Barclays 2013 Annual Report Download - page 232

Supervision of the Group
The Group’s operations, including its overseas offices, subsidiaries and
associates, are subject to a significant body of rules and regulations
that are a condition for authorisation to conduct banking and financial
services business. These apply to business operations and affect
financial returns and include reserve and reporting requirements and
prudential and conduct of business regulations. These requirements
are set by the relevant central banks and regulatory authorities that
supervise the Group in the jurisdictions in which it operates. The
requirements reflect global standards developed by, among others, the
Basel Committee on Banking Supervision and the International
Organisation of Securities Commissions. They also reflect requirements
of or derived from EU legislation.
Under the Financial Services Act 2012, the Bank of England has
responsibility for monitoring the financial system as a whole and the
system of regulation in the UK has been reorganised. Since 1 April
2013, the regulation and supervision of the Group has been divided
between the Prudential Regulation Authority (PRA) – which is
established as part of the Bank of England – and the Financial Conduct
Authority (FCA). In addition, the Financial Policy Committee (FPC) of
the Bank of England has significant influence on the prudential
requirements that may be imposed on the banking system through
powers of direction and recommendation. The FPC has direction
powers over sectoral capital requirements which the FPC can set in
relation to exposures to specific sectors judged to pose a risk to the
financial system as a whole. The government has also proposed to
make the FPC responsible for the Basel III countercyclical capital buffer,
introduced in the EU under the Capital Requirements Directive and
Regulation (CRD).
The Financial Services and Markets Act 2000 (FSMA) as amended
remains the principal statute under which financial institutions are
regulated in the UK. Barclays Bank PLC is authorised under FSMA to
carry on a range of regulated activities within the UK and is authorised
and subject to solo and consolidated prudential supervision by the PRA
and subject to conduct regulation and supervision by the FCA. Firms
are subject to a rolling programme of continuous, intensive and
assertive engagement on prudential and conduct matters.
In its role as supervisor, the PRA seeks to maintain the safety and
soundness of financial institutions with the aim of strengthening, but
not guaranteeing, the protection of customers and the financial
system. The PRA’s continuing supervision of financial institutions is
conducted through a variety of regulatory tools, including the
collection of information from prudential returns, reports obtained
from skilled persons, visits to firms and regular meetings with
management to discuss issues such as performance, risk management
and strategy.
The regulation and supervision of conduct matters is the responsibility
of the FCA. FCA regulation of the Group is carried out through a
combination of continuous assessment over rolling two-year periods;
regular thematic and project work based on the FCA’s sector
assessments, which analyse the different areas of the market and the
risks that may lie ahead; and responding to crystallised risks, seeking to
ensure remediation as appropriate.
The Banking Act 2009 (the Banking Act) provides a regime to allow the
Bank of England (or, in certain circumstances, HM Treasury) to resolve
failing banks in the UK, in consultation with the PRA and HM Treasury
as appropriate. Under the Banking Act, these authorities are given
powers, including (a) the power to make share transfer orders pursuant
to which all or some of the securities issued by a UK bank may be
transferred to a commercial purchaser or the 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 PLC) or
its holding company (Barclays PLC) and warrants for such shares and
bonds. From 1 April 2013, certain of these powers were extended to
companies within the same group as a UK bank. The Act also gives the
authorities powers to override events of default or termination rights
that might be invoked as a result of the exercise of the resolution
powers. The Banking Act powers apply regardless of any contractual
restrictions and compensation may be payable in the context of both
share transfer orders and property appropriation. These resolution
powers were supplemented with a bail-in power through the Financial
Services (Banking Reform) Act 2013. This power allows for the
cancellation or modification of a liability owed by the bank, with the
exception of ‘excluded liabilities’. Excluded liabilities include: deposits
protected under a deposit insurance scheme, secured liabilities, client
assets and assets with an original maturity of less than seven days
owed to a credit institution or investment firm among others.
The Banking Act also gives the Bank of England the power to override,
vary or impose contractual obligations between a UK bank, its holding
company and its group undertakings for reasonable consideration, in
order to enable any transferee or successor bank to operate effectively.
There is also power for the Treasury to amend the law (excluding
provisions made by or under the Banking Act) for the purpose of
enabling it to use the regime powers effectively, potentially with
retrospective effect.
The Financial Services Act 2010, among other things, requires the UK
regulators to make rules about remuneration and to require regulated
firms to have a remuneration policy that is consistent with effective risk
management. The UK regulators are mandated to make rules that
require authorised firms (or a subset of authorised firms) to draw up
recovery and resolution plans and to consult with HM Treasury and the
Bank of England on the adequacy of firms plans. This Act also allows
the FCA to make rules requiring firms to operate a collective consumer
redress scheme to deal with cases of widespread failure by regulated
firms to meet regulatory requirements that may have created consumer
detriment.
All disclosures in this section (pages 230 to 235)
are unaudited
Risk review
Supervision and regulation
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230 Barclays PLC Annual Report 2013