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Barclays PLC
Annual Report 2014
Helping people
achieve their
ambitions –
in the right way

Table of contents

  • Page 1
    Helping people achieve their ambitions - in the right way Barclays PLC Annual Report 2014

  • Page 2
    ...operating environment Market and risk Page 05 Our approach to value creation is consistent Through our broad service offer Business model Pages 06-07 Shareholder information and contact details Useful references to manage your Barclays shareholding Pages 343-346 Barclays PLC Annual Report 2014...

  • Page 3
    ... way Helping people achieve their ambitions - in the right way Barclays PLC Strategic Report 2014 Barclays PLC Pillar 3 Report 2014 We will fulfil our purpose and achieve our goal The Strategic Report Governance Our strategy remains on course Our Balanced Scorecard Your Board has set a clear...

  • Page 4
    ... need access to essential banking services Our purpose is to help people achieve their ambitions in the right way Chairman's statement The Barclays of today is a very different bank to the one that I joined in 2012. From substantially improving our capital and leverage position to changing how...

  • Page 5
    ...'s strategic review Today's Barclays is a stronger business with better prospects than at any time since the financial crisis. The execution of our Transform Strategy, which I set out in February 2013 and updated in May 2014, has created a focused international bank, delivering on the right...

  • Page 6
    ... and effectively manage risk and continuously improve control. duct Con Helping people achieve their ambitions - in the right way Collea gue C iti z e n s h i p Stakeholders Barclays strives to create value for all of our stakeholders, balanced across both the short and the long-term. By taking...

  • Page 7
    ... banking book balance sheet. Funding Risk: Failure to maintain capital ratios and liquidity obligations leading to inability to support normal business activity and meet liquidity regulatory requirements. Operational Risk: Losses or costs resulting from human factors, inadequate internal processes...

  • Page 8
    ..., to work together with our regulators to help reduce risk in the industry and provide a more sustainable banking landscape over the long term. We are actively engaging with a number of banking supervisors internationally to develop a new industry model and to ensure that our business is sustainable...

  • Page 9
    ... equity shares. We seek to add value to our clients through our end-to-end network. For example an individual retail customer in the UK is able to access current and savings account balances along with Barclaycard data all via the same mobile banking app, Pingit, our peer-to-peer payments service...

  • Page 10
    ... Numbers Improve business returns, define and execute plan to deliver return on equity above cost of equity 0-5 years - Sustain FORward Momentum Become the 'Go-To' bank for our stakeholders - customers and clients, colleagues, investors, and wider society 2013 2014 2015 2016 2017 2018 Strategy...

  • Page 11
    ... than £14.5bn, down from £16.2bn at end 2013. In Non-Core, our focus is on reducing the drag on the Core business. We are targeting a drag on ROE from Non-Core of less than 3% in 2016. Financial statements Shareholder information barclays.com/annualreport Barclays PLC Annual Report 2014 I 09

  • Page 12
    ... emerging regulatory environment. The Core Personal & Corporate Banking, Barclaycard and Africa Banking businesses accounted for 45% of 2013 RWAs, with the Core Investment Bank expected to represent no more than 30% of the Group total by 2016, compared with just over 50% pre-Strategy Update. Capital...

  • Page 13
    ... Group, certain direct reports of the Chief Executive, heads of major business units, certain senior managing directors and directors on the boards of undertakings of the Group, but exclude individuals who sit as directors on the board of the Company. Shareholder information Introduction In 2014...

  • Page 14
    ... at Group level in 2014 has been driven by scores awarded by UK retail customers. During 2014 legacy issues have continued to weigh heavily on the reputations of banking brands, Barclays among them. This year has also seen substantial investment in programmes designed to improve customer experience...

  • Page 15
    ... growth and career aspirations, ensuring access to the right technical and professional development Providing clear strategic direction and leadership in creating the right environment for colleagues to do their best work Q The campaign to challenge the culture of silence Shareholder information...

  • Page 16
    ... £38.5bn £150bn Q Actual 2013 Actual 2014 Target 2015 Balanced Scorecard metric Actual 2013 Actual 2014 Target 2015 10/11 11/11 Plan targets Supporting our communities (cumulative)a Investment in community Number of 10-35 year olds supported in building skills Q £136.5m 2.43m £198...

  • Page 17
    ... deliver on the 10 conduct risk outcomes: Q An extra pair of eyes keeps client emails safe Shareholder information Our culture places customer interests at the heart of our strategy, planning, decision making and judgements Our strategy is to develop long term banking relationships with our...

  • Page 18
    ...Group's risk appetite; and to support the Group's credit rating. In 2014 the Group's CET1 ratio increased by 120bps to 10.3%, demonstrating strong progress towards meeting our target and continuing to exceed regulatory requirements. This improvement was achieved despite further provision for conduct...

  • Page 19
    ... how each of our businesses contribute in their own individual way. Africa Banking replicates the Balanced Scorecard of the South African listed entity, Barclays Africa Group Limited. Financial statements Shareholder information barclays.com/annualreport Barclays PLC Annual Report 2014 I 17

  • Page 20
    ...operate in as part of our Citizenship agenda barclays.com/annualreport Q Contribution to the Group's total income £8,828m £m Total income increased 1% on prior year driven by balance growth and improved savings margins in Personal Banking and Mortgages. Q Q 18 I Barclays PLC Annual Report...

  • Page 21
    ...by Barclaycard in partnership with the Mayor's Fund for London Q Supporting '5 Million Young Futures' through Yes2Chess and Apps for Good Conduct Q Year on year complaints volume reduced by c.20% in 2014 in the context of an increasing customer base Company Contribution to the Group 2014 2013 2012...

  • Page 22
    ... over 250k active customers and more than $825m in loans only 21 months after launching Leading the 'best-buy' tables for balance transfers in the UK for the whole of 2014, giving consumers the best offer in the market daily Our future priorities for Barclaycard Barclaycard's strategic intent is to...

  • Page 23
    ... review Financial review Financial statements Shareholder information Contribution to the Group's total income £3,664m £m Total income net of insurance claims decreased 9% on prior year. On a constant currency basis, it increased 7%. barclays.com/annualreport Barclays PLC Annual Report 2014...

  • Page 24
    ..., continue to add value through additional services, improving the customer experience and introducing many digital innovations, from the Homeowners app in South Africa, allowing applicants to track progress of mortgage applications, to the launch of Barclays Mobile Banking in markets outside of...

  • Page 25
    ... to closely manage our market and credit risk appetite as the market environment evolves. The environment is still challenging with low interest rates and reduced volatility impacting the Investment Bank. Alongside more structural regulatory change, including new capital and leverage requirements...

  • Page 26
    ... small number of Barclaycard and Wealth portfolios. BNC is run by a dedicated management team operating within a clear governance framework to optimise shareholder value and preserve maximum book value as businesses and assets are divested. Manage BNC in accordance with Barclays' Purpose and Values...

  • Page 27
    ... and supporting the Executive team Barclays PLC Annual Report 2014 I 25 Financial statements Chairman's governance overview Our key priority as a Board is clear: build a sustainable business that generates good returns for our shareholders over the long-term. Our role is to set Barclays' strategic...

  • Page 28
    ... control issues. This new approach is helping set a higher standard for the internal control environment and less than satisfactory performance has direct implications in respect of performance assessment and remuneration. Sir David Walker Chairman Our Corporate Governance Framework What the Board...

  • Page 29
    ... level of variable pay in a given year in order to maximise shareholder value over the medium term. In May 2014 the update to the Group Strategy resulted in the creation of a Core business comprising four units: Personal and Corporate Banking, Barclaycard, Africa Banking, and the Investment Bank...

  • Page 30
    ... Remuneration for executive Directors continues to be tied closely to our strategy and performance. In considering the executive Directors' 2014 performance against the Financial, Balanced Scorecard and personal measures set at the beginning of the year, the Committee has decided to award an annual...

  • Page 31
    ... quo where appropriate to drive results and achieve cost targets. For each of the Directors, the Committee judged that 11% of a maximum of 15% was appropriate. Risk review Financial review Financial statements Shareholder information barclays.com/annualreport Barclays PLC Annual Report 2014 I 29

  • Page 32
    ... to improve overall returns. This adjustment therefore also incorporated consideration of executive accountability for the significant Group-wide conduct issues that impacted Barclays in 2014 which included, for example, the ongoing Foreign Exchange trading investigations. The resulting 2014 bonus...

  • Page 33
    ... retired from the Board as a non-executive Director with effect from 31 December 2013. j Sir Andrew Likierman retired from the Board as a non-executive Director with effect from 25 April 2013. Financial statements Shareholder information barclays.com/annualreport Barclays PLC Annual Report 2014...

  • Page 34
    ... division by 2016 4.1% 7.2% BCBS 270 fully loaded leverage ratio In line with regulatory requirements, from 30 June 2014 Barclays adopted the January 2014 BCBS 270 rules for leverage exposure to derive the related leverage ratio for the Group. The ratio is calculated as fully loaded Tier 1 Capital...

  • Page 35
    ...Committee Report 37 40 48 49 52 55 62 70 74 77 111 How we comply Other statutory information People Remuneration report Barclays' implementation of the Salz review Risk review Financial review Financial statements Shareholder information barclays.com/annualreport Barclays PLC Annual Report 2014...

  • Page 36
    ... into conduct risk issues. Other current appointments Chairman, Barclays Africa Group Limited; Chairman, Absa Bank Limited, Chairman, Absa Financial Services; Afrika Tikkun NPC (non-profit); Peotona Group Holdings Committees C Relevant skills and experience John is a former CEO of ANZ Bank with...

  • Page 37
    ... Board of The World Economic Forum's Davos Open Forum Committees A, C Tushar Morzaria Group Finance Director Age: 46 Appointed: 15 October 2013 Diane de Saint Victor Non-executive Age: 60 Appointed: 1 March 2013 The Strategic Report Relevant skills and experience Dambisa is an international...

  • Page 38
    ... Group Head of Compliance 7 1 4 1 Continental Europe United States Other Industry/background experience (Chairman and non-executive Directors)a Ashok Vaswani Chief Executive, Personal and Corporate Banking Financial Services Political/regulatory contacts Current/recent Chair/CEO Accountancy...

  • Page 39
    ...of my fellow Directors, both individually and collectively, so that the Board works as a team that, together, is stronger than the sum of its parts.' Governance Risk review Financial review Financial statements Shareholder information barclays.com/annualreport Barclays PLC Annual Report 2014 I 37

  • Page 40
    ... Board Committee meetings, but committing time to initial induction, ongoing training and engagement with both the Executive team and with external constituents, including shareholders and regulators. I aim to ensure that Directors are kept fully informed about key businesses, performance and risks...

  • Page 41
    ... The Strategic Report Finance, Capital and Liquidity Q Q Governance and Risk Q Q Q Q Q Governance Q Culture and Values Q Q Other Q Risk review Q Q Q Financial review Financial statements Shareholder information Board Allocation of Time (%) 4 1 1 Strategy Formulation...

  • Page 42
    ... Board statement on the effectiveness of risk management and internal controls. 'I see our activity as directly supporting the embedding of Barclays' Values and playing an important part in changing the culture'. Dear Shareholders In my report last year I spoke about the level of change Barclays...

  • Page 43
    ... experience and future claims profile under close scrutiny ahead of the announcements of Barclays' financial results. Having assessed the information available, including discussing current projections as appropriate with the Group Finance Director and the external auditor, the Committee supported...

  • Page 44
    ... information) Barclays has allocated certain assets to the Non-Core business following the Group Strategy Update Q Q Q Q The Committee approved the restatement document and recommended it for publication It also confirmed that Barclays' retail, wealth and certain corporate banking assets...

  • Page 45
    ... matters in Barclays' external financial reports to ensure they remain accessible for a non-expert user It supported the proposal from management to make changes in the presentation of Barclays' half-year results so that they were easier to understand It also concluded that additional information...

  • Page 46
    ... are described below: Area of focus Matter addressed Role of the Committee Q Conclusion/action taken Q Internal control Read more about the Barclays' internal control and risk management processes on pages 67 and 68 Impact on governance and controls of the Group Strategy Update and the creation...

  • Page 47
    ... review Q Internal audit The performance of internal audit and delivery of the internal audit plan, including scope of work performed and level of resources Q Q Financial review Q Q Q Financial statements Q Q Shareholder information External audit Read more about the Committee...

  • Page 48
    ... announcement of the Group Strategy Update in May 2014. The Committee examined how PwC had refined its risk assessment in light of the resegmentation of the business and the creation of the Non-Core business and looked at the key areas of IT, valuations, impairment, conduct and litigation; Settled...

  • Page 49
    ... 6 Control Issues Financial Results Internal Audit matters External Audit matters Business Control Environment Other (including Governance and Compliance) 2014 24 42 8 11 10 5 2013 16 40 8 11 16 8 Financial statements Shareholder information barclays.com/annualreport Barclays PLC Annual Report...

  • Page 50
    ..., Board Enterprise Wide Risk Committee 2 March 2015 Board Enterprise Wide Risk Committee Allocation of Time (%) 3 4 1 2 1 2 3 4 Risk Profiles/Risk Appetite Key Risk issues Regulatory frameworks/Risk Policies Other 2014 79 13 4 4 2013 61 16 10 13 48 I Barclays PLC Annual Report 2014 barclays.com...

  • Page 51
    ... level of financial risk the Group is prepared to take (risk appetite) to achieve the creation of long-term shareholder value; Monitoring financial risk appetite, including setting limits for individual types of financial risk, e.g. credit, market and funding risk; Q Shareholder information...

  • Page 52
    ...: Directors' report What we did in 2014 Board Financial Risk Committee Report The Committee's work The significant matters addressed by the Committee during 2014 are described below: Area of focus Matter addressed Role of the Committee Q Conclusion/action taken Q Financial risk appetite...

  • Page 53
    ... also covered the following matters in 2014: Q Board Financial Risk Committee Allocation of Time (%) 4 3 1 1 Risk Profile/Risk Appetite (including capital and liquidity management) 2 Key Risk issues 3 Internal Control/Risk Policies 4 Other (including remuneration and governance issues) 2014 57...

  • Page 54
    ... time. Committee meetings were attended by management, including the Group Chief Executive, Chief Internal Auditor, Chief Risk Officer, General Counsel, Group Corporate Relations Director, and the Heads of Compliance, Conduct Risk and Operational Risk, as well as representatives from the businesses...

  • Page 55
    ... lines of defence Supported management in establishing levels of acceptance and accountability for conduct risk by the businesses including adoption of formal KPIs Worked with management to develop key risk indicators and metrics Assessed any conduct risk impacts arising from the strategy update...

  • Page 56
    ... function's business plan and key areas of focus for 2014; Compliance Group Policies; An update to The Barclays Way, the Group-wide code of conduct, and the levels of attestation by colleagues globally; The results of Barclays' review of collections processes and procedures conducted in tandem...

  • Page 57
    ... succession for key Board appointments, planning ahead to deal with upcoming retirements and to fill any expected skills gaps; Q Shareholder information Q Provide oversight, at Board level, of the Group's talent management programme and diversity and inclusion initiatives; Agree the annual...

  • Page 58
    ... needs of the Company, assessed the overall bench strength of leadership of Barclays Senior Leaders Group and evaluated the adequacy of succession plans for members of the Group Executive Committee and the Board Scrutinised progress reports relating to the Talent Management Programme, which identi...

  • Page 59
    ... in Barclays; Proposals for the 2014 Corporate Governance Report; Its annual review of the Directors' register of interests and authorisations granted; Changes to the Committee's terms of reference to reï¬,ect requirements of the UK Corporate Governance Code and the European Banking Authority...

  • Page 60
    ... to improve board readiness; Barclays high potential development programme for managing directors has 38% female representation, which will help rebalance female representation in the Senior Leaders Group and the Group Executive Committee through the internal pipeline; and A further key development...

  • Page 61
    ... retail and investment banking who will bring great leadership, integrity and knowledge to the role. Shareholder information 2015 1 January 2015 John McFarlane took up his appointment as non-executive Director Sir John Sunderland barclays.com/annualreport Barclays PLC Annual Report 2014 I 59

  • Page 62
    ... 2014 Board Corporate Governance and Nominations Committee Report Board evaluation in 2014 Board priorities Exhibiting and upholding the Company's values 2013 findings To be kept directly informed on the progress of implementing cultural change Leveraging Board experience in support of executives...

  • Page 63
    ... framework emerges we will ensure that sufficient Board time continues to be devoted to debating strategy and strategic options, including leveraging the collective perspectives of the non-executive Directors Shareholder information barclays.com/annualreport Barclays PLC Annual Report 2014...

  • Page 64
    ... to the Board include the approval of strategy, the interim and full year financial statements, significant changes in accounting policy and practice, the appointment or removal of Directors or the Company Secretary, Directors' conï¬,icts of interest, changes to the Group's capital structure and...

  • Page 65
    ... Framework Barclays Board The Board is the principal decision-making forum for the Group, setting the strategic direction and ensuring that the Group manages risk effectively. The Board is accountable to shareholders for financial and operational performance. See page 62 for further information...

  • Page 66
    Governance: Directors' report How we comply Attendance During 2014, the Directors attended meetings, both scheduled meetings and additional meetings called at short notice, as set out below. Where a Director did not attend meetings owing to prior commitments or other unavoidable circumstances, he ...

  • Page 67
    ... current Directors' service contracts and letters of appointment are set out in the Remuneration Report on page 77. Non-executive Director Q Q Financial review Q Company Secretary Q Q Q Effectiveness For details of the role of the Board Corporate Governance and Nominations Committee...

  • Page 68
    ...to work related to Board and Board Committee meetings, the Chairman and non-executive Directors also take time to meet with executives, meet with Barclays' regulators, visit Barclays' businesses and undertake induction, training and evaluation. Induction On joining the Barclays Board, a new Director...

  • Page 69
    ... other operational controls. Risk management and internal control framework The Directors formally review the effectiveness of the system of internal control and risk management annually. Throughout the year ended 31 December 2014 and to date, the Group has operated a system of internal control that...

  • Page 70
    ... investors. On a practical level, during 2014 we conducted a tracing process to reunite over 14,000 shareholders, with their unclaimed dividends. By the end of the year, we had returned over £2m of dividends to these shareholders. Our Annual General Meeting (AGM) Our AGM continues to be a key date...

  • Page 71
    ...-annual meetings with the main credit rating agencies. These involved updates from Group Executive Committee members on their business units, as well as from Finance, Risk and Treasury, and allowed the credit rating agencies to develop a deeper understanding of our business. The redesign of barclays...

  • Page 72
    ... persons 75 Financial instruments 275-296 Hedge accounting policy 276 Remuneration policy, including details of the remuneration 77-110 of each Director and Directors' interests in shares Corporate governance report 34-69 Risk review 113-220 Disclosures required pursuant to Listing Rule 9.8.4R...

  • Page 73
    ... type of transport is material and data is available. Research and development In the ordinary course of business the Group develops new products and services in each of its business divisions. Share capital Share capital structure The Company has ordinary shares in issue. The Company's Articles...

  • Page 74
    Governance: Directors' report Other statutory information that member shall not be entitled to attend or vote at any meeting of the Company. The Board may further direct that if the shares of the defaulting member represent 0.25% or more of the issued shares of the relevant class, that dividends or...

  • Page 75
    .... By order of the Board The Strategic Report Governance Risk review Lawrence Dickinson Company Secretary 2 March 2015 Barclays PLC Registered in England, Company No. 48839 Financial review Financial statements Shareholder information barclays.com/annualreport Barclays PLC Annual Report 2014 I 73

  • Page 76
    ... deployed business training academies across Compliance, Barclays Internal Audit, Client & Customer Experience in Personal & Corporate Banking, and Investment Banking, giving access to role specific learning as well as core and leadership development. To embed our desired culture at all levels of...

  • Page 77
    ...Assistant Vice Presidents % female Directors 24 23 % female Managing Directors % female Board members 14 12 20 20 Above shows the positive change in female representation within Barclays during 2014 38 37 2014 2013 Governance Risk review Financial review Financial statements Shareholder information...

  • Page 78
    ...cally support vulnerable customers or pensioners to bank with Barclays in a way that works for them. Our Armed Forces Transitioning, Employment and Rehabilitation (AFTER) programme also continued to see ex-military talent join our Company, or be supported to gain relevant work-ready skills. In 2015...

  • Page 79
    ... level of variable pay in a given year in order to maximise shareholder value over the medium term. In May 2014 the update to the Group Strategy resulted in the creation of a Core business comprising four units: Personal and Corporate Banking, Barclaycard, Africa Banking, and the Investment Bank...

  • Page 80
    ... Remuneration for executive Directors continues to be tied closely to our strategy and performance. In considering the executive Directors' 2014 performance against the Financial, Balanced Scorecard and personal measures set at the beginning of the year, the Committee has decided to award an annual...

  • Page 81
    ... 2014 2013 2012 2011 2010 Financial review Employees Shareholder information Compensation to adjusted net income 37.7%a b 38.7% 37.5% 42.6% 42.4% Group compensation costs £8,891m £9,616m £9,759m £10,523m £11,079m c Capital Common Equity Tier 1 (CET1)a 10.3% 9.1% 8.2% Note a The Group changed...

  • Page 82
    ... to both the Balanced Scorecard and our Values and Behaviours in this way promotes the delivery of sustainable individual and business performance, and establishes clear alignment between remuneration policy and Barclays' strategy. 80 I Barclays PLC Annual Report 2014 barclays.com/annualreport

  • Page 83
    ...lead the Committee to do this include, but are not limited to, employee misconduct or a material failure of risk management. Clawback applies to any variable remuneration awarded to a MRT on or after 1 January 2015. Barclays may apply clawback if at any time during the 7 year period from the date on...

  • Page 84
    ...per Group employee excluding the Investment Bank and Non-Core is £6,900 (2013: £7,600) Levels of bonus deferral continue to significantly exceed the PRA Remuneration Code's minimum requirements and are expected to remain among the highest deferral levels globally. 2014 bonuses awarded to Managing...

  • Page 85
    ...matter under review. Total incentive awards granted - current year and deferred (audited) Year Ended 31.12.14 £m Barclays Group Year Ended 31.12.13 £m Year Ended 31.12.14 £m Investment Bank Year Ended 31.12.13a £m Financial review Financial statements Shareholder information % Change % Change...

  • Page 86
    ... granted to income statement charge (audited) Year Ended 31.12.14 £m Barclays Group Year Ended 31.12.13 £m Year Ended 31.12.14 £m Investment Bank Year Ended 31.12.13a £m % Change % Change Total incentive awards for 2014 Less: deferred bonuses awarded in 2014 Add: current year charges for...

  • Page 87
    ... awards. b Does not include the impact of grants which will be made in 2015 and 2016. c The income statement charge is based on the period over which performance conditions are met. Financial review Financial statements Shareholder information barclays.com/annualreport Barclays PLC Annual Report...

  • Page 88
    .... Annual Bonus Annual bonuses are discretionary and are typically awarded in Q1 following the financial year to which they relate. The 2014 bonus awards reï¬,ect the Committee's assessment of the extent to which each of the executive Directors achieved their Financial (50% weighting) and Balanced...

  • Page 89
    ... in our Balanced Scorecard. He has strengthened the Executive Committee and the Senior Leadership Group. The Committee judged that 11% of a maximum of 15% was appropriate. Financial review Financial statements Shareholder information barclays.com/annualreport Barclays PLC Annual Report 2014 I 87

  • Page 90
    .... The 2015-2017 LTIP awards will be subject to the following performance measures. Performance measure Weighting Threshold Maximum vesting Net Generated Equitya Core Return on Risk Weighted Assets (RoRWA) excluding own credit Non-Core drag on Adjusted Return on Equity (RoE) Loan Loss Rate Balanced...

  • Page 91
    ... 2014-2016 2014-2016 Risk review Maximum vesting Return on Risk Weighted Assets (RoRWA) Loan loss rate Balanced Scorecard 50% 20% 30% 23% of award vests for average annual RoRWA Average annual RoRWA of 1.52% of 1.08% 7% of award vests for average annual loan loss Average annual loan loss rate...

  • Page 92
    ... failure of risk management, taking account of the individual's proximity to and responsibility for that incident. As set out in the Directors' remuneration policy, malus provisions will continue to apply to unvested deferred awards. 90 I Barclays PLC Annual Report 2014 barclays.com/annualreport

  • Page 93
    ...Risk review Conduct: Q Q Company: Q Financial review Q Q Tushar Morzaria's 2015 personal objectives include: Customers & Clients: Q Deliver "Go-To" operating model - transformational change, enabling structural and regulatory reform, through a simplified operating model and improved...

  • Page 94
    ... of executive Directors, but will always be provided in line with the Directors' remuneration policy. Performance graph and table The performance graph below illustrates the performance of Barclays over the past six financial years from 2009 to 2014 in terms of total shareholder return compared...

  • Page 95
    ... 2014. i David Booth retired from the Board as a non-executive Director with effect from 31 December 2013. j Sir Andrew Likierman retired from the Board as a non-executive Director with effect from 25 April 2013. Shareholder information barclays.com/annualreport Barclays PLC Annual Report 2014...

  • Page 96
    ... the shareholding requirement of, as a minimum, Barclays' shares worth four times salary. Executive Directors have five years from the later of (i) 2013 and (ii) date of appointment to meet this requirement. At close of business on 27 February 2015, the market value of Barclays ordinary shares was...

  • Page 97
    ...-executive Director with effect from 1 May 2014. d Steve Thieke joined the Board with effect from 7 January 2014. e John McFarlane joined the Board with effect from 1 January 2015. Financial review Financial statements Shareholder information barclays.com/annualreport Barclays PLC Annual Report...

  • Page 98
    ... a time/cost basis and Towers Watson were paid a total of £193,000 (excluding VAT) in fees for its advice to the Committee in 2014 relating to the executive Directors (either exclusively or along with other employees within the Committee's Terms of Reference). 96 I Barclays PLC Annual Report 2014...

  • Page 99
    ...fits provision, assistance and technology support for employee surveys and performance management, and remuneration data to the Group. Towers Watson also provides pensions advice and administration services to the Barclays Bank UK Retirement Fund. The Committee regularly reviews the objectivity and...

  • Page 100
    ...determining the 2014 incentive pool. The Committee is absolutely committed to aligning pay and performance. N/A N/A A fixed to variable remuneration ratio of 1:2 for 'Remuneration Code Staff ' 96.02% 10,364,453,159 3.98% 429,517,557 21,212,841 98 I Barclays PLC Annual Report 2014 barclays.com...

  • Page 101
    ... remuneration in the table above, 54% are based in the US, 33% in the UK, and 13% in the rest of the world. The number of employees paid above £1m has reduced from 481 in 2013 to 359 in 2014. Financial statements Shareholder information barclays.com/annualreport Barclays PLC Annual Report 2014...

  • Page 102
    ...) Number of Shares awarded in year (maximum) Market Price on award date Number of Shares released Market Price on release date Antony Jenkins Barclays LTIP 2012-2014 Barclays LTIP 2012-2014 Barclays LTIP 2013-2015 Barclays LTIP 2014-2016 Share Value Plan 2011 Share Value Plan 2012 Share Value Plan...

  • Page 103
    ...16/03/2015 16/03/2015 The Strategic Report - - - 1,375,811 733,877 309,557 - 821 - 31/12/2016 17/03/2014 16/03/2015 06/03/2017 05/03/2018 06/03/2017 Governance Risk review Financial review Financial statements Shareholder information barclays.com/annualreport Barclays PLC Annual Report 2014...

  • Page 104
    ... management and is aligned to shareholders; provide direct line of sight with Barclays' strategy through the incentive programmes; and comply with and adapt to the changing regulatory landscape. Q Q Remuneration policy for executive Directors Element and purpose Operation Maximum value...

  • Page 105
    ... Balanced Scorecard. Personal objectives may include key initiatives relating to the role of the Director or in support of Barclays' strategic objectives. The Balanced Scorecard may be updated from time to time in line with the Group's strategy. In making its assessment of any bonus, the Committee...

  • Page 106
    ...report Directors' remuneration policy Remuneration policy for executive Directors continued Element and purpose Operation Maximum value and performance measures B. Variable Pay continued Long Term Incentive Plan (LTIP) award To reward execution of Barclays' strategy and growth in shareholder value...

  • Page 107
    ... of shareholders' and executive Directors' interests in long-term value creation Barclays' shares worth a minimum of 400% of salary must be held within five years. Financial review Financial statements Shareholder information barclays.com/annualreport Barclays PLC Annual Report 2014 I 105

  • Page 108
    ... understanding of remuneration for the broader employee population and uses the all employee data to compare remuneration and ensure consistency throughout the Group. Employees are not consulted directly on the Directors' remuneration policy. 106 I Barclays PLC Annual Report 2014 barclays.com...

  • Page 109
    ... as far as possible the expected value, timing and form of delivery, the terms of the forfeited remuneration and must be in the best long-term interests of Barclays. Barclays deferral policy shall however apply as a minimum to any buy out of annual bonus opportunity. Risk review Financial review...

  • Page 110
    ... quarterly delivery date shall be pro rated for the number of days from the start of the relevant quarter to the termination date. Where Barclays elects to terminate the employment with immediate effect by making a payment in lieu of notice, the executive Director will not receive any shares that...

  • Page 111
    ... relating to the termination of employment and provide outplacement services. The Company may pay the executive Director's tax on these particular costs. Risk review Other Financial review Financial statements Shareholder information barclays.com/annualreport Barclays PLC Annual Report 2014...

  • Page 112
    ...: Remuneration report Directors' remuneration policy Remuneration policy for non-executive Directors Element and purpose Operation Fees Reï¬,ect individual responsibilities and membership of Board Committees and are set to attract non-executive Directors who have relevant skills and experience to...

  • Page 113
    ... current Remuneration Policy can be found on pages 80 and 81. Financial statements 5 Risk culture, framework and control functions (recommendations 28, 29, 31, 32, 33) Barclays published our Enterprise Risk Management Framework in December 2013 and conducted our annual refresh of it in Q4 2014...

  • Page 114
    112 I Barclays PLC Annual Report 2014 barclays.com/annualreport

  • Page 115
    ... existing and emerging risks and uncertainties we face and the key areas of management focus. Q Q Q Q Q Q Q Q Business conditions, general economy and geopolitical issues UK political and policy environment Model risk Credit risk Market risk Funding risk Operational risk Conduct risk 116...

  • Page 116
    ... Q Q Liquidity risk overview Liquidity risk stress testing Liquidity pool Funding structure and funding relationships Wholesale funding Term financing Encumbrance Credit ratings Liquidity management at BAGL Group Contractual maturity of financial assets and liabilities Operational risk overview...

  • Page 117
    ... 3 Report. A summary of this information may also be found in this report in the Risk Management section between pages 123 to 141. The Strategic Report Governance Risk review Financial review Financial statements Shareholder information barclays.com/annualreport Barclays PLC Annual Report 2014...

  • Page 118
    ... to market losses in trading portfolios resulting from changes in credit ratings, share prices and solvency of counterparties; and (iii) higher levels of default rates and impairment. ii) UK political and policy environment (emerging risk) The political outlook in the UK is uncertain ahead of the...

  • Page 119
    ...Non-Core assets, including commercial real estate and leveraged finance loans, which (i) remain illiquid; (ii) are valued based upon assumptions, judgements and estimates which may change over time; and (iii) are subject to further deterioration and write-downs. As a result, the Group is at risk of...

  • Page 120
    ...'s consolidated financial statements. Market risk The Group's financial position may be adversely affected by changes in both the level and volatility of prices leading to lower revenues and may include: i) Major changes in quantitative easing programmes (emerging risk) The trading business model...

  • Page 121
    ... systemic risk, such that the likelihood of extraordinary sovereign support for a failing bank is less predictable, as well as to address the finalisation of revised capital and leverage rules under CRD IV. Following their review, Standard and Poor's downgraded Barclays PLC's long-term rating...

  • Page 122
    ...management actions to meet the changed requirements, such as: increasing capital or liquidity resources, reducing leverage and risk weighted assets; modifying legal entity structure (including with regard to issuance and deployment of capital and funding for the Group); changing the Group's business...

  • Page 123
    ... Group's share capital, and may result in creditors, including debt holders, losing all or a part of their investment in the Group's securities that could be subject to such powers. The Strategic Report Governance Risk review The UK Financial Services (Banking Reform) Act 2013 (the Banking Reform...

  • Page 124
    ... structural changes (whether in connection with RRP or other structural reform initiatives) could impact capital, liquidity and leverage ratios, as well as the overall profitability of the Group, for example via duplicated infrastructure costs, lost cross-rate revenues and additional funding costs...

  • Page 125
    ... 127 128 128 129 129 130 131 131 132 132 132 134 134 134 135 135 136 137 137 137 138 139 139 140 The Strategic Report Governance Risk review Financial review Financial statements Shareholder information barclays.com/annualreport Barclays PLC Annual Report 2014 I 123

  • Page 126
    ...fic information on Group policies can be found in Barclays PLC 2014 Pillar 3 Report or at barclays.com Barclays risk management strategy Evaluate Introduction This section outlines the Group's strategy for managing risk and how risk culture has been developed to ensure that there is a set of...

  • Page 127
    ...analyses of significant risk topics, which are presented by the CRO or senior risk managers in the businesses. The Chair of the Committee prepares a statement each year on its activities. Financial statements Shareholder information barclays.com/annualreport Barclays PLC Annual Report 2014 I 125

  • Page 128
    ...â- â- reviews the Group's aggregate Operational Risk profile reviews and challenges presentations on individual Key Risk Types â- â- â- Credit Risk Market Risk Funding Risk Operational Risk Conduct Risk Reputation Risk 126 I Barclays PLC Annual Report 2014 barclays.com/annualreport

  • Page 129
    ... statement about its system of internal controls. At the business level executive management hold specific Business Risk Oversight Meetings to monitor all Principal Risks. Key Risk Officers report their assessments of the risk exposure and control effectiveness to Group-level oversight committees...

  • Page 130
    ... credit risk profile against plan and agree any required actions Review impairment performance and coverage ratios Review key retail risk issues, model methodologies and coverage Review retail credit risk policies and framework Monitor risk appetite consumption 128 I Barclays PLC Annual Report 2014...

  • Page 131
    ... policies are in place to ensure that credit risk mitigation is appropriately recognised and recorded and more information can be found in the Barclays PLC Pillar 3 Report. Financial review Financial statements Shareholder information barclays.com/annualreport Barclays PLC Annual Report 2014...

  • Page 132
    ... Risk Committee Chaired by the Group Financial Risk Director Oversees the management of the Group's market risk profile Approves Market Risk Key Risk Frameworks Reviews arising market or regulatory issues Proposes risk appetite levels to the Board 130 I Barclays PLC Annual Report 2014 barclays...

  • Page 133
    ...Pillar 3 Report. Understand and control market risk by robust measurement, limit setting, reporting and oversight; Shareholder information Q Facilitate business growth within a controlled and transparent risk management framework; barclays.com/annualreport Barclays PLC Annual Report 2014 I 131

  • Page 134
    ... on how capital and liquidity risks are managed is covered below: Board Financial Risk Committee Group Treasury Committee Chaired by the Group Treasurer Oversees the manangement of the Group's Capital Plan Sets policy/controls for liquidity, maturity transformation and structural interest rate...

  • Page 135
    ...with strategic objectives, balancing capital generation of the business with business growth and shareholder distributions Meet minimum regulatory requirements at all times in the UK and in all other jurisdictions that the Group operates in, such as the United States and South Africa where regulated...

  • Page 136
    ...of policy formation, review and governance, analysis, stress testing, limit setting and monitoring. Together, these meet internal and regulatory requirements. Organisation and structure Barclays Treasury operates a centralised governance control process that covers all of the Group's liquidity risk...

  • Page 137
    ... the operational key risks listed above to cover areas included within conduct risk. For more information on conduct risk please see pages 137 and 138. Financial review Board Audit Committee Board Conduct Operational and Reputational Risk Committee Financial statements Operational Risk & Control...

  • Page 138
    ...time businesses are required to present a deep-dive of their operational risk and control environment. The committee then considers material control issues and their effective remediation. On control issues the OR&CC additionally presents to the BAC. Specific reports are prepared by businesses, Key...

  • Page 139
    ...Financial review Q Q Q Financial statements Board Conduct Operational and Reputational Risk Committee Conduct and Reputational Risk Committee Shareholder information Conduct Risk Committee Responsible for the oversight and challenge of conduct risk and control environment within Barclays...

  • Page 140
    ...with the Key Risk Frameworks and the 10 outcomes. Barclays is developing a range of businessspecific and Group metrics and measures, which will further improve its ability to monitor and assess the identification and management of conduct risks. 138 I Barclays PLC Annual Report 2014 barclays.com...

  • Page 141
    ... the Group managed reputation risk during the year. The following policies, tools and guidance support the Group's businesses and functions in implementing the requirements of the Framework: Q The Strategic Report The Barclays Way (Code of Conduct) sets out in one place what it means to work in...

  • Page 142
    ... current and emerging priority reputation risks to BCORR Ad hoc review of identified reputationally controversial issues/ transactions/relationships by business reputation committees, with escalation to Group Reputation Committee, where required. Q Q 140 I Barclays PLC Annual Report 2014...

  • Page 143
    ... Conduct risk risk Operational Reputation risk Conduct risk Reputation risk Page The Strategic Report XX 142 XX 174 XX 184 191 XX 209 212 XX 213 XX XX Governance Risk review Financial review Financial statements Shareholder information barclays.com/annualreport Barclays PLC Annual Report 2014...

  • Page 144
    ... and asset types. Key metrics Q Credit impairment charges in 2014 were 29% lower than 2013: -£0.2bn Group Core Lower charges reï¬,ected improved performance in the majority of businesses -£0.1bn Retail Core Lower charges in key PCB portfolios reï¬,ecting better economic conditions in the UK...

  • Page 145
    ...: i) balance sheet, including the maximum exposure, and collateral, and loans and advances; ii) areas of concentrations, including the eurozone; iii) exposure to and performance metrics for specific portfolios and assets types, including home loans, credit cards and UK commercial real estate; iv...

  • Page 146
    ...retail lending Corporate loans Total loans and advances to customers Reverse repurchase agreements and other similar secured lending Available for sale debt securities Other assets Total on-balance sheet Off-balance sheet: Contingent liabilities Documentary credits and other short term trade related...

  • Page 147
    ...retail lending Corporate loans Total loans and advances to customers Reverse repurchase agreements and other similar secured lending Available for sale debt securities Other assets Total on-balance sheet Off-balance sheet: Contingent liabilities Documentary credits and other short term trade related...

  • Page 148
    ... current, the Group will use its own internal ratings for the securities. Balance sheet credit quality The following tables present the credit quality of Group assets exposed to credit risk. Overview As at 31 December 2014, the ratio of the Group's assets classified as strong improved to 84% (2013...

  • Page 149
    ... risk % The Strategic Report As at 31 December 2014 Cash and balances at central banks 39,695 Items in the course of collection from other banks 1,134 Trading portfolio assets: Debt securities 60,290 Traded loans 446 Total trading portfolio assets 60,736 Financial assets designated at fair value...

  • Page 150
    ... Operations Barclays Core Barclays Non-Core Total Group Wholesale Group Total Traded loans Loans and advances designated at fair value Loans and advances held at fair value Total loans and advances As at 31 December 2013 Personal & Corporate Banking Africa Banking Barclaycard Barclays Core Barclays...

  • Page 151
    ... banks Loans and advances to customers Reverse repurchase agreements and other similar secured lending Available for sale debt securities Other assets Total on-balance sheet Off-balance sheet: Contingent liabilities Documentary credits and other short-term trade related transactions Forward starting...

  • Page 152
    ... banks Loans and advances to customers Reverse repurchase agreements and other similar secured lending Available for sale debt securities Other assets Total on-balance sheet Off-balance sheet: Contingent liabilities Documentary credits and other short-term trade related transactions Forward starting...

  • Page 153
    ...the country of residence for retail customers and country of operations for business banking customers. Off-balance sheet exposure consists primarily of undrawn commitments and guarantees issued to third parties on behalf of our corporate clients. Summary of Group Exposures The following table shows...

  • Page 154
    ...31 December Sovereign Financial institutions Residential mortgages Corporate Other retail lending Amortised cost - loans and advances Impairment allowances 2014 total 2013 total Gross £m £m £m £m Off balance sheet contingent liabilities and commitments 2014 £m 2013 £m Fair value through OCI...

  • Page 155
    ... the Group is insured in the event of termination of employment or death. Arrears rates (30 and 90 days) on salary loans improved to 2.0% (2013: 2.2%) and 0.8% (2013: 1.0%) respectively, while charge-off rates worsened to 18.7% (2013: 13.8%). The Strategic Report Q £142m (2013: £394m) of credit...

  • Page 156
    ... bought and sold to support client transactions and for risk management purposes. The contract notional amount represents the size of the credit derivative contracts that have been bought or sold, while the fair value represents the change in the value of the reference asset. The net protection or...

  • Page 157
    ... Loans and advances to customers - Reverse repurchase agreements and other similar secured lending 38,946 Available for sale debt securities 11,122 Other assets 635 Total on-balance sheet 357,648 Off-balance sheet: Contingent liabilities 1,159 Documentary credits and other short-term trade related...

  • Page 158
    ... Loans and advances to customers - Reverse repurchase agreements and other similar secured lending 62,180 Available for sale debt securities 15,625 Other assets 470 Total on-balance sheet 347,865 Off-balance sheet: Contingent liabilities 1,620 Documentary credits and other short-term trade related...

  • Page 159
    ... steady at 60.0%. The proportion of home loans in recoveries increased to 3.0% (2013: 2.4%). This was due to the lengthy local legal process and difficult property market conditions. Financial statements Shareholder information barclays.com/annualreport Barclays PLC Annual Report 2014 I 157

  • Page 160
    ... appetite for new lending in the UK as confidence in the housing market improved. New bookings rose by 19% to £20.3bn, which was broadly in line with the growth in the industry. South Africa: The proportion of new home loans above 85% LTV increased to 33.5% (2013: 30.4%) due to a revised strategy...

  • Page 161
    ... but connected account to the main mortgage loan facility. The balance drawn must be repaid on redemption of the mortgage. Of the total 944k home loan customers in the UK, 505k have MCA reserves, with total reserve limits of £17.9bn (2013: £18.3bn). Financial review Financial statements As at...

  • Page 162
    ... given default model. UK personal loans: Arrears and charge-off rates reduced over the year, as a result of the improved economic conditions and previous changes to credit criteria that have taken full effect. The recoveries proportion reduced to 10.0% (2013: 15.8%) as the write-off policy was fully...

  • Page 163
    ... operate to specific lending criteria and the portfolio of assets is continually monitored through a range of mandate and scale limits. Financial statements Q Shareholder information Note a Based on the most recent valuation assessment. barclays.com/annualreport Barclays PLC Annual Report 2014...

  • Page 164
    ... values. Unsecured balances primarily relate to working capital facilities agreed to CRE companies. Notes a Valuation weighted LTV for 2013 were revised to standardise the valuation weighted calculation methodology used. b Corporate Banking balances under £1m. 162 I Barclays PLC Annual Report 2014...

  • Page 165
    ... in the renewable energy sector. Credit Risk Loans decreased to £841m (2013: £3,148m) as a result of the reclassification of Spanish loans now held for sale and a write-off of a single name exposure. Shareholder information barclays.com/annualreport Barclays PLC Annual Report 2014 I 163

  • Page 166
    ....0bn due to higher Corporate Banking lending balances driven by an increase in bank lending. Credit Risk Loans decreased £0.2bn to £1.6bn and loan impairment charges improved 17% to £219m due to the improving economic environment in the UK, particularly impacting Corporate which benefitted from...

  • Page 167
    ... Governments and other public bodies Corporate and other issuers US agency Mortgage and asset backed securities Bank and building society certificates of deposit Total Government securities As at 31 December United States United Kingdom Germany France South Africa £m Financial review 106,292 29...

  • Page 168
    ... by either UK or New York law. Exposure relating to derivatives, repurchase agreements, reverse repurchase agreements, stock borrowing and loan transactions is calculated using internal PRA approved models. These are used as the basis to assess both regulatory capital and capital appetite and are...

  • Page 169
    ... the year. See below for more information on these portfolios. Financial statements Shareholder information Notes a Re-ages data for 2013 revised to include customers who move to charge-off or into forbearance programmes within 12 months of the re-age offering. b New re-ages in the year and new re...

  • Page 170
    ... £355m due to the improved economic environment. Africa - South Africa (home loans): Reduction in forbearance balances to £207m (2013: £248m) is due to enhanced qualification criteria which resulted in a more appropriate and sustainable programme for the customer, and local currency depreciation...

  • Page 171
    ... difficulty. During 2014, the proportion of customers meeting this definition has decreased, primarily as a result of the improved economic conditions. Forbearance by type Credit cards and unsecured loans - Barclays Core portfolios UK cards US cards UK personal loans 2014 2013 2014 2013 2014 2013...

  • Page 172
    Risk review Risk performance Credit risk Wholesale forbearance reporting split by exposure class Corporate £m Personal and trusts £m Other £m Total £m As at 31 December 2014 Restructure: reduced contractual cash ï¬,ows Restructure: maturity date extension Restructure: changed cash ï¬,ow profi...

  • Page 173
    ... year £m Exchange Balance at Amounts and other written off adjustmentsa 31 December £m £m £m Financial review At beginning of year £m Repayments £m 2014 Home loans Credit cards, unsecured and other retail lending Corporate loans Total impaired loans 2013 Home loans Credit cards, unsecured...

  • Page 174
    ... 3 report. Potential credit risk loans and coverage ratios by business As at 31 December Personal & Corporate Banking Africa Banking Barclaycard Barclays Core Barclays Non-Core Total Group retail Investment Bank Personal & Corporate Banking Africa Banking Barclays Core Barclays Non-Core Total Group...

  • Page 175
    ... UK large corporate & business lending Africa South Africa home loans Barclaycard UK cards Financial review 52 48 30 98 22 62 55 10 19 14 11 5 Financial statements UK home loans: Primarily to offset the benefits that recent increases in the House Price Index have had on impairment models...

  • Page 176
    ... average daily revenue Non-traded market risk measures suggest a higher sensitivity to a change in interest rates, with a stable structural currency exposure 55% Increase in the positive impact on pre-tax net interest income of a 100bps rise in interest rates 174 I Barclays PLC Annual Report 2014...

  • Page 177
    ... asset and liability balances subject to market risk in the Investment Bank, Non-Core and Head Office', on page 178, provides another view; balance sheet values are shown for market risk-taking business lines. Q Shareholder information barclays.com/annualreport Barclays PLC Annual Report 2014...

  • Page 178
    ... foreign exchange rates. Credit spreads and equity prices will also be a factor where the Group holds debt and equity securities respectively, either as financial assets designated at fair value (see Note 14) or as available for sale (see Note 16). 176 I Barclays PLC Annual Report 2014 barclays.com...

  • Page 179
    ... of time. Foreign Exchange VaR fell back before the year-end when the positions were closed out. See also the Group management VaR graph below. The business remained within the management VaR limits that were reported to the Board Financial Risk Committee (BFRC) throughout 2014 for both asset class...

  • Page 180
    ... service is the execution of liquidity investments and debt and funding operations. securities in issue. Derivative financial instruments and trading portfolio asset/liabilities and repurchase agreements. Market risk exposure arises from credit trading including bond syndication, and interest rate...

  • Page 181
    ... of the balance sheet instruments that generate market risk, as defined by the Group for purposes of risk management, assets and liabilities that are expected to generate market risk have been aggregated by main business lines. Note, however, that due to differences in data sets for market risk and...

  • Page 182
    ... rate sensitivity tables as these are measured and managed using VaR. Net interest income sensitivity (AEaR) by business unit Personal & Corporate Banking £m Barclaycard £m Africa £m BNCa £m Otherb £m Total £m As at 31 December 2014 +200bps +100bps -100bps -200bps As at 31 December 2013...

  • Page 183
    Economic Capital for non-traded risk by business unit Personal & Corporate Banking £m Barclaycard £m Africa Banking £m BNCa £m Total £m As at 31 December 2014 Prepayment risk Recruitment risk Residual riska Total As at 31 December 2013 Prepayment risk Recruitment risk Residual risk Total 32 ...

  • Page 184
    ... fund assets might decline, or the investment returns might reduce; or the estimated value of the pension liabilities might increase. See page 146 in the 2014 Barclays PLC Pillar 3 Report for more information on how pension risk is managed. Assets The Board of Trustees defines an overall long-term...

  • Page 185
    ... 35 to the financial statements for information on the current position of the fund. Governance Risk review Insurance risk review Insurance risk is managed within Africa Banking. From an economic capital perspective, four significant categories of insurance risk are reported. Please see page 146...

  • Page 186
    Risk review Risk performance Funding risk - Capital Analysis of capital risk Capital risk is the risk that the Group has insufficient capital resources, which could lead to (i) a failure to meet regulatory requirements; (ii) a change to credit rating; or (iii) an inability to support business ...

  • Page 187
    ... as the United States and South Africa where regulated activities are undertaken. The Group's authority to operate as a bank is dependent upon the maintenance of adequate capital resources; Support its credit rating. A weaker credit rating would increase the Group's cost of funds; and Support its...

  • Page 188
    ... of the current rules. Key capital ratios As at 31 December Fully Loaded Common Equity Tier 1 PRA Transitional Common Equity Tier 1a,b PRA Transitional Tier 1b,c PRA Transitional Total Capitalb,c Capital resources (audited) As at 31 December Shareholders' equity (excluding non-controlling interests...

  • Page 189
    ... for goodwill and intangible assets. The reduction in PVA results principally from the £0.9bn adjustment to the balance sheet valuation of the ESHLA portfolio at year end, which reduces the PVA relating to that portfolio. Q Financial review Q Transitional total capital decreased by £0.1bn to...

  • Page 190
    ... Funding risk - Capital Risk weighted assets (RWAs) by risk type and business Credit risk Std £m IRB £m Counterparty credit riska Std IRB £m £m Market riskb Std £m Operational risk IMA £m £m Total RWAs £m As at 31 December 2014 Personal and Corporate Banking Barclaycard Africa Banking...

  • Page 191
    ..., Barclays' BCBS 270 leverage ratio was 3.7%, which is in line with the expected minimum end state requirement outlined by the Financial Policy Committee (FPC). BCBS 270 leverage ratio Leverage exposure Accounting assets Derivative financial instruments Cash collateral Reverse repurchase agreements...

  • Page 192
    ... assesses capital requirements by measuring the Group's risk profile using internally developed models. The Group assigns EC primarily within the following risk categories: credit risk, market risk, operational risk, fixed asset risk (mainly property) and pension risk. The Group regularly reviews...

  • Page 193
    ... requirements Governance £15bn Term Issuance The Group maintains access to stable and diverse sources of funding across customer deposits and wholesale debt Risk review Financial review Financial statements Shareholder information barclays.com/annualreport Barclays PLC Annual Report 2014 I 191

  • Page 194
    ...fied. Wholesale funding outstanding (excluding repurchase agreements) was £171bn (2013: £186bn). The Group was active in wholesale unsecured, secured and debt capital markets, issuing £15bn (2013: £1bn) net of early redemptions. 192 I Barclays PLC Annual Report 2014 barclays.com/annualreport

  • Page 195
    ...at 31 December 2014, the Group had a surplus to both of these metrics with an estimated CRD IV LCR of 124% (2013: 96%) and an estimated Basel III NSFR of 102% (2013: 94%). Financial review Financial statements Shareholder information barclays.com/annualreport Barclays PLC Annual Report 2014 I 193

  • Page 196
    ... well for potential rating changes as credit rating agencies assess sovereign support in Barclays Bank PLC credit ratings. The Group plans to maintain its surplus to the internal and regulatory stress requirements at an efficient level, while considering risks to market funding conditions and its...

  • Page 197
    ... returns generated by these highly liquid assets, the risk and reward profile is continuously managed. The Group manages the liquidity pool on a centralised basis. As at 31 December 2014, 92% of the liquidity pool was located in Barclays Bank PLC (2013: 90%) and was available to meet liquidity...

  • Page 198
    ... agreements that provide financing to customers collateralised by liquid securities on a short-term basis or are used to settle short-term inventory positions; repo financing of trading portfolio assets and matched cash collateral and settlement balances. 196 I Barclays PLC Annual Report 2014...

  • Page 199
    ... demand and savings accounts at short notice, the Group's broad base of customers - numerically and by depositor type - helps protect against unexpected ï¬,uctuations in balances. Such accounts form a stable funding base for the Group's operations and liquidity needs. The Group models the behaviour...

  • Page 200
    ..., covered bonds/asset-backed securities (ABS) and subordinated debt where the original maturity of the instrument was more than one year. b The composition of wholesale funds comprises the balance sheet reported deposits from banks, financial liabilities at fair value, debt securities in issue and...

  • Page 201
    ... sheet, but can be used to raise secured funding or meet additional funding requirements. Risk review Financial review Financial statements Shareholder information Note a Includes £1bn of bilateral secured funding in 2015 and £1bn in 2016. barclays.com/annualreport Barclays PLC Annual Report 2014...

  • Page 202
    ... and reverse available repurchase as collateral agreements £bn £bn On-balance sheet As at 31 December 2014 Cash and balances at central banks Trading portfolio assets Financial assets at fair value Derivative financial instruments Loans and advances - banksb Loans and advances - customersb Cash...

  • Page 203
    ... Fair value of securities accepted as collateral Total unencumbered collateral 428.3 356.0 72.3 331.2 - 217.3 1.5 73.6 Risk review Financial review Financial statements Shareholder information Notes a The amounts included in the table are for the Group excluding BAGL. The assets relating to...

  • Page 204
    ... 85.0 Notes a Highly liquid assets include government bonds, agency securities and agency mortgage-backed securities. Less liquid assets include asset-backed securities, corporate bonds, equities and other. b Includes collateral swaps. 202 I Barclays PLC Annual Report 2014 barclays.com/annualreport

  • Page 205
    ... of business and financial attributes including risk management processes and procedures, capital strength, earnings, funding, liquidity, accounting and governance. Credit ratingsa As at 31 December 2014 Barclays Bank PLC Long-term Short-term Stand-alone rating Barclays PLC Long-term Short-term...

  • Page 206
    ...%). As at 31 December 2014, BAGL had £9bn of wholesale funding outstanding (2013: £9bn), of which £5bn matures in less than 12 months (2013: £6bn). Additional information on liquidity management at BAGL can be found in the Barclays Africa Group Annual Report. Contractual maturity of financial...

  • Page 207
    ... and balances at central banks Items in the course of collection from other banks Trading portfolio assets Financial assets designated at fair value Derivative financial instruments Loans and advances to banks Loans and advances to customers Reverse repurchase agreements and other similar secured...

  • Page 208
    ... ten years £m As at 31 December 2013 Assets Cash and balances at central banks Items in the course of collection from other banks Trading portfolio assets Financial assets designated at fair value Derivative financial instruments Loans and advances to banks Loans and advances to customers Reverse...

  • Page 209
    ... 31 December 2014 Deposits from banks Items in the course of collection due to other banks Customer accounts Repurchase agreements and other similar secured lending Trading portfolio liabilities Financial liabilities designated at fair value Derivative financial instruments Debt securities in issue...

  • Page 210
    ... 17,873 Documentary credits and other short term trade related transactions 504 Forward Starting reverse repo - Standby facilities, credit lines and other commitments 247,045 Total off balance sheet commitments given 265,422 On demand £m Not more than three months £m Over ten years £m Total...

  • Page 211
    ... reporting, conduct risk remediation provisions have been included within this operational risk section. Conduct risk is a separate principal risk and is covered more fully on pages 211 and 212. Financial statements Shareholder information barclays.com/annualreport Barclays PLC Annual Report 2014...

  • Page 212
    ... in the number of significant loss events for external fraud and execution delivery and process management. The Group's operational risk profile is informed by bottom-up risk assessments undertaken by each business unit and top-down qualitative review from the Operational Risk & Control Committee...

  • Page 213
    ... customers and market integrity at the heart of our business Q Q Financial review Q Learning lessons from the past and attempting to improve management of conduct risk in the future Financial statements Shareholder information barclays.com/annualreport Barclays PLC Annual Report 2014...

  • Page 214
    ... Risk Programme has been leading this change across the Group. Conduct Risk was re-categorised as a Principal Risk in 2013 and is supported by seven Key Risk Frameworks (KRF) which were issued during 2014. The KRF articulate expectations for achieving good customer outcomes and protecting market...

  • Page 215
    ... areas The Strategic Report Governance Q Q Q Risk review Remuneration Ongoing concerns around executive remuneration Remuneration levels continued to be a source of reputation risk in 2014 from the broader banking sector and Barclays' own perspectives. The Group is committed to paying...

  • Page 216
    ... from supporting corporate communications planning to measuring performance in key areas and benchmarking the Group's reputation against peers. The surveys are conducted with critical opinion formers (including politicians, media, business and NGOs) across key geographies (UK, Europe, Africa, the...

  • Page 217
    ... 2019. Comments on the consultative document were due in February 2015, and the FSB is expected to finalize its proposal in 2015. The Strategic Report Governance Risk review Financial review Financial statements Shareholder information barclays.com/annualreport Barclays PLC Annual Report 2014...

  • Page 218
    ... systemic risk. By adhering to this protocol Barclays is able, in ISDA Master Agreements and related credit support agreements entered into with other adherents, to opt in to different resolution regimes such that cross-default and direct default rights that would otherwise arise under the terms...

  • Page 219
    ... customers). This represents the implementation of recommendations made by the Parliamentary Committee on Banking Standards in this area. The Strategic Report Governance Risk review Financial review Financial statements Shareholder information barclays.com/annualreport Barclays PLC Annual Report...

  • Page 220
    ...' operations in South Africa, including Barclays Africa Group Limited, are supervised and regulated mainly by the South African Reserve Bank (SARB), the Financial Services Board (SAFSB) as well as the Department of Trade and Industry (DTI). The SARB oversees the banking industry and follows a risk...

  • Page 221
    ... the FRB as if it were a US bank holding company of comparable size. Barclays Bank PLC's US branches will be subject to certain separate requirements, including with respect to liquidity. Financial statements Shareholder information barclays.com/annualreport Barclays PLC Annual Report 2014 I 219

  • Page 222
    ... to conduct monthly internal liquidity stress tests for the IHC (and also, separately, for Barclays Bank PLC's US branch network), and to maintain a 30-day buffer of highly liquid assets; (v) other liquidity risk management requirements, including compliance with liquidity risk management standards...

  • Page 223
    ...statement Income statement commentary Consolidated summary balance sheet Balance sheet commentary Analysis of results by business 222 224 225 227 228 229 Governance Risk review Financial review Financial statements Shareholder information barclays.com/annualreport Barclays PLC Annual Report 2014...

  • Page 224
    ...June 2014: £45.4bn). Tier 1 Capital includes £4.6bn of Additional Tier 1 (AT1) securities. Transform target: BCBS 270 leverage ratio > 4.0% by 2016. The ability to pay dividends to shareholders demonstrates the financial strength of the Group. 2014 dividend per share of 6.5p (2013: 6.5p) resulted...

  • Page 225
    ... Exchange and goodwill impairment. Risk review 2013: £16,377m 2012: £16,472m 2016 Core Target:

  • Page 226
    Financial review Consolidated summary income statement For the year ended 31 December Continuing operations Net interest income Non-interest income net of claims and benefits on insurance contracts Adjusted total income net of insurance claims Own credit gain/(charge) Gain on US Lehman acquisition...

  • Page 227
    ... effective tax rate on adjusted profit before tax decreased to 31.0% (2013: 40.0%). 2013 included a charge of £440m relating to the write-down of deferred tax assets in Spain. The Strategic Report Governance Risk review Financial review Financial statements Shareholder information barclays.com...

  • Page 228
    ... from Group structural hedging activities. Credit impairment charges improved 8% to £3,071m, with a loan loss rate of 64bps (2012: 70bps). This reï¬,ected lower impairments in the wholesale businesses and improved arrears rates in Africa Banking, particularly on South Africa home loans. This...

  • Page 229
    ... liabilities and equity Net tangible asset value per share Net asset value per ordinary share Number of ordinary shares of Barclays PLC (in millions) Year-end United States dollar exchange rate Year-end Euro exchange rate Year-end South African rand exchange rate 2014 £m 2013 £m 2012 £m 2011...

  • Page 230
    ... capital and share premium increased by £0.9bn to £20.8bn due to the issuance of shares under employee share schemes and the Barclays PLC scrip dividend programme. Other equity instruments increased by £2.3bn to £4.3bn due to issuance of equity accounted AT1 securities to investors in exchange...

  • Page 231
    ... of adjusted results by business Personal and Corporate Banking £m Barclaycard £m Africa Banking £m Investment Bankb £m Head Office £m Barclays Core £m Barclays Non-Core £m Group adjusted results £m For the year ended 31 December 2014 Total income net of insurance claims Credit impairment...

  • Page 232
    ... £m Group statutory results £m Group adjusted results £m 2012 Adjusting items £m Group statutory results £m For the year ended 31 December Total income net of insurance claims Credit impairment charges and other provisions Net operating income Operating expenses UK bank levy Costs to achieve...

  • Page 233
    ... The Strategic Report Q Q Q Q Risk review 2014 £m 2013 £m 2012 £m Financial review Income statement information Total income net of insurance claims Credit impairment charges and other provisions Net operating income Operating expenses UK bank levy Costs to achieve Transform...

  • Page 234
    Financial review Analysis of results by business Personal and Corporate Banking 2014 compared to 2013 Profit before tax increased 29% to £2,885m driven by 3% growth in Personal income, lower impairment due to the improving economic environment in the UK, and the continued reduction in operating ...

  • Page 235
    ... UK bank levy to £66m (2012: £49m). The Strategic Report Governance Risk review 2014 £m 2013 £m 2012 £m Financial review Key facts Average LTV of mortgage lendinga Average LTV of new mortgage lendinga Number of branches Number of employees (full time equivalent) Performance measures Return...

  • Page 236
    ... of services, consolidation of sites and digitalisation, resulting in an improvement in the cost to income ratio to 43% (2013: 45%). The business focus on risk management is reï¬,ected in stable 30-day delinquency rates and falling loan loss rates. The diversified and scaled business model has...

  • Page 237
    ... net lending growth, higher operating losses and costs to achieve Transform of £49m (2012: £nil). The Strategic Report Governance Risk review 2014 £m 2013 £m 2012 £m Financial review Key facts 30 days arrears rates - UK cards 30 days arrears rates - US cards Number of employees (full time...

  • Page 238
    ... the closing 2014 exchange rate for the balance sheet to eliminate the impact of movement in exchange rates between the two periods. c RWAs are on a CRD IV fully loaded basis. CRD IV rules came into effect in 2013; therefore no 2012 comparatives are available. 236 I Barclays PLC Annual Report 2014...

  • Page 239
    ... card portfolio for the full year. 2014 £m 2013 £m 2012 £m Financial review The Strategic Report Governance Risk review Key facts Average LTV of mortgage portfolioa Average LTV of new mortgage lendinga Number of distribution points Number of employees (full time equivalent) ZAR/£ - Period end...

  • Page 240
    ... product set in Markets, which will enable it to build on existing strengths and adapt to regulatory developments. The business continued to execute this strategy despite difficult market-making conditions and continued low levels of activity. This has particularly impacted credit and interest rate...

  • Page 241
    ... Strategic Report Governance Risk review 2014 £m 2013 £m 2012 £m Financial review Key facts Number of employees (full time equivalent) Performance measures Return on average tangible equitya Return on average equitya Cost: income ratio Analysis of total income Investment banking fees Lending...

  • Page 242
    ...4bn (2013: £7.0bn) as the Group moved towards the allocation rate of 10.5% fully loaded CRD IV CET1 ratio during the year, resulting in a reduction in excess equity allocated to businesses. 2013 compared to 2012 Loss before tax of £15m moved from a profit of £190m in 2012. Net operating income...

  • Page 243
    ... portfolio. Q Risk review Q 2014 £m 2013 £m 2012 £m Financial review Income statement information Net interest income Net fee and commission income Net trading income Net investment income Net premiums from insurance contracts Other income/(expense) Total income Net claims and benefits...

  • Page 244
    ... agreements and other similar secured lending Total assets Customer deposits Risk weighted assetsb Average allocated tangible equity Average allocated equity Key facts Number of employees (full time equivalent) Performance measures Return on average tangible equityc Return on average equityc Loan...

  • Page 245
    ... equity. The Strategic Report Governance Return on average equity 2014 % 2013 % 2012c % Risk review Personal and Corporate Banking Barclaycard Africa Banking Investment Bank Barclays Core excluding Head Office Head Officea Barclays Core Barclays Non-Corea Barclays Group adjusted total Return...

  • Page 246
    ...results by business Margins analysis Year ended 31 December 2014 Average Net Net interest customer interest income assets margin £m £m % Year ended 31 December 2013 Average Net Net interest customer interest income assets margin £m £m % Personal and Corporate Banking Barclaycard Africa Banking...

  • Page 247
    ... transactions and Directors' remuneration Auditors' remuneration Financial risks, liquidity and capital management Transition Notes - Changes in accounting policies, comparability and other adjustments Non-current assets held for sale and associated liabilities Barclays PLC (the Parent Company) 265...

  • Page 248
    ... global banks in a number of areas, including liquidity and funding, credit risk and market risk. Barclays has fully adopted the recommendations across the Annual Report and Pillar 3 report. In line with the Financial Reporting Council's guidance on Clear and Concise reporting, for 2014 Barclays has...

  • Page 249
    ... the year then ended; The Consolidated and Parent Company statements of changes in equity for the year then ended; and The notes to the financial statements, which include a summary of significant accounting policies and other explanatory information. The Strategic Report Q Barclays PLC's Group...

  • Page 250
    ... statement reporting issues is set out on pages 41 to 43. How our audit addressed the area of focus and what we found We focused on this area because for some of these assets and liabilities the external evidence supporting the Group's valuations was limited because of the lack of a liquid market...

  • Page 251
    ... management, but in our view the differences were within a reasonable range of outcomes in the context of the overall loans and advances and the uncertainties disclosed in the financial statements. Financial statements Shareholder information barclays.com/annualreport Barclays PLC Annual Report...

  • Page 252
    ... area because the Directors have made provisions that require significant judgement in relation to the amount of current and potential future claims from customers for losses or damages associated with inappropriate business activities. In particular, we focused on the provision for £1.1bn Payment...

  • Page 253
    ... and segmental structure of the Group, the accounting processes and controls, and the industry in which the Group operates. During the year the Group re-segmented its business into five core operating segments: Personal and Corporate Banking, Investment Bank, Africa Banking, Barclaycard and Head...

  • Page 254
    ... C.1.1 of the UK Corporate Governance Code ('the Code'), that they consider the Annual Report taken as a whole to be fair, balanced and understandable and provides the information necessary for members to assess the Group's and Parent Company's performance, business model and strategy is materially...

  • Page 255
    ... report. Andrew Ratcliffe (Senior Statutory Auditor) for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors London 2 March 2015 Risk review Financial review Financial statements Shareholder information barclays.com/annualreport Barclays PLC Annual Report 2014...

  • Page 256
    ... Registered Public Accounting Firm To the Board of Directors and Shareholders of Barclays PLC In our opinion, the accompanying consolidated balance sheets and the related consolidated income statements, consolidated statements of comprehensive income, consolidated statements of changes in equity and...

  • Page 257
    ...,012) 110 28 2 797 (616) 181 The Strategic Report Governance Risk review 33 (174) 250 76 769 845 p 540 - 540 757 1,297 p (624) - (624) 805 181 p Financial review 11 11 (0.7) (0.7) 3.8 3.7 (4.8) (4.8) Financial statements Shareholder information Note a The profit after tax attributable to...

  • Page 258
    ...) not recycled to profit or loss: Retirement benefit remeasurements Tax Other comprehensive income/(loss) for the period Total comprehensive income/(loss) for the year Attributable to: Equity holders of the parent Non-controlling interests 2014 £m 2013 £m 2012 £m 845 1,297 181 486 5,333...

  • Page 259
    Consolidated financial statements Consolidated balance sheet As at Assets Cash and balances at central banks Items in the course of collection from other banks Trading portfolio assets Financial assets designated at fair value Derivative financial instruments Available for sale investments Loans ...

  • Page 260
    ... (loss)/income for the year Issue of new ordinary shares Issue of shares under employee share schemes Issue of other equity instruments Increase in treasury shares Vesting of shares under employee share schemes Dividends paid Other reserve movements Balance as at 31 December 2013 19,887 150 772...

  • Page 261
    ... 4 123,233 The Strategic Report Governance Risk review Financial review Financial statements Interest received was £22,384m (2013: £23,387m, 2012: £24,390) and interest paid was £9,251m (2013: £10,709m, 2012: £16,701m). The Group is required to maintain balances with central banks and other...

  • Page 262
    ... Company had no staff during the year (2013: nil, 2012: nil). Balance sheet As at 31 December Assets Investment in subsidiary Loans and advances to subsidiary Derivative financial instrument Other assets Total assets Liabilities Deposits from banks Subordinated liabilities Debt securities in issue...

  • Page 263
    ...review Financial statements 821 (6) 734 (6) 696 4 The Parent Company's principal activity is to hold the investment in its wholly-owned subsidiary, Barclays Bank PLC. Dividends received are treated as operating income. The Company was not exposed at 31 December 2014 or 2013 to significant risks...

  • Page 264
    ... into Sterling at the period end exchange rates. Exchange gains and losses on such balances are taken to the income statement. The Group's foreign operations (including subsidiaries, joint ventures, associates and branches) based mainly outside the UK may have different functional currencies...

  • Page 265
    ... reï¬,ect these changes. Shareholder information 6. Future accounting developments There have been and are expected to be a number of significant changes to the Group's financial reporting after 2014 as a result of amended or new accounting standards that have been or will be issued by the IASB...

  • Page 266
    ... operating and finance leases on the balance sheet. The IASB also plans to issue a new standard on insurance contracts. The Group will consider the financial impacts of these new standards as they are finalised. Critical accounting estimates and judgements The preparation of financial statements...

  • Page 267
    ...to the results or financial position. Financial review 2014 £m 2013 £m 2012 £m Cash and balances with central banks Available for sale investments Loans and advances to banks Loans and advances to customers Other Interest income Deposits from banks Customer accounts Debt securities in issue...

  • Page 268
    ... or received by the Group are recognised as the services are provided, for example on completion of the underlying transaction. 2014 £m 2013 £m 2012 £m Fee and commission income Banking, investment management and credit related fees and commissions Foreign exchange commission Fee and commission...

  • Page 269
    ... and short positions and funding costs relating to trading activities. Income arises from both the sale and purchase of trading positions, margins which are achieved through market-making and customer business and from changes in fair value caused by movements in interest and exchange rates, equity...

  • Page 270
    ... are conducted individually for significant assets, which comprise all wholesale customer loans and larger retail business loans and collectively for smaller loans and for portfolio level risks, such as country or sectoral risks. For the purposes of the assessment, loans with similar credit risk...

  • Page 271
    ... £901m; 2012: £1,228m) and amounts to 14% (2013: 29%; 2012: 37%) of the total impairment charge on loans and advances. Further information on impairment allowances and related credit information is set out within the Risk review. 2014 £m 2013 £m 2012 £m The Strategic Report Governance New and...

  • Page 272
    ... The Group applies IAS 19 Employee benefits in its accounting for most of the components of staff costs. Short-term employee benefits - salaries, accrued performance costs and social security are recognised over the period in which the employees provide the services to which the payments relate...

  • Page 273
    ... relating to share based payments in 2014 and 2012, and the UK rate change in 2013. The table below shows the reconciliation between the actual tax charge and the tax charge that would result from applying the standard UK corporation tax rate to the Group's profit before tax. Financial review 2014...

  • Page 274
    ... on the balance sheet were as follows: 219 (1,042) (823) (1,402) (26) 1,552 12 (687) 334 (1,021) (687) 252 (621) (369) (2,153) (2) 1,558 143 (823) 219 (1,042) (823) 2014 £m 2013 £m Barclays Group US Inc. (BGUS) tax group US Branch of Barclays Bank PLC (US Branch) UK tax group Spanish tax...

  • Page 275
    ... on business profit forecasts. Further detail on the recognition of deferred tax assets are provided on page 272 in the deferred tax assets and liabilities section of this tax note. Financial review Financial statements Shareholder information barclays.com/annualreport Barclays PLC Annual Report...

  • Page 276
    ... scrip dividend programme. The rights issue in October 2013 resulted in the issue of an additional 3,219m shares. 12 Dividends on ordinary shares The Directors have approved a final dividend in respect of 2014 of 3.5p per ordinary share of 25p each which will be paid on 2 April 2015 to shareholders...

  • Page 277
    ...359 18,695 268 (112) - 158 (14) (828) 18 (511) 131 Shareholder information Note a 2013 balances have been revised to better reï¬,ect the credit risk disclosures relating to loans and advances at fair value and credit derivatives. barclays.com/annualreport Barclays PLC Annual Report 2014 I 275

  • Page 278
    ... such as house price indices and retail price indices related to non-trading positions. Where derivatives are held for risk management purposes, and when transactions meet the required criteria for documentation and hedge effectiveness, the Group applies fair value hedge accounting, cash ï¬,ow...

  • Page 279
    ... £m Notional contract amount £m 2013 The Strategic Report Fair value Assets £m Liabilities £m Foreign exchange derivatives Forward foreign exchange Currency swaps OTC options bought and sold OTC derivatives Foreign exchange derivatives cleared by central counterparty Exchange traded futures and...

  • Page 280
    ... risk management are set out in the following table: Derivatives held for risk management 2014 Notional contract amount £m Fair value Assets £m Liabilities £m Notional contract amount £m 2013 Fair value Assets £m Liabilities £m Derivatives designated as cash ï¬,ow hedges Interest rate swaps...

  • Page 281
    ...49,244 8,071 1,705 5,306 470 64,796 52,306 9,161 - 5,331 470 67,268 Financial statements Shareholder information Note a The cumulative own credit balance for 2013 is revised to better reï¬,ect the cumulative own credit gains/losses. barclays.com/annualreport Barclays PLC Annual Report 2014 I 279

  • Page 282
    ...effect on fair value of changes in own credit spreads derived from observable market data, such as spreads on Barclays' issued bonds or credit default swaps. Most market parameters are either directly observable or are implied from instrument prices. The model may perform numerical procedures in the...

  • Page 283
    ...) (347,118) (465,378) Risk review Financial review Included in financial assets designated at fair value is the Non-Core Education, Social Housing and Local Authority (ESHLA) loan portfolio of £17.4bn (2013: £15.6bn). This portfolio primarily consists of long dated fixed rate loans extended to...

  • Page 284
    ... other money market instruments Reverse repurchase and repurchase agreements Non asset backed loans Asset backed securities Commercial real estate loans Issued debt Equity cash products Funds and fund linked products Physical commodities Otherb Total As at 31 December 2013 Interest rate derivatives...

  • Page 285
    ...£m Transfers In £m The Strategic Report Sales £m Issues Settlements £m £m As at 31 December Out 2014 £m £m Government and government sponsored debt Corporate debt Asset backed securities Non asset backed loans Funds and fund linked products Other Trading portfolio assets Commercial real...

  • Page 286
    ... 2013 £m Sales £m Government and government sponsored debt Corporate debt Asset backed securities Non asset backed loans Funds and fund linked products Other Trading portfolio assets Commercial real estate loans Non asset backed loans Asset backed loans Private equity investments Other Financial...

  • Page 287
    ... for UK Gilt strips; £204m in fund and fund linked products held as trading portfolio assets; The Strategic Report Q Q £(346)m of government and government sponsored debt held as trading portfolio liabilities; and £(108)m of certificates of deposit, commercial paper and other money market...

  • Page 288
    ... dividends, volatilities, interest rates, equity repo curves and, for multi-asset products, correlations. Unobservable model inputs are determined by reference to liquid market instruments and applying extrapolation techniques to match the appropriate risk profile. 286 I Barclays PLC Annual Report...

  • Page 289
    ...government bonds actively traded through an exchange or clearing house are marked to the closing levels observed in these markets. Less liquid bonds are valued using observable market prices which are sourced from broker quotes, inter-dealer prices or other reliable pricing services. Where there are...

  • Page 290
    ... nature and the commercial real estate market is illiquid, valuation inputs are largely unobservable. Non-current assets held for sale Description: Non-current assets held for sale materially consists of the Spanish business, which includes all assets and liabilities of Barclays Bank S.A.U. and its...

  • Page 291
    ...other money market instruments Non-asset backed loans Asset backed securities Commercial real estate loans Issued debt Equity cash products Funds and fund linked products Otherb Total As at 31 December 2013 Interest rate derivatives Foreign exchange derivatives Credit derivativesa Equity derivatives...

  • Page 292
    ... instruments Corporate debt Asset backed securities 3,061 1,631 Commercial real estate loans Non-asset backed securities Otherc 1,180 17,744 2,320 (13) Discounted cash ï¬,ows Credit spread Comparable pricing Price - Discounted cash ï¬,ows Conditional prepayment rate Constant default rate Loss...

  • Page 293
    ... pay to the securitisation, resulting in a movement in fair value that is unfavourable for the holder of the securitised product. barclays.com/annualreport Barclays PLC Annual Report 2014 I 291 The Strategic Report Governance Risk review Financial review Financial statements Shareholder information

  • Page 294
    ... by offsetting long and short positions by strike and term in accordance with the risk management and hedging strategy. Bid-offer levels are derived from market sources, such as broker data. Other exit adjustments Market data input for exotic derivatives may not have a directly observable bid-offer...

  • Page 295
    ... data uncertainty, model limitations and counterparty risk - further detail on these fair value adjustments is disclosed on page 292. Financial statements Shareholder information Risk review Financial review The Strategic Report Governance barclays.com/annualreport Barclays PLC Annual Report 2014...

  • Page 296
    ...'s balance sheet: Quoted market prices (Level 1) £m Significant Observable unobservable inputs inputs (Level 2) (Level 3) £m £m As at 31 December 2014 Financial assets Loans and advances to banks Loans and advances to customers: - Home loans - Credit cards, unsecured and other retail lending...

  • Page 297
    ...-convertible loan capital are based on quoted market rates for the issue concerned or issues with similar terms and conditions. Risk review Financial review Financial statements Shareholder information The Strategic Report Governance barclays.com/annualreport Barclays PLC Annual Report 2014 I 295

  • Page 298
    ...held at fair value 19 Offsetting financial assets and financial liabilities In accordance with IAS 32 Financial Instruments: Presentation, the group reports financial assets and financial liabilities on a net basis on the balance sheet only if there is a legally enforceable right to set off the...

  • Page 299
    ...fications had not been made, the Group's income statements for 2014 would have included a net gain on the reclassified trading assets of £57m (2013: gain of £57m). Financial review Financial statements Shareholder information barclays.com/annualreport Barclays PLC Annual Report 2014 I 297

  • Page 300
    ...return them. The securities are not included in the balance sheet as the Group does not acquire the risks and rewards of ownership. Consideration paid (or cash collateral provided) is accounted for as a loan asset at amortised cost. The Group may also sell (a repurchase agreement) or lend securities...

  • Page 301
    ... review to take account of any change in circumstances. The Group uses the following annual rates in calculating depreciation: Annual rates in calculating depreciation Depreciation rate The Strategic Report Governance Freehold land Freehold buildings and long-leasehold property (more than 50 years...

  • Page 302
    ... to reï¬,ect current economic conditions. Discounted cash ï¬,ow techniques may be employed to calculate fair value where there have been no recent transactions, using current external market inputs such as market rents and interest rates. Valuations are carried out by management with the support of...

  • Page 303
    ... is allocated to business operations according to business segments as follows: 2014 £m 2013 £m Personal and Corporate Banking Africa Banking Barclaycard Barclays Non-Core Total net book value of goodwill 3,471 915 427 74 4,887 3,471 948 381 78 4,878 The Strategic Report Goodwill Testing...

  • Page 304
    ... leases various offices, branches and other premises under non-cancellable operating lease arrangements. With such operating lease arrangements, the asset is kept on the lessor's balance sheet and the Group reports the future minimum lease payments as an expense over the lease term. The leases have...

  • Page 305
    ... would pay if the insured event does not occur. Insurance liabilities include current best estimates of future contractual cash ï¬,ows, claims handling, and administration costs in respect of claims. Liability adequacy tests are performed at each balance sheet date to ensure the adequacy of contract...

  • Page 306
    ... expected, with increased levels of claims from Claims Management Companies in particular. Barclays are committed to delivering the right customer outcomes and as such re-review cases to ensure all cases are consistently treated in line with current policy. During 2014 half of all relevant cases...

  • Page 307
    ... on balance sheet: 2014 £m 2013 £m Risk review Guarantees and letters of credit pledged as collateral security Performance guarantees, acceptances and endorsements Contingent liabilities Documentary credits and other short-term trade related transactions Forward starting reverse repurchase...

  • Page 308
    ... been consolidated with the class action filed in the New York Federal Court described above. Also, following the filing of the Complaint, Barclays was named in a shareholder securities class action along with its current and certain of its former CEOs and CFOs on the basis that investors suffered...

  • Page 309
    ...NPA. In particular, under the NPA, BBPLC agreed for a period of two years from 26 June 2012, amongst other things, to: Q The Strategic Report Governance Risk review Financial review Financial statements Shareholder information Commit no US crimes whatsoever; Truthfully and completely disclose non...

  • Page 310
    ... New York State Department of Financial Services are investigating a range of issues associated with Foreign Exchange sales and trading, including electronic trading. The DOJ-AD is also investigating potential violations of US anti-trust laws. Certain of these investigations involve multiple market...

  • Page 311
    ...of US securities law. The action has been remanded back to the district court for further proceedings, and discovery is expected to be substantially complete by the end of 2015. Financial review Financial statements Shareholder information barclays.com/annualreport Barclays PLC Annual Report 2014...

  • Page 312
    ... of Foreign Exchange Trading Since November 2013, a number of civil actions have been filed in the SDNY on behalf of proposed classes of plaintiffs alleging manipulation of Foreign Exchange markets under the US Sherman Antitrust Act and New York state law and naming several international banks as...

  • Page 313
    ... into market practices involving mortgage-backed securities, and the Group is co-operating with several of those investigations. RMBS Repurchase Requests Background The Group was the sole provider of various loan-level R&Ws with respect to: Q Governance Risk review Approximately $5bn of Group...

  • Page 314
    ...Margin. In this context, the Group is satisfied with the valuation of the asset recognised on its balance sheet and the resulting level of effective provision. American Depositary Shares BPLC, BBPLC and various current and former members of BPLC's Board of Directors have been named as defendants in...

  • Page 315
    ...it. Shareholder information Financial review Financial statements The Strategic Report Governance Risk review Civil Actions in respect of the US Anti-Terrorism Act In November 2014, a civil complaint was filed in the US Federal Court in the Eastern District of New York by a group of approximately...

  • Page 316
    ... 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...

  • Page 317
    ... liabilities None of the Group's loan capital is secured. Undated subordinated liabilities 5,640 15,513 21,153 6,127 15,568 21,695 Governance Initial call date Subordinated liabilities per balance sheet 2014 2013 £m £m Risk review Barclays Bank PLC issued Tier One Notes (TONs) 6% Callable...

  • Page 318
    ... loan capital Undated loan capital is issued by the Bank and its subsidiaries for the development and expansion of their business and to strengthen their capital bases. The principal terms of the undated loan capital are described below: Subordination All undated loan capital ranks behind the claims...

  • Page 319
    ...23 105 116 69 - - 107 223 15,568 The Strategic Report 2015 2018 2018 Governance Risk review 2014 2014 2015 2017 2017 2017 2018 2018 2019 2019 2023 Financial review Financial statements Dated loan capital Dated loan capital is issued by the Company, the Bank and respective subsidiaries for the...

  • Page 320
    ... (held as non-controlling interests for Barclays PLC) and £607m of subordinated debt instruments (Tier 1 Notes and Reserve Capital Instruments). The exchange exercise involved Barclays PLC issuing AT1 securities to investors in exchange for Barclays Bank PLC preference shares and Barclays Bank PLC...

  • Page 321
    ...based payments. Financial statements Shareholder information 33 Non-controlling interests Profit attributable to non-controlling interest 2014 2013 £m £m Equity attributable to non-controlling interest 2014 2013 £m £m Dividends paid to non-controlling interest 2014 2013 £m £m Barclays Bank...

  • Page 322
    ... Balance sheet information Total assets Total liabilities Shareholder equity 3,530 765 (7) 758 3,356 807 (71) 736 43 109 55,378 50,150 5,228 55,616 50,500 5,116 Full financial statements for Barclays Africa Group Limited can be obtained at barclaysafrica.com/barclaysafrica/Investor-Relations...

  • Page 323
    ... effect of outstanding share options. Included within other schemes are Sharesave (both UK and overseas), the Barclays Long Term Incentive Plan and the Executive Share Award Scheme. Financial statements Shareholder information barclays.com/annualreport Barclays PLC Annual Report 2014 I 321

  • Page 324
    ... based payment schemes. The total number of Barclays shares held in these employee benefit trusts at 31 December 2014 was 5.2 million (2013: 3.2 million). Dividend rights have been waived on all of these shares. The total market value of the shares held in trust based on the year end share price of...

  • Page 325
    ... returns achieved. Apart from the UKRF and the BPSP, Barclays operates a number of smaller pension and long-term employee benefits and post-retirement healthcare plans globally, the largest of which are the US and South African defined benefit schemes. Many of the plans are funded, with assets...

  • Page 326
    ... income on scheme assets Employer contribution Settlements Remeasurement - return on plan assets greater than discount rate Employee contributions Benefits paid Exchange and other movements Fair value of scheme assets at the end of the year Net deficit Retirement benefit assets Retirement bene...

  • Page 327
    ... Investigation Bureau subject to a long term trend of 1.25% p.a. in future improvements. The table below shows how the assumed life expectancy at 60, for members of the UKRF, has varied over the last three years: Assumed life expectancy 2014 2013 2012 The Strategic Report Life expectancy at 60 for...

  • Page 328
    ... to setting the discount rate. The recovery plan to eliminate the deficit will result in the Bank paying deficit contributions to the Fund until 2021. Deficit contributions of £300m are payable in 2015, and also in 2016. Further deficit contributions of £740m p.a. are payable during 2017 to...

  • Page 329
    ...Strategic Report Governance Risk review Company name Principal place of business or incorporation Nature of business Percentage of voting rights held % Barclays Bank PLC Barclays Capital Securities Limited Barclays Private Clients International Limited Barclays Securities Japan Limited Barclays...

  • Page 330
    ... by consolidated structured entities £379m (2013: £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...

  • Page 331
    ...unconsolidated structured entities Secured financing £m Short-term traded interests £m Traded derivatives £m Other interests £m Risk review The Strategic Report Governance Total £m Financial review As at December 2014 Assets Trading portfolio assets Financial assets designated at fair value...

  • Page 332
    ...) short-term traded interests were comprised of debt securities issued by asset securitisation vehicles. Traded derivatives The Group enters into a variety of derivative contracts with structured entities which reference market risk variables such as interest rates, foreign exchange rates and credit...

  • Page 333
    ... conduit credit portfolio programmes £m £m Lending £m Mortgagebacked securities £m Investment funds and trusts £m Others £m Total £m As at December 2014 Trading portfolio assets - Debt securities - Equity securities Financial assets designated at fair value - Loans and advances to customers...

  • Page 334
    ...purchase capital equipment for parent companies and are supported by government export guarantees. Mortgage-backed securities This represents a portfolio of ï¬,oating rate notes, mainly mortgage-backed security positions, used as an accounting hedge of interest rate risk under the Group's structural...

  • Page 335
    ...the Group's share for the year ended 31 December 2014 with the exception of certain undertakings for which the amounts are based on accounts made up to dates not earlier than three months before the balance sheet date. Associates 2014 £m 2013 £m Joint ventures 2014 2013 £m £m Risk review (Loss...

  • Page 336
    ... balance sheet: 2014 Assets Carrying amount £m Fair Value £m Liabilities Carrying amount £m Fair Value £m 2013 Assets Carrying amount £m Liabilities Carrying amount £m Loans and advances to customers Residential mortgage loans Credit cards, unsecured and other retail lending Corporate loans...

  • Page 337
    ... within its asset backed funding programmes that can readily be used to raise additional secured funding and available to support future issuance. Other assets in 2014 include £6bn of loans pledged in the Spanish business which has been designated as held for sale. The 2013 balances have not...

  • Page 338
    ... Directors of Barclays PLC and the Officers of the Group, certain direct reports of the Chief Executive and the heads of major business units and functions. There were no material related party transactions with entities under common directorship where a Director or other member of Key Management...

  • Page 339
    41 Related party transactions and Directors' remuneration continued The Group provides banking services to Directors and other Key Management Personnel and persons connected to them. Transactions during the year and the balances outstanding were as follows: Loans outstanding 2014 £m 2013 £m As at...

  • Page 340
    ... audit services for the review of the interim financial information under the Listing Rules of the UK listing authority. c Includes consultation on tax matters, tax advice relating to transactions and other tax planning and advice. 338 I Barclays PLC Annual Report 2014 barclays.com/annualreport

  • Page 341
    ... below: Consolidated balance sheet - movement between published and restated 2013 IAS 32 (revised) impact £m 2012 IAS 32 (revised) impact £m Financial statements As at 31 December Assets Derivative financial instruments Loans and advances to banks Loans and advances to customers Total assets...

  • Page 342
    ... restated 2013 IAS 32 (revised) impact £m 2012 IAS 32 (revised) impact £m For the year ended 31 December Continuing operations Changes in operating assets and liabilities Net (increase)/decrease in loans and advances to banks and customers Net (decrease) in deposits and debt securities in issue...

  • Page 343
    ... down the Non-Core segment of the Group. No write down is recognised under IFRS 5 as the fair value less costs to sell is expected to exceed the current carrying value. Financial review Financial statements Shareholder information barclays.com/annualreport Barclays PLC Annual Report 2014 I 341

  • Page 344
    ...arose as a result of shares issued by Barclays PLC to fund share awards for employee share schemes within Barclays Bank PLC. Shareholders' equity Ordinary shares, share premium, and reserves Called up share capital and share premium of Barclays PLC (the Parent Company) was £20,809m (2013: £19,887m...

  • Page 345
    ... Page The Strategic Report Shareholder information Q Q Q Shareholder enquiries Your Barclays shareholding Useful contact details 344 345 346 Governance Risk review Financial review Financial statements Shareholder information barclays.com/annualreport Barclays PLC Annual Report 2014 I 343

  • Page 346
    ... to Barclays Aspect House Spencer Road Lancing West Sussex BN99 6DA Tel: 0871 384 2055a or +44 (0) 121 415 7004 (from overseas) Email: [email protected] or, in the United States of America: The Corporate Communications Department Barclays Bank PLC 745 Seventh Avenue New York NY...

  • Page 347
    ...payout ratio in the short term as we focus on capital accretion. How do Barclays shareholders receive their dividends? As at 31 December 2014, Barclays shareholders received their dividends in the following ways: % 50% 29% 21% Bank account Cheque New shares Annual General Meeting (AGM) This year...

  • Page 348
    Shareholder information Useful contact details Shareview You do not hafe to receife paper shareholder information. Many Barclays shareholders go online to manage their shareholding and find out about Barclays' performance. Sharefiew members receife the latest updates from Barclays directly by email...