Barclays 2014 Annual Report Download - page 221

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Regulation in the United States
In the United States, Barclays PLC, Barclays Bank PLC and their US
subsidiaries are subject to a comprehensive regulatory framework
involving numerous statutes, rules and regulations, including the
International Banking Act of 1978, the Bank Holding Company Act of
1956 (BHC Act), the USA PATRIOT Act of 2001 and the Dodd-Frank
Wall Street Reform and Consumer Protection Act of 2010 (DFA). This
legislation regulates the activities of Barclays, including its US banking
subsidiaries and the US branches of Barclays Bank PLC, as well as
imposing prudential restrictions, such as limits on extensions of credit
by the Barclays Bank PLC’s US branches and the US banking
subsidiaries to a single borrower and to affiliates. The New York and
Florida branches of Barclays Bank PLC are subject to extensive federal
and state supervision and regulation by the Board of Governors of the
Federal Reserve System (FRB) and, as applicable, the New York State
Department of Financial Services and the Florida Office of Financial
Regulation. Barclays Bank Delaware, a Delaware chartered commercial
bank, is subject to supervision and regulation by the Federal Deposit
Insurance Corporation (FDIC), the Delaware Office of the State Bank
Commissioner and the Consumer Financial Protection Bureau. The
deposits of Barclays Bank Delaware are insured by the FDIC. Barclays
Wealth Trustees (US) NA is an uninsured non-depository trust
company chartered and supervised by the Office of the Comptroller of
the Currency. The licensing authority of each US branch of Barclays
Bank PLC has the authority, in certain circumstances, to take
possession of the business and property of Barclays Bank PLC located
in the state of the office it licenses or to revoke or suspend such licence.
Such circumstances generally include violations of law, unsafe business
practices and insolvency.
Barclays PLC and Barclays Bank PLC are bank holding companies
registered with the FRB, which exercises umbrella supervisory authority
over Barclays US operations. Barclays is required to implement by July
2016 a US intermediate holding company (IHC) which will hold
substantially all of Barclays’ US subsidiaries and assets (including
Barclays Capital Inc. and Barclays Bank Delaware, other than Barclays’
US branches and certain other assets and subsidiaries). This IHC will
also be a US bank holding company and generally regulated as such
under the BHC Act. As part of this supervision, the IHC will also
generally be subject to the enhanced prudential supervision
requirements under the DFA as US bank holding companies of similar
size, including US Basel III-based regulatory capital and leverage,
liquidity stress-testing and risk management requirements. Barclays
PLC and Barclays Bank PLC have each elected to be treated as a
financial holding company under the BHC Act. Financial holding
companies may generally engage in a broader range of financial and
related activities, including underwriting and dealing in all types of
securities, than are permitted to registered bank holding companies
that do not maintain financial holding company status. Financial
holding companies such as Barclays PLC and Barclays Bank PLC are
required to meet or exceed certain capital ratios and be deemed to be
‘well managed’. Barclays Bank Delaware and Barclays Wealth Trustees
(US) NA are each required to meet certain capital requirements and be
deemed to be ‘well managed’. In addition, Barclays Bank Delaware must
have at least a ‘satisfactory’ rating under the Community Reinvestment
Act of 1977 (CRA). Entities ceasing to meet any of these requirements,
are allotted a period of time in which to restore capital levels or the
management or CRA rating. Should Barclays PLC or Barclays Bank PLC
fail to meet the above requirements, during the allotted period of time
they could be prohibited from engaging in new types of financial
activities or making certain types of acquisitions in the US. If the capital
level or rating is not restored, the Group may ultimately be required by
the FRB to cease certain activities in the United States. More generally,
Barclays’ US activities and operations may be subject to other
requirements and restrictions by the FRB under its supervisory
authority, including with respect to safety and soundness.
Under the Federal Deposit Insurance Act, as amended by the DFA,
Barclays is required to act as a source of financial strength for Barclays
Bank Delaware. This could, among other things, require Barclays to
inject capital into Barclays Bank Delaware if it fails to meet applicable
regulatory capital requirements.
A major focus of US government policy relating to financial institutions
in recent years has been combating money laundering and terrorist
financing and enforcing compliance with US economic sanctions.
Regulations applicable to US operations of Barclays Bank PLC and its
subsidiaries impose obligations to maintain appropriate policies,
procedures and controls to detect, prevent and report money
laundering and terrorist financing and to ensure compliance with US
economic sanctions against designated foreign countries, nationals
and others. Failure of a financial institution to maintain and implement
adequate programmes to combat money laundering and terrorist
financing or to ensure economic sanction compliance could have
serious legal and reputational consequences for the institution.
Barclays’ US securities broker/dealer, investment advisory and
investment banking operations 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 self-regulatory organisations (SROs) as part of a
comprehensive scheme of regulation of all aspects of the securities and
commodities business under the US federal and state securities laws.
Similarly, Barclays US commodity futures and options-related
operations are subject to ongoing supervision and regulation by the
Commodity Futures Trading Commission (CFTC), the National Futures
Association and other SROs.
The credit card activities of the Group in the US are subject to the
Credit Card Accountability, Responsibility and Disclosure Act of 2009
which prohibits certain pricing and marketing practices for consumer
credit card accounts.
The DFA became law in July 2010. Although many of the DFA rules
have been adopted and implemented, a number of rules have not yet
been adopted, or have been adopted but not fully implemented. In
addition, the rules that have been adopted and implemented have, for
the most part, only recently become effective and their impact, in many
cases, cannot yet be fully evaluated. Therefore, the full scale of the
DFA’s impact on the Group continues to remain unclear. In addition,
market practices and structures may change in response to the
requirements of the DFA in ways that are difficult to predict but that
could impact Barclays business. Nonetheless, certain provisions of the
DFA are particularly likely to have a significant effect on the Group,
including:
Q Structural Reform: On 18 February 2014, the FRB issued a final rule
implementing certain enhanced prudential standards of Section 165
of the DFA for certain foreign banking organisations, such as
Barclays.
The rule’s specific requirements depend on the amount of assets of
the foreign banking organisation both inside and outside the United
States, with the most stringent requirements imposed on foreign
banking organizations with over $50bn in US non-branch assets.
Barclays is subject to the most stringent requirements of the rule,
including the requirement to create a US intermediate holding
company (IHC) structure to hold its US banking and non-banking
subsidiaries. The IHC will be subject to supervision and regulation by
the FRB as if it were a US bank holding company of comparable size.
Barclays Bank PLC’s US branches will be subject to certain separate
requirements, including with respect to liquidity.
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