Barclays 2003 Annual Report Download - page 110

108
Economic and Monetary Union
Barclays is maintaining a prudent programme to validate and develop
further its existing plans relating to the potential membership of
European Monetary Union by the UK, and to conduct feasibility studies
with selected suppliers and partners.
Barclays continues to take an active role via the British Bankers’
Association and other groups in industry-wide discussions, and maintains
a dialogue with the regulatory community on UK Entry issues. It is also
contributing to the further development of the Managed Transition Plan
being authored by HM Treasury.
Given the considerable uncertainty that continues to surround whether
and when the UK may enter, it has not been possible to draw any
definitive conclusions as to the final overall cost of preparing the Group’s
systems and operations.
Barclays incurred minimal expenditure during 2003 with respect to any
decision to introduce the euro in the UK.
International Financial Reporting
Standards
By Regulation, the EU has agreed that virtually all listed companies must
use International Financial Reporting Standards (IFRS) adopted for use in
the EU in the preparation of their 2005 consolidated accounts. Barclays
will have to comply with this Regulation. The objective is to improve
financial reporting and enhance transparency to assist the free flow of
capital throughout the EU and to improve the efficiency of the capital
markets. Details of the Barclays implementation programme are
discussed on pages 118 to 119.
Supervision and Regulation
UK
The Financial Services Authority (FSA) is the independent body
responsible for regulating financial services in the UK. The FSA was
established by the Government and it exercises statutory powers under
the Financial Services & Markets Act 2000 (FSMA). Since 1st December
2001, the FSA is the single statutory regulator responsible for the
regulation of deposit taking, life insurance and investment business.
In December 2001, HM Treasury announced that the powers of the FSA
would be extended to include the regulation of mortgages and general
insurance. There are two implementation dates, known as N(M&GI).
From 31st October 2004, the FSA will regulate mortgage lending, sales
and administration. From 14th January 2005, the FSA will regulate the
sale and administration of general insurance contracts.
Under the FSMA 2000, the FSA is required to pursue four statutory
objectives to:
1) Maintain market confidence in the UK financial system;
2) Promote public awareness and understanding of the financial system;
3) Secure an appropriate degree of protection for consumers; and
4) Reduce the scope for financial crime.
Whilst carrying out these objectives, the FSA is also required to take into
account a number of factors (‘principles of good regulation’) including:
• using its resources in the most efficient way;
• taking into account the international character of financial services
and the desirability of maintaining the UK’s competitive position; and
• facilitating and not having an unnecessarily adverse effect on
competition.
The FSA Handbook contains the rules and regulatory guidance
applicable to the UK financial services industry. The Handbook consists
of sourcebooks providing the basis of FSA requirements, guidance and
processes to be followed. Since its first introduction, the Handbook has
undergone revision and updating. New sourcebooks are being added to
the Handbook to provide the rules for the regulation of mortgages and
general insurance.
In its role as supervisor, the FSA is seeking to ensure the safety and
soundness of financial institutions (in fulfilment of the first and third
objectives above) with the aim of strengthening, but not guaranteeing,
the protection of customers.
Barclays Bank PLC is authorised by the FSA to carry on regulated
activities within the UK and is subject to consolidated supervision.
The FSA’s continuing supervision of financial institutions authorised
by it is conducted through a variety of regulatory tools, including the
collection of information from statistical and prudential returns, reports
obtained from skilled persons, visits to firms and regular meetings with
management to discuss issues such as performance, risk management
and strategy.
Under the FSA’s risk-based approach to supervision, the starting point
for the FSA’s supervision of all financial institutions is based on a
systematic analysis of the risk profile for each authorised firm. The FSA
has adopted a homogeneous risk, processes and resourcing model in
its approach to its supervisory responsibilities (known as the ARROW
model) and the results of the risk assessment will be used by the FSA
to develop a risk mitigation programme for a firm. The FSA also
promulgates requirements that banks and other financial institutions
are required to meet on matters such as capital adequacy (see Capital
Resources on page 100), limits on large exposures to individual entities
and groups of closely connected entities, and liquidity.
Banks, insurance companies and other financial institutions in the UK are
subject to a single financial services compensation scheme (the Financial
Services Compensation Scheme) where an authorised firm is unable or
is likely to be unable to meet claims made against it due to its financial
circumstances. This single scheme replaces a number of pre-FSA
schemes, including the Deposit Protection Scheme, the Investors
Compensation Scheme and the Policyholders Protection Scheme.
Other Information
Economic and Monetary Union, International Financial Reporting Standards
and Supervision and Regulation