Barclays 2012 Annual Report Download - page 193

The strategic report Governance Risk review Financial review Financial statements Risk management Shareholder information
Banks, insurance companies and other financial institutions in the UK
are subject to a single financial services compensation scheme (the
Financial Services Compensation Scheme – FSCS) which operates
when an authorised firm is unable or is likely to be unable to meet
claims made against it because of its financial circumstances. Most
deposits made with branches of Barclays Bank PLC within the European
Economic Area (EEA) which are denominated in Sterling or other
currencies are covered by the FSCS. Most claims made in respect of
investment business will also be protected claims if the business was
carried on from the UK or from a branch of the bank or investment firm
in another EEA member state. The FSCS is funded by levies on
authorised UK firms such as Barclays Bank PLC. In the event that the
FSCS raises those funds more frequently or significantly increases the
levies to be paid by firms, the associated costs to the Group may have a
material impact on the Group’s results. Further details can be found in
Note 28 on page 280.
Outside the UK, the Group has operations (and main regulators)
located in continental Europe, in particular France, Germany, Spain,
Switzerland, Portugal and Italy (local central banks and other regulatory
authorities); Asia Pacific (various regulatory authorities including the
Hong Kong Monetary Authority, the Financial Services Agency of Japan,
the Australian Securities and Investments Commission, the Monetary
Authority of Singapore, the China Banking Regulatory Commission
and the Reserve Bank of India); Africa and the Middle East (various
regulatory authorities including the South African Reserve Bank) and
the United States of America (including the Board of Governors of the
Federal Reserve System (FRB), the Securities and Exchange Commission
(SEC) and the Commodity Futures Trading Commission (CFTC)).
Regulation in the UK is considerably shaped and influenced by EU
directives and regulations. These provide the structure of the European
Single Market, an important feature of which is the framework for the
regulation of authorised firms. This framework is designed to enable a
credit institution or investment firm authorised in one EU member state
to conduct banking or investment business through the establishment
of branches or by the provision of services on a cross-border basis in
other member states without the need for local authorisation. Barclays
operations in Europe are authorised and regulated by a combination of
both home and host regulators.
Barclays operations in South Africa, including Absa Group Limited, are
supervised and mainly regulated by the South African Reserve Bank
(SARB), the Financial Services Board (FSB) as well as the Department
of Trade and Industry (DTI). SARB oversees the banking industry and
follows a risk-based approach to supervision, whilst the FSB oversees
the non-banking financial services industry such as insurance and
investment business and focuses on enhancing consumer protection
and regulating market conduct. The DTI regulates consumer credit
through the National Credit Act (NCA) 2005, as well as other aspects
of consumer protection not regulated under the jurisdiction of the FSB
through the Consumer Protection Act (CPA) 2008. It is intended that
regulatory responsibilities in South Africa will in future be divided
between the SARB which will be responsible for prudential regulation
and the FSB will be responsible for matters of market conduct. The
precise timing for the move to ‘twin peaks’ regulation remains to
be determined.
In the United States, Barclays PLC, Barclays Bank PLC and Barclays
US banking subsidiaries are subject to a comprehensive regulatory
framework involving numerous statutes, rules and regulations, including
the International Banking Act of 1978, the Bank Holding Company Act
of 1956, as amended (BHC Act), the Foreign Bank Supervision
Enhancement Act of 1991, the Financial Services Modernization Act of
1999, the USA PATRIOT Act of 2001 and the Dodd-Frank Wall Street
Reform and Consumer Protection Act of 2010 (DFA). This framework
regulates the activities of Barclays, including its US banking subsidiaries
and the US branches of Barclays Bank PLC, as well as imposing
prudential restrictions, such as limits on extensions of credit by the
Bank’s US branches and the US banking subsidiaries to a single
borrower and to affiliates. The New York and Florida branches of
Barclays Bank PLC are subject to extensive federal and state supervision
and regulation by the FRB and, as applicable, the New York State
Department of Financial Services and the Florida Office of Financial
Regulation. Barclays Bank Delaware, a Delaware chartered commercial
bank, is subject to supervision and regulation by the Federal Deposit
Insurance Corporation (FDIC), the Delaware State Bank Commissioner
and the Consumer Financial Protection Bureau. The deposits of
Barclays Bank Delaware are insured by the FDIC. Barclays Wealth
Trustees (US) NA is an uninsured non-depository trust company
chartered and supervised by the Office of the Comptroller of the
Currency (OCC). The licensing authority of each US branch of Barclays
Bank PLC has the authority, in certain circumstances, to take
possession of the business and property of Barclays Bank PLC located
in the state of the office it licenses or to revoke or suspend such license.
Such circumstances generally include violations of law, unsafe business
practices and insolvency.
Barclays PLC and Barclays Bank PLC are bank holding companies
registered with the FRB, which exercises umbrella authority over
Barclays US operations. Barclays PLC and Barclays Bank PLC have each
elected to be treated as a financial holding company under the BHC
Act. Financial holding companies may engage in a broader range of
financial and related activities than are permitted to registered bank
holding companies that do not maintain financial holding company
status, including underwriting and dealing in all types of securities.
Financial holding companies such as Barclays PLC and Barclays Bank
PLC are required to meet or exceed certain capital ratios and be
deemed to be ‘well managed’, and Barclays Bank Delaware and Barclays
Wealth Trustees (US) NA are each required to meet certain capital
requirements and be deemed to be ‘well managed’. In order for
Barclays PLC and Barclays Bank PLC to maintain their status as financial
holding companies, Barclays Bank Delaware must be both ‘well
capitalised’ and ‘well managed’ under applicable regulatory standards.
In addition, Barclays Bank Delaware must have at least a ‘satisfactory’
rating under the Community Reinvestment Act of 1977 (CRA). Entities
ceasing to meet any of these requirements, are allotted a period of time
in which to restore capital levels or the management or CRA rating.
Should Barclays PLC or Barclays Bank PLC fail to meet the above
requirements, during the allotted period of time they could be
prohibited from engaging in new types of financial activities or making
certain types of acquisitions. If the capital level or rating is not restored,
the Group may be required by the FRB to cease certain activities in the
United States.
Under the Federal Deposit Insurance Act of 1950, as amended by the
DFA, Barclays is required to act as a source of financial strength for
Barclays Bank Delaware. This could, among other things, require
Barclays to inject capital into Barclays Bank Delaware if it fails to meet
minimum regulatory capital requirements.
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