Barclays 2012 Annual Report Download - page 59

 We considered and approved the scenarios for Barclays internal stress
testing exercise, including a reverse stress test, and later reviewed the
results. The stress tests included a potential Eurozone break-up
scenario. As in previous years, the stress testing exercises
demonstrated that Barclays remains well-capitalised and profitable
in a stress scenario; and
 We considered risk appetite for 2013 and recommended it to the
Board for approval. Taking a 1 in 7 scenario and a 1 in 25 scenario,
we assessed the performance of agreed financial volatility
parameters in those scenarios to establish if there are any potential
constraints. While the financial volatility parameters are largely
unchanged from the prior year, some were recalibrated.
The proposed risk appetite for 2013 also allows for a higher level
of non-credit losses, given the impact in 2012 of such losses,
for example, product mis-selling redress. The Committee will
monitor risk appetite for 2013 and may revisit it in light of the
Transform Programme.
Key Risk Issues
Some of the other specific matters we considered in 2012 were:
 We undertook two specific country and business risk reviews in
2012. We reviewed our operations in India, where we primarily have
Investment Banking business and support activities. From that
discussion, we asked for loan to deposit ratios on a country by
country basis to be reported to the Committee as a key indicator.
We also reviewed our business in South Africa in view of the weak
economic outlook there and the difficult political environment,
which present a number of challenges, particularly in terms of
operational risk management. The Committee was content with
the actions being taken by management to address these
challenges although asked to be kept informed of the progress
of certain remediation programmes;
 After the significant trading losses experienced at JPMorgan in
2012, we received a report from management on their
understanding of what occurred in this incident and an assessment
of the risk management systems and controls in place over any
similar trading activity at Barclays. After due consideration, the
Committee was satisfied with management’s assessment that
appropriate systems and controls are in place;
 We received a regular report on the progress of the enhancements
that are being made 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 should the UK’s credit rating be
downgraded. Having discussed and assessed the position, the
Committee supported the recommended credit rating strategy
and associated programme of engagement with ratings agencies;
 Each year the Committee reviews Tax Risk. In early 2012, HMRC
issued a statement concerning the tax treatment of a repurchase of
debt by Barclays. In light of that announcement, in its discussion on
Tax Risk the Committee focused on tax risk in Barclays Structured
Capital Markets business and on the steps being taken to enhance
Barclays compliance with both the letter and spirit of its obligations
under the HMRC Code of Practice. After discussion and challenge,
the Committee was satisfied with the actions being taken by
management and asked to be promptly advised should tax risk
limits require further review; and
 ensuring that risk is taken into account during the due diligence
phase of any strategic transaction; and
 providing input from a risk perspective into the deliberations of the
Board Remuneration Committee.
You can obtain the Committee’s full terms of reference on the
corporate governance section of Barclays website. More information
on risk management and the internal control framework is included
in the Directors’ Report on pages 64-66 and in the Risk management
section on pages 313-343.
The Committee met 10 times in 2012 and the chart opposite shows
the way in which we allocated our time. Committee meetings were
attended by management, including the Group Finance Director, Chief
Internal Auditor, Chief Risk Officer and General Counsel. The external
auditor also attended each meeting. From time to time, senior
management below Board and Executive Committee level, including
representatives of the risk management function at both Group and
business unit level, attended meetings for specific items. The Chief
Internal Auditor, in addition to providing input on risk and control
matters presented to the Committee, also presented a regular, formal
report on risk control issues.
The way in which the Committee discharged its responsibilities during
2012 is described below:
Risk Profile/Risk Appetite
We considered the following matters in 2012:
 The Chief Risk Officer presented a quarterly Group Risk Profile Report,
providing an update on credit, market, funding and liquidity and
operational risk in each of Barclays main businesses. Given the
continuing uncertainties in the Eurozone, our discussions focused
primarily on the potential impact of the Eurozone debt crisis, Eurozone
sovereign risk and redenomination risk in our European businesses. We
received specific reports on Eurozone sovereign risk, including details
of Barclays scenario planning in the event of a country exiting the Euro.
In addition, we discussed the potential impact on our businesses of
failure to resolve the US Fiscal Cliff. We were also updated on specific
country risk for countries where the economic outlook may be
worsening or where there is risk to our businesses arising from
political instability;
 The Group Treasurer provided a quarterly update on capital and
liquidity. During 2012, given market conditions and the ongoing
uncertainty in the Eurozone, we held two additional meetings
specifically to discuss liquidity risk appetite and Barclays liquidity risk
management framework. In view of the external environment, and
taking into account the potential stresses on Barclays following the
announcement of the penalties imposed relating to the industry-
wide investigation into the setting of interbank offered rates, for a
time over the summer we asked management to implement a revised
liquidity risk management framework, in order to extend the time
horizon period for Barclays liquidity and to reduce our overall balance
sheet leverage. Also during 2012 we agreed to a revised limit
framework for Barclays US repo business. Further details of Barclays
liquidity risk management framework can be found in the Risk
management section. The Group Treasurer also updated the
Committee on regulatory changes in liquidity rules, on the
introduction of new facilities, such as the Funding for Lending
Scheme and on the potential impact of CRD IV;
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