Barclays 2014 Annual Report Download - page 214

212 I Barclays PLC Annual Report 2014 barclays.com/annualreport
Risk performance
Conduct and reputation risk
Risk review
Conduct risk
Doing the right thing in the right way and providing suitable products
and services for customers and clients is central to Barclays’ wider
strategy of being the Go-To bank. Barclays is committed to Group-wide
changes to business practices, governance and mindset and
behaviours so that good customer outcomes and protecting market
integrity are integral to the way Barclays operates.
As part of the Transform initiatives, the Conduct Risk Programme has
been leading this change across the Group. Conduct Risk was
re-categorised as a Principal Risk in 2013 and is supported by seven Key
Risk Frameworks (KRF) which were issued during 2014. The KRF
articulate expectations for achieving good customer outcomes and
protecting market integrity.
Summary of performance in the period
Conduct risk management continues to mature as businesses become
more adept at considering potential conduct risks within their existing
business models and as part of strategy development. Throughout
2014 conduct risks were raised by businesses for consideration by the
Board Conduct, Operational and Reputation Risk Committee (BCORR).
These include conduct risks associated with business growth
strategies, the expansion of digital propositions, increasing cyber crime
and the restructure of the bank, including exiting markets and
migrating customers. BCORR has reviewed the risks raised and
whether the management actions proposed are appropriate to ensure
conduct risks were effectively managed. The Committee also reviewed
the nature and scope of the conduct risk training provided to staff and
its suitability for supporting the cultural change Barclays is undertaking.
In 2014, all businesses undertook conduct risk assessments to evaluate
how strategy and business models could generate conduct risks for
customers and markets and to identify actions that should be taken.
Increasing the awareness of all staff of the importance of good
customer outcomes and protecting market integrity has been a priority.
During 2014, over 95% of Barclays staff successfully completed
e-learning and there have been a number of business specific training
and awareness events.
As a result of increased awareness and early consideration of conduct
risk in the business, a number of actions have been taken to improve
customer outcomes including:
Q Outcomes for clients impacted by the creation of BNC;
Q The overdraft charges on UK current accounts have been revised,
with increased clarity on terms and pricing, providing customers
with greater control over their borrowing and a reduction in Barclays’
revenues from unauthorised borrowing;
Q A new UK mortgage product was not launched because of potential
conduct risks; and
Q A fixed-rate lending product was created for SME customers; this
was a simplified product with transparent risks and benefits and fair
pricing, including appropriate controls on marketing and sales.
Whilst the above actions seek to reduce the future levels of conduct
risk where appropriate, Barclays is also looking to put things right with
regard to its historic transactions with customers. During 2014 Barclays
incepted redress programmes for customers including:
Q Remediating customers where paperwork was not correct under the
Consumer Credit Act;
Q Barclays will be apologising and making refunds to some business
customers, where a fixed interest rate was charged beyond the set
fixed rate period, where this fixed rate exceeded the floating rate that
customers could have been charged; and
Q A redress agreement with Affinion International Ltd and 11 banks
and card issuers, including Barclays, to compensate customers for
issues identified with the way that a feature of the card security
product was sold to customers. Notifications to affected customers
commenced in January 2015.
The Group continued to incur the significant costs of conduct matters
and additional charges of £1,513m were recognised for customer
redress including £1,270m for the cost of PPI remediation. Barclays also
continues to be party to litigation and regulatory actions involving
claimants who consider that inappropriate conduct by the Group has
caused damage. Investigations in respect of various conduct issues
related to FX remain ongoing and related class actions have been filed
in US Courts. As at 31 December 2014 a provision of £1,250m has been
recognised for certain aspects of ongoing investigations involving
certain authorities and litigation relating to Foreign Exchange. Details in
respect of the status of such investigations and related litigation
matters are included in the Legal, Competition and Regulatory Matters
note on page 306. Resolution of these matters remains a necessary and
important part of delivering the Group’s strategy, but there are early
signs that we are driving better outcomes for customers from a more
thoughtful consideration of our customers’ needs.
Conduct Reputation measure
To aid monitoring progress in the management of conduct, a ‘Conduct
Reputation’ measure is included within the Balance Scorecard. The
conduct measure is developed through a conduct and reputation
survey, undertaken by YouGov, across a range of respondents including
business and political stakeholders, the media, NGOs, charities and
other opinion formers across key geographies (UK, Europe, Africa, the
US and Asia). Barclays’ 2014 mean score remained stable at 5.3 (2013:
5.2) with minor improvement in all five components of the Index
(which are: delivering value for money for customers/clients; can be
trusted; treat staff well at all levels of the business; have high quality
products and services; and operate openly and transparently). Progress
towards the 2018 target of 6.5 is slower than desired as the impact of
legacy issues act as a drag on the benefit of actions to improve
management of conduct.
Conduct risk is the risk that detriment is caused to our
customers, clients, counterparties or Barclays because
of inappropriate judgement in the execution of our
business activities.
All disclosures in this section (page 212) are unaudited unless otherwise stated