Barclays 2014 Annual Report Download - page 330

328 I Barclays PLC Annual Report 2014 barclays.com/annualreport
Notes to the financial statements
Scope of consolidation
36 Principal subsidiaries continued
An interest in equity voting rights exceeding 50% would typically indicate that the Group has control of an entity. However certain entities are
excluded from consolidation because the Group does not have exposure to their variable returns. These entities are controlled by external
counterparties rather than the Group. Where appropriate, interests relating to these entities are included in Note 37 Structured entities.
Country of registration or incorporation Company name
Percentage of voting
rights held (%)
Equity shareholder’s
funds (£m)
Retained profit for
the year (£m)
UK Fitzroy Finance Limited 100 – –
Cayman Islands Palomino Limited 100 1 –
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 £1,757bn (2013: £1,789bn) and £1,683bn
(2013: £1,720bn) 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, leverage and exposure ratios restricting the ability of these entities
to make distributions of cash or other assets to the parent company, Barclays PLC.
In order to meet capital requirements, subsidiaries may hold certain equity accounted and debt accounted issued financial instruments and
non-equity instruments such as Tier 1 and Tier 2 capital instruments and other forms of subordinated liability. See Note 33 Non-controlling
interests and Note 30 Subordinated liabilities 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 maintain liquidity pools to meet PRA and local regulatory requirements. The main subsidiaries
affected are Barclays Bank PLC, Barclays Africa Group Limited and Barclays Capital Inc. which must maintain daily compliance with the regulatory
minimum. See page 191 to 208 for further details of liquidity requirements, including those of our 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. Once
encumbered, the assets are not available for transfer around the Group. The assets affected are disclosed in Note 40 Assets pledged.
Assets held by consolidated structured entities
£379m (2013: £690m) of assets included in the Group’s balance sheet relate to consolidated investment funds and are held to pay return and
principal to the holders of units in the funds. The assets held in these funds cannot be transferred to other members of the Group. The decrease is
materially driven by the closure of European wealth funds during the year.
Other restrictions
The Group is required to maintain balances with central banks and other regulatory authorities and these amounted to £4,448m (2013: £4,722m).
Barclays Africa Group Limited assets are subject to exchange control regulation determined by the South African Reserve Bank (SARB). Special
dividends and loans in lieu of dividends cannot be transferred without SARB approval.
37 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: