Barclays 2015 Annual Report Download - page 46

44 I Barclays PLC Annual Report 2015 home.barclays/annualreport
Governance: Directors’ report
What we did in 2015
Board Audit Committee report
The Committee’s work
The significant matters addressed by the Committee during 2015 are
described below.
Significant financial statement reporting issues
Assumptions and estimates or judgements are an unavoidable and
significant part of the financial reporting process and are evaluated
carefully by the Committee ahead of the publication of Barclays’ results
announcements. The Committee examined in detail the main
judgements and assumptions made by management, any sensitivity
analyses performed and the conclusions drawn from the available
information and evidence, with the main areas of focus during the year
set out below. Where appropriate, the Committee sought input and
guidance from the external auditor and welcomed its challenge on
specific matters. In addition to these main areas of focus, the Committee
also covered matters relating to Barclays’ pension scheme, taxation and
accounting policy choices.
Area of focus Reporting issue Role of the Committee Conclusion/action taken
Conduct provisions
(see Note 27 to the
financial statements).
Barclays makes certain
assumptions and estimates,
analysis of which underpins
provisions made for the costs of
customer redress, such as for
Payment Protection Insurance
(PPI), Packaged Bank Accounts
(PBA) and rates provided to
certain customers on foreign
exchange transactions.
In debating Barclays’ financial results
statements, the Committee examined the
provisions held for the costs of customer
redress.
In respect of PPI, the Committee:
 analysed the judgements and estimates
with regard to the PPI provision, taking
into account estimated overturn rates, the
estimation policy on missing data, and
complaints trend data
 evaluated Financial Ombudsman Service
overturn rates and trends, provisions
utilisation, latest flow forecasts and how
reasonable high and low end scenarios had
been determined in order to assess the
range of reasonable possible future costs
 debated proposed additional provisions
and whether the analysis performed by
management was consistent with prior
periods
 assessed the Group’s ability to forecast
trends in PPI complaints, discussing the
levels of uncertainty in the projections
 debated the potential range of outcomes
that might arise from the Plevin case (the
2014 UK Supreme Court ruling in Plevin v
Paragon Personal Finance Ltd) and the
potential impact on the future range of
provisions arising from the proposed
timebar on claims.
The Committee agreed that an
additional provision of £150m should be
taken at the first quarter but requested
a full review of forecasts for PPI redress
for the second quarter 2015. Having
assessed the outputs of that review, it
agreed to increase the provision at the
half year by £600m. Following the
review at the third quarter, the
Committee concluded that no
additional provisions were required but
asked management to conduct further
review and analysis for the 2015
year end to ensure that provisions were
within an acceptable range. In
deliberating the analyses presented by
management in connection with the
2015 full year results, and considering in
particular the potential impact resulting
from the FCA’s consultation on
introducing a time limit for claims and
addressing the Plevin case, the
Committee agreed with management’s
proposal to increase the provision at the
year end by £1,450m. The Committee
and management will continue to
monitor closely any changes in
customer or claims management
companies’ behaviour in light of the
Plevin case and the proposed timebar.
With regard to PBA redress, the Committee:
 debated the practice of providing for
future costs where persistent levels of
complaints are received
 assessed PBA claims experience
throughout 2015, examining the level of
provisions against forecast volumes and
actual claims experience
 evaluated management’s analysis of
complaint levels and trends and the
outputs of product reviews.
The Committee endorsed management’s
recommendation that an expense of
£282m for PBA should be provided for
in the first half and agreed it should be
disclosed as a separate item in the
interim results. Having examined claims
trend data, it concluded that no further
provisions were required during 2015.
In relation to redress to certain customers
regarding rates provided on foreign
exchange transactions, the Committee:
 examined the results of the internal
review conducted by management on
foreign exchange transactions
 evaluated the Group’s proposal for
calculating remediation for the customers
affected.
The Committee agreed with the
proposal to make a provision of £290m
in the third quarter and that this
provision should be separately
disclosed. The remediation is still at an
early stage and the Committee noted
that there were no significant
developments in the fourth quarter.
The Committee therefore agreed that
no adjustment was required in the
provision at the end of 2015.