Syndication fees are earned for
arranging
 
and administering a loan syndication; however,
 
the associated
 
fee may be subject to variability until
 
the loan has been syndicated to
other syndicate members or until other contingencies (such
 
as a successful M&A closing) have been resolved
 
and therefore
 
the fee revenue is
deferred
 
until the uncertainty is resolved.
 
Included
 
in the underwriting and syndication, are commitment fees to provide
 
loan financing includes fees which are not presented as part of the
carrying value of the loan in accordance
 
with IFRS 9,
 
for example as part of the effective
 
interest rate.
 
Loan commitment fees included as IFRS 15
revenue
 
s
 
are fees for loan commitments that are not expected to fund, fees received
 
as compensation for unfunded
 
commitments and the
applicable portion
 
of fees received for
 
a revolving loan facility,
 
which for that period, are undrawn.
 
Such commitment fees are recognised over
 
time
through
 
to the contractual maturity of the
 
commitment.
 
Contract assets and contract liabilities
 
The Group
 
had no material contract assets or contract liabilities as at 31 December
 
2019
 
(2018: nil).
 
 
Impairment on fee receivables and contract assets
 
During 2019
 
,
 
there have been no
 
material impairments recognised in relation to fees receivable and contract assets (2018:
 
nil). Fees in relation to
transactional business can be added to outstanding customer
 
balances. These amounts may be subsequently impaired as part of the overall
 
loans
and advances balance.
 
 
Remaining performance obligations
 
The Group
 
applies the practical
 
expedient of IFRS 15
 
and does not disclose information about
 
remaining performance
 
obligations that
 
have original
expected durations of one year or
 
less
 
or because the Group
 
has a right to
 
consideration that corresponds
 
directly with the value of
 
the service
provided
 
to the client
 
or customer.
 
 
Costs incurred in obtaining
 
or fulfilling a contract
 
The Group
 
expects that
 
incremental costs of obtaining
 
a contract such as success fee and commission fees paid are recoverable
 
and therefore
capitalised such contract costs in the amount of £159
 
m
 
at 31 December 2019
 
(2018: £125m).
 
 
Capitalised contract costs are amortised based on the transfer of
 
services to which the asset relates which typically ranges over
 
the expected life of
the relationship. In 2019,
 
the amount of amortisation was £30m
 
(2018:
 
£30m)
 
and there was no impairment loss
 
recognised in connection
 
with
the capitalised contract costs (2018:
 
nil).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Performance/return
 
 
 
224
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
5 Net trading income
Accounting for net trading income
In accordance
 
with IFRS 9,
 
trading positions are held at fair value, and the resulting gains and losses
 
are included in the income statement, together
with interest and dividends arising from
 
long and short positions and funding costs relating to trading activities.
 
Income arises from both the sale and purchase
 
of trading positions, margins which are achieved through
 
market making and customer business
and from changes
 
in fair value caused by movements in interest and exchange
 
rates, equity prices
 
and other market variables.
 
Gains or losses on non
 
-trading financial instruments designated or mandatorily at fair value with changes in fair value recognised in the income
statement are included in net trading income
 
where the business model is to manage assets and liabilities on a fair value basis which includes use
of derivatives or where
 
an instrument is
 
designated at fair value to eliminate an accounting
 
mismatch and the related instrument's gain and losses
are reported
 
in trading income.
 
2019
2018
2017
£m
£m
£m
Net gains from financial instruments held for trading
2,941
3,292
2,388
Net gains from financial instruments designated at fair value
256
267
1,112
Net gains from financial instruments mandatorily at fair value
1,038
1,007
-
Net trading income
4,235
4,566
3,500
 
6 Net investment income
Accounting for net investment income
 
Dividends are recognised
 
when the right to receive the dividend has been established. Other accounting policies relating to net investment income
are set out in Note 13 and
 
Note 15.
 
2019
2018
2017
£m
£m
£m
Net gains from financial instruments mandatorily at fair value
510
226
-
Net gains from disposal of debt instruments at fair value through
 
other comprehensive income
502
158
-
Net gains from disposal of financial assets and liabilities measured at amortised cost
a
257
38
147
Dividend income
76
91
48
Net (losses)/gains on other investments
(214)
72
30
Net gains from financial instruments designated at fair value
b
-
-
338
Net gains from disposal of available for
 
sale investments
c
-
-
298
Net investment income
1,131
585
861
 
Notes
 
a
 
Included
 
within
 
the 2019 balance of £257m are gains
 
of £170m relating
 
to the sale of
 
debt securities
 
as part of the Group’s
 
Treasury
 
operations.
 
b
 
Following the
 
adoption of IFRS 9 in 2018,
 
gains or losses
 
on financial
 
assets
 
designated at fair value to eliminate
 
or reduce an accounting mismatch are
 
recognised within
 
net
trading
 
income lines.
 
c
 
Following the
 
adoption of IFRS 9 in 2018,
 
available for sale classification
 
is no longer applicable.
 
 
 
 
Notes
 
to the financial
 
statements
Performance/return
 
 
 
225
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
7 Credit impairment charges
Accounting for the impairment of financial assets under IFRS 9 effective
 
from 1 January 2018
 
Impairment
 
The Group
 
is required to recognise expected
 
credit losses
 
(ECLs) based on unbiased forward
 
-looking information for all financial assets
 
at
amortised cost, lease receivables, debt financial assets at fair
 
value through
 
other comprehensive income,
 
loan commitments and financial
guarantee contracts.
 
 
At the reporting
 
date, an allowance (or provision for
 
loan commitments and financial guarantees) is required for the 12
 
month (Stage 1) ECLs.
 
If the
credit risk has significantly increased since initial recognition
 
(Stage 2), or if the financial instrument is credit impaired (Stage 3), an allowance (or
provision)
 
should be recognised
 
for the lifetime
 
ECLs.
 
 
The measurement of ECL is calculated using three main components:
 
(i) probability of default (PD) (ii) loss given default (LGD) and (iii) the
exposure at default (EAD).
 
 
The 12 month
 
and lifetime ECLs are calculated by multiplying the respective PD, LGD and
 
the EAD. The 12
 
month and lifetime PDs represent the PD
occurring
 
over the next 12 months and
 
the remaining maturity of the instrument respectively. The EAD represents the expected balance at default,
taking into account the repayment
 
of principal and interest from the balance sheet date to the default event together with any expected
drawdowns
 
of committed facilities. The LGD represents expected losses on the EAD given the event of default, taking into account, among
 
other
attributes, the mitigating effect
 
of collateral value at the time it is expected to be realised and the time value of money.
 
 
Determining a significant increase in credit risk since initial recognition:
 
The Group
 
assesses
 
when a significant increase in credit
 
risk has occurred
 
based on quantitative and qualitative assessments. The credit risk of an
exposure is considered to have significantly increased when:
 
i)
 
Quantitative test
The annualised lifetime PD has increa
 
sed by more than an agreed
 
threshold relative to the equivalent at origination.
 
PD deterioration thresholds are
 
defined as percentage increases, and are set at an origination
 
score band and
 
segment level to ensure the test
appropriately
 
captures significant increases in credit risk at all risk levels. Generally, thresholds
 
are inversely correlated to the origination PD,
 
i.e. as
the origination PD increases, the threshold value reduces.
 
The assessment of the point at which a PD increase is deemed ‘significant’,
 
is based upon analysis of the portfolios’ risk profile
 
against a common
set of principles and performance
 
metrics (consistent
 
across both retail and wholesale businesses), incorporating
 
expert credit judgement where
appropriate. Application
 
of quantitative PD floors does not represent the use of
 
the low credit risk exemption
 
as exposures can separately move
into Stage 2 via the qualitative route
 
described below.
 
 
Wholesale assets apply a 100%
 
increase in PD and 0.2% PD floor to determine a significant increase in credit risk.
 
Retail assets apply bespoke
 
relative increase and absolute PD thresholds based on product
 
type and origination PD. Thresholds
 
are subject to
maximums defined by Group
 
policy and typically apply minimum relative thresholds of 50-100%
 
and a maximum relative threshold of 400%.
 
For existing/historical exposures where
 
origination point scores or data are no longer
 
available or do not represent a comparable estimate of
lifetime PD, a proxy
 
origination score is defined, based upon:
 
 
back-population
 
of the approve
 
d
 
lifetime
 
PD score either to origination date or, where
 
this is
 
not feasible, as far back as possible, (subject
 
to a
data start point no later than 1 January 2015);
 
or
 
use of available historical account
 
performance
 
data and other customer information, to derive a comparable ‘proxy’ estimation of origination PD.
 
ii)
 
Qualitative test
This is relevant for accounts that meet the portfolio’s
 
‘high risk’ criteria and are subject to closer credit monitoring.
 
High risk customers may not be in arrears but either through
 
an event or an observed behaviour
 
exhibit credit distress.
 
The definition and
assessment of high risk includes as wide a range
 
of information as reasonably available, such as industry and Group
 
-wide customer level data,
including but not limited to bureau
 
scores and high consumer
 
indebtedness index, wherever possible or relevant.
 
Whilst the high risk populations applied for
 
IFRS 9 impairment purposes are aligned with risk management processes, they are also regularly
reviewed and validated to ensure that they capture
 
any incremental segments where
 
there is evidence of credit deterioration.
 
iii)
 
Backstop criteria
This is relevant for accounts that are more
 
than 30 calendar days past due. The 30 days past due criteria is a backstop
 
rather than a primary driver
of moving exposures
 
into Stage 2.
 
The criteria for determining a significant increase in credit risk
 
for assets with bullet repayments
 
follows the same principle as all other assets, i.e.
quantitative, qualitative and backstop
 
tests are all applied.
 
Exposures will move back
 
to Stage 1 once they no longer
 
meet the criteria
 
for a significant increase in credit risk.
 
This means that, at a minimum all
payments must be up
 
-to-date, the PD deterioration test is no longer met, the account is no longer classified as high risk, and the customer has
evidenced an ability to maintain future payments.
 
 
 
 
 
Notes
 
to the financial
 
statements
Performance/return
 
 
 
226
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Exposures are only removed
 
from Stage 3 and re-assigned to Stage 2 once the original default trigger event no longer applies. Exposures being
removed
 
from Stage 3 must no longer qualify as credit impaired, and:
a) the obligor
 
will also have demonstrated consistently good payment behaviour
 
over a 12
 
-month period, by making all consecutive contractual
payments due and, for forborne
 
exposures, the relevant EBA defined probationary
 
period has also
 
been successfully completed or;
b) (for non
 
-forborne
 
exposures) the performance conditions are defined and approved within an appropriately sanctioned restructure
 
plan,
including 12
 
months’ payment history have been met.
 
Management overlays
 
and other exceptio
 
ns to model outputs are applied only if consistent
 
with the objective of identifying significant increases in
credit risk.
 
Forward
 
-looking information
The measurement of ECL involves complexity and judgement, including
 
estimation of PD, LGD, a range
 
of unbiased future economic
 
scenarios,
estimation of expected lives (where
 
contractual life is not appropriate), and estimation of EAD and assessing significant increases in credit risk.
 
Credit losses are the expected cash shortfalls from
 
what is contractually due over the expected life of the financial instrument, discounted
 
at the
original effective interest rate (EIR). ECLs
 
are the unbiased probability
 
-weighted credit losses determined by evaluating a range of possible
outcomes and considering
 
future economi
 
c
 
conditions.
 
The Group
 
uses a
 
five-scenario model to calculate ECL. An external consensus forecast is
 
assembled from key sources, including HM Treasury
(short and medium term forecasts), Bloomberg
 
(based on median of economic forecasts) and the Urban
 
Land
 
Institute (for US House Prices),
which forms the baseline scenario. In addition, two adverse scenarios
 
(Downside 1 and Downside
 
2) and two favourable
 
scenarios (Upside 1 and
Upside 2) are derived, with associated probability
 
weightings. The adverse scenarios are calibrated to a similar severity to internal stress
 
tests,
whilst also considering IFRS 9 specific sensitivities and non
 
-linearity. Downside 2 is benchmarked
 
to the Bank of England’s annual cyclical
 
scenarios
and to the most severe scenario from Moody’s inventory,
 
but is not designed to be the same. The favourable scenarios are calibrated to be
symmetric to the adverse scenarios, subject to a ceiling calibrated to relevant
 
recent favourable
 
benchmark
 
scenarios. The scenarios include eight
economic variables, (GDP,
 
unemployment,
 
House Price Index (HPI)
 
and base rates
 
in both the UK and US markets), and expanded variables using
statistical models based on historical correlations. The upside and downside
 
shocks are designed to evolve over a five-year stress
 
horizon, with all
five scenarios converging
 
to a steady
 
state after approximately eight years.
 
The methodology
 
for estimating probability weights for each of the scenarios involves a comparison
 
of the distribution of key historical UK and US
macroeconomic
 
variables against the
 
forecast paths of the five scenarios. The methodology
 
works such that the baseline
 
(reflecting current
consensus outlook) has the highest weight and the weights of adverse and favourable
 
scenarios depend on the deviation from
 
the baseline;
 
the
further from
 
the baseline,
 
the smaller the weight. A single set of five
 
scenarios is used across all portfolios and all five weights are normalised to
equate to 100%.
 
The same scenarios and weights that are used in the estimation of expected credit losses are also used for
 
the Barclays Group
internal planning purposes. The impacts across the portfolios are different
 
because of the sensitivities of each of the portfolios to specific
macroeconomic
 
variables, for example, mortgages are highly sensitive to
 
house prices and base rates, credit cards
 
and unsecured
 
consumer loans
are highly sensitive to unemployment.
 
 
Definition of default, credit impaired
 
assets,
 
write-offs, and interest income
 
recognition
The definition of default for the purpose
 
of determining ECLs, and for internal credit risk management purposes, has been aligned to the Regulatory
Capital CRR Article 178 definition of default, to
 
maintain a consistent approach
 
with IFRS 9 and associated
 
regulatory
 
guidance. The
 
Regulatory
Capital CRR Article 178 definition of default considers indicators that the debtor
 
is unlikely to pay, includes exposures
 
in forbearance
 
and is no later
than when the exposure is more
 
than 90 days past due or 180
 
days past due in the case of UK
 
mortgages. When exposures are identified as credit
impaired or
 
purchased
 
or originated as such interest income is
 
calculated on the carrying
 
value net of the impairment allowance.
 
An asset is considered
 
credit impaired when
 
one or more events occur that have a detrimental impact on the estimated future cash flows of the
financial asset. This comprises assets defined as defaulted and other individually assessed exposures
 
where imminent default or actual loss is
identified.
 
Uncollectable loans are written off against the
 
related allowance for loan impairment
 
on completion of the Group’s
 
internal processes and when all
reasonably expected recoverable
 
amounts have been collected. Subsequent recoveries of amounts previously written
 
off are credited to the income
statement. The timing and extent of write-offs may
 
involve some element of subjective judgement. Nevertheless, a
 
write-off will often be prompted
by a specific event, such as the inception
 
of insolvency proceedings
 
or other formal recovery action, which
 
makes it
 
possible to establish that some
or the entire advance is beyond
 
realistic
 
prospect of recovery.
 
Loan modifications and renegotiations that are
 
not credit-impaired
When modification of a loan agreement
 
occurs as a result of commercial restructuring
 
activity
 
rather than due to the credit risk of the borrower,
 
an
assessment must be performed
 
to determine whether the terms of the new agreement are substantially
 
differen
 
t
 
from the terms of the existing
agreement. This assessment considers both the change in cash flows arising from
 
the modified terms as well as the change in overall instrument
risk profile.
 
 
Where terms are substantially different,
 
the existing loan will be derecognised
 
and a new loan will be recognised at fair value, with any difference in
valuation recognised immediately within the income statement, subject to observability
 
criteria.
 
Where terms are not substantially different,
 
the loan carrying value will be adjusted to reflect the present value of modified cash
 
flows discounted at
the original EIR, with any resulting gain or
 
loss recognised immediately within the income statement as a modification gain or loss.
 
 
Expected life
Lifetime ECLs must be measured over
 
the expected life. This is restricted to the maximum contractual life and takes into account expected
 
 
 
Notes
 
to the financial
 
statements
Performance/return
 
 
 
227
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
prepayment,
 
extension, call and similar options. The exceptions are certain revolver
 
financial instruments, such as credit cards and bank over
 
drafts,
that include both a drawn
 
and an undrawn
 
component where the entity’s
 
contractual ability to demand repayment
 
and cancel the undrawn
commitment does not limit the entity’s exposure
 
to credit losses to the contractual notice period. For revolving
 
facilities,
 
expected life is analytically
derived to reflect behavioural
 
life of the asset, i.e. the full period over
 
which the business expects
 
to be exposed to credit risk. Behavioural
 
life is
typically based upon historical analysis of the average time
 
to default, closure or withdrawal
 
of facility. Where data is insufficient
 
or analysis
inconclusive, an additional ‘maturity factor’ may be incorporated
 
to reflect the full estimated
 
life of the exposures, based upon
 
experienced
judgement and/or
 
peer analysis.
 
Potential future
 
modifications of contracts are not taken into account when determining
 
the expected life or EAD
until they occur.
 
Discounting
ECLs are discounted at the EIR at initial recognition
 
or an approxi
 
mation thereof and consistent
 
with income recognition. For
 
loan commitments the
EIR is the rate that is expected to apply when
 
the loan is drawn down
 
and a financial asset
 
is recognised. Issued financial guarantee
 
contracts are
discounted at the risk free rate. Lease receivables are
 
discounted at the rate implicit in the lease. For variable/floating
 
rate financial assets, the spot
rate at the reporting
 
date is
 
used and projections of changes in the variable rate over
 
the expected life are not made to estimate future interest cash
flows or for
 
discounting.
 
Modelling techniques
ECLs are calculated by multiplying three main components, being
 
the PD, LGD and the EAD, discounted at the original EIR. The regulatory
 
Basel
Committee of Banking Supervisors
 
(BCBS) ECL
 
calculations are leveraged
 
for IFRS 9 modelling but adjusted for key differences which
 
include:
 
 
BCBS requires 12 month
 
through
 
the economic cycle losses
 
whereas IFRS 9 requires 12
 
months or lifetime point in time losses based on
conditions at the report
 
ing date and multiple forecasts of the future economic conditions over
 
the expected lives;
 
IFRS 9 models do not include certain conservative
 
BCBS model floors and downturn
 
assessments
 
and require
 
discounting to the reporting
 
date at
the original EIR rather than using the cost of capital to the date of default;
 
Management adjustments are made to modelled output to account
 
for situations where known
 
or expected risk factors and information have not
been considered
 
in the modelling process, for example forecast
 
economic scenarios for uncertain
 
political events; and
 
ECL is measured at the individual financial instrument level, however
 
a collective approach
 
where financial instruments with similar risk
characteristics are grouped
 
together, with apportionment to individual financial instruments, is used where effects can only be seen at a collective
level, for example for forward
 
-looking information.
 
For the IFRS 9 impairment
 
assessment, the Group’s risk models are used to determine the PD,
 
LGD and EAD. For Stage
 
2 and 3, the Group applies
lifetime PDs but uses 12 month
 
PDs for Stage 1. The ECL drivers of PD, EAD and LGD are modelled
 
at an account level which considers vintage,
among other
 
credit factors. Also, the assessment of significant increase in credit risk is based on the initial lifetime PD curve,
 
which accounts for the
different credit risk underwritten
 
over time.
 
Forbearance
A financial asset is subject to forbearance
 
when it is
 
modified due to the credit distress of
 
the borrower.
 
A modification made to the terms of
 
an
asset due to forbearance
 
will typically be assessed
 
as a non
 
-substantial
 
modification that does not result in derecognition
 
of the original loan,
except in circumstances where
 
debt is exchanged for equity.
 
 
Both performing
 
and non
 
-performing forbearance assets
 
are classified as Stage 3 except where it is established that the concession granted
 
has
not resulted in diminished financial obligation and that no other regulatory
 
definition of default criteria
 
has been triggered,
 
in which case the
 
asset
is classified as Stage 2. The minimum probationary
 
period for non
 
-performing forbearance is 12 months and for performing forbearance,
 
24
months. Hence, a minimum of 36 months is required
 
for non
 
-performing forbearance to move out of a forborne state.
 
No financial instrument in forbearance
 
can transfer back to Stage 1 until all of the Stage 2 thresholds are no longer
 
met and can only move out of
Stage 3 when no longer
 
credit impaired.
 
Accounting for the impairment of financial assets under IAS 39 for 2017
 
Loans and other assets held at amortised
 
cost
 
In accordance
 
with IAS 39, the Group assesses at each balance sheet date whether there is objective evidence that loan assets will not be
recovered
 
in full
 
and, wherever
 
necessary, recognises an impairment loss in the income statement.
 
 
An impairment loss is recognised
 
if there is objective evidence of impairment as a result of events that have occurred
 
and these have adversely
impacted the estimated future cash flows from
 
the assets. These events include:
 
becoming
 
aware of significant financial difficulty of the issuer or obligor
 
a breach
 
of contract, such as a default or delinquency in interest or principal payments
 
the Group, for
 
economic or
 
legal reasons relating to the
 
borrower’s
 
financial difficulty, grants a concession that it would not otherwise consider
 
it becomes probable
 
that the
 
borrower
 
will enter bankruptcy or other financial reorganisation
 
the disappearance of an active market for that financial
 
asset because of
 
financial difficulties
 
observable data at a portfolio level indicating that there
 
is a measurable decrease in the estimated future cash flows, although
 
the decrease
cannot yet be ascribed to individual financial assets in the portfolio
 
– such as adverse changes in the payment status of borrowers
 
in the portfolio
or national or local economic conditions that correlate with defaults on the assets in the portfolio.
 
Impairment assessments are conducted
 
individually for significant assets,
 
which comprise all wholesale customer loans and larger retail business
loans, and collectively for
 
smaller loans and for portfolio
 
level risks, such as country or sectoral risks. For the purposes of the assessment, loans with
similar credit risk characteristics are grouped
 
together – generally on the basis of their product type, industry, geographical
 
location, collateral type,
past due status and other factors relevant
 
to the evaluation of expected future cash flows.
 
 
 
 
Notes
 
to the financial
 
statements
Performance/return
 
 
 
228
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
The impairment assessment includes estimating the expected
 
future cash flows from the asset or the group
 
of assets, which are then discounted
using the original effective interest
 
rate calculated for the asset. If this is lower than the carrying
 
value of the asset
 
or the portfolio, an impairment
allowance is raised.
 
If, in a subsequent period, the amount of the impairment loss decreases, and the decrease can be related
 
objectively to an event occurring
 
after the
impairment was recognised,
 
the previously recognised
 
impairment loss is
 
reversed by
 
adjusting the allowance account. The amount of the reversal
is recognised in the income statement.
 
Following impairment, interest
 
income continu
 
es to be
 
recognised at the original effective interest rate
 
on the restated carrying amount,
representing
 
the unwind of the discount of the expected cash flows, including the principal due on non
 
-accrual loans.
 
Uncollectable loans are written off against the
 
related allowance for loan impairment
 
on completion of the Group’s
 
internal processes when all
reasonably expected recoverable
 
amounts have been collected. Subsequent recoveries of amounts previously written
 
off are credited to the income
statement.
 
Available for
 
sale financial
 
assets
Impairment of
 
available
 
for sale debt instruments
Debt instruments are assessed for impairment
 
in the same way as loans. If impairment is deemed to have occurred,
 
the cumulative decline in the
fair value of the instrument that has previously been
 
recognised in the available for sale reserve is removed
 
from
 
reserves and recognised
 
in the
income statement. This may be reversed
 
if there is evidence that the circumstances of the issuer have improved.
 
Impairment of
 
available
 
for sale equity instruments
Where there has been a prolonged
 
or significant decline in the
 
fair value of an equity instrument below its acquisition cost, it is deemed to be
impaired. The cumulative net loss that has been previously
 
recognised directly in the available for
 
sale reserve is removed
 
from reserves and
recognised in the income statement.
 
Increases in the fair value of equity instruments after impairment are recognised
 
directly in other comprehensive
 
income. Further declines in the fair
value of equity instruments after impairment are recognised
 
in the income statement.
 
Critical accounting estimates and judgements
 
IFRS 9 impairment involves
 
several important areas of judgement, including
 
estimating forward looking modelled
 
parameters (PD, LGD and
 
EAD),
developing
 
a range of unbiased future economic
 
scenarios, estimating
 
expected lives and assessing significant increases in credit risk, based on the
Group’s
 
experience of managing
 
credit risk. The determination of expected life
 
is most material for Barclays
 
credit card portfolios which
 
is obtained
via behavioural
 
life analysis to materially capture the risk of these facilities. The behavioural
 
life analysis for US Cards has been updated during
 
the
year to include more recent
 
portfolio data, as a consequence the expected life of the US credit card
 
portfolio has fallen from 10 years to 7 years. For
UK Cards,
 
the expected life has similarly fallen from
 
10 years to 8 years. These reductions led to management adjustment releases against
impairment of £28m for
 
US Cards and £9m for UK Cards.
 
Within the retail and small businesses portfolios,
 
which comprise large numbers
 
of small
 
homogenous
 
assets
 
with similar risk characteristics where
credit scoring techniques are generally
 
used, the impairment allowance is calculated using forward
 
looking modelled parameters
 
which are
typically run at account level. There are
 
many models in use, each tailored to a product,
 
line of business or customer category.
 
Judgement and
knowledge
 
is needed in selecting the statistical methods to use when the models are developed or
 
revised. The impairment allowance reflected in
the financial statements for these portfolios is therefore
 
considered to be reasonable
 
and supportable. The impairment charge
 
reflected in the
income statement for retail portfolios is £1
 
,696m
 
(201
 
8:
 
£1,598
 
m;
 
201
 
7:
 
£2,095
 
m) of the
 
total impairment
 
charge on
 
loans and advances.
 
For individually significant assets in Stage 3, impairment
 
allowances are calculated on an individual basis and all relevant considerations that have
 
a
bearing on the expected future
 
cash flows across a range of economic scenarios are taken into account. These considerations can be subjective
and can include the business prospects for the customer,
 
the realisable value of collateral, the Group’s
 
position relative to other claimants, the
reliability of customer information
 
and the likely cost and duration of the work-out process. The level of the impairment allowance is the difference
between the value of the discounted expected future
 
cash flows (discounted at the loan’s original effective interest rate), and its
 
carrying amount.
Furthermore,
 
judgements change with time as
 
new information becomes
 
available or as work-out strategies evolve, resulting in frequent
 
revisions
to the impairment allowance as individual decisions
 
are taken. Changes in these estimates would result in a change
 
in the allowances and have a
direct impact on the impairment charge.
 
The impairment charge
 
reflected in the financial
 
statements in relation to wholesale portfolios is a charge
of £208
 
m
 
(201
 
8:
 
release £133
 
m; 2017:
 
release £238m) of the total
 
impairment charge
 
on loans and advances. Further information
 
on impairment
allowances, impairment charges
 
and related credit information is set out within the Risk review on page
 
112.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Performance/return
 
 
 
229
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
2019
2018
2017
a
Impairment
charges
Recoveries
b
Total
Impairment
charges
Recoveries
b
Total
Impairment
charges
Recoveries
b
Total
£m
£m
£m
£m
£m
£m
£m
£m
£m
Loans and advances
1,957
(124)
1,833
1,785
(195)
1,590
2,654
(334)
2,320
Provision for
 
undrawn
 
contractually
committed facilities and guarantees
provided
71
-
71
(125)
-
(125)
13
-
13
Loans impairment
2,028
(124)
1,904
1,660
(195)
1,465
2,667
(334)
2,333
Cash collateral and settlement balances
1
-
1
(1)
-
(1)
-
-
-
Financial investments
-
-
-
-
-
-
3
-
3
Financial assets at fair value through
 
other
comprehensive
 
income
1
-
1
4
-
4
-
-
-
Other financial assets measured at cost
6
-
6
-
-
-
-
-
-
Credit impairment charges
2,036
(124)
1,912
1,663
(195)
1,468
2,670
(334)
2,336
 
Notes
a
 
The comparatives
 
for 2017 are presented
 
on an IAS 39 basis.
b
 
Cash recoveries
 
of previously
 
written
 
off amounts.
 
Write-offs subject to enforcement activity
The contractual amount outstanding
 
on financial assets that were written off during
 
the year and that are still subject to enforcement activity is
£1,660m
 
(2018:
 
£1,445
 
m).
 
This is
 
lower than the write-offs presented
 
in the movement in gross exposures and impairment
 
allowance table due to
post write-off recoveries.
 
Modification of financial assets
Financial assets with a loss allowance measured at an amount
 
equal to lifetime ECL of £1,383m
 
(2018:
 
£851m)
 
were subject to non-substantial
modification during
 
the year, with a resulting loss of £22m (2018:
 
£26m). The gross carrying
 
amount of financial
 
assets for which the loss
allowance has changed
 
to a 12 month ECL during the year amounts to £401
 
m
 
(2018:
 
£114m)
 
.
 
8 Operating expenses
 
2019
2018
2017
£m
£m
£m
Infrastructure costs
Property
 
and equipment
1,409
1,360
1,366
Depreciation and amortisation
a
1,487
1,252
1,161
Lease payments
a
41
329
342
Impairment of property,
 
equipment and intangible assets
33
9
80
Total infrastructure costs
2,970
2,950
2,949
Administration
 
and general costs
Consultancy, legal and professional fees
590
729
1,064
Marketing and advertising
425
495
433
UK bank levy
226
269
365
Other administration and general
 
expenses
1,059
964
878
Total administration and general costs
2,300
2,457
2,740
Staff costs
8,315
8,629
8,560
Provisions
 
for litigation and conduct
1,849
2,207
1,207
Operating expenses
15,434
16,243
15,456
 
Note
a
 
Following the
 
adoption of IFRS 16
 
from 1 January 2019,
 
the depreciation
 
charge associated
 
with right of use
 
assets is reported within the depreciation
 
and amortisation charge
 
for
2019.
 
For further
 
details
 
on staff costs including
 
accounting policies, refer to Note 31.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Performance/return
 
 
 
230
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
9 Tax
Accounting for income taxes
The Group
 
applies IAS 12
Income Taxes
in accounting for taxes on income. Income
 
tax payable on taxable profits (current tax) is recognised as an
expense in the periods in which the profits arise. Withholding taxes are
 
also treated as income taxes. Income
 
tax recoverable
 
on tax allowable losses
is recognised as a current
 
tax asset
 
only to the extent that it is regarded
 
as recoverable by
 
offsetting against taxable profits arising
 
in the current
 
or
prior periods. Current
 
tax is
 
measured using tax rates and tax laws that have
 
been enacted or substantively enacted at the balance sheet date.
 
 
Deferred tax assets are recognised
 
to the extent that it is probable that taxable profit will be available against which the deductible
 
temporar
 
y
differences, and the carry
 
forward
 
of unused tax credits and unused tax losses
 
can be utilised, except in certain circumstances where
 
the deferred
tax asset relating to the deductible temporary
 
difference arises from the initial recognition of an asset or
 
liability in a transaction that is not a
business combination and, at the time of the transaction, affects neither the
 
accounting profit nor
 
taxable profit or loss.
 
Deferred tax is determined
using tax rates and legislation enacted or substantively enacted by
 
the balance sheet date which are expected to apply when
 
the deferred tax asset
is realised or the deferred
 
tax liability
 
is settled. Deferred
 
tax assets and liabilities are only offset when there is both a legal right to set-off and
 
an
intention to settle on a net basis.
 
 
The Group
 
considers an uncertain tax position to exist
 
when it considers that ultimately,
 
in the future, the amount of profit subject to tax may be
greater than the amount initially reflected in the Group’s
 
tax returns. The Group accounts for
 
provisions in respect of uncertain tax positions in two
different ways.
 
 
A current tax provision
 
is recognised when it is considered probable
 
that the
 
outcome of a review by a tax authority of an uncertain tax
 
position will
alter the amount of cash tax due to, or from,
 
a tax
 
authority in the future. From
 
recognition, the current
 
tax provision is then measured at the
amount the Group
 
ultimately
 
expects to pay the tax authority to resolve
 
the position. Effective from
 
1 January 2019,
 
the Group changed its
accounting policy on
 
the accrual of interest
 
and penalty amounts in respect of uncertain income
 
tax positions and now recognises such amounts
as an expense within profit before
 
tax and will continue to do so in future periods. The prior periods’ tax charges have not been
 
restated because
the accrual for interest and penalties in those periods in respect of uncertain tax positions
 
was not material.
 
 
Deferred tax provisions are
 
adjustments made to the carrying
 
value of deferred tax assets in respect of uncertain tax positions. A deferred tax
provision is recognised when
 
it is
 
considered probable
 
that the
 
outcome of a review by a tax authority of an uncertain tax position will result in a
reduction in the carrying
 
value of the deferred tax asset. From recognition
 
of a provision, measurement of the underlying
 
deferred tax asset
 
is
adjusted to take into account the expected impact of resolving
 
the uncertain tax position on the loss or temporary
 
difference giving
 
rise to
 
the
deferred
 
tax asset.
 
 
The approach
 
taken to measurement takes account of whether the uncertain tax position is a discrete position that will be reviewed by the tax
authority in isolation from any other position, or one
 
of a number of issues which are expected to be reviewed together
 
concurrently and resolved
simultaneously with a tax authority. The Group’
 
s
 
measurement of provisions is based upon its best estimate of the additional profit that will
become subject to tax. For a discrete position, consideration
 
is given only to the merits of that position. Where a number
 
of issues
 
are expected to
be reviewed and resolved
 
together, the Group
 
will take
 
into account not only the merits of its position in respect of each particular issue but also
the overall level of
 
provision relative to the aggregate
 
of the uncertain tax positions across all the issues that are expected to be resolved at the
same time. In addition, in assessing provision levels, it is assumed that tax
 
authorities will review uncertain tax positions and that all facts will be
fully and transparently disclosed.
 
 
Critical accounting estimates and judgements
There are two key areas
 
of judgement that impact the reported
 
tax position.
 
Firstly,
 
the level of provisioning
 
for uncertain tax positions; and
secondly, the
 
recognition
 
and measurement of deferred
 
tax assets.
 
 
The Group
 
does not consider there to
 
be a significant
 
risk of a material adjustment to the carrying
 
amount of current
 
and deferred tax balances,
including provisions
 
for uncertain tax positions in the next financial year.
 
The provisions for uncertain
 
tax positions
 
cover a diverse range
 
of issues
and reflect advice from
 
external counsel where relevant.
 
It should be noted that only a proportion
 
of the total
 
uncertain tax positions will be under
audit at any point in time, and could therefore
 
be subject to challenge by a tax authority over the next year.
 
 
Deferred tax assets have been recognised
 
based on business profit forecasts. Details on the recog
 
nition of deferred tax assets are provided in this
note.
 
2019
2018
2017
£m
£m
£m
Current tax charge/(credit)
Current year
a
1,037
 
689
 
594
 
Adjustments in respect of prior
 
years
(45)
(214)
55
 
992
 
475
 
649
 
Deferred tax charge/(credit)
Current year
86
 
442
 
1,507
 
Adjustments in respect of prior
 
years
(75)
(6)
(90)
11
 
436
 
1,417
 
Tax charge
1,003
 
911
 
2,066
 
 
Note
a
 
From 2019,
 
due to an
 
IAS 12 update,
 
the tax relief
 
on payments
 
in relation to AT1 instruments
 
has been recognised in
 
the tax charge of the
 
income statement, whereas
 
it was
previously
 
recorded
 
in retained
 
earnings. Comparatives have
 
been restated, reducing the
 
tax charge for 2018 by £211m
 
and 2017
 
by £174m.
 
Further
 
detail can
 
be found in
 
Note 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Performance/return
 
 
 
231
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
 
The table below shows the reconciliation between the actual tax charge
 
and the tax charge that would result from applying the standard UK
corporation
 
tax rate to
 
the Barclays Group’s
 
profit before
 
tax.
 
2019
2019
2018
2018
2017
2017
£m
%
£m
%
£m
%
Profit before tax
4,357
3,494
3,541
Tax charge
 
based on the standard UK corporation
 
tax rate of 19% (2018:
19%; 2017:
 
19.25%)
 
828
19.0%
 
664
19.0%
 
682
19.3%
 
Impact of profits/losses earned
 
in territories with
 
different statutory rates
to the UK (weighted average
 
tax rate is 24.2% (2018:
 
21.9%; 2017:
29.4%))
227
5.2%
 
100
2.9%
 
356
10.1%
 
Recurring
 
items:
 
Non-creditable taxes including withholding
 
taxes
150
3.4%
 
156
4.5%
 
191
5.4%
 
Non-deductible
 
expenses
45
1.0%
 
81
2.3%
 
90
2.5%
 
Impact of UK bank levy being non
 
-deductible
43
1.0%
 
51
1.5%
 
70
2.0%
 
Banking surcharge
 
and other items
a
57
1.3%
 
104
2.9%
 
77
2.2%
 
Impact of Barclays Bank PLC's
 
overseas branches being
 
taxed both locally
and in the UK
15
0.3%
 
16
0.5%
 
(61)
(1.7%)
Tax adjustments in respect of share
 
-based payments
(6)
(0.1%)
17
0.5%
 
5
0.1%
 
Changes in recognition of deferred
 
tax and effect of
 
unrecognised
 
tax
losses
(82)
(1.9%)
(104)
(3.0%)
(71)
(2.0%)
Adjustments in respect of prior
 
years
(120)
(2.7%)
(220)
(6.3%)
(35)
(1.0%)
AT1 tax credit
a
(157)
(3.6%)
(148)
(4.3%)
(123)
(3.5%)
Non-taxable gains and income
(260)
(6.0%)
(245)
(7.0%)
(178)
(5.0%)
Non-recurring
 
items:
Remeasurement of US deferred
 
tax assets due to US tax
 
rate reduction
-
-
 
-
-
 
1,177
33.2%
 
Impact of the UK branch
 
exemption election on US branch
 
deferred tax
assets
 
-
-
 
-
-
 
(276)
(7.8%)
Non-deductible
 
provisions for UK
 
customer redress
263
6.1%
 
93
2.7%
 
129
3.6%
 
Non-deductible
 
provisions for investigations and litigation
 
-
-
 
346
9.9%
 
72
2.0%
 
Non-taxable gains and income on divestments
-
-
 
-
-
 
(39)
(1.1%)
Total tax charge
1,003
23.0%
911
26.1%
2,066
58.3%
 
Note
a
 
From 2019,
 
due to an
 
IAS 12 update,
 
the tax relief
 
on payments
 
in relation to AT1 instruments
 
has been recognised in
 
the tax charge of the
 
income statement, whereas
 
it was
previously
 
recorded
 
in retained
 
earnings. The tax charge for
 
the current period
 
has been reduced by £222m (relief at
 
the standard
 
UK corporation tax rate
 
is £157m and the
 
relief
at the banking
 
surcharge
 
rate is £65m).
 
Comparatives
 
have been restated,
 
reducing the tax charge for
 
2018 by £211m and 2017
 
by £174m
 
(relief
 
at the standard
 
UK corporation
tax rate is
 
£148m
 
(2018)
 
and £123m (2017)
 
and the
 
relief at
 
the banking surcharge
 
rate is £
 
63m
 
(2018) and £51m (2017)).
 
Further
 
detail can
 
be found in
 
Note 1.
 
 
Factors driving the effective tax rate
The effective tax rate of 23.0
 
%
 
is higher than the UK corporation
 
tax rate of 19% primarily due to prov
 
isions for UK customer redress being non-
deductible, profits earned outside the UK being
 
taxed at local statutory tax rates that are higher than the UK tax rate, non-creditable
 
taxes and non-
deductible expenses including UK bank levy.
 
In addition, the UK profits of banking
 
companies are subject to a surcharg
 
e. These factors,
 
which have
each increased the effective
 
tax rate, are partially offset by the
 
impact of non-taxable gains and income in the period
 
and tax relief on payments
made under
 
AT1 instruments, as well as adjustments in respect of prior periods.
 
Effective from
 
1 January 2019,
 
a change in accounting standards requires the tax consequences of all payments on financial instruments that are
classified as equity for accounting
 
purposes, where those payments are
 
considered to be a distribution of profit, to be included in the income
statement tax charge. Excluding
 
this accounting change which resulted in tax relief on payments in relation to AT1
 
instruments of £222m (2018:
£211
 
m)
 
being included in the income statement tax
 
charge, the Barclays Group’s
 
effective tax rate would
 
have been 28.1
 
%
 
(2018:
 
32.1%)
 
.
 
The Barclays Group’s
 
future tax charge will be sensitive to the geographic
 
mix of profits earned and the tax rates in force in the jurisdictions that the
Barclays Group
 
operates in. In the UK, legislation to reduce the corporation
 
tax rate to
 
17%
 
from 1 April 2020
 
has been enacted. However,
 
the UK
Government
 
has announced its intention to introduce legislation to reverse the planned rate reduction
 
and to maintain the current rate of 19%.
 
 
Tax in the consolidated
 
statement
 
of comprehensive income
 
The tax relating to each component
 
of other comprehensive
 
income can be found on page 206
 
in the consolidated statement
 
of comprehensive
income which includes within Other a tax credit of £16m
 
(2018:
 
£30m credit)
 
on other items including share based payments.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Performance/return
 
 
 
232
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Current tax assets and liabilities
 
Movements on current
 
tax assets
 
and liabilities were as follows:
 
2019
2018
£m
£m
Assets
798
 
482
 
Liabilities
(628)
(586)
As at 1 January
170
 
(104)
Income statement
a
(992)
(475)
Other comprehensive
 
income and reserves
a
423
 
110
 
Corporate
 
income tax paid
228
 
548
 
Other movements
270
 
91
 
99
 
170
 
Assets
412
 
798
 
Liabilities
(313)
(628)
As at 31 December
99
 
170
 
 
Note
a
 
Due to the
 
IAS 12 update
 
impacting
 
AT1 tax credits,
 
the 2018 comparative has been restated
 
to reflect
 
the £211m tax credit
 
in the income statement,
 
whereas it was previously
recorded
 
in retained
 
earnings.
 
Further detail can
 
be found in Note 1.
 
Deferred tax assets and liabilities
The deferred
 
tax amounts on the balance sheet were as follows:
 
2019
2018
£m
£m
Intermediate Holding Company
 
('IHC Tax Group')
1,037
 
1,454
 
US Branch Tax
 
Group
1,015
 
1,087
 
UK Tax Group
818
 
861
 
Other
420
 
426
 
Deferred tax asset
 
3,290
 
3,828
 
Deferred tax liability
 
(23)
(51)
Net deferred tax
 
3,267
 
3,777
 
 
US deferred tax assets in the IHC and US Branch Tax Groups
 
The deferred
 
tax asset
 
in the IHC Tax
 
Group
 
of £1,037m
 
(2018: £1,454m)
 
includes £54m
 
(2018:
 
£220m) relating to tax
 
losses and the deferred tax
asset in Barclays Bank PLC’s US Branch
 
Tax Group
 
of £1,015m
 
(2018:
 
£1,087m) includes £84
 
m
 
(2018: £167m)
 
relating to tax losses.
 
Under US tax
rules, losses occurring
 
prior to 1 January 2018
 
can be carried forward and offset against profits for a period of 20 years. The losses first arose in
2011
 
in the IHC Tax Group and 2008
 
in the US Branch Tax Group and therefore,
 
any unused amounts may begin to expire in 2031
 
and 2028
respectively.
 
The deferred
 
tax assets for the IHC and the
 
US Branch
 
Tax Groups’ tax losses are currently projec
 
ted to be fully
 
utilised by 2020
 
.
 
UK Tax Group deferred tax asset
The deferred
 
tax asset
 
in the UK Tax Group
 
of £818m
 
(2018:
 
£861m)
 
includes
 
£268m
 
(2018: £nil) relating to tax losses.
 
There is no time limit on
utilisation of UK tax losses and business profit forecasts indicate
 
that these will be fully recovered.
 
Other deferred tax assets
The deferred
 
tax asset
 
of £420m
 
(2018:
 
£426m)
 
in other entities
 
within the Group includes £117
 
m
 
(2018:
 
£142m)
 
relating to tax losses.
 
These
deferred
 
tax assets relate to a
 
number
 
of different territories and their recognition
 
is based on profit forecasts or local country law which indicate
that it is probable
 
that the
 
losses and temporary
 
differences will be utilised.
 
Of the deferred tax asset of £420m
 
(2018:
 
£426m),
 
an amount of £150
 
m
 
(2018:
 
£247m) relates to entities
 
which have suffered
 
a loss in either the
current or
 
prior year.
 
This has
 
been taken into account in reaching the above
 
conclusion that these deferred tax assets will be fully recovered
 
in the
future.
 
 
The table below shows movements
 
on deferred
 
tax assets
 
and liabilities during
 
the year. The amounts are different from
 
those disclosed on the
balance sheet and in the preceding
 
table as
 
they are presented before
 
offsetting asset and liability balances where there
 
is a legal right to set-off
and an intention to settle on
 
a net basis.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Performance/return
 
 
 
233
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Fixed asset
timing
differences
Fair value
through
 
other
comprehensive
income
Cash
flow
hedges
Retirement
benefit
obligations
Loan
impairment
allowance
Other
provisions
Tax losses
carried
forward
Share-based
payments and
deferred
compensation
Other
Total
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
Assets
1,292
180
39
46
601
112
529
359
1,377
4,535
Liabilities
(16)
(35)
(10)
(435)
-
-
-
-
(262)
(758)
At 1 January 2019
1,276
145
29
(389)
601
112
529
359
1,115
3,777
Income statement
51
-
-
(4)
(49)
23
18
(19)
(31)
(11)
Other comprehensive
income and reserves
-
(42)
(210)
(205)
(40)
2
-
9
72
(414)
Other movements
(20)
(2)
-
(4)
(11)
(9)
(24)
(5)
(10)
(85)
1,307
101
(181)
(602)
501
128
523
344
1,146
3,267
Assets
1,338
119
-
38
501
128
523
344
1,458
4,449
Liabilities
(31)
(18)
(181)
(640)
-
-
-
-
(312)
(1,182)
At 31 December 2019
1,307
101
(181)
(602)
501
128
523
344
1,146
3,267
Assets
a
1,266
200
1
52
735
157
596
384
1,362
4,753
Liabilities
(28)
(161)
(76)
(218)
-
-
-
-
(230)
(713)
At 1 January 2018
a
1,238
39
(75)
(166)
735
157
596
384
1,132
4,040
Income statement
(14)
(8)
7
(120)
(84)
(62)
(103)
(26)
(26)
(436)
Other comprehensive
income and reserves
-
108
96
(98)
(48)
8
1
(13)
(7)
47
Other movements
52
6
1
(5)
(2)
9
35
14
16
126
1,276
145
29
(389)
601
112
529
359
1,115
3,777
Assets
1,292
180
39
46
601
112
529
359
1,377
4,535
Liabilities
(16)
(35)
(10)
(435)
-
-
-
-
(262)
(758)
At 31 December 2018
1,276
145
29
(389)
601
112
529
359
1,115
3,777
 
Note
a
 
Following the
 
adoption of IFRS 9 and
 
IFRS 15 on 1 January
 
2018, additional
 
deferred
 
tax assets of £627m were recognised.
 
Other movements include the impact of changes in foreign
 
exchange rates as well as deferred
 
tax amounts relating to acquisitions and disposals.
 
 
The amount of deferred
 
tax liability
 
expected to be settled after
 
more than 12
 
months is £1,199m
 
(2018:
 
£635
 
m). The amount of deferred tax
assets expected to be recovered
 
after more than 12 months is £3,945m
 
(2018:
 
£3,703m). These amounts are before
 
offsetting asset
 
and liability
balances where there is a legal right to
 
set-off and an intention to settle on a net basis.
 
 
Unrecognised
 
deferred tax
Tax
 
losses and temporary
 
differences
Deferred tax assets have not been recognised
 
in respect of gross deductible temporary
 
differences of £213
 
m
 
(2018: £17
 
5m), unused tax credits
 
of
£247m
 
(2018:
 
£198
 
m), and gross tax
 
losses
 
of £19,582m
 
(2018:
 
£16,313
 
m).
 
The tax losses
 
include capital losses of £3,980m (20
 
18: £3,225
 
m). Of
these tax losses, £41
 
m
 
(2018:
 
£240m)
 
expire within five years, £239m
 
(2018:
 
£259m) exp
 
ire
 
within six
 
to 10 years, £5,178m
 
(2018:
 
£948m) expire
within 11
 
to 20 years and £14,124m
 
(2018: £14,866
 
m) can be carried forward indefinitely. Deferre
 
d
 
tax assets
 
have not been recognised
 
in respect
of these items because it is not probable
 
that future taxable profits
 
and gains will be available against which
 
they can be utilised
.
 
 
Group investments in subsidiaries,
 
branches and associates
 
Deferred tax is not recognised
 
in respect of the value of the Barclays Group's
 
investments in subsidiaries, branches and associates where the
Barclays Group
 
is able to control the timing of the reversal of the temporary
 
differences and it is probable
 
that such differences will not reverse in
the foreseeable future. The aggregate
 
amount of these temporary differences
 
for which deferred
 
tax liabilities
 
have not been recognised
 
was
£0.7bn
 
(2018:
 
£0.6bn).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Performance/return
 
 
 
234
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
10 Earnings
 
per share
 
2019
2018
a
2017
a
£m
£m
£m
Profit attributable to ordinary
 
equity holders of the parent in respect of continuing operations
2,461
1,597
587
Loss attributable to ordinary
 
equity holders of the parent in respect of discontinued operations
-
-
(2,335)
Profit/(loss)
 
attributable to ordinary equity holders of the parent
 
in respect of continuing
 
and
discontinued
 
operations
2,461
1,597
(1,748)
 
Note
a
 
From 2019,
 
due to an
 
IAS 12 update,
 
the tax relief
 
on payments
 
in relation to AT1 instruments
 
has been recognised in
 
the tax charge of the income statement,
 
whereas it was
previously
 
recorded
 
in retained
 
earnings. Comparatives have
 
been restated, increasing the
 
profit attributable
 
to ordinary equity
 
holders for 2018 by £211m and
 
2017 by £174m.
Further
 
detail can
 
be found in
 
Note 1.
 
2019
2018
2017
million
million
million
Basic weighted average number of shares in issue
17,200
17,075
16,996
Number of potential ordinary
 
shares
282
308
288
Diluted weighted average number of shares
17,482
17,383
17,284
 
Basic earnings
 
per share
Diluted earnings
 
per share
2019
2018
2017
2019
2018
2017
p
p
p
p
p
p
Earnings/(loss) per ordinary
 
share
14.3
9.4
(10.3)
14.1
9.2
(10.1)
Earnings per ordinary
 
share in respect of continuing operations
14.3
9.4
3.5
14.1
9.2
3.4
Loss per ordinary
 
share in respect of discontinued operation
-
-
(13.8)
-
-
(13.5)
 
The calculation of basic earnings per share is based on the profit attributable
 
to equity holders of the parent and the basic
 
weighted average
number
 
of shares excluding treasury shares held in employee benefit trusts or held for trading.
 
When calculating the diluted earnings per share, the
weighted average
 
number
 
of shares in issue
 
is adjusted for the effects
 
of all expected dilutive potential ordinary
 
shares held in respect of Barclays
PLC, totalling 282m
 
(2018:
 
308m) shares. The total
 
number
 
of share options outstanding, under schemes considered
 
to be potentially dilutive,
 
was
533m
 
(2018:
 
544m). These options have strike prices ranging from
 
£1.19
 
to £2.27.
 
Of the total number of employee
 
share options and share awards at 31 December
 
2019
 
,
 
43m (2018:
 
43m) were anti-dilutive.
 
The 125m
 
(2018:
 
79m) increase in the basic
 
weighted average
 
number
 
of shares are primarily due to shares issued
 
under employee
 
share schemes
and the Scrip Dividend Programme.
 
11 Dividends
 
on ordinary shares
The Directors have approved
 
a total
 
dividend in respect of 2019
 
of 9.0p
 
per ordinary
 
share of 25p each. The remaining full year dividend for 201
 
9
 
of
6.0p
 
per ordinary
 
share will be paid on 3 April 2020
 
to shareholders on the Share Register on 28 February
 
2020 following the 3.0p
 
half year
dividend paid on 23
 
September 2019
 
.
 
On 31 December 201
 
9,
 
there were 17,322m
 
ordinary shares in issue.
 
The financial statements for the year
ended 31
 
December 201
 
9
 
do not reflect this
 
dividend, which will be accounted for in shareholders’ equity as an appropriation
 
of retained profits in
the year ending 31
 
December 20
 
20.
 
The 2019
 
financial statements
 
include the 201
 
9
 
half year dividend of £517
 
m
 
(201
 
8:
 
£427m)
 
and a
 
full year
dividend declared
 
in relation to 2018
 
of £684
 
m
 
(201
 
8:
 
£341m). Dividends are funded out of distributable reserves.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
 
Assets
 
and liabilities held
 
at
 
fair value
 
 
235
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
The notes included in this section focus on assets and liabilities the Group
 
holds and recognises at fair value. Fair value refers to the
 
price that
would be received
 
to sell an asset or the price that would be paid to transfer a liability in an arm’s-length transaction with a willing counterparty,
which may be an observable
 
market
 
price or, where
 
there is no quoted price for the instrument, may be an estimate based on available market
data. Detail regarding
 
the Group
 
’s approach to managing market risk can be found on pages 103
 
to 104.
 
 
12 Trading portfolio
Accounting for trading portfolio
 
assets and liabilities
In accordance
 
with IFRS 9,
 
all assets and liabilities held for trading
 
purposes are held at fair value with gains and losses in the changes in fair value
taken to the income statement in net trading income (Note
 
5).
 
 
Trading portfolio
 
assets
Trading portfolio
 
liabilities
2019
2018
2019
2018
£m
£m
£m
£m
Debt securities and other eligible bills
52,739
57,283
(23,741)
(25,394)
Equity securities
56,000
39,565
(13,175)
(12,488)
Traded
 
loans
5,378
7,234
-
-
Commodities
78
105
-
-
Trading portfolio
 
assets/(liabilities)
114,195
104,187
(36,916)
(37,882)
 
13 Financial assets at fair value through the income statement
Accounting for financial assets mandatorily
 
at fair value
Financial assets that are held for trading
 
are recognised
 
at fair
 
value through
 
profit or loss. In addition, financial assets are held at fair value through
profit or loss if they do not contain contractual terms that give rise on
 
specified dates to cash flows that are SPPI, or if the financial asset is
 
not held
in a business model that is either (i) a business model to collect the contractual cash flows or
 
(ii) a business model that is achieved by both
collecting contractual cash flows and selling.
 
 
Accounting for financial assets designated at fair value
Financial assets, other than those held for trading,
 
are classified in this category if they are so irrevocably
 
designated at inception and the use of the
designation removes or
 
significantly reduces an accounting mismatch.
 
Subsequent changes in fair value for
 
these instruments are recognised in the income statement in net investment income, except if
 
reporting
 
it in
trading income reduces
 
an accounting mismatch.
 
 
The details on how
 
the fair value amounts are derived for financial assets at fair value are described in Note 17.
 
Designated
 
at fair value
Mandatorily at fair value
Total
2019
2018
2019
2018
2019
2018
£m
£m
£m
£m
£m
£m
Loans and advances
4,900
5,267
17,792
14,257
22,692
19,524
Debt securities
3,995
3,855
1,254
667
5,249
4,522
Equity securities
-
-
7,495
6,019
7,495
6,019
Reverse repurchase
 
agreements and other
 
similar secured lending
40
106
96,847
118,935
96,887
119,041
Other financial assets
-
-
763
542
763
542
Financial assets at fair value through the
 
income statement
8,935
9,228
124,151
140,420
133,086
149,648
 
Credit risk of financial assets designated at fair value and related credit derivatives
The following table shows the maximum exposure
 
to credit risk, the changes in fair value attributable to changes in credit risk, and
 
the cumulative
changes in fair value since initial recognition
 
for loans and advances. The table does not include debt securities and reverse repurchase
 
agreements
and other similar secured lending
 
designated at FV as
 
they have minimal exposure
 
to credit risk. Reverse repurchase
 
agreements are collateralised
and debt securities are primarily relating to high
 
quality sovereigns.
 
Maximum exposure
 
as at 31
December
Changes in
 
fair value during the
year ended
Cumulative changes
 
in fair value
from inception
2019
2018
2019
2018
2019
2018
£m
£m
£m
£m
£m
£m
Loans and advances designated at fair value,
attributable to credit risk
a
4,900
5,267
4
4
(26)
(35)
 
Note
a
 
The value
 
mitigated by related
 
credit
 
derivatives
 
was £nil (2018: £nil).
 
 
 
 
 
Notes
 
to the financial
 
statements
 
Assets
 
and liabilities held
 
at
 
fair value
 
 
236
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
14 Derivative financial instruments
 
Accounting for derivatives
Derivative instruments are contracts whose value
 
is derived from
 
one or more
 
underlying financial
 
instruments or indices defined in the
 
contract.
They include swaps, forward
 
-rate agreements, futures, options and combinations of these instruments and primarily affect the Group’s net interest
income, net trading income and derivative assets and liabilities. Notional amounts of the
 
contracts are not recorded
 
on the balance sheet.
Derivatives are used to hedge
 
interest rate, credit risk, inflation risk, exchange rate, commodity,
 
and equity exposures and exposures
 
to certain
indices such as house price indices and retail price indices related to non
 
-trading positions.
 
 
All derivative instruments are held at fair value through
 
profit or loss, except for derivatives that are in a designated cash flow or net investment
hedge accounting
 
relationship. Derivatives are classified as assets when their fair value is positive or as liabilities when their fair value is negative.
This includes terms included in a contract or financial liability (the host), which, had it been
 
a standalone contract, would have met the definition of
a derivative. If these are separated from
 
the host, i.e. when the economic
 
characteristics of the
 
embedded
 
derivative are not closely related with
those of the host contract and the combined
 
instrument is
 
not measured at fair value through
 
profit or loss, then they are accounted for in the
same way as derivatives. For
 
financial assets,
 
the requirements are whether
 
the financial
 
asset contain contractual terms
 
that give rise on specified
dates to cash flows that are SPPI, and
 
consequently the requirements
 
for accounting
 
for embedded derivatives are not applicable to financial
assets.
 
 
Hedge accounting
The Group
 
applies the requirements of IAS 39
Financial Instruments: Recognition and Measurement
 
for hedge accounting
 
purposes. The Group
applies hedge accounting
 
to represent the economic effects of its interest rate, currency
 
and contractually linked inflation risk management
strategies. Where derivatives are held for risk
 
management purposes, and
 
when transactions meet the required criteria for documentation
 
and
hedge effectiveness, the Group
 
applies fair value
 
hedge accounting,
 
cash flow hedge accounting, or
 
hedging of a net investment
 
in a foreign
operation, as appropriate
 
to the risks being hedged.
 
 
The Group
 
has elected to
 
early adopt the ‘Amendments
 
to IAS 39 and IFRS 7 Interest Rate Benchmark
 
Reform’ issued in September 2019.
 
In
accordance
 
with the transition
 
provisions, the amendments have
 
been adopted retrospectively
 
to hedging relationships that existed at
 
the start of
the reporting period
 
or were designated thereafter,
 
and to the amount accumulated in the cash flow hedge reserve at that
 
date.
 
The amendments provide
 
temporary
 
relief from applying specific hedge accounting requirements to hedging relationships directly affected by IBOR
(‘Interbank
 
Offered Rates’) reform. The reliefs have the effect that IBOR
 
reform
 
should not generally cause hedge accounting
 
to terminate.
However,
 
any hedge ineffectiveness continues to be recorded
 
in the income statement.
 
Furthermore,
 
the amendments set
 
out triggers for when
 
the
reliefs will end, which include the uncertainty arising from
 
interest rate benchmark reform
 
no longer being present.
 
In summary,
 
the reliefs provided
 
by the amendments that apply to the Group
 
are:
 
When considering the ‘highly probable’
 
requirement,
 
the Group has assumed that
 
the IBOR interest rates upon which
 
our hedged
 
items are based
do not change as a result of IBOR Reform.
 
In assessing whether the hedge
 
is expected to
 
be highly effective on a forward
 
-looking basis the Group has assumed that the IBOR interest rates
upon which
 
the cash flows
 
of the hedged
 
items and the interest rate swaps that hedge them are based are not altered by
 
IBOR reform.
 
The Group
 
will not discontinue hedge accounting durin
 
g
 
the period of IBOR-related uncertainty solely
 
because the retrospective effectiveness
falls outside the required
 
80–125%
 
range.
 
The Group
 
has not recycled the cash flow hedge reserve relating to the period after the reforms are expected to take effect.
 
The Group
 
has assessed
 
whether the hedged
 
IBOR risk component is a separately identifiable risk only when it first designates a hedged item in a
fair value hedge
 
and not on an ongoing
 
basis.
 
Further amendments are
 
expected for future accounting
 
periods following completion of the second part of the IASB’s two-phased project which
focuses on the impacts of IBOR reform
 
on financial reporting.
 
Fair value hedge accounting
 
Changes in fair value of derivatives that qualify
 
and are designated as fair value hedges are recorded
 
in the income statement, together with
changes in the fair value of the hedged
 
asset or liability that are attributable to the hedged
 
risk. The fair
 
value changes adjust the carrying
 
value of
the hedged asset or liability held at amortised cost.
 
If hedge relationships no longer
 
meet the criteria
 
for hedge accounting,
 
hedge accounting
 
is discontinued. For fair value hedges of interest
 
rate risk,
the fair value adjustment to the hedged
 
item is amortised to
 
the income statement over
 
the period to maturity of the previously designated hedge
relationship using the effective interest
 
method. If the hedged item is sold or repaid,
 
the unamortised fair value adjustment is recognised
immediately in the income statement. For items classified as fair value
 
through
 
other comprehensive income, the hedge accounting
 
adjustment is
included in other comprehensive
 
income.
 
 
Cash flow hedge accounting
For qualifying cash flow hedges, the fair value
 
gain or loss associated with the effective portion
 
of the cash flow hedge is recognised initially in other
comprehensive
 
income, and then recycled to the income statement in the periods when the hedged item will affect profit or loss. Any ineffective
portion of the gain or loss on the hedging
 
instrument is recognised in the income statement immediately.
 
When a hedging
 
instrument expires or is sold,
 
or when a hedge no
 
longer meets the criteria for hedge accounting, any
 
cumulative gain or loss
existing in equity at that time remains in equity and is recognised
 
when the hedged item is ultimately recognised in the income statement. When a
forecast transaction is no longer
 
expected to occur,
 
the cumulative gain or loss
 
that was recognised
 
in equity is
 
immediately transferred
 
to the
income statement.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
 
Assets
 
and liabilities held
 
at
 
fair value
 
 
237
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Hedges of net investments
 
The Group’s
 
net investments in foreign
 
operations, including monetary
 
items accounted for as part of the
 
net investment, are hedged for
 
foreign
currency
 
risks using both derivatives and foreign currency
 
borrowings. Hedges of net investments are accounted for similarly to
 
cash flow hedges;
the effective
 
portion of the gain or loss on the hedging instrument is being recognised
 
directly in other comprehensive income and
 
the ineffective
portion being
 
recognised immediately in the income statement. The cumulative gain or loss recognised in other comprehensive
 
income is
recognised in the income statement on the disposal or partial disposal of the foreign
 
operation, or other
 
reductions in the Group’s investment in the
operation.
 
 
Total derivatives
2019
2018
Notional
contract
amount
Fair value
Notional
 
contract
 
amount
Fair value
Assets
Liabilities
Assets
Liabilities
£m
£m
£m
£m
£m
£m
Total derivative assets/(liabilities)
 
held for trading
42,111,110
229,063
(228,617)
44,193,753
222,384
(219,578)
Total derivative assets/(liabilities)
 
held for risk management
181,375
173
(587)
180,202
154
(65)
Derivative assets/(liabilities)
42,292,485
229,236
(229,204)
44,373,955
222,538
(219,643)
 
Further information
 
on netting arrangements
 
of derivative financial instruments
 
can be found within Note 18.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
 
Assets
 
and liabilities held
 
at
 
fair value
 
 
238
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
The fair values and notional amounts of derivative
 
instruments held for trading and held for
 
risk management are set out in the following table:
 
Derivatives held for trading and held for risk management
2019
2018
Notional
 
contract
 
amount
Fair value
Notional
 
contract
 
amount
Fair value
Assets
Liabilities
Assets
Liabilities
£m
£m
£m
£m
£m
£m
Derivatives held for trading
Foreign exchange derivatives
OTC derivatives
4,906,647
56,480
(56,845)
5,193,761
64,018
(63,887)
Derivatives cleared by central counterparty
74,698
84
(145)
72,526
163
(233)
Exchange traded
 
derivatives
18,520
12
(31)
23,585
7
(7)
Foreign exchange derivatives
4,999,865
56,576
(57,021)
5,289,872
64,188
(64,127)
Interest rate derivatives
OTC derivatives
12,627,808
140,207
(133,401)
9,969,325
123,706
(119,289)
Derivatives cleared by central counterparty
17,428,460
867
(1,093)
16,083,853
1,056
(1,016)
Exchange traded
 
derivatives
5,041,948
1,251
(1,265)
11,087,714
356
(323)
Interest rate derivatives
35,098,216
142,325
(135,759)
37,140,892
125,118
(120,628)
Credit derivatives
OTC derivatives
399,386
5,253
(5,399)
386,508
6,575
(5,239)
Derivatives cleared by central counterparty
426,130
2,962
(2,687)
372,567
4,180
(4,280)
Credit derivatives
825,516
8,215
(8,086)
759,075
10,755
(9,519)
Equity and stock index derivatives
OTC derivatives
232,050
10,628
(15,785)
190,496
9,711
(11,830)
Exchange traded
 
derivatives
841,994
10,178
(10,849)
692,435
11,171
(12,066)
Equity and stock index derivatives
1,074,044
20,806
(26,634)
882,931
20,882
(23,896)
Commodity derivatives
OTC derivatives
7,327
303
(256)
9,756
521
(408)
Exchange traded
 
derivatives
106,142
838
(861)
111,227
920
(1,000)
Commodity derivatives
113,469
1,141
(1,117)
120,983
1,441
(1,408)
Derivative assets/(liabilities)
 
held for trading
42,111,110
229,063
(228,617)
44,193,753
222,384
(219,578)
Total OTC derivatives
 
held for trading
18,173,218
212,871
(211,686)
15,749,846
204,531
(200,653)
Total derivatives cleared by
 
central counterparty
 
held for
trading
17,929,288
3,913
(3,925)
16,528,946
5,399
(5,529)
Total exchange
 
traded derivatives held for trading
6,008,604
12,279
(13,006)
11,914,961
12,454
(13,396)
Derivative assets/(liabilities)
 
held for trading
42,111,110
229,063
(228,617)
44,193,753
222,384
(219,578)
Derivatives held for risk management
Derivatives designated as cash flow hedges
OTC interest rate derivatives
1,195
7
(1)
2,075
11
(6)
Interest rate derivatives cleared by central counterparty
66,578
-
 
-
 
73,314
-
 
-
 
Derivatives designated as cash flow hedges
67,773
7
(1)
75,389
11
(6)
Derivatives designated as fair value hedges
OTC interest rate derivatives
8,379
136
(586)
2,065
143
(49)
Interest rate derivatives cleared by central counterparty
104,078
-
 
-
 
99,780
-
 
-
 
Derivatives designated as fair value hedges
112,457
136
(586)
101,845
143
(49)
Derivatives designated as hedges of net investments
OTC foreign
 
exchange derivatives
1,145
30
-
 
2,968
-
 
(10)
Derivatives designated as hedges of net investments
1,145
30
-
 
2,968
-
 
(10)
Derivative assets/(liabilities)
 
held for risk management
181,375
173
(587)
180,202
154
(65)
Total OTC derivatives
 
held for risk management
10,719
173
(587)
7,108
154
(65)
Total derivatives cleared by
 
central counterparty
 
held for risk
management
170,656
-
 
-
 
173,094
-
 
-
 
Derivative assets/(liabilities)
 
held for risk management
181,375
173
(587)
180,202
154
(65)
 
 
Notes
 
to the financial
 
statements
 
Assets
 
and liabilities held
 
at
 
fair value
 
 
239
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Hedge accounting
Hedge accounting
 
is applied predominantly for the following risks:
 
Interest rate risk – arises due to a mismatch between
 
fixed interest rates and floating interest rates. Interest
 
rate risk also includes exposure to
inflation risk for
 
certain types of investments.
 
Currency
 
risk – arises
 
due to assets or liabilities being denominated
 
in different currencies than the functional currency
 
of the relevant entity. At a
consolidated level,
 
currency
 
risk also
 
arises when the functional currency
 
of subsidiaries are different from the parent
 
.
 
Contractually linked inflation risk – arises from
 
financial instruments within contractually specified inflation risk. The Group
 
does not hedge
inflation risk that arises from other
 
activities.
 
In order
 
to hedge these risks,
 
the Group
 
uses the
 
following hedging
 
instruments:
 
Interest rate derivatives to swap interest rate
 
exposures into either fixed or variable rates.
 
Currency
 
derivatives to swap foreign currency
 
net investment exposure to local currency
 
.
 
Inflation derivatives to swap inflation exposure
 
into either fixed or variable interest rates.
 
In some cases, certain items which are economically hedged
 
may be ineligible hedged items for the purposes of IAS 39, such as core deposits and
equity.
 
In these instances, a proxy hedging
 
solution can be utilised
 
whereby
 
portfolios of floating rate assets are designated as eligible hedged items
in cash flow hedges.
 
In some hedging
 
relationships, the Group designates risk components of hedged
 
items
 
as follows:
 
Benchmark
 
interest rate risk as a component of interest rate risk, such as the LIBOR or Risk Free Rate (RFR) component
 
.
 
Inflation risk as a contractually specified component
 
of a debt instrument.
 
Spot exchange rate risk for
 
foreign currency
 
financial assets
 
or financial liabilities.
 
Components of cash flows of hedge
 
d
 
items,
 
for example certain interest
 
payments for part of the life of an instrument
 
.
 
Using the benchmark interest rate risk results in other
 
risks,
 
such as credit risk and liquidity risk,
 
being excluded
 
from the hedge accounting
relationship. LIBOR is considered
 
the predominant interest rate risk and therefore the hedged
 
items
 
change in fair value on a fully proportionate
basis with reference
 
to this risk.
 
In respect of many of the Group
 
’s hedge accounting relationships, the hedged item and hedging instrument change frequently due to the dynamic
nature of the risk management and hedge
 
accounting strategy. The Group
 
applies hedge accounting to dynamic scenarios, predominantly in
relation to interest rate risk, with a combination
 
of hedged items in order for
 
its
 
financial statements to reflect as closely as possible the economic
risk management undertaken.
 
In some cases,
 
if the hedge accounting
 
objective changes, the relevant hedge accounting
 
relationship is de-
designated and is replaced with a differen
 
t
 
hedge accounting
 
relationship.
 
Changes in the GBP value of net investments due
 
to foreign currency
 
movements are captured in the currency translation reserve, resulting in a
movement in CET1 capital. The Group
 
mitigates this by matching the CET1 capital movements to the revaluation of the foreign
 
currency
 
RWA
exposures. Net investment hedges are designated where
 
necessary to reduce the exposure to movement
 
in a particular exchange rate to within
limits mandated by Risk. As far as possible, existing external currency
 
liabilities
 
are designated as the hedging
 
instruments.
 
The hedging
 
instruments share the same risk exposures as the hedged items. Hedge effectiveness is determined with reference
 
to quantitative
tests, predominant
 
ly regression testing,
 
but to the extent hedging
 
instruments are exposed to different risks than the hedged items, this could
result in hedge ineffectiveness or
 
hedge accounting
 
failures.
 
Sources of ineffectiveness
 
include the following:
 
Mismatches between the contractual terms of the hedged
 
item and hedging instrument, including basis differences.
 
Changes in credit risk of the hedging
 
instruments.
 
If a hedging
 
relationship becomes over
 
-hedged, for example in hedges of net investments if
 
the net asset
 
value designated at the start of the
period falls below the amount of the hedging
 
instrument.
 
Cash flow hedge
 
s
 
using external swaps with non
 
-zero fair values.
 
The effects of the forthcoming
 
reforms to IBOR because these might take effect at a different time and
 
have a different impact on
 
hedged items
and hedging
 
instruments.
 
Across all benchmarks which
 
Barclays is materially exposed to, there is still uncertainty regarding
 
the precise timing and effects
 
of IBOR reform.
There is yet to be full consensus regarding
 
methodologies for converging
 
existing IBORs
 
to their final
 
benchmark
 
rates. As such, Barclays has not
incorporated
 
any change in assumptions for affected benchmarks
 
into its
 
expectations or calculations. Barclays does, however,
 
assume sufficient
liquidity in IBOR linked benchmarks to provide
 
reliable valuation calculations of both hedged items and hedging instruments (notwithstanding
reliefs already applied within the financial reporting).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
 
Assets
 
and liabilities held
 
at
 
fair value
 
 
240
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Interest Rate Benchmark Reform
Following the financial crisis, the reform
 
and replacement of benchmark
 
interest rates
 
such as IBOR has become a priority for global regulators.
Since the changes are market driven, there
 
is currently some uncertainty around
 
the timing and precise nature of
 
these changes.
 
 
The Group
 
’s risk
 
exposure is directly affected
 
by interest rate benchmark
 
reform, across both
 
its
 
cash flow hedge accounting activities; where IBOR-
linked derivatives are designated as a
 
cash flow hedge of IBOR
 
-linked cash flows,
 
and its
 
fair value hedge
 
accounting activities; where IBOR-linked
derivatives are designated as a fair value hedge
 
of fixed interest rate assets and liabilities.
 
The Group
 
’s risk
 
exposure is predominately
 
to GBP, USD, EUR, JPY
 
and AUD LIBOR with the vast majority concentrated in derivatives
 
within the
Corporate
 
and Investment Bank. Some additional exposure resides on floating rate loans and
 
advances and debt securities held and issued within
the Corporate and Investment
 
Bank. Retail lending and mortgage
 
exposure in Barclays UK
 
is minimal.
 
Approaches
 
to transition will vary product by
product, and
 
counterparty
 
by counterparty. Barclays expected
 
derivative contracts facing central clearing counterparties
 
to follow a market-wide,
standardised approach
 
to reform. Whereas bilateral derivative agreements, loan agreements and other
 
cash securities to largely be negotiated
bilaterally with the counterparty.
 
There are key differences
 
between IBORs and RFRs. IBORs are ‘term rates’,
 
which means that they are published for a borrowing
 
period (for
example three months), and they are ‘forward
 
-looking’, because they are published at the beginning of a borrowing
 
period, based upon an
estimated inter-bank borrowing
 
cost for the period. RFRs are typically
 
‘backward
 
-looking’ rates, as
 
they are based upon
 
overnight
 
rates from actual
transactions, and are therefore
 
published at the end of the overnight
 
borrowing
 
period. Furthermore, IBORs include a credit spread over the RFR.
Therefore,
 
to transition existing contracts and agreements to RFR, adjustments for term and credit differe
 
nces may need to be applied to RFR-
linked rates to enable the two benchmarks
 
to be economically equivalent upon transition. The methodologies
 
for determining
 
these adjustments
are undergoing
 
in-depth consultations by industry working groups, on behalf of the respective global regulators
 
and related market participants.
 
Barclays has established a Group
 
-wide LIBOR Transition Pro
 
gramme, with oversight from the Group Finance
 
Director and with cross-business line
and functions-support
 
governance. The Transition
 
Programme
 
follows a risk
 
management approach,
 
based upon recognised ‘change
 
delivery’
control standards, to drive strategic execution, and
 
identify, manage
 
and resolve key risks and issues as they arise. Accountable
 
Executives are in
place within key working
 
groups, with overall Board
 
oversight delegated to the Board
 
Risk Committee
 
and the Group
 
Finance Director.
 
Barclays
performs a prominent
 
stewardship role to drive orderly
 
transition via our representation on official sector and industry working
 
groups across all
major jurisdictions and product
 
classes.
 
The Group
 
is actively engaging with the counterparties to include appropriate
 
fallback provisions in its
floating rate assets and liabilities with maturities after 2021,
 
when most IBORs are expected to cease to exist. We expect that the hedging
instruments will be modified by the amendments to the 2006
 
ISDA definitions that will include fallback provisions for
 
when the existing IBORs are
permanently discontinued. Additionally,
 
the Group Finance Director
 
is Chair
 
of the UK’s ‘Working Group
 
on Sterling Risk-Free Reference Rates’,
whose mandate is to catalyse a broad
 
-based transition to using SONIA (‘Sterling Overnight Inde
 
x
 
Average’)
 
as the
 
primary sterling interest rate
benchmark
 
in bond, loan and derivatives markets. Further, hedge
 
accounting specific impacts of IBOR reform are expected as transition progresses,
with impact on financial reporting
 
becoming clearer followin
 
g
 
anticipated completion of Phase 2 of the IASB’s IBOR Reform project.
 
Amount, timing and uncertainty of future cash flows
The following table shows the hedging
 
instruments which are carried on the Group’s
 
balance sheet:
 
 
Carrying value
Nominal amount
Change in fair
value used as a
basis to
determine
ineffectiveness
Nominal amount
directly impacted
by IBOR reform
Derivative assets
 
Derivative
liabilities
Loan liabilities
Hedge type
Risk category
£m
£m
£m
£m
£m
£m
As at 31 December 2019
Fair value
 
Interest rate risk
110
(44)
-
104,568
(1,571)
55,552
Inflation risk
26
(542)
-
7,889
(82)
6,101
Cash flow
Interest rate risk
3
(1)
-
66,515
739
15,223
Inflation risk
4
-
-
1,258
31
-
Net investment
Foreign
 
exchange risk
30
-
(10,051)
11,196
288
-
As at 31 December 2018
Fair value
 
Interest rate risk
106
(41)
-
98,320
135
n/a
Inflation risk
37
(8)
-
3,525
29
n/a
Cash flow
Interest rate risk
11
(6)
-
75,389
(380)
n/a
Net investment
Foreign
 
exchange risk
-
(10)
(12,325)
15,300
(745)
n/a
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
 
Assets
 
and liabilities held
 
at
 
fair value
 
 
241
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
The following table summarises the significant hedge
 
accounting exposures
 
impacted by the IBOR reform
 
as at
 
31 December
 
2019:
 
 
Nominal amount
of hedged
 
items
directly impacted
by IBOR reform
 
Nominal amount
of hedging
instruments
directly impacted
by IBOR reform
Current benchmark rate
Expected convergence to
 
RFR
£m
£m
GBP London
 
Interbank Offered
 
rate (LIBOR)
Reformed
 
Sterling Overnight Index Average
 
(SONIA)
14,733
12,269
USD LIBOR / Effective Federal Funds
 
Rate
(EFFR)
Secured Overnight
 
Financing Rate (SOFR)
57,941
57,967
Euro Overnight
 
Index Average
 
(EONIA)
Euro Short
 
-Term
 
Rate (€STR)
3,009
3,009
JPY LIBOR
Tokyo
 
Overnight Average
 
(TONA)
1,428
1,428
AUD LIBOR
Bank Bill Swap Rate (BBSW) / Overnight Cash Rate
(AONIA)
1,183
1,183
All Other IBORs
Various
 
Other RFRs
1,199
1,020
 
The Group
 
’s exposure risk management also includes
 
the use of the Euro
 
Interbank
 
Offered Rate (‘EURIBOR’). The calculation methodology of
EURIBOR changed
 
during 2019.
 
In July 2019, the Belgian Financial Services
 
and Markets Authority
 
granted authorisation with respect to EURIBOR
under the European
 
Union Benchmarks Regulation. This allows market participants to continue to use EURIBOR after 1 January 2020
 
for both
existing and new contrac
 
ts.
 
The Group
 
expects that
 
EURIBOR will continue to exist as a benchmark
 
rate for the foreseeable future. The Group
 
does
not anticipate changing
 
the hedged risk to a different benchmark. For
 
these reasons, the Group does not consider
 
its
 
fair value or cash flow hedges
of the EURIBOR benchmark
 
interest rate to
 
be directly affected by
 
interest rate benchmark
 
reform
 
at 31 December 2019.
 
 
The following table profiles the expected notional values of current
 
hedging instruments in future years:
 
 
2020
2021
2022
2023
2024
2025
 
and later
£m
£m
£m
£m
£m
£m
As at 31 December
Fair value hedges of interest rate risk
Notional amount
97,933
79,192
64,625
57,432
44,630
38,488
Fair value hedges of inflation risk
 
 
 
 
 
 
Notional amount
6,675
5,519
4,560
3,589
3,036
2,025
 
There are 2,308
 
(2018:
 
1,805) interest rate risk fair
 
value hedges with an average
 
fixed rate of 2.13% (2018:
 
2.79%) across the relationships and
117
 
(2018:
 
44) inflation risk fair value
 
hedges with an average rate of 0.7%
 
(2018:
 
1%) across the relationships.
 
 
The Group
 
has hedged the following forecast cash flows, which primarily vary with interest rates. These cash flows are expected
 
to impact the
income statement in the following periods, excluding
 
any hedge adjustments that may be applied:
 
Total
Up to
 
one year
One to
 
two years
Two to three
years
Three to four
years
Four to
 
five years
More than five
years
£m
£m
£m
£m
£m
£m
£m
2019
Forecast receivable cash flows
1,696
493
409
324
238
122
110
2018
Forecast receivable cash flows
2,599
685
717
536
346
200
115
 
The maximum length of time over
 
which the Group
 
hedges exposure to the variability in
 
future cash flows for forecast transactions,
 
excluding
those forecast transactions related to the payment
 
of variable interest on existing financial instruments is 10
 
years (2018:
 
10 years).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
 
Assets
 
and liabilities held
 
at
 
fair value
 
 
242
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Hedged items in fair value hedges
Accumulated fair
 
value adjustment
included in
 
carrying amount
Hedged item
 
statement of
 
financial position
 
classification and risk
category
Carrying amount
Total
Of which:
Accumulated fair
value adjustment
 
on
items no longer
 
in a
hedge relationship
Change in fair
value used as a
basis to
determine
ineffectiveness
Hedge
ineffectiveness
recognised
 
in the
income
statement
a
£m
£m
£m
£m
£m
2019
Assets
Loans and advances at amortised cost
- Interest rate risk
8,442
694
(643)
1,030
76
- Inflation risk
525
325
-
(2)
1
Financial assets at fair value through
 
other comprehensive
income
 
 
 
 
 
- Interest rate risk
32,169
922
494
2,046
(4)
- Inflation risk
7,811
87
-
111
(16)
Debt securities classified as amortised cost
 
 
 
 
 
- Interest rate risk
2,974
(1)
-
(1)
-
- Inflation risk
2,258
(41)
-
(41)
1
Liabilities
 
 
 
 
 
Debt securities in issue
 
 
 
 
 
- Interest rate risk
(55,589)
(1,574)
(75)
(1,445)
(13)
2018
Assets
Loans and advances at amortised cost
- Interest rate risk
7,106
(363)
(626)
(568)
37
- Inflation risk
512
312
-
2
(1)
Financial assets at fair value through
 
other comprehensive
income
- Interest rate risk
30,108
416
(21)
(96)
17
- Inflation risk
2,907
(20)
-
(50)
(18)
Liabilities
Debt securities in issue
- Interest rate risk
53,935
(289)
(256)
549
(34)
 
Note
a
 
Hedge ineffectiveness
 
is recognised in
 
net interest income.
 
For items classified as fair value through
 
other comprehensive income,
 
the hedge accounting
 
adjustment is
 
not included in the carrying amount,
but rather adjusts other comprehensive
 
income.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
 
Assets
 
and liabilities held
 
at
 
fair value
 
 
243
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Hedged items in cash flow hedges and hedges of net investments in foreign
 
operations
Description
 
of hedge
 
relationship
 
and hedged risk
Change in value
of hedged
 
item
used as the
basis for
recognising
ineffectiveness
Balance in
cash flow
hedging
reserve for
continuing
hedges
Balance in
currency
translation
reserve for
continuing
hedges
Balances
remaining in cash
flow hedging
reserve for
 
which
hedge accounting
is no longer
applied
Balances
remaining in
currency
translation
reserve for
 
which
hedge accounting
is no longer
applied
Hedging
 
gains
or losses
recognised
 
in
other
comprehensiv
e income
Hedge
ineffectivenes
s recognised
in the income
statement
a
£m
£m
£m
£m
£m
£m
£m
2019
Cash flow hedge of interest rate risk
Loans and advances at amortised cost
(696)
(223)
-
(1,072)
-
(706)
43
Debt securities classified as amortised cost
(29)
(26)
-
-
-
(25)
2
Hedge of net investment in foreign
operations
 
 
 
 
 
 
 
USD foreign operations
215
-
1,087
-
-
215
-
EUR foreign operations
70
-
(1)
-
16
70
-
Other foreign operations
3
-
1
-
240
3
-
Total foreign operations
288
-
1,087
-
256
288
-
2018
Cash flow hedge of interest rate risk
Loans and advances at amortised cost
375
(44)
-
(827)
-
334
(5)
Hedge of net investment in foreign
operations
USD foreign operations
719
-
1,648
-
-
719
-
EUR foreign operations
-
-
1
-
86
-
-
Other foreign operations
25
-
(3)
-
241
25
(1)
Total foreign operations
744
-
1,646
-
327
744
(1)
 
Note
a
 
Hedge ineffectiveness
 
is recognised in
 
net interest income.
 
The effect on the income statement and other comprehensive
 
income of recycling amounts in respect of cash flow hedges and net investment
hedges of foreign
 
operations is set out in the following table:
 
2019
2018
Amount recycled
from other
comprehensive
income due to
hedged item
affecting income
statement
Amount recycled
from other
comprehensive
income due to
 
sale
or disposal
 
of
investment
Amount recycled
from other
comprehensive
income due to
hedged item
affecting
 
income
statement
Amount recycled
from other
comprehensive
income due to sale
or disposal
 
of
investment
Description
 
of hedge
 
relationship
 
and hedged risk
£m
£m
£m
£m
Cash flow hedge of interest rate risk
Recycled to interest income
259
18
332
-
Hedge of net investment in foreign operations
 
 
Recycled to other income
-
15
-
(41)
 
A detailed reconcil
 
iation of the
 
movements of the cash flow
 
hedging reserve
 
and the currency translation reserve is as follows:
 
2019
2018
Cash flow hedging
reserve
Currency
translation
 
reserve
Cash flow hedging
reserve
Currency
translation
 
reserve
£m
£m
£m
£m
Balance on 1 January
660
3,888
1,161
3,054
Currency
 
translation movements
(7)
(816)
(10)
1,537
Hedging gains/(losses) for the year
731
287
(334)
(744)
Amounts reclassified in relation to cash flows affecting
 
profit or loss
(277)
(15)
(332)
41
Tax
(105)
-
175
-
Balance on 31 December
1,002
3,344
660
3,888
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
 
Assets
 
and liabilities held
 
at
 
fair value
 
 
244
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
15 Financial assets at fair value through other comprehensive
 
income
Accounting for financial assets at fair value through other comprehensive
 
income (‘FVOCI’) under IFRS 9 effective from
 
1 January 2018
Financial assets that are debt instruments held in a business model that is achieved by both
 
collecting contractual cash flows and selling and that
contain contractual terms that give rise on specified dates to cash flows that are SPPI
 
are measured at FVOCI. They are subsequently re-measured
at fair value and changes therein
 
(except for those relating to impairment, interest income and foreign
 
currency
 
exchange gains and losses)
 
are
recognised in other
 
comprehensive
 
income until the assets
 
are sold. Interest (calculated using the effective
 
interest method) is recognised in the
income statement in net interest income (Note 3). Upon
 
disposal, the
 
cumulative gain or loss recognised
 
in other comprehensive
 
income is
included in net investment income.
 
In determining whether
 
the business
 
model is achieved by both
 
collecting contractual cash flows and selling financial assets, it is determined that
both collecting contractual cash flows and selling financial assets are integral to
 
achieving the objective of the business model. The Group
 
will
consider past sales and expectations about future
 
sales to establish if the business model is achieved.
 
For equity securities that are not held for trading,
 
the Group may
 
make an irrevocable election on initial recognition
 
to present subsequent changes
in the fair value of the instrument in other comprehensive
 
income (except for dividend income
 
which is recognised in profit or loss). Gains
 
or losses
on the de-recognition
 
of these equity securities
 
are not transferred
 
to profit or loss. These assets are also not subject to the impairment
requirements and
 
therefore
 
no amounts are recycled
 
to the income statement.
 
Where the Group
 
has not made the irrevocable election to present
subsequent changes in the fair value of the instrument in other
 
comprehensive
 
income, equity securities
 
are measured at fair value through
 
profit
or loss.
 
Accounting for financial in
 
vestments under IAS 39 for 2017
Available for
 
sale financial assets are held at fair value with gains and losses being included in other comprehensive
 
income. The Group uses this
classification for assets that are not derivatives and
 
are not held for trading purposes
 
or otherwise designated at fair value through profit or
 
loss,
 
or
at amortised cost. Dividends and interest (calculated using the effective
 
interest method) are recognised
 
in the income statement
 
in net interest
income or,
 
net investment income. On disposal, the cumulative gain or loss recognised
 
in other comprehensive
 
income is also
 
included in net
investment income.
 
Held to maturity assets are held at amortised cost. The Group
 
uses this classification
 
when there is an intent and ability to
 
hold the asset to
maturity. Interest on
 
the investments are recognised in the income statement within net interest income.
 
2019
2018
£m
£m
Debt securities and other eligible bills
64,103
51,026
Equity securities
1,023
1,122
Loans and advances
624
668
Financial assets at fair value through other comprehensive
 
income
65,750
52,816
 
16 Financial liabilities
 
designated at
 
fair value
Accounting for liabilities
 
designated at
 
fair value through profit and loss
In accordance
 
with IFRS 9,
 
financial liabilities may be designated at fair value, with gains and losses taken
 
to the income statement within net
trading income (Note 5)
 
and net investment income (Note 6).
 
Movements in own credit are reported
 
through
 
other comprehensive income, unless
the effects of changes in the liability's credit risk
 
would create
 
or enlarge an accounting
 
mismatch in P&L. In these
 
scenarios, all gains and losses on
that liability (including
 
the effects of changes in the credit risk of the liability) are presented in P&L. On derecognition
 
of the financial
 
liability no
amount relating to own credit risk are
 
recycled to the income statement. The Group
 
has the ability
 
to make the fair value designation when ho
 
lding
the instruments at fair value reduces
 
an accounting mismatch (caused by an offsetting liability or asset being held at fair value),
 
or is managed by
the Group on
 
the basis of its fair value, or includes terms that have substantive derivative characte
 
ristics (Note 14).
 
The details on how
 
the fair value amounts are arrived for financial liabilities designated at fair value are described
 
in Note 17.
 
2019
2018
Fair value
Contractual
amount due
on maturity
Fair value
Contractual
amount due
on maturity
£m
£m
£m
£m
Debt securities
49,559
56,891
46,649
54,159
Deposits
25,526
25,725
31,682
32,029
Repurchase agreements
 
and other similar secured borrowing
128,547
128,706
138,484
138,724
Other financial liabilities
694
694
19
19
Financial liabilities
 
designated at
 
fair value
204,326
212,016
216,834
224,931
 
The cumulative own credit net loss recognised
 
is £373
 
m
 
(201
 
8:
 
£121
 
m
 
loss).
 
 
 
 
Notes
 
to the financial
 
statements
 
Assets
 
and liabilities held
 
at
 
fair value
 
 
245
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
17 Fair value of financial instruments
Accounting for financial assets and liabilities
 
– fair values
 
Financial instruments that are held for trading are
 
recognised at fair value through
 
profit or loss. In addition, financial assets are held at fair value
through
 
profit or loss if
 
they do not contain contractual
 
terms that
 
give rise on specified dates to cash flows that are SPPI, or
 
if the financial asset is
not held in a business model that is either (i) a business model to collect the contractual cash flows or
 
(ii) a business model that is achieved by both
collecting contractual cash flows and selling. Subsequent
 
changes in fair value for these instruments are recognised in the income statement in net
investment income, except if reporting
 
it in
 
trading income reduces
 
an accounting mismatch.
 
 
All financial instruments are initially recognised
 
at fair value on the date of initial recognition
 
(including transaction costs, other than financial
instruments held at fair value through
 
profit or loss) and depending
 
on the subsequent classification
 
of the financial asset or liability, may continue
to be held at fair value either through
 
profit or loss or other comprehensive
 
income. The fair value of a financial
 
instrument is the price that would
be received to sell an asset or paid to transfer
 
a liability in an orderly
 
transaction between market participants at the measurement date.
 
Wherever possible, fair value is determined
 
by reference
 
to a quoted market price for that instrument. For many of the Group’s
 
financial assets and
liabilities, especially derivatives, quoted prices are not available
 
and valuation models are used to estimate fair value. The models calculate the
expected cash flows under
 
the terms of each specific contract and then discount these values back to a present value. These models use as their
basis independently sourced
 
market inputs including, for example, interest rate yield curves, equities and commodities prices, option volatilities and
currency
 
rates.
 
For financial liabilities measured at fair value,
 
the carrying amount reflects the effect on fair value
 
of changes in own credit spreads derived
 
from
observable market data such as in primary
 
issuance and redemption activity for structured notes.
 
 
On initial recognition, it is presumed
 
that the
 
transaction price is the fair value unless there
 
is observable information
 
available in an active market
to the contrary.
 
The best evidence of an instrument’s fair value on initial recognition is typically the transaction price. However,
 
if fair value can be
evidenced by comparison
 
with other observable current market transactions in the same instrument, or is based on a valuation technique whose
inputs include only data from observable
 
markets, then the instrument
 
should
 
be recognised at the fair value derived
 
from such observable
 
market
data.
 
For valuations that have made use
 
of unobservable
 
inputs, the difference between the model valuation and the initial transaction price (Day One
profit) is recognised
 
in profit or loss either: on a straight-line basis over the term of the transaction; or over
 
the period until all model inputs will
become observable
 
where appropriate; or
 
released in full
 
when previously unobservable
 
inputs become observable.
 
Various
 
factors influence
 
the availability of observable inputs and these may vary
 
from product
 
to product and change over time. Factors include
the depth of activity in the relevant market, the type of product,
 
whether the product
 
is new and not widely traded in the
 
marketplace, the maturity
of market modelling and the nature of the transaction (bespoke
 
or generic). To
 
the extent that
 
valuation is based on models or
 
inputs that are not
observable in the market, the determination of fair
 
value can be more subjective, dependent on
 
the significance of
 
the unobservable
 
input to the
overall valuation. Unobservable
 
inputs are determined based on the best information available, for example by reference
 
to similar
 
assets, similar
maturities or other analytical techniques.
 
The sensitivity of valuations used in the financial statements to possible changes in significant unobservable
 
inputs is
 
shown on page
 
253
 
.
 
Critical accounting estimates and judgements
The valuation of financial instruments often involves
 
a significant degree of judgement and complexity,
 
in particular where valuation models make
use of unobservable
 
inputs (‘Level 3’ assets
 
and liabilities). This note provides information
 
on these instruments, including the related unrealised
gains and losses recognised
 
in the period, a description of significant valuation techniques and unobservable inputs, and a sensitivity analysis.
 
Valuation
IFRS 13
Fair value measurement
 
requires an entity to classify its assets and liabilities according
 
to a hierarchy that reflects the observability of
significant market inputs. The three levels of
 
the fair value hierarchy
 
are defined below.
 
Quoted market
 
prices – Level 1
 
Assets and liabilities are classified as Level 1 if their value is observable
 
in an active market. Such instruments are valued by reference
 
to unadjusted
quoted prices for identical assets or liabilities in active markets where
 
the quoted price is readily available, and the price represents actual
 
and
regularly occurring
 
market transactions. An active market is
 
one in which transactions occur with sufficient volume and frequency
 
to provide
pricing information
 
on an ongoing
 
basis.
 
 
Valuation technique using observable
 
inputs –
 
Level 2
 
Assets and liabilities classified as Level 2 have been
 
valued using models whose inputs are observable either directly or indirectly.
 
Valuations
 
based
on observable inputs include assets and liabilities
 
such as swaps and forwards
 
which are valued using market standard pricing
 
techniques, and
options that are commonly
 
traded in markets where all the inputs to the market standard pricing models are observable.
 
 
Valuation technique using significant unobservable
 
inputs – Level 3
 
Assets and liabilities are classified as Level 3 if their valuation incorporates
 
significant inputs that are not based on observable market data
(unobservable
 
inputs). A valuation input is considered observable if it can be directly observed from transactions in an active market, or
 
if there is
compelling external evidence demonstrating
 
an executable exit price. Unobservable input levels are generally determined via reference
 
to
observable inputs, historical observ
 
ations or using other analytical
 
techniques.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
 
Assets
 
and liabilities held
 
at
 
fair value
 
 
246
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
17 Fair value of financial instruments
continued
The following table shows the Barclays
 
Group’s
 
assets and liabilities that are held at fair value disaggregated by valuation technique
 
(fair value
hierarchy)
 
and balance sheet classification:
 
Assets and liabilities
 
held at fair
 
value
2019
2018
Valuation technique
 
using
Valuation
 
technique
 
using
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
As at 31 December
£m
£m
£m
£m
£m
£m
£m
£m
Trading
 
portfolio assets
60,352
51,579
2,264
114,195
51,029
49,545
3,613
104,187
Financial assets at fair value through
 
the
income statement
10,445
114,141
8,500
133,086
8,918
131,348
9,382
149,648
Derivative financial assets
5,439
220,642
3,155
229,236
6,813
210,510
5,215
222,538
Financial assets at fair value through
 
other
comprehensive
 
income
18,755
46,566
429
65,750
19,764
32,697
355
52,816
Investment property
-
-
13
13
-
-
9
9
Total assets
94,991
432,928
14,361
542,280
86,524
424,100
18,574
529,198
Trading
 
portfolio liabilities
(20,977)
(15,939)
-
(36,916)
(20,654)
(17,225)
(3)
(37,882)
Financial liabilities designated at fair value
(82)
(203,882)
(362)
(204,326)
(76)
(216,478)
(280)
(216,834)
Derivative financial liabilities
(5,305)
(219,910)
(3,989)
(229,204)
(6,152)
(208,748)
(4,743)
(219,643)
Total liabilities
(26,364)
(439,731)
(4,351)
(470,446)
(26,882)
(442,451)
(5,026)
(474,359)
 
The following table shows the Barclays
 
Group’s
 
Level 3 assets and liabilities that are held at fair value disaggregated by
 
product
 
type:
 
Level 3 assets and liabilities
 
held at fair
 
value by product type
2019
2018
Assets
Liabilities
Assets
Liabilities
£m
£m
£m
£m
Interest rate derivatives
 
605
(812)
2,478
(2,456)
Foreign
 
exchange derivatives
 
291
(298)
192
(185)
Credit derivatives
539
(342)
1,381
(331)
Equity derivatives
 
1,711
(2,528)
1,136
(1,743)
Commodity derivatives
 
9
(9)
28
(28)
Corporate
 
debt
 
521
-
456
-
Reverse repurchase
 
and repurchase
 
agreements
 
-
(167)
768
-
Non-asset backed loans
 
6,811
-
8,304
-
Asset backed securities
 
756
-
688
-
Equity cash products
 
1,228
-
698
(3)
Private equity investments
899
(19)
1,071
(19)
Other
a
991
(176)
1,374
(261)
Total
14,361
(4,351)
18,574
(5,026)
 
Note
a
 
Other includes
 
commercial real estate
 
loans, funds and fund-linked
 
products,
 
issued debt, government
 
sponsored debt and investment
 
property.
 
Valuation techniques and sensitivity
 
analysis
Sensitivity analysis is performed
 
on products with significant unobservable inputs (Level 3) to generate a range of reasonably possible alternative
valuations. The sensitivity methodologies applied take account of the nature
 
of the valuation techniques used, as well as the availability and
reliability of observable
 
proxy
 
and historical data and the
 
impact of using alternative models.
 
 
Sensitivities are dynamically calculated on a monthly basis. The calculation is based on range
 
or spread data of a reliable reference source
 
or a
scenario based on relevant market analysis alongside
 
the impact of using alternative models. Sensitivities are calculated without reflecting the
impact of any diversification in the portfolio.
 
 
The valuation techniques used, observability and sensitivity analysis for
 
material products within Level 3, are described below.
 
Interest rate derivatives
Description:
 
Derivatives linked to interest rates or inflation indices. The category
 
includes futures, interest rate and inflation swaps, swaptions, caps,
floors, inflation options, balance guaranteed
 
swaps and other exotic interest rate derivatives.
 
Valuation:
 
Interest rate and inflation derivatives are
 
generally valued using curves of forward
 
rates constructed from market data to project and
discount the expected future cash flows of trades. Instruments with
 
optionality are valued using volatilities implied from mar
 
ket inputs, and use
industry standard or bespoke
 
models depending
 
on the product type.
 
 
 
Notes
 
to the financial
 
statements
 
Assets
 
and liabilities held
 
at
 
fair value
 
 
247
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
 
Observability:
 
In general, inputs are considered
 
observable up to liquid maturities which are determined separately for each input and underlying.
Unobservable
 
inputs are generally set by referencing
 
liquid market instruments and applying extrapolation techniques or inferred
 
via another
reasonable method.
 
Foreign exchange derivatives
Description:
Derivatives linked to the foreign
 
exchange (FX) market. The category
 
includes FX forward contracts, FX swaps and FX options. The
majority are traded as over
 
the counter (OTC) derivatives.
 
Valuation:
 
FX derivatives are valued
 
using industry standard and bespoke
 
models depending
 
on the product type. Valuation inputs include FX rates,
interest rates, FX volatilities, interest rate volatilities, FX interest
 
rate correlations
 
and others as appropriate.
 
 
Observability:
 
FX correlations, forwards
 
and volatilities are generally observable up to liquid maturities which are determined separately for
 
each
input and underlying.
 
Unobservable
 
inputs are set
 
by referencing
 
liquid market instruments and applying extrapolation techniques, or inferred
 
via
another reasonable
 
method.
 
Credit derivatives
Description:
 
Derivatives linked to the credit spread of a
 
referenced
 
entity, index or basket of referenced
 
entities or a pool of referenced
 
assets (e.g.
 
a
securitised product).
 
The category includes single name and index credit default swaps (CDS) and asset backed CDS.
 
Valuation:
 
CDS are valued on industry standard models using curves
 
of credit spreads as the principal input. Credit spreads are observed
 
directly
from broker
 
data, third party vendors or
 
priced to proxies.
 
Observability:
 
CDS contracts referencing
 
entities that are actively traded are generally considered
 
observable. Other valuation inputs are considered
observable if products with significant sensitivity to the inputs are actively
 
traded in a liquid market. Unobservable
 
valuation inputs are generally
determined with reference
 
to recent transactions or inferred from
 
observable trades of the same issuer
 
or similar entities.
 
Equity derivatives
Description
: Exchange traded
 
or OTC derivatives linked to equity indices and single names. The category
 
includes vanilla and exotic equity
products.
 
Valuation:
 
Equity derivatives are valued using industry standard
 
models. Valuation
 
inputs include stock prices, dividends, volatilities, interest rates,
equity repurchase
 
curves and, for multi-asset products, correlations.
 
Observability:
 
In general, valuation inputs are observable up
 
to liquid maturities which are determined separately for each input and underlying.
Unobservable
 
inputs are set
 
by referencing
 
liquid market instruments and applying extrapolation techniques, or inferred
 
via another reasonable
method.
 
Commodity
 
derivatives
Description:
 
Exchange traded
 
and OTC derivatives based on underlying
 
commodities such as metals,
 
crude oil and refined products,
 
agricultural,
power
 
and natural gas.
 
 
Valuation:
 
Commodity swaps and options
 
are valued using models incorporating
 
discounting of cash flows and other industry standard modelling
techniques. Valuation inputs
 
include forward
 
curves, volatilities implied
 
from market observable
 
inputs and correlations.
 
 
Observability:
 
Commodity correlations, forwards
 
and volatilities are generally observable up to liquid maturities which are determined
 
separately for
each input and underlying. Unobservable
 
inputs are set
 
with reference to similar observable
 
products, or
 
by applying extrapolation techniques to
observable inputs.
 
Corporate
 
debt
Description:
 
Primarily corporate
 
bonds.
 
 
Valuation:
 
Corporate
 
bonds are valued using observable
 
market prices sourced from
 
broker quotes, inter-dealer prices or other reliable pricing
sources.
 
 
Observability:
 
Prices for actively traded bonds
 
are considered
 
observable. Unobservable bonds prices are generally
 
determined by reference to bond
yields or CDS spreads for actively traded instruments issued by
 
or referencing
 
the same (or a similar)
 
issuer.
 
Reverse repurchase
 
and repurchase agreements
Description:
 
Includes securities purchased
 
under resale agreements, securities sold under repurchase
 
agreements, and other similar secured
lending agreements. The agreements are primarily
 
short-term in nature.
 
 
Valuation:
 
Repurchase
 
and reverse repurchase
 
agreements are
 
generally valued by
 
discounting the expected future cash flows using
 
industry
standard models that incorporate
 
market interest rates and repurchase
 
rates, based on the specific details
 
of the transaction.
 
Observability:
 
Inputs are deemed observable
 
up to
 
liquid maturities,
 
and are determined based on
 
the specific features of the transaction.
Unobservable
 
inputs are generally set by referencing
 
liquid market instruments and applying extrapolation techniques, or inferred
 
via another
reasonable method.
 
Non-asset backed
 
loans
 
 
Notes
 
to the financial
 
statements
 
Assets
 
and liabilities held
 
at
 
fair value
 
 
248
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Description:
 
Largely made up of fixed rate loans.
 
 
Valuation:
 
Fixed rate loans
 
are valued using models that discount expected future cash flows based on
 
interest rates and loan spreads.
 
 
Observability:
 
Within this loan population, the loan spread is generally unobservable.
 
Unobservable
 
loan spreads are determined by
 
incorporating
funding costs, the level of comparable
 
assets such as gilts, issuer credit quality and other factors.
 
Asset backed
 
securities
Description:
 
Securities that are linked to the cash flows of a pool of referenced
 
assets via securitisation.
 
The category includes residential mortgage
backed securities, commercial mortgage
 
backed securities, CDOs, collateralised loan obligations (CLOs) and other asset backed securities.
 
Valuation:
 
Where available, valuations are based on
 
observable market prices sourced
 
from broker
 
quotes and inter-dealer prices. Otherwise,
valuations are determined
 
using industry standard discounted cash flow analysis that calculates the fair value based on valuation inputs such as
constant default rate, conditional prepayment
 
rate, loss
 
given default and yield.
 
These inputs are determined by
 
reference
 
to a number of sources
including proxying
 
to observed transactions, market indices or market research, and by
 
assessing
 
underlying
 
collateral performance.
 
 
Proxying
 
to observed transactions, indices or research requires
 
an assessment
 
and comparison
 
of the relevant securities’ underlying
 
attributes
including collateral, tranche, vintage, underlying
 
asset
 
composition (historical losses, borrower
 
characteristics
 
and loan attributes such as loan to
value ratio and geographic
 
concentration) and credit ratings (original and current).
 
Observability:
 
Where an asset backed
 
product
 
does not have an observable market price
 
and the valuation is
 
determined using a discounted cash
flow analysis, the instrument is considered
 
unobservable.
 
 
Equity cash products
Description:
 
Includes listed equities, Exchange Traded
 
Funds (ETF) and preference
 
shares.
 
Valuation:
 
Valuation of equity
 
cash products is primarily determined through
 
market observable prices.
 
Observability:
 
Prices for actively traded equity cash products
 
are considered
 
observable. Unobservable
 
equity prices are generally determined by
referen
 
ce to actively traded instruments that are similar in nature, or inferred via another reasonable
 
method.
 
 
Private equity investments
Description:
 
Includes private equity holdings and principal
 
investments.
 
 
Valuation:
 
Private equity investments are
 
valued in accordance
 
with the ‘International Private Equity and Venture Capital Valuation
 
Guidelines’
which require
 
the use of a
 
number
 
of individual pricing benchmarks
 
such as the
 
prices of recent transactions in the same or similar entities,
discounted cash flow analysis and comparison
 
with the earnings multiples of listed
 
companies. While the valuation of unquoted
 
equity instruments
is subjective by nature, the relevant
 
methodologies are commonly
 
applied by other market participants and have been consistently applied over
time.
 
 
Observability:
 
Inputs are considered
 
observable if there is active trading in a liquid market of products with significant sensitivity to the inputs.
Unobservable
 
inputs include earnings estimates,
 
multiples of comparative companies, marketability
 
discounts and discount rates.
 
Other
Description:
 
Other includes commercial real estate loans, funds and fund
 
-linked products, asset backed loans, physical commodities and
investment property.
 
Assets and liabilities
 
reclassified between Level
 
1 and Level 2
During the period, there
 
were no material transfers between Level 1 and Level 2 (2018
 
:
 
there were no material transfers between Level 1 and Level
2).
 
Level 3 movement analysis
The following table summarises the movements
 
in the Level 3 balances during
 
the period. The table shows gains and losses
 
and includes amounts
for all financial assets and liabilities that are held at fair value transferred
 
to and from Level 3 during
 
the period. Transfers have
 
been reflected as if
they had taken place at the beginning
 
of the year.
 
Asset and liability transfers between
 
Level 2 and
 
Level 3 are primarily due
 
to i)
 
an increase or decrease in observable market activity related
 
to an
input or ii)
 
a change in the significance of the unobservable
 
input, with assets and liabilities classified as Level 3 if an unobservable input is deemed
significant.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
 
Assets
 
and liabilities held
 
at
 
fair value
 
 
249
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Analysis of movements in Level 3 assets and liabilities
As at 1
January
2019
Total gains
 
and losses
in the period
recognised
 
in the
income statement
Total gains
or losses
recognised
in OCI
Transfers
 
As at 31
December
2019
Purchases
Sales
Issues
Settlements
Trading
income
Other
income
In
Out
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
Corporate
 
debt
388
 
126
 
(52)
 
-
 
(311)
1
 
 
-
 
 
-
 
45
 
(77)
120
 
Non-asset backed loans
2,263
 
1,844
 
(2,799)
 
-
 
(134)
24
 
 
-
 
 
-
 
200
 
(424)
974
 
Asset backed securities
664
 
202
 
(166)
 
-
 
 
-
 
(30)
 
-
 
 
-
 
16
 
(30)
656
 
Equity cash products
136
 
62
 
(40)
 
-
 
 
-
 
(31)
 
-
 
 
-
 
293
 
(28)
392
 
Other
162
 
 
-
 
 
-
 
 
-
 
(1)
(24)
 
-
 
 
-
 
 
-
 
(15)
122
 
Trading portfolio
 
assets
3,613
 
2,234
 
(3,057)
 
-
 
(446)
(60)
 
-
 
 
-
 
554
 
(574)
2,264
 
Non-asset backed loans
5,688
 
235
 
 
-
 
 
-
 
(755)
343
 
(1)
 
-
 
 
-
 
(16)
5,494
 
Equity cash products
559
 
66
 
 
-
 
 
-
 
(2)
3
 
209
 
 
-
 
 
-
 
 
-
 
835
 
Private equity investments
1,071
 
45
 
(121)
 
-
 
(28)
 
-
 
55
 
 
-
 
41
 
(163)
900
 
Other
2,064
 
5,719
 
(5,720)
 
-
 
(9)
12
 
(15)
 
-
 
24
 
(804)
1,271
 
Financial assets at fair value
through the income
statement
9,382
 
6,065
 
(5,841)
 
-
 
(794)
358
 
248
 
 
-
 
65
 
(983)
8,500
 
Non-asset backed loans
 
-
 
283
 
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 
60
 
 
-
 
 
-
 
343
 
Asset backed securities
 
-
 
116
 
(30)
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 
86
 
Equity cash products
2
 
 
-
 
(1)
 
-
 
 
-
 
 
-
 
 
-
 
(1)
 
-
 
 
-
 
 
-
 
Other
353
 
 
-
 
 
-
 
 
-
 
(135)
 
-
 
 
-
 
 
-
 
 
-
 
(218)
 
-
 
Financial assets at fair value
through other
comprehensive income
355
 
399
 
(31)
 
-
 
(135)
 
-
 
 
-
 
59
 
 
-
 
(218)
429
 
Investment property
9
 
5
 
 
-
 
 
-
 
 
-
 
 
-
 
(1)
 
-
 
 
-
 
 
-
 
13
 
Trading portfolio
 
liabilities
(3)
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 
3
 
 
-
 
Financial liabilities
designated at fair value
(280)
(179)
10
 
(42)
41
 
67
 
(2)
 
-
 
(27)
50
 
(362)
Interest rate derivatives
22
 
(9)
 
-
 
 
-
 
88
 
(92)
 
-
 
 
-
 
(177)
(38)
(206)
Foreign
 
exchange derivatives
7
 
 
-
 
 
-
 
 
-
 
25
 
(12)
 
-
 
 
-
 
(32)
5
 
(7)
Credit derivatives
1,050
 
(59)
3
 
 
-
 
(866)
76
 
 
-
 
 
-
 
(9)
3
 
198
 
Equity derivatives
(607)
(296)
(35)
 
-
 
(2)
(296)
 
-
 
 
-
 
(37)
454
 
(819)
Net derivative financial
instruments
a
472
 
(364)
(32)
 
-
 
(755)
(324)
 
-
 
 
-
 
(255)
424
 
(834)
Total
13,548
 
8,160
 
(8,951)
(42)
(2,089)
41
 
245
 
59
 
337
 
(1,298)
10,010
 
 
Note
a
 
The derivative
 
financial
 
instruments are represented
 
on a net basis.
 
On a gross basis, derivative
 
financial assets are £3,155m
 
(2018: £5,215m)
 
and derivative
 
financial
 
liabilities are
£3,989m
 
(2018:
 
£4,743m).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
 
Assets
 
and liabilities held
 
at
 
fair value
 
 
250
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Analysis of movements in Level 3 assets and liabilities
As at 1
January
2018
Purchases
Sales
Issues
Settlements
 
Total gains
 
and losses
in the
 
period recognised
in the
 
income
statement
Total gains
or losses
recognised
in OCI
Transfers
 
As at 31
December
2018
Trading
income
Other
income
In
Out
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
Corporate
 
debt
871
 
108
 
(88)
 
-
 
(23)
9
 
 
-
 
 
-
 
39
 
(528)
388
 
Non-asset backed loans
166
 
5,514
 
(3,480)
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 
71
 
(8)
2,263
 
Asset backed securities
627
 
205
 
(168)
 
-
 
(2)
(21)
 
-
 
 
-
 
58
 
(35)
664
 
Equity cash products
68
 
18
 
(9)
 
-
 
 
-
 
(16)
 
-
 
 
-
 
107
 
(32)
136
 
Other
245
 
18
 
(55)
-
(20)
(32)
-
-
145
 
(139)
162
 
Trading portfolio
 
assets
1,977
 
5,863
 
(3,800)
 
-
 
(45)
(60)
 
-
 
 
-
 
420
 
(742)
3,613
 
Non-asset backed loans
6,073
 
74
 
 
-
 
 
-
 
(508)
49
 
 
-
 
 
-
 
 
-
 
 
-
 
5,688
 
Equity cash products
398
 
87
 
(1)
 
-
 
 
-
 
1
 
74
 
 
-
 
 
-
 
 
-
 
559
 
Private equity investments
688
 
279
 
(114)
 
-
 
 
-
 
2
 
117
 
 
-
 
125
 
(26)
1,071
 
Other
360
 
6,624
 
(4,920)
 
-
 
(47)
29
 
18
 
 
-
 
 
-
 
 
-
 
2,064
 
Financial assets at fair value
through the income
statement
7,519
 
7,064
 
(5,035)
 
-
 
(555)
81
 
209
 
 
-
 
125
 
(26)
9,382
 
Equity cash products
36
 
 
-
 
(16)
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 
(18)
2
 
Private equity investments
129
 
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 
(129)
 
-
 
Other
40
 
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 
 
-
 
(1)
314
 
 
-
 
353
 
Financial assets at fair value
through other
comprehensive income
205
 
 
-
 
(16)
 
-
 
 
-
 
 
-
 
 
-
 
(1)
314
 
(147)
355
 
Investment property
116
 
9
 
(115)
 
-
 
 
-
 
 
-
 
(1)
 
-
 
 
-
 
-
9
 
Trading portfolio
 
liabilities
(4)
-
-
-
-
(3)
-
-
-
4
(3)
 
-
 
Financial liabilities
designated at fair value
(480)
-
-
(4)
18
33
(10)
-
(225)
388
(280)
Interest rate derivatives
(150)
1
(1)
-
196
(25)
-
-
(71)
72
22
Foreign
 
exchange derivatives
37
-
-
-
(9)
5
-
-
(13)
(13)
7
Credit derivatives
1,146
(6)
3
-
(12)
(85)
-
-
7
(3)
1,050
Equity derivatives
(896)
72
(570)
-
125
73
1
-
128
460
(607)
Net derivative financial
instruments
137
67
(568)
-
300
(32)
1
-
51
516
472
Total
9,470
13,003
(9,534)
(4)
(282)
19
199
(1)
685
(7)
13,548
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
 
Assets
 
and liabilities held
 
at
 
fair value
 
 
251
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Unrealised gains
 
and losses on Level 3 financial assets and liabilities
The following table discloses the unrealised gains and losses recognised
 
in the year arising on Level 3 financial assets and liabilities held at year end.
 
Unrealised gains
 
and losses recognised during the period on Level 3 assets and liabilities held at year end
2019
2018
Income statement
Other
compre-
hensive
income
Income statement
Other
 
compre-
hensive
income
Trading
income
Other
income
Total
Trading
income
Other
income
Total
As at 31 December
£m
£m
£m
£m
£m
£m
£m
£m
Trading
 
portfolio assets
(57)
-
-
(57)
(60)
-
-
(60)
Financial assets at fair value through
 
the income
statement
346
246
-
592
68
206
-
274
Fair value through
 
other comprehensive income
-
-
60
60
-
-
(1)
(1)
Investment property
-
(1)
-
(1)
-
(1)
-
(1)
Trading
 
portfolio liabilities
-
-
-
-
(3)
-
-
(3)
Financial liabilities designated at fair value
64
-
-
64
55
-
-
55
Net derivative financial instruments
 
(459)
-
-
(459)
(14)
-
-
(14)
Total
(106)
245
60
199
46
205
(1)
250
 
Significant unobservable
 
inputs
The following table discloses the valuation techniques and
 
significant unobservable
 
inputs for assets and liabilities
 
recognised
 
at fair value and
classified as Level 3 along with the range of values
 
used for those significant unobservable
 
inputs:
 
Valuation
 
technique(s)
c
Significant
 
unobservable
inputs
2019
Range
2018
Range
Min
Max
Min
Max
Units
a
Derivative financial
instruments
b
Interest rate derivatives
Discounted cash flows
Inflation forwards
1
3
1
2
%
Credit spread
41
1,620
6
897
bps
Comparable pricing
Price
-
37
-
100
points
Option model
Inflation volatility
47
190
33
174
bps vol
Interest rate volatility
8
431
10
199
bps vol
IR - IR correlation
(30)
100
(26)
100
%
Credit derivatives
Discounted cash flows
Credit spread
72
200
142
209
bps
Comparable pricing
Price
-
155
10
96
points
Equity derivatives
Option model
Equity volatility
1
200
2
81
%
Equity - equity
correlation
(20)
100
(100)
100
%
Discounted cash flow
Discounted margin
(500)
1,100
(171)
301
bps
Non-derivative financial
instruments
Non-asset backed loans
Discounted cash flows
Loan spread
31
1,884
30
531
bps
Credit spread
180
1,223
25
800
bps
Price
-
133
-
118
points
Comparable pricing
Price
-
123
-
100
points
Asset backed securities
Comparable pricing
Price
-
99
-
102
points
Private equity investments
EBITDA multiple
EBITDA multiple
5
16
7
8
Multiple
Discounted cash flow
Discount margin
8
10
8
10
%
Other
d
Discounted cash flows
Credit spread
126
649
143
575
bps
 
Notes
a
 
The units
 
used
 
to disclose ranges for significant unobservable inputs
 
are percentages, points and basis points. Points are a percentage of par;
 
for example, 100 points equals 100%
 
of par.
 
A basis point
 
equals 1/100th of 1%; for example, 150 basis points
 
equals 1.5%.
b
 
Certain derivative
 
instruments
 
are classified as Level 3 due to a significant
 
unobservable credit spread
 
input into the calculation
 
of the Credit Valuation
 
Adjustment for the
 
instruments.
 
The range of significant
 
unobservable credit spreads
 
is between 41-1,620bps (2018: 6-897bps).
c
 
A range has
 
not been provided
 
for Net Asset Value
 
as there would be a wide range
 
reflecting
 
the diverse nature of the
 
positions
d
 
Other includes
 
commercial real estate
 
loans, funds and fund-linked
 
products,
 
issued debt, government
 
sponsored debt and investment
 
property.
 
 
 
Notes
 
to the financial
 
statements
 
Assets
 
and liabilities held
 
at
 
fair value
 
 
252
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
17 Fair value of financial instruments
 
continued
The following section describes the significant unobservable
 
inputs identified in the table above, and the sensitivity of fair value measurement of
the instruments categorised as Level 3 assets or liabilities to increases in
 
significant unobservable
 
inputs. Where sensitivities
 
are described, the
inverse relationship will also generally apply.
 
Where reliable interrelationships can be identified between
 
significant unobservable
 
inputs used in fair
 
value measurement, a description of those
interrelationships is included below.
 
Forwards
 
A price or rate that is applicable to a financial transaction that will take place
 
in the future.
 
In general, a significant increase in a forward
 
in isolation
 
will result in a fair value increase for
 
the contracted receiver
 
of the underlying (currency,
bond, commodity,
 
etc.), but the
 
sensitivity is dependent
 
on the specific terms
 
of the instrument.
 
Credit spread
 
Credit spreads typically represent
 
the difference in yield between an instrument and a benchmark
 
security or reference
 
rate. Credit spreads reflect
 
the additional yield that a market participant demands for
 
taking on exposure to the credit risk of an instrument and form part of the yield used in a
discounted cash flow calculation.
 
In general, a significant increase in credit spread in isolation will
 
result in a movement in a fair value decrease for a
 
cash asset.
 
For a derivative instrument, a significant
 
increase in credit spread in isolation can result in a fair value increase
 
or decrease depending
 
on the
specific terms of the instrument.
 
Volatility
 
Volatility is a measure of the
 
variability or uncertainty in return for a given derivative underlying.
 
It is
 
an estimate of how much
 
a particular
underlying
 
instrument input or index will change in value over time. In general, volatilities are implied from
 
observed option
 
prices. For
unobservable
 
options the implied volatility may reflect additional assumptions about the nature of the underlying
 
risk, and the
 
strike/maturity
profile of a specific contract.
 
In general a significant increase in volatility in isolation will result
 
in a fair value increase for the holder
 
of a simple option, but the sensitivity is
dependent on
 
the specific
 
terms of the instrument.
 
 
There may be interrelationships between unobservable
 
volatilities
 
and other unobservable
 
inputs (e.g. when equity prices fall, implied
 
equity
volatilities generally rise) but these are generally
 
specific to individual markets and may vary over
 
time.
 
Correlation
 
Correlation is a measure of the relationship between the movements
 
of two variables. Corre
 
lation can be a significant input into valuation of
derivative contracts with more
 
than one underlying
 
instrument. Credit correlation generally refers to the correlation
 
between default processes for
the separate names that make up
 
the reference pool
 
of a CDO
 
structure.
 
A significant increase in correlation
 
in isolation can result in a fair value increase or decrease depending
 
on the specific
 
terms of the instrument.
 
Comparable
 
price
 
Comparable
 
instrument prices are used in valuation by calculating an implied yield (or spread
 
over a liquid benchmark)
 
from the price of a
comparable
 
observable instrument, then adjusting that yield (or spread) to account
 
for relevant differences
 
such as maturity
 
or credit quality.
Alternatively, a
 
price-to-price
 
basis can be assumed
 
between the comparable
 
and unobservable
 
instruments in order to establish
 
a value.
 
In general, a significant increase in comparable
 
price in isolation will
 
result in an increase in the price of the unobservable
 
instrument. For
derivatives, a ch
 
ange in the comparable price
 
in isolation
 
can result in a fair value increase or
 
decrease depending
 
on the specific terms
 
of the
instrument.
 
Loan spread
 
Loan spreads typically represent
 
the difference in yield between an instrument and a benchmark
 
security or reference
 
rate. Loan spreads typically
reflect credit quality,
 
the level of comparable
 
assets such as gilts and other factors, and form part of the yield used in a discounted cash flow
calculation.
 
The ESHLA portfolio primarily
 
consists
 
of long
 
-dated fixed rate loans extended to counterparties in the UK Education, Social Housing and Local
Authority sectors. The loans are categorised as Level 3 in the fair value hierarchy
 
due to their illiquid nature and the significance of unobservable
loan spreads to the valuation. Valuation
 
uncertainty arises from the long
 
-dated nature of the portfolio, the lack of secondary market in the loans
and the lack of observable loan spreads. The majority of
 
ESHLA loans are to borrowers
 
in heavily regulated sectors that
 
are considered
 
extremely
low credit risk, and have a
 
history of near zero defaults since inception
.
While the overall loan
 
spread range
 
is from 31bps to 1,884
 
bps (2018
 
:
 
30bps
to 531
 
bps), the vast majority of spreads are concentrated towards
 
the bottom end of this range, with 99% of the loan notional being valued with
spreads less than 200bps
 
consistently for both years.
 
In general, a significant increase in loan spreads in
 
isolation will result in a fair value decrease for a loan.
 
EBITDA
 
multiple
EBITDA multiple is the ratio of the valuation of the
 
investment to the earnings before
 
interest, taxes, depreciation and amortisation.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
 
Assets
 
and liabilities held
 
at
 
fair value
 
 
253
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
In general, a significant increase in the multiple will result in
 
a fair value increase for an investment.
 
Sensitivity analysis
 
of valuations using unobservable inputs
2019
2018
Favourable changes
Unfavourable changes
Favourable
 
changes
Unfavourable changes
Income
statement
Equity
Income
statement
Equity
Income
statement
Equity
Income
statement
Equity
£m
£m
£m
£m
£m
£m
£m
£m
Interest rate derivatives
44
-
(127)
-
80
-
(162)
-
Foreign
 
exchange derivatives
5
-
(7)
-
7
-
(10)
-
Credit derivatives
73
-
(47)
-
126
-
(73)
-
Equity derivatives
114
-
(119)
-
110
-
(112)
-
Commodity derivatives
-
-
-
-
1
-
(1)
-
Corporate
 
debt
11
-
(16)
-
10
-
(2)
-
Non-asset backed loans
214
8
(492)
(8)
274
-
(458)
-
Equity cash products
123
-
(175)
-
121
-
(155)
-
Private equity investments
205
-
(235)
-
230
-
(241)
-
Other
a
1
-
(1)
-
2
-
(2)
-
Total
790
8
(1,219)
(8)
961
-
(1,216)
-
 
Note
a
 
Other includes
 
commercial real estate
 
loans, funds and fund-linked
 
products,
 
issued debt, government
 
sponsored debt and investment
 
property.
 
The effect of stressing unobservable
 
inputs to a
 
range of reasonably
 
possible alternatives, alongside considering the impact of using alternative
models, would be to increase fair values by
 
up to £798
 
m
 
(2018:
 
£961
 
m) or to decrease fair values
 
by up to £1,227
 
m
 
(2018
 
:
 
£1,216m)
 
with
substantially all the potential effect impacting prof
 
it and loss rather than reserves.
 
 
Fair value adjustments
Key balance sheet valuation adjustments are quantified
 
below:
 
2019
2018
£m
£m
Exit price adjustments derived from
 
market bid-offer
 
spreads
(429)
(457)
Uncollateralised derivative funding
(57)
(47)
Derivative credit valuation adjustments
(135)
(125)
Derivative debit valuation adjustments
155
237
 
Exit price adjustments derived from
 
market bid
 
-offer spreads
 
The Barclays Group
 
uses mid-market pricing where it is a market maker and has the ability to transact at, or better
 
than, mid price (which is the
case for certain equity, bond
 
and vanilla derivative markets). For other
 
financial assets and liabilities, bid-offer adjustments are recorded
 
to reflect
the exit level for the expected close out strategy.
 
The methodology
 
for determining
 
the bid-offer adjustment for a derivative portfolio involves
calculating the net risk exposure by
 
offsetting long and short positions by strike and term in accordance
 
with the risk
 
management and hedging
strategy.
 
Bid-offer
 
levels are generally derived
 
from market quotes such as broker
 
data. Less
 
liquid instruments may not have a directly observable bid
 
-offer
level. In such instances, an exit price adjustment may be derived
 
from an observable
 
bid-offer
 
level for a comparable liquid instrument, or
determined by
 
calibrating to derivative prices, or by scenario or historical analysis.
 
Exit price adjustments derived from
 
market bid-offer
 
spreads have decreased by
 
£28m
 
to £429m
 
as a
 
result of movements in market bid offer
spreads.
 
Discounting approaches
 
for derivative instruments
 
Collateralised
In line with market practice, the methodology
 
for discounting collateralised derivatives takes into account the nature and currency
 
of the collateral
that can be posted within the relevant credit support
 
annex (CSA). The CSA aware discounting approach
 
recognises the ‘cheapest to deliver’ option
that reflects the ability of the party posting collateral to change the currency
 
of the collateral.
 
 
Uncollateralised
 
A fair value adjustment of £57m
 
is applied to account for the impact of incorporating
 
the cost of
 
funding into the valuation of uncollateralised
and partially collateralised derivative portfolios and
 
collateralised derivatives where
 
the terms of the agreement do not allow the rehypothecation
of collateral received. This adjustment is referred
 
to as
 
the Funding Fair Valu
 
e
 
Adjustment (FFVA).
 
FFVA
 
has increased by £10
 
m
 
to £57m
 
mainly
as a result of increase in underlying
 
derivative exposures.
 
FFVA
 
incorporates
 
a scaling factor which is an estimate of the
 
extent to which the cost of funding
 
is incorporated into observed
 
traded levels. On
calibrating the scaling factor,
 
it is with the assumption that Credit Valuation
 
Adjustments (CVA)
 
and Debit Valuation Adjustments (DVA)
 
are
 
 
Notes
 
to the financial
 
statements
 
Assets
 
and liabilities held
 
at
 
fair value
 
 
254
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
retained as valuation components
 
incorporated
 
into such levels.
 
The effect of incorporating
 
this scaling
 
factor at 31
 
December 2019
 
was to
reduce FFVA
 
by £170
 
m
 
(2018: £141
 
m).
 
Derivative credit and debit valuation adjustments
 
CVA
 
and DVA
 
are incorporated
 
into derivative valuations to reflect
 
the impact on fair value of counterparty
 
credit risk and Barclays’ own credit
quality respectively. These
 
adjustments are calculated for uncollateralised and partially
 
collateralised derivatives across all asset classes. CVA
 
and
DVA
 
are calculated using estimates of exposure
 
at default, probability of default and recovery
 
rates, at
 
a counterparty
 
level. Counterparties include
(but are not limited to) corporates, sovereigns
 
and sovereig
 
n
 
agencies and supranationals.
 
Exposure at default is generally estimated through
 
the simulation
 
of underlying
 
risk factors through approximating
 
with a more vanilla structure, or
by using current
 
or scenario-based mark
 
to market as
 
an estimate of future exposure.
 
 
Probability of default and recovery
 
rate information is generally sourced from
 
the CDS
 
markets. Where this information
 
is not available, or
considered unreliable,
 
alternative approaches are taken based on mapping
 
internal counterparty
 
ratings onto historical or market-based default
and recovery
 
information. In particular,
 
this applies
 
to sovereign related names where
 
the effect of using the recovery
 
assumptions implied in
 
CDS
levels would imply a £36m
 
(2018:
 
£50m) increase in CVA.
 
 
Correlation between counterparty
 
credit and underlying derivative risk factors, termed ‘wrong
 
-way,’ or ‘right
 
-way’ risk, is
 
not systematically
incorporated
 
into the CVA calculation but is adjusted where the underlying
 
exposure is directly related to the counterparty.
 
 
CVA
 
increased by £10m
 
to £135m,
 
as a
 
result of increase in underlying
 
derivative exposures offset by general tightening
 
in Credit Spreads. DVA
decreased by £82m
 
to £155
 
m, as
 
a result of tightening in Barclays’ credit spreads.
 
Barclays continues to monitor
 
market practices and activity to ensure the approach to uncollateralised derivative valuation remains
 
appropriate.
 
Portfolio
 
exemptions
 
The Barclays Group
 
uses the
 
portfolio exemption
 
in IFRS 13
Fair Value Measurement
 
to measure the fair value of groups of financial assets and
liabilities. Instruments are measured using the price that would
 
be received to sell a net long position (i.e. an asset) for a particular risk exposure
 
or
to transfer a net short position (i.e. a liability) for a particular risk
 
exposure in an orderly
 
transaction between market participants at the balance
sheet date under current
 
market conditions. Accordingly,
 
the Barclays Group
 
measures the fair value of the
 
group
 
of financial assets and liabilities
consistently with how market participants would
 
price the net risk exposure at the measurement date.
 
Unrecognised
 
gains as a result of the
 
use of valuation models
 
using unobservable inputs
 
The amount that has yet to be recognised
 
in income that relates to the difference between the transaction price (the fair value at initial
 
recognition)
and the amount that would have
 
arisen had valuation models using unobservable inputs been used on initial
 
recognition, less amounts
subsequently recognised, is £113
 
m
 
(2018:
 
£141
 
m) for financial instruments measured at fair
 
value and £255
 
m
 
(2018:
 
£262
 
m) for financial
instruments carried at amortised cost. There are additions of £41
 
m
 
(201
 
8: £65
 
m), and amortisation
 
and releases of £69m
 
(201
 
8: £33m) for
financial instruments measured at fair value and additions of £7m (2018:
 
£29m) and
 
amortisation
 
and releases of £14m
 
(201
 
8: £20m) for financial
instruments measured at amortised cost.
 
 
Third party credit enhancements
 
Structured and brokered
 
certificates
 
of deposit issued by Barclays are insured up
 
to $250,000
 
per depositor by the Federal Deposit Insurance
Corporation
 
(FDIC) in the US.
 
The FDIC is funded by premiums
 
that Barclays and other banks pay for deposit insurance
 
coverage.
 
The carrying
value of these issued certificates of deposit that are designated under
 
the IFRS 9 fair value
 
option includes this third party credit enhancement.
 
The
on-balance sheet value of these brokered
 
certificates
 
of deposit amounted
 
to £3,218
 
m
 
(2018:
 
£4,797
 
m).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
 
Assets
 
and liabilities held
 
at
 
fair value
 
 
255
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Comparison
 
of carrying amounts and fair values for assets
 
and liabilities not held at fair value
 
The following table summarises the fair value of financial assets and liabilities measured at amortised cost on the Barclays Group’s
 
balance sheet:
 
2019
2018
 
Carrying
amount
Fair value
Level 1
Level 2
Level 3
Carrying
amount
Fair value
Level 1
Level 2
Level 3
As at 31 December
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
Financial assets
Loans and advances at
amortised cost
a
339,115
337,510
11,145
73,378
250,985
326,406
325,264
4,599
68,955
249,653
Reverse repurchase
 
agreements
and other similar secured
lending
 
3,379
3,379
-
3,379
-
2,308
2,308
-
2,308
-
 
Financial liabilities
Deposits at amortised cost
(415,787)
(415,807)
(327,329)
(78,659)
(9,819)
(394,838)
(394,857)
(348,905)
(40,106)
(5,846)
Repurchase agreements
 
and
other similar secured borrowing
 
(14,517)
(14,517)
-
(14,517)
-
(18,578)
(18,578)
-
(18,578)
-
Debt securities in issue
 
(76,369)
(78,512)
-
(76,142)
(2,370)
(82,286)
(81,687)
-
(78,315)
(3,372)
Subordinated
 
liabilities
 
(18,156)
(18,863)
-
(18,863)
-
(20,559)
(21,049)
-
(21,049)
-
 
Note
 
a
 
The fair
 
value hierarchy
 
for finance lease
 
receivables presented
 
within loans and advances
 
at amortised cost, with fair
 
value amounting to £2,002m (2018: £2,057m),
 
is not
required
 
as part
 
of the standard.
 
The fair value is an estimate of the price that would be received
 
to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date.
 
As a wide range of valuation techniques are available, it may not be appropriate
 
to directly compare
this fair value information to independent
 
market sources or other
 
financial institutions.
 
Different valuation methodologies
 
and assumptions can
have a significant impact on fair values which
 
are based on unobservable
 
inputs.
 
Financial assets
 
The carrying value of financial assets held at amortised cost is determined in accordance
 
with the relevant accounting policy in Note 19.
 
Loans and advances at amortised
 
cost
 
The fair value of loans and advances, for
 
the purpose of this disclosure, is derived from
 
discounting expected cash flows in a way that reflects the
current market
 
price for lending to issuers of similar credit quality. Where market data
 
or credit information
 
on the underlying
 
borrowers is
unavailable, a number
 
of proxy/extrapolation
 
techniques are employed to determine the appropriate discount rates.
 
Revers
 
e
 
repurchase agreements
 
and other similar secured borrowing
 
The fair value of reverse repurchase
 
agreements approximates
 
carrying amount as these balances
 
are generally short dated and fully collateralised.
 
Financial liabilities
The carrying value of financial liabilities held at amortised cost is determined
 
in accordance with the accounting policy in Note 1.
 
Deposits at amortised cost
 
In many cases, the fair value disclosed approximates
 
carrying value because the instruments are short term in nature
 
or have interest rates that
reprice frequently,
 
such as customer accounts and other deposits and short-term debt securities.
 
The fair value for deposits with longer
 
-term maturities,
 
mainly time deposits, are estimated using discounted cash flows applying
 
either market
rates or current
 
rates for deposits of similar remaining maturities. Consequently, the fair value discount is minimal.
 
 
Repurchase agreements and other
 
similar secured borrowing
 
The fair value of repurchase
 
agreements approximates
 
carrying amounts as these
 
balances are generally
 
short dated.
 
Debt securities in issue
 
Fair values of other debt securities in issue are based on
 
quoted prices where
 
available, or where the instruments are short dated, carrying
 
amount
approximates fair value.
 
 
Subordinated liabilities
 
Fair values for dated and undated
 
convertible and
 
non-convertible
 
loan capital are based on quoted market rates for the issuer concerned or
 
issuers
with similar terms and conditions.
 
18 Offsetting financial assets and financial liabilities
In accordance
 
with IAS 32
Financial Instruments:
 
Presentation
, the Group
 
reports financial assets
 
and financial liabilities on a net basis on
 
the
balance sheet only if there is a legally enforceable
 
right to set-off the recognised amounts and there
 
is intention to settle on a net basis, or to realise
the asset and settle the liability simultaneously. The following
 
table shows the impact of netting
 
arrangements on:
 
all financial assets and liabilities that are reported
 
net on the balance sheet
 
all derivative financial instruments and reverse
 
repurchase
 
and repurchase agreements and
 
other similar secured lending and borrowing
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
 
Assets
 
and liabilities held
 
at
 
fair value
 
 
256
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
agreements that are subject to enforceable
 
master netting arrangements or similar agreements, but do not qualify for balance sheet netting.
The ‘Net amounts’ presented on the next page are not intended to represent
 
the Group
 
’s actual exposure to credit risk, as a variety of credit
mitigation strategies are employed
 
in addition to netting and collateral arrangements.
 
Amounts subject
 
to enforc
 
eable netting
 
arrangements
Amounts not
subject to
enforceable
netting
arrangements
c
Balance sheet
total
d
Effects of
 
offsetting
 
on-balance sheet
Related amounts
 
not offset
Gross amounts
Amounts
offset
a
Net amounts
reported on
 
the
balance sheet
Financial
instruments
Financial
collateral
b
Net amount
£m
£m
£m
£m
£m
£m
£m
£m
As at 31 December 2019
Derivative financial assets
260,206
(32,546)
227,660
(175,998)
(38,922)
12,740
1,576
229,236
Reverse repurchase
 
agreements
and other similar secured lending
e
374,274
(276,021)
98,253
-
(98,253)
-
2,013
100,266
Total assets
634,480
(308,567)
325,913
(175,998)
(137,175)
12,740
3,589
329,502
Derivative financial liabilities
(255,269)
31,180
(224,089)
175,998
38,632
(9,459)
(5,115)
(229,204)
Repurchase agreements
 
and other
similar secured borrowing
e
(406,081)
276,021
(130,060)
-
130,058
(2)
(13,004)
(143,064)
Total liabilities
(661,350)
307,201
(354,149)
175,998
168,690
(9,461)
(18,119)
(372,268)
As at 31 December 2018
Derivative financial assets
239,180
(18,687)
220,493
(172,001)
(36,904)
11,588
2,045
222,538
Reverse repurchase
 
agreements
and other similar secured lending
e
354,409
(235,772)
118,637
-
(118,195)
442
2,712
121,349
Total assets
593,589
(254,459)
339,130
(172,001)
(155,099)
12,030
4,757
343,887
Derivative financial liabilities
(233,543)
18,229
(215,314)
172,001
32,959
(10,354)
(4,329)
(219,643)
Repurchase agreements
 
and other
similar secured borrowing
e
(375,976)
235,772
(140,204)
-
140,165
(39)
(16,858)
(157,062)
Total liabilities
(609,519)
254,001
(355,518)
172,001
173,124
(10,393)
(21,187)
(376,705)
 
Notes
a
 
Amounts offset
 
for Derivative
 
financial assets
 
additionally includes
 
cash collateral netted
 
of £4,099m (2018: £2,187m). Amounts
 
offset
 
for Derivative
 
financial
 
liabilities additionally
include
 
s
 
cash collateral
 
netted of £5,465m (2018: £2,645m).
 
Settlements
 
assets
 
and liabilities have been offset
 
amounting to £14,079m
 
(2018:
 
£23,095m).
 
b
 
Financial
 
collateral of £38,922m
 
(2018:
 
£36,904m) was received
 
in respect
 
of derivative
 
assets, including £33,411m
 
(2018:
 
£31,402m)
 
of cash collateral
 
and £
 
5,511m
 
(2018:
£5,502m)
 
of non-cash
 
collateral. Financial
 
collateral of £38,632m (2018:
 
£32,959m) was
 
placed in
 
respect
 
of derivative liabilities,
 
including £35,712m
 
(2018:
 
£29,842m)
 
of cash
collateral and
 
£2,920m
 
(2018:
 
£3,117m)
 
of non-cash
 
collateral. The
 
collateral amounts
 
are limited
 
to net balance sheet
 
exposure so as to not include
 
overcollateralisation.
c
 
This
 
column includes
 
contractual rights of set-off
 
that are subject
 
to uncertainty under the laws
 
of the relevant
 
jurisdiction.
d
 
The balance sheet
 
total is the
 
sum of ‘Net amounts reported
 
on the balance sheet’ that
 
are subject to enforceable netting
 
arrangements
 
and ‘Amounts
 
not subject to enforceable
netting
 
arrangements’.
e
 
Reverse
 
repurchase
 
agreements and
 
other similar secured
 
lending of £100,266m
 
(2018:
 
£121,349m)
 
is split
 
by fair value
 
£96,887m
 
(2018:
 
£119,041m)
 
and amortised
 
cost
£3,379m
 
(2018:
 
£2,308m). Repurchase
 
agreements and
 
other similar
 
secured borrowing of £143,064m (2018:
 
£157,062m)
 
is split
 
by fair value
 
£128,547m (2018: £138,484m)
and amortised
 
cost £14,517m
 
(2018:
 
£18,578m).
 
Derivative assets and liabilities
 
The ‘Financial instruments’ column identifies financial assets and liabilities that are subject to set-off
 
under netting agreements,
 
such as the
 
ISDA
Master Agreement
 
or derivative exchange
 
or clearing counterparty agreements, whereby
 
all outstanding transactions
 
with the same counterparty
can be offset and close-out netting
 
applied across all outstanding transactions covered
 
by the agreements if an event of default or other
predetermined
 
events occur.
 
Financial collateral refers to cash and
 
non-cash collateral obtained, typically daily or weekly,
 
to cover the net exposure between
 
counterparties by
enabling the collateral to be realised in an event of default
 
or if other predetermined
 
events occur.
 
Repurchase and reverse
 
repurchase agreements
 
and other similar secured lending and borrowing
 
The ‘Amounts
 
offset’ column identifies financial assets and liabilities that are subject to set-off
 
under netting agreements,
 
such as Global Master
Repurchase
 
Agreements and Global Master Securities Lending Agreements,
 
whereby
 
all outstanding transactions
 
with the same counterparty can
be offset and close-out netting applied across
 
all outstanding transactions covered
 
by the agreements if an event of default or other predetermined
events occur.
 
Financial collateral typically comprises highly liquid securities which are legally transferred
 
and can be liquidated in the event of counterparty
default.
 
These offsetting and collateral arrangements
 
and other credit risk mitigation strategies used by the Group
 
are further explained in the Credit risk
mitigation section on pages 102
 
to 103.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Assets
 
at amortised
 
cost and
 
other
 
investments
 
 
 
257
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
The notes included in this section focus on the Group’s
 
loans and advances and deposits at amortised cost, leases, property,
 
plant and equipment
and goodwill and intangible assets.
 
Details regarding
 
the Group’s liquidity and capital position can be found on
 
pages 143
 
to 164.
 
 
19 Loans and advances and deposits
 
at amortised cost
Accounting for loans and advances and deposits held
 
at amortised cost under IFRS 9 effective from 1 January 2018
Loans and advances to customers and banks, customer accounts, debt securities and most
 
financial liabilities, are held at amortised cost. That is,
the initial fair value (which is normally
 
the amount advanced or
 
borrowed)
 
is adjusted
 
for repayments
 
and the amortisation of coupon, fees and
expenses to represent the effective
 
interest rate of the asset or liability.
 
Balances deferred on
 
-balance sheet as
 
effective interest rate
 
adjustments
are amortised to interest income
 
over the life of the financial instrument to which they relate.
 
Financial assets that are held in a business model to collect the contractual cash
 
flows and that contain contractual terms that give rise on specified
dates to cash flows that are SPPI, are
 
measured at amortised cost. The carrying value of these financial assets at initial recognition
 
includes any
directly attributable transaction costs.
 
Refer to Note 1 for details on ‘solely payments
 
of principal and interest’.
 
In determining whether
 
the business
 
model is a ‘hold to collect’ model, the objective of the business model must be to hold the financial asset to
collect contractual cash flows rather
 
than holding the financial asset for trading or
 
short-term profit taking purposes. While the objective of the
business model must be to hold the financial asset to collect contractual cash flows this does not mean the Group
 
is required to hold the financial
assets until maturity.
 
When determining if the business model objective is to collect contractual cash flows the Group
 
will consider past sales and
expectations about future sales.
 
Accounting for loans and advances and deposits held
 
at amortised cost under IAS 39 for 2017
 
Loans and advances to customers and banks, customer accounts, debt securities and most
 
financial liabilities, are held at amortised cost.
That is, the initial fair value (which is normally
 
the amount advanced or
 
borrowed)
 
is adjusted
 
for repayments
 
and the amortisation of coupon, fees
and expenses to represent
 
the effective interest rate of the asset or
 
liability. Balances deferred
 
on-balance sheet as effective interest rate
adjustments are amortised to interest income
 
over the life of the financial instrument to which they relate.
 
Loans and advances and deposits at amortised cost
2019
2018
As at 31 December
£m
£m
Loans and advances at amortised cost to banks
9,624
10,575
Loans and advances at amortised cost to customers
311,739
310,097
Debt securities at amortised cost
17,752
5,734
Total loans and advances at amortised cost
339,115
326,406
Deposits at amortised cost from banks
15,402
14,166
Deposits at amortised cost from customers
400,385
380,672
Total deposits at amortised cost
415,787
394,838
 
20 Property, plant and equipment
Accounting for property, plant and equipment
The Group
 
applies IAS 16
Property
 
Plant and Equipment
 
and IAS 40
Investment Properties
.
 
Property,
 
plant and equipment is stated at cost, which includes direct and incremental acquisition costs less accumulated depreciation and
provisions for impairment,
 
if required. Subsequent costs are capitalised if these result in enhancement
 
of the asset.
 
 
Depreciation is provided
 
on the depreciable amount
 
of items
 
of property,
 
plant and equipment on a straight-line basis
 
over their estimated useful
economic lives. Depreciation rates, methods
 
and the residual values underlying
 
the calculation of depreciation of items of property,
 
plant and
equipment are kept under
 
review to take account of any change in circumstances. The Group
 
uses the
 
following annual rates in calculating
depreciation:
 
Annual rates in calculating depreciation
Depreciation rate
 
Freehold land
 
Freehold buildings and
 
long-leasehold property
 
(more than 50 years to run)
 
Leasehold property
 
over the remaining
 
life of the
 
lease (less than 50 years to run)
Costs of adaptation of freehold and leasehold property
Equipment installed in freehold and leasehold property
Computers and similar equipment
Fixtures and fittings and other
 
equipment
Not depreciated
 
2-3.3%
Over the remaining
 
life of the lease
 
6-10%
6-10%
17
 
-33%
9-20%
 
Costs of adaptation and installed equipment are depreciated
 
over the shorter of the life of the lease or the depreciation rates noted in the table
above.
 
 
Investment property
The Group
 
initially recognises investment property at cost, and subsequently at fair value at each balance sheet date, reflecting market conditions
at the reporting
 
date. Gains and losses on remeasurement are included
 
in the income statement.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Assets
 
at amortised
 
cost and
 
other
 
investments
 
 
 
258
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
 
Investment
property
Property
Equipment
Leased assets
Right of
 
use
assets
a
Total
£m
£m
£m
£m
£m
£m
Cost
As at 31 December 2018
9
3,684
2,956
9
-
6,658
Effects of changes in accounting
 
policies (see
 
Note 1)
-
-
-
-
1,748
1,748
As at 1 January 2019
9
3,684
2,956
9
1,748
8,406
Additions
5
377
337
-
95
814
Disposals
-
(73)
(251)
-
(10)
(334)
Exchange and other
 
movements
(1)
(50)
(65)
-
(7)
(123)
As at 31 December 2019
13
3,938
2,977
9
1,826
8,763
Accumulated depreciation and impairment
As at 31 December 2018
-
(1,792)
(2,322)
(9)
-
(4,123)
Effects of changes in accounting
 
policies (see
 
Note 1)
-
-
-
-
(104)
(104)
As at 1 January 2019
-
(1,792)
(2,322)
(9)
(104)
(4,227)
Depreciation charge
-
(178)
(229)
-
(226)
(633)
Impairment
-
(11)
(1)
-
(2)
(14)
Disposals
-
56
205
-
-
261
Exchange and other
 
movements
-
24
41
-
-
65
As at 31 December 2019
-
(1,901)
(2,306)
(9)
(332)
(4,548)
Net book value
 
13
2,037
671
-
1,494
4,215
Cost
As at 1 January 2018
116
3,493
2,748
9
-
6,366
Additions
9
217
262
-
-
488
Disposals
(115)
(83)
(99)
-
-
(297)
Change in fair value of investment properties
(3)
-
-
-
-
(3)
Exchange and other
 
movements
2
57
45
-
-
104
As at 31 December 2018
9
3,684
2,956
9
-
6,658
Accumulated depreciation and impairment
As at 1 January 2018
-
(1,668)
(2,117)
(9)
-
(3,794)
Depreciation charge
-
(166)
(252)
-
-
(418)
Impairment
-
(3)
-
-
-
(3)
Disposals
-
73
79
-
-
152
Exchange and other
 
movements
-
(28)
(32)
-
-
(60)
As at 31 December 2018
-
(1,792)
(2,322)
(9)
-
(4,123)
Net book value
 
9
1,892
634
-
-
2,535
 
Note
a
 
Right of use
 
(ROU) asset
 
balances relate
 
to property
 
leases under IFRS 16, which Barclays
 
adopted on 1 January 2019.
 
Refer
 
to Note 21 for further
 
details.
 
Property
 
rentals of £22m (2018:
 
£19m) have
 
been included in other income.
 
The fair value of investment property
 
is determined by reference
 
to current market prices for similar properties, adjusted as necessary for condition
and location, or by reference
 
to recent transactions updated to reflect current economic
 
conditions. Discounted cash flow techniques may be
employe
 
d
 
to calculate fair value where there have been no
 
recent transactions, using current external market inputs such as market rents and
interest rates. Valuations are
 
carried out by management
 
with the support of appropriately qualified independent valuers. Refer to Note 17
 
for
further details.
 
 
 
 
Notes
 
to the financial
 
statements
Assets
 
at amortised
 
cost and
 
other
 
investments
 
 
 
259
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
21 Leases
Accounting for leases under IFRS 16 effective from 1 January 2019
IFRS 16 applies to all leases with the exception of licenses of
 
intellectual property,
 
rights held by licensing agreement within the scope of IAS 38
Intangible Assets,
 
service concession arrangements, leases of biological assets within the scope of IAS 41
Agriculture
 
and leases of minerals, oil,
natural gas and similar non
 
-regenerative
 
resources. IFRS 16 includes an accounting policy choice for
 
a lessee
 
to elect not to apply IFRS 16 to
remaining assets within the scope of IAS 38
 
Intangible Assets
 
which the Group
 
has decided to apply.
 
 
When the Group is the lessee, it is required
 
to recognise both:
 
A lease liability,
 
measured at the present value of remaining cash flows on the lease, and
 
 
A right of use (ROU) asset, measured at the amount of the initial measurement of the
 
lease liability, plus any
 
lease payments made prior
 
to
commencement
 
date, initial
 
direct costs, and estimated costs of restoring the underlying
 
asset to the
 
condition required
 
by the lease,
 
less any
lease incentives received.
 
Subsequently the lease liability will increase for the accrual of interest,
 
resulting in a constant rate of return
 
throughout the life of the lease, and
reduce when
 
payments are made. The right of use asset will amortise to the income statement over the life of the lease. The lease liability is
remeasured
 
when there is a change in one of the following:
 
Future lease payments arising
 
from a change in an index or rate;
 
The Group’s
 
estimate of the amount expected to be payable under
 
a residual value guarantee; or
 
The Group’s
 
assessment of whether it will exercise a purchase, extension or termination option.
 
When the lease liability is remeasured,
 
a corresponding
 
adjustment is
 
made to the carrying amount of the ROU asset, or is recorded
 
in the income
statement if the carrying
 
amount of the ROU asset has been reduced
 
to nil.
 
 
On the balance sheet, the ROU assets are included
 
within property,
 
plant and equipment and the lease liabilities are included within other liabilities.
 
 
The Group
 
applies the recognition exemption in IFRS 16 for
 
leases
 
with a term not exceeding
 
12 mo
 
nths. For these leases
 
the lease payments are
recognised as an expense on a straight line basis over
 
the lease term unless another systematic basis is more appropriate.
 
 
When the Group is the lessor,
 
the lease must be classified as either a finance lease or an operating lease. A finance lease is a lease which
 
confers
substantially all the risks and rewards
 
of the leased
 
assets on the lessee. An operating
 
lease is
 
a lease where substantially all of the risks and
rewards of the leased asset remain
 
with the lessor.
 
 
When the lease is deemed a finance lease, the leased asset is not held on the balance sheet; instead a finance lease receivable is recognised
representing
 
the minimum lease
 
payments
 
receivable under
 
the terms of the
 
lease, discounted at the rate of interest implicit in the lease.
 
When the lease is deemed an operating
 
lease,
 
the lease income is recognised
 
on a straight-line basis over the period of the lease unless another
systematic basis is more appropriate.
 
The Group
 
holds the leased
 
assets on-balance sheet within proper
 
ty, plant and equipment.
 
 
Accounting for finance leases under IAS 17 for 2018
 
and 2017
Under IAS 17,
 
a finance lease is a lease which confers substantially all the risks and rewards of the leased assets on the lessee. Where the Group
 
is
the lessor,
 
the leased asset is not held on the balance sheet; instead a finance lease receivable is recognised
 
represent
 
ing the minimum lease
payments receivable under
 
the terms of the lease, discounted at the rate of interest implicit in the lease. Where the Group
 
is the
 
lessee, the leased
asset is recognised
 
in property,
 
plant and equipment and a finance lease liability is
 
recognised, representing
 
the minimum lease payments payable
under the lease, discounted at the rate of interest implicit in the lease.
 
Interest income or expense is recognised
 
in interest receivable or payable, allocated to accounting periods
 
to reflect a
 
constant periodic
 
rate of
return
 
.
 
Accounting for operating leases under IAS
 
17 for 2018 and 2017
An operating
 
lease under IAS 17 is a lease where substantially all of the risks and rewards
 
of the leased assets remain with the lessor. Where the
Group
 
is the
 
lessor, lease
 
income is recognised on a straight-line basis over
 
the period of the lease unless another systematic basis is more
appropriate. The Group
 
holds the leased
 
assets on-balance sheet within property,
 
plant and equipment.
 
Where the Group
 
is the lessee, rentals payable are recognised as an expense in the income
 
statement on a straight-line basis over the lease term
unless another systematic basis is more
 
appropriate.
 
As a Lessor
Finance lease receivables are included
 
within loans and advances at amortised cost. The Group
 
specialises in the provision of leasing and other
asset finance facilities across a broad
 
range of asset types to business and individual customers
.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Assets
 
at amortised
 
cost and
 
other
 
investments
 
 
 
260
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
The following table sets out a maturity analysis of lease receivables,
 
showing the lease payments to be received
 
after the reporting date.
 
2019
2018
Gross
investment in
finance lease
receivables
Future
finance
income
Present value
of minimum
lease
payments
receivable
Unguarantee
d residual
values
Gross
investment
 
in
finance
 
lease
receivables
Future
 
finance
income
Present value
of minimum
lease
payments
receivable
Unguaranteed
residual
 
values
£m
£m
£m
£m
£m
£m
£m
£m
Not more than one year
1,403
(115)
1,288
77
1,333
(110)
1,223
86
One to two year
909
(76)
833
53
827
(69)
758
53
Two to three year
593
(49)
544
45
599
(49)
550
55
Three to four year
354
(28)
326
43
401
(38)
363
20
Four to five year
123
(8)
115
19
185
(15)
170
20
Over five years
115
(17)
98
22
381
(44)
337
22
Total
3,497
(293)
3,204
259
3,726
(325)
3,401
256
 
The Group
 
does not have any material operating leases as a lessor.
 
The impairment allowance for
 
finance lease receivables amounted to £55m (2018:
 
£87m).
 
Finance lease income
Finance lease income is included within interest income. The following table shows amounts recognised
 
in the income statement during the year.
 
2019
£m
Finance income from net investment in lease
141
Profit on sales
6
 
As a Lessee
 
The Group
 
leases
 
various offices,
 
branches and other
 
premises under non
 
-cancellable
 
lease arrangements to meet its
 
operational business
requirements. In some instances, Barclays will sublease property
 
to third parties when it is no longer needed
 
to meet business
 
requirements.
Currently, Barclays
 
does not have any material subleasing
 
arrangements.
 
ROU asset balances relate to property
 
leases
 
only. Refer to
 
Note 20 for a breakdown
 
of the carrying amount of ROU assets.
 
The total expenses recognised
 
during the year for
 
short term leases
 
were £14
 
m. The portfolio of short term leases
 
to which Barclays is exposed
 
at
the end of the year is not dissimilar to the expenses recognised
 
in the year.
 
Lease liabilities
2019
£m
As at 31 December 2018
-
Effect of changes in accounting policies (see Note 1)
1,696
As at 1 January 2019
1,696
Interest expense
76
New leases
94
Disposals
(19)
Cash payments
(289)
Exchange and other
 
movements
5
As at 31 December 2019 (see Note 23)
 
1,563
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Assets
 
at amortised
 
cost and
 
other
 
investments
 
 
 
261
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
The below table sets out a maturity analysis of undiscounted
 
lease liabilities, showing the lease payments to be paid after the reporting
 
date.
 
 
Undiscounted
 
lease liabilities maturity analysis
2019
£m
Not more than one year
296
One to two years
252
Two to three years
 
208
Three to four years
186
Four to five years
165
Five to ten years
565
Greater than ten years
310
Total undiscounted lease liabilities
 
as at
 
31 December 2019
1,982
 
In addition to the cash flows identified above,
 
Barclays is exposed to:
 
 
Variable lease payments: This variability
 
will typically arise from either inflation index instruments or market based pricing
 
adjustments. Currently,
Barclays has 939
 
leases out of the total 1,467 leases which have variable lease payment
 
terms based on market based pricing adjustments. Of the
gross cash flows identified above, £1
 
,526
 
m
 
is attributable
 
to leases with some degree
 
of variability predominately linked to market based pricing
adjustments.
 
Extension and termination options: The table above represents Barclays
 
best estimate of future cash out flows for
 
leases, including assumptions
regarding
 
the exercising of contractual extension and termination options. The above gross cash flows have been reduced
 
by £474m
 
for leases
where Barclays is highly expected
 
to exercise an early termination option. However,
 
there is no significant impact where Barclays is expected to
exercise an extension option.
 
The Group
 
currently does not have
 
any significant sale and lease back transactions. The Group does not have any
 
restrictions or covenants
imposed by the lessor on its property
 
leases
 
which restrict its businesses.
 
Operating lease commitments under
 
IAS 17 in 2018
In 2018,
 
operating lease rentals of £329m
 
were included in administration and general
 
expenses.
 
The prior year
 
comparative table for future
 
minimum lease payments by the Group under
 
non-cancellable operating leases are as
 
follows:
 
2018
Property
£m
Not more than one year
302
Over one year but not more
 
than five years
786
Over five years
1,257
Total
2,345
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Assets
 
at amortised
 
cost and
 
other
 
investments
 
 
 
262
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
22 Goodwill and intangible
 
assets
Accounting for goodwill
 
and intangible assets
Goodwill
The carrying value of goodwill
 
is determined in accordance with IFRS 3
Business Combinations
 
and IAS 36
Impairment of
 
Assets.
 
Goodwill arising on the acquisition of subsidiaries represents the excess of the fair value of the
 
purchase consideration
 
over the fair value of the
Group’s
 
share of the assets acquired and the liabilities and contingent
 
liabilities assumed on the date of the
 
acquisition.
 
Goodwill is reviewed annually for
 
impairment, or more
 
frequently when there
 
are indications that
 
impairment may have occurred.
 
The test
 
involves
comparing
 
the carrying value of the cash generating unit (CGU) including
 
goodwill with the
 
present value of the pre-tax cash flows, discounted at a
rate of interest that reflects the inherent
 
risks, of the CGU to which the goodwill relates, or the CGU’s fair value if this is higher.
 
 
Intangible assets
Intangible assets other than goodwill are
 
accounted for
 
in accordance with IAS 38
Intangible Assets
.
 
Intangible assets are initially recognised
 
when they are separable or arise from contractual
 
or other legal rights, the cost
 
can be measured reliably
and, in the case of intangible assets not acquired
 
in a business combination, where it is probable that future economic
 
benefits attributable to
 
the
assets will flow from
 
their use.
 
Intangible assets are stated at cost (which
 
is, in the case of assets acquired in a business combination, the acquisition date fair value) less
accumulated amortisation and provisions for
 
impairment, if any, and are
 
amortised over their useful lives in a manner
 
that reflects the pattern to
which they contribute to future cash flows, generally using the amortisation periods
 
set out below:
 
Annual rates in calculating amortisation
Amortisation
 
period
Goodwill
 
Internally generated
 
software
a
Other software
Customer lists
Licences and other
Not amortised
12 months to 6 years
12
 
months to 6 years
12 months to 25 years
12 months to 25 years
 
Intangible assets are reviewed
 
for impairment when
 
there are indications that impairment may have occurred.
 
Note
a
 
Exceptions
 
to the above rate relate
 
to useful
 
lives of certain
 
core banking platforms that are
 
assessed
 
individually and, if appropriate,
 
amortised over longer periods
 
ranging from
10 to 15 years.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Assets
 
at amortised
 
cost and
 
other
 
investments
 
 
 
263
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Intangible assets
Goodwill
Internally
 
generated
 
software
Other
 
software
Customer
 
lists
Licences
 
and other
Total
£m
£m
£m
£m
£m
£m
2019
Cost
 
As at 1 January 2019
4,768
5,835
389
1,630
558
13,180
Additions and disposals
-
857
120
(124)
(39)
814
Exchange and other
 
movements
(8)
(49)
(4)
(41)
(30)
(132)
As at 31 December 2019
4,760
6,643
505
1,465
489
13,862
Accumulated amortisation and impairment
As at 1 January 2019
(861)
(2,362)
(254)
(1,359)
(371)
(5,207)
Disposals
-
67
25
124
37
253
Amortisation charge
-
(716)
(52)
(49)
(37)
(854)
Impairment charge
-
(17)
(2)
-
-
(19)
Exchange and other
 
movements
-
39
4
34
7
84
As at 31 December 2019
(861)
(2,989)
(279)
(1,250)
(364)
(5,743)
Net book value
3,899
3,654
226
215
125
8,119
2018
Cost
 
As at 1 January 2018
4,759
5,501
427
1,547
519
12,753
Additions and disposals
-
280
(34)
-
12
258
Exchange and other
 
movements
9
54
(4)
83
27
169
As at 31 December 2018
4,768
5,835
389
1,630
558
13,180
Accumulated amortisation and impairment
As at 1 January 2018
(860)
(2,195)
(313)
(1,209)
(327)
(4,904)
Disposals
-
530
101
-
13
644
Amortisation charge
-
(669)
(50)
(81)
(34)
(834)
Impairment charge
-
(6)
-
-
-
(6)
Exchange and other
 
movements
(1)
(22)
8
(69)
(23)
(107)
As at 31 December 2018
(861)
(2,362)
(254)
(1,359)
(371)
(5,207)
Net book value
3,907
3,473
135
271
187
7,973
 
Goodwill
Goodwill is allocated to business operations according
 
to business
 
segments as follows:
 
2019
2018
£m
£m
Barclays UK
3,526
3,526
Barclays International
329
334
Head Office
44
47
Total net book value of goodwill
3,899
3,907
 
 
Notes
 
to the financial
 
statements
Assets
 
at amortised
 
cost and
 
other
 
investments
 
 
 
264
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Goodwill
 
Testing goodwill for impairment
 
involves a
 
significant amount of judgement.
 
This includes the
 
identification of independent CGUs and the allocation
of goodwill to these units based on which units are expected to benefit from the acquisition. Cash flow projections take into account changes in the
market in which a business operates including the level of growth, competitive activity, and the impacts
 
of regulatory change.
 
The estimation of
 
pre-
tax cash flows is sensitive to the periods for which detailed forecasts are available and to assumptions regarding
 
long-term sustainable
 
cash flows.
 
Goodwill
 
within Personal Banking was £2,718
 
m
 
(2018:
 
£2,718m)
 
,
 
of which £2,501m
 
(2018:
 
£2,501m) was attributable to Woolwich,
 
and within
Business Banking was £629
 
m
 
(2018:
 
£629m), fully attributable to Woolwich.
 
The carrying value of the CGUs have been determined
 
by using net
asset values. The recoverable
 
amounts of the CGUs,
 
calculated as value in use, have been determined
 
using cash flow predictions based on
financial budgets approved
 
by management, covering
 
a five-year period, with a terminal growth rate of 1.5% (2018: 0.0% to 3.5%)
 
applied
thereafter. The forecasted cash flows have been d
 
iscounted using a pre-tax rate
 
range of 11.0% to 13
 
.3%
 
(2018: 11.1%
 
to 13.7%). Based on these
assumptions, the total
 
recoverable
 
amount exceeded the carrying amount
 
including goodwill by £4,551m
 
(2018: £7,762m).
 
A one percentage point
change in the discount rate or terminal growth rate would increase or decrease
 
the recoverable amount by £1,45
 
8m
 
(2018: £1,501m)
 
and £968m
(2018:
 
£980m) respectively. A reduction in the forecasted cash flows of
 
15%
 
per annum (2018: 10%) would reduce the recoverable amount by
£2,534
 
m
 
(2018:
 
£1,828m). Other goodwill of £552m
 
(2018: £560m) was allocated to
 
multiple CGUs which are not considered
 
individually
significant.
 
Other intangible assets
 
Determining the estimated useful lives of intangible assets (such as those arising from contractual
 
relationships) requires an analysis
 
of
circumstances.
 
The assessment of whether an asset is exhibiting indicators of impairment as well as the calculation of
 
impairment, which requires
the estimate of future cash flows and fair values less costs to sell, also requires the preparation
 
of cash flow forecasts and fair
 
values for assets
 
that
may not be regularly bought
 
and sold.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Accruals,
 
provisions,
 
contingent
 
liabilities
 
and
 
legal
 
proceedings
 
 
 
265
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
The notes included in this section focus on the Group’s
 
accruals, provisions and contingent liabilities. Provisions are recognised
 
for present
obligations arising as consequences
 
of past events where it is probable that a transfer of economic
 
benefit will be necessary to settle the obligation,
and it can be reliably estimated. Contingent liabilities reflect potential liabilities that
 
are not recognised
 
on the balance sheet.
 
 
23 Other liabilities
 
2019
2018
£m
£m
Accruals and deferred
 
income
a
3,472
3,877
Other creditors
3,257
3,540
Items in the course of collection due to other banks
213
277
Obligations under finance lease
-
22
Lease liabilities
b
 
(refer to Note 21)
1,563
-
Other liabilities
8,505
7,716
 
Notes
 
a
 
Upon adoption
 
of IFRS 16 on 1 January
 
2019, £40m of rent
 
free adjustments
 
which were
 
previously recorded within
 
accruals and
 
deferred income were transferred
 
to right of use
asset impairment
 
allowance. Please see Note 1 for further
 
detail.
 
b
 
Lease liabilities
 
represents
 
the minimum lease
 
payments under the lease
 
,
 
discounted at the rate
 
of interest implicit in
 
the lease.
 
 
24 Provisions
Accounting for provisions
The Group
 
applies IAS 37
Provisions, Contingent Liabilities and Contingent Assets
in accounting for non
 
-financial liabilities.
 
 
Provisions are recognised
 
for present obligations arising as consequences of past events where it is more likely than not that a transfer of
 
economic
benefit will be necessary to settle the obligation, which can be reliably estimated.
 
Provision is made for the anticipated cost of restructuring,
including redundancy
 
costs when an obligation exists;
 
for example, when the Group
 
has a detailed
 
formal plan for restructuring
 
a business
 
and has
raised valid expectations in those affected by
 
the restructuring
 
by announcing
 
its
 
main features or starting to implement the plan. Provision is made
for undrawn
 
loan commitments if it is
 
probable
 
that the
 
facility will be drawn
 
and result in the recognition of an asset at an amount less than the
amount advanced.
 
Critical accounting estimates and judgements
 
The financial reporting
 
of provisions involves a significant degree of judgement
 
and is complex. Identifying whether a present obligation exists
 
and
estimating the probability,
 
timing, nature and quantum of the outflows that may arise from
 
past events requires judgements to be made based on
the specific facts and circumstances relating to individual events and often requires
 
specialist professional advice. When matters
 
are at an early
stage, accounting judgements and
 
estimates can be difficult because of the high degree of uncertainty involved.
 
Management continues to monitor
matters as they develop to re
 
-evaluate on an ongoing
 
basis whether provisions should be recognised,
 
however there can remain
 
a wide range of
possible outcomes and uncertainties, particularly in relation to legal, competition and regulatory
 
matters, and as a result it is often not practicable
to make meaningful estimates even when matters
 
are at a more advanced
 
stage.
 
 
The complexity of such matters often requires the input of
 
specialist professional advice in making assessments to produce
 
estimates.
 
Customer
redress and legal, competition and regulatory
 
matters are areas where a higher degree
 
of professional judgement is required. The amount
 
that is
recognised as a provision
 
can also be very sensitive to the assumptions made in calculating it. This gives rise to a large range of potential outcomes
which require
 
judgement in determining an appropriate provision
 
level. See
 
below for information
 
on payment protection
 
redress and Note 26 for
more detail of legal, competition and regulatory
 
matters.
 
Undrawn
contractually
committed
facilities and
guarantees
a
Customer redress
Legal,
competition
and
regulatory
matters
Onerous
contracts
Redundancy
and
restructuring
Payment
Protection
Insurance
Other
customer
redress
Sundry
provisions
Total
£m
£m
£m
£m
£m
£m
£m
£m
As at 31 December 2018
139
169
271
888
444
414
327
2,652
Effects of changes in accounting
 
policies
b
(64)
-
-
-
-
-
-
(64)
As at 1 January 2019
75
169
271
888
444
414
327
2,588
Additions
29
178
391
1,425
219
287
121
2,650
Amounts utilised
(48)
(137)
-
(1,158)
(211)
(303)
(86)
(1,943)
Unused amounts reversed
(14)
(58)
(334)
-
(38)
(17)
(38)
(499)
Exchange and other
 
movements
-
(9)
(6)
-
6
(5)
(18)
(32)
As at 31 December 2019
42
143
322
1,155
420
376
306
2,764
 
Notes
a
 
Undrawn
 
contractually
 
committed
 
facilities
 
and guarantees provisions
 
are accounted for under
 
IFRS 9.
b
 
Upon adoption
 
of IFRS 16 on 1 January
 
2019, £64m of onerous
 
lease provisions
 
were transferred
 
to right of use asset impairment
 
allowance. Please see page
 
216 in note 1 for
 
 
Notes
 
to the financial
 
statements
Accruals,
 
provisions,
 
contingent
 
liabilities
 
and
 
legal
 
proceedings
 
 
 
266
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
further
 
detail.
 
Provisions expected to be recovered
 
or settled within no more than 12 months after 31
 
December 2019
 
were £2,457
 
m
 
(2018:
 
£2,144m).
 
Onerous contracts
 
Onerous contract provisions
 
comprise an estimate
 
of the costs involved
 
with fulfilling
 
the terms and conditions of contracts net of any expected
benefits to be received.
 
Redundancy and restructuring
 
These provisions comprise the estimated cost of restructuring,
 
including redundancy costs
 
where an obligation exists. Additions made during the
year relate to formal restructuring plans and have
 
either been utilised,
 
or reversed, where
 
total costs
 
are now expected to be lower
 
than the
original provision
 
amount.
 
Undrawn contractually committed facilities and guarantees
 
Impairment allowance
 
under IFRS 9 considers both the drawn and
 
the undrawn counterparty exposure. For retail
 
portfolios, the total
 
impairment
allowance is allocated to the
 
drawn
 
exposure to the extent that
 
the allowance does not exceed the exposure as ECL
 
is not reported separately. Any
excess is reported
 
on the liability
 
side of the
 
balance sheet as
 
a provision.
 
For wholesale portfolios, the impairment allowance on the
 
undrawn
exposure is reported
 
on the liability
 
side of the
 
balance sheet as
 
a provision.
 
Provisions are made if it is probable that a facility
 
will be drawn
 
and
the resulting asset is expected to have a realisable value that is less than the
 
amount advanced.
 
Customer redress
 
Customer redress provisions comprise
 
the estimated
 
cost of making redress payments to customers, clients and counterparties for
 
losses
 
or
damages associated with inappropriate
 
judgement in the execution of Barclays Group
 
’s
 
business activities.
 
Provisions for other
 
customer redress
include smaller provisions across the retail and corporate
 
businesses
 
which are expected to be utilised in the next 12
 
-24 months.
 
 
Legal, competition and regulatory matters
 
The Barclays Group
 
is engaged in various legal proceedings, both in the UK and a number
 
of other overseas jurisdictions, including the US. For
further information
 
in relation to legal proceedings and
 
discussion of the
 
associated uncertainties, refer to Note 26.
 
 
Sundry provisions
 
This category includes provisions
 
that do not fit
 
into any of the other categories, such as fraud losses and dilapidation provisions.
 
Payment Protection Insurance (PPI) Redress
As at 31 December
 
2019,
 
Barclays had recognised
 
cumulative provisions totalling
 
£11bn
 
(December 2018:
 
£9.6bn), against the cost
 
of PPI redress
and associated processing costs, of which £1.4bn
 
was recognised in Q319.
 
Utilisation of the
 
cumulative provisions to
 
date is £9.8bn (December
2018:
 
£8.7bn), leaving a residual provision
 
of £1.2bn
 
(December 2018:
 
£0.9bn). This represents Barclays best estimate
 
as at 31 December
 
2019
based on the information available.
 
The current provision
 
reflects the
 
estimated cost of PPI redress attributable to claims
 
and information requests from
 
customers, Claims
Management Companies and the Official Receiver
 
in relation to bankrupt
 
individuals, prior to the Financial
 
Conduct Authority
 
(FCA) complaint
deadline of 29th August 2019
 
.
 
Q3 2019
 
saw an exceptional level of claims, enquiries and information
 
requests received in advance of the complaint deadline of 29 August 2019.
 
Of the greater than two million items outstanding at Q3 2019,
 
materially all have now been processed into Barclays’ systems, 52%
 
of which has
been resolved including
 
invalid items.
 
The residual provision has been calculated by
 
applying a number
 
of assumptions to
 
the population of claims and information requests.
 
Based on
resolution of
 
complaints during
 
Q4 2019,
 
the observed outcomes support the aggregate provision amount.
 
The following table outlines the key assumptions used in the provision
 
calculation as at 31 December
 
2019,
 
excluding enquiries from the Official
Receiver, and
 
a sensitivity analysis illustrating the impact on the provision,
 
if assumptions prove too high
 
or too low.
 
Assumptions
 
Validity of claims and information
 
requests received (%)
 
- the proportion
 
of claims
 
and information requests received
 
prior to the FCA
complaint deadline that are expected to be valid when
 
all processing stages are completed
 
Average uphold
 
rate per
 
claim (%)
 
- the expected average uphold
 
rate applied to valid claims where PPI policy/policies exist
 
Average claim redress
 
- the expected average payment
 
to customers for upheld valid claims based on the type and age of the policy/policies (£)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Accruals,
 
provisions,
 
contingent
 
liabilities
 
and
 
legal
 
proceedings
 
 
 
267
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Validity assumptions
Historically observed
valid
Current assumption
valid
Sensitivity volume
+/- 1% valid rate
Sensitivity
 
£m
Claims received
a
20% - 40%
25%
e
3k
 
1% = £8m
Information
 
requests received
b
5% - 11%
7%
e
32k
1% = £76m
Average
 
uphold rate per
 
claim
c
88%
86%
f
-
1%
 
= £8m
Average
 
uphold rate per
 
valid claim
d
£2,231
£2,314
-
£100
 
= £31m
 
Notes
a
 
Total valid
 
claims received,
 
excluding
 
those for which no PPI policy exists,
 
information requests received,
 
enquiries from the Official
 
Receiver in relation to bankrupt
 
individuals and
responses
 
to proactive mailing.
 
The sensitivity
 
analysis has
 
been calculated to show the impact
 
of a 1% increase or decrease
 
in the volume of unresolved
 
valid claims would
 
have
on
 
the provision
 
level, inclusive
 
of operational processing
 
costs.
b
 
Total valid
 
information
 
requests
 
received,
 
excluding those for which
 
no PPI policy exists, enquiries
 
from the Official Receiver
 
in relation to bankrupt individuals
 
and responses to
proactive
 
mailing. The
 
sensitivity
 
analysis has been calculated
 
to show the impact
 
a 1% increase or decrease
 
in the volume of valid information
 
requests
 
would have on the
provision
 
level, inclusive
 
of operational processing
 
costs.
c
 
Average uphold
 
rate per
 
claim, excluding those
 
for which
 
no PPI
 
policy exists,
 
enquiries
 
from the Official Receiver
 
in relation to bankrupt
 
individuals and responses
 
to proactive
mailing. The
 
sensitivity
 
analysis has been calculated
 
to show the impact a 1% change in
 
the average uphold
 
rate per
 
claim would have on the
 
provision level.
 
d
 
Average redress
 
stated
 
on a per policy basis
 
for valid claims received
 
by Barclays excluding
 
enquiries from the
 
Official Receiver in
 
relation to bankrupt
 
individuals and responses
 
to
proactive
 
mailing. The
 
sensitivity
 
analysis has been calculated
 
to show the impact
 
a £100 increase or decrease
 
in the average redress
 
per claim would
 
have on the provision level.
e
 
Based
 
on recently
 
observed data,
 
August to December 2019.
f
 
Based
 
on annual
 
observed rate to September
 
2019. No material change observed to
 
December 2019.
 
These assumptions remain subjective due to the uncertainty associated with the outstanding population
 
of claims and information requests yet to
be resolved.
 
It is possible that the eventual cumulative provision
 
may differ from
 
the current estimate.
 
The estimate related to enquiries received from
 
the Official Receiver is subject to additional uncertainty and sensitivity as the legal position; uphold
rates and average
 
claim redress may differ from those experienced
 
more generally,
 
given the particular circumstances of this population. The range
of uncertainty is not material in the context of the total provision.
 
25 Contingent liabilities
 
and commitments
Accounting for contingent liabilities
Contingent liabilities are possible obligations whose existence will be confirmed
 
only by uncertain future
 
events, and present obligations where the
transfer of economic resources
 
is uncertain or cannot be reliably measured. Contingent liabilities are not recognised
 
on the balance sheet but are
disclosed unless the likelihood of an outflow of economic
 
resources is remote.
 
The following table summarises the nominal principal
 
amount of contingent liabilities and commitments which are not recorded
 
on-balance sheet:
 
2019
2018
£m
£m
Guarantees and letters of credit
 
pledged as collateral security
17,606
15,805
Performance
 
guarantees, acceptances and endorsements
6,921
4,498
Total contingent liabilities
24,527
20,303
Of which: Financial guarantees carried
 
at fair value
43
4
Documentary credits and other
 
short-term trade related transactions
1,291
1,741
Standby facilities, credit lines and other commitments
333,164
322,482
Total commitments
334,455
324,223
Of which: Loan commitments carried
 
at fair value
17,679
11,723
 
Provisions held against contingent
 
liabilities and commitments equal £322m (2018:
 
£271m).
 
 
Further details on contingent liabilities relating to legal and competition and regulatory
 
matters can be found in Note 26.
 
 
Notes
 
to the financial
 
statements
Accruals,
 
provisions,
 
contingent
 
liabilities
 
and
 
legal
 
proceedings
 
 
 
268
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
26 Legal, competition and regulatory matters
 
Members of the Group
 
face legal, competition and regulatory
 
challenges, many of which are beyond
 
our control. The extent
 
of the impact of these
matters cannot always
 
be predicted but may materially impact our
 
operations, financial results, condition and prospects. Matters arising from a set
of similar circumstances can give rise to either a contingent
 
liability or a provision, or both, depending
 
on the relevant facts and circumstances.
 
 
The recognition
 
of provisions in relation to such matters involves critical accounting
 
estimates and judgments in accordance
 
with the relevant
accounting policies as described in Note 24,
 
Provisions. We
 
have not disclosed an estimate of the potential financial impact or effect on the
 
Group
of contingent liabilities where it is not currently
 
practicable to do so. Various matters
 
detailed in this note seek damages of an unspecified amount.
While certain matters specify the damages claimed, such claimed amounts do not necessarily reflect
 
the Group’s potential financial exposure
 
in
respect of those matters.
 
 
Matters are ordered
 
under headings corresponding to the financial statements in which they are disclosed.
 
 
1.
 
Barclays PLC and Barclays Bank PLC
 
Investigations into certain advisory
 
services agreements and other matters and
 
civil action
 
FCA proceedings
 
In 2008,
 
Barclays Bank PLC and Qatar Holdings LLC entered into two advisory service agreements
 
(the Agreements). The Financial Conduct
Authority (FCA), is conducting
 
an investigation into whether the Agreements may have related to Barclays PLC’s capital raisings in
 
June and
November
 
2008
 
(the Capital
 
Raisings) and therefore should have
 
been disclosed in the announcements or public documents relating to the Capital
Raisings. In 2013,
 
the FCA issued
 
warning
 
notices (the Notices) finding that Barclays PLC and Barclays Bank PLC acted recklessly
 
and in breach of
certain disclosure-related listing rules, and that Barclays PLC
 
was also in breach
 
of Listing
 
Principle 3. The financial penalty provided
 
in the Notices
is £50m. Barclays PLC and Barclays Bank
 
PLC continue
 
to contest the findings. The FCA action has been stayed due to the UK Serious Fraud
 
Office
(SFO) proceedings
 
pending against certain former
 
Barclays executives.
 
All charges brought
 
by the SFO against Barclays PLC and Barclays Bank PLC
in relation to the Agreements
 
were dismissed in 2018.
 
Civil action
 
PCP Capital Partners LLP and PCP International Finance Limited (PCP) are seeking damages of approximately £1.6bn
 
from Barclays Bank PLC for
fraudulent misrepresentation and
 
deceit, arising from alleged statements made by Barclays Bank PLC
 
to PCP in relation to the terms on which
securities were to be issued to potential investors, allegedly
 
including PCP,
 
in the November 2008
 
capital raising.
 
Barclays Bank PLC is defending
 
the
claim and trial is scheduled to commence
 
in June 2020.
 
Investigation into historic
 
hiring
 
practices
 
In 2019,
 
Barclays PLC reached
 
a settlement of $6.4m with the US Securities and Exchanges Commission (SEC) in relation to certain of
 
its hiring
practices in Asia, resolving this matter.
 
 
Investigations into LIBOR and other benchmarks and related civil actions
 
 
Regulators and law enforcement
 
agencies, including certain competition authorities, from a number
 
of governments have been conducting
investigations relating to Barclays Bank
 
PLC’s involvement in allegedly manipulating
 
certain financial benchmarks, such as LIBOR. The SFO has
closed its investigation with no action to be taken against the
 
Group.
 
Various
 
individuals and corporates in a range of jurisdictions have threatened
or brought
 
civil actions
 
against the Group and
 
other banks in relation to the alleged manipulation of LIBOR and/or other benchmarks. Certain
actions remain pending.
 
USD LIBOR civil actions
 
The majority of the USD LIBOR cases, which have been
 
filed in various US jurisdictions, have been consolidated for pre
 
-trial purposes in the US
District Court in the Southern District of New York
 
(SDNY). The complaints are substantially similar and allege, among other
 
things, that
 
Barclays
PLC, Barclays Bank PLC,
 
Barclays Capital Inc. (BCI) and other financial institutions individually and collectively violated provisions of the
 
US Sherman
Antitrust Act (Antitrust Act), the US Commodity Exchange
 
Act (CEA), the US Racketeer Influenced and Corrupt Organizations Act (RICO), the
Securities Exchange Act of 1934
 
and various state laws by manipulating USD LIBOR rates.
 
 
Putative class actions and individual actions seek unspecified damages with the exception
 
of five lawsuits, in which the plaintiffs are seeking a
combined total in excess of $1.25bn
 
in actual damages and additional
 
punitive damages against all defendants, including Barclays Bank PLC. Some
of the lawsuits also seek trebling of damages under
 
the Antitrust Act and RICO. Barclays has previously settled certain
 
claims. Two of the class
action settlements where Barclays
 
has paid $20m
 
and $7.1m,
 
respectively, remain subject to final court approval
 
and/or the right of class members
to opt out of the settlement to file their own
 
claims.
 
Sterling LIBOR civil actions
 
In 2016,
 
two putative class actions filed in the SDNY against Barclays Bank PLC, BCI and other Sterling LIBOR panel banks alleging, among
 
other
things, that the defendants manipulated the Sterling LIBOR rate in violation of
 
the Antitrust Act, CEA and RICO, were
 
consolidated. The defendants’
motion to dismiss the claims was granted in December
 
2018.
 
The plaintiffs
 
have appealed the dismissal.
 
Japanese Yen
 
LIBOR civil actions
 
In 2012,
 
a putative class action was filed in the SDNY against Barclays Bank PLC and other Japanese
 
Yen LIBOR panel banks by
 
a lead plaintiff
involved in exchange
 
-traded derivatives and members of the Japanese Bankers
 
Association’s
 
Euroyen
 
Tokyo
 
Interbank
 
Offered Rate (Euroyen
TIBOR) panel. The complaint alleges, among other
 
things, manipulation of the Euroyen TIBOR and Yen
 
LIBOR rates and breaches of the CEA and
the Antitrust Act. In 2014,
 
the court dismissed the
 
plaintiff’s antitrust claims in full, but the plaintiff’s CEA claims remain pending.
 
In 2015,
 
a second putative class action, making similar allegations to the above class action, was filed in the SDNY against Barclays PLC, Barclays
Bank PLC and BCI. In 2017,
 
this action was dismissed in full and the plaintiffs have appealed the dismissal.
 
 
 
Notes
 
to the financial
 
statements
Accruals,
 
provisions,
 
contingent
 
liabilities
 
and
 
legal
 
proceedings
 
 
 
269
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
 
SIBOR/SOR civil action
 
In 2016,
 
a putative class action was filed in the SDNY against Barclays PLC, Barclays Bank PLC, BCI and other
 
defendants, alleging manipulation of
the Singapore Interbank
 
Offered Rate (SIBOR) and Singapore
 
Swap Offer Rate (SOR). In October 2018,
 
the court dismissed all claims
 
against
Barclays PLC, Barclays
 
Bank PLC and BCI. The plaintiffs have appealed the
 
dismissal.
 
 
ICE LIBOR civil
 
actions
In 2019,
 
several putative class actions have been filed in the SDNY against Barclays PLC, Barclays
 
Bank PLC, BCI, other financial institution
defendants and Intercontinental Exchange
 
Inc. and certain of its
 
affiliates (ICE), asserting antitrust claims that defendants manipulated USD LIBOR
through
 
defendants’ submissions to
 
ICE. These actions have been consolidated. The defendants ha
 
ve filed a motion to dismiss.
 
Non-US benchmarks
 
civil actions
 
Legal proceedings (which
 
include the claims
 
referred
 
to below in ‘Local authority civil actions concerning
 
LIBOR’) have been brought or threatened
against Barclays Bank PLC (and, in
 
certain cases, Barclays Bank UK PLC) in the UK in connection
 
with alleged manipulation of LIBOR, EURIBOR and
other benchmarks. Proceedings
 
have also been brought in a number
 
of other jurisdictions
 
in Europe and Israel. Additional proceedings
 
in other
jurisdictions may be brought
 
in the future.
 
Foreign Exchange investigations and related civil actions
 
In 2015,
 
the Group reached
 
settlements
 
totalling approximately $2.38bn
 
with various US federal and state
 
authorities and the FCA in relation to
investigations into certain sales and trading
 
practices in the Foreign Exchange
 
market. Under the related plea agreement with the US Department of
Justice (DoJ),
 
which received final court approval
 
in January 2017,
 
the Group agreed to a term of probation
 
of three years. The Group also continues
to provide relevant
 
information to certain authorities.
 
 
The European
 
Commission is
 
one of a number
 
of authorities still conducting an investigation into certain trading practices in Foreign Exchange
markets. The European
 
Commission announced
 
two settlements
 
in May 2019
 
and the Group
 
paid penalties totalling
 
approximately €210m.
 
In June
2019,
 
the Swiss Competition Commission announced
 
two settlements
 
and the Group
 
paid penalties totalling approximately CHF 27m. The financial
impact of the ongoing
 
matters is not expected to be material to the Group’s operating
 
results, cash
 
flows or financial position.
 
A number
 
of individuals and corporates in a range of jurisdictions have also threatened or
 
brought civil actions against the
 
Group
 
and other banks
in relation to alleged manipulation of Foreign
 
Exchange markets, and may do so in the future. Certain
 
actions remain pending.
 
 
FX opt out
 
civil action
 
In 2018,
 
Barclays Bank PLC and BCI settled a consolidated action filed in the SDNY, alleging
 
manipulation of Foreign
 
Exchange markets
(Consolidated FX Action), for a total amount of $384m.
 
Also in 2018,
 
a group
 
of plaintiffs
 
who opted out of the Consolidated FX Action filed a
complaint in the SDNY against Barclays PLC, Barclays
 
Bank PLC, BCI and other
 
defendants.
 
 
Retail basis
 
civil action
 
In 2015,
 
a putative class action was filed against several international banks, including Barclays PLC and BCI, on behalf of a proposed
 
class
 
of
individuals who exchanged
 
currencies on a retail basis at bank branches (Retail Basis Claims). The SDNY has ruled that the Retail Basis Claims are
not covered
 
by the settlement agreement in the Consolidated FX Action. The Court subsequently dismissed all Retail Basis
 
Claims against the Group
and all other defendants. The plaintiffs have
 
filed an amended complaint.
 
State law FX civil action
 
In 2017,
 
the SDNY dismissed consolidated putative
 
class actions brought
 
under federal and various state laws on behalf of proposed
 
classes
 
of (i)
stockholders of Exchange Traded
 
Funds and others who purportedly were
 
indirect investors in FX instruments, and (ii)
 
investors who traded FX
instruments through
 
FX dealers or brokers not alleged to have manipulated Foreign
 
Exchange Rates. The plaintiffs’
 
amended complaint as to their
state law claims is pending.
 
Non-US FX civil actions
 
In addition to the actions described above, legal proceedings
 
have been brought
 
or are threatened against Barclays PLC, Barclays Bank PLC, BCI and
Barclays Execution Services Limited (BX)
 
in connection with alleged manipulation of Foreign
 
Exchange in the UK, a number of other jurisdictions in
Europe, Israel and Australia and additional proceedings
 
may be brought in the future.
 
Metals investigations and related civil actions
 
Barclays Bank PLC
 
previously provided
 
information to the DoJ, the US Commodity Futures Trading
 
Commission and other authorities
 
in connection
with investigations into metals and metals-based financial instruments.
 
 
A number
 
of US civil
 
complaints, each on behalf of a proposed
 
class
 
of plaintiffs, have been consolidated and transferred
 
to the SDNY. The
complaints allege that Barclays Bank PLC
 
and other members
 
of The London Gold
 
Market Fixing Ltd. manipulated the
 
prices of gold and gold
derivative contracts in violation of US antitrust and other
 
federal laws. This consolidated putative class action remains pending.
 
A separate US civil
complaint by a proposed
 
class
 
of plaintiffs against a number
 
of banks, including Barclays Bank PLC, BCI and BX (formerly,
 
Barclays Capital Services
Limited), alleging manipulation of the price of silver in violation of the CEA, the Antitrust Act and state antitrust and consumer
 
protection laws, has
been dismissed as against the Barclays entities. The plaintiffs
 
have the option to
 
seek the court’s permission to appeal.
 
Civil actions have also been filed in Canadian courts against Barclays PLC,
 
Barclays Bank PLC, Barclays
 
Capital Canada Inc. and BCI on behalf of
proposed
 
classes
 
of plaintiffs
 
alleging manipulation of gold and silver prices.
 
 
 
 
Notes
 
to the financial
 
statements
Accruals,
 
provisions,
 
contingent
 
liabilities
 
and
 
legal
 
proceedings
 
 
 
270
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
US residential
 
mortgage related civil actions
 
There are various pending
 
civil actions
 
relating to US Residential Mortgage
 
-Backed Securities (RMBS), including four actions arising from
unresolved
 
repurchase
 
requests submitted by Trustees for certain RMBS, alleging breaches of various loan-level representations and
 
warranties
(R&Ws) made by Barclays
 
Bank PLC and/or a subsidiary acquired
 
in 2007
 
(the Acquired
 
Subsidiary). The unresolved repurchase requests received
as at 31 Dece
 
mber 2019
 
had an original unpaid principal balance of approximately $2.1bn.
 
The Trustees have also alleged that the relevant R&Ws
may have been breached
 
with respect to a
 
greater (but unspecified)
 
amount of loans than previously stated in the unresolved
 
repurchase
 
requests.
 
 
These repurchase actions are ongoing.
 
In one repurchase action, the New York
 
Court of Appeals held that claims related to certain R&Ws are time-
barred.
 
Barclays Bank PLC has reached a settlement to resolve two of the
 
repurchase
 
actions,
 
which is subject to final court approval.
 
The financial
impact of the settlement is not expected to be material to the Group’s
 
operating results, cash flows or financial position. The remaining two
repurchase
 
actions are pending.
 
Government and agency securities civil
 
actions and related matters
Certain governmental
 
authorities are conducting investigations into activities relating to the trading of certain government
 
and agency securities in
various markets. The Group
 
provided
 
information in cooperation
 
with such investigations.
 
Civil actions have also been filed on the basis of similar
allegations, as described below.
 
Treasury
 
auction
 
securities civil actions
Consolidated putative class action complaints filed in US federal court
 
against Barclays Bank PLC, BCI and other financial institutions under the
Antitrust Act and state common
 
law allege that
 
the defendants (i) conspired
 
to manipulate the US Treasury securities market and/
 
or (ii) conspired
to prevent the creation of certain platforms by
 
boycotting
 
or threatening to boycott
 
such trading platforms. The defendants have filed a motion to
dismiss.
 
In addition, certain plaintiffs have filed a related, direct action
 
against BCI and certain other financial institutions, alleging that defendants conspired
to fix and manipulate the US Treasury
 
securities market in violation of the Antitrust Act, the CEA and state common law.
 
Supranational,
 
Sovereign and
 
Agency bonds civil actions
Civil antitrust actions have been filed in the SDNY and Federal
 
Court of Canada in Toronto
 
against Barclays Bank PLC, BCI,
 
BX (formerly,
 
Barclays
Services Limited), Barclays Capital Securities
 
Limited and, with respect to the civil action filed in Canada only, Barclays Capital
 
Canada, Inc. and
other financial institutions alleging that the defendants conspired
 
to fix prices
 
and restrain
 
competition in the market for US dollar-
 
denominated
Supranational, Sovereign
 
and Agency bonds.
 
 
In one of the actions filed in the SDNY, the court
 
granted the defendants’ motion to dismiss the plaintiffs’ complaint with respect to Barclays Bank
PLC and certain Group
 
entities. Defendants have filed a motion to dismiss those plaintiffs’ remaining
 
claims against BCI.
 
The remaining action filed
in the SDNY is stayed.
 
Variable
 
Rate Demand Obligations
 
civil actions
Civil actions have been filed against Barclays
 
Bank PLC and BCI and other financial institutions alleging the defendants conspired
 
or colluded to
artificially inflate interest rates set for Variable
 
Rate Demand Obligations (VRDOs). VRDOs are municipal bonds
 
with interest rates that reset on a
periodic basis, most commonly weekly.
 
Two actions in state court
 
have been filed by private plaintiffs on behalf of the states of Illinois and
California. Two
 
putative class action complaints, which have been consolidated, have
 
been filed in the SDNY.
 
 
Government
 
bond civil
 
actions
In a putative class action filed in the SDNY in 2019,
 
plaintiffs alleged that BCI and certain other bond dealers conspired
 
to fix the
 
prices of US
government
 
sponsored
 
entity bonds in violation of US
 
antitrust law. BCI has agreed a settlement of $87m,
 
subject to court approval.
 
In 2019,
 
the
Louisiana Attorney
 
General and the City of Baton Rouge each filed a complaint against Barclays Bank PLC
 
and other financial institutions making
similar allegations as the class action plaintiffs.
 
In 2018,
 
a separate putative class action against various financial institutions including Barclays PLC, Barclays
 
Bank PLC, BCI, Barclays Bank Mexico,
S.A., and certain other subsidiaries of the Group
 
was consolidated in the SDNY. The plaintiffs asserted antitrust and state law claims arising out of
an alleged conspiracy
 
to fix the
 
prices of Mexican Government
 
bonds. Barclays PLC has settled the claim, subject to court approval.
 
The financial
impact of the settlement is not material to the Group’s
 
operating results, cash flows or financial position.
 
BDC Finance L.L.C.
 
In 2008,
 
BDC Finance L.L.C. (BDC) filed
 
a complaint in the NY Supreme
 
Court, demanding
 
damages of $298m, alleging that Barclays Bank PLC had
breached
 
a contract in connection with a portfolio of total return swaps governed
 
by an ISDA Master Agreement
 
(collectively, the Agreement).
Following a trial on certain liability issues, the court ruled
 
in December 2018
 
that Barclays Bank PLC was not a
 
defaulting party,
 
which was affirmed
on appeal.
 
In 2011,
 
BDC’s
 
investment advisor,
 
BDCM Fund Adviser, L.L.C. and its parent
 
company,
 
Black Diamond Capital Holdings, L.L.C. also sued Barclays
Bank PLC and BCI in Connecticut State Court for unspecified damages allegedly resulting from
 
Barclays Bank PLC’s conduct
 
relating to the
Agreement, asserting claims for violation of the Connecticut Unfair Trade
 
Practices Act and tortious interference with business and prospective
business relations. This case is currently
 
stayed.
 
Civil actions in respect of the US Anti-Terrorism
 
Act
 
There are a number
 
of civil actions, on behalf of
 
more than 4,000
 
plaintiffs, filed in US federal courts in the US District Court in the Eastern District
of New York
 
(EDNY) and SDNY against Barclays Bank PLC and a number
 
of other banks. The complaints generally allege that Barclays Bank PLC
and those banks engaged
 
in a conspiracy to facilitate
 
US dollar
 
-denominated transactions for the Government
 
of Iran and various Iranian banks,
 
 
Notes
 
to the financial
 
statements
Accruals,
 
provisions,
 
contingent
 
liabilities
 
and
 
legal
 
proceedings
 
 
 
271
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
which in turn funded acts of terrorism that injured
 
or killed plaintiffs or plaintiffs’ family members. The plaintiffs seek to recover
 
damages for pain,
suffering and mental anguish under
 
the provisions of the US Anti-Terrorism
 
Act, which allow for the trebling of any proven
 
damages.
 
 
The court granted
 
the defendants’ motion to dismiss
 
one action in the EDNY,
 
and plaintiffs have filed a notice of appeal. The defendants
 
have
moved to dismiss two other
 
EDNY actions. The court also granted the defendants’ motion to dismiss another action in the SDNY, but the plaintiffs
have moved
 
to file an amended complaint. The remaining actions are stayed pending decisions in these cases.
 
 
Interest rate swap and credit default swap US civil
 
actions
 
Barclays PLC, Barclays
 
Bank PLC and BCI, together
 
with other financial institutions that act as market makers for interest rate swaps (IRS) are
named as defendants in several antitrust class actions which were
 
consolidated in the SDNY in 2016.
 
The complaints allege the defendants
conspired to prevent
 
the development of exchanges for
 
IRS and demand un
 
specified money damages.
 
 
In 2018,
 
trueEX LLC filed an antitrust class action in the SDNY against a number of financial institutions including Barclays PLC, Barclays Bank PLC
and BCI based on similar allegations with respect to trueEX LLC’s development
 
of an IRS platform. In 2017,
 
Tera Group
 
Inc. filed a separate
 
civil
antitrust action in the SDNY claiming that certain conduct alleged in the IRS cases also caused the plaintiff to suffer
 
harm with respect to the Credit
Default Swaps market. In November
 
2018
 
and July 2019, respectively, the court dismissed certain claims in both cases for unjust enrichment and
tortious interference but denied motions to dismiss the federal and state
 
antitrust claims, which remain pending.
 
 
Portuguese Competition Authority investigation
 
 
The Portuguese
 
Competition Authority found
 
that a
 
subsidiary of Barclays Bank PLC and other banks violated competition law by
 
exchanging
information about retail credit products
 
relating to mortgages, consumer lending
 
and lending to small and
 
medium enterprises. The Group
 
applied
for immunity and received
 
no fine.
 
 
2.
 
Barclays PLC, Barclays Bank PLC and Barclays Bank UK PLC
 
Investigation into collections
 
and recoveries relating to unsecured lending
 
 
Since February
 
2018,
 
the FCA has
 
been investigating whether the Group
 
implemented effective systems and controls with respect to collections
and recoveries
 
and whether it paid due consideration to the interests of customers in default and arrears.
 
The FCA investigation is at an advanced
stage.
 
HM Revenue & Customs (HMRC) assessments
 
concerning UK Value Added
 
Tax
 
In 2018,
 
HMRC issued notices that have the effect of removing
 
certain overseas subsidiaries that have operations in the UK from Barclays’ UK
 
VAT
group,
 
in which group
 
supplies between members are generally free from VAT.
 
The notices have retrospective effect and correspond
 
to
assessments of £181m
 
(inclusive of interest),
 
of which Barclays would expect to attribute
 
an amount of approximately
 
£128m
 
to Barclays Bank UK
PLC and £53m
 
to Barclays Bank PLC. HMRC’s decision has been appealed to the First Tier Tribunal
 
(Tax Chamber).
 
Local authority civil
 
actions concerning
 
LIBOR
 
Following settlement by
 
Barclays Bank PLC
 
of various governmental
 
investigations concerning certain benchmark
 
interest rate submissions
 
referred
to above in ‘Investigations into
 
LIBOR and other benchmarks
 
and related civil actions’, in the UK, certain local authorities have brought
 
claims
against Barclays Bank PLC (and, in
 
certain cases, Barclays Bank UK PLC) asserting that they entered
 
into loans in reliance on misrepresentations
made by Barclays Bank PLC in
 
respect of its conduct in relation to LIBOR. Barclays
 
has applied to strike out the claims.
 
General
The Group
 
is engaged in various other legal, competition and regulatory matters in the UK, the US and a number of other
 
overseas jurisdictions. It is
subject to legal proceedings
 
brought by
 
and against the Group which arise in the ordinary course of business from time to
 
time, including (but not
limited to) disputes in relation to contracts, securities, debt collection, consumer
 
credit, fraud, trusts, client assets, competition, data management
and protection, money
 
laundering, financial crime, employment, environmental
 
and other statutory and common law issues.
 
The Group
 
is also subject
 
to enquiries and examinations, requests for
 
information, audits, investigations and legal and other proceedings
 
by
regulators, governmental
 
and other public bodies in connection
 
with (but not limited
 
to) consumer protection measures, compl
 
iance with
legislation and regulation, wholesale trading
 
activity and other areas of banking and business activities in which the Group
 
is or has
 
been engaged.
The Group
 
is cooperating with the relevant authorities and keeping all relevant agencies briefed
 
as appropriate in relation to these matters and
others described in this note on an ongoing
 
basis.
 
At the present time, Barclays PLC
 
does not expect the ultimate resolution of any of these other matters
 
to have a material adverse effect on the
Group’s
 
financial position. However,
 
in light of the uncertainties involved in such matters and the matters specifically
 
described in this note, there
can be no assurance that the outcome of a particular matter
 
or matters (including formerly
 
active matters
 
or those matters arising after the
 
date of
this note) will not be material to Barclays PLC’s results, operations
 
or cash flow for a particular period, depending
 
on, among other things, the
amount of the loss resulting from
 
the matter(s) and the amount of profit otherwise reported
 
for the reporting
 
period.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Capital
 
instruments,
 
equity
 
and
 
reserves
 
 
 
272
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
The notes included in this section focus on the Group
 
’s loan capital
 
and shareholders’ equity including
 
issued share capital, retained earnings, other
equity balances and interests of minority shareholders
 
in our subsidiary entities (non-controlling
 
interests).
 
For more
 
information on capital
management and how
 
the Group maintains sufficient capital to meet our regulatory
 
requirements refer to pages 104
 
to 105
 
.
 
27 Subordinated
 
liabilities
Accounting for subordinated
 
liabilities
Subordinated
 
liabilities
 
are measured
 
at amortised cost using the effective interest method under
 
IFRS 9.
 
2019
2018
£m
£m
As at 1 January
20,559
23,826
Issuances
1,352
221
Redemptions
(3,248)
(3,246)
Other
(507)
(242)
As at 31 December
18,156
20,559
 
Issuances of £1,352m
 
comprises $1,500m
 
5.088% Fixed-to-Floating Rate Subordinated
 
Notes (£1,194m)
 
and £158m USD Floating Rate Notes.
 
Redemption
 
s
 
of £3,24
 
8m
 
comprises £3,000m
 
14% Step-up Callable Perpetual Reserve Capital Instruments,
 
£33m 6.3688%
 
Step-up Callable
Perpetual Reserve
 
Capital Instruments, £158m
 
USD Floating Rate Notes,
 
£43
 
m
 
EUR Floating Rate Notes and £14m
 
JPY Floating Rate Loans.
 
 
Subordinated
 
liabilities
 
include accrued interest and compris
 
e
 
undated and dated subordinated
 
liabilities
 
as follows:
 
2019
2018
£m
£m
Undated subordinated
 
liabilities
303
3,522
Dated subordinated liabilities
17,853
17,037
Total subordinated liabilities
18,156
20,559
 
None of the Group’s
 
subordinated
 
liabilities
 
are secured.
 
Undated subordinated liabilities
2019
2018
Initial call
 
date
£m
£m
Barclays Bank PLC issued
Tier One Notes (TONs)
6% Callable Perpetual Core Tier One Notes
2032
16
16
6.86% Callable Perpetual Core
 
Tier One Notes (USD 179m)
2032
203
199
Reserve Capital Instruments (RCIs)
6.3688%
 
Step-up Callable Perpetual Reserve Capital Instruments
2019
-
34
14% Step-up Callable Perpetual
 
Reserve Capital Instruments
2019
-
3,189
5.3304%
 
Step-up Callable Perpetual Reserve Capital Instruments
2036
53
51
Undated Notes
Junior
 
Undated Floating Rate Notes (USD 38m)
Any interest payment
 
date
29
30
Total undated subordinated
 
liabilities
303
3,522
 
Undated subordinated liabilities
Undated subordinated
 
liabilities
 
are issued by Barclays Bank PLC and
 
its subsidiaries for the development
 
and expansion of the business and to
strengthen the capital bases. The principal terms of the undated subordinated
 
liabilities
 
are described below:
 
Subordination
All undated subordinated
 
liabilities
 
rank behind the claims against the bank of depositors and other
 
unsecured
 
unsubordinated creditors and
holders of dated subordinated
 
liabilities
 
in the following order:
 
Junior
 
Undated Floating Rate Notes; followed by TONs and RCIs ranking pari passu
with each other.
 
Interest
The Junior
 
Undated Notes are floating rate notes where rates are fixed periodically in advance based on
 
the related interbank rate.
 
Payment of interest
No payment of principal
 
or any interest may be made in relation to the TONs
 
and RCIs unless Barclays Bank PLC satisfies a specified solvency test.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Capital
 
instruments,
 
equity
 
and
 
reserves
 
 
 
273
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Barclays Bank PLC
 
may elect to defer any payment
 
of interest on the RCIs. Any such deferred
 
payment of interest must be paid on the earlier of: (i)
the date of redemption
 
of the RCIs, and (ii) the coupon payment date falling on or nearest to the tenth anniversary of the date of deferral
 
of such
payment. While such deferral
 
is continuing, neither Barclays Bank PLC nor
 
Barclays PLC may (i) declare or pay
 
a dividend,
 
subject to certain
exceptions, on any
 
of its ordinary shares or preference
 
shares and (ii) certain restrictions
 
on the redemption, purchase
 
or reduction of their
respective share capital and
 
certain other securities also apply.
 
Barclays Bank PLC
 
may elect to defer any payment
 
of interest on the TONs if it determines that it is, or
 
such payment would
 
result in it being, in
non-compliance
 
with capital
 
adequacy requirements
 
and policies of the PRA. Any such deferred payment
 
of interest will only be payable on a
redemption
 
of the TONs. Until such time as Barclays Bank PLC next makes a payment of interest
 
on the TONs, neither Barclays Bank PLC nor
Barclays PLC
 
may (i) declare or pay
 
a dividend, subject to certain exceptions, on any of their respective ordinary
 
shares or preference
 
shares, or
make payments
 
of interest in respect of Barclays Bank PLC’s Reserve Capital
 
Instruments and (ii) certain restrictions on the redemption, purchase
or reduction
 
of their respective share capital and certain other securities also apply.
 
Repayment
All undated subordinated
 
liabilities
 
are repayable
 
at the option of Barclays Bank PLC, generally in whole, at the initial call date and on any
subsequent coupon
 
or interest payment date. In addition, each issue of undated subordinated liabilities is repayable, at the option of Barclays
Bank PLC in whole for
 
certain tax reasons, either at any time, or on an interest payment
 
date. There are no events of default except non
 
-payment
of principal or mandatory
 
interest. Any repayments require
 
the prior approval of the PRA.
 
Other
All issues of undated subordinated
 
liabilities
 
are non
 
-convertible.
 
Dated subordinated liabilities
2019
2018
Initial call
 
date
Maturity
 
date
£m
£m
Barclays PLC issued
2.625% Fixed Rate Subordinated
 
Callable
 
Notes (EUR 1,250m)
2020
2025
1,072
1,130
2% Fixed Rate Subordinated
 
Callable
 
Notes (EUR 1,500m)
2023
2028
1,309
1,367
4.375%
 
Fixed Rate Subordinated Notes (USD 1,250m)
 
2024
995
982
3.75% Fixed Rate Resetting
 
Subordinated
 
Callable
 
Notes (SGD 200m)
2025
2030
116
116
5.20% Fixed Rate Subordinated
 
Notes (USD 2,050m)
2026
1,561
1,509
4.836% Fixed Rate Subordinated
 
Callable
 
Notes (USD 2,000m)
2027
2028
1,578
1,523
5.088%
 
Fixed-to-Floating Rate Subordinated Callable Notes (USD 1,500m)
2029
2030
1,152
-
Barclays Bank PLC issued
Floating Rate Subordinated
 
Notes (EUR 50m)
2019
-
45
5.14%
 
Lower Tier 2 Notes (USD 1,094m)
2020
832
851
6% Fixed Rate Subordinated
 
Notes (EUR 1,500m)
2021
1,375
1,474
9.5% Subordinated
 
Bonds (ex-
 
Woolwich Plc)
2021
239
256
Subordinated
 
Floating Rate Notes (EUR 100m)
2021
85
89
10% Fixed Rate Subordinated
 
Notes
 
2021
2,157
2,194
10.179%
 
Fixed Rate Subordinated Notes (USD 1,521m)
2021
1,123
1,143
Subordinated
 
Floating Rate Notes (EUR 50m)
2022
43
45
6.625% Fixed Rate Subordinated
 
Notes (EUR 1,000m)
2022
957
1,032
7.625%
 
Contingent Capital Notes (USD 3,000m)
2022
2,284
2,272
Subordinated
 
Floating Rate Notes (EUR 50m)
2023
42
45
5.75% Fixed Rate Subordinated
 
Notes
2026
350
351
5.4% Reverse Dual
 
Currency
 
Subordinated
 
Loan (JPY 15,000m)
2027
105
107
6.33% Subordinated
 
Notes
 
2032
62
61
Subordinated
 
Floating Rate Notes (EUR 68m)
2040
58
61
External issuances by other subsidiaries
2021
 
-2024
358
384
Total dated subordinated liabilities
17,853
17,037
 
Dated subordinated liabilities
Dated subordinated liabilities are issued by Barclays
 
PLC, Barclays Bank PLC and
 
respective subsidiaries for
 
the development and expansion
 
of their
business and to strengthen their respective capital
 
bases. The principal terms of the dated subordinated
 
liabilities
 
are described below:
 
Subordination
Dated subordinated liabilities issued by Barclays
 
PLC ranks behind
 
the claims against Barclays PLC of unsecured unsubordinated
 
creditors but
before the claims of the holders
 
of its equity.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Capital
 
instruments,
 
equity
 
and
 
reserves
 
 
 
274
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
All dated subordinated
 
liabilities
 
externally issued by
 
Barclays Bank PLC rank behind
 
the claims against the bank of depositors and other unsecured
unsubordinated
 
creditors but before
 
the claims
 
of the undated subordinated
 
liabilities
 
and the holders of its equity. The dated subordinated
liabilities externally issued by other subsidiaries are similarly subordinated
 
as the
 
external subordinated
 
liabilities
 
issued by Barclays Bank PLC.
 
 
Interest
Interest on the Floating Rate Notes is fixed periodically in advance, based on
 
the related interbank or
 
local central bank rates.
 
 
Interest on the 2.625%
 
Fixed Rate Subordinated Callable Notes, 4.836% Fixed Rate Subordinated Callable Notes, 2% Fixed Rate Subordinated
Callable Notes and the 3.75% Fixed Rate Resetting
 
Subordinated
 
Callable Notes are fixed until the call date. After the respective call dates, in the
event that they are not redeemed,
 
the interest
 
rates will be reset and fixed until maturity based
 
on a market rate. Interest on the 5.088%
 
Fixed-to-
Floating Rate Subordinated
 
Callable Notes are fixed until the call date. After the call date, in the event that they are not redeemed, the interest rate
will reset periodically in advance based on U.S dollar London
 
interbank rates.
 
 
Repayment
Those subordinated
 
liabilities with a call date are repayable at the option of the issuer, on conditions
 
governing
 
the respective debt obligations,
some in whole or in part, and some only in whole. The remaining
 
dated subordinated
 
liabilities
 
outstanding at 31
 
December 2019
 
are redeemable
only on maturity, subject in particular cases to
 
provisions allowing an early redemption
 
in the event of certain
 
changes in tax law, or
 
to certain
changes in legislation or regulations.
 
 
Any repayments
 
prior to maturity require,
 
in the case
 
of Barclays PLC and
 
Barclays Bank PLC, the prior
 
approval
 
of the PRA, or
 
in the case
 
of the
overseas issues, the approval
 
of the local regulator for that jurisdiction and of the PRA in certain circumstances.
 
There are no committed
 
facilities in existence at the balance sheet date which permit the refinancing of debt beyond
 
the date of maturity.
 
Other
The 7.625%
 
Contingent Capital Notes will be automatically transferred from investors to Barclays PLC (or
 
another entity within the Group)
 
for nil
consideration in the event the Barclays PLC
 
consolidated CRD IV CET1 ratio (FSA October 2012
 
transitional statement) falls below 7%.
 
 
28 Ordinary shares, share premium, and other equity
 
Called up share capital, allotted and fully paid
Number of shares
Ordinary share
capital
Ordinary share
premium
Total share
capital and share
premium
 
Other
equity
instruments
m
£m
£m
£m
£m
As at 1 January 2019
17,133
4,283
28
4,311
9,632
Issued to staff under share incentive plans
76
19
82
101
-
Issuances relating to Scrip Dividend Programme
113
29
153
182
-
AT1 securities issuance
-
-
-
-
3,500
AT1 securities redemption
-
-
-
-
(2,262)
Other movements
-
-
-
-
1
As at 31 December 2019
17,322
4,331
263
4,594
10,871
As at 1 January 2018
17,060
4,265
17,780
22,045
8,941
Issued to staff under share
 
incentive plans
30
7
44
51
-
Issuances relating to Scrip Dividend Programme
43
11
77
88
-
AT1 securities issuance
-
-
-
-
1,925
AT1 securities redemption
-
-
-
-
(1,233)
Capital reorganisation
-
-
(17,873)
(17,873)
-
Other movements
-
-
-
-
(1)
As at 31 December 2018
17,133
4,283
28
4,311
9,632
 
Called up share capital
Called up share capital comprises 17,322m
 
(2018:
 
17,133m)
 
ordinary shares of 25p each.
 
 
Share repurchase
At the 2019
 
AGM on 2 May 2019,
 
Barclays PLC was authorised to repurchase
 
up to an aggregate of 1,714m
 
of its
 
ordinary
 
shares of 25p. The
authorisation is effective until the
 
AGM in 2020
 
or the close of business
 
on 30 June
 
2020
 
,
 
whichever is the earlier. No share repu
 
rchases were made
during
 
either 2019
 
or 2018.
 
Capital reorganisation
 
On 11 September
 
2018,
 
the High Court of Justice in
 
England and Wales confirmed
 
the cancellation of the
 
share premium
 
account of Barclays PLC,
with the balance of £17,873m
 
credited to retained earnings.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Capital
 
instruments,
 
equity
 
and
 
reserves
 
 
 
275
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
 
Other equity instruments
Other equity instruments of £10,871
 
m
 
(2018:
 
£9,632m)
 
include AT1 securities issued
 
by Barclays PLC.
 
The AT1 securities are perpetual
 
securities
with no fixed maturity and are structured
 
to qualify as AT1 instruments under prevailing
 
capital rules
 
applicable as at the relevant issue date.
 
In 2019,
 
there were three issuances of AT1 instruments, in the form of Fixed Rate Resetting
 
Perpetual Subordinated
 
Contingent Convertible
Securities (2018:
 
one issuance), totalling £3,500m (2018
 
:
 
£1,925m
 
). There were also three redemptions
 
in 2019
 
(2018: one redemption
 
), totalling
£2,262m
 
(2018:
 
£1,233m).
 
 
AT1 equity instruments
2019
2018
Initial call
 
date
£m
£m
AT1 equity instruments - Barclays PLC
7.0% Perpetual
 
Subordinated
 
Contingent Convertible Securities
2019
-
695
6.625% Perpetual
 
Subordinated
 
Contingent Convertible Securities
 
(USD 1,211m)
2019
-
711
6.5% Perpetual Subordinated
 
Contingent Convertible Securities (EUR 1,077m)
2019
-
856
8.0% Perpetual Subordinated
 
Contingent Convertible Securities (EUR 1,000m)
2020
830
830
7.875%
 
Perpetual Subordinated
 
Contingent Convertible Securities
2022
995
995
7.875%
 
Perpetual Subordinated
 
Contingent Convertible Securities
 
(USD 1,500m)
2022
1,131
1,131
7.25%
 
Perpetual Subordinated
 
Contingent Convertible Securities
2023
1,245
1,245
7.75%
 
Perpetual Subordinated
 
Contingent Convertible Securities
 
(USD 2,500m)
2023
1,925
1,925
5.875%
 
Perpetual Subordinated
 
Contingent Convertible Securities
2024
1,244
1,244
8% Perpetual Subordinated
 
Contingent Convertible Securities (USD 2,000m)
2024
1,509
-
7.125%
 
Perpetual Subordinated
 
Contingent Convertible Securities
2025
996
-
6.375%
 
Perpetual Subordinated
 
Contingent Convertible Securities
2025
996
-
Total AT1 equity instruments
10,871
9,632
 
The principal terms of the AT1
 
securities are described below:
 
 
AT1 securities rank behind
 
the claims against Barclays PLC of 1) unsubordinated
 
creditors; 2) claims which are expressed to be subordinated to
the claims of unsubordinated
 
creditors of Barclays PLC but not further
 
or otherwise; or 3) claims
 
which are, or are expressed to be, junior to the
claims of other creditors of Barclays PLC,
 
whether subordinated
 
or unsubordinated, other than claims which rank, or are expressed to rank, pari
passu with, or junior
 
to, the claims of holders of the
 
AT1 securities.
 
 
AT1 securities bear a fixed rate of interest until
 
the initial call date. After the initial call date, in the event that they are not redeemed,
 
the AT1
securities will bear interest at rates fixed periodically in
 
advance for five-year
 
periods based on market rates.
 
 
Interest on the AT1
 
securities
 
will be due and
 
payable only at the sole discretion of Barclays PLC, and Barclays
 
PLC has sole and absolute
discretion at all times and for any reason
 
to cancel (in whole or in part) any
 
interest payment that would otherwise be payable
 
on any interest
payment date.
 
 
AT1 securities are undated
 
and are redeemable, at the option of Barclays PLC, in whole but not in
 
part at the initial call date, or on any
 
fifth
anniversary after the initial call date. In addition, the AT1
 
securities
 
are redeemable, at the option of Barclays PLC,
 
in whole in the event of certain
changes in the tax or regulatory
 
treatment of the securities. Any redem
 
ptions require the prior
 
consent of the
 
PRA.
 
 
All AT1
 
securities will be converted into ordinary
 
shares of Barclays PLC, at
 
a pre
 
-determined price, should the fully loaded CET1 ratio of the Group
fall below 7%.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Capital
 
instruments,
 
equity
 
and
 
reserves
 
 
 
276
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
29 Reserves
 
Currency translation reserve
 
The currency
 
translation reserve represents the cumulative gains and losses on the retranslation of the Group’s
 
net investment in foreign
operations, net of the effects of hedging.
 
Fair value through other comprehensive
 
income reserve
 
The fair value thro
 
ugh other comprehensive
 
income reserve represent
 
s
 
the changes in the fair
 
value of fair value through
 
other comprehensive
income investments since initial recognition.
 
Cash flow hedging
 
reserve
The cash flow hedging
 
reserve represents the cumulative gains and losses on effective cash flow hedging
 
instruments that
 
will be recycled to profit
or loss when the hedged
 
transactions affect profit or loss.
 
Own credit reserve
The own
 
credit reserve
 
reflects the cumulative
 
own
 
credit gains and losses on financial
 
liabilities
 
at fair value.
 
Amounts in the own credit reserve are
not recycled to profit or loss in future periods.
 
Other reserves and treasury shares
Other reserves relate to redeemed
 
ordinary
 
and preference
 
shares issued by the Group.
 
 
Treasury
 
shares relate to Barclays PLC shares held in
 
relation to the Group’s
 
various share schemes. These schemes are described in Note 32.
Treasury
 
shares are deducted from
 
shareholders’ equity within other reserves. A transfer is made to retained earnings in line with the vesting of
treasury shares held for
 
the purposes of share-based payments.
 
2019
2018
£m
£m
Currency
 
translation reserve
3,344
3,888
Fair value through
 
other comprehensive income reserve
(187)
(258)
Cash flow hedging reserve
1,002
660
Own credit reserve
(373)
(121)
Other reserves and treasury shares
974
984
Total
4,760
5,153
 
30 Non-controlling
 
interests
 
Profit
 
attributable
 
to non-
controlling
 
interest
Equity attributable
 
to non-
controlling
 
interest
Dividends
 
paid to non
 
-controlling
interest
2019
2018
a
2019
2018
2019
2018
a
£m
£m
£m
£m
£m
£m
Barclays Bank PLC
 
issued:
– Preference
 
shares
41
204
529
529
41
204
– Upper Tier 2 instruments
39
30
691
691
39
30
Other non-controlling
 
interests
-
-
11
3
-
-
Total
80
234
1,231
1,223
80
234
 
Note
a
 
From 2019,
 
due to an
 
IAS 12 update,
 
the tax relief
 
on payments
 
in relation to Upper Tier 2 instruments
 
has been recognised in the
 
tax charge of the income statement,
 
whereas it
was previously
 
recorded
 
directly
 
in equity. Comparatives
 
have been restated, increasing
 
profit
 
attributable to non-controlling
 
interest and dividends
 
paid to non-controlling
 
interest
by £8m. Further
 
detail can
 
be found in Note 1.
 
Barclays Bank PLC and protective rights of non-controlling
 
interests
Barclays PLC
 
holds 100% of the voting rights of Barclays Bank PLC.
 
As at 31 December
 
2019,
 
Barclays Bank PLC has in issue preference shares and
Upper
 
Tier 2 instruments.
 
These are non-contro
 
lling interests
 
to the Group.
 
A fixed coupon
 
rate is
 
attached to all Upper
 
Tier 2 instruments until
 
the initial call date, with the exception of the 9% Bonds, which are fixed for the
life of the issue and the Series 1, Series 2 and Series 3 Undated
 
Notes, which are floating rate at rates fixed periodically in advance based on market
rates.
 
After the initial call date, in the event they are not redeemed,
 
coupon
 
payments in relation to
 
the 7.125%,
 
6.125%
 
Undated Notes, and the 9.25%
Bonds are fixed periodically in advance for
 
five-year periods based on
 
market rates. Coupon payments for
 
all other Upper Tier 2 instruments are at
rates fixed periodically in advance
 
based on market rates.
 
 
The payment of preference
 
share dividends and Upper
 
Tier 2 coupons are typically at
 
the discretion of Barclays Bank PLC, except for coupon
payments that become
 
compulsory
 
where Barclays PLC has declared
 
or paid a dividend on ordinary
 
shares, or in certain cases,
 
any class of
preference
 
shares, in the preceding six-month period.
 
Barclays Bank PLC is not obliged to make a payment of interest on its 9.25% Perpetual
Subordinated
 
Bonds if, in the immediately preceding 12
 
month interest period, a dividend has not been paid on any class of its share capital.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Capital
 
instruments,
 
equity
 
and
 
reserves
 
 
 
277
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Coupons not paid becomes
 
payable in each case if such a dividend is subsequently paid or in certain other circumstances. No dividend
 
or coupon
payments may be made unless Barclays
 
Bank PLC satisfies a specified solvency test.
 
Under the terms of these instruments, Barclays PLC may
 
not
pay dividends on ordinary
 
shares until a
 
dividend or coupon
 
is next
 
paid on these instruments or the instruments are redeemed or
 
purchased
 
by
Barclays Bank PLC. There
 
are no restrictions on Barclays Bank PLC’s ability to remit capital to the Parent
 
as a result of these issued instruments.
 
Preference
 
share redemptions are typically at the discretion of Barclays Bank PLC. Upper
 
Tier 2 instruments are repayable, at the option of Barclays
Bank PLC generally in whole at the initial call date and on
 
any subsequent coupon
 
payment date or,
 
in the case
 
of the 7.125%,
 
6.125%
 
Undated
Notes and the 9.25% Perpetual
 
Bonds, on any fifth anniversary after the initial call date. In addition, each issue of Upper Tier 2 instruments is
repayable, at
 
the option of Barclays Bank PLC, in whole for
 
certain tax reasons, either at any time, or on
 
an interest payment date. There are no
events of default except non
 
-payment of principal
 
or mandatory interest. Any repayments or
 
redemptions require
 
the prior approval of the PRA,
and in respect of the preference
 
shares, any such redemption will be subject to the Companies Act 2006
 
and the Articles of
 
Barclays Bank PLC.
 
2019
2018
Instrument
£m
£m
Preference Shares:
6.278% non
 
-cumulative callable preference shares
318
318
4.75% non
 
-cumulative callable preference shares
211
211
Total Barclays Bank PLC Preference Shares
529
529
Upper Tier 2 Instruments:
Undated Floating Rate Primary
 
Capital
 
Notes Series 1
93
93
Undated Floating Rate Primary
 
Capital
 
Notes Series 2
179
179
5.03% Undated
 
Reverse Dual Currency Subordinated
 
Loan (JPY8bn)
39
39
5.0% Reverse Dual Currency
 
Undated Subordinated Loan
 
(JPY12bn)
53
53
Undated Floating Rate Primary
 
Capital Notes Series 3 (£145m)
20
20
9% Permanent
 
Interest Bearing Capital Bonds (£100m)
40
40
7.125%
 
Undated Subordinated
 
Notes (£525m)
158
158
6.125%
 
Undated Subordinated
 
Notes (£550m)
34
34
9.25% Perpetual
 
Subordinated
 
Bonds (ex Woolwich) (£150m)
75
75
Total Upper Tier 2 Instruments
691
691
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Employee
 
benefits
 
 
278
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
The notes included in this section focus on the costs and commitments associated with employing
 
our staff.
 
 
 
31 Staff costs
Accounting for staff
 
costs
The Group
 
applies IAS 19
Employee benefits
 
in its
 
accounting for
 
most of the components
 
of staff
 
costs.
 
Short-term employee benefits
 
– salaries,
 
accrued performance costs and social security
 
are recognised over the period in which the employees
provide
 
the services to
 
which the payments relate.
 
Performance
 
costs
 
– recognised to the extent that
 
the Group has a present obligation to its
 
employees that can be measured reliably and are
recognised over
 
the period of service that
 
employees are required to work to qualify for
 
the payments.
 
Deferred cash
 
and share awards are made
 
to employees to incentivise
 
performance over the period employees provide services.
 
To receive
 
payment
under an award,
 
employees must provide service over the vesting period. The period
 
over which the expense for deferred cash
 
and share awards is
recognised is based upon the period employees consider their services contribute
 
to the awards. For past awards, the Group considers that
 
it is
appropriate
 
to recognise the awards over the period from the
 
date of grant to the date
 
that the
 
awards vest. In relation to awards granted from 2017,
the Group, taking into account the changing employee understanding surrounding those awards,
 
considered it appropriate
 
for expense to be
recognised over
 
the vesting period including the
 
financial year
 
prior to
 
the grant date.
 
 
The accounting policies for share-
 
based payments, and pensions
 
and other post-retirement benefits
 
are included in Note 32 and Note 33 respectively.
 
2019
2018
2017
£m
£m
£m
Incentive awards granted:
Current year bonus
1,008
1,067
990
Deferred bonus
429
515
442
Commissions and other incentives
53
67
74
Total incentive awards granted
1,490
1,649
1,506
Reconciliation of incentive awards granted to income statement charge:
Less: deferred
 
bonuses granted but not
 
charged in current year
(293)
(359)
(302)
Add: current
 
year charges for
 
deferred bonuses from previous years
308
299
457
Other differences between incentive
 
awards granted
 
and income statement charge
(48)
(33)
29
Income statement charge for performance costs
1,457
1,556
1,690
Other income statement charges:
Salaries
4,332
4,200
3,982
Social security costs
573
558
580
Post-retirement benefits
a
501
619
493
Other compensation costs
480
413
378
Total compensation costs
b
7,343
7,346
7,123
Other resourcing
 
costs:
Outsourcing
433
594
1,094
Redundancy
 
and restructuring
132
133
80
Temporary
 
staff
 
costs
256
386
354
Other
151
170
(91)
Total other resourcing
 
costs
972
1,283
1,437
Total staff costs
8,315
8,629
8,560
Group compensation costs as % of total income
c
33.9%
34.1%
33.8%
Group staff costs as % of total income
c
38.4%
40.2%
40.6%
 
Notes
 
a
 
Post-retirement
 
benefits
 
charge includes
 
£270m
 
(2018: £236m; 2017:
 
£230m)
 
in respect
 
of defined contribution
 
schemes and £231m (2018: £383m; 2017:
 
£263m) in respect
 
of
defined
 
benefit schemes
 
.
 
b
 
£439m (2018:
 
£296m; 2017:
 
£312m) of Group
 
compensation
 
was capitalised
 
as internally
 
generated software.
 
c
 
2018
 
comparative
 
excludes
 
a GMP charge of £140m.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Employee
 
benefits
 
 
279
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
32 Share-based payments
 
Accounting for share-based payments
The Group
 
applies IFRS 2
Share-based
 
Payments
 
in accounting for employee
 
remuneration in the form of shares.
 
 
Employee incentives
 
include awards in the form of shares and
 
share options, as well as offering
 
employees the opportunity
 
to purchase shares on
favourable
 
terms. The cost of the employee services received in respect of the shares or share options granted
 
is recognised in the income
statement over the period that employees provide
 
services.
 
The overall cost of the award
 
is calculated using the number of shares and options
expected to vest and the fair value of the shares
 
or options at the date of grant.
 
 
The number
 
of shares and options expected to vest
 
takes into account the likelihood that performance
 
and service conditions included in the terms
of the awards will be met. Failure
 
to meet the non-vesting condition is treated as a cancellation, resulting in an acceleration of recognition
 
of the
cost of the employee services.
 
The fair value of shares is the market price ruling
 
on the grant date, in some cases adjusted to reflect restrictions on
 
transferability. The fair value of
options granted is determined using option pricing
 
models to estimate the
 
numbers of shares likely to vest. These
 
take into account the exercise
price of the option, the current
 
share price, the risk-free interest rate, the expected volatility of the share price over the life of the option
 
and other
relevant factors. Market conditions that must
 
be met in order
 
for the award to vest are also reflected in the fair value of the award, as are any
 
other
non-vesting conditions – such as continuing
 
to make payments into a share-based savings scheme.
 
 
The charge for
 
the year arising from share-based payment
 
schemes was as follows:
 
Charge for the
 
year
2019
2018
2017
£m
£m
£m
Share Value Plan
6
45
153
Deferred Share
 
Value Plan
266
217
166
Others
206
187
186
Total equity settled
478
449
505
Cash settled
3
1
3
Total share-based payments
 
481
450
508
 
The terms of the main current plans are as follows:
 
Share Value Plan (SVP)
The SVP was introduced
 
in March 2010
 
.
 
SVP awards have
 
been
 
granted to participants in the form of a conditional right to receive Barclays PLC
shares or provisional
 
allocations of Barclays PLC shares which vest or are considered
 
for release over a period
 
of three, five or seven years.
Participants do not pay
 
to receive an award or
 
to receive a release of shares. For awards
 
granted before
 
December 2017,
 
the grantor may
 
also make
a dividend equivalent payment
 
to participants on release of a SVP award. SVP awards
 
are also made to eligible employees for
 
recruitment purposes.
All awards are subject to potential forfeiture
 
in certain leaver scenarios.
 
Deferred Share Value Plan (DSVP)
The DSVP was introduced
 
in February
 
2017.
 
The terms of the DSVP are materially
 
the same as the terms of the SVP as described above, save that
Executive Directors are
 
not eligible to participate in the DSVP and the DSVP operates ov
 
er market purc
 
hase shares only.
 
Other schemes
 
In addition to the SVP and DSVP,
 
the Barclays Group
 
operates a number of other
 
schemes settled
 
in Barclays PLC Shares including Sharesave
 
(both
UK and Ireland),
 
Sharepurchase
 
(both UK and overseas), and the Barclays Group
 
Long Term Incentive Plan. A delivery of upfront
 
shares to ‘Material
Risk Takers’ can be made as a Share
 
Incentive Award
 
(Holding Period)
 
.
 
Share option and award plans
The weighted average
 
fair value per award granted,
 
weighted average
 
share price at the date
 
of exercise/release of shares during
 
the year,
weighted average
 
contractual remaining
 
life and number of options and awards
 
outstanding (including those exercisable)
 
at the
 
balance sheet date
were as follows:
 
2019
2018
Weighted average
fair value per
award granted
 
in
year
Weighted average
share price at
exercise/release
during
 
year
Weighted
average
remaining
contractual
life
Number of
options/
awards
outstanding
Weighted average
fair value
 
per
award granted
 
in
year
Weighted average
share price
 
at
exercise/release
during
 
year
Weighted
average
remaining
contractual
life
Number of
options/
awards
outstanding
£
£
years
(000s)
£
£
years
(000s)
SVP
a,b
1.45
1.59
1
5,619
1.90
2.11
<1
67,898
DSVP
a,b
1.43
1.60
1
325,872
1.94
2.10
1
206,571
Others
a
0.40-1.60
1.57-1.70
0-3
232,259
0.36-2.11
1.82
 
-2.11
0-3
217,952
 
Notes
a
 
Options/award
 
granted over
 
Barclays
 
PLC shares.
 
b
 
Weighted average
 
exercise
 
price is
 
not applicable
 
for SVP and DSVP awards
 
as these
 
are not share option
 
schemes.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Employee
 
benefits
 
 
280
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
SVP and DSVP are nil cost awards
 
on which the performance
 
conditions are substantially
 
completed at the date of grant. Consequently, the fair
value of these awards is
 
based on the market value at that date.
 
Movements in options and awards
The movement in the number
 
of options and awards for
 
the major schemes and the weighted average exercise price of options was:
 
SVP
a,b
DSVP
a,b
Others
a,c
Number (000s)
Number (000s)
Number (000s)
Weighted average
 
ex. price (£)
2019
2018
2019
2018
2019
2018
2019
2018
Outstanding at beginning
 
of
year/acquisition date
 
67,898
191,610
206,571
125,399
217,952
210,160
1.41
1.41
Granted in the year
2,317
1,425
217,075
135,964
215,694
114,335
1.19
1.51
Exercised/released in the year
(62,970)
(119,688)
(82,354)
(43,402)
(151,827)
(78,771)
1.21
1.50
Less: forfeited in the year
(1,626)
(5,449)
(15,420)
(11,390)
(42,331)
(25,494)
1.51
1.54
Less: expired in the year
-
-
-
-
(7,229)
(2,278)
2.08
1.80
Outstanding at end of year
5,619
67,898
325,872
206,571
232,259
217,952
1.29
1.41
Of which exercisable:
-
-
-
-
32,376
23,556
1.32
1.96
 
Notes
a
 
Options/award
 
granted over
 
Barclays
 
PLC shares.
 
b
 
Weighted average
 
exercise
 
price is
 
not applicable
 
for SVP and DSVP awards
 
as these
 
are not share option
 
schemes.
c
 
The number
 
of awards
 
within
 
Others
 
at the end of the year principally
 
relates to Sharesave
 
(number of awards exercisable
 
at end of year was 15,148,343). The
 
weighted average
exercise
 
price relates
 
to Sharesave.
 
Awards
 
and options granted under
 
the Group’s share plans may be satisfied using new issue shares, treasury shares and market purchase shares.
Awards
 
granted under
 
the DSVP may be satisfied
 
using market purchase shares only.
 
There were
 
no significant modifications to the share-based payments arrangements
 
in 201
 
9
 
and 201
 
8.
 
As at 31 December
 
201
 
9,
 
the total
 
liability arising from cash-settled share
 
-based payments transactions was £3m (2018:
 
£2m).
 
Holdings
 
of Barclays PLC shares
Various
 
employee be
 
nefit trusts established by the Group hold shares in Barclays PLC to meet obligations under
 
the Barclays
 
share-based payment
schemes. The total number
 
of Barclays shares held in these employee benefit trusts at 31 December
 
201
 
9
 
was 13.1m
 
(201
 
8:
 
11.4m).
 
Dividend
rights have been waived on all these shares.
 
The total market value of the shares held in trust based on the year end
 
share price of £1.80
 
(201
 
8:
£1.51
 
)
 
was £24m
 
(201
 
8:
 
£17m). For
 
accounting of treasury shares, see
 
Note 29.
 
 
 
Notes
 
to the financial
 
statements
Employee
 
benefits
 
 
281
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
33 Pensions
 
and post-retirement benefits
Accounting for pensions
 
and post-retirement benefits
The Group
 
operates a number of pension schemes and post-employment
 
benefit schemes.
 
Defined contribution schemes
 
– the Group
 
recognises contributions due
 
in respect of the accounting period in the income statement. Any
contributions unpaid
 
at the
 
balance sheet date are included
 
as a liability.
 
Defined benefit schemes
 
– the Group
 
recognises its obligations
 
to member
 
s
 
of each scheme at the period end, less the fair value of the scheme
assets after applying the asset ceiling test.
 
 
Each scheme’s obligations are calculated using the projected
 
unit credit method. Scheme assets are stated at fair value as at the period end.
 
Changes in pension scheme liabilities or assets (remeasurements)
 
that do not arise
 
from regular
 
pension cost, net interest on net defined benefit
liabilities or assets, past service costs, settlements
 
or contributions to the scheme, are recognised
 
in other comprehensive
 
income.
Remeasurements comprise experience
 
adjustments (differences between previous actuarial assumptions and what has actually occurred),
 
the
effects of changes
 
in actuarial assumptions, return on scheme assets (excluding amounts inc
 
luded in the interest
 
on the assets) and any changes in
the effect of the asset ceiling restriction
 
(excluding amounts included
 
in the interest
 
on the restriction).
 
Post-employment
 
benefit schemes
 
– the cost of providing
 
healthcare benefits to retired employees is accrued as a liability in the financial
statements over the period
 
that the
 
employees provide
 
services to the Group
 
,
 
using a methodology similar to that for defined benefit pension
schemes.
 
Pension schemes
UK Retirement Fund (UKRF)
The UKRF is the Barclays Group’s
 
main scheme, representing 97%
 
of the Barclays Group’s total retirement benefit obligations. Barclays Bank PLC
 
is
the principal employer
 
of the UKRF. The UKRF was closed to new entrants on
 
1 October 2012,
 
and comprises 10 sections, the
 
two most significant
of which are:
 
 
 
Afterwork, which comprises a contributory
 
cash balance defined benefit element,
 
and a voluntary defined contribution
 
element. The cash
balance element is accrued
 
each year and revalued
 
until Normal Retirement
 
Age in line with
 
the increase in Retail Price Index
 
(RPI) (up
 
to a
maximum of 5% p.a.). An increase of up to 2% a year may
 
also be added at Barclays’ discretion. The costs of ill-health
 
retirements and death in
service benefits for Afterwork
 
members are borne
 
by the UKRF. The main risks that
 
Barclays runs in relation to Afterwork
 
are limited although
additional contributions are required
 
if pre-retirement investment returns are
 
not sufficient to
 
provide
 
for the benefits.
 
 
The 1964
 
Pension Scheme. Most employees recruited
 
before July
 
1997 built up benefits in this non-contributory defined
 
benefit scheme in
respect of service up to 31
 
March 2010.
 
Pensions were calculated by reference
 
to service and pensionable salary. From 1 April 2010,
 
members
became eligible to accrue future service benefits in either Afterwork
 
or the Pension Investment Plan (PIP),
 
a historic defined contribution section
which is now closed to future contributions. The risks that Barclays
 
runs in relation to the 1964
 
section are typical
 
of final salary pension
schemes, principally that investment
 
returns fall short of expectations, that inflation exceeds expectations, and that retirees live
 
longer than
expected.
 
Barclays
 
Pension Savings
 
Plan (BPSP)
The BPSP is a defined contribution scheme providing
 
benefits for all
 
new
 
UK hires from 1 October
 
2012,
 
BPSP is not subject
 
to the same investment
return, inflation or life expectancy risks for Barclays
 
that defined benefit schemes are. Members’ benefits reflect contributions
 
paid and the level of
investment returns
 
achieved.
 
 
 
Other
Apart from
 
the UKRF and the BPSP, Barclays
 
operates a number
 
of smaller pension and long-term employee
 
benefits and post-retirement
healthcare plans globally,
 
the largest of which are the US defined benefit schemes. Many of the
 
schemes are funded, with assets backing the
obligations held in separate legal vehicles such as trusts. Others are operated
 
on an unfunded
 
basis.
 
The benefits provided, the approach
 
to
funding, and the legal basis of the schemes, reflect local environments.
 
 
Governance
The UKRF operates under
 
trust law and is managed and administered on behalf of the members in accordance
 
with the terms
 
of the Trust Deed
and Rules and all relevant legislation. The Corporate
 
Trustee is Barclays Pension
 
Funds Trustees Limited, a private limited company
 
and a wholly
owned subsidiary of Barclays Bank PLC. The Trustee
 
is the legal owner of the assets of the UKRF which are
 
held separately from the assets of the
Barclays Group.
 
The Trustee Board
 
comprises six Management Directors selected by Barclays, of whom three are
 
independent Directors
 
with no relationship with
Barclays (and who
 
are not members of the UKRF), plus three Member Nominated
 
Directors selected from eligible active staff, deferred
 
and
pensioner members
 
who apply for the role.
 
The BPSP is a Group Personal
 
Pension arrangement
 
which operates as a collection of
 
personal pension plans. Each personal pension plan is a direct
contract between the employee
 
and the BPSP provid
 
er (Legal & General Assurance Society Limited), and is regulated by the FCA.
 
Similar principles of pension governance
 
apply to the Barclays Group’s other
 
pension schemes, depending on
 
local legislation.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Employee
 
benefits
 
 
282
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Amounts recognised
The following tables include amounts recognised
 
in the income statement and an analysis
 
of benefit obligations and scheme assets for all Barclays
Group
 
defined benefit schemes. The net
 
position is reconciled
 
to the assets and liabilities recognised on the balance sheet. The tables include
funded and unfunded
 
post-retirement benefits.
 
 
Income statement charge
2019
2018
2017
£m
£m
£m
Current service cost
231
243
265
Net finance cost
(48)
(24)
(12)
Past service cost
-
134
(3)
Other movements
2
5
-
Total
185
358
250
 
Balance sheet reconciliation
2019
2018
Total
Of which relates
to UKRF
Total
Of which
 
relates
to UKRF
£m
£m
£m
£m
Benefit obligation at beginning of the year
(28,269)
(27,301)
(30,268)
(29,160)
Current service cost
(231)
(210)
(243)
(226)
Interest costs on scheme liabilities
(747)
(718)
(705)
(677)
Past service cost
-
-
(134)
(140)
Remeasurement (loss)/gain – financial
(3,087)
(2,964)
1,129
1,075
Remeasurement (loss)/gain – demographic
223
214
(241)
(245)
Remeasurement (loss)/gain – experience
277
266
(75)
(94)
Employee contributions
(5)
(1)
(4)
(1)
Benefits paid
1,459
1,410
2,205
2,167
Exchange and other
 
movements
47
-
67
-
Benefit obligation
 
at end
 
of the year
(30,333)
(29,304)
(28,269)
(27,301)
Fair value of scheme assets at beginning
 
of the year
29,722
29,036
30,922
30,112
Interest income on scheme assets
795
774
729
709
Employer
 
contribution
755
731
754
741
Remeasurement – return
 
on scheme assets greater than discount rate
2,312
2,230
(400)
(360)
Employee contributions
5
1
4
1
Benefits paid
(1,459)
(1,410)
(2,205)
(2,167)
Exchange and other
 
movements
(37)
-
(82)
-
Fair value of scheme assets at end of the year
32,093
31,362
29,722
29,036
Net surplus
1,760
2,058
1,453
1,735
Retirement benefit assets
2,108
2,058
1,768
1,735
Retirement benefit liabilities
(348)
-
(315)
-
Net retirement benefit assets
1,760
2,058
1,453
1,735
 
Included
 
within
 
the benefit obligation was £759
 
m
 
(2018:
 
£757
 
m) relating to overseas pensions
 
and £202
 
m
 
(2018: £204
 
m) relating to other post-
employment benefits.
 
 
As at 31 December
 
2019,
 
the UKRF’s scheme assets
 
were in surplus versus IAS 19 obligations by £2,058m
 
(2018:
 
£1,735m).
 
The movement for the
UKRF was driven
 
by higher
 
than assumed asset
 
returns, payment of de
 
ficit reduction contributions, updated
 
mortality assumptions,
 
and lower than
expected inflation, partially offset by a decrease in
 
the discount rate.
 
 
The weighted average
 
duration of the benefit payments reflected in the defined benefit obligation for the UKRF is 17
 
years. The UKRF expected
benefits are projected to be paid out for
 
in excess of 50 years, although 25%
 
of the total
 
benefits are expected to be paid
 
in the next 10 years; 30%
in years 11
 
to 20 and 25% in years 20 to 30. The remainder
 
of the benefits
 
are expected to be paid beyond
 
30 years.
 
Of the £1,410
 
m
 
(2018
 
:
 
£2,16
 
7m) UKRF benefits paid out,
 
£580m
 
(2018
 
:
 
£1,420
 
m) related to
 
transfers
 
out of the fund.
 
Where a scheme’s assets exceed its obligation, an asset is recognised
 
to the extent that it does not exceed the present value of future contribution
holidays or refunds
 
of contributions (the asset ceiling). In the case of the UKRF the asset ceiling is not applied as, in certain specified circumstances
such as wind-up, the Group
 
expects to be able
 
to recover
 
any surplus. Similarly, a liability in respect of future minimum funding
 
requirements is not
recognised. The Trustee
 
does not have a substantive right to
 
augment benefits, nor do
 
they have the right to wind up the plan except in the
dissolution of the Group
 
or termination of
 
contributions by the Group.
 
The application of the asset
 
ceiling to other plans and recognition
 
of
additional liabilities in respect of future minimum
 
funding requirements are
 
considered on
 
an individual plan basis.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Employee
 
benefits
 
 
283
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
33 Pensions
 
and post-retirement benefits
continued
 
Critical accounting estimates and judgements
Actuarial valuation of the schemes’ obligation is dependent
 
upon a series of assumptions. Below is a summary of the main financial and
demographic
 
assumptions adopted for the UKRF.
 
2019
2018
Key UKRF financial assumptions
% p.a.
% p.a.
Discount rate
1.92
2.71
Inflation rate (RPI)
3.02
3.25
 
The UKRF discount rate assumption for 2019
 
was based on a variant of the standard Willis Towers
 
Watson RATE Link model. This variant includes
all bonds rated AA by
 
at least one of the four major ratings agencies, and assumes that forward
 
rates after year 30 are flat. The RPI inflation
assumption for 2019
 
was set by reference to the Bank of England’s implied inflation curve, assuming the forward
 
rates remain flat
 
after 30 years.
The inflation assumption incorporates a deduction
 
of 20
 
basis points
 
as an allowance for
 
an inflation risk premium.
 
The methodology
 
used to
derive the discount rate and price
 
inflation assumptions is consistent with that used at the prior year end, except for a switch to holding
 
forward
rates rather spot rates flat after year
 
30.
 
The UKRF’s post-retirement mortality assumptions are based on
 
a best estimate assumption derived from
 
an analysis in 2019
 
of the UKRF’s
 
own
post-retirement mortality experience, and taking account of recent evidence
 
from
 
published mortality surveys. An allowance has been made for
future mortality improvements
 
based on the 201
 
8
 
core projection
 
model published by the Continuous Mortality Investigation Bureau subject to a
long-term trend
 
of 1.5%
 
per annum in future improvements.
 
The methodology used is consistent
 
with the prior year
 
end, except that the 201
 
7
 
core
projection model
 
was used at 201
 
8, and a long-trend of 1.25%
 
per annum was applied.
 
The table below shows how the assumed life expectancy at
60, for members of the UKRF,
 
has varied over the past three years:
 
Assumed life expectancy
2019
2018
2017
Life expectancy at 60 for current pensioners (years)
– Males
27.1
27.7
27.8
– Females
29.3
29.4
29.4
Life expectancy at 60 for future pensioners
 
currently aged 40 (years)
– Males
28.9
29.2
29.3
– Females
31.1
31.0
31.0
 
The assumption for future transfers
 
out has been remov
 
ed,
 
to reflect lower volumes experienced
 
in 2019
 
and immaterial volumes expected going
forwards
 
.
 
The previous assumption was
 
that 5%
 
of the benefit obligation in respect of deferred
 
members will transfer out during 2020,
 
2.5% in
2021,
 
tapering down
 
to 0%
 
from 2022
 
onwards.
 
Sensitivity analysis
 
on actuarial assumptions
The sensitivity analysis has been calculated by valuing the UKRF liabilities
 
using the amended assumptions shown in the table below and keeping
the remaining assumptions the same as disclosed in the table above, except in the
 
case of the inflation sensitivity where
 
other assumptions that
depend on
 
assumed inflation have also been amended correspondingly.
 
The difference betw
 
een the recalculated liability
 
figure and that stated in
the balance sheet reconciliation table above
 
is the figure shown. The selection of these movements to illustrate the sensitivity of
 
the defined benefit
obligation to key assumptions should not be interpreted
 
as Barclays expressing any specific view
 
of the probability of such movements happening.
 
Change in key assumptions
2019
2018
(Decrease)/
Increase in UKRF
defined benefit
obligation
(Decrease)/
Increase in
 
UKRF
defined
 
benefit
obligation
£bn
£bn
Discount rate
0.5% p.a. increase
(2.3)
(2.1)
0.25% p.a. increase
(1.2)
(1.1)
0.25% p.a. decrease
1.2
1.1
0.5% p.a. decrease
2.6
2.4
Assumed RPI
0.5% p.a. increase
1.5
1.3
0.25% p.a. increase
0.8
0.7
0.25% p.a. decrease
(0.7)
(0.6)
0.5% p.a. decrease
(1.4)
(1.3)
Life expectancy at 60
One year increase
1.0
0.9
One year decrease
(1.0)
(0.9)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Employee
 
benefits
 
 
284
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Assets
A long-term investment strategy has been set for the UKRF,
 
with its asset allocation comprising
 
a mixture of equities, bonds, property
 
and other
appropriate
 
assets.
 
This recognises that different
 
asset classes are likely to produce
 
different long
 
-term returns and some asset classes
 
may be
more volatile than others. The long
 
-term investment strategy ensures, among other
 
aims,
 
that investments are adequately diversified.
 
The UKRF also employs derivative instruments, where
 
appropriate, to achieve a desired exposure
 
or return, or
 
to match assets
 
more closely to
liabilities. The value of assets shown
 
reflects the assets held by the scheme, with any derivative holdings
 
reflected on a fair value basis.
 
 
The value of the assets of the schemes and their percentage
 
in relation to total scheme assets were as follows:
 
Analysis of scheme assets
Total
Of which relates to
 
UKRF
Value
£m
% of total
 
fair value of
 
scheme
 
assets
%
Value
£m
% of total
 
fair value of
 
scheme
 
assets
%
As at 31 December 2019
Equities
 
2,349
7.3
2,174
6.9
Private equities
2,083
6.5
2,083
6.6
Bonds - fixed government
3,447
10.7
3,175
10.1
Bonds - index-linked government
11,036
34.4
11,027
35.2
Bonds - corporate
 
and other
9,234
28.8
9,042
28.8
Property
1,644
5.1
1,633
5.2
Infrastructure
1,558
4.9
1,558
5.0
Cash and liquid assets
742
2.3
670
2.2
Fair value of scheme assets
 
32,093
100.0
31,362
100.0
As at 31 December 2018
Equities
 
3,349
11.3
3,211
11.1
Private equities
1,995
6.7
1,995
6.9
Bonds - fixed government
3,320
11.2
3,062
10.5
Bonds - index-linked government
10,945
36.8
10,936
37.7
Bonds - corporate
 
and other
6,371
21.4
6,197
21.3
Property
1,712
5.8
1,702
5.9
Infrastructure
1,196
4.0
1,196
4.1
Cash and liquid assets
834
2.8
737
2.5
Fair value of scheme assets
 
29,722
100.0
29,036
100.0
 
Included
 
within the fair
 
value of scheme assets were nil
 
(2018:
 
nil)
 
relating to shares in Barclays PLC and nil (2018:
 
nil)
 
relating to bonds issued by
Barclays PLC. The UKRF
 
also invests in pooled investment vehicles which may
 
hold shares or debt issued by Barclays
 
PLC.
 
The UKRF assets above do
 
not include the Senior Notes asset referred
 
to in the section
 
below on Triennial
 
Valuation, as these are non
 
-transferable
instruments
 
and not recognised
 
under IAS19
 
.
 
Approximately
 
44%
 
of the UKRF assets
 
are invested in liability-driven investment
 
strategies; primarily UK gilts as well as interest rate and
 
inflation
swaps. These are used to better match
 
the assets to its liabilities. The swaps are used to reduce
 
the scheme’s
 
inflation and duration
 
risks against its
liabilities.
 
Triennial valuation
The latest triennial actuarial valuation of the UKRF with an effective
 
date of 30 September
 
2019
 
has been completed. This valuation showed a
funding deficit of £2.3bn and a funding
 
level of 94%, compared to a £4.0bn
 
funding deficit in the 30 September 2018
 
update, and a
 
£7.9bn
 
funding
deficit in the previous triennial valuation (effective
 
date 30 September
 
2016).
 
The decrease in funding deficit over the year to 30 September 2019
was mainly driven by
 
the payment of deficit reduction
 
contributions and changes to mortality assumptions.
 
The Bank and UKRF Trustee have
 
agreed a revised statement of funding principles, schedule of contributions, and recovery
 
plan to seek
 
to eliminate
the funding deficit.
 
 
The main differences between the
 
funding and accounting
 
assumptions are a different approach
 
to setting the
 
discount rate and a more
conservative longevity assumption for funding.
 
 
The deficit reduction contributions
 
agreed with the UKRF Trustee as part of the 30 September 2019
 
triennial valuation recovery
 
plan are shown
alongside the deficit reduction
 
contributions agreed
 
in 2017
 
for the prior 30 September 2016
 
triennial valuation.
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Employee
 
benefits
 
 
285
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Deficit reduction
 
contributions
under the
 
30 September 2016
valuation
Deficit reduction
 
contributions
under the
 
30 September 2019
valuation
Year
£m
£m
Cash paid:
2019
 
- paid in two installments of £250m in April and September
500
-
2019
 
- paid in December
-
500
Future commitments:
2020
500
500
2021
1,000
700
2022
1,000
294
2023
1,000
286
2024
 
- 2026
1,000 each year
-
 
As part of the triennial actuarial valuation, Barclays
 
Bank PLC agreed to pay a £500m
 
contribution on
 
11 December 2019
 
and at the same
 
time the
UKRF subscribed for
 
non-transferrable
 
listed
 
senior fixed rate notes for £500m, backed
 
by UK gilts (the Senior Notes). The Senior Notes were issued
by Heron
 
Issuer Limited (Heron), an entity that is consolidated within the Barclays Group
 
under IFRS 10. The Senior
 
Notes entitle
 
the UKRF to semi-
annual coupon
 
payments for five years, and full repayment of the subscription in cash at maturity in 2024.
 
Heron acquired
 
the gilts
 
from BBPLC
 
for
cash of £600m
 
to support these payments. BBPLC also subscribed for Junior
 
notes issued
 
by Heron
 
for £100m.
 
The contribution forms part of the
recovery
 
plan agreed as part of the 201
 
9
 
valuation of the UKRF.
 
No liability is recognis
 
ed under IAS19
 
for the obligation to make deficit
 
reduction
contributions or to repay
 
the Senior Notes, as settlement in 2024
 
gives rise to both a reduction in cash and a corresponding
 
increase in net defined
benefit assets.
 
The deficit reduction
 
contributions
 
are in
 
addition to
 
the regular
 
contributions
 
to meet the
 
Barclays Group’s
 
share of the cost
 
of benefits accruing
over each year.
 
The next funding valuation of the UKRF is due to be completed in 202
 
3
 
with an effective date of 30 September 20
 
22.
 
 
Other support measures agreed
 
which
 
remain in place
Collateral – The UKRF Trustee
 
and Barclays Bank PLC have entered
 
into an arrangement whereby
 
a collateral pool has
 
been put in place to provide
security for the UKRF funding
 
deficit as it increases
 
or decreases over
 
time. The collateral pool is currently
 
made up of government
 
securities,
 
and
agreement was made with the Trustee to
 
cover 100%
 
of the funding deficit with an
 
overall cap of £9bn. The arrangement
 
provi
 
des
 
the UKRF
Trustee with dedicated access to the pool
 
of assets in the event of Barclays Bank PLC not paying
 
a deficit reduction contribution
 
to the UKRF or in
the event of Barclays Bank PLC’s insolvency.
 
These assets are included within Note 38 Assets pledged, collateral received and assets transferred.
 
 
Support from
 
Barclays PLC – In the event of Barclays Bank PLC not paying
 
a deficit reduction contribution
 
payment required
 
by a specified pre-
payment date, Barclays
 
PLC has entered into an arrangement
 
whereby
 
it will
 
be required
 
to use, in
 
first priority, dividends received
 
from Barclays
Bank UK PLC (if any)
 
to invest the proceeds in Barclays Bank PLC (up
 
to the maximum amount of the deficit reduction contribution
 
unpaid by
Barclays Bank PLC). The proceeds
 
of the investment will be used to discharge Barclays Bank PLC’s unpaid
 
deficit reduction contribution.
 
Participation – As permitted under
 
the Financial Services and Markets Act 2000 (Banking
 
Reform) (Pensions)
 
Regulations 2015,
 
Barclays Bank UK
PLC is a participating employer
 
in the UKRF and will remain so during a transitional phase until September 2025
 
as set
 
out in a deed of
participation. Barclays
 
Bank UK PLC will make contributions for
 
the future service of its employees who are currently
 
Afterwork m
 
embers and, in
the event of Barclays Bank PLC’s insolvency during
 
this period provision has been made to require
 
Barclays Bank UK PLC to become the principal
employer
 
of the UKRF. Barclays Bank PLC’s Section 75
 
debt would be triggered
 
by the insolvency (the
 
debt would be calculated after allowing for
the payment to the UKRF of the collateral above).
 
Defined benefit contributions paid
 
with respect to the UKRF were as follows:
 
Contributions
 
paid
£m
2019
1,231
2018
741
2017
1,124
 
There were
 
nil (2018:
 
nil;
 
2017:
 
£153m)
 
Section 75 contributions included within the Barclays Group’s
 
contributions paid as no participating
employers left the UKRF scheme in 2019.
 
The Barclays Group’s
 
expected contribution
 
to the UKRF in respect of defined benefits in 2020 is £743m
 
(2019:
 
£725m). In addition, the expected
contributions to UK defined contributio
 
n
 
schemes in 2020 is £33m (2019:
 
£34m) to the UKRF and £185m
 
(2019:
 
£168
 
m) to the BPSP.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Scope
 
of consolidation
 
 
 
286
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
The notes included in this section present information on
 
the Group
 
’s investments in
 
subsidiaries, joint ventures and associates and its interests in
structured entities. Detail is also given on securitisation transactions the Group
 
has entered into and arrangements that are held off-balance sheet.
 
 
34 Principal
 
subsidiaries
The Group
 
applies IFRS 10
Consolidated Financial Statements
. The
 
consolidated financial statements combine the financial statements of the
Group
 
and all its
 
subsidiaries. Subsidiaries are entities over
 
which the Group
 
has control. Under IFRS 10,
 
this is
 
when the Group
 
is exposed or has
rights to variable returns from
 
its
 
involvement in
 
the entity and has the ability to affect those returns through
 
its
 
power
 
over the entity.
 
The Group
 
reassesses whether it
 
controls an entity if facts and
 
circumstances indicate that there have been changes to its power,
 
its rights to
variable returns or its ability to use its power
 
to affect the
 
amount of its returns.
 
Intra-group
 
transactions and balances are eliminated on consolidation and consistent
 
accounting policies are used throughout
 
the Group for
 
the
purposes of the consolidation. Changes in ownership
 
interests
 
in subsidiaries are accounted
 
for as equity transactions if they occur after control
has been obtained and
 
they do not result in loss of
 
control.
 
The significant judgements used in applying
 
this policy are set out below.
 
Accounting for investment in subsidiaries
In the individual financial statements of Barclays
 
PLC, investments in subsidiaries are stated at cost less impairment.
 
Principa
 
l
 
subsidiaries for the Group
 
are set out below. This includes those subsidiaries that are most significant
 
in the context of the Group’s
business, results or financial position.
 
Principal place of
business
 
or
incorporation
Percentage of
 
voting
rights
 
held
Non-controlling
 
interests
- proportion
 
of ownership
interests
Non-controlling
interests
 
- proportion
of voting
 
interests
Company name
Nature of
 
business
%
%
%
Barclays Bank PLC
United Kingdom
Banking, holding company
100
3
-
Barclays Bank UK PLC
United Kingdom
Banking, holding company
100
-
-
Barclays Bank Ireland
 
PLC
Ireland
Banking, holding company
100
-
-
Barclays Execution Services Limited
United Kingdom
Service company
100
-
-
Barclays Capital Inc.
United States
Securities dealing
100
-
-
Barclays Capital Securities Limited
United Kingdom
Securities dealing
100
-
-
Barclays Securities Japan
 
Limited
Japan
Securities dealing
100
-
-
Barclays US LLC
United States
Holding company
100
-
-
Barclays Bank Delaware
United States
Credit card issuer
 
100
-
-
 
The country of registration or
 
incorporation
 
is also
 
the principal area of operation of each of the above subsidiaries.
 
 
Ownership interests are in some cases different to
 
voting interests due to the existence of non
 
-voting equity interests, such as preference shares.
Refer to Note 30
 
for more
 
information.
 
 
Determining whether the Group
 
has control of an entity is generally straightforward based on
 
ownership of the majority of the voting capital.
However,
 
in certain instances, this determination will involve judgement, particularly
 
in the case of structured entities where voting rights are often
not the determining
 
factor in decisions over the relevant activities. This judgement will involve assessing the purpose
 
and design of the entity. It will
also often be necessary to
 
consider whether
 
the Group, or
 
another involved party with power
 
over the relevant activities,
 
is acting as a principal in
its own right
 
or as an agent on behalf of others.
 
 
There is also often considerable
 
judgement involved
 
in the ongoing assessment of
 
control over
 
structured entities.
 
In this regard,
 
where market
conditions have deteriorated
 
such that the other investors’ exposures to the structure’s variable returns have been
 
substantively eliminated, the
Group
 
may conclude that the managers of the structured entity are acting as its agent and therefore
 
will consolidate
 
the structured
 
entity.
 
 
An interest in equity voting rights exceeding 50%
 
would typically indicate that
 
the Group has control
 
of an entity. However, the entity set
 
out
below is excluded from
 
consolidation because the Group does not have exposure to its
 
variable returns.
 
 
Percentage of
 
voting
rights
 
held
Equity shareholders'
 
funds
Retained profit
 
for the
year
Country of
 
registration
 
or incorporation
Company name
%
£m
£m
Cayman Islands
Palomino Limited
100
-
-
 
This entity is managed
 
by
 
an external
 
counterparty
 
and consequently
 
is
 
not controlled by
 
the Group. Interests relating to this entity
 
are included in
Note 35.
 
 
 
Notes
 
to the financial
 
statements
Scope
 
of consolidation
 
 
 
287
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Significant restrictions
 
As is typical for a group
 
of its
 
size and international scope, there are restrictions
 
on the ability of Barclays PLC to obtain distributions of capital,
access the assets or repay
 
the liabilities of
 
members of its Group
 
due to the statutory, regulatory
 
and contractual requirements of its subsidiaries
and due to the protective rights of non
 
-controlling interests. These are considered below.
 
Regulatory
 
requirements
 
Barclays’ principal
 
subsidiary companies have assets and liabilities before intercompany
 
eliminations of
 
£1,474bn
 
(2018:
 
£1,418bn)
 
and
£1,388
 
bn (2018:
 
£1,337
 
bn) respectively. The assets and liabilities
 
are subject to prudential regulation
 
and regulatory
 
capital requirements in the
countries in which they are regulated. These require
 
entities to maintain minimum capital
 
levels which cannot
 
be returned
 
to the parent
company,
 
Barclays PLC on a going concern
 
basis.
 
 
In order
 
to meet capital
 
requirements, subsidiaries may issue
 
certain equity-accounted and
 
debt-accounted
 
financial instruments
 
and non-
equity instruments such as Tier 1 and Tier 2 capital instruments and other
 
forms of subordinated
 
liabilities.
 
Refer to Note 27
 
and Note 28 for
particulars of these instruments. These instruments may be subject to cancellation clauses or
 
preference
 
share restrictions that
 
would limit
the ability of the entity to repatriate the capital on
 
a timely basis.
 
Liquidity requirements
Regulated subsidiaries of the Group
 
are required
 
to meet applicable PRA or local regulatory requirements pertaining to liquidity. Some of the
regulated subsidiaries include Barclays Bank
 
PLC and Barclays Capital Securities Limited (which
 
are regulated on a combined
 
basis under a
Domestic Liquidity Sub-Group
 
(DoLSub) arrangement)
 
,
 
Barclays Bank UK PLC, Barclays Bank Ireland
 
PLC, Barclays Capital
 
Inc. and Barclays Bank
Delaware. See pages 145
 
to 154
 
for further details of liquidity requirements, including
 
those of the Group’s significant subsidiaries.
 
Statutory requirements
 
The Group’s
 
subsidiaries are subject to statutory requirements not to make distributions of capital and unrealised profits and generally
 
to maintain
solvency. These
 
requirements restrict the ability of subsidiaries to make remittances
 
of dividends to Barclays PLC,
 
the ultimate parent, except in the
event of a legal capital reduction
 
or liquidation. In most cases, the
 
regulatory
 
restrictions referred
 
to above exceed the statutory restrictions.
 
Contractual requirements
Asset encumbrance
The Group
 
uses its
 
financial assets to raise finance in the form
 
of securitisations and through the liquidity schemes of central banks,
 
as well as to
provide
 
security to the
 
UK Retirement Fund
 
.
 
Once encumbered,
 
the assets
 
are not available
 
for transfer around
 
the Group. The assets typically
affected are disclosed in Note 38.
 
Other restrictions
The Group
 
is required to maintain balances with central banks and other regulatory
 
authorities, and these
 
amounted to £4,893m
 
(2018:
 
£4,717
 
m).
 
35 Structured entities
A structured entity is an entity in which voting or similar rights are not the dominant factor in deciding
 
control. Structured
 
entities are generally
created to achieve a narrow
 
and well-defined objective with restrictions around their ongoing
 
activities.
 
 
Depending on
 
the Group’s power
 
over the activities
 
of the entity and its exposure to and ability to influence its own returns, it may consolidate the
entity. In other
 
cases, it may sponsor or have exposure
 
to such an entity
 
but not consolidate it.
 
Consolidated structured entities
The Group
 
has contractual arrangements which
 
may require
 
it to
 
provide
 
financial support to the following types of consolidated structured
entities:
 
Securitisation vehicles
The Group
 
uses securitisation as a source of financing and a means of risk transfer. Refer to
 
Note 37 for
 
further detail.
 
Commercial
 
paper
 
(CP) and medium-term note conduits
The Group
 
provided
 
£8.3bn (2018: £1
 
1.7bn) in undrawn contractual backstop liquidity facilities
 
to CP conduits.
 
Fund management entities
In previous periods,
 
the Group had
 
contractually guaranteed
 
the performance of certain cash
 
investments in a number of managed
 
investment
funds which resulted in their consolidation. As at 31 December
 
2019,
 
the notional value of
 
the guarantees were £nil (2018:
 
£nil) as the
 
European
Wealth Funds associated with these guarantees
 
were either closed or ownership
 
has been transferred outside the Group
 
and they are no longer
consolidated.
 
Employee benefit and other trusts
The Group
 
provides capital contributions to employee
 
benefit trusts
 
to enable them to meet obligations to employees in r
 
elation to share-based
remuneration
 
arrangements. During 2019,
 
the Group provided undrawn
 
liquidity facilities
 
of £2.5bn (2018:
 
£2.6bn) to certain trusts.
 
Unconsolidated
 
structured entities in which the Group has an
 
interest
 
An interest in a structured
 
entity is any form of contractual or
 
non-contractual involvement
 
which creates variability in
 
returns arising from the
performance
 
of the entity
 
for the Group.
 
Such interests include holdings of debt or equity securities, derivatives that transfer financial risks from
 
the
entity to the Group,
 
lending, loan commitments, financial guarantees and investment management agreements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Scope
 
of consolidation
 
 
 
288
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Interest rate swaps, foreign
 
exchange derivatives that are not complex and which expose the Group
 
to insignificant
 
credit risk by being
 
senior in the
payment waterfall of a
 
securitisation and derivatives that are determined to introduce
 
risk or variability to a structured entity are not considered to
be an interest in an entity and have been
 
excluded from
 
the disclosures below.
 
The nature and extent of the Group’s
 
interests in structured entities is summarised below:
 
Summary of interests in unconsolidated
 
structured entities
Secured
financing
Short-term
traded interests
Traded
derivatives
Other interests
Total
£m
£m
£m
£m
£m
As at 31 December 2019
Assets
Trading
 
portfolio assets
 
-
 
9,585
 
-
 
76
9,661
Financial assets at fair value through
 
the income statement
32,859
 
-
 
 
-
 
2,659
35,518
Derivative financial instruments
 
-
 
 
-
 
2,369
 
-
 
2,369
Financial assets at fair value through
 
other comprehensive income
 
-
 
 
-
 
 
-
 
391
391
Loans and advances at amortised cost
 
-
 
 
-
 
 
-
 
19,061
19,061
Reverse repurchase
 
agreements at amortised cost
77
-
-
-
77
Other assets
 
-
 
 
-
 
 
-
 
28
28
Total assets
32,936
9,585
2,369
22,215
67,105
Liabilities
Derivative financial instruments
 
-
 
 
-
 
3,171
2,437
5,608
As at 31 December 2018
Assets
Trading
 
portfolio assets
-
12,206
-
-
12,206
Financial assets at fair value through
 
the income statement
32,359
-
-
2,598
34,957
Derivative financial instruments
-
-
5,236
-
5,236
Financial assets at fair value through
 
other comprehensive income
-
-
-
-
-
Loans and advances at amortised cost
-
-
-
17,341
17,341
Other assets
-
-
-
33
33
Total assets
32,359
12,206
5,236
19,972
69,773
Liabilities
Derivative financial instruments
-
-
6,438
2,586
9,024
 
Secured financing arrangements,
 
short-term traded interests and traded derivatives are typically managed
 
under market risk manageme
 
nt policies
described on pages 103
 
to 104 which includes an indication of the change of risk measures compared
 
to last
 
year. For
 
this reason, the total assets
of these entities are not considered
 
meaningful for the purposes of understanding
 
the related risks
 
and so have not been presented. Other interests
include conduits and lending where
 
the interest
 
is driven by normal
 
customer demand.
 
Secured financing
 
The Group
 
routinely enters into reverse repurchase
 
contracts, stock borrowing and similar arrangements on normal commercial terms where the
counterparty
 
to the arrangement is a structured entity. Due to the nature of these arrangements, especially the transfer
 
of collateral and ongoing
margining, the Group
 
has minimal exposure to the performance of the structured
 
entity counterparty.
 
This includes margin lending which is
presented under
 
financial assets at fair value
 
through
 
the income statement
 
to align to the balance sheet presentation.
 
 
Short-term traded
 
interests
The Group
 
buys and sells
 
interests in structured entities
 
as part of its trading activities, for example, retail mortgage
 
-backed securities, collateralised
debt obligations and similar interests. Such interests are
 
typically held individually or as part of a larger portfolio
 
for no more
 
than 90 days. In such
cases, the Group
 
typically has
 
no other involvement
 
with the structured entity other than the securities it holds as part of trading activities and its
maximum exposure
 
to loss
 
is restricted to the carrying
 
value of the asset.
 
 
As at 31 December
 
2019,
 
£8,903
 
m
 
(2018:
 
£8,436m) of the Group’s £9,585
 
m
 
(2018: £12,206m)
 
short-term traded interests were comprised of
debt securities issued by asset securitisation vehicles.
 
Traded
 
derivatives
The Group
 
enters into a variety
 
of derivative contracts with
 
structured entities which reference
 
market risk variables such as interest rates, foreign
exchange rates and credit indices among
 
other things. The main derivative types which are considered interests in structured entities include index-
based and entity specific credit default swaps, balance
 
guaranteed
 
swaps, total return swaps, commodities swaps, and equity swaps. A description
of the types of derivatives and the risk management practices are detailed in Note
 
14. The risk of loss may be mitigated through
 
ongoing margining
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Scope
 
of consolidation
 
 
 
289
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
requirements as well as a right
 
to cash flows from the structured entity which are senior in the payment
 
waterfall. Such margining
 
requirements
 
are
consistent with market practice for many
 
derivative arrangements
 
and in line with
 
the Grou
 
p’s normal credit policies.
 
Derivative transactions require
 
the counterparty
 
to provide cash or other
 
collateral under margining agreements to mitigate counterparty credit
risk. The Group
 
is mainly
 
exposed to settlement risk on
 
these derivatives which is mitigated through
 
daily margining. Total notionals amounted to
£314,170m
 
(2018:
 
£246,774
 
m).
 
Except for credit default swaps
 
where the maximum exposure
 
to loss
 
is the swap notional amount, it is not possible to estimate the maximum
exposure to loss in respect of derivative positions
 
as the fair value of derivatives is subject to changes in market rates of interest,
 
exchange rates
and credit indices which by
 
their nature are uncertain. In addition, the Group’s
 
losses would be subject to mitigating action under its traded market
risk and credit risk policies that require
 
the counterparty
 
to provide collateral in cash or other assets in most cases.
 
Other interests in unconsolidated structured
 
entities
The Group’s
 
interests in structured entities not held for the purposes of short
 
-term trading activities are set out below, summarised by the
 
purpose
of the entities and limited to significant categories, based on maximum
 
exposure to loss.
 
Nature of interest
Multi-seller
conduit
programmes
Lending
Investment funds
and trusts
Others
Total
£m
£m
£m
£m
£m
As at 31 December 2019
Trading portfolio
 
assets
-
 
-
 
-
 
76
76
Financial assets at fair value through the income statement
– Debt securities
-
 
-
 
-
 
80
80
– Loans and advances
-
 
159
-
 
2,417
2,576
– Equity securities
-
 
-
 
-
 
3
3
Financial assets at fair value through other comprehensive
income
-
 
-
 
-
 
391
391
Loans and advances at amortised cost
5,930
8,132
-
 
4,999
19,061
Other assets
17
4
7
-
 
28
Total on-balance sheet exposures
5,947
8,295
7
7,966
22,215
Total off
 
-balance sheet notional amounts
8,649
3,751
-
 
1,621
14,021
Maximum exposure to loss
14,596
12,046
7
9,587
36,236
Total assets of the entity
78,716
145,181
9,180
24,919
257,996
As at 31 December 2018
Trading portfolio
 
assets
-
 
-
 
-
 
-
 
-
 
Financial assets at fair value through the income statement
– Debt securities
444
-
 
-
 
114
558
– Loans and advances
-
 
-
 
-
 
2,040
2,040
Financial assets at fair value through other comprehensive
income
-
 
-
 
-
 
-
 
-
 
Loans and advances at amortised cost
6,100
9,140
-
 
2,101
17,341
Other assets
9
3
21
-
 
33
Total on-balance sheet exposures
6,553
9,143
21
4,255
19,972
Total off
 
-balance sheet notional amounts
11,671
4,327
-
 
431
16,429
Maximum exposure to loss
18,224
13,470
21
4,686
36,401
Total assets of the entity
73,109
196,865
9,341
28,163
307,478
 
Maximum exposure to loss
Unless specified otherwise below,
 
the Group’s maximum
 
exposure to loss is the total of its on-balance sheet positions and its off-balance sheet
arrangements, being
 
loan commitments and financial guarantees. Exposure to loss is mitigated through
 
collateral, financial guarantees, the
availability of netting and credit protection
 
held.
 
Multi-seller conduit programme
The multi-seller conduit engages in providing
 
financing to various clients and holds whole or partial interests in pools of receivables or similar
obligations. These instruments are protected
 
from loss through
 
over
 
collateralisation,
 
seller guarantees, or other credit enhancements provided
 
to
the conduit. The Group’s off
 
-balance sheet exposure included in the table above
 
represents liquidity facilities that are provided
 
to the conduit for
the benefit of the holders of the commercial paper
 
issued by the conduit and will only be drawn where the conduit
 
is unable to access
 
the
commercial paper
 
market. If these
 
liquidity facilities are drawn,
 
the Group is protected from
 
loss through over
 
collateralisation,
 
seller guarantees, or
other credit enhanc
 
ements provided
 
to the conduit.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Scope
 
of consolidation
 
 
 
290
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
 
Lending
The portfolio includes lending provided
 
by the Group to unconsolidated structured
 
entities
 
in the normal course of its
 
lending business to earn
income in the form
 
of interest and lending fees and includes loans to structured entities that are generally collateralised by
 
property,
 
equipment or
other assets. All loans are subject to the Group’s
 
credit sanctioning process. Collateral arrangements
 
are specific to the circumstances of each loan
with additional guarantees and collateral sought from the sponsor
 
of the structured entity for certain arrangements.
 
During the period
 
the Group
incurred
 
an impairment of £7m (2018:
 
£67
 
m) against
 
such facilities.
 
Investment funds and trusts
 
In the course of its fund management activities, the Group
 
establishes pooled investment funds that comprise investments of various kinds, tailored
to meet certain investors’ requirements.
 
The Group’s
 
interest in funds is generally restricted to a fund management fee, the value of which is
typically based on the performance
 
of the fund.
 
The Group
 
acts as trustee to a number of trusts established by or on behalf of its clients. The purpose of the trusts, which meet the definition of
structured entities, is to hold assets on behalf of beneficiaries. The Group’s
 
interest in trusts is generally restricted to unpaid fees which,
 
depending
on the trust, may be fixed or
 
based on the value of the trust assets. The Group
 
has no other risk exposure to the trusts.
 
 
Other
This includes fair value loans with structured
 
entities where the market risk is materially hedged with corresponding
 
derivative contracts, interests
in debt securities issued by securitisation vehicles and
 
drawn
 
and undrawn
 
loan facilities
 
to these entities.
 
Assets transferred
 
to sponsored unconsolidated structured entities
Assets transferred
 
to sponsored unconsolidated
 
structured entities were £471m
 
(2018: £516m)
 
.
 
36 Investments in associates and joint ventures
Accounting for associates and joint ventures
The Group
 
applies IAS 28
Investments in Associates
 
and IFRS 11
Joint Arrangements
. Associates
 
are entities in which
 
the Group has significant
influence, but not control, over the operating
 
and financial policies. Generally the Group
 
holds more than 20%, but less than 50%, of their voting
shares. Joint ventures are arrangeme
 
nts where the Group has joint control and rights to the net assets of the
 
entity.
 
 
The Group’s
 
investments in associates and joint ventures are initially recorded
 
at cost
 
and increased (or decreased)
 
each year by the Group’s share
of the post acquisition profit/(loss). The Group
 
ceases to recognise its
 
share of the losses of equity accounted
 
associates when its share of the net
assets and amounts due from the entity have been
 
written off in full, unless it has a contractual or constructive
 
obligation to make good its share of
the losses. In some cases, investments in these entities may be
 
held at fair value through
 
profit or loss, for example, those held by private equity
businesses.
 
 
There are no individually significant investments in joint ventures
 
or associates held by the Group.
 
 
2019
2018
Associates
Joint ventures
Total
Associates
Joint ventures
Total
£m
£m
£m
£m
£m
£m
Equity accounted
457
264
721
481
281
762
Held at fair value through
 
profit or loss
-
516
516
-
509
509
Total
457
780
1,237
481
790
1,271
 
Summarised financial information for
 
the Group’s equity accounted
 
associates
 
and joint ventures is set out below.
 
The amounts shown are the net
income of the investees, not just the Group’s
 
share,
 
for the year ended 31
 
December 2019,
 
with the exception of certain undertakings for which the
amounts are based on accounts made up to dates not earlier than three months before
 
the balance sheet date.
 
Associates
Joint ventures
2019
2018
2019
2018
£m
£m
£m
£m
Profit from continuing
 
operations
49
173
86
54
Other comprehensive
 
income/(expense)
-
28
3
32
Total comprehensive income from continuing
 
operations
49
201
89
86
 
Unrecognised
 
shares of the losses
 
of individually immaterial associates and joint ventures were
 
£nil (2018:
 
£nil).
 
The Barclays commitments and
 
contingencies to its associates and joint ventures comprised
 
unutilised credit facilities provided
 
to customers of
£1,726m
 
(2018:
 
£1,715m). In
 
addition, the Group has made commitments to finance or otherwise provide
 
resources to its
 
joint ventures and
associates of £403m
 
(2018:
 
£318
 
m).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Scope
 
of consolidation
 
 
 
291
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
37 Securitisations
Accounting for securitisations
The Group
 
uses securitisations
 
as a source of finance and a means of risk
 
transfer. Such transactions generally
 
result in the transfer of contractual
cash flows from portfolios of financial assets to holders of issued debt securities.
 
Securitisations may, depending
 
on the individual arrangement, result in continued recognition
 
of the securitised
 
assets and the recognition of the
debt securities issued in the transaction; lead to partial continued recognition
 
of the assets
 
to the extent of the Group’s
 
continuing involvement
 
in
those assets or to derecognition
 
of the assets
 
and the separate recognition,
 
as assets or liabilities, of any rights and obligations created or retained
in the transfer. Full derecognition
 
only occurs when the Group
 
transfers both its
 
contractual right to receive cash flows from
 
the financial assets, or
retains the contractual rights to receive the cash
 
flows, but assumes a contractual obligation to pay
 
the cash flows to another party without
material delay or reinvestment, and also transfers
 
substantially all the risks and rewards of ownership,
 
including credit risk, prepayment
 
risk and
interest rate risk.
 
In the course of its normal banking activities, the Group
 
makes transfers of financial assets, either where legal rights to the cash flows from
 
the
asset are passed to the counterparty
 
or beneficially, where the Group
 
retains the rights
 
to the cash flows but assumes a responsibility to transfer
them to the counterparty.
 
Depending on
 
the nature of the transaction, this
 
may result in
 
derecognition
 
of the assets
 
in their entirety, partial
derecognition
 
or no derecogn
 
ition of the
 
assets
 
subject to the transfer.
 
 
A summary of the main transactions, and the assets and liabilities and the financial risks arising from these transactions,
 
is set out below:
 
Transfers of financial assets that do not result in derecognition
Securitisations
The Group
 
was party to securitisation transactions involving its credit card balances.
 
 
In these transactions, the assets, interests in the assets, or
 
beneficial interests in the cash flows arising from the assets, are transferred to a
 
special
purpose entity, which then issues
 
interest bearing debt securities to third party investors.
 
 
Securitisations may, depending
 
on the individual arrangement, result in continued recognition
 
of the securitised
 
assets and the recognition of the
debt securities issued in the transaction. Partial continued
 
recognition
 
of the assets
 
to the extent of the Group’s
 
continuing involvement
 
in those
assets can also occur or
 
derecognition
 
of
 
the assets
 
and the separate recognition,
 
as assets or liabilities, of any rights and obligations created or
retained in the transfer.
 
 
The following table shows the carrying
 
amount of securitised assets that have not resulted in full derecognition,
 
together with the associated
liabilities, for each category of asset on the balance sheet:
 
2019
2018
Assets
Liabilities
 
Assets
Liabilities
 
Carrying
amount
 
Fair value
Carrying
amount
 
Fair value
Carrying
amount
 
Fair value
Carrying
amount
 
Fair value
£m
£m
£m
£m
£m
£m
£m
£m
Loans and advances at amortised
cost
Credit cards, unsecured
 
and other
retail lending
3,516
3,678
(2,918)
(2,922)
4,242
4,334
(4,234)
(4,218)
 
Balances included within loans and advances at amortised cost represent
 
securitisations where substantially all the risks and rewards of the asset
have
 
been retained by the Group.
 
The relationship between the transferred
 
assets and the
 
associated liabilities is that holders of notes may only
 
look to cash flows from the
securitised assets for payments of principal and
 
interest due to them under the terms of their notes, although the contractual terms of their notes
may be different to
 
the maturity and interest of the transferred
 
assets.
 
For transfers of assets
 
in relation to repurchase
 
agreements, refer to Note 38.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Scope
 
of consolidation
 
 
 
292
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Continuing involvement
 
in financial assets that have
 
been derecognised
In some cases, the Group
 
may have transferred
 
a financial
 
asset in its entirety but may have continuing
 
involvement in it. This arises in asset
securitisations where loans and asset backed securities were
 
derecogni
 
sed as
 
a result of the Group’s involvement
 
with commercial mortgage
backed securities.
 
Continuing involvement
 
largely arises from providing
 
financing into these structures in
 
the form of retained notes, which do not
bear first losses.
 
The table below shows the potential financial implications of such continuing
 
involvement:
 
Continuing
 
involvement
a
Gain/(loss) from continuing
involvement
Carrying amount
 
Fair value
Maximum
exposure to
 
loss
For the year ended
Cumulative to 31
December
Type of transfer
£m
£m
£m
£m
£m
2019
Commercial mortgage
 
backed securities
189
188
189
1
4
2018
Commercial mortgage
 
backed securities
135
135
135
2
3
 
Note
a
 
Assets
 
which represent
 
the Group’s
 
continuing involvement
 
in derecognised
 
assets are recorded
 
in Loans and advances
 
at amortised cost.
 
38 Assets pledge
 
d, collateral received and assets transferred
Assets are pledged
 
or transferred
 
as collateral
 
to secure liabilities under
 
repurchase
 
agreements, securitisations
 
and stock lending agreements
 
or as
security deposits relating to derivatives. Assets transferred
 
are non
 
-cash assets
 
transferred
 
to a third party that do not qualify for derecognition
from the Group
 
balance sheet, for example because Barclays retains substantially all the exposure to those assets under
 
an agreement to
repurchase
 
them in the future for a fixed price.
 
Assets pledged or
 
transferred
 
as collateral
 
include all assets categorised as encumbe
 
red in the disclosure on pages 221
 
to 222 of the Barclays PLC
Pillar 3 Report
 
2019
 
(unaudited),
 
other than those held in commercial paper conduits. In these transactions, the Group will be required to step in to
provide
 
financing itself under a liquidity facility if
 
the vehicle cannot access the commercial
 
paper market
 
.
 
Where non
 
-cash assets
 
are pledged or
 
transferred
 
as collateral
 
for cash received,
 
the asset continues to be recognised in full, and a related liability
is also recognised on
 
the balance sheet.
 
Liabilities are shown
 
on a net basis in accordance
 
with IAS 32. Where non
 
-cash assets
 
are pledged or
transferred
 
as collateral in an exchange for
 
non-cash assets, the transferred asset continues to be recognised in full, and there is no associated
liability as the non-cash collateral received is not recognised
 
on the balance sheet. The Group
 
is unable to
 
use, sell or pledge the transferred
 
assets
for the duration of the transaction and remains
 
exposed to interest rate risk and credit risk on these pledg
 
ed assets. Unless stated, the
counterparty's
 
recourse is not limited to the transferred assets.
 
The following table summarises the nature
 
and carrying
 
amount of the assets
 
pledged as security against these liabilities:
 
2019
2018
£m
£m
Cash collateral and settlements
64,400
55,532
Loans and advances at amortised cost
39,354
42,683
Trading
 
portfolio assets
65,532
63,143
Financial assets at fair value through
 
the income statement
10,104
7,450
Financial assets at fair value through
 
other comprehensive income
9,278
10,354
Assets pledged
188,668
179,162
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Scope
 
of consolidation
 
 
 
293
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
The following table summarises the transferred
 
financial assets and the associated liabilities:
 
Transferred
assets
Associated
liabilities
£m
£m
At 31 December 2019
Derivatives
68,609
(68,609)
Repurchase agreements
52,840
(35,708)
Securities lending arrangements
49,106
-
Other
18,113
(12,005)
188,668
(116,322)
At 31 December 2018
Derivatives
58,338
(58,338)
Repurchase agreements
57,606
(40,717)
Securities lending arrangements
42,092
-
Other
21,126
(14,094)
179,162
(113,149)
 
Included
 
within other are agreements where
 
a counterparty's recourse is limited to
 
the transferred
 
assets.
 
The relationship between
 
the transferred
assets and the associated liabilities is that holders of notes may only look to cash flows from
 
the securitised assets for payments of principal
 
and
interest due to them under the terms of their notes.
 
 
Carrying value
Fair value
Transferred
assets
Associated
liabilities
Transferred
assets
Associated
liabilities
Net position
£m
£m
£m
£m
£m
2019
Recourse to transferred
 
assets only
3,516
(2,918)
3,678
(2,922)
756
2018
Recourse to transferred
 
assets only
4,242
(4,234)
4,334
(4,218)
116
 
The Group
 
has an additional £12bn (2018:
 
£10bn) of loans and advances within its
 
asset backed funding
 
programmes that can readily be used to
raise additional secured funding
 
and are available to support future issuances.
 
 
Total assets pledged
 
includes a collateral pool put in place to provide
 
security for the UKRF funding deficit. Refer to Note 33 for further details.
 
Collateral held as security for assets
Under certain transactions, including reverse
 
repurchase
 
agreements and stock borrowing
 
transactions, the
 
Group
 
is allowed to
 
resell or re-pledge
the collateral held. The fair value at the balance sheet date of collateral accepted and
 
re-pledged
 
or transferred
 
to others was as
 
follows:
 
2019
2018
£m
£m
Fair value of securities accepted as collateral
656,598
598,348
Of which fair value of securities re-
 
pledged/transferred
 
to others
554,988
528,957
 
Additional disclosure has been included
 
in collateral and other credit enhancements (see page 109).
 
 
Assets pledged as collateral include all assets categorised as encumbered
 
in the disclosure on pages
 
221
 
to 222 of
 
the Barclays PLC Pillar 3 Report
2019
 
(unaudited).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Other
 
disclosure
 
matters
 
 
 
294
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
The notes included in this section focus on related party transactions,
 
Auditors’ remuneration
 
and Directors’ remuneration. Related parties include
any subsidiaries, associates, joint ventures
 
and Key Management Personnel.
 
 
 
39 Related party transactions and Directors’ remuneration
 
Related party transactions
 
Parties are considered
 
to be related if
 
one party has the ability to control
 
the other party or exercise significant influence over the other party in
making financial or operational
 
decisions, or one other party controls both.
 
Subsidiaries
Transactions between Barclays
 
PLC and its subsidiaries meet the definition
 
of related party transactions. Where these are eliminated on
consolidation, they are not disclosed in the Group’s
 
financial statements. Transactions between Barclays
 
PLC and its subsidiaries are fully
disclosed in Barclays PLC’s financial statements.
 
A list of the Group’s principal
 
subsidiaries is shown in Note 34.
 
Associates, joint ventures and other entities
The Group
 
provides banking
 
services to its
 
associates, joint ventures and the Group
 
pension funds (principally the UK Retirement Fund),
providing
 
loans, overdrafts, interest and non-interest bearing deposits and current
 
accounts to these entities as well as other services. Group
companies also provide
 
investment management and custodian services to the Group pension schemes. All of these transactions are conducted
on the same terms as third party transactions. Summarised financial information
 
for the Group’s
 
investments in associates and joint ventures is
set out in Note 36.
 
Amounts included in the Group’s
 
financial statements, in aggregate, by category
 
of related party entity are as follows:
 
Associates
Joint ventures
Pension
 
funds
£m
£m
£m
For the year ended and as at 31 December 2019
Total income
-
12
5
Credit impairment charges
-
-
-
Operating expenses
(46)
-
-
Total assets
-
1,303
3
Total liabilities
-
-
75
For the year ended and as at 31 December 2018
Total income
-
7
4
Credit impairment charges
-
-
-
Operating expenses
(27)
(7)
-
Total assets
12
1,288
3
Total liabilities
85
2
139
 
An
 
entity that is consolidated within the Group
 
under IFRS 10
 
has issued
 
Senior Notes to the UKRF with a nominal value of £500m. This is not
included within the table above
 
.
 
Refer to Note 33
 
for further details. Total liabilities includes derivatives
 
transacted on behalf of the pensions funds
of £6m (2018:
 
£3m).
 
Key Management Personnel
Key Management Personnel
 
are defined as those persons having authority and responsibility for planning, directing
 
and controlling
 
the activities
 
of
Barclays PLC
 
(directly or indirectly) and comprise
 
the Directors and Officers of Barclays PLC, certain direct
 
reports of the Group
 
Chief Executive and
the heads of major business units and functions.
 
The Group
 
provides banking
 
services to Key Management Personnel and
 
persons connected to them. Transactions during the year and the
balances outstanding were as follows:
 
Loans outstanding
2019
2018
£m
£m
As at 1 January
7.2
4.8
Loans issued during the year
a
4.8
4.2
Loan repayments
 
during the year
b
(4.8)
(1.8)
As at 31 December
 
7.2
7.2
 
Notes
a
 
Includes
 
loans issued
 
to existing Key Management
 
Personnel and
 
new or existing loans issued to newly
 
appointed Key
 
Management Personnel.
b
 
Includes
 
loan repayments
 
by existing Key Management
 
Personnel and
 
loans to former Key Management
 
Personnel.
 
No allowances for impairment were
 
recognised in respect of loans to Key Management Personnel
 
(or any connected
 
person).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Other
 
disclosure
 
matters
 
 
 
295
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Deposits outstanding
2019
2018
£m
£m
As at 1 January
6.9
6.9
Deposits received during
 
the year
a
36.0
24.8
Deposits repaid during
 
the year
b
(30.8)
(24.8)
As at 31 December
 
12.1
6.9
 
Notes
a
 
Includes
 
deposits
 
received from existing Key
 
Management Personnel
 
and new or existing deposits received
 
from newly appointed Key
 
Management Personnel.
b
 
Includes
 
deposits
 
repaid by existing Key
 
Management Personnel
 
and deposits of former
 
Key Management
 
Personnel.
 
Total commitments outstanding
Total commitments outstanding
 
refers to the total of any undrawn
 
amounts on credit cards and/or
 
overdraft facilities
 
provided
 
to Key
Management Personnel.
 
Total commitments outstanding as at 31
 
December 2019
 
were £0.8m (2018: £0.9
 
m).
 
All loans to Key Management
 
Personnel
 
(and persons connected to them) were made
 
in the ordinary course of business; were made on
substantially the same terms, including interest rates and collateral, as those
 
prevailing at the same time for comparable
 
transactions with other
persons;
 
and did not involve more
 
than a normal risk of collectability or present other unfavou
 
rable features.
 
Remuneration of Key Management Personnel
Total remuneration
 
awarded
 
to Key Management Personnel below
 
represents the awards made to individuals that
 
have been approved
 
by the
Board
 
Remuneration
 
Committee as part of the
 
latest remuneration
 
decisions, and is consistent with the approach adopted
 
for disclosures set out
on pag
 
es 44 to 82.
 
Costs recognised in the income statement reflect the accounting charge
 
for the year included within operating
 
expenses. The
difference between
 
the values awarded
 
and the recognised income
 
statement
 
charge principally
 
relates to
 
the recognition of deferred
 
costs for
prior year
 
awards. Figures are provided
 
for the period that individuals met the
 
definition of Key Management Personnel.
 
2019
2018
£m
£m
Salaries and other short
 
-term benefits
38.5
33.0
Pension costs
0.1
-
Other long-term benefits
8.7
7.6
Share-based payments
13.4
16.2
Employer
 
social security charges on emoluments
7.4
7.5
Costs recognised for accounting purposes
68.1
64.3
Employer
 
social security charges on emoluments
(7.4)
(7.5)
Other long-term benefits – difference
 
between awards granted
 
and costs recognised
(0.6)
2.8
Share-based payments – difference
 
between awards granted
 
and costs recognised
2.2
0.7
Total remuneration awarded
62.3
60.3
 
Disclosure
 
required by the Companies Act 2006
The following information
 
regarding
 
the Barclays PLC Board
 
of Directors is presented in accordance with the Companies Act 2006:
 
2019
2018
£m
£m
Aggregate
 
emoluments
a
8.5
9.0
Amounts paid under
 
LTIPs
b
0.8
0.9
9.3
9.9
 
Notes
a
 
The aggregate emoluments
 
include
 
amounts paid
 
for the 2019 year. In addition,
 
deferred
 
share awards for 2019 with a total value
 
at grant of £2m (2018:
 
£1m) will be made
 
to
James E Staley and
 
Tushar
 
Morzaria which will only vest
 
subject to meeting
 
certain conditions.
b
 
The figure
 
above for ‘Amounts
 
paid
 
under
 
LTIPs’ in
 
2019 relates to an LTIP award
 
that was
 
released
 
to Tushar Morzaria in
 
2019. Dividend
 
shares released
 
on the award are
excluded.
 
The LTIP figur
 
e
 
in the
 
single total figure table for
 
executive Directors' 2019 remuneration
 
in the
 
Directors' Remuneration
 
report relates to the
 
award that is
 
scheduled to
be released
 
in 2020 in respect
 
of the 2017-2019
 
LTIP cycle.
 
There were
 
no pension contributions
 
paid to defined contribution schemes on behalf of Directors (2018:
 
£nil). There were no notional pension
contributions to defined contribution
 
schemes.
 
As at 31 December
 
2019,
 
there were no Directors
 
accruing benefits under a defined benefit scheme (2018: nil).
 
Directors’ and Officers’ shareholdings
 
and options
The beneficial ownership
 
of ordinary
 
share capital of Barclays PLC by all Directors and Officers of Barclays PLC (involving
 
25 persons) at 31
December 2019
 
amounted to 22,789,126
 
(2018: 18,884,023
 
)
 
ordinary shares of 25p each (0.13
 
%
 
of the ordinary share capital outstanding).
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Other
 
disclosure
 
matters
 
 
 
296
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
 
As
 
at 31 December 2019,
 
executive Directors and Officers of Barclays PLC (involving 15
 
persons) held options to purchase a total of 40,428 (2018:
6,000)
 
Barclays PLC ordinary
 
shares of 25p each at a price of 125p
 
under Sharesave.
 
Advances and credit to Directors and guarantees on behalf of Directors
In accordance
 
with Section 413 of the Companies Act 2006,
 
the total
 
amount of advances and credits
 
made available in 2019
 
to persons who
served as Directors during
 
the year was £0.3m (2018:
 
£0.4
 
m). The total value
 
of guarantees entered into on behalf of
 
Directors during
 
2019
 
was
£nil (2018:
 
£nil).
 
40 Auditor’s
 
remuneration
Auditor
 
’s
 
remuneration
 
is included within consultancy, legal and professional fees in administration and general expenses and comprises:
 
2019
2018
2017
£m
£m
£m
Audit of the Barclays Group's annual accounts
10
8
11
Other services:
Audit of the Company's
 
subsidiaries
a
35
32
27
Other audit related fees
b
9
9
8
Other services
2
2
2
Total Auditor's remuneration
56
51
48
 
Notes
a
 
Comprises
 
the fees
 
for the statutory
 
audit of subsidiaries both inside
 
and outside the
 
UK and fees for work performed
 
by associates
 
of KPMG in respect of the
 
consolidated
financial
 
statements
 
of the Company.
b
 
Comprises
 
services
 
in relation
 
to statutory and
 
regulatory filings. These
 
include audit services for the review
 
of the interim financial
 
information under the Listing Rules
 
of the UK
listing
 
authority.
 
The figures shown in the above
 
table relate to fees paid to KPMG as principal Auditor,
 
of which the fees paid in relation to
 
discontinued operations
were £nil (2018:
 
£nil, 2017:
 
£4m).
 
 
Under SEC regulations, the remuneration
 
of our auditors is required to be presented
 
as follows:
 
audit fees £50m (2018:
 
£45m, 2017:
 
£42m), audit-
related fees £5m (2018:
 
£5m, 2017:
 
£4m), tax fees
 
£nil (2018:
 
£nil, 2017:
 
£nil), and all other fees £1m (2018:
 
£1m, 2017:
 
£2m).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
to the financial
 
statements
Other
 
disclosure
 
matters
 
 
 
297
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
41 Discontinued
 
operations and assets included
 
in disposal groups classified as held for sale and associated liabilities
Accounting for non-current assets held for sale and associated liabilities
The Group
 
applies IFRS 5
Non-current Assets Held for Sale and Discontinued Operations.
 
 
Non-current
 
assets
 
(or disposal groups)
 
are classified as held for sale when their carrying amount
 
is to
 
be recovered
 
principally through a sale
transaction rather than continuing
 
use. In order to be classified as held for sale, the asset must be available for immediate sale in its present
condition subject only to terms that are usual and customary and the sale must be highly probable.
 
Non-current
 
assets
 
(or disposal groups)
 
held
for sale are measured at the lower
 
of carrying amount
 
and fair value less
 
cost to sell.
 
A component
 
of the Group that has either been disposed of or is classified as held for sale is presented as a discontinued operation
 
if it represents a
separate major line of business or geographical
 
area of operations, is part of a single coordinated plan to dispose of the separate major line or
geographical
 
area of operations, or if it
 
is a subsidiary acquired exclusively with a
 
view to re-sale.
 
Discontinued
 
operation
Following
 
the reduction of the Group’s
 
interest in BAGL in 2017,
 
the Group’s remaining
 
holding of 14.9%,
 
as at
 
31 December
 
2019
 
,
 
is reported as a
financial asset at fair value through
 
other comprehensive income
 
in the Head Office
 
segment,
 
with the Group’s
 
share of Absa Group Limited’s
dividend recognised
 
in the Head Office income statement.
 
Prior to the disposal of shares on 1 June 2017,
 
BAGL met the requirements for
 
presentation as a
 
discontinued operation.
 
As such, the
 
results, which
have been presented
 
as the profit after tax and non-controlling
 
interest in respect
 
of the discontinued operation on
 
the face of the
 
Group
 
’s income
statement, are analysed in the income statement below. The income
 
statement, statement of other comprehensive
 
income and cash flow
statement below represent five months of results
 
as a discontinued operation to 31
 
May 2017.
 
 
Barclays Africa disposal
 
group income statement
2019
2018
2017
For the year ended 31 December
£m
£m
£m
Net interest income
-
-
1,024
Net fee and commission income
-
-
522
Net trading income
-
-
149
Net investment income
-
-
30
Other income
-
-
61
Total income
-
-
1,786
Credit impairment charges
-
-
(177)
Net operating income
-
-
1,609
Staff costs
-
-
(586)
Administration and general expenses
a
-
-
(1,634)
Operating expenses
-
-
(2,220)
Share of post-tax results of associates and joint ventures
-
-
5
Loss before tax
 
-
-
(606)
Taxation
-
-
(154)
Loss after tax
b
-
-
(760)
Attributable to:
Equity holders of the parent
 
-
-
(900)
Non-controlling
 
interests
-
-
140
Loss after tax
b
-
-
(760)
 
Notes
a
 
Includes
 
impairment
 
of £1,090m in 2017.
b
 
Total loss
 
in respect
 
of the discontinued
 
operation in 2017 was £2,195m,
 
which included
 
the £60m loss on sale
 
and £1,375m loss on recycling
 
of other comprehensive
 
loss on
reserves.
 
 
Notes
 
to the financial
 
statements
Other
 
disclosure
 
matters
 
 
 
298
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
42 Barclays PLC (the Parent company)
Total income
Dividends received
 
from
 
subsidiaries
 
Dividends received from
 
subsidiaries of £1,560m
 
(2018:
 
£15,360m,
 
2017:
 
£674m) largely relates to dividends received from
 
Barclays Bank UK PLC
£1,050m,
 
Barclays Execution Services Limited £250m
 
and Barclays Bank PLC £233m.
 
The dividends received in 2018
 
included both a dividend in
specie, representing
 
the transfer of the holding in Barclays Bank UK PLC from Barclays
 
Bank PLC to Barclays PLC,
 
and ordinary
 
dividends from
subsidiaries.
 
 
Other income
 
Other income of £1,760m
 
(2018:
 
£923m, 2017:
 
£690m) includes £813m
 
(2018:
 
£752m, 2017:
 
£639m)
 
of income received from gross coupon
payments on Barclays Bank PLC and
 
Barclays
 
Bank UK PLC issued AT1 securities and £947m
 
of fair value and foreign exchange
 
gains on other
positions with subsidiaries. This includes a fair value net loss of £81m
 
for own credit
 
movements on financial liabilities designated at fair value.
 
 
Total assets and liabilities
 
Investment in subsidiaries
 
The investment in subsidiaries of £59,546m
 
(2018:
 
£57,374m)
 
predominantly relates
 
to investments in Barclays Bank PLC and Barclays
 
Bank UK
PLC, as well as holdings of their AT1
 
securities
 
of £10,843m
 
(2018:
 
£9,666m). The increase of £2,172m
 
during the year was predominantly driven
by capital contributions into Barclays Bank
 
PLC totaling £995m
 
and additional AT1 holdings
 
of $2,000m, £1,000m
 
and £1,000m, partially offset
 
by
the redemption of AT1
 
holdings with principal amounts totaling $1,211m,
 
€1,077m and
 
£698m.
 
 
At the end of each reporting
 
period an impairment review
 
is undertaken in respect of investment in subsidiaries.
 
Impairment is required
 
where the
investment exceeds the recoverable
 
amount. The recoverable
 
amount is calculated using
 
a value in use (VIU) methodology
 
to arrive at the present
value of future cash flows expected
 
to be derived from
 
the investment. The VIU calculation uses forecast attributable profit, based on financial
budgets approved
 
by management, covering
 
a five-year period, as an approximation of future
 
cash flows.
 
A terminal growth rate of 1.5% has been
applied to arrive at cash flows thereafter,
 
which is based on long term expected growth
 
rates published by the International Monetary Fund. The
forecasted cash flows have been discounted
 
at a pre-tax rate of 13.7%. The calculation showed
 
a VIU higher
 
than the carrying value of investments
in ordinary shares and no
 
impairment was recog
 
nised as
 
a result of the impairment review.
 
 
Financial assets and liabilities designated at fair value
 
Financial liabilities designated at fair value of £3,498m
 
(2018:
 
£nil) comprises $2,750m Fixed-
 
to-Floating Rate Senior Notes,
 
£600m
 
Fixed Rate
Senior Notes, AUD940m
 
Fixed and Floating Rate Senior Notes
 
and ¥20,000m
 
Fixed-to-Floating Rate Bonds. The proceeds raised through
 
these
transactions were used to invest in
 
subsidiaries of Barclays PLC and
 
are included within the financial assets designated at fair value through
 
the
income statement balance of £10,348m
 
(2018:
 
£6,945m). The effect of changes in the liabilities’ fair value, including those due to credit risk, is
expected to offset the changes in the fair value of the related financial asset
 
in the income
 
statement. The cumulative own credit net loss on
financial liabilities designated at fair value is £81m
 
(2018:
 
£nil). The difference between the financial liabilities’ carrying amount and the contractual
amount on maturity is £174m
 
(2018:
 
£nil).
 
 
Subordinated liabilities and Debt Securities in issue
 
During the year,
 
Barclays PLC issued $1,500m
 
of Fixed-to-Floating Rate Subordinated Notes, which are included within the subordinated
 
liabilities
balance of £7,656m
 
(2018:
 
£6,775m). Debt Securities
 
in issue of £30,564m
 
(2018:
 
£32,373m)
 
have reduced in the year due to the maturity of
positions with subsidiaries partially offset by an
 
issuance of a new Senior Fixed Rate Note of €750m.
 
 
Management of internal investments, loans and advances
Barclays PLC
 
retains the discretion to manage the nature of its internal investments
 
in subsidiaries according to their regulatory
 
and business
needs. Barclays PLC may invest
 
capital and funding into Barclays Bank PLC,
 
Barclays Bank UK PLC and other
 
Group
 
subsidiaries such as
 
the Barclays
Execution Services Limited and the US Intermediate Holding Company
 
(IHC).
 
 
Total equity
 
Called up share capital and share premium
 
Called up share capital and share premium
 
of Barclays PLC is £4,594m
 
(2018:
 
£4,311m).
 
The increase in the year is
 
primarily due to shares issued
under employee
 
share schemes and the Scrip Dividend Programme
 
.
 
Other equity instruments
 
Other equity instruments of £10,865m
 
(2018:
 
£9,633m) comprises AT1 securities issued by Barclays PLC. AT1
 
securities are perpetual
subordinated
 
contingent convertible
 
securities
 
structured to qualify as AT1 instruments under
 
prevailing capital rules applicable as at the relevant
issue date. There have been
 
three issuances during the year with principal amounts totaling $2,000m,
 
£1,000m
 
and £1,000m, and redemptions
with principal amounts $1,211m,
 
€1,077m and
 
£698m. For further details, please
 
refer to Note 28.
 
 
Additional information
 
 
 
 
 
299
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Shareholder information
 
Additional
 
shareholder information
 
Articles of Association
 
Barclays PLC
 
(the “Company”) is a public limited company
 
registered in England and Wales under company
 
number 48839. Barclays, originally
named Barclay & Company
 
Limited, was incorporated
 
in England and Wales on 20 July 1896
 
under the Companies Acts 1862 to 1890
 
as a
company
 
limited by shares. The company
 
name was changed to Barclays Bank Limited on 17
 
February
 
1917
 
and it was
 
registered on 15
 
February
1982
 
as a
 
public limited company
 
under the Companies Acts 1948
 
to 1980. On 1 Janu
 
ary 1985, the company
 
changed its
 
name to Barclays PLC.
 
 
Under the Companies Act 2006
 
a company’s Memorandum
 
of Association now need only contain the names of the subscribers and the number of
shares each subscriber
 
has agreed to take. For companies
 
in existence
 
as of 1 October
 
2009, all other provisions which
 
were contained in the
company’s Memorandum
 
of Association, including the company’s objects, are now deemed to be contained in the company’s articles. The
Companies Act 2006
 
also states that a company
 
’s objects
 
are unrestricted unless the company’s articles provide
 
otherwise.
 
The Articles of Association were adopted
 
at the
 
Company’s Annual General
 
Meeting (“AGM”)
 
on 30 April 2010
 
and amended at the AGM of the
Company
 
on 25 April 2013.
 
 
The following is a summary and explanation of the current
 
Articles of Association, which are available for inspection.
 
Directors
 
(i) The minimum number
 
of Directors (excluding alternate Directors) is five. There is no maximum limit. There is no age limit for Directors.
 
(ii) Excluding executive remuneration
 
and any other entitlement to remuneration
 
for extra services (including service on board
 
committees) under
the Articles, a Director is entitled to a fee at a rate determined
 
by the Board
 
but the aggregate fees paid to all Directors shall not exceed £2,000,000
per annum or
 
such higher amount as may be approved
 
by an ordinary resolution of the Company.
 
Each Director is entitled
 
to reimbursement for
 
all
reasonable travelling, hotel and
 
other expenses properly
 
incurred by
 
him/her in or about the performance of his/her duties.
 
(iii) No Director may
 
act (either himself/herself or through
 
his/her firm) as an auditor of the Company. A Director may
 
hold any other office of the
Company
 
on such terms as the Board shall determine.
 
 
(iv) At each AGM
 
of the Company, one
 
third of the Directors (rounded
 
down) are required
 
under the Articles of
 
Association to retire from office by
rotation and may offer
 
themselves for re-
 
election. The Directors so retiring are first, those who wish to
 
retire and not offer themselves for
 
re-
election, and, second those who have been
 
longest in office (and in the case of equality of service length are selected by lot). Other than a retiring
Director, no
 
person shall (unless recommended
 
by the Board) be eligible for election unless a
 
member notifies the Company
 
Secretary in advance
of his/her intention to propose
 
a person for election. It is Barclays’ practice that all Directors offer themselves
 
for re-
 
election annually in accordance
with the UK Corporate
 
Governance
 
Code.
 
(v) The Board
 
has the power to appoint additional Directors or to fill a casual vacancy amongst the Directors. Any Director so appointed holds
office until the next AGM, when he/she may offer
 
himself/herself for reappointment.
 
He/she is not taken into account in determining the number
of Directors retiring by rotation.
 
(vi)The Board
 
may appoint any Director
 
to any executive position or employment in the Company
 
on such terms as they
 
determine.
 
 
(vii)The Company
 
may by ordinary
 
resolution remove a Director before
 
the expiry of his/her period of office (without prejudice to a claim for
damages for breach
 
of contract or otherwise) and may
 
by ordinary resolution
 
appoint another person who is willing
 
to act to be a Director in
his/her place.
 
 
(viii) A Director may
 
appoint either another Director
 
or some other person approved
 
by the Board to act as
 
his/her alternate with power to attend
Board
 
meetings and generally to exercise the functions of the appointing Director in his/her absence (other
 
than the power to appoint an
alternate).
 
(ix) The Board
 
may authorise any matter in relation to which a Director has, or
 
can have, a direct interest that conflicts, or possibly may conflict
with, the Company’s interests. Only Directors
 
who have no
 
interest in the matter being considered will be able to authorise the relevant matter and
they may impose limits or
 
conditions when giving authorisation if they think this is appropriate.
 
(x) A Director may hold
 
positions with or be interested in other companies and, subject to legislation applicable to the Company
 
and the FCA’s
requirements, may contract
 
with the Company or any other
 
company
 
in which the Company is interested. A
 
Director may not vote or
 
count
towards the quorum
 
on any resolution concerning
 
any proposal in
 
which he/she (or any person
 
connected with him/her) has a material
 
interest
(other than by virtue of his/her interest in securities
 
of the Company) or
 
if he/she has
 
a duty which conflicts or
 
may conflict with the interests of
the Company,
 
unless the resolution relates to any proposal:
 
(a) to indemnify a Director or
 
provide
 
him/her with a guarantee or security in respect of money lent by him/her to, or any
 
obligation incurred by
him/her or any
 
other person for
 
the benefit of (or at the
 
request of),
 
the Company (or
 
any other member
 
of the Group);
 
(b) to indemnify or give security or a guarantee
 
to a third party in respect of a debt or obligation of the Company (or
 
any other member
 
of the
Group)
 
for which the Director has personally assumed responsibility;
 
(c) to obtain insurance for the benefit of Directors;
 
 
Additional information
 
 
 
 
 
300
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
 
(d) involving
 
the acquisition by a Director of any securities of the Company (or
 
any other member
 
of the Group) pursuant to an offer to existing
holders of securities or to the public;
 
(e) that the Director underwrite
 
any issue of securities
 
of the Company
 
(or any other
 
member of the Group);
 
(f) concerning any other
 
company in which the Director is interested as an officer or creditor or
 
Shareholder
 
but,
 
broadly,
 
only if he/she (together
with his/her connected
 
persons) is directly or indirectly interested in less than 1% of either any class of the issued equity share capital or of the
voting rights of that company;
 
and
 
(g) concerning
 
any other arrangement for the benefit of employees of the Company (or
 
any other member of the Group) under which
 
the Director
benefits or stands to benefit in a similar manner
 
to the employees concerned
 
and which does not give the Director any advantage
 
which the
employees to whom the arrangement
 
relates would not receive.
 
(xi) A Director may not vote or be counted
 
in the quorum on
 
any resolution which concerns his/her own
 
employment or appointment to any office
of the Company
 
or any other company
 
in which the Company is
 
interested.
 
(xii) Subject to applicable legislation, the provisions
 
described in sub-paragraphs
 
(x) and (xi) may be relaxed or
 
suspended by an ordinary resolution
of the members of the Company
 
or any applicable governmental or
 
other regulatory body.
 
(xiii) A Director is required
 
to hold an interest in
 
ordinary
 
shares having a nominal value of at least £500, which currently
 
equates to 2,000 Ordinary
Shares unless restricted from
 
acquiring or
 
holding such interest by any applicable law or regulation
 
or any applicable go
 
vernmental or other
regulatory
 
body.
 
A Director may act before acquiring
 
those shares but must
 
acquire the qualification shares within two months from his/her
appointment. Where a Director is unable to acquire
 
the requisite number
 
of shares within that
 
time
 
owing to law,
 
regulation or requirement
 
of any
governmental
 
or other relevant authority,
 
he/she must acquire the shares as soon as
 
reasonably practicable once
 
the restriction(s) end.
 
(xiv) The Board
 
may exercise all of the powers of the Company to borro
 
w
 
money, to mortgage or
 
charge its
 
undertaking, property
 
and uncalled
capital and to issue debentures
 
and other securities.
 
Classes of Shares
The Company
 
only has Ordinary Shares in issue. The Articles of Association also provide for
 
pound
 
sterling preference shares of £100
 
each, US
dollar preference
 
shares of US$100
 
each, US dollar preference
 
shares of $0.25 each, euro preference shares of €100
 
each and yen preference
shares of ¥10,000
 
each (together,
 
the “Preference Shares”). In accordance
 
with the authority granted at the AGM on 25 April 2013,
 
Preference
Shares may be issued by
 
the Board from
 
time to time
 
in one or
 
more series with such rights and subject to such restrictions and limitations as the
Board
 
may determine. No Preference
 
Shares have been issued to date.
 
 
Dividends
Subject to the provisions of the Articles and applicable legislation, the Company
 
in general meeting may declare dividends on
 
the Ordinary Shares
by ordinary
 
resolution, but any such dividend may not exceed
 
the amount recommended
 
by the Board. The Board may also pay interim or final
dividends if it appears they are justified by
 
the Company’s financial position.
 
 
Each Preference
 
Share confers the right to a preferential dividend (“Preference
 
Dividend”) payable in such currency
 
at such rates
 
(whether fixed or
calculated by reference
 
to or in accordance
 
with a specified
 
procedure
 
or mechanism), on such dates and on such other terms as
 
may be
determined by
 
the Board prior
 
to allotment thereof.
 
The Preference
 
Shares rank in regard
 
to payment of dividends in priority to the holders of Ordinary Shares and any other
 
class
 
of shares in the
Company
 
ranking junior
 
to the Preference Shares.
 
 
Dividends may be paid on the Preference
 
Shares if, in the opinion of the Board, the Company
 
has sufficient distributable profits, after payment in
full or the setting aside of a sum to provide
 
for all dividends payable on (or
 
in the case of shares carrying a cumulative right to dividends, before)
 
the
relevant dividend payment
 
date on any class of shares in the Company
 
ranking pari passu with or in priority to the relevant series of Preference
Shares as regards participation
 
in the profits of the Company.
 
 
If the Board
 
considers that the distributable
 
profits of the Company
 
available for distribution are insufficient to cover
 
the payment in full of
Preference
 
Dividends, Preference
 
Dividends shall
 
be paid to the extent of the distributable profits on a pro rata basis.
 
Notwithstanding the above, the Board
 
may, at its absolute discretion, determine that any Pref
 
erence Dividend which
 
would otherwise be payable
may either not be payable
 
at all or only payable
 
in part.
 
If any Preference
 
Dividend on a series of Preference Shares is not paid, or is only paid in part, for
 
the reasons described above, holders
 
of Prefer
 
ence
Shares will not have a claim in respect
 
of such non-payment.
 
 
If any dividend on a series of Preference
 
Shares is not paid in full on the relevant dividend payment
 
date, a
 
dividend restriction shall apply. The
dividend restriction means that, subject to certain exceptions, neither the Company
 
nor Barclays Bank may
 
(a) pay a dividend on, or (b)
 
redeem,
purchase, reduce
 
or otherwise acquire, any of their respective ordinary
 
shares, other preference
 
shares or other share capital
 
ranking equal or
 
junior
to the relevant series of Preference
 
Shares until the earlier of such time as the Company
 
next pays in full a dividend on the relevant series of
Preference
 
Shares or the date on which all of the relevant series of Preference
 
Shares are redeemed.
 
 
 
Additional information
 
 
 
 
 
301
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
All unclaimed dividends payable
 
in respect of any share may be invested or otherwise made
 
use of by the Board
 
for the benefit of the Company
until claimed. If a dividend is not claimed after 12
 
years of it becoming payable,
 
it is
 
forfeited
 
and reverts to the Company.
 
The Board
 
may, with the approval
 
of an ordinary resolution
 
of the Company, offer
 
Shareholders the right to choose to rece
 
ive an allotment
 
of
additional fully paid Ordinary Shares instead of cash in respect of
 
all or part of any dividend. The Company
 
currently provides a scrip dividend
programme
 
pursuant to an authority granted at the AGM held on 25 April 2013
 
and renewed at the AGM on 1 May 2018
 
.
 
Redemption and Purchase
Subject to applicable legislation and the rights of the other shareholders,
 
any share may be issued on terms that it is, at the option of the Company
or the holder of such share, redeemable. The Directors
 
are authorised to determine the terms, conditions and manner
 
of redemption of any
 
such
shares under
 
the Articles
 
of Association.
 
 
Calls on capital
 
The Directors may make calls upon
 
the members in respect of any monies unpaid on their shares. A person upon
 
whom a call is made remains
liable even if the shares in respect of which
 
the call is made have been transferred.
 
Interest will be chargeable on any
 
unpaid amount
 
called at
 
a rate
determined by
 
the Board (of not more
 
than 20% per annum).
 
If a member
 
fails to pay any call in full (following notice from the Board
 
that such failure will result in forfeiture of the relevant shares), such shares
(including any dividends
 
declared but not paid) may
 
be forfeited by a resolution of the Board, and
 
will become the property of the Company.
Forfeiture shall not absolve a
 
previous member
 
for amounts payable
 
by him/her (which may continue
 
to accrue interest).
 
The Company
 
also has a lien over all partly paid shares of the Company
 
for all monies payable or called on that share and over
 
the debts and
liabilities of a member to the Company.
 
If any monies which are the subject of the lien remain
 
unpaid after a notice from the Board
 
demanding
payment, the Company
 
may sell such shares.
 
Annual and other general meetings
 
The Company
 
is required to hold an AGM in addition to such other general
 
meetings as the Directors think fit. The type of the meeting will be
specified in the notice calling it. Under
 
the Companies Act 2006, the AGM must be held within six months of the financial year end. A general
meeting may be convened
 
by the Board
 
on requisition in accordance
 
with the applicable legislation.
 
In the case of an AGM, a minimum of 21
 
clear days’ notice is required.
 
The notice must be in writing and must specify the place, the day
 
and the
hour of the meeting, and the general nature of the business to be transacted. A notice
 
convening
 
a meeting to pass
 
a special resolution shall specify
the intention to propose
 
the resolution as such. The accidental failure to give notice of a general meeting or the non
 
-receipt of such notice will not
invalidate the proceedings
 
at such meeting.
 
Subject as noted above,
 
all Shareholders are entitled to attend and vote at general meetings. The Articles do,
 
however,
 
provide
 
that arrangements
may be made
 
for simultaneous attendance at
 
a satellite meeting place or, if the meeting place is inadequate to accommodate
 
all members and
proxies entitled to attend, another
 
meeting place may be arranged
 
to accommodate such persons other
 
than that specified
 
in the notice of
meeting, in which case Shareholders may be excluded
 
from the principal place.
 
Holders of Preference
 
Shares have no right to receive notice of, attend
 
or vote at, any general meetings of the Company
 
as a result of holding
Preference
 
Shares.
 
Notices
 
A document or
 
information may be sent by the Company
 
in hard copy
 
form, electronic form, by
 
being made available on a website,
 
or by another
means agreed with the recipient, in accordance
 
with the provisions set out in the Companies Act 2006. Acco
 
rdingly,
 
a document or information
may only be sent in electronic form to a
 
person who
 
has agreed to receive it in that form or, in the case of a company,
 
who has been deemed to
have so agreed
 
pursuant to applicable legislation.
 
A document
 
or information
 
may only be sent by being made available on a website if the
recipient has agreed
 
to receive it in that form or has been deemed
 
to have so agreed pursuant to applicable legislation, and has not revoked that
agreement.
 
In respect of joint holdings, document
 
s
 
or information shall be sent to the joint holder whose name stands first in the register.
 
A member who
 
(having no
 
registered address within the UK) has not supplied an
 
address in the UK at which documents or information
 
may be
sent in hard copy
 
form, or an address to which notices, documents or information
 
may be sent or supplied by electronic means, is not entitled to
have documents or
 
information sent to him/her.
 
In addition, the Company may cease
 
to send notices to any member who
 
has been sent documents on two consecutive occasions over a period
 
of
at least 12
 
months and when each of those documents is returned undelivered
 
or notification is
 
received that they have not been
 
delivered.
 
Capitalisation of profits
 
The Company
 
may, by
 
ordinary
 
resolution,
 
upon the recommendation
 
of the Board capitalise
 
all or any part of an amount standing to the credit of a
reserve or fund
 
to be set
 
free for
 
distribution provided
 
that amounts from the share premium account, capital redemption
 
reserve or any
 
profits not
available for distribution should be applied
 
only in paying up unissued shares to be allotted to members
 
credited as fully paid and no unrealised
profits shall be applied in paying up
 
debentures of the Company
 
or any amount unpaid
 
on any share in the
 
capital
 
of the Company.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional information
 
 
 
 
 
302
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Indemnity
Subject to applicable legislation, every current
 
and former
 
Director or other officer of the Company
 
(other than any person engaged by the
company
 
as auditor) shall
 
be indemnified by the
 
Company
 
against any liability in relation to the Company, other
 
than (broadly)
 
any liability
 
to the
Company
 
or a member of the Group,
 
or any criminal or regulatory
 
fine.
 
Officers of
 
the Group
Date of
Appointment
 
as
Officer
Ashok Vaswani
Global Head of Consumer Banking and
 
Payments
2012
Bob Hoyt
Group
 
General Counsel
2013
Tushar Morzaria
Group
 
Finance Director
2013
James E Staley
Group
 
Chief Executive Officer
2015
Tristram Roberts
Group
 
Human Resources Director
2015
Paul Compton
President, Barclays
 
Bank PLC
 
2016
C S Venkatakrishnan
 
Group
 
Chief Risk Officer
 
2016
Stephen Shapiro
Company
 
Secretary
2017
Laura Padovani
Group
 
Chief Compliance Officer, Chief Operating Officer,
 
BX
2017
Mark Ashton-Rigby
Group
 
Chief Operating Officer
2019
Alistair Currie
Head of Barclays Corporate
 
Banking
2019
Stephen Dainton
Global Head of Markets
2019
Matt Hammerstein
Chief Executive Officer,
 
Barclays
 
UK
2019
Joe McGrath
Global Head of Banking
2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional information
 
 
 
 
 
303
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Dividends
 
on the ordinary shares of Barclays PLC
 
The dividends declared for
 
each of the last
 
five years were:
 
Pence per 25p ordinary share
2019
2018
2017
2016
2015
Half year
3.00
2.50
1.00
1.00
3.00
Full year
6.00
4.00
2.00
2.00
3.50
Total
9.00
6.50
3.00
3.00
6.50
US Dollars
 
per 25p ordinary share
2019
2018
2017
2016
2015
Half year
0.04
0.03
0.01
0.01
0.05
Full year
0.08
0.05
0.02
0.02
0.05
Total
0.12
0.08
0.03
0.03
0.10
 
The gross dividends applicable to an American
 
Depositary Share (ADS) representing
 
four ordinary
 
shares, before deduction of withholding tax, are
as follows:
 
US Dollars
 
per American Depositary Share
2019
2018
2017
2016
2015
Half year
0.15
0.13
0.05
0.05
0.18
Full year
0.31
0.21
0.10
0.10
0.20
Total
0.46
0.34
0.15
0.15
0.38
 
The final dividends shown above
 
are expressed in Dollars translated at the closing spot rate for Pounds
 
Sterling as
 
determined by
 
Bloomberg
 
at
5pm in New York
 
City (the ‘Closing Spot Rate’) on the latest practicable date for inclusion in this report. No representation
 
is made that Pounds
Sterling amounts have be
 
en, or could have been, or
 
could be, converted into Dollars at these rates.
 
Trading market for ordinary shares of Barclays PLC
 
The principal trading market
 
for Barclays PLC ordinary
 
shares is
 
the London
 
Stock Exchange. At the close
 
of business on 31 December
 
2019,
17,
 
322,057,836
 
ordinary shares were in issue.
 
Ordinary share listings were also obtained
 
on the New York
 
Stock Exchange (NYSE) with effect from
 
9 September 1986.
 
Trading on the NYSE is in
the form of ADSs under
 
the symbol ‘BCS’. Each ADS represents four
 
ordinary
 
shares and is
 
evidenced by an American
 
Depositary Receipt (ADR).
The ADR depositary is JP Morgan
 
Chase Bank, N.A.
 
Details of trading activity are published in the stock tables of leading daily newspapers in the US.
 
There were
 
420
 
ADR
 
holders and 1,647
 
recorded holders of ordinary shares with US addresses at
 
31 December
 
2019,
 
whose shareholdings
represented
 
approximately 4.02%
 
of total
 
outstanding ordinary
 
shares on that date.
 
Since a certain number of the ordinary
 
shares and ADRs were
held by brokers
 
or other nominees, the number
 
of recorded holders in the
 
US may not be representative of the number
 
of beneficial holders or of
their country of residence.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional information
 
 
 
 
 
304
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Shareholdings
 
at 31 December
 
2019
a
Number of
shareholders
Percentage of
holders
Shares held
Percentage of
capital
Classification of shareholders
Personal Holders
234,580
97.35%
406,736,728
2.35%
Banks and Nominees
2,355
0.98%
15,088,074,831
87.10%
Other Companies
4,013
1.67%
1,827,240,627
10.55%
Insurance Companies
1
-
208
-
Pension Funds
4
-
5,442
-
Total
240,953
100.00%
17,322,057,836
100.00%
Shareholding
 
range
1 - 100
16,830
6.98%
623,481
-
101
 
- 250
 
50,540
20.98%
10,293,006
0.06%
251
 
- 500
65,349
27.12%
22,920,959
0.13%
501
 
- 1,000
38,606
16.02%
27,312,081
0.16%
1,001
 
- 5,000
49,066
20.36%
109,035,763
0.63%
5,001
 
- 10,000
10,824
4.49%
76,191,319
0.44%
10,001
 
- 25,000
6,438
2.67%
97,470,931
0.56%
25,001
 
- 50,000
1,531
0.64%
52,080,001
0.30%
50,001
 
and over
1,769
0.73%
16,926,130,295
97.71%
Total
240,953
100.00%
17,322,057,836
100.00%
United States Holdings
1,647
0.68%
3,879,805
0.02%
 
Note
 
a
 
These
 
figures
 
do not inclu
 
de Barclays
 
Sharestore members.
 
 
Additional information
 
 
 
 
 
305
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Taxation of UK holders
The following is a summary of certain UK tax issues which
 
are likely to be material to the holding and
 
disposal of Ordinary Shares of Barclays PLC or
ADSs representing
 
such Ordinary Shares (the ‘Shares’).
 
It is based on the current
 
laws of England and Wales, UK tax law and the practice of Her Majesty’s Revenue
 
and Customs (‘HMRC’), each of which
may be subject to change, possibly with retrospective
 
effect. It is a general guide
 
for information
 
purposes and should be treated with appropriate
caution. It is not intended as tax advice and it does not purport
 
to describe all of
 
the tax considerations that may be relevant to a prospective
purchaser,
 
holder or
 
disposer of Shares. In particular, save where expressly stated to the contrary,
 
this summary deals
 
with shareholders
 
who are
resident and, in the case of individuals, domiciled in (and
 
only in) the UK for UK tax purposes, who hold
 
their Shares as
 
investments (other than
under an individual savings account) and
 
who are the absolute beneficial owners of their Shares and any dividends paid on
 
them.
 
The statements are not addressed to: (i) shareholders
 
who own
 
(or are deemed to own) 10% or
 
more of the voting power of Barclays PLC; (ii)
shareholders who
 
hold Shares as part of hedging transactions; (iii) investors who have (or
 
are deemed to have) acquired
 
their Shares by virtue of an
office or
 
employment; and (iv) shareholders
 
who hold Shares in connection with a trade, profession or vocation carried
 
on in the UK (whether
through
 
a branch or
 
agency or, in the case of
 
a corporate shareholder,
 
through a permanent establishment,
 
or otherwise). It does not discuss the
tax treatment of classes of shareholder
 
subject to special rules,
 
such as dealers in securities.
 
Persons who
 
are in any doubt as to their tax position should consult their professional advisers. Persons who
 
may be liable to taxation in
jurisdictions other than the UK in respect of their acquisition, holding
 
or disposal of Shares are particularly advised to consult their professional
advisers as to whether they are so liable.
 
(i)
 
Taxation
 
of dividends
In accordance
 
with UK law, Barclays PLC pays dividends
 
on the Shares without any deduction or withholding
 
for or on account of any taxes
imposed by the UK government
 
or any UK taxing authority.
 
The total dividends (including any
 
dividends paid by Barclays PLC) paid
 
to a UK resident individual shareholder in a tax year (the ‘Total Dividend
Income’) will generally form
 
part of that shareholder’s total income for UK income
 
tax purposes, and will
 
be subject to UK income tax at the rates
discussed below.
 
For dividends paid on
 
or after 6 April 2016,
 
the rate of UK income tax applicable to
 
the Total Dividend Income
 
will depend on the amount of the
Total Dividend
 
Income and
 
the UK income tax band(s) that the Total Dividend Income falls within when included as part of the shareholder’s total
income for UK income
 
tax purposes for that tax
 
year.
 
For the tax year from
 
6 April 2019
 
to 5 April 2020 (inclusive), a nil rate of UK income tax applies to the first £2,000 of Total Dividend Income
received by
 
an individual shareholder in that tax year (the ‘Nil Rate Amount’). For
 
the 2018
 
-2019
 
tax year, the Nil Rate Amount was £2,000. For the
2016
 
-2017
 
and 2017
 
-2018 tax years, the Nil
 
Rate Amount was £5,000.
 
Where the Total Dividend
 
Income received
 
by an individual shareholder
 
in a tax
 
year exceeds the relevant Nil Rate Amount
 
for that tax year, the
excess amount (the ‘Remaining Dividend Income’)
 
will be subject
 
to UK income
 
tax at the following rates:
(a)
 
at the rate of 7.5%
 
on any portion
 
of the Remaining Dividend Income
 
that falls
 
within the basic tax band;
(b)
 
at the rate of 32.5%
 
on any portion
 
of the Remaining Dividend Income
 
that falls
 
within the higher tax band; and
(c)
 
at the rate of 38.1%
 
on any portion
 
of the Remaining Dividend Income
 
that falls
 
within the additional tax band.
 
In determining the tax band the Remaining Dividend
 
Income falls within for a tax year, the individual
 
shareholder’s Total Dividend Income
 
for the
tax year in question (including the portion
 
comprising the Nil Rate Amount) will be treated as the top slice of the shareholder’s total income for UK
income tax purposes.
 
Subject to
 
special rules for small companies, UK
 
resident shareholders within the charge to UK corporation
 
tax will
 
not generally be subject to UK
corporation
 
tax on the dividends paid on the Shares,
 
provided
 
the dividend falls
 
within an exempt class and certain co
 
nditions are met.
 
(ii)
 
Taxation
 
of shares under the Scrip
 
Dividend Programme
Where an individual shareholder
 
elects
 
to purchase
 
shares using their cash dividend as part of the Scrip Dividend Programme,
 
such shareholder will
generally be liable for
 
UK income tax as the shareholder would
 
have been on the receipt of a cash dividend of an amount equal to the ‘cash
equivalent’ of the new shares. The ‘cash
 
equivalent’ of the new shares will be the amount of the cash dividend
 
which the shareholder
 
would have
received in the absence of an election to take shares,
 
unless the difference between the cash dividend
 
forgone
 
and the market value of the shares
on the first day of dealings on the London
 
Stock Exchange is 15% or more
 
of such market value, in which case the ‘cash equivalent’ of the new
shares will be their market value.
 
 
A corporate
 
shareholder
 
will not generally be charged UK corporation tax on shares received instead of cash dividends under the Scrip Dividend
Programme.
 
(iii) Taxation
 
of capital
 
gains
The disposal of Shares may,
 
depending
 
on the shareholder’s circumstances, give rise to a liability to UK tax on chargeable capital gains.
 
Where Shares are sold, a liability to UK tax may
 
result if the proceeds
 
from that sale
 
exceed the sum of the base cost of the
 
Shares sold and any
other allowable deductions such as share dealing costs and, in
 
certain circumstances, indexation relief (discussed further
 
below). To
 
arrive at the
total base cost of any Barclays
 
PLC shares held, in appropriate
 
cases the
 
amount subscribed for
 
rights taken up in 1985,
 
1988
 
and 2013
 
must be
added to the cost of all such shares held. For this purpose,
 
current legislation permits the market valuation at 31 March
 
1982
 
to be substituted
 
for
the original cost of shares purchas
 
ed before that date, subject to certain exceptions for shareholders within the charge to UK corporation
 
tax.
 
 
Additional information
 
 
 
 
 
306
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Shareholders other
 
than those within the
 
charge to UK corporation
 
tax should note that,
 
following the Finance Act 2008, no
 
indexation allowance
will
 
be available. Following the
 
Finance Act 2018,
 
shareholders within the charge to UK corporation
 
tax may be eligible
 
for indexation allowance for
the period of ownership
 
of their Shares up to December 2017,
 
but no indexation allowance will be available in
 
respect of the period
 
of ownership
starting on or after 1 January
 
2018.
 
Chargeable capital gains may also arise from
 
the gifting of Shares to connected parties such as relatives (although not spouses or civil partners)
and family trusts.
 
The calculations required
 
to compute chargeable
 
capital gains
 
may be complex. Shareholders
 
are advised to consult their personal financial
 
adviser
if further information
 
regarding
 
a possible tax
 
liability in respect of their holdings of shares is required.
 
(iv) Stamp duty
 
and stamp
 
duty reserve tax
Dealings in Shares will generally be subject to UK
 
stamp duty or stamp duty reserve tax (although see the comments below as regards
 
ADSs in the
section ‘Taxation of
 
US holders – UK stamp duty and stamp duty reserve tax’). The transfer on sale of Shares will
 
generally be liable to stamp duty
at 0.5% of the consideration paid for that transfer
 
(rounded
 
up to the next £5). An unconditional agreement to transfer Shares, or any interest
therein, will generally be subject to stamp
 
duty reserve tax at 0.5% of the consideration
 
given. Such liability to stamp duty reserve tax will be
cancelled, or a right to a repayment
 
(generally with interest) in respect of the stamp duty reserve tax liability will arise, if the agreement
 
is
completed by a duly stamped transfer within six years of
 
the agreement having become
 
unconditional. Both stamp duty and stamp duty reserve tax
are normally the liability of the transferee.
 
Paperless transfers of Shares within CREST are liable to
 
stamp duty reserve tax rather than stamp duty.
 
Stamp duty reserve tax on transactions settled within
 
the CREST system or reported
 
through
 
it for regulatory purposes will
 
be collected by CREST.
 
Special rules apply to certain categories of person, including intermediarie
 
s, market makers, brokers, dealers and persons connected
 
with
depositary arrangements
 
and clearance services.
 
(v)
 
Inheritance
 
tax
An individual may be liable to inheritance tax on the transfer
 
of Shares. Where an individual is so liable, inheritance tax may be charged
 
on the
amount by which
 
the value of his or her estate is reduced as a result of any transfer
 
by way of gift or
 
other gratuitous transaction made by them or
treated as made by them.
 
Taxation of US holders
The following is a summary of certain US federal income
 
tax considerations and certain UK tax considerations to the purchase,
 
ownership and
disposition of Ordinary Shares of Barclays PLC
 
or ADSs representing such Ordinary
 
Shares (the "
Shares
") that are likely to be relevant for US
Holders (as defined below)
 
who own
 
the Shares as
 
capital assets for tax purposes. This discussion is not a comprehensive
 
analysis of all the
potential US or UK tax consequences that may be relevant
 
to US Holders and does not discuss particular tax consequences that may be applicable
to US Holders who may be subject to special tax rules, such as banks,
 
brokers
 
or dealers in securities
 
or currencies, traders
 
in securities that elect to
use a mark-to-market method
 
of accounting for securities holdings, financial institutions, tax-exempt organisations, regulated investment
companies, life insurance companies, entities or
 
arrangements that are treated as partnerships for
 
US federal income tax purposes (or partners
therein), holders that own or are treated as owning
 
10% or more
 
of the stock
 
of Barclays PLC measured either by voting
 
power
 
or value, holders
that hold Shares as part of a straddle or a hedging
 
or conversion
 
transaction, holders that purchase or sell Shares as part of a
 
wash sale, holders
whose functional currency
 
is not the
 
US Dollar, or
 
holders who are resident, or who
 
are carrying
 
on a trade, in the UK. The summary also
 
does not
address state or local taxes or any aspect of US federal taxation other
 
than US federal income taxation (such as the estate and gift tax, the
alternative minimum tax or the Medicare tax on net investment
 
income). Investors are advised to consult their tax advisers regarding
 
the tax
implications of their particular holdings, including
 
the consequences under
 
applicable state
 
and local
 
law, and in particular
 
whether they are eligible
for the benefits of the Treaty (as
 
defined below).
 
This discussion is based on the Internal Revenue
 
Code of 1986,
 
as amended (the ‘Code’), its legislative history, existing and proposed
 
regulations,
published rulings and court
 
decisions, and on the Double Taxation Convention
 
between the UK and the US as entered into force in March 2003
 
(the
‘Treaty’), and, in respect
 
of UK tax, the Estate and Gift Tax Convention
 
between the UK and the US as entered into force on 11
 
November
 
1979 (the
‘Estate and Gift Tax Convention’),
 
the current UK tax law and the practice of HMRC, all of which are
 
subject to change, possibly on a retroactive
basis. This discussion is based in part upon
 
the representations of the ADR Depositary and the assumption that each obligation of the Deposit
Agreement
 
and any related agreement
 
will be performed in accordance
 
with its
 
terms.
 
A “US Holder” is a beneficial owner
 
of Shares that is a citizen or resident of the United States or a US domestic corporation
 
or that otherwise is
subject to US federal income
 
taxation on a net income basis in respect of such Shares and that is fully eligible for benefits under
 
the Treaty.
 
In general, the holders of ADRs evidencing ADSs will be treated as owners
 
of the underlying Ordinary
 
Shares for the purposes of the Treaty, the
Estate and Gift Tax Convention,
 
and the Code. Generally,
 
exchanges of shares for ADRs and ADRs for shares will not be subject to US federal
income tax or to UK capital gains tax.
 
Taxation
 
of dividends
Subject to the PFIC rules discussed below,
 
the gross amount of any distribution of cash or property
 
with respect to the
 
Shares (including any
amount withheld in respect of UK taxes) that is paid out of
 
Barclays PLC’s current
 
or accumulated earnings and
 
profits (as determined for US
federal income tax purposes)
 
will be includible in
 
a US Holder’s taxable income as ordinary
 
dividend income on
 
the day such US Holder receives the
dividend, in the case of Ordinary
 
Shares, or the date the Depositary receives the dividends, in the case of ADRs, and will not be eligible for the
dividends-received
 
deduction allowed to corporations
 
under the Code.
 
 
 
Additional information
 
 
 
 
 
307
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Subject to certain exceptions for short-term positions, dividends paid
 
by Barclays PLC to an individual with respect
 
to the Shares will generally be
subject to taxation at a preferential rate
 
if the dividends are “qualified dividend
 
income.”
 
Dividends
 
paid on the Shares will be treated as qualified
dividend income if (i) the Shares are readily tradable on an established securities
 
market in the United States or Barclays PLC is eligible for
 
the
benefits of a comprehensive
 
tax treaty with
 
the United States that the US Treasury
 
determines is satisfactory for purposes
 
of this
 
provision and
 
that
includes an exchange
 
of information program,
 
and (ii) Barclays PLC was not a PFIC (as defined below) in the year of the distribution or the
immediately preceding
 
taxable year. The ADRs are listed on the New York
 
Stock Exchange, and will qualify as readily tradable on an established
securities market so long as they are so listed. In addition, the US Treasury
 
has determined that the Treaty meets the requirements
 
for reduced
rates of taxation, and Barclays PLC
 
believes that it is eligible for the benefits of the Treaty.
 
Based on its audited financial statements and relevant
market and shareholder
 
date, Barclays PLC believes that it was not treated as a PFIC for US fede
 
ral income tax purposes with respect to its 2019
 
or
2018
 
taxable years.
 
In addition, based on its audited financial statements and current
 
expectations regarding
 
the value and nature of its
 
assets, the
sources and nature of its income, and relevant market and shareholder
 
data, Barclays PLC does not anticipate becoming
 
a PFIC for its
 
current
taxable year or in the foreseeable future.
 
 
Dividends paid by Barclays PLC
 
to a US Holder with respect to the Shares will not be subject to UK withholding
 
tax.
 
For foreign
 
tax credit purposes,
dividends will generally be income from
 
sources outside the US and will generally be “passive” income for purposes
 
of computing the foreign
 
tax
credit allowable to a US Holder.
 
The amount of the dividend distribution includable in income will be the US Dollar value of the distribution, determined
 
at the spot Pound
Sterling/US Dollar rate on the date the dividend distribution is includable in income, regardless of whether
 
the payment is in fact converted
 
into US
Dollars. Generally, any gain or
 
loss resulting from
 
currency
 
exchange fluctuations during the period from the date the dividend payment is
includable in income to the date the payment
 
is converted
 
into US Dollars
 
will be treated as ordinary
 
income or loss and, for foreign tax credit
limitation purposes, from sources within the US, and will not be eligible for
 
the special tax rates applicable to qualified dividend income.
 
Distributions in excess of current
 
or accumulated earnings and
 
profits,
 
as determined for US federal income tax purposes, will be treated as a return
of capital to the extent of the US Holder’s basis in the Shares and thereafter
 
as capital gain. Because Barclays PLC does not currently
 
maintain
calculations of earnings and profits for US federal income tax
 
purposes, US Holders should expect that distributions with respect to the Shares will
generally be treated as dividends.
 
US Holders that receive a distribution of additional shares or
 
rights to subscribe for additional shares as part of a pro rata distribution to all our
shareholders generally
 
will not be subject to US federal income tax in respect of the distribution, unless the US Holder has the right to receive cash
or property,
 
in which case the
 
US Holder will be treated as if it received cash equal to the fair market
 
value of the distribution.
 
Taxable
 
sale or other disposition
 
of Shares
Subject to the PFIC rules discussed below,
 
upon a sale or other taxable disposition of the Shares, US Holders gener
 
ally will
 
not be subject to UK
 
tax,
but will realise gain or loss for US federal income tax
 
purposes in an amount equal to the difference between
 
the US Dollar value of the amount
realised on the disposition and the US Holder’s adjusted tax basis in the Shares,
 
as determined in US Dollars. Such gain or loss will be capital gain or
loss, and will generally be long-term capital gain or loss if the Shares have been
 
held for more
 
than one year. Long
 
-term capital gain of a
noncorporate
 
US Holder is generally taxed at
 
preferential rates. The gain or loss will generally
 
be income or loss from sources within the United
States for foreign
 
tax credit limitation purposes. The deductibility of capital losses is subject to limitations.
 
Taxation
 
of passive foreign
 
investment companies (PFICs)
Barclays PLC
 
believes that its Shares should not be treated as stock of a passive foreign
 
investment company
 
(“PFIC”) for US federal income tax
purposes, but this conclusion is a factual determination that is made annually and thus may be subject to change. In
 
general, Barclays PLC will be a
PFIC with respect to a US Holder if, for
 
any taxable year in which a US Holder holds the Shares, either (i) at least 75%
 
of the gross income of
Barclays PLC
 
for the taxable year is passive income, or (ii) at least 50% of the value, determined
 
on the basis of a quarterly average,
 
of Barclays
PLC’s assets is attributable to assets that produce
 
or are held for the production
 
of passive income (including cash). With certain exceptions,
 
a US
Holder’s Shares will be treated as stock of a PFIC if Barclays
 
PLC was a PFIC at any time during
 
such holder’s holding period
 
in its
 
Shares.
 
 
If Barclays PLC were
 
to be treated as a PFIC with respect to a US Holder,
 
unless such US Holder elected to be taxed annually on a mark-to-market
basis with respect to its Shares, such gain and certain “excess
 
distributions” would be treated as having
 
been realised ratably over a US Holder’s
holding period
 
for the Shares and generally would
 
be taxed at the
 
highest tax rate in effect for each such year to which the gain was allocated,
together with an interest charge in respect of the tax
 
attributable to each such year.
 
UK stamp duty
 
and stamp duty
 
reserve tax
No obligation to pay UK stamp duty will
 
arise on the transfer on sale of an ADS, provided
 
that any instrument of transfer is not executed in, and
remains at all times outside, the UK. No UK stamp duty reserve tax is
 
payable in respect of an agreement
 
to transfer an ADS. For the UK stamp duty
and stamp duty reserve
 
tax implications of dealings in Ordinary Shares, see the section “Taxation of UK holders
 
– (iv) Stamp duty and stamp duty
reserve tax” above.
 
UK estate and gift
 
tax
Under the Estate and Gift Tax Convention,
 
Shares held by an individual US holder
 
who is US domiciled for the purposes of the Estate and Gift Tax
Convention and
 
who is not for such purposes a UK national generally will not, provided
 
any US federal estate or gift tax chargeable has been paid,
be subject to UK inheritance tax on the individual’s death or on
 
a lifetime transfer of Shares, except in certain cases where the Shares are comprised
in a settlement (unless the settlor
 
was US domiciled and not a UK national at the time of the settlement), are part
 
of the business property of a UK
permanent establishment of an enterprise, or pertain to a UK fixed base of an individual used for
 
the performance
 
of independent personal services.
In cases where the Shares are subject to both UK inheritance
 
tax and US federal estate or gift tax, the Estate and Gift Tax Conv
 
ention generally
provides a credit against US federal tax liability for
 
the amount of any inheritance tax paid in the UK.
 
 
 
Additional information
 
 
 
 
 
308
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
 
Foreign Financial
 
Asset Reporting
Certain US Holders that own “specified foreign
 
financial assets” with an aggregate value in excess of US$50,000
 
on the last
 
day of the taxable year
or US$75,000
 
at any time
 
during the taxable year are generally required
 
to file
 
an information statement along with their tax returns, currently
 
on
Form 8938,
 
with respect to such assets.
 
“Specified foreign financial assets” include any
 
financial accounts held at a non-US financial institution, as
well as securities issued by a non
 
-US issuer that are not held in accounts maintained by financial institutions. The understatement of income
attributable to “specified foreign
 
financial assets” in excess of US$5,000 extends the statute of limitations with respect to the tax return
 
to six years
after the return was filed.
 
US Holders who fail to report the required
 
information could
 
be subject to substantial
 
penalties.
 
Prospective investors are
encouraged
 
to consult with their
 
own tax advisors regarding
 
the possible application
 
of these rules, including the application of the rules to their
particular circumstances.
 
 
Backup Withholding
 
and Information Reporting
 
Dividends paid on, and proceeds
 
from the sale or other disposition of, the Shares to a US Holder generally
 
may be subject to the information
reporting
 
requirements of the Code and may be subject to backup withholding
 
unless the
 
US Holder provides
 
an accurate taxpayer identification
number
 
and makes any other required
 
certification or otherwise establishes
 
an exemption. Backup withholding
 
is not an
 
additional tax. The
amount of any backup
 
withholding from
 
a payment to a US Holder will
 
be allowed as a refund
 
or credit against the US Holder’s
 
US federal income
tax liability, provided
 
the required
 
information is furnished to the US Internal Revenue Service (“IRS”) in a timely manner.
 
A holder that is not a US Holder may be required
 
to comply with certification and identification procedures
 
in order to establish its
 
exemption from
information reporting
 
and backup withholding.
 
 
FATCA Risk Factor
In certain circumstances, payments on
 
shares or ADSs may be subject to US withholding taxes on “passthru payments,”
 
starting on the date that is
two years after the date on which final regulations defining this concept are
 
adopted in the United States. Under the “Foreign
 
Account Tax
Compliance Act” (or
 
“FATCA”),
 
as well as intergovernmental
 
agreements between the United States and other countries and implementing laws in
respect of the foregoing,
 
certain US-source payments (including
 
dividends and interest) and certain payments made by, and financial accounts held
with, entities that are classified as financial institutions under
 
FATCA
 
are subject to a special information reporting
 
and withholding tax regime.
Regulations implementing withholding in respect of
 
“passthru payments” under
 
FATCA
 
have not yet been adopted or
 
proposed. The United States
has entered into an intergovernmental
 
agreement regarding
 
the implementation of FATCA with the UK (the “UK IGA”).
 
Under the UK IGA, as
currently drafted, it is not expected that Barclays
 
PLC will be required
 
to withhold tax under FATCA
 
on payments made with respect to the shares or
ADSs. However,
 
significant aspects of when and how FATCA
 
will apply remain unclear, and no assurance can be given
 
that withholding under
FATCA
 
will not become relevant with respect to payments
 
made on or with respect to the shares or ADSs in the future. Investors
 
should consult
their own tax advisers regarding
 
the potential impact
 
of FATCA.
 
The Barclays Group
 
has registered with the Internal Revenue Service (“IRS”) for FATCA.
 
The Global Intermediary
 
Identification Number (GIIN)
 
for
Barclays PLC
 
in the United Kingdom
 
is E1QAZN.00000.LE.826 and
 
it is
 
a Reporting
 
Model 1 FFI. The GIINs for other parts of the Barclays Group
 
or
Barclays branches
 
outside of the UK may be obtained from
 
your usual Barclays contact on request. The IRS list of registered Foreign
 
Financial
Institutions is publicly available on the IRS website.
 
Exchange controls and other limitations
 
affecting
 
security holders
 
Other than certain economic
 
sanctions which may be in force from time to time, there are currently
 
no UK laws, decrees or regulations which
would affect the transfer of capital or
 
remittance of dividends, interest and
 
other payments to holders of Barclays securities who
 
are not residents
of the UK. There are also no restrictions under
 
the Articles
 
of Association of Barclays PLC,
 
or (subject to the effect of any such econo
 
mic sanctions)
under current
 
UK laws, which relate only to non-residents of the UK, and which limit the
 
right of such non
 
-residents to hold Barclays securities or,
when entitled to vote, to do so.
 
Documents on display
 
It is possible to read and copy
 
documents that have been filed by Barclays PLC with the US Securities and
 
Exchange Commission via commercial
document retrieval services, and from the website maintained by the
 
US Securities and Exchange Commission at
www.sec.gov
.
 
 
 
 
 
 
 
 
 
 
Additional information
 
 
 
 
 
309
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Fees and charges payable by a holder of ADSs
 
The ADR depositary collects fees for delivery and
 
surrender
 
of ADSs directly from investors depositing ordinary
 
shares or surrendering ADSs for the
purpose of withdrawal
 
or from intermediaries acting for them.
 
 
The charges of the ADR depositary payable by
 
investors are as follows:
 
Type of service
ADR depositary actions
Fee
ADR depositary or substituting the
underlying
 
shares
Issuance of ADSs against the deposit of ordinary
 
shares,
including deposits and issuances in respect of:
$5.00
 
or less per 100 ADSs (or portion
thereof) evidenced by the new ADSs
delivered
 
 
Share distributions, stock splits, rights issues, mergers
 
 
 
Exchange of securities or other
 
transactions or event or
other distribution affecting the ADSs or
 
deposited
securities
 
Receiving or distributing cash dividends
Distribution of cash dividends
$0.04 or
 
less
 
per ADS
a
Selling or exercising rights
Distribution or sale of securities, the fee being in an
amount equal to the fee for the execution and delivery
 
of
ADSs which would
 
have been charged
 
as a
 
result of the
deposit of such securities
$5.00
 
or less per each 100 ADSs (or portion
thereof)
Withdrawing an underlying
 
ordinary
 
share
Acceptance of ADSs surrendered
 
for withdrawal of
deposited ordinary
 
shares
$5.00
 
or less for each 100 ADSs (or portion
thereof)
 
General depositary services, particularly
those charged on
 
an annual basis
Other services performed
 
by the ADR depositary in
administering the ADS program
No fee currently payable
Expenses of the ADR depositary
Expenses incurred
 
on behalf of Holders in connection
with:
 
Expenses of the ADR depositary in connection
 
with the
conversion
 
of foreign currency
 
into US dollars (which
are paid out of such foreign currency)
Expenses payable at
 
the sole discretion of
the ADR depositary by
 
billing Holders or by
deducting charges
 
from one or
 
more cash
dividends or other cash distributions
 
 
Taxes and
 
other governmental
 
charges
 
 
Cable, telex and facsimile transmission/delivery
 
 
Transfer
 
or registration fees, if applicable,
 
for the
registration of transfers or
 
underlying
 
ordinary shares
 
Any other charge
 
payable by
 
ADR depositary or its
agents
 
Note
a
 
The fee
 
in relation
 
to the distribution
 
of cash dividends was
 
$0.009181 per ADS in respect
 
of dividends
 
paid in the year ended
 
31 December 2019.
 
Fees and payments made by the ADR depositary to Barclays
 
The ADR depositary has agreed
 
to provide Barclays
 
with an amount based on the cash dividend, issuance
 
and cancellations fees charged
 
during
each twelve-month period
 
for expenses incurred
 
by Barclays in connection
 
with the ADS
 
program. Barclays
 
is entitled to
 
$1,562,523
 
for the year
ended 31
 
December 2019,
 
though such amount has not yet been paid to Barclays by the ADR depositary.
 
Under certain circumstances, including
 
non-routine
 
corporate actions,
 
removal of the ADR depositary or termination of the ADS program
 
by
Barclays, Barclays
 
may be charged
 
by the ADR depositary certain fees (including in connection with depositary services, certain expenses paid on
behalf of Barclays, an administrative fee, fees for
 
non-routine
 
services and corporate actions and any other reasonable
 
fees/expenses incurred by
the ADR depositary).
 
The ADR depositary has agreed
 
to waive certain of its fees chargeable to Barclays with respect to standard
 
costs associated with the administration
of the ADS program.
 
 
Additional information
 
 
 
 
 
310
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
External auditor objectivity and independence: non-audit services
 
Our policy on the provision of services by the Group
 
’s statutory
 
Auditor (the ‘Policy’) sets out the circumstances in which the
 
auditor may be
permitted to
 
undertake non
 
-audit work for the Group.
 
The Board
 
Audit Committee oversees compliance with the Policy and considers and, if appropriate,
 
approves
 
requests to use the
 
Auditor for
 
non-
audit work. Allowable services are pre
 
-approved
 
up to but not including £100,000
 
.
 
The Group Finance Director and the Company Secretary
 
and
their teams deal with day-to-day administration of the
 
Policy, facilitating
 
requests for approval.
 
Details of the services that are prohibited
 
and allowed under
 
the Policy are set out below:
 
Services that are prohibited
 
include:
 
bookkeeping;
 
design and implementation of financial information systems;
 
design or implementation of internal controls or risk management services related to financial information
 
;
 
*appraisal or valuation services;
 
fairness opinions or contribution
 
-in-kind reports;
 
*actuarial services;
 
internal audit;
 
management and Human
 
Resources functions;
 
broker
 
or dealer, investment advisor or
 
investment banking services;
 
 
legal, expert and certain *tax services or personal services to persons in a financial reporting
 
role; and
 
transaction-related and restructuring
 
services.
 
*these may be permissible subject to compliance
 
with certain requirements.
 
Allowable services that the Board
 
Audit Committee considers for approval
 
include:
 
statutory audit and audit related services and regulatory
 
non-audit services;
 
other attest and assurance services;
 
training, surveys and software;
 
risk management and controls
 
advice;
 
transaction support;
 
tax compliance services;
 
business support and recoveries;
 
and
 
translation services.
 
 
 
Additional information
 
 
 
 
 
311
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
NYSE Corporate Governance Statement
As our
 
main listing
 
is on the London
 
Stock Exchange, we follow the UK Corporate
 
Governance Code. However,
 
as Barclays also
 
has American
Depositary Receipts listed on the New York
 
Stock Exchange (NYSE), we are also subject to the NYSE’s Corporate
 
Governance
 
Rules (NYSE Rules).
We are exempt
 
from most of the NYSE Rules, which US domestic companies must follow,
 
because we are a non-US company
 
listed
 
on the NYSE.
However,
 
we are required
 
to provide an Annual
 
Written Affirmation to the NYSE of our compliance with the applicable NYSE Rules and must also
disclose any significant differences between our
 
corporate
 
governance practices and those followed by domestic US companies listed on
 
the NYSE.
Key differences between
 
the Code and NYSE Rules are set out here:
 
Director Independence
NYSE Rules require
 
the majority of the Board
 
to be independent. The Code requires
 
at least
 
half of the Board (excluding
 
the Chairman) to be
independent. The NYSE Rules contain different
 
tests from the Code for determining
 
whether a Director is independent. We follow the Code’s
recommendations
 
as well
 
as developing
 
best practices among other
 
UK public companies. The independence
 
of our non-executive Directors is
reviewed by
 
the Board on
 
an annual basis and it takes into account the guidance in the Code and the criteria we have established for determining
independence,
 
which are described on
 
page 33.
 
Board Committees
We have
 
a Board Nominations Committee and a Board
 
Remuneration
 
Committee, both of which are broadly
 
similar in
 
purpose and
 
constitution to
the Committees required
 
by the NYSE Rules and whose terms of
 
reference
 
comply with the Code’s requirements. The NYSE Rules state that both
Committees must be composed
 
entirely of independent Directors. As the Group Chairman
 
was independent on appointment, the Code permits him
to chair the Board
 
Nominations Committee. Except for this appointment, both Committees are composed
 
solely of non-executive Directors, whom
the Board has determined to be independent.
 
We comply with the NYSE Rules requirement that we have a Board
 
Audit Committee comprised solely
of independent non
 
-executive Directors. However,
 
we follow the Code recommendations, rather than the NYSE Rules, regarding
 
the responsibilities
of the Board
 
Audit Committee (except for applicable mandatory
 
responsibilities
 
under the Sarbanes-
 
Oxley Act),
 
although both are broadly
comparable.
 
Although the NYSE Rules state that the Board Audit Committee is to take respo
 
nsibility for risk oversight, Barclays has an additional
Board
 
Committee which addresses different areas of risk management.
 
To enhance
 
Board
 
governance of risk, Barclays has
 
the Board
 
Risk
Committee. A full description of the Board
 
Risk Committee can be found on page
 
25.
 
Corporate Governance Guidelines
The NYSE Rules require
 
domestic US companies to adopt and disclose corporate
 
governance guidelines. There
 
is no equivalent recommendation in
the Code but the Board
 
Nominations Committee has developed corpor
 
ate governance guidelines, ‘Corporate Governance in Barclays’, which have
been approved
 
and adopted by
 
the Board.
 
Code of Ethics
The NYSE Rules require
 
that domestic US companies adopt and disclose a code of business conduct
 
and ethics for Directors, officers and
employees.
The Barclays
 
Way
 
was introduced in 2013,
t
his is
 
a Code of Conduct which
 
outlines the Values and Behaviours which govern
 
our way of
working
 
across our business globally.
The Barclays
 
Way
 
has been adopted on a Group wide basis by all Directors,
 
Officers and employees.
The
Barclays
 
Way
 
is available
 
to view on the Barclays
 
website at home.barclays/about
 
-barclays/barclays
 
-values.
 
Shareholder Approval
 
of Equity-compensation Plans
The NYSE listing standards require
 
that shareholders must be given the opportunity to vote on all equity-compensation plans and material revisions
to those plans. We comply with UK requirements,
 
which are similar to the NYSE standards. However,
 
the Board does not explicitly take into
consideration the NYSE’s detailed
 
definition of what are considered
 
‘material revisions’.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional information
 
 
 
 
 
312
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Major shareholders
Major shareholders do
 
not have different voting
 
rights from those of other shareholders. Information
 
provided to the Company by substantial
shareholders pursuant
 
to the FCA’s Disclosure Guidance and Transparency
 
Rules are published via a
 
Regulatory Information
 
Service and is available
on the Company’s website.
 
Refer to page 42
 
of the Directors’ report
 
for a breakdown
 
of major shareholders as at
 
31 December
 
2019. Comparatives
 
for 2018
 
and 2017
 
are
presented below.
 
As at 31 December
 
2018
 
,
 
the Company had been
 
notified under Rule 5 of the
 
Disclosure and Transparency
 
Rules of the
 
UKLA of the following
holdings of voting rights in its shares:
 
2018
Holder
Number of
Barclays shares
% of total voting
rights
 
attached to
issued share
capital
a
The Capital Group Companies Inc
b
1,172,090,125
6.84
Qatar Holding LLC
c
1,017,455,690
5.94
Blackrock, Inc
d
1,018,388,143
5.95
Sherborne
 
Investors
e
923,787,634
5.41
Norges Bank
514,068,594
3.00
 
Notes
a
 
The percentage
 
of voting rights
 
detailed
 
above was calculated
 
at the time of the
 
relevant disclosures made
 
in accordance with
 
Rule 5 of the Disclosure
 
Guidance and Transparency
Rules.
b
 
The Capital
 
Group Companies
 
Inc (CG) holds
 
its shares
 
via CG Management companies
 
and funds. Part of the
 
CG holding is held as American Depositary
 
Receipts. On 14 February
2019,
 
CG disclosed
 
by way of a Schedule
 
13G filed with the
 
SEC, beneficial ownership
 
of 277,002,140 ordinary shares
 
of the Company
 
as of 31 December 2018, representing
 
1.6%
of that class
 
of shares.
c
 
Qatar Holding
 
LLC (QH) is
 
wholly-owned by Qatar Investment
 
Authority.
d
 
Total shown
 
includes
 
8,879,783
 
contracts
 
for difference
 
to which voting rights
 
are attached.
 
Part of the holding is
 
held as American Depositary
 
Receipts. On 4 February 2019,
BlackRock, Inc.
 
disclosed
 
by way of a Schedule
 
13G filed with the
 
SEC beneficial ownership
 
of 1,119,810,169
 
ordinary shares
 
of the Company
 
as of 31 December 2018,
representing
 
6.5% of that class of
 
shares.
e
 
We understand
 
from disclosures that the
 
Sherborne Shares are held
 
via three funds ultimately
 
controlled by Edward
 
Bramson and Stephen
 
Welker in
 
their capacity as managing
directors
 
of Sherborne Investors
 
Management GP, LLC (Sherborne
 
Management
 
GP) and Sherborne Investors
 
GP, LLC. Sherborne Management
 
GP is the
 
general partner
 
of
Sherborne Investors
 
Management LP (Sherborne
 
Investors)
 
which is
 
the investment
 
manager to two of the funds,
 
Whistle Investors LLC
 
and Whistle Investors
 
II LLC. Sherborne
Invest
 
ors Management (Guernsey)
 
LLC, the investment
 
manager to the third
 
fund, SIGC, LP, is wholly owned
 
by Sherborne Investors.
 
On 8 February 2019, Sherborne
 
Investors
disclosed
 
by way of a Schedule
 
13D filed with
 
the SEC beneficial
 
ownership of 943,949,089 ordinary shares
 
of the Company
 
as of 29 January 2019, representing
 
approximately
5.5% of that
 
class of shares.
 
Such Schedule 13D also disclosed
 
Edward Bramson and
 
Stephen Welker as
 
the ultimate deemed
 
beneficial owners of the
 
Sherborne Shares and that
505,086,254
 
of such
 
shares
 
were purchased through
 
funded derivative
 
transactions.
 
As at 31 December
 
2017,
 
the Company had been
 
notified under Rule 5 of the
 
Disclosure and Transparency
 
Rules of the
 
UKLA of the following
holdings of voting rights in its shares:
 
2017
Holder
Number of
Barclays shares
% of total voting
rights
 
attached to
issued share
capital
a
The Capital Group Companies Inc
b
1,172,090,125
6.98
Qatar Holding LLC
c
1,017,455,690
5.99
Blackrock, Inc
d
1,010,054,871
5.92
 
Notes
a
 
The percentage
 
of voting rights
 
detailed
 
above was calculated
 
at the time of the
 
relevant disclosures made
 
in accordance with
 
Rule 5 of the Disclosure
 
Guidance and Transparency
Rules.
b
 
The Capital
 
Group Companies
 
Inc (CG) holds
 
its shares
 
via CG Management
 
companies
 
and funds. Part of the
 
CG holding is held as American Depositary
 
Receipts. On 14 February
2018,
 
CG disclosed
 
by way of a Schedul
 
e
 
13G filed with the
 
SEC, beneficial ownership
 
of 1,167,912,211
 
ordinary
 
shares
 
of the Company
 
as of 29 December 2017, representing
6.8% of that class
 
of shares.
c
 
Qatar Holding
 
LLC is wholly-owned
 
by Qatar Investment
 
Authority.
 
On 17 January
 
2018, Qatar Holding LLC disclosed
 
by way of a Schedule
 
13G filed with the
 
SEC, beneficial
ownership
 
of 941,620,690
 
ordinary share
 
s
 
of the Company
 
as of 31 December 2017, representing
 
5.52% of that
 
class of shares.
d
 
Total shown
 
includes
 
2,009,814 contracts for
 
difference
 
to which voting rights
 
are attached.
 
Part of the holding is
 
held as American Depositary
 
Receipts. On 30 January 2018,
BlackRock, Inc.
 
disclosed
 
by way of a Schedule
 
13G filed with the
 
SEC, beneficial ownership
 
of 1,145,415,782 ordinary
 
shares
 
of the Company
 
as of 31 December 2017,
representing
 
6.7% of that class of
 
shares.
 
Disclosure
 
controls and procedures
 
The Chief Executive, James E Staley,
 
and the Group
 
Finance Director, Tushar
 
Morzaria, conducted
 
with Group Management an evaluation of the
effectiveness of the design and operation
 
of the Group’s disclosure controls and
 
procedures
 
of each of Barclays PLC as at 31 December 2019,
which are defined as those controls and procedures
 
designed to ensure that information required to be disclosed in reports filed or submitted
under the US Securities Exchange Act of 1934
 
is recorded, processed, summarised and
 
reported within the time periods specified
 
in the US
Securities and Exchange Commission’s rules and forms. As of the date of the evaluation, the
 
Chief Executive and Group
 
Finance Director concluded
that the design and operation of these disclosure controls
 
and proced
 
ures were effective.
 
 
Additional information
 
 
 
 
 
313
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Board of Directors
Nigel Higgins,
 
Chairman
Nigel joined the Board
 
as a
 
Non-Executive Director
 
in March 2019
 
and became Group Chairman in April 2019. He is also Chairman of Barclays Bank
PLC. Nigel has extensive experience
 
in, and understanding of, banking
 
and financial services,
 
gained through
 
a 36-year career
 
at Rothschild & Co.
where he was most recently Deputy Chairman. Prior
 
to that,
 
he was Chairman of the Group
 
Executive Committee and Managing Partner
 
of
Rothschild & Co. He is a seasoned business leader with a strong track record
 
in leading and chairing a range of organisations and in acting as a
strategic adviser to multiple major international corporations
 
and governments. The breadth
 
of Nigel’s
 
knowledge
 
and operational experience
 
with
international banking groups,
 
building teams and culture, and growing
 
business is
 
hugely beneficial to Barclays, and enables Nigel to contribute to
the strategic direction and long
 
-term sustainable success
 
of Barclays. Nigel’s other current
 
principal external appointments include: non
 
-executive
Director, Tetra
 
Laval International S.A., and Chairman, Sadler’s Wells
 
Jes Staley, Group Chief Executive, Executive Director
Jes joined Barclays as Group
 
Chief Executive on 1 December 2015.
 
Jes
 
has nearly four decades of extensive experience in banking and financial
services. He brings a wealth of investment banking
 
knowledge
 
to the Board as well as strong executive leadership, and this contribution is reflected
in Barclays strategy and long
 
-term sustainable success of the business. He previously worked
 
for more
 
than 30 years at JP Morgan, where he
initially trained as a commercial banker,
 
later advancing to the leadership of major businesses involving
 
equities,
 
private banking
 
and asset
management, and ultimately heading the company’s
 
Global Investment Bank. Jes is currently a Board
 
member of the Institute of International
Finance.
 
 
Mike Ashley, Non-Executive Director
Mike joined the Board
 
as a
 
Non-Executive Director
 
in September 2013.
 
Mike has deep knowledge of accounting
 
auditing and associated regulatory
issues, having previously
 
worked
 
at KPMG for over
 
20 years. Mike’s former roles include acting as the
 
lead engagement
 
partner on
 
audits of large
financial services groups
 
including HSBC, Standard Chartered and
 
the Bank of England, as Head
 
of Quality and Risk management for KPMG
 
Europe
LLP (ELLP) and as KPMG UK's Ethics Partner.
 
The Board
 
benefits from his extensive experience in accounting, auditing and financial reporting, and
therefore Mike contin
 
ues to contribute to the long-term sustainable success of the business. Mike’s other current
 
principal external appointments
include: Member,
 
Cabinet Office Board,
 
Member,
 
International Ethics Standards Board for
 
Accountants, Member, Institute of Chartered
Accountants in England and Wales’ Ethics Standards
 
Committee, and Member,
 
Charity Commission.
 
 
Tim Breedon, Non-Executive Director
Tim joined the Board
 
as a
 
Non-Executive Director
 
in November
 
2012
 
and is Chairman of the
 
Board
 
Risk Committee.
 
Tim has extensive financial
services experience, knowledge
 
of risk management and UK and EU regulation, as well as understanding of key investor issues. He had a
distinguished career with Legal & General, where
 
among other
 
roles, he was the
 
Group
 
CEO until June
 
2012,
 
and his experience enables Tim to
provide
 
challenge, advice and support to management on
 
business performance and decision-making. Tim’s other current principal external
appointment include: Chairman, Apax Global Alpha
 
Limited.
 
Sir Ian Cheshire, Non-Executive Director
Sir Ian joined the Board
 
as a
 
Non-Executive Director
 
in April 2017
 
and is Chairman of Barclays UK PLC. He contributes to the Board substantial
business experience particularly in the international retail sector from
 
his lengthy executive career at Kingfisher Group
 
,
 
as well
 
as experience in
sustainability and environmental
 
matters, which are important to the Group’s
 
strategy and long-term sustainable success. Sir Ian holds strong
credentials in leadership, is involved
 
with many charitable organisations, such as The Prince of Wales’ Charitable Foundation,
 
and is highly regarded
by the Government
 
for his work with various Government
 
departments. Sir Ian’s other current principal external appointments include: Chairman,
Menhaden plc, Chairman, Maisons du monde plc, Lead Non-
 
Executive director for
 
the Government
 
and Trustee, Institute
 
for Government.
 
Mary Anne Citrino, Non-Executive Director
Mary Anne was appointed to the Board
 
as a Non-Executive Director in July 2018.
 
Mary Anne is an experienced non-executive Director
 
with
considerable financial services and investment banking
 
experience, following an executive career
 
spanning over
 
20 years with Morgan Stanley. This
enables her to contribute
 
to the effectiveness of Barclays’ operations
 
,
 
strategy and long
 
-term sustainable success
 
of the business. Her current
 
other
non-executive
 
positions and senior advisory role with Blackstone, coupled with previous
 
board
 
and senior management level positions
 
(with Dollar
Tree, Inc. Health Net, Inc. and
 
Blackstone Advisory Partners), contribute
 
to the wide ranging global, strategic and advisory experience she can
provide
 
to the Board. Mary Anne’s other current
 
principal external appointments include, Non-Executive Director,
 
HP Inc., Non-Executive Directo
 
r,
Ahold Delhaize N.V. Non
 
-Executive Director,
 
Alcoa Corporation,
 
and Senior Advisor,
 
The Blackstone Group L.P.
 
Mohamed A. El-Erian,
 
Non-Executive Director
Dr. El-Erian was appointed
 
to the Board
 
as a
 
Non-Executive Director
 
on 1 January
 
2020. Mohamed is a highly respected economist and investor,
with considerable
 
experience in the asset management industry and multilateral institutions. He is chief economic advisor at Allianz SE, the
corporate
 
parent of PIMCO (Pacific Investment Management
 
Company
 
LLC) where he formerly served as chief executive and
 
co-chief investment
officer. As
 
well as serving on several advisory committees and boards,
 
Dr. El-Erian is a regular
 
columnist for Bloomberg
 
Opinion and a contributing
editor at the Financial Times. He has also published widely on international economic
 
and financial topics. He spent 15 years at the IMF where he
served as Deputy Director before
 
moving to the private sector and financial services. Mohamed’s acute knowledge and understanding
 
of
international econom
 
ics and the
 
financial services sector strengthens the Board’s
 
capacity for overseeing
 
the strategic direction and development
of the Group.
 
Mohamed's knowledge
 
and experience enables him to contribute to the long-term sustainable
 
success of the business. Mohamed’s
other appointments include Board
 
Member (Non-
 
Executive), Under Armour Inc., Senior advisor, Gramercy Funds
 
Management and Senior advisor,
Investcorp
 
Bank BSC.
 
 
 
 
 
 
 
 
Additional information
 
 
 
 
 
314
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Dawn Fitzpatrick, Non-Executive Director
Dawn Fitzpatrick was appointed
 
to the Board as a Non-Executive Director in September 2019.
 
Dawn is a
 
highly experienced
 
financial executive who
holds the role of Chief Investment Officer at Soros
 
Fund Management LLC. Her previous
 
experience includes 25 years with UBS and its predecessor
organisations, most recently as Head of Investments
 
for UBS Asset Management. Her knowledge
 
of the business
 
and markets in which the Group
operates further strengthens the depth and range
 
of relevant skills and experience across the Board. This enables Dawn to challenge and contribute
effectively to the Group’s
 
operations and lon
 
g-term sustainable success of the
 
business. Dawns other current
 
principal external appointments
include: Member,
 
The New York
 
Federal Reserve’s Investor Advisory
 
Committee on Financial Markets and Advisory Board
 
and Member, Advisory
Board
 
and Investment Committee of the Open Society Foundations’ Economic
 
Justice Programme.
 
Mary Francis, CBE, Non-Executive Director
Mary Francis CBE joined the Board
 
as a
 
Non-Executive Director
 
in October 2016.
 
Mary has extensive and diverse board-
 
level experience across a
range of industries, including
 
her previous non
 
-executive directorships of the Bank of England,
 
Alliance & Leicester, Aviva, Centrica and Swiss Re
Group.
 
Through
 
her former senior executive positions with
 
HM Treasury,
 
the Prime Minister’s Office, and as Director General of the Association of
British Insurers, she brings to the Board
 
a strong understanding
 
of the interaction between public and private sectors, skills
 
in strategic decision-
making and reputation management
 
and promotes strong
 
board governance values, which enables her to continue to contribute effectively to the
long-term sustainable success of the Group.
 
Mary’s other current external principal
 
appointments include: non-
 
executive Director, Valaris
 
PLC,
Advisory Panel of The Institute of Business Ethics (Member)
 
and UK Takeover
 
Appeal Board (Member).
 
Crawford Gillies, Senior
 
Independent Director
Crawford
 
joined the Board as a Non-Executive Director
 
in May 2014
 
and was appointed Senior Independent Director in April 2018.
 
Crawford has
extensive business and management
 
experience at executive and board
 
level spanning over 30
 
years. Beneficial to
 
the Board and to Barclays’
strategy and long
 
-term sustainable success
 
is his key understanding
 
of stakeholder needs and his experience in international and cross sector
organisations, strong leadership and strategic decision
 
-making. Crawford
 
brings to the Board
 
robust remuneration experience
 
gained from his
former
 
remuneration
 
committee chairmanships at Standard Life plc and other current positions. Crawford’s other
 
current principal external
appointments include: Non-Executive Director,
 
SSE plc and Chairman, The Edrington Group.
 
Brian Gilvary, Non-Executive Director
Brian was appointed to the Board
 
as a
 
Non-Executive Director
 
on 1 February
 
2020. Brian has served as Chief Financial
 
Officer for BP
 
p.l.c since
2012.
 
He joined BP in 1986
 
after obtaining a PhD in Mathematics. After performing a broad
 
range of commercial and financial roles across
 
all facets
of the group,
 
he became chief executive of BP’s integrated supply and trading function (2005
 
– 2009). Brian will
 
retire from BP
 
in June 2020. His
experience outside BP includes serving as a Non-
 
Executive Director and audit committee member
 
of Air Liquide S.A. and the
 
Royal
 
Navy. Brian also
chairs the ‘100 Group’
 
of the FTSE
 
100
 
Finance Directors and is Senior independent director
 
of the Francis Crick Institute.
 
Brian brings to the Board
his extensive experience
 
of management, finance and strategy gained at BP and other public and private boards.
 
His experience with, and
understanding
 
of, the challenges and opportunities inherent in advancing
 
a sustainable
 
energy future
 
will be invaluable as Barclays considers how
 
it
can help to accelerate the transition to a low carbon
 
world.
 
 
Tushar Morzaria, Group Finance Director, Executive Director
Tushar joined the Board
 
and Group
 
Executive Committee of Barclays in October 2013
 
as Group Finance Director.
 
Tushar is a chartered accountant
with over
 
25 years of strategic financial management, investment banking, operational and regulatory
 
relations. He joined Barclays from JP Morgan,
where he held various senior roles including
 
CFO of
 
its Corporate
 
& Investment Bank at the time of the merger of the investment bank and the
wholesale treasury/security services business. Tushar
 
currently chairs the Sterling Risk Free Reference Rates Working
 
Group.
 
Diane Schueneman, Non
 
-Executive Director
Diane joined the Board
 
as a
 
Non-Executive Director
 
in June 2015
 
and also Chairs
 
the Board of Barclays Execution
 
Services Limited
 
and is member of
Barclays US LLC, Barclays
 
US intermediate holding company.
 
She brings to Barclays a wealth of experience in managing global, cross-discipline
business operations, client services and technology
 
in the financial
 
services industry, which enables her to
 
robustly challenge the Group’s
 
strategy
and support the long
 
-term sustainable success
 
of Barclays. Diane had an extensive career
 
at Merrill Lynch, holding
 
a variety of senior roles
including responsibility for banking, brokerage
 
services and technology provided
 
to the company’s retail
 
and middle market clients.
 
Stephen Shapiro, Company Secretary
Stephen was appointed Company
 
Secretary in November
 
2017
 
having previously served as the
 
Group
 
Company
 
Secretary and Deputy General
Counsel of SABMiller plc. Prior to this he practised law as a
 
partner in a law firm in South Africa, and subsequently in corporate
 
law and M&A at
Hogan Lovells in the UK. Stephen has extensive experience
 
in corporate
 
governance, legal, regulatory and
 
compliance matters. Stephen
 
serves as
Vice Chair of the GC100, the association of General Counsel and Company
 
Secretaries working in FTSE 100
 
companies, and has previously served
as Chairman of the ICC UK’s Committee on Anti-Corruption.
 
Group Executive Committee
Jes Staley, Group Chief Executive, Executive Director
See above for
 
full biography.
 
Tushar Morzaria, Group Finance Director, Executive Director
See above for
 
full biography.
 
Paul Compton, President Barclays Bank PLC
In his role as President of Barclays
 
Bank PLC (BBPLC), Paul oversees Executive Management
 
responsibilities associated with the operation
 
of the
legal entity for the Barclays International division,
 
and supports the Group
 
Chief Executive Officer in leading strategic pan-Barclays initiatives. He is
accountable for BBPLC
 
subsidiaries including the US Intermediate Holding Company and
 
Barclays Bank Ireland; the Investment Bank Research
Team; and the governance
 
and regulatory obligations for BBPLC. Prior
 
to his appointment as
 
President of BBPLC in March 2019,
 
Paul served as
Group
 
Chief Operating Officer, and as Chief Executive Officer of Barclays
 
Execution Services
 
(BX). Paul
 
led BX's ambition to become a world
 
-class
 
 
Additional information
 
 
 
 
 
315
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
provider
 
of simple,
 
efficient, innovative and secure operations
 
and technology
 
services to Barclays Group and its two operating divisions, Barclays
UK and Barclays International. He enhanced
 
Barclays’ operating structure
 
to drive efficiency across the organisation, working with the divisions to
deliver stronger
 
outcomes for customers, clients, and shareholders. Before
 
joining Barclays in 2016,
 
Paul served for nearly two decades in a variety
of senior operating roles at JP Morgan
 
Chase, most recently as Chief Administrative Officer. Prior
 
roles included Chief Administrative Officer for the
Corporate
 
& Investment Bank and Deputy Head of Operations. Paul started his career at JP Morgan
 
in 1997,
 
and first led
 
the overhaul of the
wholesale bank’s credit risk infrastructure, before
 
taking on the role of Chief Financial Officer for the Investment Bank. Previous
 
to JP Morgan, Paul
spent 10
 
years as Principal at Ernst & Young
 
in the Brisbane, Australia
 
and New Yor
 
k
 
offices.
 
Alistair Currie, Head of Barclays Corporate Banking
Alistair Currie joined Barclays in August
 
2017
 
as Chief
 
Operating Officer & Head of Product
 
for Corporate Banking
 
and is a
 
member of the Corporate
Banking and the Barclays International COO Executive Committees.
 
In October 2017
 
Alistair
 
became Co-Head of Corporate
 
Banking and in
September 2018
 
Alistair
 
was appointed as Head of Corporate
 
Banking. Prior
 
to joining Barclays, Alistair
 
was at the ANZ Banking Group
 
in Australia
where he most recently held the role
 
of Group
 
Chief Operating Officer, responsible for technology,
 
shared services, operations and property,
 
and
played a key role
 
in the ANZ’s digital transformation. Before
 
taking up this role in 2011,
 
he had previously joined ANZ in 2008
 
as Managing Director,
Transaction Banking. Before
 
ANZ, Alistair spent 18 years at HSBC in a variety of international banking roles in the UK, Middle East and
 
Asia
including President and CEO of HSBC, Taiwan,
 
between 2007
 
and 2008.
 
As Regional Head of Trade Services, HSBC Asia
 
Office in Hong
 
Kong
 
from
2004
 
to 2007,
 
Alistair
 
further developed
 
HSBC’s
 
market-leading trade finance position in the region and from
 
2001
 
to 2004, he was COO, Wells
Fargo
 
HSBC Trade Bank NA, San Francisco. With 27 years as a
 
banking profes
 
sional, Alistair
 
has a wealth of experience in institutional, large
corporate,
 
mid-corporate and
 
consumer client segments
 
as well as transaction banking, trade finance, cash management and technology,
 
and a
track record
 
in delivering business transformation
 
and high quality customer outcomes.
 
Stephen Dainton, Global Head of Markets
Stephen leads the business across Credit, Equities, Macro,
 
and Securitized Products. He has over
 
25 years of experience in global markets across
trading, sales, risk, capital markets, structuring, and research.
 
Stephen joined Barclays in September 2017
 
as Global Head of Equities.
 
Prior to
Barclays he spent 14
 
years at Credit Suisse where he served
 
as Co-Head of Global Markets for the EMEA region. He joined Credit Suisse in 2003
 
as
Head of Equity Distribution EMEA and went on to become
 
Head of Equities
 
for the region, before
 
assuming his global markets role. Previously,
Stephen worked
 
at Goldman Sachs as Head of US and International Equities, based in New York. He
 
also held roles in
 
Equities at Donaldson, Lufkin
& Jenrette in both London
 
and New York.
 
Matt Hammerstein, Chief Executive Officer, Barclays UK
Matt Hammerstein is the CEO for Barclays
 
Bank UK, covering
 
Retail Banking, Business Banking, Barclaycard, Savings, Investments
 
and Wealth
Management. Prior
 
to becoming CEO, Matt was Head of Retail Lending covering
 
both the secured and unsecured lending
 
businesses.
 
Matt joined
Barclays in 2004
 
as Director of Group Strategy,
 
later progressing to become
 
the Group Chief of Staff;
 
a key
 
strategic role in which he provided
 
vital
support to the Group
 
CEO during the financial crisis. Matt went on to manage Barclays Group
 
Corporate
 
Strategy and Corporate Relations, Barclays
Customer and Client Experience in Retail and Business Banking and B
 
arclays UK Retail Products and
 
Segments. Before Joining Barclays, Matt was a
Senior Management Consultant at Marakon
 
Associates where he worked
 
for 12
 
years in the financial
 
services, consume products
 
and energy
sectors within the Americas and Europe.
 
Bob Hoyt, Group General Counsel
Bob joined Barclays in October 2013
 
and is responsible for all legal and regulatory matters across Barclays as Group
 
General Counsel. Previously,
Bob was at PNC Financial Services Group,
 
where he was General Counsel and Chief Regulatory Affairs Officer,
 
having previously
 
served as Deputy
General Counsel since 2009.
 
Between 2006
 
and 2009, Bob served as General Counsel of the US Department of the
 
Treasury
 
where he was the Chief
Legal Officer of the department
 
and a senior policy advisor to Secretary Henry M. Paulson, Jr. Prior
 
to that Bob served at the White House where he
was Special Assistant and Associate Counsel to President George
 
W. Bush. Earlier in
 
his career,
 
Bob was a partner
 
in the Securities,
 
Litigation and
Corporate
 
departments of the law firm of Wilmer Cutler Pickering Hale and Dorr
 
(WilmerHale).
 
Joe McGrath, Global Head of Banking
Joe oversees the provision
 
of financial advisory, capital raising, financing and risk management
 
services to corporations, governments
 
and financial
institutions worldwide. Banking
 
is comprised of the Coverage, Mergers and Acquisitions, and Capital Markets businesses. Based in New York,
 
Joe is
Chair of the Banking Executive Forum,
 
and is also a member of Barclays’ US Executive Committee. He also
 
serves on the board of Barclays’ US
Intermediate Holding Company.
 
Joe is a steadfast advocate for diversity in the workplace, participating in numerous
 
mentoring and
 
sponsorship
programs
 
across the firm, with
 
a particular focus on
 
promoting
 
emerging talent and women in Banking. He also sits on the Americas Citizenship
Council, which oversees strategic programs
 
to foster regional economic growth
 
and opportunity, and is the senior sponsor for the Unreasonable
Impact Program,
 
one of Barclays’ flagship Citizenship programs.
 
 
Laura Padovani, Group Chief Compliance Officer
Laura became Group
 
Chief Compliance Officer in
 
April 2018.
 
She joined Barclays as the Head of Global Compliance Services in 2015
 
and in 2016,
her role was expanded
 
to cover the Compliance Chief of Staff Office, where she would
 
deputise for the Chief Compliance Officer in various
capacities. Laura joined from
 
American Express and has over 25
 
years of financial services experience. She started
 
her career with American
Express in Argentina
 
in 1991
 
where she established the
 
first Compliance office and co
 
-ordinated their Legal function. Laura moved
 
to New York
 
in
1997
 
to assist with
 
the development
 
of the Global Anti-Money Laundering
 
Program for American Express. In 2000, Laura broadened
 
her Financial
Services experience moving
 
to Aviva as the
 
Head of International Compliance
 
responsible for all non-UK
 
offices across North America, Europe
 
and
Asia Pacific. Laura returned
 
to American Express in 2004,
 
focused on Global Consumer
 
Financial Services
 
and European
 
Emerging Markets, and
then as the Global Head of International Regulatory
 
Compliance. Laura has been involved in many networking
 
initiatives for Women, both at
American Express and now
 
at Barclays.
 
Mark Ashton Rigby, Group Chief Operating Officer, Chief Executive Officer, BX
In his role as Group
 
Chief Operating Officer, Mark is responsible for
 
Barclays Operations and Technology,
 
leading on the ambition to be a world-
class provider
 
of simple,
 
efficient, innovative and secure Operation and
 
Technology
 
services to Barclays’ trading entities, generating sustainable
 
 
Additional information
 
 
 
 
 
316
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
growth
 
and returns. Mark’s responsibilities also include Real Estate, Controls, and the Chief Data Office. Mark is also Chief Executive
 
Officer,
Barclays Execution Services (BX). In
 
that capacity,
 
Mark leads the continuous enhancement
 
of Barclays’ operating structure, to drive efficiency
across the organisation and generate
 
excellent outcomes for our customers and clients. Mark joined Barclays in September 2016
 
as Group Chief
Informatio
 
n
 
Officer. In this role, Mark was responsible for
 
the bank’s global technology systems and infrastructure, and led on the transformation
 
of
the technology foundations
 
across our retail and wholesale businesses. The increased digitisation of our consumer
 
offering demonstrates that our
technology infrastructure
 
and innovation capabilities are a competitive advantage for Barclays, building
 
a compelling client value proposition. Prior
to joining Barclays, Mark was
 
Chief Information Officer for JP
 
Morgan’s Corpo
 
rate and Investment bank. Prior to that, he held various Senior
Technology
 
roles at UBS and Deutsche Bank.
 
 
Tristram Roberts, Group Human Resources Director
 
Tristram is the Group
 
Human Resources Director.
 
Tristram joined Barclays in July 2013
 
as HR
 
Director for the Investment Bank. His remit was
expanded
 
in May 2014
 
to include HR responsibilities for Barclays Non-Core, and
 
became the Group
 
HR Director in December 2015.
 
Prior to
Barclays, Tristram
 
was Head of Human Resources for
 
Global Functions and Operations & Technology
 
at HSBC
 
Holdings PLC, as well as group
 
head
of performance
 
and reward.
 
Previously, he was group
 
reward and policy director for
 
Vodafone Group Plc. Tristram began
 
his career in consulting.
He became a partner
 
with Arthur Andersen
 
in 2001 and
 
was subsequently a partner with both Deloitte and KPMG.
 
Ashok Vaswani, Global Head of Consumer Banking & Payments
Ashok Vaswani is the
 
Global Head of Consumer Banking and
 
Payments overseeing
 
the execution of plans for the Group's consumer
 
banking,
private banking and payments
 
businesses in the UK and internationally. Prior
 
to this Ashok was the CEO for Barclays Bank UK, covering
 
Retail
Banking, Wealth, Business Banking and
 
Barclaycard
 
UK. Ashok joined Barclays in 2010,
 
managing the credit card busin
 
ess
 
across the UK, Europe
and the Nordics, becoming
 
chairman of Entercard.
 
He went on to manage Barclays in Africa, Barclays Retail Business Bank globally and Barclays
Personal and Corporate
 
Banking. Ashok is a member of Barclays Executive Committee, and a board
 
member for
 
Pratham Board and
 
the Trustee
Board
 
at Citizens Advice. He also sits on the advisory boards of a number
 
of institutions such as Rutberg & Co and is Founder Director
 
of Lend-a-
Hand, a non
 
-profit organisation focused
 
on rural education in India. Ashok has previously served as a Non-Executive Director on the Board
 
of
Barclays Africa Group
 
Limited, The Board of Directors, Telenor
 
ASA and the advisory boards of S. P. Jain Institute of
 
Management, Insead Singapore
and Visa Asia Pacific. Prior to Barclays, Ashok was
 
a partner
 
with a JP Morgan Chase funded private equity firm – Brysam Global Partners, which
was focused on building
 
retail financial service businesses
 
in emerging
 
markets. Ashok has demonstrated a passion for building and managing
businesses across the globe. He started his career in Mumbai, India and
 
since then, has worked and lived in Asia, Europe, the Middle East and the
US. Ashok spent twenty years with Citigroup. His last position at Citigroup
 
was CEO, Asia Pacific. Ashok was
 
also a member of the Citigroup
Operating Committee, the Citigroup Management
 
Committee, and the Global Consumer Planning
 
Group.
 
C.S. Venkatakrishnan (“Venkat”), Group Chief Risk Officer
Venkat joined as Chief Risk Officer
 
in March 2016.
 
Venkat is responsible for helping to define, set and manage the risk profile of Barclays. He heads
the risk management organisation across the Group
 
and has oversight responsibility for Compliance. Venkat has 25 years of financial market and
risk management expertise. He previously worked
 
at JP Morgan,
 
from 1994,
 
holding senior roles in Risk,
 
Investment and Asset
 
Management.
Venkat is the executive
 
sponsor for Embrace,
 
the global multi-cultural network at Barclays.
 
 
 
Additional information
 
 
 
 
 
317
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Section 13(r) to the US Securities
 
Exchange Act
 
of 1934 (Iran sanctions and related disclosure)
Section 13(r)
 
of the U.S.
 
Securities Exchange Act of 1934,
 
as amended (the “Exchange Act”) requires each SEC reporting
 
issuer to disclose in
 
its
annual and, if applicable, quarterly
 
reports whether
 
it or any of its
 
affiliates have knowingly
 
engaged in certain activities, transactions or dealings
relating to Iran
 
or with the Government
 
of Iran or certain designated natural persons
 
or entities
 
involved in terrorism
 
or the proliferation of weapons
of mass destruction during the period
 
covered
 
by the report. The requirement includes disclosure of activities not prohibited by U.S. or other law
even if conducted
 
outside the U.S.
 
by non
 
-U.S. companies or affiliates in compliance with local law. Pursuant
 
to Section 13(r)
 
of the Exchange Act
we note the following in relation to activity occurring
 
in 2019,
 
the period covered by this annual report, or in relation to activity we became aware
of in 2019
 
relating to disclosable
 
activity prior to the reporting
 
period. Except as noted below, Barclays intends to continue the activities described.
 
Barclays does not allocate profits at the level of these activities,
 
which in any event would not be significant, and we therefo
 
re report
 
only gross
revenue
 
where measurable.
 
Barclays attributed revenue
 
of approximately GBP
 
665 in 2019
 
in relation to the activities
 
disclosed below.
 
Legacy Guarantees
Between 1993
 
and 2006,
 
Barclays entered into several guarantees for
 
the benefit of Iranian banks in connection with the supply of goods and
services by Barclays customers to Iranian
 
buyers. These were counter
 
guarantees issued to the Iranian banks to support guarantees
 
issued by these
banks to the Iranian buyers.
 
The Iranian banks and a number
 
of the Iranian buyers were
 
subsequently designated as
 
Specially Designated Nationals
and Blocked Persons
 
(“SDN”) by the U.S. Department of the Treasury,
 
Office of Foreign
 
Assets
 
Control (“OFAC”).
 
In addition, between 1993
 
and
2005,
 
Barclays entered into similar guarantees for the benefit of a Syrian bank
 
that was subsequently designated pursuant to the Weapons of Mass
Destruction Proliferators Sanctions Regulations
 
in August 2011.
 
The guarantees were issued either on:
(i)
 
an “extend
 
or pay” basis which means that, although the guarantee
 
is of limited duration on its face, until there is full performance
 
under the
contract to provide
 
goods and services, the terms of the guarantee require
 
Barclays to either maintain the
 
guarantee or
 
pay the beneficiary
bank the full amount of the guarantee; or
(ii)
 
the basis that Barclays obligations can only be discharged
 
with the consent of the beneficiary counterparty.
 
Barclays is not able to exit its obligations under
 
the guarantees unilaterally, and thus maintains a limited legacy portfolio
 
of these guarantees. The
guarantees were in compliance with applicable laws and regulations
 
at the time at which they were entered
 
into. Barclays intends to terminate the
guarantees where
 
an agreement can be reached
 
with the counterparty,
 
in accordance with applicable laws and regulations.
 
Barclays attributed
 
no revenue
 
in 2019
 
in relation to this
 
activity.
 
Lease Payments
Barclays is party to a long
 
-term lease, entered into in 1979, with the National Iranian
 
Oil Company (“NIOC”), pursuant to which Barclays rents part
of NIOC House in London
 
for a Barclays bank branch.
 
The lease is
 
for 60 years, contains no early termination clause, and has 20
 
years remaining.
Barclays makes quarterly
 
lease payments in GBP to an entity that is owned
 
by the Government
 
of Iran. The payments are made in accordance
 
with
applicable laws and regulations. Barclays
 
attributed no revenue
 
in 2019
 
in relation to this
 
activity.
 
Local Clearing Systems
Banks in the United Arab Emirates (“UAE”), including
 
certain Iranian banks that are SDNs, participate in the various banking
 
payment and
settlement systems used in the UAE (the “UAE
 
Clearing Systems”). Barcl
 
ays, by virtue of its banking activities in the UAE, participates in the UAE
Clearing Systems, in accordance
 
with applicable laws and regulations. However,
 
in order to help mitigate the risk of engaging
 
in transactions in
which participant Iranian
 
SDN banks
 
may be involved, Barclays
 
has implemented restrictions relating to its involvement in the
 
UAE Image Cheque
Clearance System and the UAE
 
Funds Transfer
 
System activity, as well as restricting activity
 
via the Wages Protection Scheme. Barclays attributed
no
 
revenue
 
in 2019
 
in relation to this
 
activity.
 
Payments Notified
A Barclays customer was designated pursuant
 
to the Global Terrorism Sanctions Regulations (“GTSR”) in March 2016.
 
Barclays continues to
receive credit card repayments
 
from this customer in accordance with applicable laws and regulations. A block continues to be applied to the card
to prevent any further
 
spending. Barclays attributed revenue
 
of approximately GBP
 
480 in 2019
 
in relation to this
 
activity.
 
In 2019,
 
Barclays processed three
 
euro payments
 
relating to overflight charges, a portion of which were
 
for the overflight of Iranian
 
airspace. It is
presumed that the ultimate beneficiary of the outbound
 
payments was a Government of Iran
 
owned entity. The payments were
 
made in
accordance
 
with applicable laws
 
and regulations. No
 
payments were made directly to Iran
 
or any entity owned or
 
controlled by
 
the Government of
Iran. Although
 
OFAC has issued a general license relating to payments for
 
overflights of Iranian airspace, it does not technically apply to aircraft
owned by
 
non-U.S. persons, or registered
 
outside of the U.S.
 
Barclays attributed
 
revenue
 
of approximately GBP
 
30 in 2019
 
in relation to this
 
activity.
 
Barclays maintains customer relationships with UK
 
-incorporated
 
medical manufacturing companies. In 2018
 
and 2019, Barclays processed
 
several
payments, for
 
the benefit of our customer, relating to the export
 
of medical devices to privately-owned
 
Iranian entities.
 
The end users of these
medical devices include hospitals or clinics that may be owned
 
or controlled
 
by the Government of Iran. The payments
 
were made in accordance
with applicable laws and regulations. All payments
 
were received
 
from the privately-owned
 
Iranian entities;
 
no payments were
 
received directly
from any entity owned
 
or controlled
 
by the Government of Iran. Although
 
OFAC has issued general licenses relating to the sale of medical
 
devices,
they do not technically apply to sales of non
 
-U.S. origin items by non-
 
U.S. persons. Barclays attributed revenue of approximately
 
GBP 60 in 2019
 
in
relation to this activity.
 
Barclays maintains customer relationships with several
 
individuals who work for
 
UK-ba
 
sed entities
 
that are ultimately owned
 
by the Government
 
of
Iran and are
 
OFAC SDNs. Payments are received,
 
in GBP,
 
from a UK-based payment
 
services company,
 
in cash, or from the customer’s account at
another UK
 
-based financial institution,
 
and are credited to the customers’ accounts with
 
Barclays. The payments are
 
processed in accordance
 
with
applicable laws and regulations. No payments are received
 
directly from any entity owned
 
by the Government
 
of Iran or any
 
OFAC SDN. Barclays
attributed no revenue
 
in 2019
 
in relation to this activity.
 
 
Additional information
 
 
 
 
 
318
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
 
Barclays maintains a relationship with HM Revenue
 
& Customs (“HMRC”), a UK government
 
agency, which
 
receives funds from an Iranian
 
SDN
financial institution in relation to the settlement of tax liabilities with
 
the UK Government. The payments
 
are received by
 
Barclays and credited to
the HMRC account. The payment
 
activity is covered by
 
a license issued
 
by UK HM Treasury.
 
Barclays attributed
 
revenue
 
of approximately GBP
 
40 in
2019
 
in relation to this activity.
 
Barclays processed three
 
transactions to embassies of the Government
 
of Iran in the European
 
Union in relation to fees for renewing Iranian
passports or replacing
 
Iranian passports that had been lost or stolen. The payments were processed
 
in accordance with
 
applicable laws and
regulations. Barclays
 
attributed revenue
 
of approximately GBP
 
55 in 2019
 
in relation to this
 
activity.
 
In April 2019,
 
a Barclays customer was designated by OFAC as an
 
SDN pursuant to the GTSR. Barclays exited the relationship with the customer
and their account was closed. Barclays attributed
 
no revenue
 
in 2019
 
in relation to this
 
activity.
 
Barclays remitted
 
one transaction to the Embassy of the Government
 
of Iran in the UK in relation to redress owed to the Embassy following
 
the
application of an incorrect
 
foreign exchange
 
rate being applied to a payment the Embassy remitted from Barclays in 2012,
 
which was identified
during
 
a remediation project. The one-time payment was processed
 
in accordance with applicable laws and regulations. Barclays attributed no
revenue
 
in 2019
 
in relation to this activity.
 
 
 
 
 
 
 
 
 
Additional information
 
 
 
 
 
319
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Summary of Barclays Group share and cash plans and long
 
-term incentive plans
 
Barclays operates a number
 
of share, cash and long-term incentive plans. The principal plans used for awards made in or, in
 
respect of, the 2019
performance
 
year are shown in the table below. Awards
 
are granted by
 
the Barclays PLC Board
 
Remuneration
 
Committee (the
 
“Committee”), and
are subject to the applicable plan rules (as amended
 
from time to time). Share awards are granted
 
over ordinary
 
shares in Barclays PLC (“Shares”).
Barclays has a number
 
of employee benefit trusts which operate in conjunction
 
with these
 
plans. In some cases the trustee purchases Shares in the
market to satisfy awards; in others,
 
new issue
 
or treasury Shares may be used to satisfy awards
 
where the appropriate
 
shareholder
 
approval has
been obtained.
 
Summary of principal
 
share and cash plans and long-term incentive plans
 
Name of plan
Eligible employees
Executive
Directors
eligible
Delivery
Design
 
details
Deferred Share
Value Plan
(DSVP)
All employees
(excluding
Directors)
 
No
Deferred Share
 
awards, typically
released in instalments over
 
a
three, five or seven year period,
dependent on
 
future service and
subject to malus provisions
-
 
Plan typically used for mandatory
 
deferral of a
proportion
 
of bonus into Shares where bonus is
above a threshold (set annually by
 
the Committee).
-
 
This plan typically works in tandem with the CVP
(below).
-
 
DSVP awards vest over
 
three, five or seven years
dependent on
 
future service.
-
 
Vesting is subject to malus, suspension
 
provisions
and the other provisions of the rules of the DSVP.
-
 
For awards
 
granted before
 
2018, dividend
equivalents may be released based on the
 
number
of Shares under
 
award that are released.
-
 
On cessation of employment, eligible leavers (as
 
set
out in the rules of the DSVP) normally
 
remain
eligible for release (on the scheduled release
 
dates)
subject to the Committee and/or
 
trustee discretion.
For other
 
leavers, awards will normally lapse.
-
 
On change of control, awards
 
may vest at the
Committee’s and/or trustee’s discretion.
-
 
For DSVP awards
 
made to Material Risk Takers
(“MRTs”), a
 
holding period
 
of either 6 or 12 months
will apply to Shares (after tax) on release.
Share Value Plan
(SVP)
All employees
(including
executive
Directors)
 
Yes
Deferred Share
 
awards, typically
released in instalments over
 
a
three, five or seven year period,
dependent on
 
future service and
subject to malus provisions
-
 
The SVP is in all material respects the same as the
DSVP described above.
 
The principle differences are
that (i) executive Directors may
 
only participate in
the SVP and (ii) under the DSVP,
 
if a MRT whose
award is deferred
 
over five or seven years resigns
after the third anniversary of grant, they will
automatically be treated as an eligible leaver
 
in
respect of any unvested
 
tranches of that award.
Cash Value Plan
(CVP)
All employees
(excluding
Directors)
 
No
Deferred cash award
 
typically
released in instalments over
 
a
three, five or seven year period,
dependent on
 
future service and
subject to malus provisions
-
 
The CVP is typically used for mandatory
 
deferral of
a proportion
 
of bonus where bonus is above a
threshold (set annually by the Committee.
-
 
This plan typically works in tandem with the DSVP.
-
 
CVP awards vest
 
over three, five or seven years
dependent on
 
future service.
-
 
Vesting is subject to malus, suspension
 
provisions
and the other provisions of the rules of the CVP.
-
 
Participants granted
 
awards before
 
2019
 
may be
awarded
 
a service credit of 10% of the initial value
of the award
 
on the third anniversary of a grant.
-
 
Change of control and
 
leaver provisions are as for
DSVP.
Barclays Long
Term Incentive
Plan (LTIP)
Selected
employees
(including
executive
Directors)
Yes
Awards
 
over Shares subject to
risk-adjusted performance
conditions and malus provisions
-
 
Awarded
 
on a discretionary basis with participation
reviewed by
 
the Committee.
-
 
Awards
 
only vest if the risk-adjusted performance
conditions are satisfied over
 
a three year period.
-
 
LTIP awards
 
vest over seven years dependent
 
on
future service.
-
 
Vesting is subject to malus, suspension
 
provisions
and the other provisions of the rules of the LTIP.
-
 
Any Shares released under
 
the LTIP award
 
(after
payment of tax) will be subject to an additional
 
 
 
 
 
 
 
Additional information
 
 
 
 
 
320
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
holding peri
 
od of no less than
 
the minimum
regulatory
 
requirements
 
(currently 12 months).
-
 
On cessation of employment, eligible leavers
normally remain eligible for release (on
 
the
scheduled release dates) pro
 
-rated for time and
performance.
 
For other
 
leavers, awards will
normally lapse.
-
 
On change of control, awards
 
may vest at the
Committee’s discretion.
Sharesave
All employees in
the UK and
Ireland
Yes
Options over
 
Shares at a discount
of 20%, with Shares delivered or
cash value of savings returned
after three to five years
-
 
HMRC tax advantaged plan in the UK
 
and approved
by the Revenue Commissioners in
 
Ireland.
-
 
Opportunity to purchase
 
Shares at a discount price
(currently
 
a 20% discount) set on award date with
savings made over
 
three or five year term.
-
 
Maximum individual savings of £300
 
per month or
the Euro equivalent in Ireland.
-
 
On cessation of employment, eligible leavers may
exercise options and acquire Shares to
 
the extent of
their savings for six months.
-
 
On change of control, participants may exercise
options and acquire Shares to the extent of their
savings for six months.
Sharepurchase
All employees in
the UK
Yes
Shares purchased from
 
gross
salary deductions and
Dividend/Matching Shares are
held in trust for three to five years
-
 
HMRC tax advantaged plan in the UK.
-
 
Participants may purchase
 
up to £1,800
 
of Shares
each tax year (“Partnership
 
Shares”).
-
 
Barclays matches the first £600
 
of Partnership
Shares on a one for
 
one basis for each tax year
(“Matching Shares”).
-
 
Dividends received are awarded
 
as Dividend Shares.
-
 
Partnership Shares may be withdrawn
 
at any time
(though
 
if removed prior
 
to three years from award,
the corresponding
 
Matching Shares are forfeited).
-
 
Depending on
 
reason for and timing of leaving,
Matching Shares may be forfeited.
-
 
On change of control, participants are able
 
to
instruct the Sharepurchase
 
trustee how to act or
vote on their behalf in relation to their Shares.
Global
Sharepurchase
Employees in
certain non-UK
jurisdictions
Yes
Shares purchased from
 
net salary
deductions and
Dividend/Matching Shares are
held in trust for three to five years
-
 
Global Sharepurchase
 
is an
 
extension of the
Sharepurchase
 
plan (above).
-
 
Operates in substantially the same way as
Sharepurchase
 
but without the tax
 
advantages.
 
 
 
 
Additional information
 
 
 
 
 
321
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Related undertakings
The Barclays Group’s
 
corporate
 
structure consists
of a number
 
of related undertakings, comprising
subsidiaries, joint ventures, associates and
significant other interests. A full list of these
undertakings, the country of incorporation
 
and the
ownership of each share class is set out below.
 
The
information is provided
 
as at
 
31 December
 
2019.
The entities are grouped
 
by the countries in which
they are incorporated.
 
The profits earned by the
activities of these entities are in some cases taxed
in countries other
 
than the country
 
of
incorporation.
 
Barclays’ 2019
 
Country Snapshot
provides details of where the Group
 
carries on its
business, where its profits are subject to tax
 
and
the taxes it pays in each country
 
it operates in.
Wholly owned subsidiaries
Unless otherwise stated the undertakings below
 
are
wholly owned and
 
consolidated by Barclays and
the share capital disclosed comprises ordinary
and/or common
 
shares, 100% of the nominal
value of which is held by Barclays
 
Group
subsidiaries.
Notes
A
Directly
 
held by Barclays
 
PLC
Shares, Class
 
E Ordinary
 
Shares, Class E
B
Partnership
 
Interest
Preference
 
Shares, Class
 
F Ordinary
 
Shares,
C
Membership
 
Interest
Class F Preference
 
Shares, Class
 
H 2012
D
Trust
 
Interest
Ordinary
 
Shares, Class
 
H 2012 Preference
E
Guarantor
Shares, Class
 
H Ordinary
 
Shares, Class H
F
Preference
 
Shares
Preference
 
Shares, Class
 
I Preference
 
Shares,
G
A Preference Shares
Class J Ordinary
 
Shares, Class
 
J Preference Shares
H
B Preference
 
Shares
W
First Class
 
Common Shares, Second Class
I
Ordinary/Common
 
Shares in
 
addition
 
to other
Common Shares
shares
X
PEF Carry Shares
J
A Ordinary
 
Shares
Y
EUR Tracker
 
1 Shares,
 
GBP Tracker 1 Shares,
K
B Ordinary
 
Shares
USD Tracker
 
1 Shares,
 
USD Tracker
 
2 Shares, USD
L
C Ordinary
 
Shares
Tracker
 
3 Shares
M
F Ordinary
 
Shares
Z
Not Consolidated
 
(see Note35 Structured
N
W Ordinary
 
Shares
entities)
O
First Preference
 
Shares, Second
 
Preference
AA
USD Linked Ordinary
 
Shares
Shares
BB
Redeemable Class
 
B Shares
P
Registered
 
Address
 
not in country of
CC
Capital Contribution
 
Shares
incorporation
DD
Nominal Shares
Q
Core Shares, Insurance
 
(Classified)
 
Shares
EE
Class A Redeemable
 
Preference
 
Shares
R
B, C, D,
 
E (94.36%), F (94.36%), G (94.36%), H
FF
Class B
 
Redeemable Preference
 
Shares
(94.36%), I (94.36%),
 
J (95.23%) and
 
K Class
GG
A Shares – Tranche
 
I, Premium – Tranche
 
I, C
Shares
Shares – Tranche
 
II, Premium – Tranche
 
II
S
A Unit Shares,
 
B Unit Shares
HH
Class A Unit
 
Shares
T
Non-Redeemable Ordinary
 
Shares
U
C Preference
 
Shares, D
 
Preference
 
Shares
V
Class A Ordinary
 
Shares, Class
 
A Preference
Shares,
 
Class B
 
Ordinary
 
Shares, Class C
Ordinary
 
Shares, Class
 
C Preference
 
Shares,
Class D
 
Ordinary
 
Shares, Class D
 
Preference
Wholly owned subsidiaries
Note
Wholly owned subsidiaries
Note
Wholly owned subsidiaries
Note
United Kingdom
Barclays
 
SAMS Limited
Kirsche
 
Investments
 
Limited
- 1 Churchill Place, London,
 
E14 5HP
Barclays
 
Security Trustee
 
Limited
A
Long Island
 
Assets
 
Limited
Aequor Investments
 
Limited
Barclays
 
Services (Japan)
 
Limited
Maloney Investments
 
Limited
Ardencroft
 
Investments
 
Limited
Barclays
 
Shea Limited
Menlo Investments
 
Limited
B D & B
 
Investments
 
Limited
Barclays
 
Singapore Global Shareplans
Mercantile
 
Credit
 
Company Limited
B.P.B.
 
(Holdings)
 
Limited
Nominee Limited
Mercantile
 
Leasing Company
 
(No.132)
 
Limited
Barafor Limited
Barclays
 
Term Funding
 
Limited Liability
B
MK Opportunities
 
LP
B
Barclay
 
Leasing Limited
Partnership
Murray House
 
Investment
 
Management Limited
Barclays
 
(Barley) Limited
J, K
Barclays
 
UK Investments
 
Limited
Naxos Investments
 
Limited
Barclays
 
Aldersgate Investments
 
Limited
Barclays
 
Unquoted Investments
 
Limited
North Colonnade Investments
 
Limited
Barclays
 
Asset Management
 
Limited
Barclays
 
Unquoted Property Investments
Northwharf Investments
 
Limited
I, X
Barclays
 
Bank PLC
A, F, I
Limited
Northwharf Nominees
 
Limited
Barclays
 
Bank UK PLC
A
Barclays
 
Wealth Nominees Limited
PIA England No.2 Limited
 
Partnership
B
Barclays
 
Capital Asia
 
Holdings
 
Limited
Barclayshare
 
Nominees Limited
Real Estate
 
Participation
 
Management Limited
Barclays
 
Capital Finance
 
Limited
Barcosec Limited
Real Estate
 
Participation
 
Services Limited
Barclays
 
Capital Japan
 
Securities
 
Holdings
Barsec Nominees
 
Limited
Relative
 
Value Investments
 
UK Limited
 
Liability
B
Limited
BB Client
 
Nominees Limited
Partnership
Barclays
 
Capital Nominees
 
(No.2) Limited
BMBF (No.24) Limited
Relative
 
Value Trading
 
Limited
Barclays
 
Capital Nominees
 
(No.3) Limited
BMI (No.9) Limited
Roder Investments
 
No. 1 Limited
I, Y
Barclays
 
Capital Nominees
 
Limited
BNRI ENG 2013
 
Limited Partnership
B
Roder Investments
 
No. 2 Limited
I, Y
Barclays
 
Capital Principal
 
Investments
 
Limited
BNRI ENG 2014
 
Limited Partnership
B
RVT CLO Investments
 
LLP
B
Barclays
 
Capital Securities
 
Client Nominee
BNRI ENG GP LLP
B
Solution Personal Finance
 
Limited
Limited
BNRI England 2010
 
Limited Partnership
B
Surety Trust
 
Limited
Barclays
 
Capital Securities
 
Limited
F, I
BNRI England 2011
 
Limited Partnership
B
Sustainable Impact
 
Capital Limited
Barclays
 
CCP Funding LLP
B
BNRI England 2012
 
Limited Partnership
B
Swan Lane Investments
 
Limited
Barclays
 
Converted
 
Investments
 
(No.2) Limited
Carnegie Holdings
 
Limited
I, J, K
US Real Estate
 
Holdings
 
No.1 Limited
Barclays
 
Direct
 
Investing
 
Nominees Limited
Chapelcrest
 
Investments
 
Limited
US Real Estate
 
Holdings
 
No.2 Limited
Barclays
 
Directors
 
Limited
Clydesdale
 
Financial
 
Services Limited
US Real Estate
 
Holdings
 
No.3 Limited
Barclays
 
Equity Holdings
 
Limited
Cobalt Investments
 
Limited
Wedd Jefferson
 
(Nominees) Limited
Barclays
 
Execution Services
 
Limited
A
Cornwall Homes Loans
 
Limited
Westferry
 
Investments
 
Limited
Barclays
 
Executive
 
Schemes Trustees
 
Limited
CP Flower Guaranteeco
 
(UK) Limited
E
Woolwich Homes
 
Limited
Barclays
 
Financial
 
Planning Nominee Company
CPIA England 2009
 
Limited Partnership
B
Woolwich Qualifying
 
Employee Share
Limited
CPIA England No.2 Limited
 
Partnership
B
Ownership
 
Trustee
 
Limited
Barclays
 
Funds
 
Investments
 
Limited
DMW Realty Limited
Zeban Nominees
 
Limited
Barclays
 
Global Shareplans
 
Nominee Limited
Dorset Home Loans
 
Limited
- Hill House,
 
1 Little New Street, London,
Barclays
 
Group Holdings
 
Limited
Durlacher
 
Nominees Limited
EC4A 3TR
Barclays
 
Group Operations
 
Limited
Eagle Financial
 
and Leasing
 
Services (UK)
Barclays
 
Nominees (Branches)
 
Limited (In
Barclays
 
Industrial
 
Development Limited
Limited
Liquidation)
Barclays
 
Industrial
 
Investments Limited
Equity Value
 
Investments
 
No.1 Limited
Barclays
 
Nominees (K.W.S.) Limited
 
(In
Barclays
 
Insurance
 
Services Company
 
Limited
Equity Value
 
Investments
 
No.2 Limited
Liquidation)
 
(Dissolved
 
on 22 January 2020)
Barclays
 
Investment
 
Management Limited
Finpart
 
Nominees Limited
Gerrard Management
 
Services Limited
 
(In
Barclays
 
Investment
 
Solutions Limited
FIRSTPLUS
 
Financial
 
Group Limited
Liquidation)
Barclays
 
Leasing (No.9) Limited
Foltus Investments
 
Limited
Lombard Street
 
Nominees Limited
 
(In
Barclays
 
Long Island Limited
Global Dynasty
 
Natural Resource
 
Private
B
Liquidation)
Barclays
 
Marlist Limited
Equity Limited
 
Partnership
Ruthenium
 
Investments
 
Limited (In
Barclays
 
Mercantile
 
Business
 
Finance Limited
Globe Nominees Limited
Liquidation)
Barclays
 
Nominees (George Yard)
 
Limited
Hawkins
 
Funding
 
Limited
Woolwich Plan Managers
 
Limited (In
Barclays
 
Pension Funds
 
Trustees
 
Limited
Heraldglen
 
Limited
 
I, O
Liquidation)
Barclays
 
Principal
 
Investments
 
Limited
A, J, K
J.V. Estates
 
Limited
Woolwich Surveying
 
Services Limited
 
(In
Barclays
 
Private Bank
Isle of Wight Home Loans Limited
lLquidation)
 
 
Additional information
 
 
 
 
 
322
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Related undertakings
continued
Wholly owned subsidiaries
Note
Wholly owned subsidiaries
Note
Wholly owned subsidiaries
Note
- 1 More London
 
Place, London
 
SE1 2AF
China
- 13 Castle Street, St. Helier,
 
JE4 5UT
CP Propco 1 Limited
 
(In Liquidation)
- Room 213,
 
Building
 
1, No. 1000
 
Chenhui
Barclays
 
Index Finance
 
Trust
S
CP Propco 2 Limited
 
(In Liquidation)
Road,
 
Zhangjiang
 
Hi-Tech Park, Shanghai
- Lime Grove House,
 
Green Street, St Helier,
CP Topco Limited
 
(In Liquidation)
J, K
Barclays
 
Technology Centre
 
(Shanghai)
JE1 2ST
- 5 The North Colonnade,
 
London,
 
E14 4BB
Company Limited
 
(In Liquidation)
Barbridge Limited
 
(In Liquidation)
I, DD
Leonis Investments
 
LLP
B
- 13 Library Place, St
 
Helier, JE4 8NE
- Aurora Building,
 
120 Bothwell Street,
Germany
Barclays
 
Nominees (Jersey) Limited
Glasgow, G2 7JS
- TaunusTurm,
 
Taunustor
 
1, 60310,
 
Frankfurt
Barclaytrust
 
Channel
 
Islands Limited
R.C. Grieg Nominees
 
Limited
Barclays
 
Capital Effekten
 
GmbH
- Estera Trust
 
(Jersey) Limited, 13-14
-
 
50 Lothian
 
Road, Festival Square, Edinburgh,
- Stuttgarter Straße 55
 
-57,
 
73033
 
Göppingen
Esplanade, St Helier,
 
JE1 1EE
EH3 9WJ
Holding Stuttgarter
 
Straße GmbH
MK Opportunities
 
GP Ltd
BNRI PIA Scot GP Limited
BNRI Scots GP,
 
LLP
B
Guernsey
Korea, Republic of
Pecan Aggregator LP
B
- P.O. Box
 
33, Dorey
 
Court, Admiral Park, St.
- A-1705
 
Yeouido
 
Park Center, 28-3
- Logic House,
 
Waterfront Business
 
Park,
 
Peter Port,
 
GY1 4AT
Yeouido
 
-dong,
 
Yeongdeungpo
 
-gu, Seoul
Fleet Road,
 
Fleet, GU51 3SB
Barclays
 
Insurance
 
Guernsey PCC Limited
Q
Barclays
 
Korea GP Limited
The Logic Group
 
Enterprises
 
Limited
- PO BOX 41,
 
Floor 2, Le Marchant House,
 
Le
The Logic Group
 
Holdings
 
Limited
J
 
Truchot,
 
St Peter Port,
 
GY1 3BE
Luxembourg
- 9, allée Scheffer, L-2520,
 
Luxembourg
Barclays
 
Nominees (Guernsey)
 
Limited
- 9, allée Scheffer, L-2520
Barclays
 
Claudas
 
Investments
 
Partnership
B, P
Barclays
 
Alzin Investments
 
S.à r.l.
Barclays
 
Pelleas Investments
 
Limited
B, P
Hong
 
Kong
Barclays
 
Bayard
 
Investments
 
S.à r.l.
J, K
Partnership
- 42nd
 
floor Citibank
 
Tower, Citibank Plaza,
Barclays
 
Bedivere
 
Investments
 
S.à r.l.
Blossom Finance
 
General Partnership
B, P
3 Garden Road
Barclays
 
Bordang Investments
 
S.à r.l.
Barclays
 
Bank (Hong Kong Nominees)
 
Limited
Barclays
 
BR Investments
 
S.à r.l.
Argentina
(in Liquidation)
Barclays
 
Cantal Investments
 
S.à r.l.
- 855 Leandro
 
N.Alem Avenue, 8th Floor,
Barclays
 
Capital Asia
 
Nominees Limited
 
(In
Barclays
 
Capital Luxembourg S.à r.l.
Buenos
 
Aires
Liquidation)
Barclays
 
Capital Trading
 
Luxembourg S.à r.l.
J, K
Compañía Sudamerica
 
S.A.
- Level 41,
 
Cheung Kong
 
Center, 2 Queen's
Barclays
 
Claudas
 
Investments
 
S.à r.l.
- Marval, O’Farrell &
 
Mairal, Av. Leandro
 
N.
Road, Central
Barclays
 
Equity Index
 
Investments
 
S.à r.l.
Alem 882,
 
Buenos
 
Aires, C1001AAQ
Barclays
 
Asia Limited
 
(In Liquidation)
Barclays
 
International
 
Luxembourg Dollar
Compañia Regional del
 
Sur S.A.
Barclays
 
Capital Asia
 
Limited
Holdings
 
S.à r.l.
Barclays
 
Lamorak Investments
 
S.à r.l.
T
Brazil
India
Barclays
 
Leto Investments
 
S.à r.l.
- Av. Brigadeiro
 
Faria Lima, No. 4.440,
 
12th
- 208 Ceejay House,
 
Shivsagar Estate, Dr A
Barclays
 
Luxembourg EUR Holdings
 
S.à r.l
T
Floor, Bairro Itaim Bibi,
 
Sao Paulo, CEP,
Beasant Road,
 
Worli, Mumbai, 400
 
018
Barclays
 
Luxembourg Finance S.à r.l.
04538
 
-132
Barclays
 
Securities
 
(India) Private
 
Limited
Barclays
 
Luxembourg GBP Holdings
 
S.à r.l.
T
Barclays
 
Brasil
 
Assessoria
 
Financeira Ltda.
Barclays
 
Wealth Trustees
 
(India) Private Limited
Barclays
 
Luxembourg Global Funding
 
S.à r.l.
BNC Brazil Consultoria
 
Empresarial
 
Ltda
- 5
th
 
to 12
th
 
Floor, Building
 
G2, Gera
Barclays
 
Luxembourg Holdings
 
S.à r.l.
I, AA
Commerzone SEZ, Survey
 
No.65, Kharadi,
Barclays
 
Luxembourg Holdings
 
SSC
B
Canada
Pune, 411014
Barclays
 
Pelleas Investments
 
S.à r.l.
- 333 Bay Street, Suite 4910,
 
Toronto
 
ON M5H
Barclays
 
Global Service Centre
 
Private Limited
- 68-70
 
Boulevard de
 
la Petrusse, L-2320
2R2
- Level 10,
 
Block B6, Nirlon
 
Knowledge Park,
Adler Toy
 
Holding Sarl
Barclays
 
Capital Canada
 
Inc.
 
Off Western Express Highway,
 
Goregaon
- Stikeman Elliot LLP, 199
 
Bay Street, 5300
(East), Mumbai, 40063
Mauritius
Commerce Court
 
West, Toronto
 
ON M5L 1B9
Barclays
 
Investments
 
& Loans (India)
 
Private
F, I
- C/O Rogers
 
Capital Corporate Services
Barclays
 
Corporation Limited
Limited
Limited, 3
rd
 
Floor, Rogers
 
House,
 
No.5
- 5 The North Colonnade
 
London,
 
E14 4BB
Ireland
President
 
John Kennedy
 
Street, Port Louis
CPIA Canada Holdings
B, P
- One Molesworth
 
Street, Dublin
 
2, D02RF29
Barclays
 
Capital Mauritius
 
Limited
 
Barclaycard
 
International
 
Payments
 
Limited
Barclays
 
Capital Securities
 
Mauritius Limited
Cayman Islands
Barclays
 
Bank Ireland
 
Public Limited Company
- Fifth Floor, Ebene
 
Esplanade, 24
 
Cybercity,
- Maples Corporate Services
 
Limited, PO Box
Barclays
 
Europe Client
 
Nominees Designated
Ebene
 
309, Ugland
 
House,
 
George Town, Grand
Activity Company
Barclays
 
Mauritius
 
Overseas
 
Holdings Limited
Cayman, KY1
 
-1104
Barclays
 
Europe Firm Nominees
 
Designated
Alymere Investments
 
Limited
G, H, I
Activity Company
Mexico
Analytical Trade
 
UK Limited
Barclays
 
Europe Nominees Designated
 
Activity
- Paseo de la Reforma 505,
 
41
 
Floor, Torre
Barclays
 
Capital (Cayman)
 
Limited
Company
Mayor, Col. Cuauhtemoc,
 
CP 06500
Barclays
 
Securities
 
Financing
 
Limited
F, I
- 25-28 North
 
Wall Quay, Dublin 1,
 
D01H104
Barclays
 
Bank Mexico, S.A.
K, M
Braven
 
Investments
 
No.1 Limited
Erimon Home
 
Loans Ireland
 
Limited
Barclays
 
Capital Casa
 
de Bolsa,
 
S.A. de C.V.
K, M
Calthorpe Investments
 
Limited
Grupo Financiero
 
Barclays
 
Mexico, S.A. de C.V.
K, M
Capton Investments
 
Limited
Isle of Man
Servicios Barclays,
 
S.A. de C.V.
Claudas
 
Investments
 
Limited
I,EE,FF
- P O Box 9,
 
Victoria Street, Douglas,
 
IM99 1AJ
Claudas
 
Investments
 
Two Limited
Barclays
 
Nominees (Manx) Limited
Monaco
CPIA Investments
 
No.1 Limited
V
Barclays
 
Private Clients
 
International
 
Limited
J, K
- 31 Avenue de la Costa,
 
Monte Carlo BP
 
339
CPIA Investments
 
No.2 Limited
F, I
Barclays
 
Private Asset
 
Management (Monaco)
Gallen Investments
 
Limited
Japan
S.A.M
Hurley
 
Investments
 
No.1 Limited
- 10-1,
 
Roppongi
 
6-chome, Minato
 
-ku,
JV Assets
 
Limited
L
Tokyo
Netherlands
Mintaka Investments
 
No. 4 Limited
Barclays
 
Funds
 
and Advisory Japan
 
Limited
- Prins Bernhardplein
 
200, 1097
 
JB
OGP Leasing Limited
Barclays
 
Securities
 
Japan Limited
Amsterdam
Palomino Limited
Z
Barclays
 
Wealth Services
 
Limited
Chewdef
 
BidCo BV.
 
(In Liquidation)
Pelleas Investments
 
Limited
Pippin
 
Island
 
Investments
 
Limited
Jersey
Philippines
Razzoli Investments
 
Limited
 
F, I
- 2
nd
 
Floor, Gaspé House,
 
66-72
 
Esplanade,
- 21/F,
 
Philamlife Tower, 8767
 
Paseo de
RVH Limited
 
F, I
St. Helier, JE1 1GH
Roxas, Makati City, 1226
Wessex Investments
 
Limited
CP Newco 1 Limited (In
 
Liquidation)
Meridian
 
(SPV-AMC) Corporation
- Walkers Corporate Limited,
 
Cayman
CP Newco2 Limited
 
(In Liquidation)
J, K
Corporate Centre, 27
 
Hospital
 
Road, George
CP Newco3 Limited
 
(In Liquidation)
Saudi Arabia
Town, KY1
 
-
 
9008
Barclays
 
Services Jersey
 
Limited
- 3
rd
 
Floor Al Dahna Center, 114
 
Al-Ahsa
Long Island
 
Holding B
 
Limited
- 39 - 41
 
Broad Street, St Helier, JE2 3RR
Street, PO Box 1454,
 
Riyadh 11431
Barclays
 
Wealth Management
 
Jersey Limited
Barclays
 
Saudi Arabia (In Liquidation)
BIFML PTC
 
Limited
 
 
Additional information
 
 
 
 
 
323
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Related undertakings
 
continued
 
Wholly owned subsidiaries
Note
Wholly owned subsidiaries
Note
Other Related Undertakings
%
Note
Singapore
Analytical Trade
 
Holdings
 
LLC
Cayman Islands
- 10 Marina Boulevard,
 
#24-01
 
Marina Bay
Analytical Trade
 
Investments
 
LLC
BB
-PO Box 309GT,
 
Ugland House,
 
Financial Centre,
 
Tower 2, 018983
- 100
 
South West Street, Wilmington
 
DE 19801
South Church
 
Street, Grand
Barclays
 
Capital Futures
 
(Singapore) Private
Barclays
 
Dryrock Funding
 
LLC
C
Cayman,
 
KY1-1104
Limited
Wilmington Riverfront
 
Receivables LLC
J, K
Cupric
 
Canyon Capital
 
LP
41.09
HH, Z
Barclays
 
Capital Holdings
 
(Singapore) Private
- 15 East North
 
Street, Dover DE 19801
Cupric
 
Canyon Capital
 
GP Limited
50.00
Z
Limited
Barclays
 
Services LLC
C
Southern Peaks
 
Mining LP
55.69
HH, Z
Barclays
 
Merchant
 
Bank (Singapore) Ltd.
- CT Corporation
 
System, 225
 
Hillsborough
SPM GP Limited
90.10
Z
Street, Raleigh,
 
NC 27603
Third
 
Energy Holdings
 
Limited
78.94
 
F, J, K,
 
Z
Spain
Barclays
 
US GPF Inc.
Germany
- Calle Jose, Abascal
 
51, 28003,
 
Madrid
- 500 Forest
 
Point
 
Circle, Charlotte, North
- Schopenhauerstraße 10,
Barclays
 
Tenedora
 
De Inmuebles
 
SL.
Carolina 28273
D-90409,
 
Nurnberg
BVP Galvani Global,
 
S.A.U.
Equifirst
 
Corporation (In Liquidation)
Eschenbach
 
Holding GmbH
21.70
Z
- Aon Insurance Managers, Paul
 
Street
Eschenbach
 
Optik GmbH
21.70
Z
Switzerland
Suite 500,
 
Burlington,
 
VT05401
- Chemin de Grange
 
Canal 18-20,
 
PO Box
 
Barclays
 
Insurance
 
U.S. Inc.
Korea, Republic of
3941,
 
1211,
 
Geneva
- 18
th
 
Floor, Daishin
 
Finance Centre,
Barclays
 
Bank (Suisse)
 
SA
Zimbabwe
 
343, Samil-daero,
 
Jung-go,
 
Seoul
Barclays
 
Switzerland Services
 
SA
- 2 Premium Close,
 
Mount
 
Pleasant Business
Woori BC Pegasus
 
Securitization
70.00
W
BPB Holdings
 
SA
Park, Mount
 
Pleasant, Harare
Specialty Co., Limited
Branchcall
 
Computers
 
(Pvt) Limited
Luxembourg
United States
Other Related Undertakings
Unless otherwise stated, the undertakings
below are consolidated and the share capital
disclosed comprises ordinary
 
and/or common
shares which are held by
 
subsidiaries of the
Group.
 
The Group’s
 
overall ownership
percentage is provided
 
for each undertaking.
- 9, allée Scheffer, L-2520
 
- Corporation
 
Trust Company,
 
Corporation
BNRI Limehouse
 
No.1 Sarl
96.30
R
Trust Center,
 
1209
 
Orange Street, Wilmington
Preferred
 
Funding
 
S.à r.l.
33.33
FF
DE 19801
Preferred
 
Investments
 
S.à r.l.
33.33
FF, I
Archstone
 
Equity Holdings
 
Inc
Malta
Barclays
 
Capital Derivatives
 
Funding LLC
C
- RS2 Buildings,
 
Fort Road,
 
Mosta
Barclays
 
Capital Energy
 
Inc.
MST 1859
 
Barclays
 
Capital Holdings
 
Inc.
G, H, I
RS2 Software PLC
18.25
Z
Barclays
 
Capital Real
 
Estate Finance
 
Inc.
Monaco
Barclays
 
Capital Real
 
Estate Holdings
 
Inc.
Other Related Undertakings
%
Note
- 31 Avenue de la Costa,
Barclays
 
Capital Real
 
Estate Inc.
United Kingdom
 
Monte Carlo
Barclays
 
Commercial Mortgage Securities
 
LLC
C
- 1 Churchill Place, London,
 
E14 5HP
Societe Civile
 
Immobiliere 31 Avenue
75.00
Barclays
 
Electronic Commerce Holdings
 
Inc.
Barclaycard
 
Funding
 
PLC
75.00
J
de la Costa
Barclays
 
Financial
 
LLC
C
PSA Credit
 
Company Limited
50.00
J, L
Netherlands
Barclays
 
Group US Inc.
G, I
(In Liquidation)
- Alexanderstraat 18,
 
2514
 
JM,
 
The
Barclays
 
Oversight
 
Management Inc.
Barclays
 
Covered Bond
 
Funding
 
LLP
50.00
B
Hague
Barclays
 
Receivables LLC
C
Barclays
 
Covered Bonds
 
Limited
50.00
B
Tulip
 
Oil Holding
 
BV
30.26
GG, Z
Barclays
 
Services Corporation
Liability Partnership
Portugal
Barclays
 
US CCP Funding LLC
C
- St Helen’s, 1 Undershaft,
 
London,
Av. Manuel Júlio Carvalho
 
e Costa,
Barclays
 
US Funding LLC
C
EC3P 3DQ
no. 15
 
-A, 2750-423
 
Cascais
Barclays
 
US Investments
 
Inc.
J, K
Igloo Regeneration
 
(General Partner)
25.00
L, Z
Projepolska,
 
S.A.
24.50
Z
Barclays
 
US LLC
 
G,H,I, U
Limited
BCAP LLC
C
- 3 - 5 London
 
Road, Rainham, Kent,
South Africa
Crescent
 
Real Estate
 
Member LLC
C
ME8 7RG
- 9 Elektron Road,
 
Techno Park,
Gracechurch
 
Services Corporation
Trade
 
Ideas Limited
20.00
Z
Stellenbosch
 
7600
Long Island
 
Holding A LLC
C
- 50 Lothian
 
Road, Festival Square,
Imalivest
 
Mineral Resources
 
LP
66.63
J, K, Z
LTDL Holdings
 
LLC
C
Edinburgh,
 
EH3 9WJ
Sweden
Marbury Holdings
 
LLC
Equistone Founder
 
Partner II L.P.
20.00
B, Z
- c/o ForeningsSparbanken
 
AB,
Protium Finance
 
I LLC
C
Equistone Founder
 
Partner III L.P.
35.00
B, Z
105
 
34 Stockholm
Protium Master Mortgage
 
LP
B
- Enigma, Wavendon Business
 
Park
EnterCard
 
Group AB
40.00
K, Z
Protium REO I LP
B
Milton Keynes,
 
MK17
 
8LX
United States of
 
America
Sutton Funding
 
LLC
C
Intelligent
 
Processing Solutions
 
Limited
19.50
Z
- Corporation
 
Trust Company,
TPProperty LLC
C
- 65A Basinghall
 
Street, London,
Corporation
 
Trust Center,
 
1209
US Secured
 
Investments
 
LLC
CC
EC2V 5DZ
Orange Street, Wilmington
 
DE
- 1201
 
North Market Street, P.O. Box
 
1347
Cyber Defence
 
Alliance Limited
25.00
E, Z
19801
Wilmington,
 
DE19801
- Gate House,
 
Turnpike Road,
 
High
DG Solar Lessee
 
II, LLC
75.00
C, Z
Barclays
 
Bank Delaware
F, I
Wycombe, Buckinghamshire
 
HP12
DG Solar Lessee,
 
LLC
75.00
C, Z
Procella Investments
 
No.2 LLC
C
3NR
VS BC Solar Lessee
 
I LLC
50.00
C, Z
Procella Investments
 
No.3 LLC
C
GW City Ventures
 
Limited
50.00
K, Z
- 1415
 
Louisiana Street, Suite
Verain
 
Investments
 
LLC
GN Tower
 
Limited
50.00
Z
1600,
 
Houston,
 
Texas, 77002
- 2711
 
Centerville Road, Suite 400,
 
- 2
nd
 
Floor, 110
 
Cannon Street,
Sabine Oil
 
& Gas Holdings, Inc.
23.25
Z
Wilmington,
 
DE 19808
London,
 
EC4N 6EU
Subsidiaries
 
by virtue of control
The related undertakings below are
Subsidiaries in accordance with s.1162
Companies Act 2006
 
as Barclays can exercise
dominant influence or control
 
over them.
Protium Master Grantor
 
Trust
D
Vectorcommand
 
Limited (In
30.39
J, K, Z
- 251 Little
 
Falls Drive, New Castle County,
Liquidation)
Wilmington
 
DE 19808
- 55 Baker Street, London,
 
W1U 7EU
Barclays
 
Capital Equities
 
Trading
 
GP
B
Formerly H Limited
 
(In Liquidation)
70.32
J, Z
Lagalla Investments
 
LLC
- 15 Canada Square, London,
 
E14 5GL
Relative
 
Value Holdings,
 
LLC
Woolwich Countryside
 
Limited
50.00
N, Z
Subsidiaries by
 
virtue of control
%
Note
Surrey Funding
 
Corporation
 
(In Liquidation)
United Kingdom
Sussex Purchasing
 
Corporation
- Haberfield Old Moor
 
Road,
- 1 Churchill Place, London,
 
E14
- 745
 
Seventh Avenue, New York
 
NY 10019
Wennington,
 
Lancaster, LA2 8PD
5HP
Alynore Investments
 
Limited Partnership
B
Full House
 
Holdings
 
Limited
67.43
 
J, Z
Oak Pension Asset
 
Management
00.00
Z
Barclays
 
Payment Solutions
 
Inc.
- 6th Floor
 
60 Gracechurch
Limited
Curve Investments
 
GP
B
Street, London,
 
EC3V 0HR
Water Street Investments
 
Limited
00.00
Z
Preferred
 
Liquidity,
 
LLC
J
BMC (UK) Limited
40.18
 
F,
 
J
- CT Corporation
 
System, One Corporate
- 13-15 York
 
Buildings,
 
London,
Cayman Islands
Center, Floor
 
11,
 
Hartford
 
CT 06103
 
-3220
WC2N 6JU
- PO Box 309GT,
 
Ugland House,
Barclays
 
Capital Inc.
BGF Group PLC
24.54
 
Z
South Church
 
Street, Grand
- c/o RL&F Service Corp,
 
One Rodney
- Aurora Building,
 
120 Bothwell
Cayman,
 
KY1-1104
Square, 10th
 
Floor, Tenth
 
and King
 
Streets,
Street, Glasgow, G2 7JS
Hornbeam Limited
00.00
Z
Wilmington,
 
DE 19801
Buchanan
 
Wharf (Glasgow)
78.00
E
Barclays
 
US Holdings Limited
10.00
J
Management Limited
 
 
Additional information
 
 
 
 
 
324
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Related undertakings
continued
 
Joint Ventures
The related undertakings below are
 
Joint
Ventures
 
in accordance with s. 18, Schedule 4,
The Large and Medium
 
-sized Companies and
Groups (Accounts
 
and Reports) Regulations
2008
 
and are proportionally
 
consolidated.
Joint Ventures
%
Note
United Kingdom
- All Saints Triangle,
 
Caledonian
Road, London,
 
N1 9UT
Vaultex
 
UK Limited
50.00
Z
Joint management
 
factors
The Joint Venture
 
Board
 
comprises two
Barclays representative directors, two
 
JV
partner directors
 
and three non
 
-JV partner
directors. The Board
 
are responsible for setting
the company strategy and budgets.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional information
 
Additional
 
financial disclosure
 
 
 
325
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Deposits
 
and short-term
 
borrowings
 
Deposits
Deposits include deposits from banks and customer
 
accounts.
 
2019
2018
2017
Average for the year ended 31 December
£m
£m
£m
Deposits at amortised cost
UK
329,810
313,829
270,968
Europe
39,191
32,707
32,857
Americas
31,531
33,441
44,543
Asia
8,809
6,761
6,021
Africa
7,589
7,273
6,746
Total deposits at amortised cost
416,930
394,011
361,135
 
2019
2018
2017
For the year ended 31 December
a
£m
£m
£m
Deposits at amortised cost
415,787
394,838
398,701
In offices in the United Kingdom:
Current and demand
 
accounts
- interest free
98,207
94,074
91,951
- interest bearing
34,362
31,309
35,442
Savings accounts
128,290
123,789
121,600
Other time deposits - retail
14,585
12,677
12,467
Other time deposits - wholesale
64,774
64,675
60,044
Total repayable in offices in the United Kingdom
340,218
326,524
321,504
In offices outside the United Kingdom:
Current and demand
 
accounts
- interest free
10,613
11,091
8,950
- interest bearing
12,932
12,240
9,606
Savings accounts
14,109
13,801
12,738
Other time deposits
37,915
31,182
45,903
Total repayable in offices outside the United Kingdom
75,569
68,314
77,197
 
Deposits at amortised cost in offices in the United Kingdom
 
received from
 
non-residents amounted to £32,685m
 
(2018: £34,278
 
m)
b
.
 
Notes
a
 
The UK/Non-UK Deposit
 
analysis
 
has been updated
 
for comparative periods
 
reflecting a geographical analysis
 
based on location of office
 
which is consistent with
 
Group
disclosures.
 
UK balances received
 
from non-residents
 
have been updated accordingly.
 
b
 
The changes
 
were £25bn in £2018
 
and £23bn
 
in 2017
 
moving from
 
UK to Non-UK. UK non
 
-resident
 
balances were reduced
 
by £25bn in 2018 and £7bn in 2017
 
as a result.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional information
 
Additional
 
financial disclosure
 
 
 
326
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Short-term borrowings
Short-term borrowings
 
include deposits from banks, commercial paper,
 
negotiable certificates
 
of deposit and repurchase
 
agreements.
 
Deposits from banks
Deposits from banks are taken
 
from a wide range of counterparties
 
and generally have maturities of less than one year.
 
2019
2018
2017
£m
£m
£m
Year
 
-end balance
15,402
14,166
37,723
Average
 
balance
a
22,162
19,736
49,938
Maximum balance
a
27,009
26,426
56,348
Average
 
interest rate during year
1.5%
2.0%
0.8%
Year
 
-end interest rate
2.2%
2.7%
0.8%
 
Notes
a
 
Calculated
 
based on month
 
-end balances.
 
Commercial paper
Commercial paper
 
is issued by the Group,
 
mainly in the United States,
 
generally in denominations of not less than $100,000,
 
with maturities
 
of up
to 270 days.
 
 
2019
2018
2017
£m
£m
£m
Year
 
-end balance
14,269
14,479
7,981
Average
 
balance
a
18,289
12,192
8,375
Maximum balance
a
21,086
15,192
9,056
Average
 
interest rate during year
1.2%
1.1%
1.2%
Year
 
-end interest rate
1.5%
0.9%
1.3%
 
Note
a
 
Calculated
 
based on month
 
-end balances.
 
Negotiable certificates of deposit
Negotiable certificates of deposits are issued mainly in the United Kingdom
 
and United States, generally in denominations of not less than
$100,000.
 
 
2019
2018
2017
£m
£m
£m
Year
 
-end balance
8,056
10,861
21,874
Average
 
balance
a
11,153
18,485
24,984
Maximum balance
a
13,769
24,098
30,529
Average
 
interest rate during year
2.8%
1.2%
0.7%
Year
 
-end interest rate
3.9%
2.0%
0.8%
 
Note
a
 
Calculated
 
based on month
 
-end balances.
 
Repurchase agreements
Repurchase
 
agreements are entered into with both customers and banks and generally
 
have maturities of not more than three months.
 
2019
2018
2017
£m
£m
£m
Year
 
-end balance
14,517
18,578
40,338
Average
 
balance
a
17,036
19,962
37,446
Maximum balance
a
22,292
23,341
40,338
Average
 
interest rate during year
0.9%
0.9%
1.5%
Year
 
-end interest rate
1.4%
1.0%
1.4%
 
Note
a
 
Calculated
 
based on month
 
-end balances.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional information
 
Additional
 
financial disclosure
 
 
 
327
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Commitments
 
and contractual
 
obligations
Commercial commitments include guarantees, contingent liabilities and standby facilities.
 
 
Commercial commitments
Amount of
 
commitment expiration
 
per period
Less than one
year
 
Between one to
three years
Between three to
five years
 
After five years
Total amounts
committed
£m
£m
£m
£m
£m
As at 31 December 2019
Guarantees and letters of credit pledged
 
as collateral security
 
 
17,493
 
107
 
6
-
 
 
17,606
Performance
 
guarantees, acceptances and endorsements
 
6,810
 
78
 
22
 
11
 
6,921
Documentary credits and other
 
short-term trade related transactions
 
1,291
-
 
-
 
-
 
 
1,291
Standby facilities, credit lines and other commitments
 
332,160
 
367
 
273
 
364
 
333,164
As at 31 December 2018
Guarantees and letters of credit pledged
 
as collateral security
 
 
13,962
 
729
 
637
 
477
 
15,805
Performance
 
guarantees, acceptances and endorsements
 
4,351
 
122
 
4
 
21
 
4,498
Documentary credits and other
 
short-term trade related transactions
 
1,727
 
14
-
 
-
 
 
1,741
Standby facilities, credit lines and other commitments
 
321,366
 
568
 
424
 
124
 
322,482
 
Contractual obligations include debt securities and purchase
 
obligations.
 
Contractual obligations
 
Payments due
 
by period
Less than one
year
Between one to
 
three years
Between three to
five years
After five years
 
Total
£m
£m
£m
£m
£m
As at 31 December 2019
Long-term debt
a
27,979
22,152
20,418
36,272
106,821
Purchase obligations
651
951
463
128
2,193
Total
28,630
23,103
20,881
36,400
109,014
As at 31 December 2018
Long-term debt
a
34,155
19,996
16,919
40,223
111,293
Operating lease obligations
b
302
496
290
1,257
2,345
Purchase obligations
627
755
404
153
1,939
Total
35,084
21,247
17,613
41,633
115,577
 
Notes
a
 
Long-term debt
 
has been prepared
 
to reflect
 
cash flows on an undiscounted
 
basis,
 
which includes
 
interest payments.
b
 
Following the
 
adoption of accounting
 
standard
 
IFRS 16 on 1 January 2019, operating lease obligations
 
are recorded
 
on balance sheet.
 
Net cash flows from derivatives used to
 
hedge long
 
-term debt amount to £2.4
 
bn (2018:
 
£1.7bn).
 
 
Further information
 
on the contractual maturity of the Group’s assets and liabilities is given in the Liquidity risk section within the Risk review
section.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional information
 
Additional
 
financial disclosure
 
 
 
328
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Securities
 
Analysis of securities
2019
2018
2017
As at 31 December
£m
£m
£m
Investment securities
a
US government,
 
other public bodies and agencies
16,952
14,323
13,284
United Kingdom
 
government
17,617
9,400
15,096
Other government
18,748
16,067
17,077
Mortgage and asset backed securities
2,730
2,119
546
Corporate
 
and other issuers
25,817
14,856
11,126
Debt securities
81,864
56,765
57,129
Equity securities
 
1,023
1,122
1,786
Investment securities
82,887
57,887
58,915
Other securities
b
US government,
 
other public bodies and agencies
19,782
23,890
16,168
United Kingdom
 
government
10,393
10,155
4,379
Other government
12,045
9,825
11,845
Mortgage and asset backed securities
 
2,354
2,024
1,974
Corporate
 
and other issuers
13,415
15,911
16,850
Debt securities
57,989
61,805
51,216
Equity securities
 
63,495
45,584
64,008
Other securities
121,484
107,389
115,224
 
Notes
a
 
Investment
 
securities
 
for 2019
 
and 2018 includes
 
securities
 
reported
 
within loans and advances
 
at amortised cost and financial
 
assets at fair value through
 
other comprehensive
income.
 
Investment
 
securities
 
for 2017 includes securities
 
reported within financial
 
investments.
b
 
Other securities
 
includes securities
 
reported within trading portfolio and
 
financial assets
 
at fair value through the income
 
statement.
 
Investment debt securities include government
 
securities
 
held as part of the Group’s
 
treasury management portfolio
 
for asset and liability,
 
liquidity
and regulatory
 
purposes and are for
 
use on a continuing basis in
 
the activities of the Group. In
 
addition, the Group holds as investments listed and
unlisted corporate
 
securities.
 
Maturities and yield of investment debt securities
Maturing within
 
one year
Maturing after one
 
but
within five years
 
Maturing after five but
within ten years
 
Maturing after ten
 
years
Total
Amount
Yield
Amount
Yield
Amount
Yield
Amount
Yield
Amount
Yield
As at 31 December 2019
£m
%
£m
%
£m
%
£m
%
£m
%
US government,
 
other public
bodies and agencies
2,424
1.2%
7,901
1.2%
5,145
1.3%
1,482
2.3%
16,952
1.3%
United Kingdom
 
government
7,742
1.7%
3,444
1.6%
3,972
1.7%
2,459
1.3%
17,617
1.6%
Other government
6,301
0.3%
3,872
2.5%
6,608
1.5%
1,967
2.4%
18,748
1.4%
Other issuers
 
3,610
1.7%
14,571
2.0%
6,408
1.6%
3,958
1.5%
28,547
1.8%
Total book value
20,077
1.2%
29,788
1.8%
22,133
1.5%
9,866
1.8%
81,864
1.6%
 
The yield for each range
 
of maturities
 
is calculated by dividing the annualised interest income prevailing
 
at reporting date by the book value of
securities held at that date.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional information
 
Additional
 
financial disclosure
 
 
 
329
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Average balance
 
sheet
Average
 
balances are based upon monthly
 
averages.
 
Assets
2019
Average
balance
Interest
presented
within net
interest
income
Interest
presented
elsewhere
Total interest
Rate
£m
£m
£m
£m
%
Cash and balances at central banks
UK
70,371
465
(28)
437
0.6
Cash and balances at central banks
Non-UK
101,423
626
(153)
473
0.5
Cash and balances at central banks
Total
171,794
1,091
(181)
910
0.5
Loans and advances at amortised cost
UK
271,607
8,682
-
8,682
3.2
Loans and advances at amortised cost
Non-UK
71,976
3,768
-
3,768
5.2
Loans and advances at amortised cost
a
Total
343,583
12,450
-
12,450
3.6
Cash collateral
UK
59,446
394
(13)
381
0.6
Cash collateral
Non-UK
7,400
49
-
49
0.7
Cash collateral
Total
66,846
443
(13)
430
0.6
Financial investments
UK
-
-
-
-
-
Financial investments
Non-UK
-
-
-
-
-
Financial investments
Total
-
-
-
-
-
Reverse repurchase
 
agreements
UK
2,990
57
-
57
1.9
Reverse repurchase
 
agreements
Non-UK
2,041
11
-
11
0.5
Reverse repurchase agreements
Total
5,031
68
-
68
1.4
Interest earning assets at fair value through
 
other
comprehensive
 
income
UK
63,366
957
-
957
1.5
Interest earning assets at fair value through
 
other
comprehensive
 
income
Non-UK
2,961
75
-
75
2.5
Interest earning assets at fair value through other
comprehensive income
Total
66,327
1,032
-
1,032
1.6
Other interest income
b
372
-
372
-
Total interest earning assets not at fair value through
income statement
653,581
15,456
(194)
15,262
2.3
Less interest expense
(6,049)
194
(5,855)
-
Net interest
653,581
9,407
-
9,407
1.4
Financial assets at fair value through
 
income statement
UK
192,300
Financial assets at fair value through
 
income statement
Non-UK
68,031
Financial assets at fair value through income
 
statement
Total
260,331
Total interest earning assets
913,912
Impairments
(6,574)
Non-interest earning assets
356,756
Total
1,264,094
Percentage of total average interest earning assets in
offices outside the UK
28%
 
Notes
a
 
Loans and
 
advances
 
at amortised
 
cost include
 
all doubtful lending.
 
Interest
 
receivable on such lending has
 
been included to the extent
 
to which either cash payments
 
have been
received
 
or interest
 
has been accrued
 
in accordance with
 
the income recognition policy of the Barclays
 
Group.
b
 
Other interest
 
income principally
 
includes interest
 
income relating to hedging activity.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional information
 
Additional
 
financial disclosure
 
 
 
330
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Assets
2018
Average
balance
Interest
presented
within
 
net
interest
 
income
Interest
presented
elsewhere
Total interest
Rate
£m
£m
£m
£m
%
Cash and balances at central banks
UK
70,719
297
-
297
0.4
Cash and balances at central banks
Non-UK
106,370
826
-
826
0.8
Cash and balances at central banks
Total
177,089
1,123
-
1,123
0.6
Loans and advances at amortised cost
UK
262,796
8,744
-
8,744
3.3
Loans and advances at amortised cost
Non-UK
66,619
3,329
-
3,329
5.0
Loans and advances at amortised cost
a
Total
329,415
12,073
-
12,073
3.7
Cash collateral
UK
52,218
324
-
324
0.6
Cash collateral
Non-UK
5,343
47
-
47
0.9
Cash collateral
b
Total
57,561
371
-
-
371
0.6
Financial investments
UK
-
-
-
-
-
Financial investments
Non-UK
-
-
-
-
-
Financial investments
Total
-
-
-
-
-
-
Reverse repurchase
 
agreements
UK
857
2
-
2
0.2
Reverse repurchase
 
agreements
Non-UK
855
10
-
10
1.2
Reverse repurchase agreements
Total
1,712
12
-
12
0.7
Interest earning assets at fair value through
 
other
comprehensive
 
income
UK
53,499
956
-
956
1.8
Interest earning assets at fair value through
 
other
comprehensive
 
income
Non-UK
2,850
73
-
73
2.6
Interest earning assets at fair value through other
comprehensive income
Total
56,349
1,029
-
1,029
1.8
Other interest income
c
-
(67)
-
(67)
-
Total interest earning assets not at fair value through
income statement
622,126
14,541
-
14,541
2.3
Less interest expense
-
(5,479)
-
(5,479)
-
Net interest
622,126
9,062
-
9,062
1.5
Financial assets at fair value through
 
income statement
UK
171,318
Financial assets at fair value through
 
income statement
Non-UK
73,153
Financial assets at fair value through income
 
statement
Total
244,471
Total interest earning assets
866,597
Impairments
(6,875)
Non-interest earning assets
349,877
Total
1,209,599
Percentage of total average interest earning assets in
offices outside the UK
29%
 
Notes
a
 
Loans and
 
advances
 
at amortised
 
cost include
 
all doubtful lending.
 
Interest
 
receivable on such lending has
 
been included to the extent
 
to which either cash payments
 
have been
received
 
or interest
 
has been accrued
 
in accordance with
 
the income recognition policy of the Barclays
 
Group.
b
 
Prior year balances have
 
been restated
 
to provide additional
 
detail on cash collateral
 
and repurchase agreements.
 
c
 
Other interest
 
income principally
 
includes interest
 
income relating to hedging activity.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional information
 
Additional
 
financial disclosure
 
 
 
331
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Assets
2017
Average
balance
Interest
presented
within
 
net
interest
 
income
Interest
presented
elsewhere
Total interest
Rate
£m
£m
£m
£m
%
Cash and balances at central banks
UK
55,453
147
-
147
0.3
Cash and balances at central banks
Non-UK
96,262
436
-
436
0.5
Cash and balances at central banks
Total
151,715
583
-
583
0.4
Loans and advances at amortised cost
UK
242,212
8,761
75
8,836
3.6
Loans and advances at amortised cost
Non-UK
53,856
3,308
232
3,540
6.6
Loans and advances at amortised cost
a
Total
296,068
12,069
307
12,376
4.2
Cash collateral
UK
45,898
220
-
220
0.5
Cash collateral
Non-UK
5,538
49
-
49
0.9
Cash collateral
b
Total
51,436
269
-
269
0.5
Financial investments
UK
54,218
651
-
651
1.2
Financial investments
Non-UK
4,316
103
-
103
2.4
Financial investments
Total
58,534
754
-
754
1.3
Reverse repurchase
 
agreements
UK
2,832
51
20
71
2.5
Reverse repurchase
 
agreements
Non-UK
14,507
30
374
404
2.8
Reverse repurchase agreements
Total
17,339
81
394
475
2.7
Other interest income
c
-
(125)
-
(125)
-
Total interest earning assets not at fair value through
income statement
575,092
13,631
701
14,332
2.5
Less interest expense
-
(3,786)
(1,245)
(5,031)
-
Net interest
575,092
9,845
(544)
9,301
1.6
Financial assets at fair value through
 
income statement
UK
81,639
Financial assets at fair value through
 
income statement
Non-UK
87,253
Financial assets at fair value through income
 
statement
Total
168,892
Total interest earning assets
743,984
Impairments
(4,700)
Non-interest earning assets
475,757
Total
1,215,041
Percentage of total average interest earning assets in
offices outside the UK
35%
 
Notes
a
 
Loans and
 
advances
 
at amortised
 
cost include
 
all doubtful lending. Interest
 
receivable on such lending has
 
been included to the extent
 
to which either cash payments
 
have been
received
 
or interest
 
has been accrued
 
in accordance with
 
the income recognition policy of the Barclays
 
Group.
b
 
Prior year balances have
 
been restated
 
to provide additional
 
detail on cash collateral
 
and repurchase agreements.
 
c
 
Other interest
 
income principally
 
includes interest
 
income relating to hedging activity.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional information
 
Additional
 
financial disclosure
 
 
 
332
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Liabilities
2019
Average
balance
Interest
presented
within net
interest
income
Interest
presented
elsewhere
Total interest
Rate
£m
£m
£m
£m
%
Deposits at amortised cost
UK
244,387
1,306
(28)
1,278
0.5
Deposits at amortised cost
Non-UK
67,556
1,143
(153)
990
1.5
Deposits at amortised cost
Total
311,943
2,449
(181)
2,268
0.7
Cash collateral
UK
50,638
214
(13)
201
0.4
Cash collateral
Non-UK
8,332
82
-
82
1.0
Cash collateral
Total
58,970
296
(13)
283
0.5
Debt securities in issue
UK
61,053
1,134
-
1,134
1.9
Debt securities in issue
Non-UK
25,730
772
-
772
3.0
Debt securities in issue
Total
86,783
1,906
-
1,906
2.2
Subordinated
 
liabilities
UK
19,499
1,046
-
1,046
5.4
Subordinated
 
liabilities
Non-UK
374
22
-
22
5.9
Subordinated liabilities
Total
19,873
1,068
-
1,068
5.4
Repurchase agreements
UK
14,655
127
-
127
0.9
Repurchase agreements
Non-UK
2,381
20
-
20
0.8
Repurchase agreements
Total
17,036
147
-
147
0.9
Other interest expense
a
-
183
-
183
-
Total interest bearing liabilities
 
not at
 
fair value through P&L
494,605
6,049
(194)
5,855
1.2
Interest bearing liabilities at fair value through
 
P&L
UK
232,242
Interest bearing liabilities at fair value through
 
P&L
Non-UK
62,304
Interest bearing liabilities
 
at fair
 
value through P&L
Total
294,546
Total interest bearing liabilities
789,151
Interest free customer deposits
UK
94,733
Interest free customer deposits
Non-UK
10,375
Interest free customer deposits
Total
105,108
Other non-interest bearing liabilities
307,952
Shareholders' equity
61,883
Total
1,264,094
Percentage of total average interest bearing liabilities
 
in offices
outside the UK
21%
 
Note
a
 
Other interest
 
expense
 
principally includes interest expense
 
relating to hedging activity.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional information
 
Additional
 
financial disclosure
 
 
 
333
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Liabilities
2018
Average
balance
Interest
presented
within
 
net
interest
 
income
Interest
presented
elsewhere
Total interest
Rate
£m
£m
£m
£m
%
Deposits at amortised cost
UK
235,002
1,301
-
1,301
0.6
Deposits at amortised cost
Non-UK
57,576
949
-
949
1.6
Deposits at amortised cost
Total
292,578
2,250
-
2,250
0.8
Cash collateral
UK
44,782
176
-
176
0.4
Cash collateral
Non-UK
5,498
70
-
70
1.3
Cash collateral
a
Total
50,280
246
-
246
0.5
Debt securities in issue
UK
48,973
1,123
-
1,123
2.3
Debt securities in issue
Non-UK
32,177
554
-
554
1.7
Debt securities in issue
Total
81,150
1,677
-
1,677
2.1
Subordinated
 
liabilities
UK
21,369
1,208
-
1,208
5.7
Subordinated
 
liabilities
Non-UK
145
15
-
15
10.5
Subordinated liabilities
Total
21,514
1,223
-
1,223
5.7
Repurchase agreements
UK
13,660
157
-
157
1.1
Repurchase agreements
Non-UK
6,302
35
-
35
0.4
Repurchase agreements
a
Total
19,962
192
-
192
0.9
Other interest expense
b
-
(109)
-
(109)
-
Total interest bearing liabilities
 
not at
 
fair value through P&L
465,484
5,479
-
5,479
1.2
Interest bearing liabilities at fair value through
 
P&L
UK
225,502
Interest bearing liabilities at fair value through
 
P&L
Non-UK
56,872
Interest bearing liabilities
 
at fair
 
value through P&L
Total
282,374
Total interest bearing liabilities
747,858
Interest free customer deposits
UK
91,935
Interest free customer deposits
Non-UK
9,496
Interest free customer deposits
Total
101,431
Other non-interest bearing liabilities
298,521
Shareholders' equity
61,789
Total
1,209,599
Percentage of total average interest bearing liabilities
 
in offices
outside the UK
21%
 
Note
a
 
Prior year balances
 
have been restated
 
to provide additional
 
detail on cash collateral and
 
repurchase agreements.
 
b
 
Other interest
 
expense principally includes
 
interest expense
 
relating to hedging activity.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional information
 
Additional
 
financial disclosure
 
 
 
334
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Liabilities
2017
Average
balance
Interest
presented
within
 
net
interest
 
income
Interest
presented
elsewhere
Total interest
Rate
£m
£m
£m
£m
%
Deposits at amortised cost
UK
251,905
834
21
855
0.3
Deposits at amortised cost
Non-UK
52,043
659
708
1,367
2.6
Deposits at amortised cost
Total
303,948
1,493
729
2,222
0.7
Cash collateral
UK
44,197
119
-
119
0.3
Cash collateral
Non-UK
6,411
72
-
72
1.1
Cash collateral
a
Total
50,608
191
-
191
0.4
Debt securities in issue
UK
43,632
831
-
831
1.9
Debt securities in issue
Non-UK
34,819
84
-
84
0.2
Debt securities in issue
Total
78,451
915
-
915
1.2
Subordinated
 
liabilities
UK
23,930
1,223
-
1,223
5.1
Subordinated
 
liabilities
Non-UK
52
-
-
-
-
Subordinated liabilities
Total
23,982
1,223
-
1,223
5.1
Repurchase agreements
UK
22,015
22
202
224
1.0
Repurchase agreements
Non-UK
15,431
24
314
338
2.2
Repurchase agreements
a
Total
37,446
46
516
562
1.5
Other interest expense
b
-
(82)
-
(82)
-
Total interest bearing liabilities
 
not at
 
fair value through
P&L
494,435
3,786
1,245
5,031
1.0
Interest bearing liabilities at fair value through
 
P&L
UK
99,332
Interest bearing liabilities at fair value through
 
P&L
Non-UK
81,565
Interest bearing liabilities
 
at fair
 
value through P&L
Total
180,897
Total interest bearing liabilities
675,332
Interest free customer deposits
UK
88,813
Interest free customer deposits
Non-UK
9,353
Interest free customer deposits
Total
98,166
Other non-interest bearing liabilities
376,658
Shareholders' equity
64,885
Total
1,215,041
Percentage of total average interest bearing liabilities
 
in
offices outside the UK
28%
 
Notes
a
 
Prior year balances
 
have been restated
 
to provide additional
 
detail on cash collateral and
 
repurchase agreements.
b
 
Other interest
 
expense principally includes
 
interest expense
 
relating to hedging activity.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional information
 
Additional
 
financial disclosure
 
 
 
335
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Changes in total interest – volume and rate analysis
The following tables allocate changes in interest between changes
 
in volume and changes in interest rates for
 
the last two years. Volume and
 
rate
variances have been calculated on
 
the movement in the average balances and the change in the interest
 
rates on average interest earning
 
assets
and average
 
interest bearing liabilities. Where variances have arisen from changes
 
in both volumes and interest rates, these have been allocated
proportionately
 
between the two.
 
Interest income
2019/2018
 
Change due
 
to
increase/(decrease) in:
2018/2017
 
Change due
 
to increase/(decrease)
in:
Total
change
Volume
Rate
Total
change
Volume
Rate
Other
a
£m
£m
£m
£m
£m
£m
£m
Cash and balances at central banks
UK
 
140
(1)
 
141
 
150
 
40
 
86
 
24
Cash and balances at central banks
Non-UK
(353)
(36)
(317)
 
390
 
46
 
312
 
32
Cash and balances at central banks
Total
(213)
(37)
(176)
 
540
 
86
 
398
 
56
Loans and advances at amortised cost
UK
(75)
 
293
(368)
(92)
 
751
(777)
(66)
Loans and advances at amortised cost
Non-UK
 
439
 
276
 
163
(211)
 
839
(849)
(201)
Loans and advances at amortised cost
Total
 
364
 
569
(205)
(303)
 
1,590
(1,626)
(267)
Financial investments
UK
-
 
-
 
-
 
(651)
-
 
-
 
(651)
Financial investments
Non-UK
-
 
-
 
-
 
(103)
-
 
-
 
(103)
Financial investments
Total
-
 
-
 
-
 
(754)
-
 
-
 
(754)
Cash collateral
UK
 
70
 
47
 
23
 
104
(8)
 
116
(4)
Cash collateral
Non-UK
 
2
 
16
(14)
(2)
 
12
(11)
(3)
Cash collateral
b
Total
 
72
 
63
 
9
 
102
 
4
 
105
(7)
Reverse repurchase
 
agreements
UK
 
55
 
14
 
41
(69)
(50)
(64)
 
45
Reverse repurchase
 
agreements
Non-UK
 
1
 
9
(8)
(394)
(380)
(234)
 
220
Reverse repurchase agreements
Total
 
56
 
23
 
33
(463)
(430)
(298)
 
265
Interest earning assets at fair value through
 
other
comprehensive
 
income
UK
 
1
 
161
(160)
 
956
(9)
 
314
 
651
Interest earning assets at fair value through
 
other
comprehensive
 
income
Non-UK
 
2
 
3
(1)
 
73
(35)
 
5
 
103
Interest earning assets at fair value through other
comprehensive income
Total
 
3
 
164
(161)
 
1,029
(44)
 
319
 
754
Other interest income
 
439
-
 
 
439
 
58
-
 
 
58
-
 
Total interest receivable
 
721
 
782
(61)
 
209
 
1,206
(1,044)
 
47
 
Notes
a
 
Included
 
in Other
 
is the movement
 
related to the adoption of IFRS 9 where financial
 
investment assets
 
were reclassified to assets
 
held at fair value through
 
other comprehensive
income, which
 
is neither
 
volume or rate driven.
b
 
Prior year balances have
 
been restated
 
to provide additional
 
detail on cash collateral
 
and repurchase agreements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional information
 
Additional
 
financial disclosure
 
 
 
336
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Interest expense
2019/2018
 
Change due to
increase/(decrease) in:
2018/2017
 
Change due
 
to
increase/(decrease)
 
in:
Total change
Volume
Rate
Total change
Volume
Rate
£m
£m
£m
£m
£m
£m
Deposits at amortised cost
UK
(23)
 
51
(74)
 
446
(60)
 
506
Deposits at amortised cost
Non-UK
 
41
 
153
(112)
(418)
 
133
(551)
Deposits at amortised cost
Total
 
18
 
204
(186)
 
28
 
73
(45)
Cash collateral
UK
 
25
 
23
 
2
 
57
 
2
 
55
Cash collateral
Non-UK
 
12
 
30
(18)
(2)
(11)
 
9
Cash collateral
a
Total
 
37
 
53
(16)
 
55
(9)
 
64
Debt securities in issue
UK
 
11
 
247
(236)
 
292
 
110
 
182
Debt securities in issue
Non-UK
 
218
(128)
 
346
 
470
(6)
 
476
Debt securities in issue
Total
 
229
 
119
 
110
 
762
 
104
 
658
Subordinated
 
liabilities
UK
(162)
(103)
(59)
(15)
(138)
 
123
Subordinated
 
liabilities
Non-UK
 
7
 
15
(8)
 
15
-
 
 
15
Subordinated liabilities
Total
(155)
(88)
(67)
-
 
(138)
 
138
Repurchase agreements
UK
(30)
 
10
(40)
(67)
(93)
 
26
Repurchase agreements
Non-UK
(15)
(28)
 
13
(303)
(134)
(169)
Repurchase agreements
a
Total
(45)
(18)
(27)
(370)
(227)
(143)
Other interest expense
 
292
-
 
 
292
(27)
-
 
(27)
Total interest payable
 
376
 
270
 
106
 
448
(197)
 
645
 
Note
a
 
Prior year balances
 
have been restated
 
to provide additional
 
detail on cash collateral and
 
repurchase agreements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional information
 
Additional
 
financial disclosure
 
 
 
337
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Credit
 
risk
 
additional disclosure
This section of the report contains supplementary
 
information that is
 
more detailed or contains longer
 
histories than the data presented in the Risk
review section.
 
 
Risk elements in loans and advances at amortised cost
There are three main higher
 
credit risk elements identified in loans and advances at amortised cost:
 
Loans assessed as Stage
 
3 credit impaired
Stage 3 credit impaired loans are loans
 
in default assessed for lifetime expected credit losses. Further
 
details on the approach to expected credit
loss provisioning
 
under IFRS 9, including the classification into stages of gross exposures and approach
 
to the measurement of lifetime
 
expected
credit losses, can be found in Note 1.
 
Loans greater than 90 days past due not considered
 
Stage 3 credit impaired
Under a US reporting
 
framework,
 
all accruing loans greater than 90 days past due are considered
 
to be at higher risk of
 
loss. The Group classifies all
loans and advances past due 90 days except mortgages
 
as Stage 3 credit impaired loans and therefore
 
these are already considered a higher credit
risk. However,
 
in addition to Stage 3 gross loans and advances past due greater than 90 days as at 31
 
December 2019,
 
there are a further £139m
 
of
Stage 2 mortgage
 
loans between 90 to 180
 
days past due.
 
Restructured loans not included
 
above
Restructured loans comprises loans not
 
included above
 
where, for economic or
 
legal reasons related to the
 
debtor’s financial difficulties, a
concession has been granted
 
to the debtor that would not otherwise be considered. For
 
information on restructured
 
loans refer to disclosures
on forbearance
 
on pages 136
 
to 138.
 
Restructured loan
 
s
 
not classified
 
as Stage 3 credit impaired and
 
not greater than 90 days past due are £129m
as at 31 December
 
2019
 
.
 
These risk elements in loans and advances may be analysed
 
between the United Kingdom
 
and Rest of the
 
World as follows:
 
Risk elements in loans and advances at amortised cost
2019
2018
2017
a
2016
a
2015
a
As at 31 December
£m
£m
£m
£m
£m
Gross stage 3 credit impaired loans
 
(2017
 
– 2015: Individually
impaired loans)
United Kingdom
4,552
5,150
2,648
2,688
2,747
Rest of the world
3,371
3,353
1,756
1,926
2,888
Total
7,923
8,503
4,404
4,614
5,635
Accruing gross
 
loans which are not stage 3 credit impaired
loans and are contractually overdue 90 days or more as to
principal
 
or interest (2017
 
– 2015: Accruing gross loans
 
which
are not individually
 
impaired loans and are contractually
overdue 90 days or more as to principal
 
or interest)
United Kingdom
139
167
752
810
848
Rest of the world
-
 
 
-
 
516
664
896
Total
139
167
1,268
1,474
1,744
Other gross restructured loans
 
(2017
 
– 2015: Impaired and
restructured loans)
United Kingdom
11
10
179
217
286
Rest of the world
118
115
143
186
152
Total
129
125
322
403
438
Total risk elements in loans and advances at amortised cost
United Kingdom
4,702
5,327
3,579
3,715
3,881
Rest of the world
3,489
3,468
2,415
2,776
3,936
Total
8,191
8,795
5,994
6,491
7,817
 
Note
a
 
The comparatives
 
for 2017,
 
2016 and
 
2015 have been presented
 
on an IAS 39 basis.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional information
 
Additional
 
financial disclosure
 
 
 
338
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Interest forgone on risk elements in loans and advances at amortised
 
cost
2019
2018
2017
£m
£m
£m
Interest income that would have been recognised under the original
 
contractual terms
United Kingdom
74
84
87
Rest of the World
184
180
151
Total
258
226
238
 
Potential problem loans
Potential problem
 
loans are those loans for which serious doubt exists as to the ability of the borrower
 
to continue to comply with repayment terms
in the near future.
 
Loans and advances at amortised cost by product
 
on page 114
 
includes gross exposure and associated impairment allowance for assets
 
classified
as Stage 2, but not past due i.e. assets satisfying the criteria for a Significant Increase in Credit
 
Risk, but which are still complying with repayment
terms.
 
 
Forbearance
 
measures consist of
 
concessions towards a debtor
 
that is experiencing or is about to experience difficulties in meeting their financial
commitments. Both performing
 
and non-performing forbearance assets
 
are classified as Stage 3 except where
 
it is established that the concession
granted has not resulted in diminished financial obligation and
 
that no other regulatory definition of default criteria has been triggered,
 
in which
case the asset is classified as Stage 2. The minimum probationary
 
period for
 
non-performing forbearance is 12 months and for performing
forbearance,
 
24 months. Hence, a minimum of 36 months is required
 
for non
 
-performing forbearance to move out of a forborne state. Further
details can be found
 
on pages 136
 
to 138
 
.
 
In order
 
to assess
 
asset credit quality,
 
12
 
-month PDs are used to map assets into strong, satisfactory, higher
 
risk or credit impaired. A credit risk
profile by internal PD grade
 
for gross loans and advances at amortised cost and allowance for ECL is shown
 
in the credit risk section on page 131
 
,
analysing each of these categories by stage.
 
Wholesale accounts that are deemed to contain heightened
 
levels of risk are recorded
 
on graded
 
watchlists
 
comprising four
 
categories, graded in
line with the perceived
 
severity of the risk attached to the lending, and its probability of default. Where a counterparty’s
 
financial health
 
gives
grounds
 
for concern, it is immediately
 
placed into the appropriate
 
category. Once an account
 
has been placed on a watchlist, the
 
exposure is
monitored
 
and,
 
where appropriate, exposure
 
reductions are effected. Further information on
 
monitoring weaknesses in portfolios can be found in
the Barclays PLC Pillar
 
3 Report 2019
 
(unaudited).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional information
 
Additional
 
financial disclosure
 
 
 
339
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Impairment
The comparatives for 2017,
 
2016
 
and 2015
 
are presented on an IAS 39 basis.
 
Movements in allowance for impairment by geography
2019
2018
2017
2016
2015
£m
£m
£m
£m
£m
Allowance for impairment as at 1 January
6,770
7,102
4,620
4,921
5,455
Exchange and other adjustments
(834)
(226)
(293)
(816)
(766)
Amounts written off:
United Kingdom
(732)
(949)
(1,111)
(1,272)
(1,354)
Europe
(98)
(62)
(157)
(218)
(200)
Americas
(1,037)
(862)
(1,038)
(664)
(411)
Africa and Middle East
(9)
-
(9)
(20)
(300)
Asia
(7)
(18)
(14)
(19)
(12)
New and increased/(released) impairment
 
allowance:
United Kingdom
1,087
842
1,345
1,371
1,239
Europe
116
84
110
260
258
Americas
1,072
809
1,192
1,025
590
Africa and Middle East
(30)
32
23
44
416
Asia
10
18
(16)
8
6
Allowance for impairment as at 31 December
6,308
6,770
4,652
4,620
4,921
Average loans and advances at amortised cost for the year
410,430
329,415
296,068
304,805
324,172
 
Analysis of impairment charges
2019
2018
2017
2016
2015
As at 31 December
£m
£m
£m
£m
£m
Impairment charges:
United Kingdom
786
742
1,138
1,130
960
Europe
127
48
92
242
244
Americas
927
758
1,084
921
539
Africa and Middle East
(14)
17
22
43
7
Asia
8
25
(16)
7
6
Loans and advances at amortised cost
1,833
1,590
2,320
2,343
1,756
Provision for
 
undrawn
 
contractually committed facilities
 
and guarantees
provided
71
(125)
13
9
(12)
Loans impairment
1,904
1,465
2,333
2,352
1,744
Cash collateral and settlement balances
1
(1)
-
-
-
Financial investments
-
-
3
21
18
Other financial assets measured at amortised cost
 
6
-
-
-
-
Financial assets at fair value through
 
other comprehensive income
1
4
-
-
-
Impairment charges
1,912
1,468
2,336
2,373
1,762
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional information
 
Additional
 
financial disclosure
 
 
 
340
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
The industry classifications in the tables below have
 
been prepared
 
at the
 
level of the
 
borrowing
 
entity. This means
 
that a loan to a subsidiary of a
major corporation
 
is classified
 
by the industry in which the subsidiary operates, even though
 
the Parent’s predominant business may be in a
different indu
 
stry.
 
Total impairment charges on loans and advances at amortised cost by industry
2019
2018
2017
2016
2015
As at 31 December
£m
£m
£m
£m
£m
United Kingdom:
Financial institutions
(3)
71
(42)
(1)
(4)
Manufacturing
(6)
(2)
(11)
39
(8)
Construction
1
-
10
7
10
Property
16
(13)
(10)
(13)
11
Energy and water
6
-
35
12
42
Wholesale and retail distribution and leisure
42
(38)
51
38
38
Business and other services
24
(97)
220
56
110
Home loans
6
1
31
(4)
27
Cards, unsecured
 
and other personal lending
685
877
856
975
735
Other
15
(57)
(2)
20
(1)
Total United Kingdom
786
742
1,138
1,129
960
Overseas
1,048
848
1,182
1,214
796
Total impairment charges
1,833
1,590
2,320
2,343
1,756
 
Allowance for impairment by industry
2019
a
2018
2017
2016
2015
As at 31 December
£m
%
£m
%
£m
%
£m
%
£m
%
United Kingdom:
Financial institutions
65
1.0
68
1.0
11
0.2
5
0.1
10
0.2
Manufacturing
42
0.7
38
0.6
34
0.7
60
1.3
30
0.6
Construction
43
0.7
41
0.6
37
0.8
35
0.8
32
0.7
Property
81
1.3
94
1.4
48
1.0
89
1.9
122
2.5
Government
 
and central bank
1
-
11
0.2
1
-
-
-
-
-
Energy and water
21
0.3
6
0.1
108
2.3
114
2.5
90
1.8
Wholesale and retail distribution and leisure
159
2.5
140
2.1
186
4.0
143
3.1
124
2.5
Business and other services
205
3.2
196
2.9
482
10.4
252
5.5
238
4.8
Home loans
93
1.5
98
1.4
137
2.9
144
3.1
157
3.2
Cards, unsecured
 
and other personal lending
2,440
38.7
2,766
40.9
1,671
35.9
1,653
35.8
1,652
33.6
Other
95
1.5
102
1.5
42
0.9
49
1.1
37
0.8
Total United Kingdom
3,246
51.5
3,560
52.6
2,757
59.3
2,544
55.1
2,492
50.6
Overseas
3,062
48.5
3,210
47.4
1,895
40.7
2,076
44.9
2,429
49.4
Total
6,308
100.0
6,770
100.0
4,652
100.0
4,620
100.0
4,921
100.0
 
Note
a
 
Other financial
 
assets subject
 
to impairment not included
 
in the table above include £24m impairment
 
allowance relating
 
to cash collateral
 
and settlement
 
balances, financial
assets
 
at fair value
 
through other
 
comprehensive
 
income and other assets.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional information
 
Additional
 
financial disclosure
 
 
 
341
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Amounts written off and recovered by industry
Amounts written
 
off
Recoveries of amounts
 
previously written
 
off
2019
2018
2017
2016
2015
2019
2018
2017
2016
2015
As at 31 December
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
United Kingdom:
Financial institutions
6
8
2
2
3
5
2
47
1
8
Manufacturing
2
12
2
15
6
4
3
3
3
2
Construction
9
7
10
5
13
1
1
3
1
3
Property
42
46
22
18
24
13
6
1
11
13
Energy and water
-
4
32
-
-
-
-
-
2
2
Wholesale and retail distribution and leisure
13
48
23
25
94
20
15
8
5
17
Business and other services
49
227
105
52
65
6
9
9
10
15
Home loans
10
10
13
11
22
1
3
-
-
3
Cards, unsecured
 
and other personal lending
593
552
897
1,134
1,113
41
93
132
206
214
Other
8
35
5
10
14
5
7
4
2
4
Total United Kingdom
732
949
1,111
1,272
1,354
96
139
207
241
281
Overseas
1,151
942
1,218
921
923
28
56
127
125
119
Total
1,883
1,891
2,329
2,193
2,277
124
195
334
366
400
 
Impairment ratios
2019
2018
2017
2016
2015
%
%
%
%
%
Impairment charges
 
as a
 
percentage of average
 
loans and advances at amortised cost
0.47
0.45
0.79
0.78
0.54
Amounts written off (net of recoveries)
 
as a
 
percentage of average
 
loans and advances at
amortised cost
0.43
0.51
0.67
0.60
0.58
Allowance for impairment
 
balance as a percentage of loans and advances at amortised cost as at
31 December
1.83
2.03
1.42
1.32
1.36
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional information
 
Additional
 
financial disclosure
 
 
 
342
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Maturity analysis of gross
 
loans and advances at amortised cost
 
Maturity analysis of gross
 
loans and advances at amortised cost
On demand
Not more
than three
months
Over three
months
 
but
not more
than six
months
 
Over six
months
 
but
not more
than one
year
Over one
year but
 
not
more than
three years
Over three
years but
not more
than five
years
Over five
years but
not more
than ten
years
Over ten
years
Total
As at 31 December 2019
£m
£m
£m
£m
£m
£m
£m
£m
£m
United Kingdom
Corporate
 
lending
2,667
2,902
1,152
3,218
15,313
12,096
7,871
20,266
65,485
Other lending to customers in the United
Kingdom
4,178
1,438
6,652
4,618
11,262
10,755
23,532
132,785
195,220
Total United Kingdom
 
6,845
4,340
7,804
7,836
26,575
22,851
31,403
153,051
260,705
Europe
2,852
2,157
1,117
2,479
7,062
4,322
2,640
3,757
26,386
Americas
4,356
2,456
2,475
4,110
10,772
9,751
7,332
7,498
48,750
Africa and Middle East
662
662
267
128
384
771
208
189
3,271
Asia
1,358
1,415
1,635
457
544
543
132
227
6,311
Total gross loans
 
and advances at
amortised cost
16,073
11,030
13,298
15,010
45,337
38,238
41,715
164,722
345,423
As at 31 December 2018
United Kingdom
Corporate
 
lending
1,146
2,132
1,070
2,915
14,998
13,361
7,328
23,323
66,273
Other lending to customers in the United
Kingdom
4,108
2,823
3,164
3,881
13,796
12,268
29,539
107,824
177,403
Total United Kingdom
 
5,254
4,955
4,234
6,796
28,794
25,629
36,867
131,147
243,676
Europe
2,788
1,995
1,127
2,057
8,515
3,947
3,347
4,968
28,744
Americas
4,334
2,247
1,710
3,294
13,872
9,951
9,150
7,274
51,832
Africa and Middle East
362
667
564
198
746
502
110
370
3,519
Asia
712
1,676
543
516
1,115
380
191
272
5,405
Total gross loans
 
and advances at
amortised cost
13,450
11,540
8,178
12,861
53,042
40,409
49,665
144,031
333,176
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional information
 
Additional
 
financial disclosure
 
 
 
343
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Industrial and geographical
 
concentrations of Gross loans and advances at amortised cost
 
Gross loans and advances at amortised cost by industry
2019
2018
2017
a
2016
a
2015
a
As at 31 December
£m
£m
£m
£m
£m
Financial institutions
29,366
28,237
35,654
49,648
46,335
Manufacturing
8,392
8,849
9,193
12,198
12,012
Construction
2,877
2,802
3,284
3,525
3,798
Property
21,673
20,933
20,364
20,831
19,982
Government
 
and central bank
23,851
12,776
9,090
9,312
3,114
Energy and water
5,442
5,582
5,644
7,154
7,172
Wholesale and retail distribution and leisure
10,224
11,809
12,605
13,070
13,908
Business and other services
17,420
19,989
20,381
21,390
23,590
Home loans
154,911
150,735
147,460
145,184
156,384
Cards, unsecured
 
loans and other personal lending
60,045
60,561
57,245
59,851
63,217
Other
11,222
10,903
7,780
8,357
12,996
Gross loans and advances at amortised cost
345,423
333,176
328,700
350,520
362,508
 
Gross loans and advances at amortised cost in the UK
2019
2018
2017
a
2016
a
2015
a
As at 31 December
£m
£m
£m
£m
£m
Financial institutions
7,268
6,200
6,233
8,200
8,556
Manufacturing
4,904
4,440
6,198
6,816
5,696
Construction
2,623
2,593
3,025
3,254
3,164
Property
18,876
18,036
18,168
18,145
15,556
Government
 
and central bank
19,902
7,867
7,906
7,226
1,048
Energy and water
2,777
2,668
2,501
2,229
1,860
Wholesale and retail distribution and leisure
8,547
9,970
10,617
10,586
10,378
Business and other services
12,460
15,092
16,385
16,425
16,311
Home loans
144,734
138,323
134,820
131,945
132,324
Cards, unsecured
 
loans and other personal lending
30,808
31,139
30,786
31,260
30,452
Other
7,806
7,348
6,220
6,464
6,431
Gross loans and advances at amortised cost in the UK
260,705
243,676
242,859
242,550
231,776
 
Gross loans and advances at amortised cost in Europe
2019
2018
2017
a
2016
a
2015
a
As at 31 December
£m
£m
£m
£m
£m
Financial institutions
5,958
5,950
6,143
5,541
5,659
Manufacturing
1,072
1,335
1,347
2,522
2,173
Construction
133
85
80
30
68
Property
510
716
734
1,047
795
Government
 
and central bank
1,849
1,778
323
702
488
Energy and water
827
676
621
1,217
775
Wholesale and retail distribution and leisure
752
735
808
907
710
Business and other services
907
991
1,023
1,014
1,260
Home loans
8,387
10,563
11,578
12,189
12,503
Cards, unsecured
 
loans and other personal lending
5,108
5,076
4,483
4,283
5,047
Other
883
839
632
385
1,489
Gross loans and advances at amortised cost in Europe
26,386
28,744
27,772
29,837
30,967
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional information
 
Additional
 
financial disclosure
 
 
 
344
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Gross loans and advances at amortised cost in the Americas
2019
2018
2017
a
2016
a
2015
a
As at 31 December
£m
£m
£m
£m
£m
Financial institutions
12,374
12,458
18,559
30,348
23,446
Manufacturing
1,782
2,426
1,262
2,348
1,424
Construction
77
71
147
204
120
Property
2,161
2,097
1,272
1,463
1,709
Government
 
and central bank
471
2,869
-
 
162
91
Energy and water
1,437
1,667
1,986
2,709
2,780
Wholesale and retail distribution and leisure
635
613
660
949
815
Business and other services
3,623
2,973
2,629
3,322
2,997
Home loans
646
715
567
595
624
Cards, unsecured
 
loans and other personal lending
23,445
23,756
21,486
23,700
18,140
Other
2,099
2,187
523
828
1,328
Gross loans and advances at amortised cost in the Americas
48,750
51,832
49,091
66,628
53,474
 
Gross loans and advances at amortised cost in Africa and Middle East
2019
2018
2017
a
2016
a
2015
a
As at 31 December
£m
£m
£m
£m
£m
Financial institutions
948
1,319
1,066
1,065
3,625
Manufacturing
160
51
13
60
2,320
Construction
-
 
-
 
-
 
2
363
Property
55
55
112
80
1,755
Government
 
and central bank
269
262
860
1,031
1,450
Energy and water
116
200
252
494
1,025
Wholesale and retail distribution and leisure
67
123
219
328
1,837
Business and other services
363
221
64
237
2,683
Home loans
728
698
378
357
10,689
Cards, unsecured
 
loans and other personal lending
534
494
406
494
8,081
Other
31
96
97
200
3,026
Gross loans and advances at amortised cost in Africa and
Middle East
3,271
3,519
3,467
4,348
36,854
 
Gross loans and advances at amortised cost in Asia
2019
2018
2017
a
2016
a
2015
a
As at 31 December
£m
£m
£m
£m
£m
Financial institutions
2,818
2,310
3,653
4,494
5,049
Manufacturing
474
597
373
452
399
Construction
44
53
32
35
83
Property
71
29
78
96
167
Government
 
and central bank
1,360
-
 
1
191
37
Energy and water
285
371
284
505
732
Wholesale and retail distribution and leisure
223
368
301
300
168
Business and other services
67
712
280
392
339
Home loans
416
436
117
98
244
Cards, unsecured
 
loans and other personal lending
150
96
84
114
1,497
Other
403
433
308
480
722
Gross loans and advances at amortised cost in Asia
6,311
5,405
5,511
7,157
9,437
 
Note
a
 
The comparatives
 
for 2017,
 
2016 and
 
2015 have been presented
 
on an IAS 39 basis.
 
Interest rate sensitivity of gross
 
loans and advances at amortised cost
2019
2018
Fixed rate
Variable rate
Total
Fixed rate
a
Variable
 
rate
a
Total
As at 31 December
£m
£m
£m
£m
£m
£m
Gross loans and advances at amortised cost
158,819
186,604
345,423
135,139
198,037
333,176
 
Note
a
 
The comparatives
 
have been restated
 
to better reflect
 
the interest rate classification.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional information
 
Additional
 
financial disclosure
 
 
 
345
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
Foreign outstandings
 
for countries where this exceeds 0.75% of
 
total Group assets
a
As % of
 
assets
Total
Banks and other
financial
institutions
Government and
official institutions
Commercial
industrial
 
and
other private
sectors
Financial
guarantees
%
£m
£m
£m
£m
£m
As at 31 December 2019
b
United States
9.4
107,178
64,929
20,668
20,798
783
Germany
1.3
15,216
10,787
2,886
1,447
96
France
1.0
11,269
9,979
-
1,231
59
Netherlands
0.9
10,246
7,224
738
2,084
200
As at 31 December 2018
b
United States
8.7
98,695
61,457
17,324
18,713
1,201
Germany
2.1
24,269
5,062
17,240
1,851
116
France
1.8
20,017
12,269
3,636
4,077
35
As at 31 December 2017
b
United States
7.4
84,215
46,888
13,081
23,609
637
Germany
1.6
17,642
2,818
12,554
2,206
64
France
2.3
25,599
15,156
4,067
6,248
128
 
Note
a
 
Foreign
 
outstanding
 
includes
 
cross border exposure
 
in non-local currency
 
of the Barclays
 
branches and subsidiaries, and
 
in country foreign currency
 
exposure.
 
b
 
Comparatives
 
have been restated
 
to reflect
 
the carrying value
 
on the balance sheet. Figures
 
are net of short securities
 
.
 
 
Off-balance sheet and other credit exposures
2019
2018
2017
As at 31 December
£m
£m
£m
Off-balance sheet exposures
Contingent liabilities
24,527
20,303
19,012
Commitments
334,455
324,223
315,573
On-balance sheet exposures
Trading
 
portfolio assets
114,195
104,187
113,760
Financial assets at fair value through
 
the income statement
133,086
149,648
116,281
Derivative financial instruments
229,236
222,538
237,669
Financial investments
a
-
-
58,915
Financial assets at fair value through
 
other comprehensive income
65,750
52,816
-
 
Note
a
 
Following the
 
adoption of IFRS 9 in 2018,
 
financial
 
investments
 
classification is no longer applicable.
 
Notional principal
 
amounts of credit derivatives
2019
2018
2017
As at 31 December
£m
£m
£m
Credit derivatives held or issued for
 
trading purposes
a
825,516
759,075
715,001
 
Note
a
 
Includes
 
credit
 
derivatives
 
held as economic hedges
 
which are not designated
 
as hedges for accounting purposes.
 
Related party
 
transactions
 
additional
 
disclosure
For US disclosure purposes, the aggregate
 
emoluments of all Directors and Officers of Barclays PLC
 
who held office during
 
the year (2019:
 
31
persons, 2018:
 
24 persons, 2017:
 
30 persons)
 
for the year ended 31 December 2019
 
amounted to £68.0m (2018:
 
£64.3m, 2017:
 
£88.7m). In
addition, the aggregate
 
amount set aside for the year ended 31
 
December 2019
 
,
 
to provide pension benefits for the Directors and
 
Officers
amounted to £0.1m
 
(2018:
 
£nil, 2017:
 
£0.1m).
 
 
Glossary of terms
 
 
 
 
 
346
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
‘A-
 
IRB’ / ‘Advanced
 
-Internal Ratings Based’
 
See ‘Internal Ratings Based (IRB)’.
 
‘ABS CDO Super Senior’
 
Super senior tranches of debt linked to collateralised debt obligations of asset backed
 
securities (defined below). Payment
of super senior tranches takes priority over
 
other obligations.
 
‘Accep
 
tances and endorsements’
 
An acceptance is an undertaking by
 
a bank to pay a bill of exchange drawn
 
on a customer. The Barclays Group
expects most acceptances to be presented, but reimbursement
 
by the customer is normally immediate. Endorsements are residual
 
liabilities of the
Barclays Group
 
in respect of bills of exchange which have been paid and
 
subsequently rediscounted.
 
‘Additional Tier 1 (AT1)
 
capital’
 
AT1 capital largely comprises eligible non
 
-common
 
equity capital securities
 
and any related
 
share
 
premium.
 
‘Additional Tier 1 (AT1)
 
securities’
 
Non-common
 
equity securities
 
that are eligible as AT1 capital.
 
 
‘Advanced
 
Measurement Approach
 
(AMA)’
 
Under the AMA, banks are allowed to develop their own empirical model
 
to quantify required capital
for operational risk. Banks can only use this approach
 
subject to approval from
 
their local regulators.
 
‘Agencies’
 
Bonds issued by state and / or governmen
 
t
 
agencies or government-sponsored entities.
 
‘Agency
 
Mortgage
 
-Backed Securities’
 
Mortgage
 
-Backed Securities issued
 
by government
 
-sponsored entities.
 
‘All price
 
risk (APR)’
An estimate
 
of all the material market risks, including
 
rating migration and defaul
 
t
 
for the correlation trading
 
portfolio.
‘American
 
Depository Receipts (ADR)’
A negotiable certificate that represents the ownership
 
of shares in a
 
non-US company
 
(for example Barclays)
trading in US financial markets.
 
‘Americas’
 
Geographic
 
segment comprising the US, Canada and countries where Barclays operates
 
within Latin
 
America.
‘Annual
 
Earnings at Risk (AEaR)’
 
A measure of the potential change in Net Interest Income
 
(NII) due
 
to an interest
 
rate movement over
 
a one-year
period.
‘Annualised cumulative weighted
 
average lifetime PD’
 
The probability of default over
 
the remaining life of the asset, expressed as an annual rate,
reflecting a range
 
of possible economic scenarios.
‘Application scorecards’
Algorithm based decision tools used to aid business decisions and manage credit
 
risk based on available customer data at
the point of application for a product.
 
‘Arrears’
 
Customers are said to be in arrears when
 
they are behind in fulfilling their obligations with the result that an outstanding loan is unpaid or
overdue.
 
Such customers are also said to be in a state of delinquency. When a customer is in arrears, their entire
 
outstanding balance is said to be
delinquent, meaning that delinquent balances are the total outstanding loans on which
 
payments are overdue.
 
‘Asia’
 
Geographic
 
segment comprising countries where Barclays operates
 
within Asia
 
and the Middle East.
 
‘Asset
 
Backed Commercial Paper’
 
Typically short-term notes secured on specified assets issued by consolidated special purpose entities for funding
purposes.
 
‘Asset
 
Backed Securities (ABS)’
 
Securities that represent an interest in an underlying
 
pool of referenced
 
assets.
 
The referenced
 
pool can comprise
any assets which attract a
 
set of associated cash flows but are commonly
 
pools of residential or commercial mortgages and, in the case of
Collateralised Debt Obligations (CDOs), the referenced
 
pool may be ABS or other
 
classes
 
of assets.
 
‘Attributa
 
ble profit’
 
Profit after tax that is attributable to ordinary
 
equity holders of Barclays adjusted for the after tax amounts of capital securities
classified as equity.
 
‘Average
 
allocated tangible equity’
Calculated as the average of the previous month’s
 
period end allocated tangible equity and the current month’s
period end allocated tangible equity. The average
 
allocated tangible equity for the period is the average
 
of the monthly averages within that period.
 
‘Average
 
tangible shareholders’ equity’
Calculated as the average of the previous month’s
 
period end
 
tangible equity and the current month’s
period end tangible equity.
 
The average tangible shareholders’
 
equity for the period is the average of the monthly averages within that period.
 
‘Average
 
UK leverage ratio’
 
As per the PRA rulebook, is calculated as the average capital measure based on
 
the last day of each month in the
quarter divided by
 
the average exposure
 
measure for the quarter,
 
where the average exposure
 
is based on each day in the
 
quarter.
 
‘Back testing’
Includes a number
 
of techniques that assess the
 
continued statistical validity of a model
 
by simulating how the model would have
predicted recent
 
experience.
‘Barclays Africa’ or ‘Absa’
Barclays
 
Africa Group
 
Limited (now Absa Group
 
Limited), which was previously a subsidiary of
 
the Barclays Group.
Following a sell down
 
of shares resulting in a loss of control, the Barclays Group’s
 
shareholding
 
in Absa Group Limited is now classified as a
financial asset at fair value through
 
other comprehensive income.
‘Balance weighted Loan to Value (LTV)
 
ratio’
 
In the context of the credit risk disclosures on
 
secured home
 
loans, a means
 
of calculating marked to
market LTVs derived
 
by calculating individual LTVs at account
 
level and weighting it by the balances to
 
arrive at the average
 
position.
 
Balance
weighted loan to value is calculated using the following
 
formula: LTV
 
= ((loan balance 1 x MTM LTV% for
 
loan 1) + (loan balance 2 x MTM LTV%
for loan 2) + ...) / total outstandings in portfolio.
‘Barclaycard’
 
An international consumer payments
 
business serving the needs of
 
businesses and consumers
 
through
 
credit cards, consumer
lending, merchant acquiring,
 
commercial cards and point of sale finance. Barclaycard
 
has scaled
 
operations in the UK, US, Germany
 
and
Scandinavia.
 
‘Barclaycard
 
Consumer UK’
 
The UK Barclaycard
 
business.
 
 
Glossary of terms
 
 
 
 
 
347
 
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‘Barclays’ or ’Barclays Group’
 
Barclays PLC, together with its subsidiaries.
 
‘Barclays Bank Group’
 
Barclays Bank PLC, together with its subsidiaries.
 
‘Barclays Bank UK
 
Group’
 
Barclays Bank UK PLC, together with its subsidiaries.
 
‘Barclays Operating
 
businesses’
The core Barclays businesses operated
 
by Barclays UK (which
 
include the UK Personal banking;
 
UK business
banking and the Barclaycard
 
consumer UK
 
businesses) and Barclays
 
International (the large UK Corporate business; the international Corporate and
Private Bank businesses; the Investment Bank;
 
the international Barclaycard
 
business; and payments).
‘Barclays Direct’
 
A Barclays brand,
 
comprising the savings and mortgage
 
businesses.
‘Barclays Execution
 
Services’ or ‘BX’ or ‘BSerL’ or ‘Group
 
Service Company’
Barclays Execution Services Limited, the Group
 
services company set up
to provide services to Barclays
 
UK and Bar
 
clays International to deliver operational continuity.
 
‘Barclays International’
The segment of Barclays held by Barclays Bank PLC
 
which has not been ring-fenced
 
as part of regulatory ring fencing
requirements.
 
The division includes the large UK Corporate
 
business; the international Corporate and Private Bank businesses; the Investment
Bank; the international Barclaycard
 
business; and payments.
‘Barclays Non
 
-Core’
The previously reported
 
unit comprising of a group of businesses and assets
 
that were exited or run
 
down by
 
Barclays, which
was closed in 2017.
 
‘Barclays UK’
The segment of Barclays held by Barclays
 
Bank UK PLC which has been ring
 
-fenced as part of regulatory ring
 
fencing requirements.
 
The division includes the UK Personal banking;
 
UK business banking and the Barclaycard
 
consumer UK
 
businesses.
 
‘Basel 3’
 
The third of the Basel Accords, setting minimum
 
requirements and
 
standards that apply to internationally
 
active banks.
 
Basel 3 is a set of
measures developed by
 
the Basel Committee on Banking Supervision aiming to strengthen the regulation, supervision and
 
risk management of
banks.
‘Basel Committee of Banking Supervision
 
(BCBS or The Basel Committee)’
 
A forum for
 
regular cooperation
 
on banking supervisory matters which
develops global supervisory
 
standards for the banking industry.
 
Its 45 members are officials from central banks or
 
prudenti
 
al supervisors from 28
jurisdictions.
 
‘Basic Indicator
 
Approach
 
(BIA)’
Under
 
the
 
BIA,
 
banks
 
are
 
required
 
to
 
hold
 
regulatory
 
capital for
 
operational
 
risk equal to
 
15%
 
of the
 
annual
average, calculated over
 
a rolling three-year period,
 
of the relevant income
 
indicator for the bank as whole.
‘Basis point(s)’ / ‘bp(s)’
 
One hundredth
 
of a per cent (0.01%); 100
 
basis points
 
is 1%.
 
The measure is used in quoting
 
movements in interest rates,
yields on securities and for other purposes.
 
‘Basis risk’
 
Index/Tenor
 
risk, that
 
arises when floating rate products are linked to different interest
 
rate indices, which are
 
imperfectly correlated,
especially under stressed market conditions.
‘Behavioural scorecards’
Algorithm based decision tools used to aid business decisions and manage credit risk based on existing customer data
derived from
 
account usage.
‘Book quality’
In the context of the Capital Risk section, changes in RWAs caused by
 
factors such as underlying
 
customer behaviour or
demographics
 
leading to changes in risk profile.
‘Book size’
In the context of the Capital Risk section
,
 
changes in RWAs
 
driven by
 
business activity, including net originations or repayments
 
.
 
‘Business Banking’
 
Offers specialist advice, products
 
and services to small
 
and medium enterprises in the UK.
‘Business Lending’
Business Lending in Barclays UK that primarily
 
relates to small and medium enterprises typically with exposures up
 
to £3m or
with a turnover
 
up to £5m.
 
‘Business scenario stresses’
 
Multi asset scenario analysis of extreme, but plausible events that may impact the market
 
risk exposures of the
Investment Bank.
 
‘Buy to let mortgage’
A mortgage where
 
the intention of the
 
customer (investor)
 
was to let the
 
property
 
at origination.
‘Capital Conservation Buffer
 
(CCB)’
A capital buffer of 2.5% of a bank’s total exposures
 
that needs to be met with an additional amount of Common
Equity Tier 1 capital above
 
the 4.5% minimum requirement
 
for Common Equity Tier 1 set out in
 
CRR. Its objective is to conserve a bank’s capital by
ensuring that banks build up surplus capital outside periods
 
of stress which can be drawn down
 
if losses
 
are incurred.
 
‘Capital ratios’
 
Key financial ratios measuring the Bank's capital adequacy
 
or financial strength expressed as a percentage of RWAs.
 
‘Capital Requirements Directive (CRD)’
Directive 2013/36/EU,
 
a component of the CRD
 
IV package which
 
accompanies the Capital
 
Requirements
Regulation and sets out macroprudential
 
standards including the countercyclical capital buffer and capital buffers for
 
systemically important
institutions. Directive (EU) 2019/878,
 
published as part of the EU Risk
 
Reduction Measure package
 
amends CRD. These amendments enter into
force from
 
27 June
 
2019, with EU member
 
states
 
required
 
to adopt the measures within the
 
Directive by
 
28 December
 
2020.
 
‘Capital Requirements Regulation
 
(CRR)’
Regulation (EU) No 575/2013,
 
a component of the CRD
 
IV package which
 
accompanies the Capital
Requirements Directive and sets
 
out detailed rules for capital eligibility,
 
the calculation of RWAs, the measurement
 
of leverage, the management
 
of
large exposures and minimum
 
standards for liquidity. Between 27
 
June 2019
 
and 28 June 2023, this regulation will be amended in line with the
requirements of amending
 
Regulation (EU) 2019/876
 
(CRR II).
 
‘Capital Requirements Regulation
 
II (CRR II)’
Regulation (EU) 2019/876,
 
amending Regulation
 
(EU) No 575/2013
 
(CRR). This
 
is a
 
component
 
of the
EU Risk Reduction Measure package. The requirements
 
set out
 
in CRR II will be introduced
 
between 27 June
 
2019
 
and 28 June 2023.
 
 
Glossary of terms
 
 
 
 
 
348
 
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‘Capital requirements
 
on the underlying
 
exposures (KIRB)’
An approach available to banks when calculating RWAs for securitisation
 
exposures. This
is based upon the RWA
 
amounts that would be calculated under
 
the IRB approach
 
for the underlying pool of securitised exposures in the
 
program,
had such exposures not been securitised.
‘Capital resources’
 
Common Equity Tier 1, Additional Tier 1 and Tier 2 capital that are eligible to satisfy capital requirements
 
under CRD. Referred
 
to
as ‘own
 
funds’ within EU regulatory
 
texts.
 
‘Capital risk’
 
The risk that the Barclays Group
 
has an insufficient level or composition of capital to support its normal business activities and to meet
its regulatory
 
capital requirements under
 
normal operating environments or stressed conditions (both actual and as defined for internal planning or
regulatory
 
testing purposes). This includes
 
the risk from
 
the Barclays Group’s pension plans.
‘Central Counterparty’
 
/ ‘Central Clearing Counterparties (CCPs)’
 
A clearing house mediating between the buyer
 
and the seller in a financial
transaction, such as a derivative contract
 
or repurchase
 
agreement (repo). Where a central
 
counterparty
 
is used,
 
a single bi-lateral contract
between the buyer and
 
seller is replaced with two contracts, one between the buyer
 
and the CCP and one between the CCP and the
 
seller.
 
The use
of CCPs allows for greater
 
oversight and improved
 
credit risk
 
mitigation in over-the-counter
 
(OTC) markets.
 
‘Charge-off’
 
In the retail segment this refers to the point in time when
 
collections activity changes from the collection of arrears to the recovery
 
of
the full balance. This is normally when
 
six payments are
 
in arrears.
 
‘Client Assets’
Assets managed or administered by Barclays
 
Group
 
on behalf of clients
 
including assets under management
 
(AUM), custody assets,
assets under administration and client deposits.
‘CLOs and Other insured assets’
 
Highly rated CLO positions wrapped
 
by monolines, non
 
-CLOs
 
wrapped
 
by monolines and other assets
 
wrapped
with Credit Support Annex
 
(CSA) protection.
‘Collateralised Debt Obligation (CDO)’
 
Securities issued by a third party
 
which reference
 
Asset
 
Backed Securities (ABSs) (defined above)
 
and/or
certain other related assets purchased
 
by the issuer. CDOs may feature exposure
 
to sub-prime mortgage
 
assets
 
through
 
the underlying assets.
 
‘Collateralised Loan Obligation (CLO)’
 
A security backed
 
by the repayments from
 
a pool of commer
 
cial loans.
 
The payments may be made to
different classes of owners (in tranches).
 
‘Collateralised Mortgage
 
Obligation (CMO)’
 
A type of security backed by
 
mortgages. A special purpose entity receives income from
 
the mortgages
and passes them on to investors of the security.
‘Combined Buffer
 
Requirement’
In the context of the CRD
 
capital obligations, the combined
 
requirements
 
of the Capital
 
Conservation Buffer,
 
the
GSII Buffer,
 
the OSII buffer, the
 
Systemic Risk buffer and an institution specific counter
 
-cyclical buffer.
‘Commercial paper (CP)’
 
Short-term notes issued by entities, including banks, for funding
 
purposes.
 
‘Commercial
 
real estate (CRE)’
Commercial real estate includes office buildings, industrial property,
 
medical centres, hotels, retail stores, shopping
centres, farm land, multifamily housing buildings, warehouses,
 
garages, and industrial properties and other similar properties. Commercial real
estate loans are loans backed
 
by a package of commercial real estate. Note: for the purposes of the Credit
 
Risk section, the UK CRE portfolio
includes property
 
investment, development, trading and housebuilders
 
but excludes social housing contractors.
‘Committee of Sponsoring
 
Organisations of the Treadway Commission Framework
 
(COSO)’
A joint initiative of five private sector organisations
dedicated to the development
 
of frameworks and providing
 
guidance on enterprise risk
 
management, internal control and fraud
 
deterrence.
‘Commodity derivatives’
 
Exchange traded
 
and over
 
-the-counter (OTC) derivatives based on an underlying
 
commodity (e.g.
 
metals,
 
precious metals,
oil and oil related, power
 
and natural gas).
 
‘Commodity risk’
 
Measures the impact of changes in commodity
 
prices and volatilities, including the basis between related commodities (e.g. Brent
vs. WTI crude prices).
 
‘Common Equity Tier 1 (CET1) capital’
 
The highest quality form of regulatory
 
capital under CRR that
 
comprises
 
common
 
shares issued
 
and related
share premium, retained earnings
 
and other reserves, less specified regulatory adjustments.
‘Common Equity Tier 1 (CET1) ratio’
 
A measure of Common Equity Tier 1 capital expressed as a percentage
 
of RWAs.
‘Compensation: income ratio’
The ratio of compensation expense over
 
total income. Compensation represents total staff costs less non-
compensation items consisting of outsourcing,
 
staff training, redundancy costs and retirement costs.
Comprehensive
 
Capital Analysis and Review (CCAR)’
An annual exercise, required
 
by and evaluated by the Federal Reserve, through
 
which the
largest bank holding
 
companies operating
 
in the US assess
 
whether they have sufficient capital to
 
continue operations through
 
periods of
economic and financial stress and have robust capital-planning
 
processes that account for their unique
 
risks.
‘Comprehensive Risk Measure (CRM)’
An estimate of all the material market risks, including
 
rating migration and default for the correlation
 
trading
portfolio. Also referred
 
to as
 
All Price Risk (APR)
 
and Comprehensive
 
Risk Capital
 
Charge (CRCC).
‘Conduct risk’
 
The risk of detriment to customers, clients, market integrity, competition
 
or Barclays from
 
the inappropriate supply of financial
services, including instances
 
of wilful or negligent misconduct.
‘Constant Currency
 
Basis’
Excluding the impact of foreign currency
 
conversion to GBP when comparing financial results in
 
two different
 
financial
periods.
‘Consumer, Cards and Payments’
Barclays US Consumer Bank, Barclay
 
card Germany,
 
Barclays Partner
 
Finance, Barclaycard
 
Commercial Payments,
Barclaycard
 
Payment Solutions (including merchant
 
acquiring) and the international Wealth business.
 
 
Glossary of terms
 
 
 
 
 
349
 
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‘Contingent capital notes (CCNs)’
 
Interest bearing
 
debt securities issued by Barclays Group or
 
its
 
subsidiaries that are either permanently
 
written off
or converted
 
into an equity instrument from the issuer's
 
perspective in the event of the Common
 
Equity Tier 1 (CET1) ratio of the relevant Barclays
Group
 
entity falling below a specific level, or at the direction of regulators.
 
 
‘Conversion
 
Trigger’
Used in
 
the context
 
of Contingent
 
Capital Notes and AT1
 
securities.
 
A capital adequacy
 
trigger event occurs
 
when the CET1
ratio
 
of
 
the
 
bank
 
falls below
 
a certain
 
level (the trigger)
 
as defined
 
in the Terms
 
& Conditions
 
of the
 
instruments issued.
 
See ‘Contingent capital
notes’.
 
‘Core deposit intangibles’
 
Premium paid
 
to acquire the deposit base of an institution.
‘Correlation risk’
 
Refers to the change in marked
 
to market value of a security when the correlation
 
between the underlying
 
assets
 
changes over
time.
‘Corporate and Investment
 
Bank (CIB)’
Barclays Corporate
 
and Investment Bank businesses which form part of Barclays International.
 
‘Cost: income ratio’
 
Total operating
 
expenses divided by total income.
 
‘Cost of Equity’
 
The rate of return
 
targeted by the equity holders of a company.
 
‘Cost: net operating income
 
ratio’
 
Operating expenses compared
 
to total
 
income less credit impairment charges and other
 
provisions.
 
 
‘Cost to income jaws’
 
Relationship of the percentage
 
change movement
 
in operating expenses relative to
 
total income.
‘Countercyclical Capital Buffer
 
(CCyB)’
An additional buffer introduced
 
as part of the
 
CRD IV package that requires banks to have an additional
cushion of CET 1 capital with which to absorb potential losses, enhancing
 
their resilience and contributing to a stable financial system.
 
‘Countercyclical leverage ratio buffer
 
(CCLB)’
A macroprudential
 
buffer that has applied to specific
 
PRA regulated institutions since 2018
 
and is
calculated at 35%
 
of any risk weighted countercyclical capital buffer
 
set by the Financial Policy Committee (FPC).
 
The CCLB applies in addition to
the minimum of 3.25% and any G-
 
SII additional Leverage Ratio Buffer that applies.
‘Counterparty credit risk’
 
The risk related to a counterparty
 
defaulting before the final settlement of a transaction’s cash flows. In the context of
RWAs,
 
a component
 
of RWAs that represents the risk of loss in derivatives, repurchase
 
agreements and similar transactions resulting from the
default of the counterparty.
‘Coverage ratio’
 
This represents the percentage
 
of impairment allowance reserve
 
against the gross exposure.
‘Covered bonds’
 
Debt securities backed by a portfolio of mortga
 
ges that
 
are segregated from
 
the issuer’s other assets solely for the benefit of the
holders of the covered
 
bonds.
 
‘CRD IV’
The Fourth Capital Requirements Directive, an EU Directive
 
and an accompanying
 
Regulation (CRR) that together prescribe EU capital
adequacy and liquidity requirements
 
and implements Basel 3 in the European Union.
‘CRD V’
The Fifth Capital Requirements Directive, comprising
 
an EU amending Directive and an accompanying
 
amending Regulation (CRR II) that
together prescribe
 
EU capital adequacy and liquidity requirements and implements enhanced Basel 3 proposals in the European
 
Union.
 
‘Credit conversion
 
factor (CCF)’
Factor used to estimate the risk from off
 
-balance sheet commitments for the purpose of calculating the total
Exposure at Default (EAD) used to calculate RWAs.
‘Credit default swaps (CDS)’
 
A contract under
 
which the protection seller receives premiums or interest-related payments in return
 
for contracting
to make payments to the protection
 
buyer in the event of a defined credit
 
event. Credit events normally
 
include bankruptcy,
 
payment default on a
reference
 
asset or assets, or downgrades
 
by a rating agency.
 
‘Credit derivatives (CDs)’
 
An arrangement
 
whereby
 
the credit risk of an
 
asset (the reference asset) is transferred
 
from the buyer
 
to the seller
 
of the
protection.
 
‘Credit impairment charges’
 
Also known as ‘credit
 
impairment’. Impairment
 
charges on loans and advances to customers and banks and
impairment charges on
 
fair value through other
 
comprehensive income assets and reverse repurchase
 
agreements.
 
‘Credit market exposures’
 
Assets and other instruments relating to commercial real estate and leveraged
 
finance businesses that
 
have been
significantly impacted by the deteri
 
oration in the global credit markets. The exposures
 
include positions subject to fair value movements in the
Income Statement, positions that are classified as loans and advances
 
and available for sale and other assets.
‘Credit quality step’
 
In the context of the Standardised Approach
 
to calculating credit risk
 
RWAs,
 
a “credit quality assessment scale” maps the
 
credit
assessments of a recognised credit rating
 
agency or export
 
credit agency to credit quality steps
 
that determine the risk weight to be applied to an
exposure.
 
‘Credit Rating’
An evaluation of the creditworthiness of an
 
entity seeking to enter into a credit agreement.
 
‘Credit risk’
 
The risk of loss to Barclays from
 
the failure of clients, customers or counterparties, including sovereigns,
 
to fully honour their
obligations to Barclays, including the whole and timely payment
 
of principal, interest, collateral and other receivables. In the context of RWAs,
 
it is
the component of RWAs
 
that represents the risk of loss in loans and advances and similar transactions resulting from
 
the default of the
counterparty.
‘Credit risk mitigation’
 
A range of techniques and strategies to actively mitigate credit risks to which
 
the bank is exposed. These can be broadly
divided into three types; collateral, netting
 
and set-off, and risk transfer.
 
‘Credit spread’
 
The premium over
 
the benchmark or risk-free rate required
 
by the market to accept a lower credit quality.
 
 
 
Glossary of terms
 
 
 
 
 
350
 
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2019 Annual Report on Form 20-F
 
 
‘Credit Valuation
 
Adjustment (CVA)’
 
The difference between
 
the risk-free value of a portfolio of trades and the market value which takes into
account the counterparty’s risk of default. The CVA
 
therefore
 
represents an estimate of the adjustment to fair value that a market participant would
make to incorporate
 
the credit risk of the
 
counterparty
 
due to any failure to perform
 
on contractual agreements.
 
‘CRR leverage exposure’
 
Is calculated in accordance with article 429 as per the CRR.
‘CRR leverage ratio’
Is calculated using the CRR definition of Tier 1 capital for the numerator
 
and the CRR definition
 
of leverage exposure
 
as the
denominator.
 
‘Customer assets’
 
Represents loans and advances to
 
customers. Average
 
balances are calculated as the sum of all daily balances for the year to
date divided by number
 
of days in the year to date.
 
‘Customer deposits’
 
In the context of the Liquidity Risk section, money deposited
 
by all individuals and companies that are not credit institutions.
Such funds are recorded
 
as liabilities
 
in the Barclays Group’s
 
balance sheet under deposits at amortised cost.
 
‘Customer liabilities’
 
See ‘Customer deposits’.
 
‘Customer net interest income’
 
The sum of customer asset
 
and customer liability net interest income. Customer net interest income reflects interest
related to customer assets and liabilities only and does not include any interest on
 
securities or other non
 
-customer assets
 
and liabilities.
 
‘CVA
 
volatility charge’
 
The volatility charge added
 
to exposures that adjusts for mid-market valuation on a portfolio of transactions with a
counterparty.
 
This is to reflect the current market value of the credit risk associated with the counterparty
 
to the Barclays Group. Th
 
e
 
charge is
prescribed
 
by the CRR.
 
‘DBRS’
 
A credit rating agency.
 
‘Debit Valuation Adjustment (DVA)’
 
The opposite of Credit Valuation Adjustment (CVA).
 
It is the difference between the risk-free value of a
portfolio of trades and the market value which
 
takes into account the Barclays Group’s
 
risk of default. The DVA, therefore,
 
represents an estimate
of the adjustment to fair value that a market participant would
 
make to incorporate
 
the credit risk of
 
the Barclays Group
 
due to any failure to
perform
 
on contractual obligations. The DVA
 
decreases the value of a
 
liability to take into account
 
a reduction in the remaining balance that would
be settled should
 
the Barclays Group
 
default or not perform
 
any contractual obligations.
 
‘Debt buybacks’
 
Purchases of the Barclays Group’s
 
issued debt securities, including equity accounted instruments, leading to their de-recognition
from the balance sheet.
 
‘Debt securities in issue’
 
Transferable
 
securities evidencing indebtedness of the Barclays Group.
 
These are liabilities of the Barclays Group
 
and
include certificates of deposit and commercial paper.
 
‘Default grades’
 
Barclays
 
Group
 
classify
 
ranges of default probabilities into a set of 21
 
intervals called default grades, in order
 
to distinguish
differences in the probability
 
of default risk.
‘Default fund contributions’
 
The amount of contribution
 
made by members of a central counterparty (CCP).
 
All members are required
 
to contribute
to this fund in advance of using a CCP.
 
The default fund can be used by the CCP to cover losses incurred
 
by the CCP where losses are greater than
the margins provided
 
by that member.
 
‘Derivatives netting’
 
Adjustments applied across asset and liability mark
 
-to-market derivative positions pursuant to legally enforceable
 
bilateral
netting agreements and eligible cash collateral received
 
in derivative transactions that meet the requirements
 
of BCBS 270.
‘Diversification effect’
 
Reflects the fact the risk of a diversified portfolio is smaller than the sum
 
of the risks of its constituent parts. It is measured as
the sum of the individual asset class DVaR
 
estimates less the total DVaR.
 
‘Dodd-Fr
 
ank Act (DFA)’
 
The US Dodd-Frank
 
Wall Street
 
Reform and
 
Consumer Protection
 
Act of 2010.
 
‘Early warning
 
lists (EWL)’
 
Categorisations for wholesale customers used to identify at an early stage those customers where it is believed that
difficulties may deve
 
lop, allowing timely corrective
 
action to be taken. There are three categories of EWL, with risk increasing from EWL 1 (caution)
to EWL 2 (medium) and EWL 3 (high). It is expected that most cases would
 
be categorised EWL 1 before moving
 
to 2 or 3, but it is
 
recognised
 
that
some cases may be categorised to EWL 2 or
 
3 directly.
‘Early Warning
 
List (EWL) Managed accounts’
EWL Managed accounts are Business Lending customers that exceed the Arrears
 
Managed Accounts
limits and are monitored
 
with standard processes
 
that record heightened
 
levels of
 
risk through an EWL grading.
‘Earnings per Share contribution’
The attributable profit or loss generated by a particular business or
 
segment divided by the weighted average
number
 
of Barclays shares in issue to illustrate on a per share basis how that business or segment contributes total earnings per
 
share.
 
‘Economic Value
 
of Equity (EVE)’
 
A measure of the potential change in value of expected future cash flows due to an
 
adverse interest rate
movement, based on existing balance
 
sheet run-off profile.
'Effective Expected Positive
 
Exposure (EEPE)'
 
The weighted average
 
over time of effective expected exposure. The weights are the proportion
 
that
an individual exposure represents of the entire exposure
 
horizon
 
time interval.
‘Eligible liabilities’
Liabilities and capital instruments that are eligible to meet MREL that do not already qualify as own
 
funds.
 
‘Encumbrance’
The use of assets to secure liabilities, such as by way of a lien or charge.
 
‘Enterprise Risk Management Framework
 
(ERMF)’
 
Barclays Group
 
risk
 
management responsibilities are laid out in the Enterprise Risk Management
Framework,
 
which describes how Barclays identifies and manages risk. The framework
 
identifies the principal risks faced by the Barclays Group;
sets out risk appetite requirements; sets out roles and responsibilities for
 
risk management; and sets out risk committee structure.
‘Equities’
 
Trading
 
businesses
 
encompassing Cash Equities, Equity Derivatives
 
& Equity Financing
 
 
Glossary of terms
 
 
 
 
 
351
 
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2019 Annual Report on Form 20-F
 
 
‘Equity and stock index derivatives’
 
Derivatives whose value is derived
 
from equity securities. This category includes equity and stock index swaps
and options (including warrants,
 
which are equity options listed on an exchange). The Barclays
 
Group
 
also enters into
 
fund-linked derivatives,
being swaps and options whose underlyings
 
include mutual funds, hedge funds, indices and multi-asset portfolios. An equity swap is an agreement
between two parties to exchange
 
periodic payments, based upon
 
a notional principal amount, with one side paying fixed or floating interest and
the other side paying
 
based on the actual return of the stock or stock index. An equity option provides
 
the buyer with the right, but not the
obligation, either to purchase
 
or sell a specified stock,
 
basket of
 
stocks or stock index at a specified price or level on or before
 
a specified date.
 
‘Equity risk’
 
In the context of trading book capital requirements, the risk of change
 
in market value of an equity investment.
 
‘Equity structural hedge’
 
An interest rate hedge in place to reduce earnings
 
volatility of the overnight / short term equity investment and to
smoothen the income over
 
a medium/long term.
 
‘EU Risk Reduction Measure
 
package’
A collection of amending Regulations and Directives that update core EU regulatory
 
texts
 
and which came
into force on 27
 
June 2019.
‘Euro Interbank
 
Offered Rate (EURIBOR)’
 
A benchmark
 
interest rate at
 
which banks can borrow
 
funds from other banks in the European
 
interbank
market.
 
‘Europe’
 
Geographic
 
segment comprising countries in which Barclays operates within the EU (excluding UK), Northern
 
Continental and Eastern
Europe.
 
‘European
 
Banking
 
Authority
 
(EBA)’
 
The European
 
Banking
 
Authority
 
(EBA)
 
is an independent
 
EU Authority which works to ensure
 
effective and
consistent prudential
 
regulation
 
and supervision
 
across the
 
European
 
banking
 
sector.
 
Its overall
 
objectives are
 
to maintain financial stability
 
in the
EU and to safeguard the integrity,
 
efficiency and orderly
 
functioning of the banking sector.
‘European Securities and Markets Authority
 
(ESMA)’
An independent
 
European Supervisory
 
Authority with the
 
remit of enhancing the protection
 
of
investors and reinforcing
 
stable and well-functioning financial markets
 
in the European
 
Union.
 
‘Eurozone’
Represents
 
the
 
19
 
European
 
Union
 
countries
 
that have
 
adopted
 
the euro
 
as their common
 
currency.
 
The 19
 
countries are
 
Austria,
Belgium,
 
Cyprus,
 
Estonia, Finland,
 
France,
 
Germany,
 
Greece,
 
Ireland,
 
Italy, Latvia, Lithuania, Luxembourg,
 
Malta, Netherlands, Portugal,
 
Slovakia,
Slovenia and Spain.
‘Expected Credit Losses (ECL)’
 
A present value measure of the credit losses expected to result from
 
default events that may occur
 
during
 
a specified
period of time. ECLs must reflect the present value of cash shortfalls, and must reflect the
 
unbiased and probability
 
weighted assessment of a range
of outcomes.
 
‘Expected Losses’
 
A regulatory measure
 
of anticipated
 
losses for exposures
 
captured under
 
an internals ratings based credit risk
 
approach
 
for
capital adequacy calculations.
 
It is measured as the Barclays Group's
 
modelled view of anticipated losses based on Probability of Default (PD), Loss
Given Default (LGD) and Exposure
 
at Default (EAD), with a one-year time horizon.
’Expert lender models’
 
Models of risk measures that are used for
 
parts of the portfolio where
 
the risk drivers are specific to a particular
counterparty,
 
but where there is insufficient data to support the construction of a statistical model. These models utilise the knowledge
 
of credit
experts that have in depth
 
experience of the specific customer type being modelled.
‘Exposure’
 
Generally refers to positions or actions taken by
 
the bank, or consequences
 
thereof, that may put a certain amount of a bank’s resources
at risk.
‘Exposure at Default (EAD)’
 
The estimation of the extent to which Barclays Group
 
may be exposed to a customer or counterparty
 
in the event of,
and at the time of, that counterparty’s default. At default, the
 
customer may not have drawn
 
the loan fully or may already have repaid some of the
principal, so that exposure may be less than
 
the approved
 
loan limit.
‘External Credit Assessment Institutions (ECAI)’
Institutions whose credit assessments may be used by
 
credit institutions for the determination of
risk weight exposures according
 
to CRR.
‘Federal Reserve
 
Board
 
(FRB)’
Is the governing
 
board of the Federal Reserve System of the US, in charge of making the country's monetary
 
policy.
 
'FICC'
Represents Macro
 
(including rates and currency),
 
Credit and Securitised products.
 
'Financial Policy Committee (FPC)'
 
The Bank of England’s Financial Policy Committee
 
(FPC) identifies, monitors and takes action to remove
 
or
reduce systemic r
 
isks with a view to protecting and enhancing
 
the resilience of the
 
UK financial system. The FPC also has a secondary objective to
support the economic
 
policy of the UK Government.
‘F-IRB / Foundation
 
-Internal Ratings Based’
 
See ‘Internal Ratings Based (IRB
 
)’.
 
‘Financial Conduct Authority (FCA)’
 
The statutory body responsible for conduct
 
of business regulation and supervision of UK authorised firms. The
FCA also has responsibility for
 
the prudential regulation of firms that do not fall within the PRA’s
 
scope.
 
‘Financial Services Compensation Scheme (FSCS)’
 
The UK’s fund for compensation of authorised
 
financial services firms that are unable to pay
claims.
 
‘Financial collateral comprehensive
 
method (FCCM)’
 
A counterparty
 
credit risk
 
exposure calculation approach
 
which applies
 
volatility adjustments
to the market value of exposure
 
and collateral when calculating RWA values.
‘Financial Stability Board
 
(FSB)’
An international
 
body
 
that monitors
 
and makes
 
recommendations
 
about
 
the global
 
financial system.
 
It promotes
international
 
financial
 
stability by
 
coordinating
 
national
 
financial
 
authorities
 
and
 
international
 
standard-setting
 
bodies
 
as
 
they
 
work
 
toward
developing
 
strong regulatory,
 
supervisory and other
 
financial sector policies.
 
It fosters a
 
level playing field by encouraging
 
coherent implementation
of these policies across sectors and jurisdictions.
 
 
 
Glossary of terms
 
 
 
 
 
352
 
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‘Fitch’
 
A credit rating
 
agency.
 
‘Forbearance
 
Programmes’
 
Forbearance
 
programmes to assist
 
customers in financial difficulty through
 
agreements to accept less than contractual
amounts due where financial distress would
 
otherwise prevent satisfactory repayment within the original terms and conditions
 
of the contract.
These agreements may be initiated by
 
the customer, Barclays or
 
a third party and
 
include approved
 
debt counselling plans,
 
minimum
 
due
reductions, interest rate concessions and
 
switches from capital and interest repayments to interest-only
 
payments.
 
‘Forbearance
 
Programmes for
 
Credit Cards’
 
Can be split into 2 main
 
types: Repayment plans-
 
A temporary
 
reduction in the minimum payment
 
due,
for a maximum of 60 months. This may involve
 
a reduction in interest rates to prevent
 
negative amortization; Fully amortising-
 
A permanent
conversion
 
of the outstanding balance into a fully amortising loan, over a maximum period of 60 months.
‘Forbearance
 
Programmes for
 
Home Loans’
 
Can be split
 
into 4 main types: Interest-only conversions
 
-
 
A temporary
 
change from a capital and
interest repayment
 
to an interest-only repayment, for a maximum of 24
 
months; Interest rate reductions
 
-
 
A temporary
 
reduction in interest rate,
for a maximum of 12 months; Payment
 
concessions-
 
An agreement to temporarily
 
accept reduced
 
loan repayments, for a maximum of 24 months;
Term extensions-
 
A permanent extension to the loan maturity date which
 
may involve a reduction
 
in interest rates, and usually involves the
capitalisation of arrears.
‘Forbearance
 
Programmes for
 
Unsecured Loans’
 
Can be split
 
into 3 main types: Payment
 
concessions-
 
An agreement to temporarily
 
accept
reduced
 
loan repayments, for
 
a maximum of 12 months;
 
Term extensions-
 
A permanent extension to the loan maturity date, usually involving the
capitalisation of arrears; Fully amortising
 
-
 
A permanent conversion
 
of the outstanding balance into a fully
 
amortising loan, over a maximum period
of 120
 
months for loans.
‘Foreclosures in Progress’
The process by which the bank initiates legal action against a customer with the intention of terminating a loan
agreement whereby
 
the bank may repossess the property subject to local law and recover
 
amounts it is owed.
 
‘Foreign exchange
 
derivatives’
 
The Barclays Group’s
 
principal exchange
 
rate-related contracts are forward
 
foreign exchange contracts, currency
swaps and currency
 
options. Forward
 
foreign exchange contracts are agreements to buy or sell a
 
specified quantity of foreign currency,
 
usually on
a specified future date at an agreed
 
rate. Currency swaps generally involves the exchange,
 
or notional exchange, of equivalent amounts of two
currencies and a commitment to exchange
 
interest periodically until the principal amounts are re-exchanged
 
on a future date. Currency options
provide
 
the buyer with the right, but not the obligation, either to purchase or sell a fixed amount of a currency
 
at a
 
specified exchange rate on or
before a future date. As compensation
 
for assuming
 
the option risk, the option writer generally receives a premium
 
at the start of the option period.
‘Foreign exchange
 
risk’
 
In the context of DVaR, the impact of
 
changes in foreign exchange
 
rates and volatilities.
 
‘Front Arena’
A deal solution that helps to trade and manage positions and risk in the global capital markets.
 
‘Full time equivalent’
 
Full time equivalent units are the
 
on-job hours
 
paid for employee
 
services divided by the number of ordinary-time hours
normally paid for a full-time staff
 
member when
 
on the job (or contract employees where
 
applicable).
 
‘Fully loaded’
 
When a
 
measure
 
is presented
 
or
 
described
 
as being on a fully loaded basis, it
 
is calculated
 
without applying the transitional provisions
set out in Part Ten
 
of CRR.
 
‘Funded
 
credit
 
protection’
 
Is a technique
 
of credit
 
risk mitigation where
 
the reduction
 
of the
 
credit risk
 
on
 
the exposure
 
of an
 
institution derives
from
 
the right
 
of that institution, in the
 
event of
 
the default of the counterparty or
 
on the occurrence
 
of other specified credit events relating to the
counterparty,
 
to liquidate, or
 
to obtain
 
transfer or appropriation
 
of, or to retain certain assets
 
or amounts, or to reduce
 
the amount of the exposure
to, or to replace it with, the amount of the difference
 
between the amount of the exposure and the amount of a claim on the institution.
‘Funding for Lending
 
Scheme (FLS)’
 
A scheme launched by the Bank of England to incentivise banks and building
 
societies to lend to
 
UK
households and non
 
-financial companies through
 
reduced funding costs, the
 
benefits of which are passed on to UK borrowers
 
in the form of
cheaper and more
 
easily
 
available loans.
 
‘Funding mismatch’
 
In the context of Eurozone
 
balance sheet funding exposures, the excess of local euro denominated
 
external assets,
 
such as
customer loans, over local euro denominated
 
liabilities, such as customer deposits.
 
‘Gains on acquisitions’
 
The amount by which
 
the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent
 
liabilities,
recognised in a business combination, exceeds the cost of the combination.
 
‘General Data Protection Regu
 
lation (GDPR)’
GDPR (Regulation (EU)
 
2016/679)
 
is a
 
regulation by which
 
the European Parliament, the Council of
the European Union
 
and the European
 
Commission intend to strengthen and unify data protection for all individuals within
 
the European Union.
 
‘General market risk’
 
The risk of a price change
 
in a financial instrument due to a change in level of interest rates or owing to a broad
 
equity market
movement unrelated
 
to any specific attributes of individual securities.
‘Global-Systemically Important
 
Banks (G-SIBs or G-SIIs)’
 
Global financial institutions whose size, complexity and systemic interconnectedness,
mean that their distress or failure would
 
cause significant disruption to the wider financial system and economic activity. The Financial Stability
Board
 
and the Basel Committee on Banking Supervision publish a list of globally systemically important banks.
 
‘G-SII additional leverage ratio buffer
 
(G-SII ALRB)’
A macroprudential buffer
 
that applies
 
to globally systemically important banks (G-SIBs) and
other major domestic UK banks and building
 
societies, including banks that are subject to ring-fencing
 
requirements. The G-SII ALRB will be
calibrated as 35% (on
 
a phased basis) of the combined systemic risk buffers that applies to the bank.
‘GSII Buffer’
Common Equity Tier 1 capital required
 
to be held under CRD to ensure that G-SIBs build up surplus capital
 
to compensate for
 
the
systemic risk that such institutions represent to the financial system.
’Grandfathering’
 
In the context of capital resources, the phasing in of the application of instrument eligibility rules which allows CRR and CRR II
non-compliant
 
capital instruments
 
to be included in regulatory
 
capital subject
 
to certain thresholds which decrease over
 
the transitional period.
 
 
Glossary of terms
 
 
 
 
 
353
 
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‘Gross charge
 
-off rates’
 
Represents the balances charged
 
-off to recoveries in the reporting
 
period, expressed as a
 
percentage of average
outstanding balances excluding balances in recoveries. Charge
 
-off to recoveries generally
 
occurs when the collections focus switches from the
collection of arrears to the recovery
 
of the entire outstanding balance, and represents a fundamental change in the relationship between the bank
and the customer. This is a
 
measure of the proportion
 
of customers
 
that have gone into default during the period.
 
‘Gross write-off rates’
 
Expressed as a percentage
 
and represents balances written off in the reporting
 
period divided
 
by gross loans and advances
held at amortised cost at the balance sheet date.
‘Gross new
 
lending’
 
New lending advanced
 
to customers during the period.
 
‘Guarantee’
 
Unless otherwise described, an undertaking
 
by a third party to pay a creditor should
 
a debtor fail to do so. It is a form of credit
substitution.
 
‘Head Office’
 
A division compris
 
ing Brand
 
and Marketing, Finance, Head Office,
 
Human Resources, Internal Audit, Legal, Compliance, Risk, Treasury
and Tax and other
 
operations.
 
‘High-Net-Worth’
 
Businesses within Barclays UK and Barclays
 
International that provide banking
 
and other services to high net worth customers.
 
‘High Risk’
In retail banking, ‘High Risk’ is defined as the subset of up
 
-to-date customers who, either through
 
an event or observed behaviour
exhibit potential financial difficulty.
 
Where appropriate,
 
these customers are proactively contacted to assess whether assistance is required.
‘Home loan’
 
A loan to purchase
 
a residential property.
 
The property
 
is then
 
used as collateral to guarantee repayment
 
of the loan. The borrower
gives the lender a lien against the property
 
and the lender can foreclose on the property
 
if the
 
borrower
 
does not repay the loan per the agreed
terms. Also known as a residential mortgage.
 
‘IHC’ or ‘US IHC’
 
Barclays US LLC, the intermediate holding
 
company
 
established by Barclays in July 2016,
 
which holds most of Barclays’ subsidiaries
and assets in the US.
‘IMA / Internal Model Approach’
In the context of RWAs, RWAs
 
for which the exposure
 
amount has been derived via the use of a PRA approved
internal market risk model.
 
‘IMM / Internal Model Method’
In
 
the context of RWAs, RWAs for
 
which the exposure amount
 
has been derived via the use of a PRA approved
internal counterparty
 
credit risk model.
‘Identified Impairment (II)’
 
Specific impairment allowances for financial assets, individually estimated.
‘IFRS 9
 
transitional arrangements’
Following
 
the application
 
of IFRS
 
9 as of 1 January
 
2018,
 
Article 473a of CRR permits institutions
 
to phase-in the
impact on capital and leverage ratios
 
of the impairment requirements under
 
the new accounting standard.
 
‘Impairment Allowances’
 
A provision held on
 
the balance sheet as a result of the raising of a charge against profit for
 
expected losses in the lending
book. An impairment allowance
 
may either be identified or unidentified and individual or collective.
 
‘Income’
 
Total income, unless otherwise specified.
 
‘Incremental Risk Charge
 
(IRC)’
An estimate of the incremental risk arising from rating migrations and defaults for traded
 
debt instruments beyond
what is already captured
 
in specific
 
market risk VaR for
 
the non-correlation
 
trading portfolio.
‘Independent
 
Commission on Banking (ICB)’
 
Body set up by HM Government to identify structural and non-
 
structural measures to reform the UK
banking system and promote
 
competition.
 
‘Independent
 
Validation Unit (IVU)’
The function within the bank responsible for independent review,
 
challenge and approval of all models.
‘Individual liquidity guidance (ILG)’
 
Guidance given to a bank about the amount, quality and funding profile
 
of liquidity resources that the PRA has
asked the bank to maintain.
 
‘Inflation risk’
 
In the context of DVaR, the impact of changes in
 
inflation rates and volatilities on cash instruments and derivatives.
 
‘Insurance Risk’
 
The risk of the Barclays Group’s
 
aggregate insurance
 
premiums received from
 
policyholders under a portfolio of insurance
contracts being inadequate to cover
 
the claims arising from those policies.
 
‘Interchange’
 
Income paid to a credit card issuer for the clearing and settlement of a sale or cash advance
 
transaction.
‘Interest-only home loans’
Under the terms of these loans, the customer makes payments
 
of interest only for the entire term of the mortgage,
although customers may make early repayments
 
of the principal within the terms of their agreement. The customer is responsible
 
for
 
repaying
 
the
entire outstanding principal on maturity,
 
which may require
 
the sale of the
 
mortgaged
 
property.
‘Interest rate derivatives’
 
Derivatives linked
 
to interest rates. This category includes interest rate swaps, collars, floors options and swaptions.
 
An
interest rate swap is an agreement
 
between two parties to exchange
 
fixed rate and floating rate interest by means of periodic payments
 
based
upon a notional principal amount
 
and the interest rates defined in the contract. Certain agreements combine interest rate and foreign
 
currency
swap transactions, which
 
may or may not include the exchange
 
of principal amounts. A basis swap is a form of interest rate swap, in which both
parties exchange
 
interest payments based on floating rates, where
 
the floating rates are based upon different
 
underlying
 
reference
 
indices. In a
forward
 
rate agreement, two parties agree a future settlement of the difference
 
between an agreed
 
rate and a future interest rate, applied to a
notional principal amount. The settlement,
 
which generally occurs
 
at the
 
start of the contract period,
 
is the discounted present value of the
payment that would
 
otherwise be made at the end of that period.
‘Interest rate risk’
 
The risk of interest rate volatility adversely impacting the
 
Barclays Group’s
 
net interest margin. In the context of the calculation of
market risk DVaR,
 
measures the impact of changes
 
in interest (swap) rates and volatilities on cash instruments and derivatives.
 
 
Glossary of terms
 
 
 
 
 
354
 
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2019 Annual Report on Form 20-F
 
 
‘Interest rate risk in the banking
 
book (IRRBB)’
The risk that
 
the Barclays Group
 
is exposed to capital or income volatility because of a
 
mismatch
between the interest rate exposures
 
of its (non-traded)
 
assets
 
and liabilities.
‘Internal Assessment Approach
 
(IAA)’
One of three types of calculation
 
that a bank with permission to use the Internal Ratings Based (IRB)
approach
 
may apply to securitisation
 
exposures. It consists of mapping a bank's internal rating methodology
 
for credit exposures to those of an
External Credit Assessment Institution (ECAI) to determine the appropriate
 
risk weight based on the ratings based approach.
 
Its applicability
 
is
limited to ABCP programmes
 
related to liquidity facilities
 
and credit enhancement.
‘Internal Capital Adequacy Assessment Process (ICAAP)’
Companies are required
 
to perform a formal Internal Capital Adequacy Assessment
Process (ICAAP)
 
as part of the
 
Pillar 2 requirements
 
(BIPRU)
 
and to provide this document to the PRA on a yearly basis.
 
The ICAAP document
summarises the Barclays Group’s
 
risk management framework, including
 
approach to managing all risks
 
(i.e. Pillar 1 and non
 
-Pillar 1 risks);
 
and,
the Barclays Group’s
 
risk appetite, economic capital and stress testing frameworks.
 
‘Internal model method (IMM)’
 
In the context of RWAs, RWAs
 
for which the exposure
 
amount has been derived via the use of a PRA approved
internal counterparty
 
credit risk model.
 
‘Internal Ratings Based (IRB)’
 
An approach
 
under the CRR framework that relies
 
on the bank’s internal models to derive the risk weights. The IRB
approach
 
is divided into two alternative applications, Advanced and Foundation:
 
Advanced
 
IRB (A-IRB):
 
the bank uses its
 
own estimates of probability
 
of default (PD), loss given default (LGD) and credit
 
conversion
factor to model a given risk exposure.
 
Foundation
 
IRB: the bank applies its own PD as for Advanced, but it uses standard parameters for
 
the LGD and the credit conversion
factor. The Foundation
 
IRB approach
 
is specifically
 
designed for wholesale credit exposures. Hence retail,
 
equity, securitisation positions
and non
 
-credit obligations asset exposures are treated under standardised or
 
A-IRB.
 
‘Investment Bank’
The Barclays Group’s
 
investment bank which
 
consists of origination led and returns focused markets and banking
 
business
which forms part of the Corporate
 
and Investment Bank segment of Barclays International
 
.
 
‘Investment Banking Fees’
 
In the context of Investment Bank Analysis of Total
 
Income, fees generated from
 
origination activity businesses –
including financial advisory, debt and equity underwriting.
 
‘Investment grade’
 
A debt security, treasury
 
bill or similar instrument with a credit rating of AAA to BBB
 
as measured by external credit rating
agencies.
 
‘ISDA Master Agreement’
 
The most commonly used master contract for OTC derivative transactions
 
internationally. It is part of
 
a framework of
documents, designed to enable OTC
 
derivatives to be documented
 
fully and flexibly. The framework consists of a master agreement, a schedule,
confirmations, definition booklets, and a credit support
 
annex. The ISDA master agreement is published by the International Swaps and Derivatives
Association (ISDA).
 
‘Key Risk Scenarios (KRS)’
Key Risk Scenarios are a summary of the extreme potential risk
 
exposure for
 
each Key Risk in each
 
business and function,
including an assessment of the potential frequency
 
of risk events, the average size of losses and three extreme scenarios. The Key Risk
 
Scenario
assessments are a key input to the Advanced
 
Measurement Approach
 
calculation of regulatory and economic capital requirements.
‘Large exposure’
A large exposure
 
is defined as the
 
total exposure of a bank to a counterparty
 
or group of connected clients, whether in the banking
book or
 
trading book
 
or both, which in aggregate equals or exceeds 10%
 
of the bank's eligible capital.
‘Legal risk’
 
The risk of loss or imposition of penalties, damages or fines from the failure of the Barclays
 
Group
 
to meet its
 
legal obligations including
regulatory
 
or contractual requirements.
‘Lender Option Borrower
 
Option (LOBO)’
 
A clause previously included in ESHLA loans that allowed Barclays, on specific dates, to raise the fixed
interest rate on the loan, upon
 
which the borrower
 
had the option to either continue with the loan at
 
the higher rate, or re-pay
 
the loan at par.
‘Lending’
In the context of Investment Bank Analysis of Total
 
Income, lending
 
income includes net interest income, gains
 
or losses on loan
 
sale
activity, and
 
risk management activity relating to the loan portfolio.
‘Letters of credit’
 
A letter typically used for the
 
purposes of international trade guaranteeing
 
that a
 
debtor’s payment to a creditor will be made on
time and in full. In the event that the debtor is unable to make payment,
 
the bank will be required
 
to cover the full or remaining amount
 
of the
purchase.
‘Level 1 assets’
High quality liquid assets under the Basel Committee’s Liquidity Coverage
 
Ratio (LCR), including cash,
 
central bank
 
reserves and
higher quality government
 
securities.
 
‘Level 2 assets’
 
Under the Basel Committee’s Liquidity Coverage
 
Ratio high quality liquid assets (HQLA) are comprised of Level 1 and Level 2 assets,
with the latter comprised
 
of Level 2A and Level 2B assets. Level 2A assets include, for example, lower quality
 
government
 
securities,
 
covered
 
bonds
and corporate
 
debt securities.
 
Level 2B assets include, for exampl
 
e, lower rated corporate
 
bonds, residential mortgage backed
 
securities
 
and
equities that meet certain conditions.
‘Lifetime expected credit losses’
 
An assessment of expected losses associated with default events that may occur
 
during
 
the life
 
of an exposure,
reflecting the present value of cash shortfalls over
 
the remaining expected life of the asset.
‘Lifetime Probability’
 
The likelihood of accounts entering default during
 
the expected remaining life of the asset.
‘Liquidity Coverage
 
Ratio (LCR)’
 
The ratio of the stock of high quality liquid assets to expected net cash outflows over
 
the next 30 days. High-quality
liquid assets should be unencumbered,
 
liquid in markets during a time of stress
 
and, ideally,
 
be central bank eligible. These include, for example,
cash and claims on central governments
 
and central banks.
 
 
 
Glossary of terms
 
 
 
 
 
355
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
‘Liquidity Pool’
 
The Barclays Group
 
liquidity pool comprises cash at
 
central banks and highly
 
liquid collateral specifically held by the Barclays Group
as a contingency
 
to enable the bank to meet
 
cash outflows in the event of stressed market
 
conditions.
 
‘Liquidity Risk’
The risk that the Barclays
 
Group
 
is unable to meet
 
its contractual or
 
contingent obligations or that is does not have the appropriate
amount, tenor and composition
 
of funding and liquidity to support its assets.
 
‘Liquidity risk appetite (LRA)’
 
The level of liquidity risk that the Barclays Group
 
chooses to take in pursuit of its business objectives and in meeting
its regulatory
 
obligations.
‘Liquidity Risk Management Framework
 
(the Liquidity Framework)’
The Liquidity Risk
 
Management Framework
 
(the Liquidity Framework), which is
sanctioned by the Board
 
Risk Committee (BRC) and which incorporates
 
liquidity policies,
 
systems and controls that
 
the Barclays Group
 
has
implemented to manage liquidity risk within tolerances approved
 
by the Board
 
and regulatory agencies.
 
‘Litigation and conduct charges’ or
 
‘Litigation
 
and conduct’
Litigation and conduct charges include regulatory
 
fines,
 
litigation settlements and
conduct related customer
 
redress.
‘Loan loss rate’
 
Quoted in basis points and represents total impairment charges
 
divided by gross loans and advances held at amortised cost at the
balance sheet date.
‘Loan to deposit ratio’
 
Loans and advances at amortised costs divided by deposits at amortised cost.
‘Loan to value (LTV)
 
ratio’
 
Expresses the amount borrowed
 
against an asset
 
(i.e. a mortgage)
 
as a
 
percentage of the appraised value of the asset.
The ratios are used in determining the appropriate
 
level of risk for the loan and are generally reported
 
as an average for new mortgages
 
or an entire
portfolio. Also see ‘Marked to market
 
(MTM) LTV
 
ratio.’
 
‘London Interbank
 
Offered Rate (LIBOR)’
 
A benchmark
 
interest rate at
 
which banks can borrow
 
funds from other banks in the London interbank
market.
 
‘Long-term refinancing
 
operation (LTRO)’
 
The European Central Bank’s 3 year long term bank refinancing
 
operation.
 
‘Loss Given Default (LGD)’
 
The percentage of Exposure
 
at Default (EAD) (defined above)
 
that will
 
not be recovered
 
following default. LGD
comprises the actual loss (the part that is not expected to be recovered),
 
together with the economic costs associated
 
with the recovery
 
process.
 
‘Management VaR’
 
A measure of the potential loss of value arising from unfavourable
 
market movements at a specific confidence level, if current
positions were to be held unchanged
 
for predefined period. Corporate and Investment
 
Bank uses Management VaR with a two-year equally
weighted historical period,
 
at a
 
95% confidence
 
level, with a one day holding
 
period.
 
‘Mandatory break clause’
 
In the context of counterparty
 
credit risk, a
 
contract clause that means a trade will be ended
 
on a particular date.
‘Marked to market approach’
 
A counterparty
 
credit risk exposure calculation approach
 
which uses
 
the current mark to market value of derivative
positions as well as a potential future exposure
 
add-on to calculate an exposure to which a risk weight can be applied. This is also known as the
Current Exposure
 
Method.
‘Marked to market (MTM) LTV
 
ratio’
 
The loan amount as a percentage of the current
 
value of the asset used to secure the loan. Also see ‘Balance
weighted Loan to Value
 
(LTV)
 
ratio’ and ‘Valuation weighted
 
Loan to Value (LTV)
 
ratio.’
‘Market risk’
 
The risk of loss arising from potential adverse changes in the value of the Barclays Group’
 
s
 
assets and liabilities from fluctuation in
market variables including, but not limited to, interest rates,
 
foreign exchange,
 
equity prices, commodity prices, credit spreads, implied volatilities
and asset correlations.
 
‘Master netting agreements’
 
An agreement that provides for
 
a single net
 
settlement of all financial instruments and
 
collateral covered
 
by the
agreement in the event of the counterparty’s
 
default or bankruptcy
 
or insolvency, resulting in a reduced
 
exposure.
‘Master trust securitisation programmes’
 
A securitisation
 
structure where a trust is set up for
 
the purpose of acquiring
 
a pool of receivables. The
trust issues multiple series of securities backed by
 
these receivables.
‘Matchbook (or
 
matched book)’
 
An asset/liability
 
management strategy where assets are matched against liabilities of equivalent value and
maturity.
 
‘Material Risk Takers (MRTs)’
Categories of staff whose
 
professional activities have or are deemed
 
to have a material impact on Barclays’ risk
profile, as determined in accorda
 
nce with the European Banking Authority regulatory
 
technical standard on the identification of
 
such staff.
‘Medium-Term
 
Notes’
 
Corporate
 
notes (or
 
debt securities) continuously offered by
 
a company to investors through
 
a dealer. Investors can choose
from
 
differing
 
maturities, ranging
 
from
 
nine months
 
to 30
 
years. They
 
can be issued on a fixed or floating coupon
 
basis or with an
 
exotic coupon;
with
 
a
 
fixed
 
maturity
 
date
 
(non
 
-callable)
 
or
 
with embedded
 
call or
 
put options
 
or
 
early repayment
 
triggers. MTNs
 
are most
 
generally
 
issued as
senior, unsecured
 
debt.
‘Methodology
 
and policy’
In the context of the Capital
 
Risk section, the effect on
 
RWAs of
 
methodology
 
changes driven by
 
regulatory policy
changes.
 
‘MiFId II’
The Markets in Financial Instruments Directive
 
2004/39/EC
 
(known as "MiFID"
 
I) as subsequently amended to MiFID II is a European
Union law that provides
 
harmonised regulation
 
for investment services across the 31 member states of the European Economic
 
Area.
 
‘Minimum requirement
 
for own funds and
 
eligible liabilities
 
(MREL)’
 
A European
 
Union wide requirement
 
under the Bank Recovery
 
and Resolution
Directive for
 
all European banks and investment banks to hold a minimum level of equity and/or
 
loss absorbing eligible liabilities
 
to ensure the
operation of the bail-in tool to absorb
 
losses and recapitalise an institution in resolution. An institution’s MREL requirement
 
is set
 
by its resolution
authority. Amendments
 
in the EU Risk Reduction Measure package
 
are designed to align MREL and TLAC for EU G-SIBs.
 
 
Glossary of terms
 
 
 
 
 
356
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
 
‘Model risk’
The risk of the potential adverse consequences from
 
financial assessments or decisions
 
based on incorrect
 
or
 
misused model outputs
and reports.
 
‘Model updates’
In the context of the Capital Risk section, changes in RWAs caused by
 
model implementation, changes in model scope or
 
any
changes required
 
to address model malfunctions.
 
‘Model validation’
 
Process through
 
which models are independently
 
challenged, tested and verified to prove that they have been built, implemented
and used correctly,
 
and that they continue to be fit-for-purpose.
 
‘Modelled—VaR’
 
In the context of RWAs, Market
 
risk calculated using value at risk models laid down by
 
the CRR
 
and supervised by the PRA.
 
‘Money market funds’
 
Investment funds typically invested
 
in short-term debt securities.
 
‘Monoline derivatives’
 
Derivatives with a monoline insurer
 
such as credit default swaps referencing the underlying
 
exposures held.
‘Moody’s’
 
A credit rating
 
agency.
 
‘Mortgage Current
 
Accounts (MCA) Reserves’
A secured overdraft
 
facility
 
available to home loan customers which allows them to borrow
 
against
the equity in their home. It allows draw
 
-down
 
up to an agreed available limit
 
on a separate but connected
 
account to the main mortgage loan
facility. The balance drawn
 
must be repaid on redemption
 
of the mortgage.
‘Multilateral development
 
banks’
 
Financial institutions created for the purposes of development, where
 
membership transcends national
boundaries.
 
‘National discretion’
 
Discretions in CRD given to member states to allow
 
the local regulator additional powers
 
in the application of certain
 
CRD rules
in its jurisdiction.
 
‘Net asset value per share’
 
Calculated by dividing shareholders’
 
equity, excluding non
 
-controlling interests and other equity instruments,
 
by the
number
 
of issued ordinary shares.
 
‘Net interest income (NII)’
 
The difference between
 
interest income on assets
 
and interest expense on liabilities.
 
‘Net interest margin (NIM)’
 
Net interest
 
income divided by the sum of
 
average customer
 
assets.
‘Net investment income’
 
Changes in the fair value of financial instruments
 
designated at fair value, dividend income
 
and the net result on disposal
of available for sale assets.
 
‘Net Stable Funding Ratio (NSFR)’
 
The ratio of available stable funding
 
to required
 
stable funding over a one year time horizon, assuming a stressed
scenario. The ratio is required
 
to be over 100%.
 
Available stable funding would include such items as
 
equity capital, preferred
 
stock with a
 
maturity
of over 1 year,
 
or liabilities with a maturity of over
 
1 year. The required
 
amount of stable funding is calculated
 
as the sum of the value of the assets
held and funded by
 
the institution, multiplied by a specific required stable funding (RSF) factor assigned to each particular asset type, added
 
to the
amount of potential liquidity exposure multiplied by its associated
 
RSF factor.
 
‘Net trading income’
 
Gains and losses arising from trading positions which are held at fair value, in respect of
 
both market-making
 
and customer
business, together with interest, dividends and funding
 
costs relating to
 
trading activities.
‘Net write-off rate’
 
Expressed as a percentage and represents
 
balances written off in the reporting
 
period less any post write-off recoveries divided
by gross loans and advances held at amortised cost at
 
the balance sheet date.
‘Net written credit protection’
 
In the context of leverage exposure,
 
the net notional value of credit derivatives protection sold and credit derivatives
protection bought.
 
‘New bookings’
The total of the original balance on accounts opened
 
in the reporting period, including any
 
applicable fees and charges included in
the loan amount.
‘Non-asset backed debt instruments’
 
Debt instruments not backed by
 
collateral, including government
 
bonds; US agency bonds; corporate bonds;
commercial paper;
 
certificates of deposit; convertible
 
bonds; corporate bonds
 
and issued notes.
 
‘Non-customer net interest income’ / ‘Non-
 
customer interest income’
 
Principally comprises the impact of product
 
and equity structural hedges, as
well as certain other net interest income received
 
on government
 
bonds and other debt securities
 
held for the purposes of interest rate hedging
 
and
liquidity for local banking activities.
 
‘Non-model method
 
(NMM)’
 
In the context of RWAs, Counterparty credit
 
risk, RWAs where
 
the exposure amount has been derived
 
through the use
of CRR norms, as opposed
 
to an internal model.
 
‘Non-performance
 
costs’
 
Costs
 
other than performance
 
costs.
‘Non-performing
 
proportion of outstanding balances’
 
Defined as balances
 
greater than 90 d
 
ays delinquent (including forbearance
 
accounts greater
than 90 days and accounts charged
 
off to recoveries), expressed as a percentage
 
of outstanding balances.
 
‘Non-performing
 
balances impairment coverage ratio’
 
Impairment allowance held against non perfo
 
rming balances expressed as a
 
percentage of
non performing
 
balances.
‘Non-Traded
 
Market Risk’
The risk that the current or
 
future exposure
 
in the banking book (i.e. non-traded book) will impact bank's capital and/or
earnings due to adverse movements in Interest or foreign
 
exchange rates.
‘Non-Traded
 
VaR’
Reflects the volatility in the value of the fair value through
 
other comprehensive
 
income (FVOCI) investments in the
 
liquidity pool
which flow directly through
 
capital via the FVOCI reserve. The underlying methodology
 
to calculate
 
non-traded
 
VaR is similar
 
to Traded
Management VaR, but the two measures
 
are not directly comparable.
 
The Non-Traded
 
VaR represents the volatility
 
to capital driven
 
by the FVOCI
exposures. These exposures are in the banking
 
book and
 
do not meet the criteria for trading book treatment.
 
 
 
Glossary of terms
 
 
 
 
 
357
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
‘Notch’
 
A single unit of measurement in a credit
 
rating scale.
 
‘Notional amount’
The nominal or face amount of a financial instrument, such as a
 
loan or a derivative, that is used to calculate payment
 
s
 
made on
that instrument.
 
‘Open Banking’
The Payment Services Directive (PSD2)
 
and the Open API standards and data sharing remedy
 
imposed by the UK Competition and
Markets Authority following
 
its
 
Retail Banking
 
Market Investigation Order.
 
‘Operational risk’
 
The risk of loss to the bank from inadequate
 
or failed processes or systems, human factors or due to external events (for example,
fraud) where
 
the root cause is
 
not due to credit or
 
market risks.
‘Operational Riskdata eXchange
 
(ORX)’
 
The Operational Riskdata eXchange
 
Association (ORX) is a not-for
 
-profit industry association dedicated to
advancing the measurement
 
and management of operational
 
risk in the
 
global financial services industry.
 
Barclays is a member
 
of ORX.
‘Origination led’
 
Focus on high margin,
 
low capital fee based activities and related hedging
 
opportunities.
 
‘Origination exposure model’
 
A technique used to measure the counterparty
 
credit risk of losing anticipated cash flows from forwards,
 
swaps,
options and other derivatives contrac
 
ts in the event the counterparty to the contract should default.
‘OSII’
Other systemically important institutions are institutions that are deemed
 
to create risk to financial stability due to their systemic importance.
 
‘Over-the-counter
 
(OTC) derivatives’
 
Derivative contracts that are traded
 
(and privately negotiated) directly between two
 
parties. They offer
flexibility because, unlike standardised exchange
 
-traded products, they can be tailored to fit specific needs.
‘Overall capital requirement’
 
The overall capital requirement is the sum of capital required
 
to meet the
 
total of a Pillar 1 requirement,
 
a Pillar 2A
requirement,
 
a Global Systemically Important Institution (G-SII)
 
buffer,
 
a Capital
 
Conservation Buffer
 
(CCB) and a Countercyclical Capital Buffer
(CCyB).
 
‘Own credit’
 
The effect of changes in the Barclays Group’s
 
own credit standing on the fair value of financial liabilities.
 
‘Owner occupied mortgage’
A mortgage where the intention of the customer was to occupy the property
 
at origination.
 
‘Own funds’
The sum of Tier 1 and Tier 2 capital.
‘Past due items’
Refers to loans where the borrower
 
has failed
 
to make a payment when due under
 
the terms of the
 
loan contract.
 
‘Payment Protection
 
Insurance
 
(PPI)
 
redress’
 
Provision for
 
the settlement
 
of PPI miss-selling claims and related claims management costs.
‘Pension Risk’
The risk of the Barclays Group’s
 
earnings and capital being adversely impacted by the Barclays
 
Group’s
 
defined benefit obligations
increasing or the value of the assets backing these
 
defined benefit obligations decreasing due to changes in both the level and volatility of prices.
 
‘Performance
 
costs’
 
The accounting charge
 
recognised in the period for performance
 
awards. For deferred
 
incentives and long-term incentives,
 
the
accounting charge
 
is spread over the relevant periods in which the employee delivers service.
 
‘Personal Banking’
Offers retail advice, products
 
and services to community and premier customers in the UK.
 
‘Period end
 
allocated tangible equity’
 
Allocated tangible equity is calculated as 13.0% (2018:
 
13.0%)
 
of RWAs for each business, adjusted for capital
deductions, excluding goodwill
 
and intangible assets,
 
reflecting assumptions the Barclays Group
 
uses for capital planning purposes. Head Office
allocated tangible equity represents the difference
 
between the Barclays Group’s
 
tangible shareholders’ equity and the amounts allocated to
businesses.
 
‘Pillar 1 requirements’
The minimum regulatory
 
capital requirements to meet the sum
 
of credit (including counterparty
 
credit), market and
operational risk.
‘Pillar 2A requirements’
The additional regulatory capital requirement
 
to meet risks
 
not captured under
 
Pillar 1 requirements. This requirement
 
is
the outcome of the bank’s Internal Capital Adequacy
 
Assessment
 
Process (ICAAP)
 
and the complementary supervisory
 
review and evaluation
carried out by the PRA.
 
‘Post-model adjustment (PMA)’
 
In the context of Basel
 
models, a PMA is a short term increase in regulatory
 
capital applied at portfolio level to
account for model
 
input data deficiencies, inadequate model performance
 
or changes to regulatory definitions (e.g. definition of default) to
 
ensure
the model output is accurate, complete and appropriate.
‘Potential Future Exposure
 
(PFE) on Derivatives’
 
A regulatory calculation in respect of the Barclays Group’s
 
potential future credit exposure on both
exchange traded
 
and OTC derivative contracts, calculated by assigning a standardised percentage
 
(based on the underlying
 
risk category and
residual trade maturity) to the gross notional value
 
of each contract.
‘PRA waivers’
 
PRA approvals
 
that specifically
 
give permission to the bank
 
to either modify or waive existing rules. Waivers are specific to an
organisation and require
 
applications being submitted to and approved
 
by the PRA.
‘Primary securitisations’
 
The issuance of securities (bonds and commercial
 
papers) for
 
fund-raising.
‘Primary Stress Tests’
 
In the context of Traded Market Risk, Stress
 
Testing provides
 
an estimate of potentially significant future losses that might
arise from extreme
 
market moves or scenarios. Primary Stress Tests apply
 
stress moves to key liquid risk factors
 
for each of the major trading asset
classes.
‘Prime Services’
 
Involves financing
 
of fixed income and equity positions using Repo and stock lending facilities. The Prime Services business also
provides brokerage
 
facilitation
 
services for hedge fund clients offering execution and
 
clearance facilities for a variety of asset classes.
 
‘Principal’
 
In the context of a loan, the amount borrowed,
 
or the part of the amount borrowed which
 
remains unpaid (excluding interest).
 
 
 
Glossary of terms
 
 
 
 
 
358
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
‘Principal Investments’
 
Private equity investments.
 
‘Principal Risks’
 
The principal risks affecting
 
the Barclays Group
 
described in the risk review section of the Barclays PLC Annual Report.
‘Private equity investments’
 
Investments in equity securities in operating
 
companies not quoted on
 
a public exchange. Investment in private equity
often involves the investment
 
of capital in private companies or
 
the acquisition of a public company that results in the delisting of public equity.
Capital for private equity investment is raised
 
by retail or institutional investors
 
and used to fund investment strategies such as leveraged
 
buyouts,
venture capital, growth
 
capital,
 
distressed investments
 
and mezzanine capital.
 
‘Private-label securitisation’
 
Residential mortgage
 
backed security transactions sold or guaranteed by
 
entities
 
that are not sponsored
 
or owned
 
by
the government.
 
‘Probability of Default (PD)’
 
The likelihood that a loan will not be repaid
 
and will fall into default. PD may be calculated for each client who has a
loan (normally applicable to wholesale customers/clients) or for a portfolio
 
of clients with similar attributes (normally applicable to retail
customers). To calculate PD, Barclays
 
assesses the credit quality of borrowers
 
and other counterparties and assigns
 
them an internal risk rating.
Multiple rating methodologies
 
may be used to inform the rating decision on individual large credits, such as internal and external models, rating
agency ratings, and for wholesale assets market information
 
such as credit spreads. For smaller credits, a single source may suffice such as the
result from an internal rating model.
‘Product structural hedge’
 
An interest rate hedge in place to reduce earnings
 
volatility
 
on product
 
balances with an instant access
 
(such as non-
interest bearing current
 
accounts and managed rate deposits) and to smoothen the income over
 
a medium/long term.
 
‘Properties in Possession held as ’Loans
 
and Advanc
 
es to Customers’’
Properties in the UK and Italy where the customer continues to retain legal
title but where the bank has enforced
 
the possession
 
order
 
as part of the foreclosure process
 
to allow for the disposal of the asset or the court has
ordered
 
the auction of the property.
‘Properties in Possession held as ‘Other Real Estate Owned’’
Properties in South Africa, where the bank has taken legal
 
ownership of the title as a
result of purchase at an auction or similar and treated as ‘Other Real
 
Estate Owned’
 
within other assets on the bank’s balance sheet.
‘Proprietary
 
trading’
 
When a bank, brokerage
 
or other financial institution
 
trades on its own
 
account, at its own risk, rather than on behalf of
customers, so as to make a profit for itself.
 
‘Prudential Regulation Authority (PRA)’
 
The statutory body responsible for the prudential supervision
 
of banks, building societies,
 
insurers and a
small number of significant investment banks in the UK. The PRA is a
 
subsidiary of the Bank of England.
 
‘Prudential valuation adjustment (PVA)’
 
A calculation which adjusts
 
the accounting
 
values of positions held on balance sheet at fair value to comply
with regulatory
 
valuation standards, which place greater emphasis on the inherent uncertainty around
 
the value at
 
which a trading book position
could be exited.
‘Public benchmark’
 
Unsecured
 
medium term notes issued in public syndicated transactions.
 
‘Qualifying central bank claims’
An amount calculated in line with the PRA policy statement allowing banks to exclude
 
claims on the central bank
from the calculation of the leverage exposure
 
measure, as long as these are matched by deposits denominated in the same currency
 
and of
identical or longer
 
maturity.
 
‘Qualifying Revolving Retail Exposure
 
(QRRE)’
 
In the context of the IRB approach
 
to credit risk RWA calculations, an exposure meeting the criteria
set out in BIPRU
 
4.6.42
 
R (2). It includes most
 
types of credit card exposure.
‘Rates’
 
In the context of Investment Bank income
 
analysis, trading revenue relating to government
 
bonds
 
and linear interest rate derivatives.
‘Re-aging’
The returning
 
of a delinquent account to up-to-date status
 
without collecting the full arrears (principal,
 
interest and fees).
‘Real Estate Mortgage
 
Investment Conduits (REMICs)’
An entity that holds a fixed pool of mortgages and that is
 
separated
 
into multiple classes of
interests for issuance to investors.
‘Recoveries Impairment
 
Coverage
 
Ratio’
 
Impairment allowance
 
held against recoveries balances expressed as a percentage of balance in recoveries.
 
‘Recoveries proportion
 
of outstanding balances’
 
Represents the amount of recoveries (gross
 
month-end
 
customer balances of all accounts that
have charged
 
-off) as
 
at the period end compared
 
to total
 
outstanding balances. The size of the recoveries book
 
would ultimately have an impact on
the overall impairment
 
requirement
 
on the portfolio. Balances in recoveries will decrease if: assets are written-off; amounts are
 
collected; or assets
are sold to a third party (i.e. debt sale).
 
‘Recovery
 
book’
 
Represents the total amount of exposure which has been transferred
 
to recovery
 
units who set
 
and implement strategies to
recover
 
the Group’s exposure.
 
‘Regulatory capital’
 
The amount of capital that a bank holds to satisfy regulatory
 
requirements.
 
‘Renegotiated loans’
 
Loans are generally renegotiated
 
either as part of an ongoing
 
customer relationship or in response to an adverse change
 
in the
circumstances of the borrower.
 
In the latter case
 
renegotiation can result in an extension of the due date of pay
 
ment or repayment
 
plans under
which the Barclays Group
 
offers a concessionary rate of interest to genuinely distressed borrowers.
 
This will
 
result in the asset continuing
 
to be
overdue
 
and will be individually impaired where the renegotiated payments of interest and principal will not recover
 
the original carrying amount
 
of
the asset. In other
 
cases,
 
renegotiation will lead to a new agreement, which
 
is treated as a new loan.
‘Repurchase agreement
 
(Repo)’ / ‘Reverse repurchase
 
agreement (Reverse
 
repo)’
 
Arrangements that
 
allow counterparties to use financial
securities as collateral for an interest bearing
 
cash loan. The borrower
 
agrees to sell
 
a security to the lender subject to a commitment to repurchase
the asset at a specified price on a given date. For the party selling the security
 
(and agreeing
 
to repurchase it in the future) it is a Repurchase
agreement or
 
Repo; for the counterparty
 
to the transaction (buying the security and agreeing to sell in
 
the future) it is a Reverse repurchase
agreement or
 
Reverse
 
repo.
 
 
 
Glossary of terms
 
 
 
 
 
359
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
‘Reputation risk’
 
The risk that an action, transaction, investment or
 
event will reduce trust in the Barclays Group’s
 
integrity and competence by
clients, counterparties, investors, regulators, employees
 
or the public.
‘Re-securitisations’
 
The repackaging
 
of Securitised Products into securities. The resulting securities are therefore
 
securitisation positions where the
underlying
 
assets are also predominantly securitisation positions.
 
‘Reserve Capital Instruments (RCIs)’
 
Hybrid issued capital securities which may be debt or
 
equity accounted, depending
 
on the terms.
 
‘Residential Mortgage
 
-Backed Securities (RMBS)’
 
Securities that represent interests in a group
 
of residential mortgages. Investors in these securities
have the right to cash received from
 
future mortgage
 
payments (interest and/or principal).
 
‘Residual maturity’
The remaining contractual
 
term of a credit obligation associated with a credit exposure.
‘Restructured loans’
 
Comprises loans where, for economic
 
or legal reasons related to the debtor’s financial difficulties, a concession has been
granted to the debtor that would not otherwise be considered.
 
Where the concession results in the expected cash flows discounted at the original
effective interest rate
 
being less than the loan’s carrying value, an impairment allowance will be raised.
 
‘Retail Loans’
 
Loans to individuals or
 
small and medium sized enterprises rather than to financial institutions and larger businesses. It includes both
secured and unsecured
 
loans such as
 
mortgages and credit card
 
balances, as
 
well as loans to certain smaller business customers,
 
typically with
exposures up to £3m or
 
with a turnover up to £5m.
 
‘Return on average
 
Risk Weighted Assets’
 
Statutory profit after tax as a proportion
 
of average RWAs.
 
‘Return on average
 
tangible shareholders’ equity’ (RoTE)
Profit after tax attributable to ordinary equity holders
 
of the parent, as a proportion
 
of
average shareholders’
 
equity excluding non
 
-controlling interests and other equity instruments adjusted
 
for the deduction of intangible assets and
goodwill.
 
‘Return on average
 
allocated tangible equity’
Profit after tax attributable to ordinary
 
equity holders of the parent, as a proportion
 
of average
allocated tangible equity.
‘Risk appetite’
 
The level of risk that Barclays is prepared
 
to accept whilst
 
pursuing its business strategy, recognising
 
a range of possible outcomes as
business plans are implemented.
‘Risk weighted assets (RWAs)’
 
A measure of a bank’s assets adjusted for their associated risks. Risk weightings are established in
 
accordance
 
with
the Basel rules as implemented by CRR and local regulators.
 
‘Risks not in VaR
 
(RNIVS)’
 
Refers to all the key market risks which are not captured
 
or not well captured within the VaR model framewo
 
rk.
‘Roll rate analysis’
 
The measurement of the rate at which
 
retail accounts deteriorate through
 
delinquency phases.
‘Sales commissions, commitments and other incentives’
 
Includes commission-based arrangements,
 
guaranteed incentives and Long
 
Term
Incentive Plan awards.
 
‘Sarbanes-Oxley requirements’
 
The Sarbanes-Oxley Act 2002
 
(SOX), which was introduced by the US Government
 
to safeguard against corporate
governance
 
scandals such as
 
Enron, WorldCom
 
and Tyco. All US-listed companies must comply with SOX.
‘Second Lien’
 
Debt that is issued against the same collateral as higher lien debt but that is subordinate
 
to it. In the case of default, compensation for
this debt will only be received after the first lien has been repaid
 
and thus represents a riskier investment than the first lien.
 
‘Secondary Stress Tests’
 
Secondary stress tests are used in measuring potential losses arising from illiquid market
 
risks that cannot be hedged
 
or
reduced
 
within the time period covered
 
in Primary Stress Tests.
‘Secured Overnight Financing
 
Rate (SOFR)’
A broad
 
measure of the cost of borrowing
 
cash overnight collateralized by U.S. Treasury securities in the
repurchase
 
agreement (repo)
 
market.
 
 
‘Securities Financing Transactions
 
(SFT)’
 
In the context of RWAs,
 
any of the following transactions: a repurchase
 
transaction, a securities or
commodities lending or borrowing
 
transaction, or a margin lending transaction whereby
 
cash collateral is
 
received or
 
paid in respect of the transfer
of a related asset.
 
‘Securities financing transactions adjustments’
 
In the context of leverage ratio, a regulatory
 
add-on calculated as exposure less collateral, taking
into account master netting agreements.
‘Securities lending arrangements’
 
Arrangements whereby
 
securities
 
are legally transferred to a third party subject to an agreement to return
 
them
at a future date. The counterparty
 
generally provides
 
collateral against
 
non performance
 
in the form of cash or other assets.
 
‘Securitisation’
 
Typically,
 
a process by which debt instruments such as mortgage loans or
 
credit card balances are aggregated
 
into a pool, which is
used to back new securities. A company
 
sells assets to a special purpose vehicle (SPV) which then issues securities backed b
 
y
 
the assets. This
allows the credit quality of the assets to be separated
 
from the credit rating of the original borrower
 
and transfers risk to external
 
investors.
 
‘Set-off clauses’
 
In the context of Counterparty credit risk, contract clauses that allow Barclays
 
to set off amounts owed
 
to us by a counterparty
against amounts owed by
 
us to the counterparty.
‘Settlement balances’
 
Are receivables or payables
 
recorded
 
between the date (the trade date) a financial
 
instrument (such as a bond)
 
is sold,
purchased
 
or otherwise closed out, and the date the
 
asset is delivered by
 
or to the entity (the settlement date) and cash is received
 
or paid.
‘Settlement risk’
 
The risk that settlement in a transfer system
 
will not take place as expected, usually owing to a party defaulting on one or
 
more
settlement obligations.
‘Significant Increase in Credit Risk (SICR)’
 
Barclays
 
assesses when a significant increase in credit risk has occurred
 
based on quantitative and
qualitative assessments.
 
 
Glossary of terms
 
 
 
 
 
360
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
‘Slotting’
 
Slotting is a Basel 2 approach
 
that requires a standard set of rules to be used in the calculation of RWAs,
 
based upon an assessment of
factors such as the financial strength of the counterparty.
 
The requirements for the application of
 
the Slotting approach
 
are detailed in BIPRU 4.5.
‘Sovereign exposure(s)’
 
Exposures to central governments,
 
including holdings in government bonds
 
and local government bonds.
 
‘Specific market risk’
 
A risk that is due to the individual nature of an asset and can potentially be diversified or
 
the risk of a price change in an
investment due to factors related to the
 
issuer or, in the case of a derivative, the issuer
 
of the underlying investment.
‘Spread risk’
 
Measures the impact of changes to the swap
 
spread,
 
i.e. the difference between swap rates and government
 
bond yields.
 
‘SRB ALRB’
 
The systemic risk buffer (SRB)
 
additional leverage ratio buffer
 
(ALRB) is firm specific requirement set by the PRA using its powers
 
under
section 55M of the Financial Services and Markets Act (2000).
 
Barclays is required to hold an amount of CET1 capital that is equal to or greater
than its ALRB.
‘Stage 1’
 
This represents financial instruments
 
where the credit risk of the financial instrument has not increased significantly since initial
recognition. Stage 1 financial instruments are required
 
to recognise a 12 month
 
expected credit loss
 
allowance.
‘Stage 2’
 
This represents financial instruments
 
where the credit risk of the financial instrument has increased significantly since initial recognition.
Stage 2 financial instruments are required
 
to recognise a lifetime expected credit loss allowance.
‘Stage 3’
 
This represents financial instruments
 
where the financial instrument is considered
 
impaired. Stage 3 financial instruments are required
 
to
recognise a lifetime expected credit
 
loss allowance.
‘Standard & Poor’s’
 
A credit rating agency.
 
‘Standby facilities, credit lines and other commitments’
 
Agreements to lend to a customer in the future,
 
subject to certain conditions. Such
commitments are either made for
 
a fixed period, or have no specific maturity but are cancellable by the lender subject to notice requirements.
 
‘Statutory’
 
Line items of income, expense, profit or
 
loss, assets, liabilities or equity stated in accordance with the requirements of the UK Companies
Act 2006 and
 
the requirements of International Financial Reporting
 
Standards (IFRS).
‘Statutory return on
 
average shareholders’
 
equity’
 
Statutory profit after tax
 
attributable to ordinary
 
shareholders as a proportion
 
of average
shareholders’ equity.
 
‘STD’ / ‘Standardised Approach’
 
A method of calculating RWAs that relies on a mandatory
 
framework
 
set by the regulator to derive risk weights
based on counterparty
 
type and a credit rating provided
 
by an External Credit Assessment
 
Institute.
 
‘Sterling Over Night Index Average
 
(SONIA)’
 
Reflects bank and building societies’ wholesale overnight funding
 
rates in the
 
sterling unsecured
market administrated and calculated by the
 
Bank of England.
‘Stress Testing’
 
A process which involves identifying possible future adverse
 
events or changes in economic conditions that could have
unfavourable
 
effects on the Barclays Group (either financial or non
 
-financial), assessing
 
the Barclays Group’s
 
ability to withstand such changes, and
identifying management actions to mitigate the impact.
 
‘Stressed Value at Risk (SVaR)’
An estimate of the potential loss arising from
 
a 12-month
 
period of significant financial stress
 
calibrated to 99%
confidence level over a 10
 
-day holding
 
period.
‘Structured entity’
 
An entity in which voting or similar rights are not the dominant factor in deciding
 
control. Structured
 
entities
 
are generally
created to achieve a narrow
 
and well defined objective with restrictions around
 
their ongoing activities.
‘Structural hedge’ / ‘hedging’
 
An interest rate hedge in place to reduce earnings
 
volatility
 
and to smoothen the income over
 
a medium/long term
on positions that exist within the balance sheet and do
 
not re-price in line with market rates. See also ‘Equity structural hed
 
ge’ and ‘Product
structural hedge’.
 
‘Structural model of default’
A model based on the assumption that an obligor
 
will default when its assets are insufficient to cover its liabilities.
‘Structured credit’
 
Includes legacy structured credit portfolio
 
primarily comprising
 
derivative exposure and
 
financing exposure to structured credit
vehicles.
‘Structured
 
finance/notes’
 
A structured
 
note is an
 
investment tool
 
that pays a
 
return
 
linked to
 
the value
 
or
 
level of a
 
specified asset or index
 
and
sometimes offers
 
capital protection
 
if the value
 
declines. Structured
 
notes can
 
be linked
 
to equities, interest rates, funds, commodities and foreign
currency.
‘Sub-prime’
 
Sub-prime
 
is
 
defined
 
as
 
loans
 
to
 
borrowers
 
typically
 
having
 
weakened
 
credit
 
histories that
 
include
 
payment
 
delinquencies
 
and
potentially more
 
severe problems
 
such as court
 
judgments
 
and bankruptcies.
 
They may
 
also display reduced repayment
 
capacity as
 
measured by
credit scores, high debt
 
-to-income ratios, or other criteria indicating heightened risk of default.
‘Subordinated liabilities’
 
Liabilities which, in the event of insolvency or liquidation of the issuer,
 
are subordinated
 
to the claims of depositors and
other creditors of the issuer.
 
‘Supranational bonds’
 
Bonds issued by an international organisation, where membership
 
transcends national boundaries (e.g. the European
 
Union
or World
 
Trade
 
Organisation).
‘Synthetic Securitisation Transactions’
 
Securitisation transactions effected
 
through
 
the use of derivatives.
‘Systemic Risk Buffer’
 
CET1 capital that may be required
 
to be held as
 
part of the Combined
 
Buffer Requirement
 
increasing the capacity of UK banks
to absorb stress and limiting the damage
 
to the economy as a result of restricted lending.
‘Tangible net asset value’
 
Shareholders’ equity excluding
 
non-controlling
 
interests
 
adjusted for the deduction of intangible assets and goodwill.
 
 
 
Glossary of terms
 
 
 
 
 
361
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
‘Tangible net asset value
 
per share (TNAV)’
 
Calculated by dividing shareholders’ equity, excluding
 
non-contro
 
lling interests
 
and other equity
instruments, less goodwill and
 
intangible assets, by the number of issued ordinary
 
shares.
 
‘Tangible shareholders’
 
equity’
 
Shareholders’ equity excluding
 
non-controlling
 
interests and other equity instruments
 
adjusted for the deduction of
intangible assets and goodwill.
 
‘Term premium’
 
Additional interest required by
 
investors to hold assets with a longer period
 
to maturity.
 
‘The
 
Fundamental
 
Review
 
of
 
the
 
Trading
 
Book
 
(FRTB)’
 
Is a comprehensive
 
suite of capital rules
 
developed
 
by
 
the Basel Committee
 
on
 
Banking
Supervision as part of Basel III
 
applicable to banks’ wholesale trading activities.
‘The Standardised
 
Approach
 
(TSA)’
Under
 
the TSA, banks
 
are required
 
to hold
 
regulatory
 
capital for operational risk equal to the
 
annual average,
calculated
 
over
 
a
 
rolling
 
three-year
 
period,
 
of
 
the
 
relevant
 
income
 
indicator
 
(across
 
all business
 
lines), multiplied
 
by
 
a
 
supervisory
 
defined
percentage factor
 
by business lines.
 
‘The three lines of defence’
The three lines of defence operating
 
model enables Barclays to separate risk management activities between those
client facing areas of the Barclays
 
Group
 
and associated support functions responsible for identifying risk, operating within applicable limits and
escalating risk events (first line); colleagues in Risk and Compliance who
 
establish the limits, rules and constraints under which the first line
operates and monitors their performance
 
against those
 
limits and constraints (second line); and, colleagues in Internal Audit who pr
 
ovide
assurance to the Board
 
and Executive Management over
 
the effectiveness
 
of governance,
 
risk management and control over
 
risks (third line). The
Legal function does not sit in any of the three lines,
 
but supports them all. The Legal function is, howeve
 
r, subject to oversight from Risk and
Compliance with respect to operational and conduct
 
risks.
‘Tier 1 capital’
 
The sum of the Common Equity Tier 1 capital and Additional Tier 1 capital.
 
‘Tier 1 capital ratio’
 
The ratio which expresses Tier 1 capital as a percentage
 
of RWAs under
 
CRR.
 
‘Tier 2 (T2) capita
l’
 
A type of capital as defined in the CRR principally composed
 
of capital instruments, subordinated loans and share premium
accounts where qualifying conditions have
 
been met.
‘Tier 2 (T2) securities’
 
Securities that are treated as Tier 2 (T2)
 
capital in the context of CRR.
 
‘Total capital ratio’
Total Regulatory capital as a percentage
 
of RWAs.
‘Total Loss Absorbing
 
Capacity (TLAC)’
 
A standard published by the FSB which is applicable to G-SIBs and requires a G-SIB to hold a prescriptive
minimum level of instruments and liabilities that should be readily available
 
for bail-in within resolution to absorb
 
losses and recapitalise the
institution.
‘Total outstanding balance’
In retail banking, total outstanding
 
balance is defined as the gross month-end
 
customer balances on all accounts
including accounts charged
 
off to recoveries.
 
‘Total return
 
swap’
 
An instrument whereby
 
the seller
 
of protection receives the full return
 
of the asset, including both the income and change
 
in the
capital value of the asset. The buyer
 
of the protection in return receives a predetermined
 
amount.
‘Total balances on forbearance
 
programmes coverage
 
ratio’
 
Impairment allowance
 
held against Forbearance
 
balances expressed as a
 
percentage of
balance in forbearance.
‘Traded
 
Market Risk’
The risk of a reduction
 
to earnings or capital due to volatility of trading book positions.
 
‘Trading
 
book’
All positions
 
in financial instruments and commodities held by an institution
 
either with trading intent, or in order
 
to hedge positions
held with trading intent.
‘Traditional Securitisation Transactions’
 
Securitisation transactions in which an underlying
 
pool of assets
 
generates cash flows to service payments
to investors.
‘Transitional’
 
When a measure is presented or
 
described as being on a transitional basis, it is calculated in accordance with the transitional
provisions set out in Part Ten of
 
CRR.
‘Treasury and
 
Capital Risk’
 
This comprises of Liquidity Risk, Capital Risk and Interest Rate Risk in
 
the Banking Book.
‘Twelve
 
month expected credit losses’
 
The portion of the lifetime ECL arising if default occurs within 12 months
 
of the reporting date (or
 
shorter
period if the expected life is less than 12 months), weighted
 
by the probabili
 
ty of said default occurring.
‘Twelve
 
month PD’
 
The likelihood of accounts entering default within 12 months of the reporting
 
date.
‘Unencumbered’
 
Assets
 
not used to secure liabilities or otherwise pledged.
 
‘United Kingdom (UK)’
 
Geographic segment where
 
Barclays operates comprising the UK. Also see ‘Europe’.
 
‘UK Bank levy’
 
A levy that applies to UK banks, building societies and the UK operations of foreign
 
banks. The levy is payable based on a percentage
of the chargeable
 
equity and liabilities
 
of the bank on its balance sheet date.
 
‘UK leverage exposure’
Is calculated as per the PRA rulebook, where the exposure
 
calculation also
 
includes the FPC’s recommendation to allow
banks to exclude claims on the central bank from
 
the calculation of the leverage exposure measure, as long as these are matched
 
by deposits
denominated in the same currency
 
and of identical or longer maturity.
‘UK leverage ratio’
As per the PRA rulebook,
 
means a bank’s tier 1 capital divided by its total exposure measure, with this ratio expressed as a
percentage.
 
 
Glossary of terms
 
 
 
 
 
362
 
Barclays PLC
 
2019 Annual Report on Form 20-F
 
 
‘Unfunded
 
credit protection’
 
Is a technique
 
of credit
 
risk mitigation where
 
the reduction
 
of the credit risk on the exposure of an institution derives
from the obligation of a third party to pay
 
an amount in the event of the default of the borrower
 
or the occurrence of other specified credit events.
‘US Partner
 
Portfolio’
 
Co-branded credit card
 
programs with companies across various sectors including travel, entertainment, retail and financial
sectors.
 
‘US Residential Mortgages’
 
Securities that represent interests in a group
 
of US residential
 
mortgages.
 
‘Utilisation rate’
 
Utilisation of MCA balances expressed as a percentage
 
of total
 
MCA reserve limits.
 
‘Valuation weighted Loan
 
to Value (LTV)
 
Ratio’
 
In the context of credit risk disclosures on secured
 
home loans, a means of calculating marked
 
to
market LTVs derived
 
by comparing
 
total outstanding balance and the value of total collateral we hold against these balances. Valuation weighted
loan to value is calculated using the following formula:
 
LTV = total outstandings in portfolio/total property
 
values of total
 
outstandings in portfolio.
‘Value at Risk (VaR)’
 
A measure of the potential loss of value arising from unfavourable
 
market movements at a specific confidence level and within
a specific timeframe.
‘Weighted off balance
 
sheet commitments’
 
Regulatory add
 
-ons to the leverage exposure measure
 
based on credi
 
t
 
conversion
 
factors used in the
Standardised Approach
 
to credit risk.
‘Wholesale loans’ / ‘lending’
 
Lending to larger businesses, financial institutions and sovereign
 
entities.
 
‘Write-off (gross)’
 
The point where it is determined that an asset is irrecoverable,
 
or it is
 
no longer
 
considered economically
 
viable to try to
 
recover
the asset or it is deemed immaterial or full and final settlement is reached
 
and the shortfall written off. In
 
the event of write-off, the customer
balance is removed
 
from the balance sheet and the impairment allowance held against the asset is released. Net write-offs represent
 
gross write-
offs less post write-off recoveries.
 
‘Wrong
 
-way risk’
Arises, in a trading exposure,
 
when there is significant correlation between the underlying
 
asset
 
and the counterparty,
 
which in
the event of default would
 
lead to a
 
significant mark to market loss. When assessing the credit exposure
 
of a wrong
 
-way trade, analysts
 
take into
account the correlation between
 
the counterparty
 
and the underlying asset as
 
part of the sanctioning process.
 
 
 
 
 
 
 
 
EXHIBIT INDEX
 
Exhibit
 
Description
1.1
 
2.1
Long Term
 
Debt Instruments: Barclays PLC is not party to any single instrument relating to long
 
-term debt pursuant to which a total
amount of securities exceeding 10%
 
of its total assets (on a consolidated basis) is authorised to be issued. Barclays PLC hereby
 
agrees
to furnish to the Securities and Exchange Commission (the “Commission”), upon
 
its request, a copy of any instrument defining the
rights of holders of its long-
 
term debt or the rights of holders of the long-term debt of any of its subsidiaries for which consolidated or
unconsolidated financial statements are required
 
to be filed with
 
the Commission.
2.2
4.1
 
4.2
 
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
4.12
4.13
4.14
4.15
4.16
4.17
4.18
4.19
8.1
12.1
13.1
 
15.1
99.1
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy
 
Extension Schema
101.CAL
XBRL Taxonomy
 
Extension Schema Calculation
 
Linkbase
101.DEF
XBRL Taxonomy
 
Extension Schema Definition Linkbase
101.LAB
XBRL Taxonomy
 
Extension Schema Label Linkbase
101.PRE
XBRL Taxonomy
 
Extension Schema Presentation Linkbase
 
 
 
 
 
 
 
Signatures
 
 
The registrant hereby
 
certifies that it meets all of the requirements for filing on Form
 
20-
 
F
 
and that it has
 
duly caused and authorised the
undersigned
 
to sign this annual report on its behalf.
 
 
 
Date February
 
13, 2020
Barclays PLC
(Registrant)
 
By
/s/ Tushar Morzaria
 
 
Tushar Morzaria, Group Finance Director