Barclays 2011 Annual Report Download - page 157

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, the USA PATRIOT
Act of 2001 and the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010. Such laws cover 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 Delaware, a Delaware chartered
commercial bank, is subject to supervision and regulation by the Federal
Deposit Insurance Corporation (FDIC), the Delaware State Bank
Commissioner and the Bureau of Consumer Financial Protection.
Only the deposits of Barclays Bank Delaware are insured by the FDIC.
Barclays Wealth Trustees (US) NA is an uninsured non-depository trust
company chartered and supervised by the OCC.
Barclays PLC and Barclays Bank PLC are bank holding companies
registered with the FRB, which exercises umbrella authority over Barclays
US operations. 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. Financial holding companies such as
Barclays PLC and Barclays Bank PLC are required to meet or exceed certain
capital ratios and be deemed to be ‘well managed,’ and Barclays Bank
Delaware and Barclays Wealth Trustees (US) NA are each required to 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 (CRA). Entities ceasing to meet any of these requirements,
are allotted a period of time in which to restore capital levels or the
management or CRA rating. If the capital level or rating is not restored,
the Group may be required by the FRB to cease certain activities in the
United States.
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), the CFTC
and other government agencies and self-regulatory organisations (SROs)
as part of a comprehensive scheme of regulation of all aspects of the
securities and commodities business under the US federal and state
securities laws. Similarly, Barclays US commodity futures and options-
related operations are subject to ongoing supervision and regulation by
the CTFC, the National Futures Association and other SROs.
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 October 2011, 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
The financial crisis has generated regulatory change that, is having and
will continue to have a substantial impact on all financial institutions,
including the Group. While some of the broad lines of change and some of
the impacts of these changes are becoming clearer, a significant amount
remains to be determined. Regulatory change is being pursued at a
number of levels, globally notably through the G20, Financial Stability
Board (FSB) and BCBS, 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. Increased prudential requirements and changes to what is
defined to constitute capital may affect the Group’s planned activities and
could increase costs and contribute to adverse impacts on the Group’s
earnings. Similarly, increased requirements in relation to capital markets
activities and to market conduct requirements may affect the Group’s
planned activities and could increase costs and thereby contribute to
adverse impacts on the Group’s earnings.
Global
The programme of reform of the global regulatory framework that was
agreed by G20 Heads of Government in April 2009 has continued to
advance substantially during 2011.
The FSB has been designated by the G20 as the body responsible for
co-ordinating the delivery of the global reform programme. It has focused
particularly on the risks posed by systemically important financial
institutions (SIFI). At the Cannes summit in November 2011, G20 Heads
of Government adopted FSB proposals for a programme to reform the
regulation of globally systematically important financial institutions
(G-SIFIs). A key element of this programme is that systemic institutions,
including G-SIFIs should be capable of being resolved without recourse
to taxpayer support. Barclays has been designated a G-SIFI by the FSB.
G-SIFIs will be subject to:
– A new international standard for national resolution regimes. Among
other things, this seeks to give resolution authorities powers to
intervene in and resolve a financial institution that is no longer viable,
including through the transfers of business and creditor financed
recapitalisation (bail-in within resolution) that allocates losses to
shareholders and unsecured and uninsured creditors in their order
of seniority, at a regulator-determined point of non-viability that may
precede insolvency.
– Requirements for resolvability assessments and for recovery and
resolution planning.
– Requirements for banks determined to be globally systemically
important to have additional loss absorption capacity above that
required by Basel 3 standards (see below). These surcharges have been
tailored to the impact of the default of the G-SIFI using a methodology
developed in 2011 by the BCBS. The surcharges rise in increments from
1% to 2.5% of risk-weighted assets (with an empty bucket of 3.5% to
discourage institutions from developing their business in a way that
heightens their systemic nature). This additional buffer must be met
with common equity.
– More intensive supervision, including through stronger supervisory
mandates, resources and powers, and higher supervisory expectations
for risk management functions, data aggregation capabilities, risk
governance and internal controls.
G-SIFIs will be subject to enhanced supervision and a comprehensive
crisis management framework within supervisory colleges. The concept
of bail-in may affect the rights of senior unsecured creditors subject to
any bail-in in the event of a resolution of a failing bank.
Barclays PLC Annual Report 2011 www.barclays.com/annualreport 155
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