Barclays 2009 Annual Report Download - page 250

248 Barclays PLC Annual Report 2009 www.barclays.com/annualreport09
Notes to the accounts
For the year ended 31st December 2009
continued
36 Competition and regulatory matters
The scale of regulatory change remains challenging and the global financial crisis is resulting in a significant tightening of regulation and changes to
regulatory structures globally, especially for banks that are deemed to be of systemic importance. Concurrently, there is continuing political and regulatory
scrutiny of the operation of the banking and consumer credit industries in the UK and elsewhere which, in some cases, is leading to increased regulation.
For example, the Credit Card Accountability, Responsibility and Disclosure Act of 2009 in the US will restrict many credit card pricing and marketing practices.
The nature and impact of future changes in the legal framework, policies and regulatory action cannot currently be fully predicted and are beyond Barclays
control but, especially in the area of banking regulation, are likely to have an impact on Barclays businesses and earnings.
The market for payment protection insurance (PPI) has been under scrutiny by the UK competition authorities and financial services regulators. Following a
reference from the Office of Fair Trading (OFT), the UK Competition Commission (CC) undertook an in-depth enquiry into the PPI market. The CC published
its final report on 29th January 2009 concluding that the businesses which offer PPI alongside credit face little or no competition when selling PPI to their
credit customers. In March 2009, Barclays submitted a targeted appeal focused on the prohibition on sale of PPI at the point of sale (POSP) remedy on the
basis that it was not based on sound analysis, and is unduly draconian. The Competition Appeals Tribunal (CAT) upheld Barclays appeal on two grounds,
meaning that the CC will be required to reconsider the POSP remedy and the basis for it, and made an order to that effect on 26th November 2009.
This remittal process is expected to take until the autumn of 2010, at which time the CC will publish its final Remedies Order.
Separately, in 2006, the FSA published the outcome of its broad industry thematic review of PPI sales practices in which it concluded that some firms fail
to treat customers fairly and that the FSA would strengthen its actions against such firms. Tackling poor PPI sales practices remains a priority for the FSA.
In September 2009, the FSA issued a Consultation Paper on the assessment and redress of PPI complaints made on or after 14th January 2005. The FSA
has announced that it intends to publish a final version of the policy statement in early 2010 and will amend the DISP (Dispute Resolution: Complaints)
rules in the FSA Sourcebook. Barclays voluntarily complied with the FSA’s request to cease selling single premium PPI by the end of January 2009.
The OFT has carried out investigations into Visa and MasterCard credit card interchange rates. A decision by the OFT in the MasterCard interchange case
was set aside by the CAT in 2006. The OFT is progressing its investigations in the Visa interchange case and a second MasterCard interchange case in
parallel and both are ongoing. The outcome is not known but these investigations may have an impact on the consumer credit industry in general and
therefore on Barclays business in this sector. In 2007, the OFT expanded its investigations into interchange rates to include debit cards.
Notwithstanding the Supreme Court ruling in relation to the test case (see Note 35 on page 247) Barclays continues to be involved in the OFT’s work on
personal current accounts. The OFT initiated a market study into personal current accounts (PCAs) in the UK in 2007 which also included an examination
of other retail banking products, in particular savings accounts, credit cards, personal loans and mortgages in order to take into account the competitive
dynamics of UK retail banking. In 2008, the OFT published its market study report, in which it concluded that certain features of the UK PCA market were
not working well for consumers. The OFT reached the provisional view that some form of regulatory intervention is necessary in the UK PCA market.
The OFT also held a consultation to seek views on the findings and possible measures to address the issues raised in its report. In October 2009, the OFT
published a follow-up report containing details of voluntary initiatives in relation to transparency and switching agreed between the OFT and the industry.
A further follow-up report is expected in March 2010 to provide details of voluntary initiatives agreed in relation to charging structures. Barclays has
participated fully in the market study process and will continue to do so.
US laws and regulations require compliance with US economic sanctions, administered by the Office of Foreign Assets Control, against designated foreign
countries, nationals and others. HM Treasury regulations similarly require compliance with sanctions adopted by the UK government. Barclays has been
conducting an internal review of its conduct with respect to US Dollar payments involving countries, persons and entities subject to these sanctions and has
been reporting to governmental authorities about the results of that review. Barclays received inquiries relating to these sanctions and certain US Dollar
payments processed by its New York branch from the New York County District Attorney’s Office and the US Department of Justice, which, along with other
authorities, has been reported to be conducting investigations of sanctions compliance by non-US financial institutions. Barclays has responded to those
inquiries and is cooperating with the regulators, the Department of Justice and the District Attorney’s Office in connection with their investigations of
Barclays conduct with respect to sanctions compliance. Barclays has also received a formal notice of investigation from the FSA, and has been keeping
the FSA informed of the progress of the US investigations and Barclays internal review. Barclays review is ongoing. It is currently not possible to predict the
ultimate resolution of the issues covered by Barclays review and the investigations, including the timing and potential financial impact of any resolution,
which could be substantial.