Barclays 2011 Annual Report Download - page 252

Notes to the financial statements
For the year ended 31 December 2011 continued
32 Competition and regulatory matters
This note highlights some of the key competition and regulatory challenges facing Barclays, many of which are beyond our control. The extent of the
impact of these matters on Barclays cannot always be predicted but may materially impact our businesses and earnings.
Regulatory change
The scale of regulatory change remains challenging with a significant tightening of regulation and changes to regulatory structures globally, especially
for banks that are deemed to be of systemic importance. Concurrently, there is continuing political and regulatory scrutiny of the operation of the
banking and consumer credit industries which, in some cases, is leading to increased or changing regulation which is likely to have a significant effect
on the industry. Examples include Basel 3, the emerging proposals on bank resolution regimes and proposals relating to over-the-counter derivatives
clearing and global systemically important banks.
In the UK, the FSA’s current responsibilities are to be reallocated between the Prudential Regulatory Authority (a subsidiary of the Bank of England) and
a new Financial Conduct Authority. In addition, the Independent Commission on Banking (the ICB) completed its review of the UK banking system and
published its final report on 12 September 2011. The ICB recommended (amongst other things) that: (i) the UK and EEA retail banking activities of a UK
bank or building society should be placed in a legally distinct, operationally separate and economically independent entity (so-called “ring-fencing”);
and (ii) the loss-absorbing capacity of ring-fenced banks and UK-headquartered global systemically important banks (such as Barclays Bank PLC)
should be increased to levels higher than the Basel 3 proposals. The UK Government published its response to the ICB recommendations in December
2011 and indicated that primary and secondary legislation relating to the proposed ring-fence will be completed by May 2015, with UK banks and
building societies expected to be compliant as soon as practicable thereafter, and the requirements relating to increased loss-absorbing capacity of ring-
fenced banks and UK-headquartered global systemically important banks will be applicable from 1 January 2019.
The US Dodd-Frank Wall Street Reform and Consumer Protection Act contains far reaching regulatory reform. The full impact on Barclays businesses
and markets will not be known until the principal implementing rules are adopted in final form by governmental authorities, a process which is
underway and which will take effect over several years.
Payment Protection Insurance (PPI)
See Note 29.
Interchange
The Office of Fair Trading, as well as other competition authorities elsewhere in Europe, continues to investigate Visa and MasterCard credit and debit
interchange rates. These investigations may have an impact on the consumer credit industry as well as having the potential for the imposition of fines.
Timing is uncertain but outcomes may be known within the next 2-4 years.
London Interbank Offered Rate (LIBOR)
The FSA, the US Commodity Futures Trading Commission, the SEC, the US Department of Justice Fraud Section of the Criminal Division and Antitrust
Division and the European Commission are amongst various authorities conducting investigations into submissions made by Barclays and other panel
members to the bodies that set various interbank offered rates. Barclays is co-operating in the relevant investigations and is keeping regulators
informed. In addition, Barclays has been named as a defendant in a number of class action lawsuits filed in US federal courts involving claims by
purported classes of purchasers and sellers of LIBOR-based derivative products or Eurodollar futures or options contracts between 2006 and 2009. The
complaints are substantially similar and allege, amongst other things, that Barclays and other banks individually and collectively violated US antitrust
and commodities laws and state common law by suppressing LIBOR rates during the relevant period. Barclays has been informed by certain of the
authorities investigating these matters that proceedings against Barclays may be recommended with respect to some aspects of the matters under
investigation, and Barclays is engaged in discussions with those authorities about potential resolution of those aspects. It is not currently possible to
predict the ultimate resolution of the issues covered by the various investigations and lawsuits, including the timing and the scale of the potential
impact on the Group of any resolution.
250 Barclays PLC Annual Report 2011 www.barclays.com/annualreport