Barclays 2011 Annual Report Download - page 160

Risk management
Supervision and regulation continued
– Resolution plans: The DFA requires bank holding companies with total
consolidated assets of US$50 billion or more to submit to the FRB and
the FDIC, and regularly update, a plan for “rapid and orderly” resolution
to be used if the company experiences material financial distress or
failure. Non-US banking organisations that are treated as bank holding
companies under US law, such as Barclays, are required to submit such
plans with respect to their US operations if they have more than US$50
billion in US assets. Barclays US assets exceed US$250 billion, and as a
result Barclays is required to submit a resolution plan by 1 July 2012.
– Regulation of derivatives markets: Among the changes mandated by
the DFA are that many types of derivatives now traded in the over-the-
counter markets be traded on an exchange or swap execution facility
and centrally cleared through a regulated clearing house. In addition,
many participants in these markets will be required to register with the
CFTC as “swap dealers” or “major swap participants” and/or with the
US SEC as “securities swap dealers” or “major securities swap dealers”
and be subject to CFTC and SEC regulation and oversight. Barclays Bank
PLC and, potentially, one or more of its US subsidiaries may be
subjected to these requirements. Entities required to register will also
be subject to business conduct, capital, margin, recordkeeping and
reporting requirements. In addition, the CFTC, pursuant to the DFA, has
adopted rules on position limits on derivatives on physical commodities.
It is possible that additional regulation, and the related expenses and
requirements, will restrict participation in the derivative markets,
thereby increasing the costs of engaging in hedging or other
transactions and reducing liquidity and the use of the derivative
markets. Barclays Bank PLC and its subsidiaries and affiliates may be
exposed to these effects whether or not they are required to register
in the capacities described. The new regulation of the derivative
markets could adversely affect the business of Barclays Bank PLC and
its affiliates in these markets and could make it more difficult and
expensive to conduct hedging and trading activities. The DFA also
contains a “derivatives push-out” requirement that, as early as 2013,
could prevent the Group from conducting certain swaps-related
activities in the US branches of Barclays Bank PLC.
– Risk retention requirements for securitisations: The US federal banking
agencies are required by the DFA to develop rules whereby anyone who
organises or initiates an asset-backed security transaction must retain
a portion (generally, at least five percent) of any credit risk that the
person conveys to a third party. This may impact the participation by
the Group’s US operations in such transactions.
– Creation of the Bureau of Consumer Financial Protection (CFPB): The
CFPB is empowered to regulate the credit card industry, including the
terms of credit card agreements with consumers, disclosures, and fees.
Actions by the CFPB in this area are likely to impact the Group’s US
credit card business. The CFPB became operational in July 2011, and is
soliciting public comment on a model credit card disclosure form and
accepting consumer credit card complaints. More broadly, the CFPB
has the authority to examine and take enforcement action against any
US bank with over US$10 billion in total assets, such as Barclays Bank
Delaware, with respect to its compliance with Federal laws regulating
the provision of consumer financial services.
158 Barclays PLC Annual Report 2011 www.barclays.com/annualreport