Barclays 2013 Annual Report Download - page 139

The Group is exposed to many forms of risk relating to legal,
competition and regulatory proceedings, including that: (i) business
may not be, or may not have been, conducted in accordance with
applicable laws and regulations in the relevant jurisdictions around the
world and financial and other penalties may result; (ii) contractual
obligations may either not be enforceable as intended or may be
enforced in a way adverse to the Group; (iii) intellectual property may
not be protected as intended and the Group may use intellectual
property which infringes, or is alleged to infringe, the rights of third
parties; and (iv) liability may be incurred to third parties harmed by the
conduct of the Group’s business.
Risks arising from material legal, competition and regulatory matters
The Group, in common with other global financial services firms, has in
recent years faced a risk of increased levels of legal proceedings in
jurisdictions in which it does business. This is particularly true in the US
where the Group is facing and may in the future face legal proceedings
relating to its business activities, including in the form of class actions.
The Group also faces existing regulatory and other investigations in
various jurisdictions as well as the risk of potential future regulatory
and other investigations or proceedings and/or further private actions
and/or class actions being brought by third parties.
Material legal, competition and regulatory matters to which the Group
is currently exposed are detailed in Note 30 to the financial statements
and include:
 Lehman Brothers civil action;
 Civil actions in respect of certain series of preference shares issued in
the form of American Depositary Shares;
 Mortgage related activity and litigation;
 Devonshire Trust civil action;
 London Interbank Offered Rates (LIBOR) and other benchmarks civil
actions; civil actions in respect of foreign exchange trading; and
investigations into LIBOR, ISDAfix and other benchmarks and foreign
exchange rates;
 Federal Energy Regulatory Commission – matters relating to the
Group’s power trading in the western US;
 BDC Finance LLC civil action;
 Interchange investigations;
 Interest rate hedging products redress;
 Credit default swap antitrust investigations;
 Swiss/US tax programme; and
 Investigations into certain agreements, including two advisory
services agreements entered into by BBPLC and Qatar Holding LLC
in 2008.
The outcome of each of these legal, competition and regulatory
matters (and any future matters) is difficult to predict. However, it is
likely that the Group will incur significant expense in connection with
some or all of these matters, regardless of the ultimate outcome, and
one or more of them could expose the Group to any of the following:
substantial monetary damages and/or fines; other penalties and
injunctive relief; additional civil or private litigation; criminal
prosecution in certain circumstances; the loss of any existing agreed
protection from prosecution; regulatory restrictions on the Group’s
business; increased regulatory compliance requirements; suspension of
operations; public reprimands; loss of significant assets; and/or a
negative effect on the Group’s reputation.
Potential financial and reputational impacts of other legal, competition
and regulatory matters or other proceedings
The Group is engaged in various other legal, competition and
regulatory matters both in the UK and a number of overseas
jurisdictions. It is subject to legal proceedings by and against the Group
which arise in the ordinary course of business from time to time,
including (but not limited to) disputes in relation to contracts,
securities, debt collection, consumer credit, fraud, trusts, client assets,
competition, data protection, money laundering, employment,
environmental and other statutory and common law issues. The Group
is also subject to enquiries and examinations, requests for information,
audits, investigations and legal and other proceedings by regulators,
governmental and other public bodies in connection with (but not
limited to) consumer protection measures, compliance with legislation
and regulation, wholesale trading activity and other areas of banking
and business activities in which the Group is or has been engaged.
In addition to the specific matters set out above, there may be other
legal, competition and regulatory matters currently not known to the
Group or in respect of which it is currently not possible to ascertain
whether there could be a material adverse effect on the Group’s
position. In light of the uncertainties involved in legal, competition and
regulatory matters, there can be no assurance that the outcome of a
particular matter or matters will not be material to the Group’s results
of operations for a particular period, depending on, among other
things, the amount of the loss resulting from the matter(s) and the
amount of income otherwise reported for the reporting period.
Non-compliance by the Group with applicable laws, regulations and
codes of conduct relevant to its businesses in all jurisdictions in which
it operates, whether due to inadequate controls or otherwise, could
expose the Group, now or in the future, to any of the consequences set
out above as well as withdrawal of authorisations to operate particular
businesses.
Non-compliance may also lead to costs relating to investigations and
remediation of affected customers. The latter may, in some
circumstances, exceed the direct costs of regulatory enforcement
actions. In addition, reputational damage may lead to a reduction in
franchise value.
There is also a risk that the outcome of any legal, competition or
regulatory matters, investigations or proceedings to which the Group is
subject and/or a party could (whether current or future, specified in
this risk factor or not) may give rise to changes in law or regulation as
part of a wider response by relevant law makers and regulators. An
adverse decision in any one matter, either against the Group or another
financial institution facing similar claims, could lead to further claims
against the Group.
Any of these risks, should they materialise, could have an adverse
impact on the Group’s operations, financial results and condition and
prospects.
vi) Regulatory risk
Regulatory risks: the financial services industry continues to be the
focus of significant regulatory change and scrutiny which may
adversely affect the Group’s business, financial performance capital
and risk management strategies
Regulatory risk arises from a failure or inability to comply fully with the
laws, regulations or codes applicable specifically to the financial
services industry which are currently subject to significant changes.
Non-compliance could lead to fines, public reprimands, damage to
reputation, increased prudential requirements, changes to Group
structure and/or strategy, enforced suspension of operations or, in
extreme cases, withdrawal of authorisations to operate. Non-
compliance may also lead to costs relating to investigations and
remediation of affected customers. The latter may exceed the direct
costs of regulatory enforcement actions. In addition, reputational
damage may lead to a reduction in franchise value.
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