Barclays 2014 Annual Report Download - page 53

barclays.com/annualreport Barclays PLC Annual Report 2014 I 51
Area of focus Matter addressed Role of the Committee Conclusion/action taken
Political and
economic risk
The prospect of a ‘yes’ vote in the
Scottish independence referendum
Q Evaluated management’s view of the
potential impact, including potential
exposures to redenomination risk,
and assessed contingency plans
Q Debated the possible wider
implications for political and
economic policy and the potential
impact on economic growth and
market volatility
Q The Committee supported the
contingency measures identified but
asked for the plans to be revisited in
the event of a ‘yes’ vote
Retail credit risk The potential overheating of the UK
housing market, particularly in
London and the South East
Q Examined Barclays’ exposures to
the UK mortgage market and
details of the lending criteria
applied, including a higher interest
rate stress
Q Debated affordability measures,
income multiples and Loan to Value
(LTV) ratios
Q The Committee asked for additional
monitoring of high LTV/loan to
income mortgages, which was
subsequently incorporated into the
quarterly risk profile report presented
to the Committee
Retail credit risk Risk management in Barclaycard
given its plans for growth
Q Assessed the strength of risk
management in place to ensure
that growth remains within risk
appetite
Q The Committee will be kept updated
on the risk performance of new
business
Redenomination risk Barclays’ exposure to redenomination
risk in selected Eurozone countries
Q Examined management’s proposals
to continue to reduce the funding
gap in certain Eurozone countries,
in particular Italy
Q The Committee encouraged
management to make further
progress in reducing redenomination
risk, particularly in the context of the
creation of the Non-Core business
and the intention to exit certain
markets. Overall redenomination risk
fell by 22% in 2014
Risk governance and
control
Enhancing the limit framework and
governance of leveraged finance and
single name risk
Q Examined the limit framework and
governance in place around
leveraged finance to ensure its
robustness given that this business
is a significant source of income
and risk for the Investment Bank
Q The Committee asked for a more
granular limit framework to be put in
place, including revised limits and
enhanced governance of single-name
risk. This new framework was
implemented in December 2014
Remuneration The scope of any risk adjustments to
be taken into account by the Board
Remuneration Committee when
making remuneration decisions for
2014
Q Assessed a report from the Risk
function on the risk metrics to be
used to determine financial
performance
Q Evaluated the Risk function’s view
of performance, which informed
remuneration decisions for 2014
Q The Committee supported the
proposed choice of metrics and
supported the Risk function’s view of
2014 financial risk performance
The Remuneration Report on
pages 77 to 110 includes more detail
on how risk is taken into account in
remuneration decisions
In addition, the Committee also covered the following matters in 2014:
Q Tracked the utilisation of risk appetite and evaluated the Group’s risk
profile;
Q Assessed the progress being made to deliver a new target operating
model for the Risk function;
Q Evaluated the MCA and control environment of the Risk and Treasury
functions, including any plans in place to achieve improvements;
Q Approved updated limits for traded market risk and underwriting risk;
Q Examined the progress being made on model risk governance,
including progress made on achieving full review and validation of all
of the most significant risk models on an annual basis;
Q Evaluated the funding mix of Barclays’ US operations;
Q Assessed Barclays’ potential exposures to central counterparties in
the event of a default and confirmed the appropriateness of the
governance in place to manage any potential risk; and
Q Recommended to the Board the proposed agreement with the
Trustees of the UK Retirement Fund on the pension scheme triennial
valuation and proposed deficit recovery plan.
Board Financial Risk Committee Allocation of Time (%)
1
2
3
4
2014 2013
1Risk Profile/Risk Appetite
(including capital and liquidity management)
57 48
2Key Risk issues 19 22
3Internal Control/Risk Policies 11 12
4Other (including remuneration and
governance issues)
13 19
Read more about Barclays’ risk management on pages 123 to 140
and in our Pillar 3 report, which is available online at
barclays.com/annualreport
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