Barclays 2013 Annual Report Download - page 359

Note 38: Principal Subsidiaries continued
Significant judgements and assumptions used to determine the scope of the consolidation
Determining whether the Group has control of an entity is generally straightforward based on ownership of the majority of the voting capital.
However, in certain instances this determination will involve significant judgment, particularly in the case of structured entities where voting rights
are often not the determining factor in decisions over the relevant activities. This judgment may involve assessing the purpose and design of the
entity. It will also often be necessary to consider whether the Group, or another involved party with power over the relevant activities, is acting as a
principal in its own right or as an agent on behalf of others.
There is also often considerable judgment involved in the ongoing assessment of control over structured entities. In this regard, where market
conditions have deteriorated such that the other investors’ exposures to the structure’s variable returns have been substantively eliminated, the
Group may conclude that the managers of the structured entity are acting as its agent and therefore will consolidate the structured entity.
An interest in equity voting rights exceeding 50% would typically indicate that the Group has control of an entity. However certain entities are
excluded from consolidation because the Group does not have exposure to their variable returns. These entities are managed by external
counterparties and consequently are not controlled by the Group. Where appropriate, interests relating to these entities are included in Note 39
Structured Entities.
Country of registration or incorporation Company Name
Percentage of voting
rights held (%)
Equity shareholder’s
funds (£m)
Retained profit for the
year (£m)
UK Fitzroy Finance Limited 100 – –
Cayman Islands Palomino Limited 100 1 –
Significant restrictions
As is typical for a Group of its size and international scope, there are restrictions on the ability of Barclays PLC to obtain distributions of capital,
access the assets or repay the liabilities of members of its group due to the statutory, regulatory and contractual requirements of its subsidiaries
and due to the protective rights of non-controlling interests. These are considered below.
Regulatory requirements
Subsidiary companies with assets and liabilities before intercompany eliminations of £1,797bn (2012: £1,963bn) and £1,727bn (2012: £1,900bn)
respectively are subject to prudential regulation and regulatory capital requirements in the countries in which they are regulated. These require
entities to maintain minimum capital, leverage and exposure ratios restricting the ability of these entities to make distributions of cash or other
assets to the parent company, Barclays PLC.
In order to meet capital requirements, subsidiaries may hold certain equity accounted and debt accounted issued financial instruments and
non-equity instruments such as Tier 1 and Tier 2 capital instruments and other forms of subordinated liabilities. See the non-controlling interests
Note 34 and the subordinated liabilities Note 31 for particulars of these instruments. These instruments may be subject to cancellation clauses or
preference share restrictions that would limit the ability of the entity to repatriate the capital on a timely basis.
Liquidity requirements
Regulated subsidiaries of the Group are required to maintain liquidity pools to meet PRA and local regulatory requirements. The main subsidiaries
affected are Barclays Bank PLC, Absa Bank Limited and Barclays Capital Inc. which must maintain daily compliance with the regulatory minimum.
See pages 208 to 224 for further details of liquidity requirements, including those of our significant subsidiaries.
Statutory requirements
The Group’s subsidiaries are subject to statutory requirements not to make distributions of capital and unrealised profits and generally to maintain
solvency. These requirements restrict the ability of subsidiaries to make remittances of dividends to Barclays PLC, the ultimate parent, except in the
event of a legal capital reduction or liquidation. In most cases the regulatory restrictions referred to above exceed the statutory restrictions.
As at 31 December 2013, the non-distributable reserves of Barclays Bank PLC, including share capital and other equity instruments were £23,571m
(2012: £18,608m).
Contractual requirements
Asset encumbrance
The Group uses its financial assets to raise finance in the form of securitisations and through the liquidity schemes of central banks. Once
encumbered, the assets are not available for transfer around the Group. The assets typically affected are disclosed in Note 42 Assets Pledged.
Assets held by consolidated structured entities
£690m of assets included in the Group’s balance sheet relate to consolidated investment funds and are held to pay return and principal to the
holders of units in the funds. The assets held in these funds cannot be transferred to other members of the Group.
Other restrictions
The Group is required to maintain balances with central banks and other regulatory authorities and these amounted to £4,722m as at
31 December 2013 (2012: £5,169m).
Barclays Africa Group Limited assets are subject to exchange control regulation determined by the South African Reserve Bank (SARB). Special
dividends and loans in lieu of dividends cannot be transferred without SARB approval.
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