Barclays 2014 Annual Report Download - page 51

barclays.com/annualreport Barclays PLC Annual Report 2014 I 49
What we did in 2014
Board Financial Risk Committee Report
‘Further regulatory change, such as structural reform in
the UK, US and continental Europe, which will require
Barclays to segregate its activities, will require changes in
how the Group operates and an increased focus on
capital, liquidity and funding in legal entities.’
Dear Shareholders
Going into 2014, we expected to see a continuation of subdued
economic conditions in some of our main markets. GDP was expected
to show a gradual recovery, with unemployment remaining high in the
medium term and house prices staying below their long-run average,
albeit with an upward trend. Significant areas of uncertainty also
existed, including the possible slowing of monetary stimulus. It was in
this context that our financial risk appetite for 2014 and our financial
risk triggers were set within parameters that positioned Barclays
conservatively.
The Committee continued to scrutinise credit performance in each of
our main markets during 2014 in the light of the ongoing uncertain
political, economic and regulatory environment. We saw a reduction in
credit impairment and better performance in our UK and US portfolios
in 2014, reflecting improved economic conditions in these countries.
The South African economy remained weak, with higher
unemployment and inflation, while our European portfolios remained
under pressure, with the Eurozone still susceptible to exogenous and
other shocks. Overall credit risk performance for 2014 was ahead of our
expectations. The Committee reflected in 2014 on the creation of the
Non-Core business and the potential impact on risk management
structures and processes. The Group Strategy Update, announced on
8 May 2014, and the rebalancing of the Group into Core and Non-Core
businesses, is designed to de-risk the Group, strengthen the balance
sheet and meet capital and leverage targets. This realignment of the
business has been reflected in the distribution of Risk Weighted Assets
(RWAs), although Barclays’ overall risk appetite for 2014 remained
unchanged. Overall RWAs decreased by £40.6bn in 2014, primarily as a
result of reductions in Barclays Non-Core. The Group’s plans to run
down the Non-Core business further will free up capital both to
improve further the Group’s capital ratios and fund growth in the
Core businesses.
Committee performance
As part of the annual Board effectiveness review, a separate exercise
was conducted to assess the Committee’s performance. The
assessment found that the Committee is performing effectively. Please
see the Board evaluation report on pages 60 and 61 for more details.
I would like to extend my thanks to my colleagues on the Committee
for their contribution and support during 2014.
Looking ahead
During 2014 I had a significant level of engagement with our regulators
in the UK and the US in my role as Chairman of the Committee. Basel III
and CRD IV have required Barclays to increase the amount and quality
of the capital it is required to hold and good progress has been made
towards achieving the Group’s targets. It is clear, however, that further
regulatory change, such as structural reform in the UK, US and
continental Europe, which will require Barclays to segregate its
activities, will require changes in how the Group operates and an
increased focus on capital, liquidity and funding, in legal entities. The
Committee expects to focus its attention in 2015 on ensuring that
Barclays is able to respond to the challenge of these new regulatory
requirements.
Tim Breedon
Chairman, Board Financial Risk Committee
2 March 2015
Committee composition and meetings
The Committee is composed solely of independent non-executive
Directors. Tim Breedon became Chairman of the Committee with effect
from 1 January 2014. Steve Thieke joined the Committee with effect
from 7 January 2014 on his appointment to the Board. Sir Michael Rake
stepped down from the Committee with effect from 31 July 2014.
Details of the skills and experience of the Committee members can be
found in their biographies on pages 34 and 35.
The Committee met seven times in 2014, with two of the meetings held
in New York. The chart on page 51 shows how the Committee allocated
its time during 2014. Committee meetings were attended by
management, including the Group Chief Executive, Group Finance
Director, Chief Internal Auditor, Chief Risk Officer, Barclays Treasurer
and General Counsel, as well as representatives from the businesses.
The lead audit partner from the external auditor also attended each
meeting.
Member Meetings attended/eligible to attend
Tim Breedon 7/7
Mike Ashley 7/7
Reuben Jeffery III* 5/7
Dambisa Moyo 7/7
Sir Michael Rake (to 31 July 2014)* 3/4
Steve Thieke (from 7 January 2014) 7/7
* Unable to attend meetings owing to prior business commitments
Committee role and responsibilities
The Committee’s responsibilities include:
Q Recommending to the Board the total level of financial risk the Group
is prepared to take (risk appetite) to achieve the creation of
long-term shareholder value;
Q Monitoring financial risk appetite, including setting limits for
individual types of financial risk, e.g. credit, market and funding risk;
Q Monitoring the Group’s financial risk profile;
Q Ensuring that financial risk is taken into account during the due
diligence phase of any strategic transaction; and
Q Providing input from a financial risk perspective into the deliberations
of the Board Remuneration Committee.
The Committee’s terms of reference are available at
barclays.com/corporategovernance
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