Barclays 2010 Annual Report Download - page 142

Risk management
Supervision and regulation continued
Barclays US securities broker/dealer, investment advisory and Investment
banking operations are subject to ongoing supervision and regulation by
the SEC, the Financial Industry Regulatory Authority (FINRA) and other
government agencies and self-regulatory organisations as part of a
comprehensive scheme of regulation of all aspects of the securities
business under the US federal and state securities laws.
The credit card-related activities of the Group in the US are subject to
the Credit Card Accountability, Responsibility and Disclosure Act of 2009
(Credit CARD Act) which was enacted by Congress in May 2009 to prohibit
certain credit card pricing and marketing practices for consumer credit
card accounts. Among the numerous provisions, which came into effect
at various times through August 2010, are those that prohibit increasing
rates on existing balances and over limit fees in most instances, restrict
increasing fees and rates prospectively, restrict what penalty fees can be
assessed, regulate how payments are to be allocated to different balances
and how the billing process is to work, and revises all communications
to cardholders.
Regulatory Developments
In the wake of the financial crisis there has been regulatory change that,
when fully implemented, will have a substantial impact on all financial
institutions, including the Group. Regulatory change is being pursued at
a number of levels, globally notably through the G20, Financial Stability
Board (FSB) and Basel Committee on Banking Supervision, regionally
through the European Union and nationally, especially in the UK and US.
It is of importance to the Group and to the banking industry generally
that the various bodies work harmoniously and that a globally consistent
approach is taken to banking regulation.
Global
While some of the uncertainty surrounding the nature of the future
regulation of banks has been resolved, the full extent of the impact of
regulatory change is not yet fully clear. Nevertheless, the programme
of reform of the global regulatory framework that was agreed by G20
Heads of Government in April 2009 has advanced substantially during
2010, notably through the issue of final guidelines on Basel III capital and
liquidity standards in December 2010. The requirements of Basel III will be
applicable from 1st January 2013 with a number of transitional provisions
that run to the end of 2018. An initial assessment of the likely impact of
the Basel III capital, leverage and liquidity requirements can be found on
pages 43, 129 and 132.
The FSB has been designated by the G20 as the body responsible for
co-ordinating the delivery of the global reform programme. It is continuing
to work on developing additional regulation as well as guidelines for the
supervision of systemically significant institutions. A key element of the
global reform programme is that systemic institutions, including globally
systemic financial institutions (G-SIFIs) should be capable of being
resolved without recourse to taxpayer support. The details of the future
regime for systemic banks remains one of the areas of uncertainty,
although the FSB has made it clear that systemically significant institutions
will be required to maintain loss absorbency that is greater than the
The UK regulatory agenda is considerably shaped and influenced by the
directives emanating from the EU. These form part of the European Single
Market programme, an important feature of which is the framework for
the regulation of authorised firms. This framework is designed to enable
a credit institution or investment firm authorised in one EU member state
to conduct banking or investment business through the establishment
of branches or by the provision of services on a cross-border basis in
other member states without the need for local authorisation. Barclays
operations in Europe are authorised and regulated by a combination
of both home (the FSA) and host regulators.
Barclays operations in South Africa, including Absa Group Limited, are
supervised and regulated by the South African Reserve Bank (SARB) and
the Financial Services Board (FSB). SARB oversees the banking industry
and follows a risk-based approach to supervision whilst the FSB oversees
the non-banking financial services industry and focuses on enhancing
consumer protection and regulating market conduct.
In the United States, Barclays PLC, Barclays Bank PLC and Barclays US
banking subsidiaries are subject to a comprehensive regulatory structure
involving numerous statutes, rules and regulations, including the
International Banking Act of 1978, the Bank Holding Company Act of 1956,
as amended (BHC Act), the Foreign Bank Supervision Enhancement Act
of 1991, the Financial Services Modernization Act of 1999 and the USA
PATRIOT Act of 2001. Such laws impose restrictions on the activities of
Barclays, including its US banking subsidiaries and the Bank’s US branches,
as well as prudential restrictions, such as limits on extensions of credit
by the Bank’s US branches and the US banking subsidiaries to affiliates.
The New York and Florida branches of Barclays Bank PLC are subject to
extensive federal and state supervision and regulation by the FRB and the
New York and Florida banking supervisors. Barclays Bank PLC also operates
a federal agency in California that is licensed by and subject to regulation
and examination by the OCC. Barclays Bank Delaware, a Delaware-
chartered commercial bank, is subject to supervision and regulation
by the Delaware banking supervisor and the Federal Deposit Insurance
Corporation (FDIC). Only the deposits of Barclays Bank Delaware are
insured by the FDIC.
Barclays PLC and Barclays Bank PLC are bank holding companies registered
with the FRB. Following the transfer of ownership of Barclays Bank
Delaware from Barclays Group US Inc. to Barclays Bank PLC, Barclays
Group US Inc. is no longer a bank holding company. 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 engage
in a broader range of financial and related activities than are permitted to
registered bank holding companies that do not maintain financial holding
company status, including underwriting and dealing in all types of
securities. To maintain financial holding company status, each of Barclays
PLC and Barclays Bank PLC is required to meet or exceed certain capital
ratios and to be deemed to be ‘well managed,’ and Barclays Bank Delaware
must meet certain capital requirements, be deemed to be ‘well managed’
and must have at least a ‘satisfactory’ rating under the Community
Reinvestment Act of 1977.
140 Barclays PLC Annual Report 2010 www.barclays.com/annualreport10