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Building the
‘Go-To’ bank
Barclays PLC
Annual Report 2012

Table of contents

  • Page 1
    Building the 'Go-To' bank Barclays PLC Annual Report 2012

  • Page 2
    ... create value Business review UK Retail and Business Banking (UKRBB) Europe Retail and Business Banking (Europe RBB) Africa Barclaycard Investment Bank Corporate Banking Wealth and Investment Management Group Finance Director's review Risk Corporate Governance Citizenship Summary remuneration report...

  • Page 3
    ... Directors' report Board of Directors Executive Committee People Remuneration report 38 62 67 70 71 72 The strategic report Risk review Governance Insight into the level of risk across our businesses and portfolios, the material risks and uncertainties we face and the key areas of management...

  • Page 4
    ... equity (RoTE) Return on average risk weighted assets (RoRWA) Profit before tax Cost: income ratio Loan loss rate Dividend per share Total income Income by geography: UK Europe Americas Africa and Middle East Asia Gross new lending to UK households and businesses Global investment in our communities...

  • Page 5
    ..., lends, invests and protects money for customers and clients worldwide. Barclays banking and financial service businesses work together to provide customers and clients the best offerings across our chosen markets. The strategic report Governance Total income by business segment 7 6 1 UK Retail...

  • Page 6
    ...that we win back trust and ensure that we have in place a sustainable business model that will create long term shareholder value. I have three particular areas of focus: The right culture Running Barclays the right way Responding to regulation 04 I Barclays PLC Annual Report 2012 barclays.com...

  • Page 7
    ... Financial review Running Barclays the right way Changes will be made to the way Barclays is governed in order to reflect the new environment in which we are operating and reinforce the cultural change that we are putting in place. We were one of the first banks to create a Board Risk Committee...

  • Page 8
    ... on recovery and resolution planning. The new regulatory environment will require changes to both business models and cost structures. The Transform Programme and Strategic Review that Antony Jenkins sets out in his CEO's Review is designed to address precisely these issues. However, care does need...

  • Page 9
    ..., honect ancwerc The strategic report Governance Risk review Financial review Financial statements "What doec being the 'Go-To' bank mean and how will it affect me?" Being the 'Go-To' bank meanc being the inctinctive partner of choice for anyone looking to do banking bucinecc, whether a cmall...

  • Page 10
    ... Return Acceptable Numbers 0-5 years Sustain FORward Momentum For more information on our Transform Programme please see pages 10-13 Improve business returns, define and execute plan to deliver RoE above CoE Become the 'Go-To' bank, for our stakeholders - customers and clients, colleagues, investors...

  • Page 11
    ... - we will do everything in our power to achieve our objective of becoming the 'Go-To' bank. Governance Risk review Financial review Financial statements Risk management Antony Jenkins Group Chief Executive Shareholder information barclays.com/annualreport Barclayc PLC Annual Report 2012 I 09

  • Page 12
    .... Supporting society Our Corporate Banking business in the UK developed Cash-back for Business, which is a new initiative as part of the government's Funding for Lending and provides additional funding upfront equal to 2% of the loan. 10 I Barclays PLC Annual Report 2012 barclays.com/annualreport

  • Page 13
    ... and the impact we have on society. Risk review Financial review Financial statements Risk management Improving our business controls In December 2012, we created a new role of Head of Compliance and Government and Regulatory Relations, reporting directly to the CEO. To help build a more...

  • Page 14
    ... mass-affluent customer segment Reposition Barclays European and Asian Equities and the Investment Banking Division businesses to reflect the market opportunities and maintain a relevant proposition for our clients Close the Structured Capital Markets business unit Manage Risk Weighted Assets (RWAs...

  • Page 15
    ... environment regulators view us as a model of constructive engagement. Our products and â- â- Fewer customer complaints services will be designed and distributed to meet clients' and customers' needs consistent with our mutual risk appetite and will be priced appropriately. Shareholder information...

  • Page 16
    ... credit cards, we earn interest income on credit balances. We provide clients with financial and transaction advice, assistance with capital raising, trade execution and risk management for which we earn trading and fee income. We provide clients with banking, cash management and financing services...

  • Page 17
    ... level and the services each of the businesses provide, along with the priorities for 2013 and beyond. Their divisional performance is included to help give context to overall 2012 performance. Risk management Shareholder information barclays.com/annualreport Barclays PLC Annual Report 2012 I 15

  • Page 18
    ... on embedding Group values to do business - in the right way. â- â- â- â- â- â- Note a Cumulative net stock lending for Q3 2012 as per Bank of England publication in December 2012: http//www.bankofengland.co.uk/markets/Pages/FLS/ data.aspx 16 I Barclays PLC Annual Report 2012 barclays.com...

  • Page 19
    ... base through greater sharing of infrastructure with Barclays other European businesses to better serve customers. Continue to employ technology to streamline processes. Risk management â- â- â- â- Shareholder information â- â- barclays.com/annualreport Barclays PLC Annual Report 2012 I 17

  • Page 20
    ... involved. In 2012, 11,705 colleagues volunteered to the benefit of communities across the continent. Africa Repail and Business Banking (Africa RBB) Barclays Group reports Africa RBB separately and the following information relates specifically to the Retail and Business Bank. Our global businesses...

  • Page 21
    ... 2013 â- â- Deliver leading and innovative products to our retail customers and business clients that help them achieve their ambitions - in the right way. Expand payment acceptance and commercial payments in Europe and consolidate to a single card platform for continental Europe. Attract, develop...

  • Page 22
    ... of income and risk to the Group and are able to deliver market execution services for retail, wealth and corporate customers. Our business model Invespmenp Banking Division Our Investment Banking Division provides a full suite of banking services to corporations, governments and institutions...

  • Page 23
    ...of GDF SUEZ's assets which closed in February 2011 and resulted in GDF SUEZ owning 70% of the issued share capital of International Power. The 2012 transaction valued the entire share capital of International Power at c£23bn, delivered a c20% premium to International Power shareholders, in addition...

  • Page 24
    Business review Corporate Banking We work closely with clients to achieve their potential through cash management, loans, trade finance and risk management services. Conpribupion po popal income £2,918m Our 2012 performance Income (£m) Adjusted profit/(loss) before tax Adjusted ROE (%) Loan ...

  • Page 25
    Business review Wealth and Investment Management We provide holistic wealth management services to affluent and high-net-worth clients globally. Conpribupion po popal income The strategic report £1,815m Our 2012 performance Income (£m) Adjusted profit before tax Adjusted ROE (%) Loans and ...

  • Page 26
    ... in lending in the Investment Bank, Europe RBB and Corporate Banking. "We have delivered adjusted profit before tax of £7bn in 2012. Our capital, liquidity and funding remain strong, with our Core Tier 1 ratio at 10.9%." Chrts Lucas Group Finance Director 24 I Barclays PLC Annual Report 2012...

  • Page 27
    ... 2012 2011 2010 Taxes collectedc Staff Compensation to adjusted net operating income Bonus pool as % adjusted profit 38% 42% 43% 20% 29% 34% 2012 2011 2010 Financial statements Risk management Shareholder information Notes a Calculated as dividend per share divided by adjusted Earnings Per Share...

  • Page 28
    ... time and their impact on the Group will vary in response to internal and external events. Independent risk teams are in place within each of our businesses to support close working relationships with the business teams taking on the risk. These risk teams ultimately report to a Chief Risk Officer...

  • Page 29
    ... risk please see page 188 Governance Performance in 2012 While the economic environment in Barclays main markets was marked by generally weak or negative growth in 2012, Barclays loan impairment charges reduced 6% and the loan loss rate remained broadly stable at 75bps (2011: 77bps). The retail...

  • Page 30
    ... Governance Code makes clear that corporate governance is about what the board of a company does and how it sets the company's values. ihis is something that has been brought into sharp focus for Barclays during 2012. Barmlays has a well-defined and well-strumtured morporate governanme framework...

  • Page 31
    ... Succession planning and talent Board effectiveness Other 2012 21 32 29 14 4 % 2011 19 31 30 16 4 Board Audit Committee allocation of time 1 2 6 1 2 3 4 5 6 Control issues Financial results Internal audit matters External audit matters Business control environment Other (including governance...

  • Page 32
    ... Risk Committee. It will retain responsibility for oversight of Barclays Citizenship strategy. In 2012, we amended our internal management practices to ensure the consistent implementation and execution of our Citizenship Plan throughout the bank, particularly integration in each business division...

  • Page 33
    ..., earn back - over time - the trust of our stakeholders and achieve our goal of making Barclays the 'Go-To' bank for customers, clients and society. The strategic report Governance Measuring our performance 2012 Gross new lending to UK households and businesses (£bn) Number of start-up businesses...

  • Page 34
    ... 2012 saw us move significantly forward in achieving the right balance between the priorities of our various stakeholders. Reduced remuneration costs, increasingly robust risk adjustments to both the incentive pool and individual incentive awards, tougher performance conditions, new shareholding...

  • Page 35
    ...remuneration for executive Directors, members of the Group and business unit Executive Committees, Code Staff and all employees with total annual remuneration of £1m or more. It also approves major changes in Barclays pension, benefits and long term incentive plans. The Committee takes into account...

  • Page 36
    ... we can continue to pay our people competitively for performance while also enabling us to deliver a greater share of the income we generate to shareholders." Barclays Group compensation as a percentage of adjusted net operating income 55% 52% 50% 48% 44% 43% 40% 38% 35% 2010 2011 2012 42% 39% 44...

  • Page 37
    ... the fees and benefits shown above are for the whole of 2012. Total shareholder return Year ended 31 December 103 100 91 72 61 59 62 101 Financial statements Risk management £ 111 Total shareholder return The graph opposite shows the value, at 31 December 2012, of £100 invested in Barclays on...

  • Page 38
    ... sensible way. For the first time we will be overtly linking pay to performance based on delivering a set of values that reinforce our promise to the stakeholders we serve. See page 13 for further details on our balanced scorecard. 36 I Barclays PLC Annual Report 2012 badclays.com/annualdepodt

  • Page 39
    ... policy Implementation of Directors' remuneration in 2012 Remuneration Committee Additional remuneration disclosures Statutory remuneration disclosures Risk review Financial review Financial statements Risk management Shareholder information badclays.com/annualdepodt Barclays PLC Annual Report...

  • Page 40
    ... will make further appointments during the course of 2013. How is risk management being enhanced? In looking at the corporate governance structures in place, it is clear to me that Barclays has been well served by having, for many years, a Board Risk Committee focused on credit, counterparty, market...

  • Page 41
    Corporate governance report Leadership The role of the Board The principal responsibility of the Board is to promote the long term success of Barclays by creating and delivering sustainable shareholder value. The Board leads and provides direction for management by setting strategy and overseeing ...

  • Page 42
    ... the Chairman and other Directors or shareholders, as required, where the stability of the Board or Barclays is threatened. The Company Secretary, Lawrence Dickinson, works closely with the Chairman, the Group Chief Executive and the Board Committee Chairmen in setting the annual forward calendar of...

  • Page 43
    ..., key competencies and behaviours we expect of our Directors, together with the key indicators of high performance, are set out in our Charter of Expectations, which is available on our website, Barclays.com. Shareholder information badclays.com/annualdepodt Barclays PLC Annual Report 2012...

  • Page 44
    ... announcement. Key activities for the Board during the year included: â- â- 1 Chairman 2 Executive Directors 10 Independent non-executive Directors reviewing strategic options open to the Group in its different business areas in light of the regulatory and economic environment. receiving updates...

  • Page 45
    ... David Walker assumed chairmanship of the Committee in early 2013. Governance Risk review Financial review Financial statements Risk management Shareholder information Sir Michael Rake Deputy Chairman and Senior Independent Director badclays.com/annualdepodt Barclays PLC Annual Report 2012 I 43

  • Page 46
    .... Both were assessed against the required skills and competencies that the Board Corporate Governance and Nominations Committee had identified as being desirable. Tim was previously Chief Executive of Legal & General Group plc and has over 25 years experience of working in the insurance industry. He...

  • Page 47
    ... and has brought immense experience, integrity and knowledge to the role. Governance Risk review Financial review Financial statements Sir John Sunderland Independent non-executive Director Risk management Shareholder information badclays.com/annualdepodt Barclays PLC Annual Report 2012 I 45

  • Page 48
    ... a new Group Chief Executive The process to appoint a new Group Chief Executive was initially led by my predecessor, Marcus Agius, in conjunction with Sir Michael Rake, the Deputy Chairman, and other members of the Board Corporate Governance and Nominations Committee, although I was closely involved...

  • Page 49
    ...on the Investment Bank's fixed income and prime services businesses. They also attended sessions demonstrating the use of new technology in Barclays branch network. Members of the Board Audit Committee attended briefing sessions on algorithmic trading and members of the Board Risk Committee attended...

  • Page 50
    ... Group Chief Executive is circulated to Board members, covering key issues and developments, including regulatory matters, trading and senior appointments. This provides up-to-date information to Directors outside the formal Board meeting reports. Increasing use has been made of a secure electronic...

  • Page 51
    ... for key Board positions, in particular, continuing to ensure that the Board builds its knowledge and understanding of the depth of talent in the business. Financial review Financial statements Risk management Shareholder information badclays.com/annualdepodt Barclays PLC Annual Report 2012 I 49

  • Page 52
    ... by the Committee in 2012, which set out the core competencies and skills that it would be desirable to have on the Board, such as financial services, experienced chief executives from other companies and industries, accountancy, retail and marketing and experience of the main geographic markets in...

  • Page 53
    ... it reported in early 2012; and reviewed the market for board effectiveness facilitators and agreed to re-appoint Egon Zehnder. Financial statements â- â- Priorities for 2013 Risk management In 2013, the Committee will continue to carry out regular reviews of the balance of skills and experience...

  • Page 54
    ...Board Audit Committee allocation of time 1 2 6 1 2 3 4 5 6 Control issues Financial results Internal audit matters External audit matters Business control environment Other (including Governance and Compliance) 2012 13 31 14 6 14 22 % 2011 4 42 6 6 23 19 5 4 3 52 I Barclays PLC Annual Report 2012...

  • Page 55
    ... the necessary information for shareholders to assess Barclays performance, business model and strategy. We were satisfied that, taken as a whole, the Annual Report is fair, balanced and understandable; We reviewed the Group's credit impairment charges, which have reduced overall in 2012, to satisfy...

  • Page 56
    ... environment and performance against any key indicators. We also regularly reviewed the Internal Audit Plan, any changes proposed and the level of resourcing available to the Internal Audit function. A new Chief Internal Auditor was appointed in early 2012 and during the year provided the Committee...

  • Page 57
    ... action plans that arise from the controls workstream of the Transform Programme. Governance Risk review Sir Michael Rake Chairman, Board Audit Committee Financial review Financial statements Risk management Shareholder information badclays.com/annualdepodt Barclays PLC Annual Report 2012 I 55

  • Page 58
    ... Key risk issues 3 Internal control/Risk policies 4 Regulatory frameworks 5 Other (including Remuneration and Governance issues) 2012 61 18 6 5 10 % â- â- recommending to the Board the total level of risk the Group is prepared to take (risk appetite) to achieve the generation of shareholder value...

  • Page 59
    ...to risk management systems and controls in our Investment Bank business in the US. The Committee will continue to monitor progress in 2013; In view of continuing weak global economic conditions, we were updated on Barclays credit rating strategy and on the potential impact on Barclays credit ratings...

  • Page 60
    ...internal control issues. The Remuneration Report on page 72 includes more detail on how risk is taken into account in remuneration decisions. Priorities for 2013 I expect the Committee in 2013 to continue to focus on monitoring the risk to Barclays business from the ongoing weak economic conditions...

  • Page 61
    ... the Board Conduct, Reputation and Operational Risk Committee. It will retain responsibility for oversight of Barclays citizenship strategy. The Committee is expected to focus in 2013 on developing Barclays approach to conduct risk in the context of the UK regulator's new focus on conduct risk and...

  • Page 62
    ... structured Investor Relations programme is in place to ensure regular communication with shareholders and access to the Group Chief Executive and Group Finance Director as well as senior management from across the business. Shareholder engagement is spread throughout the year, with particular focus...

  • Page 63
    ... investors on Barclays strategy, priorities, businesses, capital, funding and liquidity and management. It also provided a view on the outlook for stock market conditions. Directors receive a weekly briefing note from the Group Chief Executive, which includes share price and market information...

  • Page 64
    ... be located as follows: Pages Likely future developments Employee involvement Policy concerning the employment of disabled persons Financial instruments Remuneration policy, including details of the remuneration of each Director and Directors' interests in shares Corporate governance report Rights...

  • Page 65
    ... structure which have taken place since the year end are detailed in Note 46 Events After the Balance Sheet Date. The strategic report Governance Risk review Financial review Financial statements Risk management Shareholder information badclays.com/annualdepodt Barclays PLC Annual Report 2012...

  • Page 66
    ... regulatory requirements relating to internal control and assurance. The GICAF is reviewed and approved on behalf of the Group Chief Executive by the Group Governance and Control Committee at least annually. The Board Risk Committee also reviews the GICAF annually. Person interested His Highness...

  • Page 67
    ... of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. The strategic report Governance Risk review Financial review Financial statements Risk management Shareholder information badclays.com/annualdepodt Barclays PLC Annual Report 2012 I 65

  • Page 68
    ... of the Board during the year into account, the Directors are satisfied that the annual report and accounts, taken as a whole, is fair, balanced and understandable, and provides the information necessary for shareholders to assess the Company's performance, business and model. The Directors have...

  • Page 69
    ... Risk Committee since 1 November 2012; Chairman of the Board Enterprise Wide Risk Committee since its formation in January 2013. The strategic report 1. 2. 3. Governance Risk review 4. 5. 6. Financial review 7. 8. 9. Financial statements 10. 11. 12. Risk management 13. Shareholder...

  • Page 70
    ...Technology since October 2011; President of Eurelectric since June 2011; Independent Director of RCS MediaGroup S.p.A. since April 2012 and Vice President of Confindustria since June 2012. Commsttee membershsp Member of the Board Audit Committee since September 2006. 68 I Barclays PLC Annual Report...

  • Page 71
    ... of the Chartered Institute of Management Accountants, served as a member of the Financial Reporting Council for several years and was a member of the "Cadbury Committee" on UK Corporate Governance. Sir Andrew will retire from the Board at the 2013 AGM, having completed nine year's service on the...

  • Page 72
    ... Chief Executive of Corporate and Investment Banking 8. Valerse Soranno Keatsng CEO, Barclaycard 9. Ashok Vaswans CEO, Retail and Business Banking 10. Ssr Hector Sants Head of Compliance and Government and Regulatory Relations 7. 8. 9. 1. 2. 3. 4. 5. 6. 10. 90 I Barclays PLC Annual Report...

  • Page 73
    ... the UK Business Disability Forum benchmark and our Cultural Diversity Network being awarded Network of the Year by Race for Opportunity. We recognise there is more to be accomplished and will focus on the following priorities for 2013 and beyond: â- â- The strategic report Governance Risk review...

  • Page 74
    ... assessments and performance related remuneration will reflect both what and how business results are achieved. We will maintain a frequent, frank and constructive dialogue with our shareholders and regulators on remuneration matters, as we have in 2012. Our new remuneration policy will protect and...

  • Page 75
    ...best practice framework which we will continue to develop in the coming year and beyond. On behalf of the Board Financial review Financial statements Risk management Shareholder information Sir John Sunderland Chairman, Board Remuneration Committee 5 March 2013 Barclays PLC Annual Report 2012 I 73

  • Page 76
    ... economic success of the communities in which we live and work. The charts below detail how the earnings generated by our businesses are distributed to a number of key stakeholders. Shareholders Dividend per share 6.5p 6.0p 5.5p 19% 22% 19% 2012 2011 2010 Dividend payout ratioa Government Taxes...

  • Page 77
    ... arrangements for frontline employees in UK Retail and Business Banking. These incentives are now based only on the quality of service the employees provide to customers. Financial statements Risk management Shareholder information badclays.com/annualdepodt Barclays PLC Annual Report 2012 I 75

  • Page 78
    ... ability, experience, skill, values and behaviours to deliver that goal. 2. Will only reward business results when these are achieved in a manner consistent with Barclays values and behaviours: â- â- Remuneration and performance Adherence to the principles of the new remuneration policy means that...

  • Page 79
    ...' remuneration policy section of this report. In 2013, only executive Directors and the most senior executives will participate in the Barclays Long Term Incentive Plan. Fixed remuneration Governance Salary â- â- Salaries reflect individuals' skills and experience and are reviewed annually in...

  • Page 80
    ... section provides details of how 2012 total incentive award decisions were made. Business context and 2012 performance highlights Despite the strong financial performance set out below a number of significant risk and compliance issues hit Barclays during the year. The LIBOR investigation and other...

  • Page 81
    ...pay our people competitively for performance while also enabling us to deliver a greater share of the income we generate to shareholders." Financial statements Risk management Barclays Group compensation as a percentage of adjusted net operating income 55% 52% 50% 48% 44% 43% 40% 38% 35% 2010 2011...

  • Page 82
    ... represents the starting point in 2013, i.e. the adjustments for risk events in 2012 and the market repositioning will not be added back in 2013. Step 2 Step 3 Determination of the 2012 total incentives pool £m 2011 total incentives pool 2011 compensation to adjusted net operating income ratio...

  • Page 83
    ...62 Risk review 23 17 15 13 10 Financial review 2009 2010 % change in dividends % change in compensation costs % change in adjusted profit before tax 2011 2012 Financial statements Reconciliation of total incentive awards granted to income statement charge (audited) Barclays Group Year ended...

  • Page 84
    ... cash bonus may be awarded a service credit of 10% of the initial value of the award at the time that the final instalment is made, subject to continued employment. d The income statement charge is based on the period over which performance conditions are met. 82 I Barclays PLC Annual Report 2012...

  • Page 85
    ...Benefits + Annual Bonus + Long Term Incentive Plan Award = Total Remuneration Governance Fixed Remuneration Variable Remuneration 2013 remuneration policy for executive Directors Purpose Operation Value and applicable performance measures Risk review Salary Rewards skills and experience...

  • Page 86
    ..., the shares are (after payment of tax) subject to an additional six month holding period. The value of any annual bonus is limited to a percentage of salary. The current maximum percentage is 250% for both the Group Chief Executive and for the Group Finance Director. The performance objectives by...

  • Page 87
    ... shares worth, as a minimum, two times salary. In all other respects the shareholding requirement for other Group Executive Committee members is the same as the requirement for executive Directors. Risk management Shareholder information badclays.com/annualdepodt Barclays PLC Annual Report 2012...

  • Page 88
    ...an estimated annual value. The scenarios do not reflect share price movement between award and vesting. A significant proportion of the potential remuneration of the executive Directors is variable and is therefore performance-related and at risk. At the 'mid-point' for the Group Chief Executive, 30...

  • Page 89
    ... Board Financial Risk Committee (Board Risk Committee to 31 January 2013) Membership of Board Corporate Governance and Nominations Committee 750 80 30 70 60 30 25 25 15 750 80 30 70 60 30 15 25 15 Risk management Shareholder information badclays.com/annualdepodt Barclays PLC Annual Report 2012...

  • Page 90
    ... to leading the changes required including strengthening the culture and control environment across Barclays. The Committee welcomed Antony Jenkins' contribution to its own work in managing remuneration costs and redressing the balance between employee and shareholder returns. On 1 February 2013...

  • Page 91
    ... the UK, US and African franchises; restructuring the European retail and corporate businesses; repositioning the European and Asian equities and Investment Banking Division businesses; closing the Structured Capital Markets tax-related business unit; reducing risk weighted assets and investing in...

  • Page 92
    ... the year, contributing positively to the process of change underway since Antony became Group Chief Executive. The Committee noted Chris Lucas' effective execution of Barclays capital planning, his leadership of the finance function and his contribution to the Board's business practices review and...

  • Page 93
    ... of salary) Governance Bonus £2,000 (250% of salary) Pension/ Benefits £234 Salary £800 2012 2013 2014 2015 2016 2017 2018 Risk review Pension/Benefits £234 Salary £800 Pension/Benefits £234 Salary £800 'BIS single figure' for 2012 remuneration On the Department for Business, Innovation...

  • Page 94
    Implementation of Directors' remuneration in 2012 continued Executive Directors' shareholdings From 2013 the Committee has introduced a new requirement that executive Directors should hold Barclays shares worth, as a minimum, four times salary. The current executive Directors have five years from ...

  • Page 95
    .... Remuneration for non-executive Directors reflects their responsibility and time commitment and the level of fees paid to non-executive directors of comparable major UK companies. 2012 fees for the Chairman and non-executive Directors (audited) Fees £000 Benefits £000 2012 Total £000 2011 Total...

  • Page 96
    ... members of the Executive Committee Company Secretary Human Resources Director Reward and Performance Director Regular updates on Group and business financial performance and the Group's risk profile were provided by the Group Finance Director and Chief Risk Officer respectively No Barclays employee...

  • Page 97
    ... benefits Forecast 2012 incentive funding Operation of malus FSA Remuneration Policy Statement and Code Staff Update on all employee share plans Approach to executive Director pensions 2012 incentive funding proposals Initial considerations on senior executive remuneration Barclays LTIP 2013 design...

  • Page 98
    ... number of employees in the Barclays Group in 2011 and 2012 in bands by reference to total remuneration. Total remuneration comprises salary, bonus and the value at award of LTIP awards. Total remuneration of the employees in the Barclays Group Number of employees Total remuneration band 2012 2011...

  • Page 99
    ...defined in the FSA's Remuneration Code. Code Staff are subject to a minimum shareholding guideline and 2012 share bonuses awarded to Code Staff are subject to a six month holding period following vesting. Risk management Shareholder information badclays.com/annualdepodt Barclays PLC Annual Report...

  • Page 100
    ... 1 April 2010 Bob Diamond's salary as an executive Director was £1.35m per annum (date of previous increase was 1 January 2011). Executive Directors - Pension (audited) Age at 31 December 2012 Accrued pension at 31 December Completed 2012 years of service £000 Transfer value of Transfer value of...

  • Page 101
    ... for income in respect of any period after 3 July 2012. Executive Directors - total of salary, current year bonus, cash in lieu of pension and benefits (audited) 2012 £000 2011 £000 Antony Jenkins Chris Lucas Bob Diamond 515 1,034 1,290 - 1,028 2,499 Financial review The total for 2012 for...

  • Page 102
    ... shares awarded in year (maximum) Market price on award date Weighted average exercise price Number of shares released/exercised Antony Jenkins Executive Share Award Scheme Barclays LTIP 2012-2014 Barclays LTIP 2012-2014 Share Value Plan 2010 Share Value Plan 2011 Share Value Plan 2012 Share Value...

  • Page 103
    ... tax on a cumulative basis over the three year performance period. As a result, the award vested in March 2012 at 2.1 times the initial award (maximum was three times). Financial statements Risk management Shareholder information badclays.com/annualdepodt Barclays PLC Annual Report 2012 I 101

  • Page 104
    ... award released for 0.83% scaled to a maximum award at 1.46% PSP TSR peer group: UK: HSBC; Europe: Banco Santander, BBVA, BNP Paribas, Credit Suisse, Deutsche Bank, Societe Generale, Unicredit; US: Bank of America, JP Morgan Chase, Morgan Stanley. 102 I Barclays PLC Annual Report 2012 badclays...

  • Page 105
    ... Financial statements Total shareholder return Year ended 31 December 103 100 91 101 £ 111 Risk management 72 61 59 62 41 34 2007 FTSE 100 index Barclays PLC Source: Datastream 2008 2009 2010 2011 2012 Shareholder information badclays.com/annualdepodt Barclays PLC Annual Report 2012...

  • Page 106
    ...to trust Barclays again? Will the culture really change?" Only a business driven by strong values can deliver strong, sustainable returns. Our newly defined Purpose and Values are fundamental to Barclays long term success and represent the set of standards under which all of us at Barclays will work...

  • Page 107
    ... Management. por a more detailed breakdown on our Risk review and Risk management contents please see pages 106-107. The strategic report Governance Risk review Financial review Financial statements Risk management Shareholder information badclays.com/annualdepodt Barclays PLC Annual Report 2012...

  • Page 108
    ...Principal risks policy Risk management in the setting of strategy Modelling of risk 108-115 314-320 314 316 317 317-320 86-93 Annual Report Risk review Risk management Credit Risk Pillar 3 Report Credit risk is the risk of suffering financial loss should the Group's customers, clients or market...

  • Page 109
    ... because of the inappropriate execution of our business activities. Conduct Risk, being a material risk faced by the Group, has been categorised as a new Principal Risk in 2013. Conduct risk 189 Shareholder information badclays.com/annualdepodt Barclays PLC Annual Report 2012 I 107

  • Page 110
    ... these regions. Economic performance in the near term remains uncertain and is expected to be subdued, which may in some cases lead to material adverse impacts on the Group's operations, financial condition and prospects, through, for example, changes in credit ratings, share price and solvency of...

  • Page 111
    ... the Group's performance in the home loan, unsecured loan, auto and credit card portfolios. In Absa Business Markets, the corporate property book remains sensitive to property prices, with reductions potentially leading to increased impairment charges. por further information see Retail Credit Risk...

  • Page 112
    ... and leveraged finance loans. The Group continues to actively manage down these exposures, but remains at risk from further deterioration to the remaining exposures, resulting in further impairment. During 2012, credit market exposures decreased by £5.9bn to £9.3bn, mainly reflecting net sales and...

  • Page 113
    ...to: â- â- Funding risk punding risk is the risk that the Group is unable to achieve its business plans due to: â- â- The strategic report Traded market risk, where Barclays supports customer activity primarily via the Investment Bank and is the risk of the Group being impacted by changes in the...

  • Page 114
    ... in the punding risk - Liquidity section for further information on Barclays credit rating and potential outflows relating to credit downgrades. (v) Local balance sheet management and redenomination risk The introduction of capital controls or new currencies by countries (for example in the Eurozone...

  • Page 115
    ... of the financial services industry. Key developments or potential developments of particular relevance to Barclays are: â- â- The strategic report â- â- Governance Risk review â- â- Financial review The UK pinancial Services (Banking Reform) Bill; The EU High Level Expert Group Review (the...

  • Page 116
    ... destroy shareholder value. (vi) Infrastructure resilience, Technology and CyberSecurity Events across the industry during 2012 have reinforced the importance of infrastructure resilience to the banking infrastructure to allow customers to access their accounts and make payments in a timely fashion...

  • Page 117
    ...). The strategic report Governance Risk review Financial review Financial statements Risk management Shareholder information Note a As defined by the World Economic porum's Partnership for Cyber Resilience, of which Barclays is a member. badclays.com/annualdepodt Barclays PLC Annual Report 2012...

  • Page 118
    ... assets designated at fair value Derivative financial instruments Loans and advances to banks Loans and advances to customers: Home loans Credit cards, unsecured and other retail lending Corporate loans Total loans and advances to customers Reverse repurchase agreements and other similar secured...

  • Page 119
    ... assets designated at fair value Derivative financial instruments Loans and advances to banks Loans and advances to customers: Home loans Credit cards, unsecured and other retail lending Corporate loans Total loans and advances to customers Reverse repurchase agreements and other similar secured...

  • Page 120
    ...other banks Trading portfolio assets pinancial assets designated at fair value Derivative financial instruments Loans and advances to banks Loans and advances to customers Reverse repurchase agreements and other similar secured lending Available for sale debt securities Other assets Total on-balance...

  • Page 121
    ... Risk review Financial review Financial statements Risk management Shareholder information Note a 2011 amounts have been restated to include analysis of other contingent liabilities of £7.8bn, identified as being exposed to credit risk. badclays.com/annualdepodt Barclays PLC Annual Report 2012...

  • Page 122
    ...in Note 28. Credit risk concentrations by industry (audited) Other financial institutions £m ConstGovernruction ment and and central property bank £m £m Wholesale and retail distrib- Business ution and and other leisure services £m £m Cards, unsecured loans and other Home personal loans lending...

  • Page 123
    ... industry (audited) Other financial institutions £m Construction and property £m Government and central bank £m Wholesale and retail distribution and leisure £m Cards, unsecured loans and other Home personal loans lending £m £m The strategic report As at 31 December 2011 £m On-balance sheet...

  • Page 124
    ... Debt securities Reverse repurchase agreements Other financial assets Total financial assets designated at fair value Derivative financial instruments Loans and advances to banks Loans and advances to customers: Home loans Credit cards, unsecured and other retail lending Corporate loans Total loans...

  • Page 125
    ... Debt securities Reverse repurchase agreements Other financial assets Total financial assets designated at fair value Derivative financial instruments Loans and advances to banks Loans and advances to customers: Home loans Credit cards, unsecured and other retail lending Corporate loans Total loans...

  • Page 126
    ...net of impairment £m Credit risk loans £m CRLs % of gross L&A % Loan impairment charges £m Loan loss rates bps As at 31 December 2012 Total retail Wholesale - customers Wholesale - banks Total wholesale Loans and advances at amortised cost Traded loans Loans and advances designated at fair value...

  • Page 127
    ... strategic report As at 31 December 2012 Banks Other financial institutions Manufacturing Construction Property Government and central bank Energy and water Wholesale and retail distribution and leisure Business and other services Home loans Cards, unsecured loans and other personal lending Other...

  • Page 128
    ... risk and Wholesale credit risk sections on pages 129 and 136. Credit impairment charges and other provisions by business (audited) 2012 £m 2011 £m 2010 £m Loan impairment UKRBB Europe RBB Africa RBB Barclaycard Investment Bankb Corporate Banking Wealth and Investment Management Head Office...

  • Page 129
    ... £m Exchange and other adjustments £m Amounts written off £m Amounts charged to Balance at income statement 31 December £m £m The strategic report Recoveries £m 2012 Home loans Credit cards, unsecured and other retail lending Corporate loans Total impairment allowance 2011 Home loans Credit...

  • Page 130
    ... for impairment £m Total £m Total £m As at 31 December 2012 Home loans Credit cards, unsecured and other retail lending Corporate loans Total As at 31 December 2011 Home loans Credit cards, unsecured and other retail lending Corporate loans Total 4,649 1,539 344 6,532 2,297 938 57 3,292...

  • Page 131
    ... 30 108 Risk management Shareholder information Notes a UKRBB Medium Business net lending (2011: £2,680m) has been reclassified from wholesale to retail as at December 2012. b Europe RBB includes loans and advances to business customers at amortised cost. c Barclaycard business net lending (2011...

  • Page 132
    ... advancesa Credit cards, overdrafts and Secured unsecured home loans loans £m £m Other secured retail lendingb £m Business lending £m Total retail £m As at 31 December 2012 UKRBB Europe RBB Africa RBB Barclaycard Corporate Banking Wealth and Investment Management Total As at 31 December 2011...

  • Page 133
    ... loans in the Group's retail portfolios. Home loans principal portfoliosb Gross loans and advances £m > 90 day arrears % Recoveries Gross proportion of charge-off outstanding rates balances % % Recoveries impairment coverage ratio % Financial review Financial statements As at 31 December 2012 UK...

  • Page 134
    ... low base rate environment. The recoveries impairment coverage ratio decreased mainly because of a release of provision due to the resolution of backlogs in litigation. In the UK, owner-occupied interest only balances of £38.1bn (2011: £39.2bn) represented 33% of total stock. Buy-to-let home loans...

  • Page 135
    ... balances % Recoveries impairment coverage ratio % The strategic report Governance Gross loans and advances £m 30 day arrears % 90 day arrears % As at 31 December 2012 UK cardsa US cardsb UK personal loans South Africa cardsc Barclays Partner pinance Europe RBB cards UK overdrafts Italy salary...

  • Page 136
    ... market LTV of subject to of home loan outstanding forbearance forbearance balances programmes balancesa % % % As at 31 December 2012 Home loans UK Spain Italy Credit cards, overdrafts and unsecured loans UK cardsb,c UK personal loans US cardsd Business lendinge UK As at 31 December 2011 Home loans...

  • Page 137
    ...-occupied home loans As at December 31 Interest only balances (£m) 90 days arrears (%) Marked to market LTV % Interest only mortgages maturing during: 2013 2014 2015 Risk review Financial review 2012 45,693 0.3 45.2 710 872 1,046 Financial statements Management adjustments to models Management...

  • Page 138
    ... £m Credit risk loans £m CRLs % of gross L&A % Loan impairment charges £m Loan loss rates bps As at 31 December 2012 Africa RBB Investment Bankc Corporate Banking - UK - Europe - Rest of World Wealth and Investment Managementd Head Office and Other Functions Total As at 31 December 2011 Africa...

  • Page 139
    ... principally due to reduced balances in the UK and Europe in Corporate Banking and Investment Bank. The PCRL coverage ratio increased to 46.5% (2011: 42.4%). Financial review Financial statements Risk management Shareholder information Notes a UKRBB Medium Business lending and Barclaycard's Global...

  • Page 140
    ...L&A net of impairment £m Credit risk loans £m CRLs % of gross L&A % Loan impairment charges £m Loan loss rates bps As at 31 December 2012 Loans and advances to banks Interbank lending Cash collateral and settlement balances Loans and advances to customers Corporate lending Government lending ABS...

  • Page 141
    ... was £49m (2011: £40m) with the increase primarily relating to UK Corporate Banking. Financial statements Risk management Shareholder information Note a An additional £270m (2011: £321m) of UK CRE exposure is held at fair value. barclays.com/annualdepodt Barclays PLC Annual Report 2012 I 139

  • Page 142
    ...on pages 143-154. Debt securities 2012 2011 % £m % As at 31 December Of which issued by: Governments and other public bodies Corporate and other issuers US agency Mortgage and asset backed securities Bank and building society certificates of deposit Total Government securities £m 124,803 35,761...

  • Page 143
    ... be calculated and the future value to be estimated, for example, current market rates, market volatility and legal documentation (including collateral rights). Financial review Financial statements Risk management Shareholder information barclays.com/annualdepodt Barclays PLC Annual Report 2012...

  • Page 144
    ... exchange movements of £459m, offset by net fair value gains and impairment charges of £44m. Barclays credit market exposures 2012 Fair value (losses)/ gains and net 2011 funding £m £m Impairment (charge)/ release £m Total (losses)/ gains £m As at 31 December US residential mortgages ABS...

  • Page 145
    ... designated at fair value include debt and equity securities, loans and reverse repurchase agreements that have been designated at fair value. Financial review â- â- â- â- Available for sale assets are principally investments in government bonds and other debt securities. Balances are reported...

  • Page 146
    ...lower new originations across Spain, Italy and Portugal in line with Group strategy to reduce redenomination risk. Other retail lending reduced by 17% to £6.3bn driven primarily by reduced lending to business banking customers in Spain and Portugal as a result of the challenging economic conditions...

  • Page 147
    ... counterparty (audited) Financial institutions £m Residential mortgages £m Other retail lending £m Total net on-balance Contingent sheet liabilities and exposure commitments £m £m Total net exposure £m The strategic report Sovereign £m Corporate £m As at 31 December 2012 France Germany...

  • Page 148
    Risk review Credit risk continued Spain (audited) Fair value through profit or loss Trading portfolio Assets £m Liabilities £m Net £m Assets £m Derivatives Liabilities £m Cash collateral £m Net £m Designated at FV Assets £m Total 2012 £m 2011 £m As at 31 December Sovereign Financial ...

  • Page 149
    ...-off rates in credit cards and unsecured loans were broadly stable in 2012; and â- â- £1,045m (2011: £1,529m) lending to small and medium enterprises (SMEs), largely secured against residential or commercial property. Financial review Financial statements Risk management Shareholder information...

  • Page 150
    Risk review Credit risk continued Italy (audited) Fair value through profit or loss Trading portfolio Assets £m Liabilities £m Net £m Assets £m Derivatives Liabilities £m Cash collateral £m Net £m Designated at FV Assets £m Total 2012 £m 2011 £m As at 31 December Sovereign Financial ...

  • Page 151
    ... (audited) Fair value through profit or loss Trading portfolio Assets £m Liabilities £m Net £m Assets £m Derivatives Liabilities £m Cash collateral £m Net £m Designated at FV Assets £m Total 2012 £m 2011 £m The strategic report As at 31 December Sovereign Financial institutions Corporate...

  • Page 152
    Risk review Credit risk continued Ireland (audited) Fair value through profit or loss Trading portfolio Assets £m Liabilities £m Net £m Assets £m Derivatives Liabilities £m Cash collateral £m Net £m Designated at FV Assets £m Total 2012 £m 2011 £m As at 31 December Sovereign Financial ...

  • Page 153
    Cyprus (audited) Fair value through profit or loss Trading portfolio Assets £m Liabilities £m Net £m Assets £m Derivatives Liabilities £m Cash collateral £m Net £m Designated at FV Assets £m Total 2012 £m 2011 £m The strategic report As at 31 December Financial institutions Corporate ...

  • Page 154
    Risk review Credit risk continued Greece (audited) Fair value through profit or loss Trading portfolio Assets £m Liabilities £m Net £m Assets £m Derivatives Liabilities £m Cash collateral £m Net £m Designated at FV Assets £m Total 2012 £m 2011 £m As at 31 December Sovereign Financial ...

  • Page 155
    ... guarantee of certain savings and investment funds, which hold a proportion of their assets in sovereign debt. As at 31 December 2012, the net liability in respect of these guarantees was £33m (2011: £41m). Shareholder information barclays.com/annualdepodt Barclays PLC Annual Report 2012 I 153

  • Page 156
    ... to manage the risk. Direct exposure to Greece is very small with negligible net funding required from Group. For Ireland there is no local balance sheet funding requirement by the Group as total liabilities in this country exceed total assets. 154 I Barclays PLC Annual Report 2012 barclays.com...

  • Page 157
    ... values of DVaR, Expected Shortfall and 3W (audited) 2012 For the year ended 31 December DVaR (95%) Average £m Higha £m Lowa £m Average £m Governance 2011 Risk review Higha £m Lowa £m Interest rate risk Inflation risk Spread risk Credit risk Basis risk poreign exchange risk Equity risk...

  • Page 158
    ... 2011. The increase in risk reflects an increase in the Group equity balances and associated hedges, partly offset by reduction in the margin compression in the retail bank. AEaR is measured for a reduction in rates for the purposes of this analysis. 156 I Barclays PLC Annual Report 2012 barclays...

  • Page 159
    ... hedges) as a percentage of the sum of average customer assets and liabilities, consistent with the presentation of the net interest margin. Risk review Financial review Financial statements Risk management Shareholder information barclays.com/annualdepodt Barclays PLC Annual Report 2012 I 157

  • Page 160
    ...strategy, fixed rate returns on product structural hedges are expected to continue to make a significant but declining contribution in 2013. The contribution from equity structural hedges in Retail and Business Banking, Corporate Banking and Wealth and Investment Management decreased to £231m (2011...

  • Page 161
    ... asset margins and a benefit to customer liability margins, resulting in a reduction of 3bps (2011: 2bps) in the net interest margin. The Group uses a range of internal funding rates which price intra-group funding and liquidity to give credit to businesses with net surplus liquidity and to charge...

  • Page 162
    ... of non-trading exposures no reasonably possible change in foreign exchange rates would have a material effect on either the Group's profit or movements in equity for either of the years ended 31 December 2012 or 2011. b) Translational foreign exchange exposure The Group's investments in overseas...

  • Page 163
    ... income and the value of assets under management. Asset management structural risk mainly resides in Wealth and Investment Management. It is Barclays policy that businesses monitor and regularly assess potential hedging strategies. Disclosures about certain trading activities including non-exchange...

  • Page 164
    ...therefore embedded in the way our businesses and legal entities operate. Our capital management strategy is driven by the strategic aims of the Group and the risk appetite set by the Board. For further information on related policies, please refer to the Risk management section on pages 313-343. For...

  • Page 165
    ...securities has been revised to include the adjustment for the scope of regulatory consolidation previously disclosed in other regulatory adjustments. c Tier 1 notes are included in subordinated liabilities in the consolidated balance sheet. barclays.com/annualdepodt Barclays PLb Annual Report 2012...

  • Page 166
    Risk review Funding risk - bapital continued Movement in total regulatory capital 2012 £m 2011 £m Sore Tier 1 capital as at 1 January (Loss)/profit for the year Removal of own credita Dividends paid Retained capital generated from earnings Movement in reserves - impact of share schemes Movement ...

  • Page 167
    ...As at 1 January 2012 Methodology and model changes Business activity Foreign exchange Change in risk parameters As at 31 December 2012 391.0 38.7 (28.4) (11.3) (3.1) 386.9 Financial statements Risk management Shareholder information barclays.com/annualdepodt Barclays PLb Annual Report 2012 I 165

  • Page 168
    ... Investment Bank risk reduction primarily in market risk and derivative counterparty credit risk, including a £4.2bn decrease as a result of the sell down of legacy assets (in addition to £1.0bn lower capital deductions related to legacy business); âˆ' £6.9bn credit risk decrease within Corporate...

  • Page 169
    ...The draft July 2011 CRD IV rules include the implementation of a capital deduction for financial holdings greater than 10% of CET1 capital, which under Basel 2.5 are subject to equity market risk capital requirements. Under current regulatory rules, the Group's financial holdings net down to £3.3bn...

  • Page 170
    ... (2011: £152bn). b Comprising counterparty netting of £387,672m (2011: £440,592m) and collateral held of £46,855m (2011: £51,124m) as disclosed on page 141. c Comprising financial assets designated at fair value and associated cash balances. 168 I Barclays PLb Annual Report 2012 barclays.com...

  • Page 171
    ... add-on relating to off-balance sheet undrawn commitments based on a credit conversion factor of 10% for unconditionally cancellable commitments and 100% for other commitments. â- â- Risk management Shareholder information barclays.com/annualdepodt Barclays PLb Annual Report 2012 I 169

  • Page 172
    ... December 2012 Cash and balances at central banks Trading portfolio assets Financial assets designated at fair value Derivative financial instruments Loans and advances to banks and customers Reverse repurchase agreements and other similar secured lending Available for sale investments Goodwill and...

  • Page 173
    ...450 The strategic report Governance £ma,b,c 2012 2011 Average economic capital allocation by risk type Wholesale credit risk (incl. CRLs)e Retail credit riske Operational risk Market risk Fixed asset risk Other risksf 10,400 11,100 7,950 8,100 1,950 2,100 £ma,b,c 2012 2011 Risk review 4,000...

  • Page 174
    ... the Group maintains sufficient financial resources of appropriate quality for the Group's funding profile. The Liquidity Framework is delivered via a combination of policy formation, review and governance, analysis, stress testing, limit setting and monitoring. Liquidity risk is managed separately...

  • Page 175
    ... stress scenario lasting for 30 days. The NSFR has a time horizon of one year and has been developed to promote a sustainable maturity structure of assets and liabilities. Financial statements Risk management Shareholder information barclays.com/annualdepodt Barclays PLC Annual Report 2012 I 173

  • Page 176
    ...Barclays specific requirement)b £bn Estimated Basel 3 LCR (revised text January 2013) £bn As at 31 December 2012 Gotal eligible liquidity pool Asset inflows Stress outflows Retail and commercial deposit outflows Wholesale funding Net secured funding Derivatives Contractual credit rating downgrade...

  • Page 177
    ... banks. These assets primarily comprise government bonds and their inclusion in the liquidity pool does not compromise the liquidity position of the Group. The composition of the liquidity pool is subject to limits set by the Board, Treasury Committee and the independent credit risk and market risk...

  • Page 178
    ...Investment Bank are Absa Group related balances totalling £37bn of loans and advances to customers funded by £33bn of customer deposits. e In addition Corporate Banking holds £17.6bn (2011: £17.2bn) loans and advances as financial assets held at fair value. 176 I Barclays PLC Annual Report 2012...

  • Page 179
    ... these businesses is met using asset backed securities (ABS) and covered bonds secured primarily over customer loans and advances such as residential mortgages and credit card receivables, resulting in a loan to deposit and secured funding ratio of 88% (2011: 101%). The excess of the Investment Bank...

  • Page 180
    .... The Group is an active participant in money markets, has direct access to US, European and Asian capital markets through its global investment banking operations and long term investors through its clients worldwide. As a result, wholesale funding is well diversified by product, maturity...

  • Page 181
    .... The Group continues to recognise the importance of a diversified funding base, and therefore monitors opportunities across a variety of funding markets. Financial review Financial statements Risk management Shareholder information barclays.com/annualdepodt Barclays PLC Annual Report 2012 I 179

  • Page 182
    .... As at 31 December 2012, only £231bn of the Group's balance sheet assets were encumbered (excluding reverse repurchase agreements), which primarily related to firm financing of trading portfolio assets and other securities and to funding secured against loans and advances to customers. In addition...

  • Page 183
    ... central bank facilities. Barclays also utilises loan collateral in central bank facilities in non-securitised form. The Group currently manages four primary on balance sheet asset-backed funding programmes to obtain term financing for mortgage and credit card lending. The UK regulated covered bond...

  • Page 184
    ...assess the credit worthiness of Barclays and are based on reviews of a broad range of business and financial attributes including risk management processes and procedures, capital strength, earnings, funding, liquidity, accounting and governance. A credit rating downgrade could result in contractual...

  • Page 185
    ... liquidity risk arising from them; any request for funds from creditors would be met by simultaneously liquidating or transferring the related investment. Financial review Financial statements Risk management Shareholder information barclays.com/annualdepodt Barclays PLC Annual Report 2012 I 183

  • Page 186
    ... other banks Trading portfolio assets Financial assets designated at fair value Derivative financial instruments Loans and advances to banks Loans and advances to customers Reverse repurchase agreements and other similar secured lending Available for sale financial investments Other financial assets...

  • Page 187
    ... ten years £m The strategic report As at 31 December 2011 Assets Cash and balances at central banks Items in the course of collection from other banks Trading portfolio assets Financial assets designated at fair value Derivative financial instruments Loans and advances to banks Loans and advances...

  • Page 188
    ...and off-balance sheet items At 31 December 2011 Deposits from banks Items in the course of collection due to other banks Customer accounts Reverse repurchase agreements and other similar secured lending Trading portfolio liabilities Financial liabilities designated at fair value Derivative financial...

  • Page 189
    ...physical assets Employment practices and workplace safety Execution, delivery and process management External fraud Internal fraud 0.2 0.5 92.2 65.9 0.1 0.3 0.1 0.5 3.7 22.4 3.6 9.9 0.1 0.5 2012 2011 Risk management Shareholder information barclays.com/annualdepodt Barclays PLC Annual Report 2012...

  • Page 190
    ... 2012. In order to strengthen the governanwe relating to reputation matters, we have rewategorised reputation risk as a new Prinwipal Risk and have wreated a Board Conduwt, Reputation and Operational Risk Committee in 2013. The Barwlays Reputation Counwil wreated a Bank wide Reputation Risk Control...

  • Page 191
    ...Relations. The womponents of the programme inwlude: â- â- Governance Risk review Design and rollout: design and embedding of a new wonduwt risk Prinwipal Risk in awwordanwe with the group prinwipal risks poliwy; Strategy and management information: assessing how best to feed wonduwt risk appetite...

  • Page 192
    ... UK government; and (b) the power to transfer all or some of the property, rights and liabilities of a UK bank to a commercial purchaser or Bank of England entity. A share transfer order can extend to a wide range of securities including shares and bonds issued by a UK bank (including Barclays Bank...

  • Page 193
    ... Barclays to inject capital into Barclays Bank Delaware if it fails to meet minimum regulatory capital requirements. The strategic report Governance Risk review Financial review Financial statements Risk management Shareholder information barclays.com/annualdepodt Barclays PLC Annual Report 2012...

  • Page 194
    ... for G-SIFIs. The FSB continues to pursue a number of work streams that will affect the Group, its counterparties and the markets in which it operates. These include policy work on shadow banking and on enhanced disclosures. 192 I Barclays PLC Annual Report 2012 barclays.com/annualdepodt

  • Page 195
    ... and, if so, how. It is expected that the European Commission will clarify its intentions later this year. The strategic report Governance Risk review Financial review Financial statements Risk management Shareholder information barclays.com/annualdepodt Barclays PLC Annual Report 2012 I 193

  • Page 196
    ... the Mortgage Market Review will apply from 26 April 2014. These will affect the economics of investment advice and home finance provision respectively. The FSA, following consultation, has also begun to take a more interventionist approach to the design of financial products and to the governance...

  • Page 197
    ... certain swaps-related activities in the US branches of Barclays Bank PLC; Risk retention requirements for securitisations: The US federal banking agencies are required by the DFA to develop rules whereby, subject to certain exceptions, any sponsor of an asset-backed security (ABS) transaction must...

  • Page 198
    ...believe our fundamentals are strong and we are well positioned to achieve long-term value. We are aiming to improve the quality and predictability of earnings allowing us to deliver sustainable returns in excess of our cost of equity. 196 I Barclays PLC Annual Report 2012 barclays.com/annualdepodt

  • Page 199
    ... performance of the Group. The strategic report Governance 198 202 203 204 205 207 Key performance indicators Consolidated summary income statement Income statement commentary Consolidated summary balance sheet Balance sheet commentary Analysis of results by business Risk review Financial review...

  • Page 200
    ... the new strategy of the Executive Committee. Returns KPIs Definition Why is it important to the business and management Return on average shareholders' equity (RoE) Adjusted RoE Statutor) RoE 2012 - 7.8% 2011 - 6.6% 2010 - 6.8% 2012 - (1.9)% 2011 - 5.8% 2010 - 7.2% RoE is calculated as profit...

  • Page 201
    ...Risk review During 2012 the loan loss rate decreased to 75bps (2011: 77bps) reflecting a 6% reduction in impairment charge on loans and advances and a 3% contraction in gross loans and advances principally due to lower balances in the Investment Bank. Dividend per share 2012 - 6.5p 2011 - 6.0p 2010...

  • Page 202
    ... of financial performance to many of our stakeholders and income growth a key execution priority for Barclays management. Adjusted total income increased 2% despite challenging economic conditions and the continuing low interest rate environment. Income by geography Defined as total income net of...

  • Page 203
    ....co.uk/markets/Pages/ FLS/data.aspx. b 2010 and 2011 employee participation figures have been restated to exclude the number of Barclays pensioners who received support as part of Barclays Community Investment programme. c For 2012 'senior' has been reinterpreted as being at a 'Director (B7...

  • Page 204
    Financial review Consolidated summary income statement Forutheuyearuendedu31uDecemberu Continuinguoperations Nut inturust incomu Non-inturust incomu nut of claims and bunufits on insurancu contracts Own crudit (chargu)/gain Gains on dubt buy-backs Totaluincomeunetuofuinsuranceuclaimsu Crudit ...

  • Page 205
    ... of BlackRock, Inc. and goodwill, and thu UK bank luvy. Adjusteduprofitureconciliation 2012 £m 2011 £m The strategic report Governance Risk review Financial review Financial statements Adjusteduprofitubeforeutax Own crudit Gains on dubt buy-backs Gain/(loss) on disposal and impairmunt of...

  • Page 206
    Financial review Consolidated summary balance sheet Asuatu31uDecemberu Assets Cash, balancus at cuntral banks and itums in thu coursu of colluction Trading portfolio assuts Financial assuts dusignatud at fair valuu Durivativu financial instrumunts Availablu for salu invustmunts Loans and advancus ...

  • Page 207
    ... matchud book trading and trading dusks' funding ruquirumunts. Trading portfolio liabilitius rumainud broadly flat at £44.8bn, with thu opposing movumunts in uquitius and dubt sucuritius ruflucting trading stratugius across dusks. The strategic report Governance Risk review Financial liabilitius...

  • Page 208
    Financial review Balance sheet commentary continued Balanceusheetuleverage Barclays continuus to opuratu within limits and targuts for balancu shuut usagu as part of its balancu shuut managumunt activitius. Thu adjustud gross luvuragu was 19x (2011: 20x) principally ruflucting a £1.2bn incruasu in...

  • Page 209
    ... in Africa, pruviously ruportud undur Africa RBB, aru now includud within Corporatu Banking. Thu 2010 and 2011 comparativus havu buun rustatud. This rustatumunt has no impact on thu Group's ovurall rusult. Shareholder information barclays.com/annualdepodt Barclays PLC Annual Report 2042 I 207

  • Page 210
    Financial review Analysis of results by business continued Thu Group's activitius havu buun organisud undur thu following businuss groupings: â- â- â- â- UKRBB is a luading UK high struut bank providing currunt account and savings products and Woolwich brandud mortgagus. UKRBB also providus ...

  • Page 211
    ... basud on 10% of risk wuightud assuts. The strategic report Returnuonuaverageuequity Adjustud Statutory 2010 % 2012 % 2011 % 2010 % Governance u UKRBB Europu RBB Africa RBB Barclaycard Invustmunt Bank Corporatu Banking Wualth and Invustmunt Managumunt Group uxcluding Huad Officu and Othur...

  • Page 212
    ...due to mortgage balance growth, an increased operational risk charge and adoption of a more comprehensive approach to loans subject to forbearance. 2012 £m 2011 £m 2010 £m Income Statement Information Net interest income Net fee and commission income Net trading loss Net investment income Net...

  • Page 213
    ... in mortgage balances. The strategic report Governance Risk review Financial review Adjusteda 2012 2011 2010 2012 Statutory 2011 2010 Performance Measures Return on average equity Return on average tangible equity Return on average risk weighted assets Loan loss rate (bps) Cost: income ratio Key...

  • Page 214
    ... mainly from Italy mortgage sales and lower sales of investment products. Credit impairment charges increased 26% to £328m due to deterioration in credit performance across Europe reflecting current economic conditions. Loan loss rate increased to 80bps (2011: 54bps). 90 day arrears rate for home...

  • Page 215
    ... competitive environment. Adjusted return on average equity of negative 6.0% (2010: negative 1.0%) reflecting the repositioning of the business during 2011. The strategic report Governance Risk review Financial review Adjusteda 2012 2011 2010 2012 Statutory 2011 2010 Performance Measures Return...

  • Page 216
    Financial review Analysis of results by business continued Africa Retail and Business Banking 2012 Income declined 12% to £3,157m. Excluding currency movements, income declined 2% reflecting non-recurrence of gains from the disposal of Group hedging instruments in 2011 and downward commercial ...

  • Page 217
    ... Financial review Adjusteda 2012 2011 2010 2012 Statutory 2011 2010 Performance Measures Return on average equityb, c Return on average tangible equityc Return on average risk weighted assets Loan loss rate (bps) Cost: income ratio Key Facts 90 days arrears rate - South African home loans Number...

  • Page 218
    ... business funding initiatives in the US and Germany. Risk weighted assets increased 7% to £36.5bn, principally due to growth in assets and an increased operational risk charge. 2012 £m 2011 £m 2010 £m Income Statement Information Net interest income Net fee and commission income Net trading...

  • Page 219
    ... strategic report Governance Risk review Financial review Adjusteda 2012 2011 2010 2012 Statutory 2011 2010 Performance Measures Return on average equity Return on average tangible equity Return on average risk weighted assets Loan loss rate (bps) Cost: income ratio Key Facts 30 day arrears rates...

  • Page 220
    ... banks, trading portfolio assets, and loans and advances to banks and customers, partially offset by an increase in reverse repurchase agreements. 2012 £m 2011 £m 2010 £m Income Statement Information Net interest income Net fee and commission income Net trading income Net investment income...

  • Page 221
    ... in credit market exposures, more than offsetting the impact of CRD III. The strategic report Governance Risk review Financial review Analysis of total income 2012 £m 2011 £m 2010 £m Fixed Income, Currency and Commodities Equities and Prime Services Investment Banking Principal Investments...

  • Page 222
    Financial review Analysis of results by business continued Corporate Banking 2012 Adjusted profit before tax improved £347m to £551m including a gain of £71m (2011: loss of £111m) in the net valuation of fair value items, primarily driven by improved credit impairment in Europe and UK and ...

  • Page 223
    ...the UK, benefiting from product innovation. Risk weighted assets decreased 2% to £72.8bn reflecting reductions in net exposures in Europe and Rest of the World, partially offset by higher net balances in the UK. The strategic report Governance Risk review Financial review Adjusteda 2012 2011 2010...

  • Page 224
    ... Net Worth businesses. Risk weighted assets increased 21% to £15.8bn principally due to growth in lending and an increased operational risk charge. 2012 £m 2011 £m 2010 £m Income Statement Information Net interest income Net fee and commission income Net trading income Net investment income...

  • Page 225
    ... in the lending portfolio. The strategic report Governance Risk review Financial review Adjusted 2012 2011 2010 2012 Statutory 2011 2010 Performance Measures Return on average equity Return on average tangible equity Return on average risk weighted assets Loan loss rate (bps) Cost: income ratio...

  • Page 226
    ...2011: profit £947m) including an own credit charge of £4,579m (2011: £2,708m gain) and non-recurrence of gains on debt buy-backs, partially offset by the impact of BlackRock, Inc. investment disposal and income from changes in the value of hedges relating to employee share awards that were closed...

  • Page 227
    The strategic report Governance Risk review Financial review Financial statements Risk management Shareholder information barclays.com/annualdepodt Barclays PLC Annual Report 2012 I 225

  • Page 228
    ... our disclosures and their use-ulness to the readers o- the financial statements in the light o- developing market practice and areas o- -ocus. See page 228 -or -urther details on our improvements made in reporting over the past year. 226 I Barclays PLC Annual Report 2012 barclays.com/annualdepodt

  • Page 229
    ... remuneration 311 45 Financial risks, liquidity and capital management 311 46 Events after the balance sheet date Risk review Performance/return 242 2 Segmental reporting 242 3 Net interest income 243 4 Net fee and commission income 244 5 Net trading income 244 6 Net investment income 245 7 Credit...

  • Page 230
    ... of global banks in a number of areas, including liquidity and funding, credit risk and market risk. In 2012 we have: â- â- BBA Code for Financial Reporting Disclosure Barclays has adopted the BBA Code for Financial Reporting Disclosure and has prepared the 2012 Annual Report and Accounts in...

  • Page 231
    ... and Parent balance sheets, Consolidated and Parent statements of changes in equity and Consolidated and Parent cash flow statements, the related notes and the parts of the Risk review, Risk management and Financial review sections that are referenced as audited. The financial reporting framework...

  • Page 232
    ...subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. PricewaterhouseCoopers LLP London, United Kingdom 5 March 2013 230 I Barclays PLC Annual Report 2012 barclays.com/annualdepodt

  • Page 233
    ... per share Diluted (loss)/earnings per share Dividends per share Interim dividends per share Final dividend per share 11 11 12 (8.5) (8.5) 6.5 3.0 3.5 25.1 24.0 6.0 3.0 3.0 30.4 28.5 5.5 3.0 2.5 Risk management Shareholder information barclays.com/annualdepodt Barclays PLC Annual Report 2012...

  • Page 234
    ...gains from changes in fair value - Net gains transferred to net profit - Tax Other Other comprehensive income for the year, net of tax, from continuing operations Total comprehensive income for the year Attributable to: Equity holders of the Parent Non-controlling interests 2012 £m 2011 £m 2010...

  • Page 235
    ...-311 were approved by the Board of Directors on 5 March 2013 and signed on its behalf by: Sir David Walker Group Chairman Antony Jenkins Group Chief Executive Chris Lucas Group Finance Director Risk management Shareholder information barclays.com/annualdepodt Barclays PLC Annual Report 2012 I 233

  • Page 236
    ... 2011 Balance as at 1 January 2010 Profit after tax Currency translation movements Available for sale investments Cash flow hedges Other Total comprehensive income for the year Issue of new ordinary shares Issue of shares under employee share schemes Increase in treasury shares Vesting of shares...

  • Page 237
    Consolidated financial statements Consolidated cash flow statement For the year ended 31 December 2012 £m 2011 £m 2010 £m The strategic report Continuing operations Reconciliation of profit before tax to net cash flows from operating activities: Profit before tax Adjustment for non-cash ...

  • Page 238
    ... by the Board of Directors on 5 March 2013 and signed on its behalf by: Sir David Walker Group Chairman Antony Jenkins Group Chief Executive Chris Lucas Group Finance Director Note a The derivative financial instrument held by Barclays PLC (the Parent company) represents Barclays PLC's right to...

  • Page 239
    ... with central banks and other assets that had no credit or market risk. Risk management Shareholder information Notes a Details of share capital and share premium are shown in Note 32 b Comprising cash and balances at central banks. barclays.com/annualdepodt Barclays PLC Annual Report 2012 I 237

  • Page 240
    ... in retail banking, credit cards, wholesale banking, investment banking, wealth management and investment management services. In addition, individual financial statements have been presented for the holding company. 2. Compliance with International Financial Reporting Standards The consolidated...

  • Page 241
    ... equity components, these are accounted for separately. The fair value of the debt is estimated first and the balance of the proceeds is included within equity. Financial review Financial statements Risk management Shareholder information barclays.com/annualdepodt Barclays PLC Annual Report 2012...

  • Page 242
    ... to calculate the fair value of financial and non-financial assets and liabilities. It is not expected to have a material impact on the Group financial statements; IAS 19 Employee Benefits (Revised 2011). This requires that actuarial gains and losses arising from defined benefit pension schemes are...

  • Page 243
    ...segmental reporting on pages 207-208. â- â- â- â- â- â- â- â- Governance These are covered by the Audit opinion included on page 229. Risk review Financial review Financial statements Risk management Shareholder information barclays.com/annualdepodt Barclays PLC Annual Report 2012 I 241

  • Page 244
    ... value for relevant accounting policies. 2012 £m 2011 £m 2010 £m Cash and balances with central banks Available for sale investments Loans and advances to banks Loans and advances to customers Other Interest income Deposits from banks Customer accounts Debt securities in issue Subordinated...

  • Page 245
    ... the Group are recognised as the services are provided, for example on completion of the underlying transaction. The strategic report Governance Risk review Financial review 2012 £m 2011 £m 2010 £m Banking, investment management and credit related fees and commissions Brokerage fees Foreign...

  • Page 246
    ...(2011: £3,850m gain, 2010: £903m loss) on financial liabilities designated at fair value. 2012 Net trading income decreased 61% to £3,025m, primarily reflecting a £7,287m variance in own credit (2012: £4,579m charge; 2011: £2,708m gain) as a result of improved credit spreads on Barclays issued...

  • Page 247
    ... after impairment are recognised directly in other comprehensive income. Further declines in the fair value of equity instruments after impairment are recognised in the income statement. Risk management Shareholder information barclays.com/annualdepodt Barclays PLC Annual Report 2012 I 245

  • Page 248
    ... charge on loans and advances. Further information on impairment allowances and related credit information is set out within the Risk review. 2012 £m 2011 £m 2010 £m New and increased impairment allowances Releases Recoveries Impairment charges on loans and advances (Releases)/charges...

  • Page 249
    ...tax assets and liabilities are only offset when there is both a legal right to set-off and an intention to settle on a net basis. Financial statements 2012 £m 2011 £m 2010 £m Risk management Current tax charge Current year Adjustment for prior years Deferred tax (credit)/charge Current year...

  • Page 250
    ... For the year ended 31 December 2012 continued 10 Tax continued The table below shows the reconciliation between the actual tax charge and the tax charge that would result from applying the standard UK corporation tax rate to the Group's profit before tax. 2012 £m 2011 £m 2010 £m Profit before...

  • Page 251
    ... that the entities will have future taxable profits against which the losses and temporary differences can be utilised. There is no net deferred tax asset in the UK. Financial statements Risk management Shareholder information barclays.com/annualdepodt Barclays PLC Annual Report 2012 I 249

  • Page 252
    ... the Group's Tax Risk Framework. Deferred tax assets have been recognised based on business profit forecasts. Further detail on the recognition of deferred tax assets is provided on page 247 in the deferred tax assets and liabilities section of this tax note. 250 I Barclays PLC Annual Report 2012...

  • Page 253
    ... (2011: £362m) and final dividend declared in relation to 2011 of £366m (2010: £298m). Financial review Financial statements Risk management Shareholder information Notes a The number of basic weighted average number of shares excludes Treasury shares held in employee benefit trusts for trading...

  • Page 254
    ...managed by the Group on the basis of its fair value, or includes terms that have substantive derivative characteristics (Note 15). 2012 £m 2011 £m Loans and advances Debt securities Equity securities Reverse repurchase agreements Customers' assets held under investment contracts Other financial...

  • Page 255
    ... are primarily designated as hedges of the foreign currency risk of net investments in foreign operations. The strategic report Governance Risk review Financial review Financial statements Risk management Shareholder information barclays.com/annualdepodt Barclays PLC Annual Report 2012 I 253

  • Page 256
    ... financing transactions and reinvestments. Interest rate derivatives designated as fair value hedges primarily hedge the interest rate risk of fixed rate borrowings in issue, fixed rate loans to banks and customers and investments in fixed rate debt securities held. Credit derivatives The Group...

  • Page 257
    ...,677) 714,377 (459,334) 43,095,991 (455,420) 25,496,759 (68) 15,763,834 (3,846) 1,835,398 (459,334) 43,095,991 Financial statements Risk management Shareholder information barclays.com/annualdepodt Barclays PLC Annual Report 2012 I 255

  • Page 258
    ...time over which the Group hedges exposure to the variability in future cash flows for forecast transactions, excluding those forecast transactions related to the payment of variable interest on existing financial instruments, is 9 years (2011: 9 years). Amounts recognised in net interest income 2012...

  • Page 259
    ... net investment income. The strategic report 2012 £m 2011 £m Debt securities and other eligible bills Equity securities Available for sale investments 74,677 432 75,109 63,610 4,881 68,491 Governance Critical accounting estimates and judgements Approximately $4.5bn (£2.8bn) of the assets...

  • Page 260
    ... Group's balance sheet. 2012 Carrying amount £m Fair value £m 2011 Carrying amount £m Fair value £m Financial assets Loans and advances to banks Loans and advances to customers: - Home loans - Credit cards, unsecured and other retail lending - Corporate loans Reverse repurchase agreements and...

  • Page 261
    ...CDSs), most fund units, certain loans, foreign exchange spot and forward transactions and certain issued notes. The strategic report Governance Risk review Financial review Financial statements Risk management Shareholder information barclays.com/annualdepodt Barclays PLC Annual Report 2012 I 259

  • Page 262
    ...723) 152,183 36,949 538,964 68,491 796,587 (45,887) (87,997) (527,910) (661,794) Transfers from Level 1 to Level 2 primarily comprised certain government bonds and equity products, as a result of regular observability reassessments. 260 I Barclays PLC Annual Report 2012 barclays.com/annualdepodt

  • Page 263
    ... strategic report As at 31 December 2012 Commercial real estate loans Asset backed products Other credit products Derivative exposure to monoline insurers Non-asset backed debt instruments Equity products Private equity Funds and fund-linked products Foreign exchange products Interest rate products...

  • Page 264
    ... for sale investments £m Non-derivative liabilities Trading portfolio liabilities £m Financial liabilities designated at fair value £m Derivatives Net derivative financial instrumentsa £m As at 31 December 2012 Commercial real estate loans Asset backed products Other credit products Derivative...

  • Page 265
    ... loans; and Net losses on the fair value of Level 3 assets recognised in the income statement totalled £1.4bn (31 December 2011: £0.3bn) primarily due to a reduction in the fair value of monoline and non-monoline credit derivatives. â- â- â- â- â- â- Risk management Shareholder information...

  • Page 266
    ... at assets fair value £m £m Available for sale investments £m Trading portfolio liabilities £m Financial liabilities designated at fair value £m Net derivative financial instruments £m Total £m As at 31 December 2012 Recognised in the income statement - trading income - other income Total...

  • Page 267
    ...shifting the recovery rate assumptions on the underlying protected assets. The probability of default of the monoline derivative counterparty is stressed by shifting the internal default curve. Risk management Shareholder information barclays.com/annualdepodt Barclays PLC Annual Report 2012 I 265

  • Page 268
    ... are performed at least bi-annually, with the portfolio reviewed on a monthly basis for material events that might impact upon fair value. Observability: Unobservable inputs include earnings estimates, multiples of comparative companies, marketability discounts and discount rates. Model inputs...

  • Page 269
    ... asset performance, independent research, ABX indices, broker quotes, observable trades on similar securities and third party pricing sources. Prepayment is projected based on observing historic prepayment. Risk review Financial review Observability: Inflation forward curves and interest rate...

  • Page 270
    ... Income statement £m Equity £m Product type As at 31 December 2012 Commercial real estate loans Asset backed products Other credit products Derivative exposure to monoline insurers Non-asset backed debt instruments Equity products Private equity Funds and fund-linked products Foreign exchange...

  • Page 271
    ...value. Barclays credit spreads tightened during 2012, leading to a charge of £4,579m (2011: gain of £2,708m) from the fair value of changes primarily in own credit itself but also reflecting the effects of foreign exchange rates, time decay and trade activity. The strategic report Governance Risk...

  • Page 272
    ... aspects of valuation in the period, including: credit valuation adjustments on monoline exposures, commercial real estate loans, private equity investments, and fair value loans to government and business and other services. 270 I Barclays PLC Annual Report 2012 barclays.com/annualdepodt

  • Page 273
    ... lease receivables are included within loans and advances to customers. The Group specialises in asset-based lending and works with a broad range of international technology, industrial equipment and commercial companies to provide customised finance programmes to assist manufacturers, dealers and...

  • Page 274
    ... (and stock borrowing or similar transaction) are a form of secured lending whereby the Group provides a loan or cash collateral in exchange for the transfer of collateral, generally in the form of marketable securities subject to an agreement to transfer the securities back at a fixed price in the...

  • Page 275
    ...recognises investment property at cost, and subsequently at fair value at each balance sheet date reflecting market conditions at the reporting date. Gains and losses on remeasurement are included in the income statement. Financial review Financial statements Risk management Shareholder information...

  • Page 276
    ... by management with the support of appropriately qualified independent valuers. Note a Of the other movement, £1.1bn relates to a transfer of Baubecon, an investment property, to other assets held for sale in June. Subsequently in July, Baubecon was disposed. 274 I Barclays PLC Annual Report 2012...

  • Page 277
    ... probable that future economic benefits attributable to the assets will flow from their use. The strategic report Governance Risk review Intangible assets are stated at cost (which is, in the case of assets acquired in a business combination, the acquisition date fair value) less amortisation and...

  • Page 278
    ... Group shareholder funds excluding goodwill based on the CGU's share of risk weighted assets before goodwill balances are added back. The recoverable amount of the CGU has been determined using cash flow predictions based on financial budgets approved by management and covering a five-year period...

  • Page 279
    ... 5,088 12 2 - 14 Financial review Total future minimum sublease payments to be received under non-cancellable subleases as at 31 December 2012 was £22m (2011: £121m). Financial statements Risk management Shareholder information barclays.com/annualdepodt Barclays PLC Annual Report 2012 I 277

  • Page 280
    ... was concentrated in short term insurance contracts in Africa. The impact to the income statement and equity under a reasonably possible change in the assumptions used to calculate the insurance liabilities would be £7m (2011: £8m). 278 I Barclays PLC Annual Report 2012 barclays.com/annualdepodt

  • Page 281
    ... main features or starting to implement the plan. Provision is made for undrawn loan commitments if it is probable that the facility will be drawn and result in the recognition of an asset at an amount less than the amount advanced. The strategic report Governance Re2un2ancy Onerous an2 contracts...

  • Page 282
    ... Future Expected 1,100k 100k 27% 39% £2,750 450k 650k 29% 53% £2,000 50k = £44m 1% = £9m 1% = £11m £100 = £41m Interest Rate Hedging Product Redress On 29 June 2012, the FSA announced that it had reached agreement with a number of UK banks, including Barclays, in relation to a review and...

  • Page 283
    ... and issues relating to the recovery of certain assets held by institutions outside the United States. The strategic report Governance Risk review Financial review Financial statements Risk management Shareholder information barclays.com/annualdepodt Barclays PLC Annual Report 2012 I 281

  • Page 284
    ... States District Court for the Southern District of New York (the Court). The consolidated amended complaint, dated 12 February 2010, alleges that the registration statements relating to American Depositary Shares representing Preferred Stock, Series 2, 3, 4 and 5 (the ADS) offered by Barclays Bank...

  • Page 285
    ... Dollar LIBOR; or (v) issued loans linked to US Dollar LIBOR. An additional class action was commenced on 30 April 2012 in the United States District Court for the Southern District of New York (SDNY) against Barclays and other Japanese Yen LIBOR panel banks by plaintiffs involved in exchange-traded...

  • Page 286
    ... changing regulation which is likely to have a significant effect on the industry. On 4 February 2013, the UK Government introduced the Financial Services (Banking Reform) Bill (the Bill) to the House of Commons. The Bill would give the UK authorities the powers to implement the key recommendations...

  • Page 287
    ... States Foreign Corrupt Practices Act. Barclays is co-operating with all the authorities fully. It is not possible to estimate the financial impact upon Barclays should any adverse findings be made. Risk management Shareholder information barclays.com/annualdepodt Barclays PLC Annual Report 2012...

  • Page 288
    ... of principal in the final five years to maturity; and the exclusion of the impact of fair value hedging. Undated subordinated liabilities Subordinated liability per balance sheet Initial call date 2012 £m 2011 £m Regulatory capital 2012 £m 2011 £m Barclays Bank PLC issued Tier One Notes (TONs...

  • Page 289
    ... under the US Securities Act of 1933. All issues of undated subordinated liabilities are non-convertible. The strategic report Governance Risk review Financial review Financial statements Risk management Shareholder information barclays.com/annualdepodt Barclays PLC Annual Report 2012 I 287

  • Page 290
    ... year ended 31 December 2012 continued 31 Subordinated liabilities continued Dated subordinated liabilities Subordinated liabilities per balance sheet Initial call date Maturity date 2012 £m 2011 £m Regulatory capital 2012 £m 2011 £m Barclays Bank PLC issued Callable Floating Rate Subordinated...

  • Page 291
    ... equity Called up share capital, allotted and fully paid Number of shares m Ordinary shares £m Share premium £m Total £m Risk review Financial review Financial statements As at 1 January 2012 Issued to staff under share incentive plans As at 31 December 2012 As at 1 January 2011 Issued to staff...

  • Page 292
    ...) net purchases of treasury shares were made principally reflecting the increase in shares held for the purposes of employee share schemes, and £946m (2011: £499m) was transferred to retained earnings reflecting the vesting of deferred share based payments. 290s I Barclays PLC Annual Report 2012...

  • Page 293
    ... interests Profit attributable to non-controlling interests 2012 £m 2011 £m Equity attributable to non-controlling interests 2012 £m 2011 £m The strategic report Barclays Bank PLC issued: - Preference shares - Reserve Capital Instruments (RCIs) - Upper Tier 2 instruments Absa Group Limited...

  • Page 294
    ...years to £1,223m. The Group incentive awards granted (which exclude charges relating to prior year deferrals but include current year awards vesting in future years) were down 16% to £2.2bn. Investment Bank incentive awards were down 20% to £1.4bn. 292 I Barclays PLC Annual Report 2012 barclays...

  • Page 295
    ... 172 837 23 860 Risk management Share Value Plan (SVP) The SVP was introduced in March 2010 and approved by shareholders (for executive Director participation and use of new issue shares) at the AGM in April 2011. SVP awards are granted to participants in the form of a conditional right to receive...

  • Page 296
    ... upon the business unit, Group and individual employee performance. The ESAS award must normally be held for at least three years. Additional bonus shares are subsequently awarded to recipients of the provisional allocation and are considered for release upon achieving continued service for three...

  • Page 297
    ...on all of these shares (2011: nil). The total market value of the shares held in trust based on the year end share price of £2.62 (2011: £1.74) was £17.8m (2011: £6.8m). Risk review Financial review Financial statements Risk management Shareholder information Notes a Options/award granted over...

  • Page 298
    ... that the employees provide services to the Group, using a methodology similar to that for defined benefit pension schemes. Future accounting development From 1 January 2013, the Group will adopt IAS 19 revised. Had the Group adopted the revisions in these financial statements the net recognised...

  • Page 299
    ... scheme assets for all Group schemes. The net position is reconciled to the assets and liabilities recognised on the balance sheet. The tables include funded and unfunded post-retirement benefits. Income statement charge 2012 £m 2011 £m 2010 £m Current service cost Interest cost Expected return...

  • Page 300
    ... RATE link model. The impact of this change on the UKRF Defined Benefit Obligation was a £1.1bn decrease with no impact on the current year profit. The change will affect future years' profits and on an IAS 19 Revised basis, the change in estimate will result in a £50m reduced charge to the income...

  • Page 301
    ... assets % Expected rate of return % The strategic report Governance Value £m Value £m As at 31 December 2012 Equities Bonds Property Derivatives Cash Other Fair value of scheme assets As at 31 December 2011 Equities Bonds Property Derivatives Cash Other Fair value of scheme assets Risk review...

  • Page 302
    ... statements For the year ended 31 December 2012 continued 37 Pensions and post-retirement benefits continued Actuarial gains and losses The actuarial gains and losses arising on scheme obligations and scheme assets are as follows: Total actuarial gains and losses 2012 £m 2011 £m 2010 £m 2009...

  • Page 303
    ...(%) £p Financial statements Country of registration or incorporation Coppany nape Retained profit for the year £p UK Caypan Islands Fitzroy Finance Lipited Palopino Lipited 100 100 - 1 - - Risk management Shareholder information barclays.com/annualdepodt Barclays PLC Annual Report 2012...

  • Page 304
    ...risk and interest rate risk. When an asset is transferred, in sope circupstances, the Group pay retain an interest in it (continuing involvepent) requiring the Group to repurchase it in certain circupstances for other than its fair value on that date. 302 I Barclays PLC Annual Report 2012 barclays...

  • Page 305
    ... on the balance sheet: 2012 Assets Carrying amount £m Fair Value £m Liabilities Carrying amount £m Fair Value £m 2011 Risk review Assets Carrying apount £p Liabilities Fair Value £p Loans and advances to customers Residential portgage loans Credit cards, unsecured and other retail lending...

  • Page 306
    ... investors in the SPE with a specified exposure; the provision of liquidity or backstop facilities which pay be drawn upon if the SPE experiences future funding difficulties; and direct investpent in the notes issued by SPEs. â- â- â- â- â- â- 304 I Barclays PLC Annual Report 2012 barclays...

  • Page 307
    ...41 years). The copbined Net Asset Value (NAV) for all of the collateral underlying the CDOs was £1bn (2011: £1bn). The strategic report Governance Risk review Financial review Financial statements Risk management Shareholder information barclays.com/annualdepodt Barclays PLC Annual Report 2012...

  • Page 308
    ... such that the underlying assets are reflected on the Group balance sheet. These consolidated entities in turn provide facilities of £661p (2011: £717p) to third party conduits containing pripe UK buy-to-let Residential Mortgage Backed Securities (RMBS) assets. As at 31 Decepber 2012, the entire...

  • Page 309
    ... of related party entity are as follows: Pension funds, unit trusts and investment funds £m Financial review Associatesa £m Entities under Joint common ventures directorshipsa £m £m Financial statements For the year ended and as at 91 December 2012 Incope Ippairpent Total Assets Total...

  • Page 310
    ... person) of Barclays. The Group provides banking services to Directors and other Key Managepent Personnel and persons connected to thep. Transactions during the year and the balances outstanding at 31 Decepber 2012 were as follows: Loans outstandinga 2012 £m 2011 £p As at 1 January Loans issued...

  • Page 311
    ... as directors during the year was £0.3p (2011: £nil). The total value of guarantees entered into on behalf of Directors during 2012 was £nil (2011: £0.2p). Financial review Financial statements Risk management Shareholder information barclays.com/annualdepodt Barclays PLC Annual Report 2012...

  • Page 312
    ... coppliance services - advisory servicesc Services relating to corporate finance transactions entered into or proposed to be entered into by or on behalf of the Coppany or any of its associatesd Other Total auditors' remuneration 2010 Audit of the Group's annual accounts Other services: Fees payable...

  • Page 313
    ... â- â- 46 Events after the balance sheet date Strategic Review On 12 February 2013, Barclays announced the outcope of its Strategic Review and set out certain coppitpents based on the results of the review. The coppitpents are expected to result in: â- â- Governance a restructuring charge of...

  • Page 314
    ... risk are being categorised as new Principal Risks in 2013 in order to ensure appropriate oversight is being applied. See page 38 for further details on our risk management process and Board Conduct, Reputation and Operational Risk Committee. 312 I Barclays PLC Annual Report 2012 barclays...

  • Page 315
    ... 341 Ongoing capital management risks Operational risk management: 342 Overview 343 Operational risk management The strategic report Governance Risk review Financial review Financial statements Risk management Shareholder information barclays.com/annualdepodt Barclays PLC Annual Report 2012 I 313

  • Page 316
    ... them a short time after the conclusion of the review. The broader work at Barclays oriented at changing the Bank's culture will be particularly informed by the Review's recommendations. Identify the Group's significant risks; Formulate the Group's risk appetite and ensure that business profile and...

  • Page 317
    ...result of business activity and external environment Financial statements Risk management Credit Risk Market Risk Funding Risk Operational Risk Shareholder information Assurance Internal Audit â- â- Assesses the adequacy and effectiveness of the Group Control Framework Assesses management...

  • Page 318
    ... review of risk exposures and related key controls. Executive management responsibilities relating to this are set via the Group's Principal Risks Policy. The Board RisD Committee (BRC) monitors the Group's risk profile against the agreed appetite. Where actual performance differs from expectations...

  • Page 319
    ... Risks Framework: â- â- Risk management in the setting of strategy (audited) The planning cycle is centred on the medium-term planning (MTP) process, performed once a year. This sets out the Group's objectives in detailed plans which take account of the likely business environment. The risk...

  • Page 320
    ... is defined as the level of potential deviation from expected financial performance that Barclays is prepared to sustain at relevant points on the risk profile. When setting appetite, management and the Board articulate the Group's strategy and summarise objectives in terms of key financial metrics...

  • Page 321
    ...business model would become no longer viable, leading to a significant change in business strategy. Examples include extreme macroeconomic downturn scenarios (such as a break-up of the Euro area) or specific idiosyncratic events. The strategic report Governance Risk review limit concentration risk...

  • Page 322
    ...risk management. For example, portfolio management in the US cards business employs stressed assumptions of unemployment to determine profitability hurdles for new accounts. In the UK mortgage business, affordability thresholds incorporate stressed estimates of interest rates. In the Investment Bank...

  • Page 323
    ... robust review and challenge of performance, risk infrastructure and strategic plans. The credit risk management teams in each business are accountable to the business risk directors in those businesses who, in turn, report to the heads of their businesses and also to the Chief Risk Officer. The...

  • Page 324
    ..., for example, loans to banks, loan commitments and debt securities. Barclays risk management policies and processes are designed to identify and analyse risk, to set appropriate risk appetite, limits and controls, and to monitor the risks and adherence to limits by means of reliable and timely data...

  • Page 325
    ...Investment Bank portfolio Risk review Financial review Financial statements Risk management Product type Emergence period (months) Outcome period (months) Mortgages Credit cards Personal loans, overdrafts & other secured loans Business banking arrears managed commercial mortgages Business banking...

  • Page 326
    ... or cancelled, the decision in Corporate Banking to return an account to performing status may only be taken by the Business Credit Risk, while within the Investment Bank, the decision can only be taken by the Investment Bank WatchList Committee. A retail asset, pre point of charge-off may only be...

  • Page 327
    ...: secured retail home loans; credit cards, unsecured and other personal lending products; and corporate facilities. Analysis and experience has indicated that, in general, the severity rates for these types of products are typically within the following ranges: â- â- Financial statements Details...

  • Page 328
    ... of loans under forbearance Loans under forbearance programmes are subject to Group Impairment Policy. In both retail and wholesale portfolios, identified impairment is raised for such accounts, recognising the agreement between the Bank and customer to pay less than the original contractual...

  • Page 329
    ...cases is reviewed by the Wholesale Credit Risk Management Committee. Please see page 139 for details of loans currently in forbearance. The strategic report â- â- â- â- Governance â- â- â- â- Retail re-aging activity Re-aging refers to the placing of an account into an up-to-date position...

  • Page 330
    ... Credit risk management continued Derivative credit risk The Group buys and sells financial instruments that are traded or cleared on an exchange, including interest rate swaps, futures and options on futures. Holders of exchange traded instruments provide margin daily with cash or other security...

  • Page 331
    ...â- â- Governance Risk review Financial review Financial statements Home loans: a fixed charge over residential property in the form of houses, flats and other dwellings; Wholesale lending: a fixed charge over commercial property and other physical assets, in various forms; Credit cards, unsecured...

  • Page 332
    ... on-balance sheet risks. In the case of commitments to lend, customers and counterparties will be subject to the same credit management policies as for loans and advances. Collateral may be sought depending on the strength of the counterparty and the nature of the transaction. Asset credit quality...

  • Page 333
    ... credit ratings provided by Standard & Poor's or Moody's. Where such ratings are not available or are not current, the Group will use its own internal ratings for the securities. Financial statements Risk management Shareholder information barclays.com/annualdepodt Barclays PLC Annual Report 2012...

  • Page 334
    ... banking book balance sheet at prevailing market levels ('non-traded market risk'). The Group's defined benefit obligations increasing or the value of the assets backing these defined benefit obligations decreasing due to changes in both the level and volatility of prices ('pension risk'). Barclays...

  • Page 335
    ... these limits. The strategic report Governance Risk review Financial review Overview of the business market risk control structure Group Market Risk Director Financial statements Risk type Traded â- Interest rate risk â- Spread risk â- Currency risk â- Equity risk â- Commodity risk...

  • Page 336
    ... & Secondary Stresses Asset Class DVaR Position limits Specific business and asset class level metrics and controls Regular Reporting to Risk owners and Committees Positions in the trading book are subject to market risk capital. Market risk capital is computed using internal models (VaR, SVaR...

  • Page 337
    ...The strategic report FX Equity Commodity Inï¬,ation Credit Basis Governance Risk review â- â- Foreign exchange - impact of unfavourable moves in currency prices and volatility; Equity - shocks to share prices including exposures to specific markets and sectors; Emerging Markets - stresses...

  • Page 338
    ... accounts and equity balances which do not have a defined maturity date and an interest rate that does not change in line with Base rate changes. The risk resides mainly in Retail and Business Banking, Corporate Banking and Group Treasury. Barclays objective is to minimise non-traded interest rate...

  • Page 339
    ... committees. Risk management Governance and organisation Barclays Treasury Committee Shareholder information Group Funding and Liquidity Management Committee Group Asset and Liability Management Committee Investment Advisory Group barclays.com/annualdepodt Barclays PLC Annual Report 2012...

  • Page 340
    ... stress test the Group's balance sheet and contingent liabilities. Limit setting and transfer pricing are tools that are designed to control the level of liquidity risk taken and drive the appropriate mix of funds, which together reduce the likelihood that a liquidity stress event could lead to an...

  • Page 341
    ...RRP submissions to the UK and US regulators in mid-2012 and has since continued to work with the authorities to identify and address any impediments to resolvability. The strategic report Governance Risk review Financial review Examples of Early Warning Indicators Change in composition of deposits...

  • Page 342
    ... account the regulatory, economic and commercial environment in which Barclays operates. Capital planning Capital forecasts are managed on a top-down and bottom-up analysis through both Short Term (Year 1 monthly) and Medium Term (3 year) financial planning cycles. Our capital plans are developed...

  • Page 343
    ... are reported to Group Treasury Committee monthly. Capital management information is readily available at all times to support the Executive Management's strategic and day-to-day business decision making, as may be required. The Group submits its Board approved ICAAP document to the FSA on an annual...

  • Page 344
    ...of direct or indirect impacts resulting from human factors, inadequate or failed internal processes and systems or external events. Recognising the impact operational risk may have on the Group a new Board Conduct, Reputation and Operational Risks Committee will be created in 2013. The management of...

  • Page 345
    ..., to businesses. The strategic report Governance Risk review Operational risk management framework The Barclays Operational risk framework is a key component of GICAF and has been designed to meet a number of external governance requirements including Basel, the Capital Requirements Directive and...

  • Page 346
    ... greater balance between staff and shareholder returns, accelerating our progressive dividend policy from 1014 and targeting a payout ratio to shareholders of 30% over time. See page 74 for further details on our dividend and distribution of earnings. 344 I Barclays PLC Annual Report 1011 barclays...

  • Page 347
    ... classes of shares and contact details for shareholder enquiries. The strategic report Governance 346 350 351 353 Shareholder information Shareholder enquiries Index Your Barclays Shareholding Risk review Financial review Financial statements Risk management Shareholder information barclays.com...

  • Page 348
    ... or give security or a guarantee to a third party in respect of a debt or obligation of the Company (or any other member of the Group) for which the Director has personally assumed responsibility; (c) to obtain insurance for the benefit of Directors; (d) involving the acquisition by a Director of...

  • Page 349
    ...excepted transfer' of all of the relevant shares to a third party has occurred, or as the Board otherwise determines. The strategic report Governance Risk review Financial review Financial statements Risk management Shareholder information barclays.com/annualdepodt Barclays PLC Annual Report 1011...

  • Page 350
    ... to hold an AGM in addition to such other general meetings as the Directors think fit. The type of the meeting will be specified in the notice calling it. Under the Companies Act 2006, the AGM must be held within six months of the financial year end. A general meeting may be convened by the Board on...

  • Page 351
    ... Americas Chief Risk Officer Co-Head of Finance Financial Controller and Co-Head of Finance Group Chief Executive, Absa and Barclays Africa Chief Executive of Corporate and Investment Banking Head of Compliance and Government and Regulatory Relations CEO, Barclaycard CEO, Retail and Business Banking...

  • Page 352
    ... Barclays in general, may write to the Director, Investor Relations at our Head office as follows: Director, Investor Relations Barclays PLC 1 Churchill Place London E14 5HP or, in the United States of America: The Corporate Communications Department Barclays Bank PLC 745 Seventh Avenue New York...

  • Page 353
    ...-relations/ annual-reports) 275-276 Goodwill 8-9 Group Chief Executive's review N 243 Net fee and commission income 242-243 Net interest income 291 Non-controlling interests Risk management H Head Office and Other Operations 224 business analysis 208 business description Shareholder information...

  • Page 354
    ... of business 208 by geographical segments 293-295 Share-based payments 345-350 Shareholder information 286-289 Subordinated liabilities P 236-237 Parent Company accounts (Barclays PLC) Pension Pensions 88-93 Directors 296-300 notes to the accounts 128 228 273-274 279-280 Potential credit risk loans...

  • Page 355
    ... in March each year. Save time and receive your dividends faster! You can choose to have your dividends paid directly into your bank or building society account. It is easy to set up and your money will be in your bank account on the dividend payment date. If you hold 2,500 shares or less, you...

  • Page 356
    ...about their shareholding and Barclays performance. Barclays e-view allows you to manage your shares online and receive the latest updates directly by email. To join Barclays e-view, please follow these 3 easy steps: Share price Information on the Barclays share price and other share price tools are...