20-F

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 20-F

(Mark One)

 

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2016

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                          to                         

OR

 

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report                         

 

Commission file numbers    Barclays PLC    1-09246   
   Barclays Bank PLC    1-10257   

BARCLAYS PLC

BARCLAYS BANK PLC

(Exact Names of Registrants as Specified in their Charter[s])

ENGLAND

(Jurisdiction of Incorporation or Organization)

1 CHURCHILL PLACE, LONDON E14 5HP, ENGLAND

(Address of Principal Executive Offices)

MARIE SMITH, +44 (0)20 7116 2907, MARIE.SMITH@BARCLAYS.COM

1 CHURCHILL PLACE, LONDON E14 5HP, ENGLAND

*(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Barclays PLC

 

Title of Each Class     

Name of Each Exchange

On Which Registered      

25p ordinary shares    New York Stock Exchange*


Title of Each Class     

Name of Each Exchange

On Which Registered    

American Depositary Shares, each
representing four 25p ordinary shares

   New York Stock Exchange

4.375% Fixed Rate Subordinated Notes due
2024

   New York Stock Exchange

2.75% Fixed Rate Senior Notes due 2019

   New York Stock Exchange

2.00% Fixed Rate Senior Notes due 2018

   New York Stock Exchange

3.65% Fixed Rate Senior Notes due 2025

   New York Stock Exchange

2.875% Fixed Rate Senior Notes due 2020

   New York Stock Exchange

5.25% Fixed Rate Senior Notes due 2045

   New York Stock Exchange

3.25% Fixed Rate Senior Notes due 2021

   New York Stock Exchange

4.375% Fixed Rate Senior Notes due 2026

   New York Stock Exchange

5.20% Fixed Rate Subordinated Notes due 2026

   New York Stock Exchange

3.20% Fixed Rate Senior Notes due 2021

   New York Stock Exchange

Floating Rate Senior Notes due 2021

   New York Stock Exchange

Floating Rate Senior Notes due 2023

   New York Stock Exchange


Title of Each Class     

Name of Each Exchange

On Which Registered    

3.684% Fixed Rate Senior Notes due 2023

  

New York Stock Exchange

4.337% Fixed Rate Senior Notes due 2028

   New York Stock Exchange

4.950% Fixed Rate Senior Notes due 2047

   New York Stock Exchange

 

  * Not for trading, but in connection with the registration of American Depositary Shares, pursuant to the requirements to the Securities and Exchange Commission.

Barclays Bank PLC

 

Title of Each Class

 

  

Name of Each Exchange

On Which Registered

 

Callable Floating Rate Notes 2035    New York Stock Exchange
Non-Cumulative Callable Dollar Preference Shares, Series 3    New York Stock Exchange*
American Depositary Shares, Series 3, each representing one Non-Cumulative Callable Dollar Preference Share, Series 3    New York Stock Exchange
Non-Cumulative Callable Dollar Preference Shares, Series 5    New York Stock Exchange*
American Depositary Shares, Series 5, each representing one Non-Cumulative Callable Dollar Preference Share, Series 5    New York Stock Exchange
5.140% Lower Tier 2 Notes due October 2020    New York Stock Exchange
iPath® Bloomberg Commodity Index Total ReturnSM ETN    NYSE Arca
iPath® Bloomberg Agriculture Subindex Total ReturnSM ETN    NYSE Arca
iPath® Bloomberg Aluminum Subindex Total ReturnSM ETN    NYSE Arca
iPath® Bloomberg Cocoa Subindex Total ReturnSM ETN    NYSE Arca


iPath® Bloomberg Coffee Subindex Total ReturnSM ETN    NYSE Arca
iPath® Bloomberg Copper Subindex Total ReturnSM ETN    NYSE Arca
iPath® Bloomberg Cotton Subindex Total ReturnSM ETN    NYSE Arca
iPath® Bloomberg Energy Subindex Total ReturnSM ETN    NYSE Arca
iPath® Bloomberg Grains Subindex Total ReturnSM ETN    NYSE Arca
iPath® Bloomberg Industrial Metals Subindex Total ReturnSM ETN    NYSE Arca
iPath® Bloomberg Lead Subindex Total ReturnSM ETN    NYSE Arca
iPath® Bloomberg Livestock Subindex Total ReturnSM ETN    NYSE Arca
iPath® Bloomberg Natural Gas Subindex Total ReturnSM ETN    NYSE Arca
iPath® Bloomberg Nickel Subindex Total ReturnSM ETN    NYSE Arca
iPath® Bloomberg Platinum Subindex Total ReturnSM ETN    NYSE Arca
iPath® Bloomberg Precious Metals Subindex Total ReturnSM ETN    NYSE Arca
iPath® Bloomberg Softs Subindex Total ReturnSM ETN    NYSE Arca
iPath® Bloomberg Sugar Subindex Total ReturnSM ETN    NYSE Arca
iPath® Bloomberg Tin Subindex Total ReturnSM ETN    NYSE Arca
iPath® S&P GSCI® Total Return Index ETN    NYSE Arca
iPath® S&P GSCI® Crude Oil Total Return Index ETN    NYSE Arca
iPath® CBOE S&P 500 BuyWrite IndexSM ETN    NYSE Arca
iPath® MSCI India IndexSM ETN    NYSE Arca
iPath® EUR/USD Exchange Rate ETN    NYSE Arca
iPath® GBP/USD Exchange Rate ETN    NYSE Arca
iPath® JPY/USD Exchange Rate ETN    NYSE Arca
iPath® S&P 500 VIX Short-Term FuturesTM ETN    NYSE Arca


iPath® S&P 500 VIX Mid-Term FuturesTM ETN    NYSE Arca
iPath® Inverse S&P 500 VIX Short-Term FuturesTM ETN    NYSE Arca
iPath® Long Extended Russell 1000® TR Index ETN    NYSE Arca
iPath® Long Extended Russell 2000® TR Index ETN    NYSE Arca
iPath® Long Enhanced MSCI EAFE® TR Index ETN    NYSE Arca
iPath® Long Enhanced MSCI Emerging Markets Index ETN    NYSE Arca
iPath® Short Enhanced MSCI Emerging Markets Index ETN    NYSE Arca
iPath® Long Extended S&P 500® TR Index ETN    NYSE Arca
iPath® Global Carbon ETN    NYSE Arca
iPath® Optimized Currency Carry ETN    NYSE Arca
iPath® US Treasury Steepener ETN    NASDAQ
iPath® US Treasury Flattener ETN    NASDAQ
iPath® US Treasury 2-year Bull ETN    NASDAQ
iPath® US Treasury 2-year Bear ETN    NASDAQ
iPath® US Treasury 10-year Bull ETN    NASDAQ
iPath® US Treasury 10-year Bear ETN    NASDAQ
iPath® US Treasury Long Bond Bull ETN    NASDAQ
iPath® US Treasury Long Bond Bear ETN    NASDAQ
iPath® Pure Beta Broad Commodity ETN    NYSE Arca
iPath® Pure Beta S&P GSCI®-Weighted ETN    NYSE Arca
iPath® Pure Beta Cocoa ETN    NYSE Arca
iPath® Pure Beta Coffee ETN    NYSE Arca
iPath® Pure Beta Cotton ETN    NYSE Arca


iPath® Pure Beta Sugar ETN    NYSE Arca
iPath® Pure Beta Aluminum ETN    NYSE Arca
iPath® Pure Beta Copper ETN    NYSE Arca
iPath® Pure Beta Lead ETN    NYSE Arca
iPath® Pure Beta Nickel ETN    NYSE Arca
iPath® Pure Beta Crude Oil ETN    NYSE Arca
iPath® Seasonal Natural Gas ETN    NYSE Arca
iPath® Pure Beta Agriculture ETN    NYSE Arca
iPath® Pure Beta Grains ETN    NYSE Arca
iPath® Pure Beta Softs ETN    NYSE Arca
iPath® Pure Beta Industrial Metals ETN    NYSE Arca
iPath® Pure Beta Energy ETN    NYSE Arca
iPath® Pure Beta Livestock ETN    NYSE Arca
iPath® Pure Beta Precious Metals ETN    NYSE Arca
iPath® US Treasury 5-year Bull ETN    NASDAQ
iPath® US Treasury 5-year Bear ETN    NASDAQ
iPath® S&P 500 Dynamic VIX ETN    NYSE Arca
iPath® Inverse S&P 500 VIX Short-Term FuturesTM ETN (II)    NYSE Arca
iPath® GEMS IndexTM ETN    NYSE Arca
iPath® GEMS Asia 8 ETN    NYSE Arca
iPath® Asian and Gulf Currency Revaluation ETN    NYSE Arca
iPath® S&P MLP ETN    NYSE Arca
iPath® Series B S&P GSCI Crude Oil Total Return Index ETN    NYSE Arca
Barclays ETN+ S&P 500® VEQTOR™ ETN    NYSE Arca


Barclays ETN+ Shiller CAPETM ETNs    NYSE Arca
Barclays ETN+ Select MLP ETN    NYSE Arca
Barclays ETN+ FI Enhanced Europe 50 ETN    NYSE Arca
Barclays ETN+ FI Enhanced Global High Yield ETN    NYSE Arca
Barclays ETN+ FI Enhanced Europe 50 ETN Series B    NYSE Arca
Barclays Women in Leadership ETN    NYSE Arca
Barclays Return on Disability ETN    NYSE Arca
Barclays Inverse US Treasury Composite ETN    NASDAQ

 

* Not for trading, but in connection with the registration of American Depositary Shares, pursuant to the requirements to the Securities and Exchange Commission.

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the issuers’ classes of capital or common stock as of the close of the period covered by the annual report.

 

Barclays PLC    25p ordinary shares      16,804,603,949  
Barclays Bank PLC    £1 ordinary shares      2,342,558,515  
   £1 preference shares      1,000  
   £100 preference shares      20,930  
   100 preference shares      31,856  
   $0.25 preference shares      161,000,000  
   $100 preference shares      58,133  

Indicate by check mark if each registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes     No


If this report is an annual or transition report, indicate by check mark if the registrants are not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act 1934.

Yes     No

Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrants: (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.

Yes     No

Indicate by check mark whether the registrants have submitted electronically and posted on their corporate Web sites, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes     No

Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Barclays PLC

 

Large Accelerated Filer      Accelerated Filer      Non-Accelerated Filer   

Barclays Bank PLC

 

Large Accelerated Filer      Accelerated Filer      Non-Accelerated Filer   

*Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP

International Financial Reporting Standards as issued by the International Accounting Standards Board  

Other

*If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:

Item 17

Item 18


If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes     No

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS.)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes     No


SEC Form 20-F Cross reference information

 

Form 20-F item number   

Page and caption references

in this document*

1   Identity of Directors, Senior Management and Advisers    Not applicable
2   Offer Statistics and Expected Timetable    Not applicable
3   Key Information   
  A.    Selected financial data    193, 195, 321-322, 447-448
  B.    Capitalization and indebtedness    Not applicable
  C.    Reason for the offer and use of proceeds    Not applicable
  D.    Risk factors    86-96
4   Information on the Company   
  A.    History and development of the company    44-46, 188, 233 (note 6), 235 (note 9), 294-295 (note 36), 298-299 (note 38), 306-307 (note 44), 308-316 (note 46), 429, 465-467
  B.    Business overview    v (Market and other data), 182-189, 197-211, 227-230, 231 (note 2)
  C.    Organizational structure    188, 294-295 (note 36), 308-316 (note 46), 429
  D.    Property, plants and equipment    223, 264 (note 21), 266-267 (note 23), 269 (note 25)
4A   Unresolved staff comments    Not applicable
5   Operating and Financial Review and Prospects   
  A.    Operating results    vi-x, 107, 149-150, 182-189, 191-211, 231-316
  B.    Liquidity and capital resources    104-107, 121-122, 140, 152, 154-159, 161-177, 182-189, 242-244 (note 15), 281-284 (note 30), 285 (note 31), 299-301 (note 39), 304 (note 43)
  C.    Research and development, patents and licenses, etc.    44
  D.    Trend information   
  E.    Off-balance sheet arrangements    272 (note 28), 295-298 (note 37), 299-301 (note 39)
  F.    Tabular disclosure of contractual obligations    406-407
  G.    Safe harbor    iv-v (Forward-looking statements)
6   Directors, Senior Management and Employees   
  A.    Directors and senior management    3-5, 332-336
  B.    Compensation    51-85, 287-288 (note 34), 289-293 (note 35), 302-304 (note 41), 426, 446 (note r)
  C.    Board practices    6-50, 80-83
  D.    Employees    47, 50 (Permanent employees by region), 199, 200, 203, 207, 208, 210
  E.    Share ownership    51-85, 287-288 (note 34), 302-304 (note 41), 339-341
7   Major Shareholders and Related Party Transactions   
  A.    Major shareholders    45, 331-332
  B.    Related party transactions    210, 302-304 (note 41), 426, 446 (note r)
  C.    Interests of experts and counsel    Not applicable


Form 20-F item number   

Page and caption references

in this document*

8   Financial Information   
  A.    Consolidated statements and other financial information    193-195, 219-316, 428-446
  B.    Significant changes    Not applicable
9   The Offer and Listing   
  A.    Offer and listing details    321
  B.    Plan of distribution    Not applicable
  C.    Markets    321
  D.    Selling shareholders    Not applicable
  E.    Dilution    Not applicable
  F.    Expenses of the issue    Not applicable
10   Additional Information   
  A.    Share capital    Not applicable
  B.    Memorandum and Articles of Association    43-46, 317-319
  C.    Material contracts    67-68
  D.    Exchange controls    326
  E.    Taxation    323-325
  F.    Dividends and paying assets    Not applicable
  G.    Statement by experts    Not applicable
  H.    Documents on display    326
  I.    Subsidiary information    294-295 (note 36) 308-316 (note 46)
11   Quantitative and Qualitative Disclosure about Market Risk    103, 141-151, 304 (note 43), 373-379
12   Description of Securities Other than Equity Securities   
  A.    Debt Securities    Not applicable
  B.    Warrants and Rights    Not applicable
  C.    Other Securities    Not applicable
  D.    American Depositary Shares    321, 327-328
13   Defaults, Dividends Arrearages and Delinquencies    Not applicable
14   Material Modifications to the Rights of Security Holders and Use of Proceeds    Not applicable
15   Controls and Procedures   
  A.    Disclosure controls and procedures    332
  B.    Management’s annual report on internal control over financial reporting    41
  C.    Attestation report of the registered public accounting firm    218
  D.    Changes in internal control over financial reporting    41
16A   Audit Committee Financial Expert    11


16B   Code of Ethics    330
16C   Principal Accountant Fees and Services    17-19, 304 (note 42), 329
16D   Exemptions from the Listing Standards for Audit Committees    Not applicable
16E   Purchases of Equity Securities by the Issuer and Affiliated Purchasers    46, 284 (Share repurchase)
16F   Change in Registrant’s Certifying Accountant    Not applicable
16G   Corporate Governance    330
17   Financial Statements    Not applicable (See Item 8)
18   Financial Statements    Not applicable (See Item 8)
19   Exhibits    Exhibit Index

 

  * Captions have been included only in respect of pages with multiple sections on the same page in order to identify the relevant caption on that page covered by the corresponding Form 20-F item number.


 

 

 

LOGO

  Building the bank

  of the future

 

 

         

Barclays PLC and Barclays Bank PLC

2016 Annual Report on Form 20-F


Notes

The term Barclays or Group refers to Barclays PLC together with its subsidiaries. Unless otherwise stated, the income statement analysis compares the year ended 31 December 2016 to the corresponding 12 months of 2015 and balance sheet analysis as at 31 December 2016 with comparatives relating to 31 December 2015. The abbreviations ‘£m’ and ‘£bn’ represent millions and thousands of millions of Pounds Sterling respectively; the abbreviations ‘$m’ and ‘$bn’ represent millions and thousands of millions of US Dollars respectively; and the abbreviations ‘m’ and ‘bn’ represent millions and thousands of millions of Euros respectively.

Comparatives have been restated to reflect the implementation of the Group business reorganisation. These restatements were detailed in our Form 6-K filed with the SEC dated 15 April 2016.

The information in this announcement, which was approved by the Board of Directors on 22 February 2017, does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2015, which included certain information required for the Joint Annual Report on Form 20-F of Barclays PLC and Barclays Bank PLC to the SEC and which contained an unqualified audit report under Section 495 of the Companies Act 2006 (which did not make any statements under Section 498 of the Companies Act 2006) have been delivered to the Registrar of Companies in accordance with Section 441 of the Companies Act 2006.

Barclays is a frequent issuer in the debt capital markets and regularly meets with investors via formal road-shows and other ad hoc meetings. Consistent with its usual practice, Barclays expects that from time to time over the coming quarter it will meet with investors globally to discuss these results and other matters relating to the Group.

Certain non-IFRS measures

Barclays management believes that the non-International Financial Reporting Standards (non-IFRS) measures included in this document provide valuable information to readers of its financial statements because they enable the reader to identify a more consistent basis for comparing the business’ performance between financial periods, and provide more detail concerning the elements of performance which the managers of these businesses are most directly able to influence or are relevant for an assessment of the Group. They also reflect an important aspect of the way in which operating targets are defined and performance is monitored by Barclays management. However, any non-IFRS measures in this document are not a substitute for IFRS measures and readers should consider the IFRS measures as well.

There are a number of key judgement areas, for example impairment calculations, which are based on models and which are subject to ongoing adjustment and modifications. Reported numbers reflect best estimates and judgements at the given point in time.

Notable items as set out on page 197 are considered to be significant items impacting comparability of performance and have been called out for each of the business segments.

Relevant terms that are used in this document but are not defined under applicable regulatory guidance or International Financial Reporting Standards (IFRS) are explained in the Results glossary of non-IFRS performance measures on page 212 and the glossary of terms on pages 449 to 464.

 

 

i


Key non-IFRS measures included in this document, and the most directly comparable IFRS measures, are:

– Attributable profit/(loss) excluding notable items represents profit after tax excluding notable items less profit attributable to non-controlling interests. The comparable IFRS measure is attributable profit. A reconciliation is presented on pages vi to vii;

– Average tangible shareholders’ equity is calculated as the average equity adjusted to remove the effect of goodwill and intangible assets. The comparable IFRS measure is average equity. A reconciliation is provided on page ix;

– Average allocated tangible equity represents the average tangible equity that is allocated to Barclays Core, and to the businesses. The comparable IFRS measure is average equity. A reconciliation is provided on page ix;

– Average tangible equity is equivalent to average tangible shareholders’ equity;

– Barclays Core results are considered to be non-IFRS because Barclays Core represents the sum of three Operating Segments, each of which is prepared in accordance with IFRS 8; “Operating Segments”: Barclays UK, Barclays International and Head Office. A reconciliation is provided on pages vi to viii;

– Basic earnings per share excluding notable items represents attributable profit excluding all notable items (page 197) divided by the basic weighted average number of shares in issue. The comparable IFRS measure is basic earnings per share. A reconciliation is provided on page 215;

– Core basic earnings per share excluding notable items represents basic earnings per share excluding notable items calculated for Barclays Core. Barclays Core represents the sum of three Operating Segments, each of which is prepared in accordance with IFRS 8, “Operating Segments”: Barclays UK, Barclays International and Head Office. The comparable IFRS measure is basic earnings per share. A reconciliation is provided on page 215;

 

– Cost: income ratio excluding notable items represents the ratio between total operating expenses excluding notable items and total income excluding notable items. The comparable IFRS measure is cost: income ratio. A reconciliation is provided on pages vi to viii;

– Core cost: income ratio excluding notable items represents cost: income ratio excluding notable items calculated for Barclays Core. Barclays Core represents the sum of three Operating Segments, each of which is prepared in accordance with IFRS 8, “Operating Segments”: Barclays UK, Barclays International and Head Office. The comparable IFRS measure is cost: income ratio. A reconciliation is provided on pages vi to viii;

– Total income excluding notable items represents total income excluding the impact of own credit, gain on disposal of Barclays’ share of Visa Europe Limited, revision of Education, Social Housing, and Local Authority (ESHLA) valuation methodology and gain on US Lehman acquisition assets. The comparable IFRS measure is total income. A full list of notable items is shown on page 197. A reconciliation is provided on pages vi to viii;

– Net operating income excluding notable items represents net operating income excluding the impact of own credit, gain on disposal of Barclays’ share of Visa Europe Limited, gain on US Lehman acquisition assets and revision of Education, Social Housing, and Local Authority (ESHLA) valuation methodology. The comparable IFRS measure is net operating income. A full list of notable items is shown on page 197. A reconciliation is provided on pages vi to viii;

 

ii


– Total operating expenses excluding notable items represents total operating expenses excluding the impact of provisions for UK customer redress, provisions for ongoing investigations and litigation including Foreign Exchange, gain on valuation of a component of the defined retirement benefit liability, impairment of goodwill and other assets relating to businesses being disposed and losses on sale relating to the Spanish, Portuguese and Italian businesses. The comparable IFRS measure is total operating expenses. A full list of notable items is shown on page 197. A reconciliation is provided on pages vi to viii;

– Profit after tax excluding notable items represents profit after tax excluding the post-tax impact of own credit, impairment of goodwill and other assets relating to businesses being disposed, provisions for UK customer redress, gain on US Lehman acquisition assets, provisions for ongoing investigations and litigation including Foreign Exchange, losses on sale relating to the Spanish, Portuguese and Italian businesses, revision of Education, Social Housing, and Local Authority (ESHLA) valuation methodology, gain on a valuation of a component of the defined retirement benefit liability, and gain on disposal of Barclays’ share of Visa Europe Limited. The comparable IFRS measure is profit after tax. A reconciliation is provided on pages vi to viii;

– Profit before tax excluding notable items represents profit before tax excluding the impact of own credit, impairment of goodwill and other assets relating to businesses being disposed, provisions for UK customer redress, excluding gain on US Lehman acquisition assets, provisions for ongoing investigations and litigation including Foreign Exchange, losses on sale relating to the Spanish, Portuguese and Italian businesses, revision of Education, Social Housing, and Local Authority (ESHLA) valuation methodology, gain on a valuation of a component of the defined retirement benefit liability, and gain on disposal of Barclays’ share of Visa Europe Limited. The comparable IFRS measure is profit before tax. A reconciliation is provided on pages vi to viii;

Return on average allocated tangible equity represents the return on average tangible equity that is allocated to Barclays Core, and to the businesses. The comparable IFRS measure is return on equity. A reconciliation is provided on page ix;

– Attributable profit/(loss) excluding notable items represents attributable profit excluding the post-tax impact of own credit, impairment of goodwill and other assets relating to businesses being disposed, provisions for UK customer redress, gain on US Lehman acquisition assets, provisions for ongoing investigations and litigation including Foreign Exchange, losses on sale relating to the Spanish, Portuguese and Italian businesses, revision of Education, Social Housing, and Local Authority (ESHLA) valuation methodology, gain on a valuation of a component of the defined retirement benefit liability, and gain on disposal of Barclays’ share of Visa Europe Limited. The comparable IFRS measure is attributable profit. A full list of notable items is shown on page 197. A reconciliation to IFRS is presented on pages vi to viii;

 

iii


– Return on average tangible shareholders’ equity excluding notable items represents attributable profit excluding notable items, including an adjustment for the tax credit recorded in reserves in respect of other equity instruments, as a proportion of average shareholders’ equity excluding non-controlling interests and other equity instruments adjusted for the deduction of intangible assets and goodwill. The comparable IFRS measure is return on equity. A reconciliation is provided on page 214;

– Return on average tangible shareholders’ equity is calculated as the return on equity adjusted to remove the effect of goodwill and intangible assets. The comparable IFRS measure is return on equity. A reconciliation is provided on page ix;

– Tangible net asset value per share is calculated by dividing shareholders equity, excluding non-controlling interests and other equity instruments, less goodwill and intangible assets, by the number of issued ordinary shares. The components of the calculation have been included on page 215;

– Total operating expenses, excluding conduct and litigation charges, and other notable items represents total operating expenses excluding the impact of impairment of goodwill and other assets relating to businesses being disposed, provisions for UK customer redress, provisions for ongoing investigations and litigation including Foreign Exchange, and gain on a valuation of a component of the defined retirement benefit liability. The comparable IFRS measure is total operating expenses. A reconciliation is provided on pages vi to viii;

– Total operating expenses excluding conduct and litigation charges represents total operating expenses excluding the impact of provisions for UK customer redress, and provisions for ongoing investigations and litigation including Foreign Exchange. The comparable IFRS measure is total operating expenses. A reconciliation to IFRS is provided on pages vi to viii; and

– Transitional CET1 ratio according to FSA October 2012. This measure is calculated by taking into account the statement of the Financial Services Authority, the predecessor of the Prudential Regulation Authority, on CRD IV transitional provisions in October 2012, assuming such provisions were applied as at 1 January 2014. This ratio is used as the relevant measure starting 1 January 2014 for purposes of determining whether the automatic write-down trigger (specified as a Transitional CET1 ratio according to FSA October 2012 of less than 7.00%) has occurred under the terms of the Contingent Capital Notes issued by Barclays Bank PLC on November 21, 2012 (CUSIP: 06740L8C2) and April 10, 2013 (CUSIP: 06739FHK0). Please refer to page 155 for a reconciliation of this measure to CRD IV CET1 ratio.

Forward-looking statements

This document contains certain forward-looking statements within the meaning of Section 21E of the US Securities Exchange Act of 1934, as amended, and Section 27A of the US Securities Act of 1933, as amended, with respect to the Group. Barclays cautions readers that no forward-looking statement is a guarantee of future performance and that actual results or other financial condition or performance measures could differ materially from those contained in the forward-looking statements. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements sometimes use words such as ‘may’, ‘will’, ‘seek’, ‘continue’, ‘aim’, ‘anticipate’, ‘target’, ‘projected’, ‘expect’, ‘estimate’, ‘intend’, ‘plan’, ‘goal’, ‘believe’, ‘achieve’ or other words of similar meaning. Examples of forward-looking statements include, among others, statements or guidance regarding the Group’s future financial position, income growth, assets, impairment charges, provisions, notable items, business strategy, structural reform, capital, leverage and other regulatory ratios, payment of dividends (including dividend pay-out ratios and expected payment strategies), projected levels of growth in the banking and financial markets, projected costs or savings, original and revised commitments and targets in connection with the strategic cost programme and the Group Strategy Update, rundown of assets and businesses within Barclays Non-Core, sell down of the Group’s interest in Barclays Africa Group Limited, estimates of capital expenditures and plans and objectives for future operations, projected employee numbers and other statements that are not historical fact. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. These may be affected by changes in legislation, the development of standards and interpretations under International Financial Reporting Standards, evolving practices with regard to the interpretation and application of accounting and regulatory standards, the outcome of current and future legal proceedings and regulatory investigations, future levels of conduct provisions, future levels of notable items, the policies and actions of governmental and regulatory authorities, geopolitical risks and the impact of competition. In addition, factors including (but not limited to) the following may have an effect: capital, leverage and other regulatory rules (including with regard to the future structure of the Group) applicable to past, current and future periods; UK, US, Africa, Eurozone and global macroeconomic and business conditions; the effects of continued volatility in credit markets; market related risks such as changes in interest rates and foreign exchange rates; effects of changes in valuation of credit market exposures; changes in valuation of issued securities; volatility in capital markets; changes in credit ratings of any entities within the Group or any securities issued by such entities; the potential for one or more countries exiting the Eurozone; the implications of the results of the 23 June 2016 referendum in the United Kingdom and the disruption that may result in the UK and globally from the withdrawal of the United Kingdom from the European Union; the implementation of the strategic cost programme; and the success of future acquisitions, disposals and other strategic transactions. A number of these influences and factors are beyond the Group’s control. As a result, the Group’s actual future results, dividend payments, and capital and leverage ratios may differ materially from the plans, goals, expectations and guidance set forth in the Group’s forward-looking statements. Additional risks and factors which may impact the Group’s future financial condition and performance are identified in our filings with the SEC which are available on the SEC’s website at www.sec.gov.

Any forward-looking statements made herein speak only as of the date they are made and it should not be assumed that they have been revised or updated in the light of new information or future events. Except as required by the Prudential Regulation Authority, the Financial Conduct Authority, the London Stock Exchange plc (the LSE) or applicable law, Barclays expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Barclays’ expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. The reader should, however, consult any additional disclosures that Barclays has made or may make in documents it has published or may publish via the Regulatory News Service of the LSE and/or has filed or may file with the SEC.

 

iv


Subject to our obligations under the applicable laws and regulations of the UK and the US in relation to disclosure and ongoing information, we undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Market and other data

This document contains information, including statistical data, about certain Barclays markets and its competitive position. Except as otherwise indicated, this information is taken or derived from Datastream and other external sources. Barclays cannot guarantee the accuracy of information taken from external sources, or that, in respect of internal estimates, a third party using different methods would obtain the same estimates as Barclays.

Uses of Internet addresses

This document contains inactive textual addresses to internet websites operated by us and third parties. Reference to such websites is made for information purposes only, and information found at such websites is not incorporated by reference into this document.

References to Pillar 3 report

This document contains references throughout to Barclays annual risk report, the Pillar 3. Reference to the aforementioned report is made for information purposes only, and information found in this report is not incorporated by reference into this document.

 

v


 

 

Barclays Group results

reconciliation

for the year ended

   31.12.16  
   Barclays
UK
     Barclays
International
       Head
Office
    

Barclays

Core

    

Barclays

Non-Core

     Barclays
Group
 
   £m      £m        £m      £m      £m      £m  

Total income

     7,517        14,995          103        22,615        (1,164      21,451  

Own credit

     -        -          (35      (35      -        (35

Gain on disposal of Barclays’ share of Visa Europe Limited

     151        464          -        615        -        615  

Total income excluding notable items

     7,366        14,531          138        22,035        (1,164      20,871  
                                                         

Credit impairment charges and other provisions

     (896      (1,355        -        (2,251      (122      (2,373
                                                         

Net operating income/(expenses)

     6,621        13,640          103        20,364        (1,286      19,078  

Notable items

     151        464          (35      580        -        580  

Net operating income/(expenses) excluding notable items

     6,470        13,176          138        19,784        (1,286      18,498  
                                                         

Operating expenses

     (3,792      (9,129        (135      (13,056      (1,509      (14,565
                                                         

UK bank levy

     (48      (284        (2      (334      (76      (410
                                                         
Total operating expenses excluding litigation and conduct, and other notable items      (3,840      (9,413        (137      (13,390      (1,585      (14,975
                                                         

Litigation and conduct

     (1,042      (48        (27      (1,117      (246      (1,363

Provisions for UK customer redress

     (1,000      -          -        (1,000      -        (1,000

Litigation and conduct excluding notable items

     (42      (48        (27      (117      (246      (363
                                                         

Total operating expenses

     (4,882      (9,461        (164      (14,507      (1,831      (16,338

Notable items

     (1,000      -          -        (1,000      -        (1,000

Total operating expenses excluding notable items

     (3,882      (9,461        (164      (13,507      (1,831      (15,338
                                                         

Cost: income ratio

     65%        63%          n/a        64%        n/a        76%  

Cost: income ratio excluding notable items

     53%        65%          n/a        61%        n/a        72%  
                                                         

Other net (expenses)/income

     (1      32          128        159        331        490  
                                                         

Profit/(loss) before tax

     1,738        4,211          67        6,016        (2,786      3,230  

Notable items

     (849      464          (35      (420      -        (420

Profit/(loss) before tax excluding notable items

     2,587        3,747          102        6,436        (2,786      3,650  
                                                         

Attributable profit/(loss)1

     828        2,412          110        3,350        (1,916      1,623  

Notable items

     (857      451          (25      (431      -        (431

Attributable profit/(loss) excluding notable items1

     1,685        1,961          135        3,781        (1,916      2,054  
                                                         

Risk weighted assets (£bn) 1

     67.5        212.7          53.3        333.5        32.1        365.6  

 

1 Attributable profit in respect of the Africa Banking discontinued operation is reported at the Group level only. Allocated tangible equity, RWAs and leverage exposure are reported in Head Office within Core.

 

vi


Barclays Group results reconciliation

for the year ended

   31.12.15  
    
Barclays
UK
 
 
   
Barclays
International
 
 
   
Head
Office
 
 
   

Barclays

Core

 

 

   

Barclays

Non-Core

 

 

   
Barclays
Group
 
 
     £m       £m       m       £m       £m       £m  

Total income

     7,343       13,747       338       21,428       612       22,040  

Own credit

     -       -       430       430       -       430  

Gains on US Lehman acquisition assets

     -       496       -       496       -       496  

Total income excluding notable items

     7,343       13,251       (92)       20,502       612       21,114  
                                                  

Credit impairment charges and other provisions

     (706)       (922)       -       (1,628)       (134)       (1,762)  
                                                  

Net operating income

     6,637       12,825       338       19,800       478       20,278  

Notable items

     -       496       430       926       -       926  
Net operating income/(expenses) excluding notable items      6,637       12,329       (92)       18,874       478       19,352  
                                                  

Operating expenses

     (3,464)       (8,029)       (272)       (11,765)       (1,958)       (13,723)  
Gain on valuation of a component of the defined retirement benefit liability      296       133       -       429       -       429  
Impairment of goodwill and other assets relating to businesses being disposed              (96)       (96)  
Losses on sale relating to the Spanish, Portuguese and Italian businesses      -       -       -       -       (3)       (3)  

Operating expenses excluding notable items

     (3,760)       (8,162)       (272)       (12,194)       (1,859)       (14,053)  
                                                  

UK bank levy

     (77)       (253)       (8)       (338)       (88)       (426)  
                                                  
Total operating expenses excluding litigation and conduct, and other notable items      (3,837)       (8,415)       (280)       (12,532)       (1,947)       (14,479)  
                                                  

Litigation and conduct

     (2,511)       (1,310)       (66)       (3,887)       (500)       (4,387)  

Provisions for UK customer redress

     (2,431)       (218)       -       (2,649)       (123)       (2,772)  
Provisions for ongoing investigations and litigation including Foreign Exchange      -       (984)       (52)       (1,036)       (201)       (1,237)  

Litigation and conduct excluding notable items

     (80)       (108)       (14)       (202)       (176)       (378)  
                                                  

Total operating expenses

     (6,052)       (9,592)       (346)       (15,990)       (2,546)       (18,536)  

Notable items

     (2,135)       (1,069)       (52)       (3,256)       (423)       (3,679)  

Total operating expenses excluding notable items

     (3,917)       (8,523)       (294)       (12,734)       (2,123)       (14,857)  
                                                  

Cost: income ratio

     82%       70%       n/a       75%       n/a       84%  

Cost: income ratio excluding notable items

     53%       64%       n/a       62%       n/a       70%  
                                                  

Other net income/(expenses)

     -       45       (106)       (61)       (535)       (596)  
Losses on sale relating to the Spanish, Portuguese and Italian businesses      -       -       (112)       (112)       (465)       (577)  
Other net income/(expenses) excluding notable items      -       45       6       51       (70)       (19)  
                                                  

Profit/(loss) before tax

     585       3,278       (114)       3,749       (2,603)       1,146  

Notable items

     (2,135     (573     266       (2,442     (888     (3,330

Profit/(loss) before tax excluding notable items

     2,720       3,851       (380     6,191       (1,715     4,476  
                                                  

Attributable (loss)/profit1

     (47     1,758       11       1,722       (2,418     (394

Notable items

     (2,008     (562     (187     (2,383     (707     (3,090

Attributable profit/(loss) excluding notable

items1

     1,961       2,320       (176     4,105       (1,711     2,696  
                                                  

Average allocated tangible equity (£bn) 1

     9.3       24.9       2.6       36.8       10.9       47.7  

Risk weighted assets (£bn) 1

     69.5       194.8       39.7       304.1       54.3       358.4  

 

1 Attributable profit in respect of the Africa Banking discontinued operation is reported at the Group level only. Allocated tangible equity, RWAs and leverage exposure are reported in Head Office within Core.

 

vii


Barclays Group results reconciliation

 

for the year ended

   31.12.14  
   Barclays
UK
    Barclays
International
    Head
Office
   

Barclays

Core

   

Barclays

Non-Core

    Barclays
Group
 
   £m     £m     m     £m     £m     £m  

Total income

     7,436       12,908       276       20,620       1,143       21,763  

Own credit

     -       -       34       34       -       34  

Revision of ESHLA valuation methodology

     -       -       -       -       (935     (935

Gains on US Lehman acquisition assets

     -       461       -       461       -       461  

Total income excluding notable items

     7,436       12,447       242       20,125       2,078       22,203  
                                                  

Credit impairment charges and other provisions

     (901     (679     -       (1,580     (241     (1,821
                                                  

Net operating income

     6,535       12,229       276       19,040       902       19,942  

Notable items

     -       461       34       495       (935     (440
Net operating income/(expenses) excluding notable items      6,535       11,768       242       18,545       1,837       20,382  
                                                  

Operating expenses

     (4,108     (8,170     (70     (12,348     (2,611     (14,959
                                                  

UK bank levy

     (59     (248     (9     (316     (102     (418
                                                  

Total operating expenses excluding litigation

and conduct, and other notable items

     (4,167     (8,418     (79     (12,664     (2,713     (15,377
                                                  

Litigation and conduct

     (1,108     (1,333     (65     (2,506     (301     (2,807

Provisions for UK customer redress

     (1,067     32       -       (1,035     (75     (1,110

Provisions for ongoing investigations and litigation

including Foreign Exchange

     -       (1,250     -       (1,250     -       (1,250

Litigation and conduct excluding notable items

     (41     (115     (65     (221     (226     (447
                                                  

Total operating expenses

     (5,275     (9,751     (144     (15,170     (3,014     (18,184

Notable items

     (1,067     (1,218     -       (2,285     (75     (2,360

Total operating expenses excluding notable items

     (4,208     (8,533     (144     (12,885     (2,939     (15,824
                                                  

Cost: income ratio

     71%       76%       n/a       74%       n/a       84%  

Cost: income ratio excluding notable items

     57%       69%       n/a       64%       n/a       71%  
                                                  

Other net (expenses)/income

     -       52       316       368       (813     (445
Losses on sale relating to the Spanish, Portuguese and Italian businesses      -       -       315       315       (761     (446

Other net (expenses)/income excluding notable items

     -       52       1       53       (52     1  
                                                  

Profit/(loss) before tax

     1,260       2,530       448       4,238       (2,925     1,313  

Notable items

     (1,067     (757     349       (1,475     (1,771     (3,246

Profit/(loss) before tax excluding notable items

     2,327       3,287       99       5,713       1,154       4,559  
                                                  

Attributable profit/(loss)1

     852       926       374       2,152       (2,659     (174

Notable items

     (855     (808     260       (1,403     (1,550     (2,605

Attributable profit/(loss) excluding notable items1

     1,707       1,734       114       3,555       (1,109     2,779  
                                                  

Average allocated tangible equity (£bn) 1

     9.1       25.0       (2.7     31.4       15.6       47.0  

Risk weighted assets (£bn) 1

     69.3       201.7       41.8       312.8       89.1       401.9  

 

1 Attributable profit in respect of the Africa Banking discontinued operation is reported at the Group level only. Allocated tangible equity, RWAs and leverage exposure are reported in Head Office within Core.

 

viii


       2016      2015      2014  

Average allocated equitya

       £bn      £bn      £bn

 

 

Barclays UK

       13.4        13.7        13.1  

Corporate and Investment Bank

       23.2        23.1        23.1  

Consumer, Cards and Payments

       5.0        4.0        4.0  

 

 

Barclays International

       28.2        27.1        27.1  

Head Officeb

       8.0        3.9        (1.3

 

 

Barclays Core

       49.6        44.7        38.9  

Barclays Non-Core

       7.8        11.2        16.0  

 

 

Barclays Group

       57.4        55.9        54.9  

Effect of Goodwill and Intangibles

       £bn      £bn      £bn

 

 

Barclays UK

       (4.5      (4.4      (3.9

Corporate and Investment Bank

       (1.4      (1.2      (1.2

Consumer, Cards and Payments

       (1.3      (1.0      (1.0

 

 

Barclays International

       (2.7      (2.2      (2.2

Head Officeb

       (1.4      (1.3      (1.4

 

 

Barclays Core

       (8.6      (7.9      (7.6

Barclays Non-Core

       (0.1      (0.3      (0.3

 

 

Barclays Group

       (8.7      (8.2      (7.9

Average allocated tangible equityc

       £bn      £bn      £bn

 

 

Barclays UK

       8.9        9.3        9.1  

Corporate and Investment Bank

       21.9        21.9        22.0  

Consumer, Cards and Payments

       3.6        3.0        3.0  

 

 

Barclays International

       25.5        24.9        25.0  

Head Officeb

       6.5        2.6        (2.7

 

 

Barclays Core

       41.0        36.8        31.4  

Barclays Non-Core

       7.8        10.9        15.6  

 

 

Barclays Group

       48.7        47.7        47.0  

 

Notes

a This table shows the allocation of Group average equity across IFRS and non-IFRS segments
b Includes the African Banking discontinued operation
c This table shows average tangible equity for the Group and for the IFRS and non-IFRS reporting segments

 

ix


       2016      2015      2014  

Profit/(loss) attributable to ordinary equity holders of the parent

       £m        £m        £m  

 

 

Barclays UK

       857        (33      869  

Corporate and Investment Bank

       1,342        1,180        421  

Consumer, Cards and Payments

       1,153        620        528  

 

 

Barclays International

       2,495        1,800        949  

Head Office

       109        11        373  

 

 

Barclays Core

       3,461        1,778        2,191  

Barclays Non-Core

       (1,899      (2,405      (2,645

Africa Banking discontinued operation

       189        302        334  

 

 

Barclays Group

       1,751        (324      (120
       2016      2015      2014  

Average allocated equitya

       £bn        £bn        £bn  

 

 

Barclays UK

       13.4        13.7        13.1  

Corporate and Investment Bank

       23.2        23.1        23.1  

Consumer, Cards and Payments

       5.0        4.0        4.0  

 

 

Barclays International

       28.2        27.1        27.1  

Head Officeb

       8.0        3.9        (1.3

 

 

Barclays Core

       49.6        44.7        38.9  

Barclays Non-Core

       7.8        11.2        16.0  

 

 

Barclays Group

       57.4        55.9        54.9  
       2016        2015        2014  

Return on average allocated equityc

       %        %        %  

 

 

Barclays UK

       6.4%        (0.2%      6.6%  

Corporate and Investment Bank

       5.8%        5.1%        1.8%  

Consumer, Cards and Payments

       23.1%        15.3%        13.2%  

Barclays International

       8.8%        6.6%        3.5%  

 

 

Barclays Core

       7.0%        4.0%        5.6%  

 

 

Barclays Group

       3.0%        (0.6%      (0.2%

 

Notes

a This table shows the allocation of Group average equity across IFRS and non-IFRS reporting segments
b Includes the African Banking discontinued operation
c This table shows return on average equity for the Group and the return on average allocated equity for the IFRS and non-IFRS reporting segments

 

x


Governance

 

Our corporate governance processes and the role they play in supporting the delivery of our strategy, including reports from the Chairman and each of the Board Committee Chairmen.  

 

 

Directors’ report

  Page
UK Corporate Governance  

§  Index to disclosures

  2
Code        
Who we are   §   Board of Directors   3
  §   Group Executive Committee   5
   

§   Board diversity

 

 

5

 

What we did in 2016   §   Chairman’s introduction   6
  §   Board Audit Committee report   10
  §   Board Risk Committee report   20
  §   Board Reputation Committee report   25
   

§   Board Nominations Committee report

 

 

29

 

 

How we comply

 

     

36

 

 

Other statutory information

 

     

51

 

 

 

People

 

      47

 

Remuneration report

      43

 

LOGO                             

 

   Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F  |  1


Governance: Directors’ report

UK Corporate Governance Code - index to disclosures

 

 

LOGO  The purpose of corporate governance is to facilitate effective, entrepreneurial and prudent management that can deliver the long-term success of the company. LOGO

The UK Corporate Governance Code

The UK Corporate Governance Code (the Code) is not a rigid set of rules. It consists of principles (main and supporting) and provisions. The Listing Rules require companies to apply the main principles and report to shareholders on how they have done so. You can find our disclosures as follows:

 

 

 

           Page  

 

 
Leadership    Every company should be headed by an effective board which is collectively responsible for the long-term success of the company.   

Board of Directors
Composition of the Board

    
3 to 4
39

 
  

 

 
   There should be a clear division of responsibilities at the head of the company between the running of the board and the executive responsibility for the running of the company’s business. No one individual should have unfettered powers of decision.    Roles on the Board      37  
  

 

 
   The chairman is responsible for leadership of the board and ensuring its effectiveness on all aspects of its role.    Roles on the Board      37  
  

 

 
   As part of their role as members of a unitary board, non-executive directors should constructively challenge and help develop proposals on strategy.    Roles on the Board      37  

 

 
Effectiveness    The board and its committees should have the appropriate balance of skills, experience, independence and knowledge of the company to enable them to discharge their respective duties and responsibilities effectively.    Board of Directors      3 to 4  
  

 

 
   There should be a formal, rigorous and transparent procedure for the appointment of new directors to the board.   

Appointment and re-election of Directors

     32  
  

 

 
   All directors should be able to allocate sufficient time to the company to discharge their responsibilities effectively.   

Attendance time commitment

    

38

39

 

 

  

 

 
   All directors should receive an induction on joining the board and should regularly update and refresh their skills and knowledge.   

Induction, training and development

     39  
  

 

 
   The board should be supplied in a timely manner with information in a form and of a quality appropriate to enable it to discharge its duties.   

Information provided to the Board

     40  
  

 

 
   The board should undertake a formal and rigorous annual evaluation of its own performance and that of its committees and individual directors.   

Review of Board and Board Committee effectiveness

     33  
  

 

 
   All directors should be submitted for re-election at regular intervals, subject to continued satisfactory performance.   

Roles on the Board
Appointment and re-election of Directors

    

37

32

 

 

 

 
Accountability    The board should present a fair, balanced and understandable assessment of the company’s position and prospects.    Risk management
going concern
    

97 to 114

32

 

 

  

 

 
   The board is responsible for determining the nature and extent of the principal risks it is willing to take in achieving its strategic objectives. The board should maintain sound risk management and internal control systems.    Risk management and internal control      40 to 41  
  

 

 
   The board should establish formal and transparent arrangements for considering how they should apply the corporate reporting, risk management and internal control principles, and for maintaining an appropriate relationship with the company’s auditors.    Board Audit Committee report      10 to 19  

 

 
Remuneration    Executive directors’ remuneration should be designed to promote the long-term success of the company. Performance-related elements should be transparent, stretching and rigorously applied.    Remuneration report      51 to 85  
  

 

 
   There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his or her own remuneration.    Remuneration report      51 to 85  

 

 

Relations with shareholders

 

   There should be a dialogue with shareholders based on the mutual understanding of objectives. The board as a whole has responsibility for ensuring that a satisfactory dialogue with shareholders takes place.    Stakeholder engagement      41 to 42  
  

 

 
   The board should use general meetings to communicate with investors and to encourage their participation.    Stakeholder engagement      41 to 42  

 

 

 

2  |  Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F   


Governance: Directors’ report

Who we are

Board of Directors

 

 

Board of Directors

 

Barclays understands the importance of having a Board containing the right balance of skills, experience and diversity and the composition of the Board is regularly reviewed by the Board Nominations Committee. The skills and experience of the current Directors and the value they bring to the Barclays Board is described below.

 

 

  LOGO    

Full biographies can be accessed online via

home.barclays/investorrelations

 

 

   

 

LOGO

 

John McFarlane

Chairman

 

Appointed:

1 January 2015

 

     

 

Relevant skills and experience

John is a senior figure in global banking and financial services circles and is in his 42nd year in the sector, including 22 years as a main board director, 10 years as a CEO and six years as a chairman. John is Chairman of Barclays PLC and Barclays Bank PLC. He is also a non-executive director of Westfield Corporation and Old Oak Holdings Limited. He is chairman of TheCityUK and a member of the Financial Services Trade and Investment Board and the European Financial Round Table. John was formerly chairman of Aviva plc, where he oversaw a transformation of the company and for a brief period he was also chairman of FirstGroup plc. He was also a non-executive director of The Royal Bank of Scotland plc, joining at the time of the UK government rescue. Prior to that for 10 years he was chief executive officer of Australia and New Zealand Banking Group Ltd, Group Executive Director of Standard Chartered plc and head of Citibank in the UK.

 

Other current appointments

None

 

Committees

Nom*

 

 

LOGO

 

Jes Staley

Group Chief Executive

 

Appointed:

1 December 2015

 

     

 

Relevant skills and experience

Jes joined Barclays as Group Chief Executive on 1 December 2015. He has nearly four decades of extensive experience in banking and financial services. He worked for more than 30 years at J P Morgan, initially training as a commercial banker, later advancing to the leadership of major businesses involving equities, private banking and asset management and ultimately heading the company’s Global Investment Bank. Most recently, Jes served as Managing Partner at BlueMountain Capital. These roles have provided him with a vast experience in leadership and he brings a wealth of investment banking knowledge to Barclays’ Board.

 

Other current appointments

None

 

Committees

None

 

 

LOGO

 

Sir Gerry Grimstone

Deputy Chairman and Senior Independent Director

 

Appointed:

1 January 2016

 

     

 

Relevant skills and experience

Sir Gerry brings to the Board a wealth of investment banking, financial services and commercial experience gained through his senior roles at Schroders and his various board positions. Sir Gerry has global business experience across the UK, Asia, the Middle East and the US. Sir Gerry has significant experience as a non-executive director and chairman. He is currently the chairman of Standard Life plc, independent non-executive board member of Deloitte LLP and the lead non-executive at the Ministry of Defence.

 

Other current appointments

Financial Services Trade and Investment Board

 

Committees

Nom, Rep*

 

 

LOGO

 

Mike Ashley

Non-executive

 

Appointed:

18 September 2013

 

 

     

 

Relevant skills and experience

Mike has deep knowledge of auditing and associated regulatory issues, having worked at KPMG for over 20 years, where he was a partner. Mike was the lead engagement partner on the audits of large financial services groups including HSBC, Standard Chartered and the Bank of England. While at KPMG, Mike was Head of Quality and Risk Management for KPMG Europe LLP, responsible for the management of professional risks and quality control. He also held the role of KPMG UK’s Ethics Partner.

 

Other current appointments

ICAEW Ethics Standards Committee; Chairman, Government Internal Audit Agency; Charity Commission

 

Committees

Aud*, Nom, Ris, Rep

 

 

LOGO

 

Tim Breedon

Non-executive

 

Appointed:

1 November 2012

 

     

 

Relevant skills and experience

Tim joined Barclays after a distinguished career with Legal & General, where, among other roles, he was the group chief executive until June 2012. Tim’s experience as a CEO enables him to provide challenge, advice and support to the Executive on performance and decision-making.

 

Tim brings to the Board extensive financial services experience, knowledge of risk management and UK and EU regulation, as well as an understanding of the key issues for investors.

 

Other current appointments

Marie Curie Cancer Care; Chairman, Apax Global Alpha Limited; Chairman, The Northview Group

 

Committees

Aud, Nom, Rem, Ris*

 

 

LOGO

 

Mary Francis CBE

Non-executive

 

Appointed:

1 October 2016

 

     

 

Relevant skills and experience

Mary has extensive board-level experience across a range of industries. She is a non-executive Director of Swiss Re Group and Ensco plc and was formerly Senior Independent director of Centrica and a non-executive director of the Bank of England, Aviva and Alliance and Leicester. She held senior executive positions in the UK Treasury and Prime Minister’s Office and in the City as Director General of the Association of British Insurers. She brings to Barclays strong understanding of the interaction between public and private sectors and skills in strategic decision-making and all aspects of board governance.

 

Other current appointments

Advisory Panel of The Institute of Business Ethics

 

Committees

Rem, Rep

 

 

LOGO

 

Crawford Gillies

Non-executive

 

Appointed:

1 May 2014

 

     

 

Relevant skills and experience

Crawford has extensive business and management experience, gained with Bain & Company and Standard Life plc. These roles have provided him with experience in strategic decision-making and knowledge of company strategy across various sectors and geographical locations.

 

Crawford has also held board and committee chairman positions during his career, notably as chairman of the remuneration committees of Standard Life plc and MITIE Group PLC.

 

Other current appointments

SSE plc; Control Risks International; The Edrington Group Limited

 

Committees

Aud, Nom, Rem*

 

 

 

 

   Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F  |  3


Governance: Directors’ report

Who we are

Board of Directors

 

 

 

LOGO

 

Reuben Jeffery III

Non-executive

 

Appointed:

16 July 2009

 

     

 

Relevant skills and experience

Reuben has extensive financial services experience, particularly within investment banking and wealth management, through his role as CEO and president of Rockefeller & Co. Inc. and Rockefeller Financial Services Inc. and his former senior roles with Goldman Sachs, including as the managing partner of the Paris office. His various government roles in the US, including as chairman of the Commodity Futures Trading Commission, provides Barclays’ Board with insight into the US political and regulatory environment.

 

Other current appointments

Advisory Board of Towerbrook Capital Partners LP; Rothschild Capital Management Limited; Financial Services Volunteer Corps; The Asia Foundation

 

Committees

Nom, Ris

 

 

 

LOGO

 

Tushar Morzaria

Group Finance Director

 

Appointed:

15 October 2013

 

     

 

Relevant skills and experience

Tushar joined Barclays in 2013 having spent the previous four years in senior management roles with JP Morgan Chase, most recently as the CFO of its Corporate & Investment Bank. Throughout his time with JP Morgan he gained strategic financial management and regulatory relations experience. Since joining the Barclays Board he has been a driving influence on the Group’s cost reduction programme and managing the Group’s capital plan, particularly in response to Structural Reform.

 

Other current appointments

Member of the 100 Group main committee

 

Committees

None

 

 

 

LOGO

 

Dambisa Moyo

Non-executive

 

Appointed:

1 May 2010

 

     

 

Relevant skills and experience

Dambisa is an international economist and commentator on the global economy, having completed a PhD in economics. Dambisa has a background in financial services and a wide knowledge and understanding of African economic, political and social issues, in addition to her experience as a director of companies with complex, global operations. She served as a non-executive director of SABMiller Plc from 2009-2016.

 

Other current appointments

Chevron Corporation; Barrick Gold Corporation; Seagate Technology plc

 

Committees

Rem, Rep

 

 

 

LOGO

 

Diane de Saint Victor

Non-executive

 

Appointed:

1 March 2013

 

     

 

Relevant skills and experience

Diane holds the role of general counsel and company secretary of ABB Limited, a listed pioneering technology leader in electrification products, robotics and motion, industrial automation and power grids. Diane’s legal background, combined with her knowledge of regulatory and compliance requirements bring a unique perspective to discussions of the Board and its committees.

 

Other current appointments

American Chamber of Commerce in France

 

Committees

Rep

 

 

LOGO

 

Diane Schueneman

Non-executive

 

Appointed:

25 June 2015

     

 

Relevant skills and experience

Diane joined Barclays after an extensive career at Merrill Lynch, holding a variety of senior roles, including responsibility for banking, brokerage services and technology provided to the company’s retail and middle market clients, and latterly for IT, operations and client services worldwide. She brings a wealth of experience in managing global, cross-discipline business operations, client services and technology in the financial services industry. Diane is a member of the board of Barclays US LLC, Barclays US intermediate holding company.

 

Other current appointments

None

 

Committees

Aud, Ris

 

 

 

LOGO

 

Steve Thieke

Non-executive

 

Appointed:

7 January 2014

     

 

Relevant skills and experience

Steve has significant experience in financial services, in both investment banking with J P Morgan, where among other roles he served as the chairman of the risk management committee, and in regulation, through roles with the Federal Reserve Bank of New York and the Financial Services Authority. He also has significant board experience, having served in both executive and non-executive director roles in his career. Steve is chairman of the board of Barclays US LLC.

 

Other current appointments

None

 

Committees

Ris

 

Company Secretary        

 

 

LOGO

 

Claire Davies

 

Appointed:

1 December 2016

 

     

 

Relevant skills and experience

Claire is a solicitor and a Fellow of the Institute of Chartered Secretaries and Administrators. She has substantial experience in legal, compliance and company secretarial roles gained in-house and in professional services. She was appointed Barclays Group Company Secretary with effect from 1 December 2016, a role she has previously held at Legal & General plc and Lloyds Banking Group plc. More recently, she was Society Secretary at the Co-operative Group. She is a non-executive member of the audit and risk committee of the Department for Business, Energy & Industrial Strategy.

 

 

Note

The composition of the board is shown as at 22 February 2017.

 

Committee membership key
Aud    Board Audit Committee
Nom    Board Nominations Committee
Rem    Board Remuneration Committee
Rep    Board Reputation Committee
Ris    Board Risk Committee
*    Committee Chairman

 

4  |  Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F   


Who we are

Group Executive Committee

 

 

 

Group Executive Committee

 

LOGO

   

Biographies for Jes Staley, Group Chief Executive, and Tushar Morzaria, Group Finance Director, who are members of the Group Executive Committee, which is chaired by Jes Staley, can be found on pages 3 and 4.

 

 

 

 

 

 

LOGO

 

 

     

 

 

LOGO

 

     

 

LOGO

 

Paul Compton

Group Chief

Operating Officer

 

     

Bob Hoyt

Group General

Counsel

 

     

Tristram Roberts

Group Human

Resources Director

 

           
           

 

LOGO      

 

LOGO

     

 

LOGO

 

Mike Roemer

Group Head of

Compliance

     

 

Amer Sajed

CEO, Barclaycard

International

     

 

Tim Throsby

President, Barclays

International and

Chief Executive

Officer, Corporate

and Investment Bank

 

 

 

LOGO

     

 

LOGO

     

 

Ashok Vaswani

     

 

CS Venkatakrishnan

     
CEO, Barclays UK       Chief Risk Officer      

 

     

 

Group Executive Committee meetings are also attended on a regular basis by the Chief Internal Auditor, Sally Clark, and by an ex-officio member, drawn from senior management. The current ex-officio member is Kathryn McLeland, Head of Investor Relations.

 

 

 

Board diversity

The Board has a balanced and diverse range of skills and experience. All Board appointments are made on merit, in the context of the diversity of skills, experience, background and gender required to be effective.

 

Balance of non-executive Directors: executive Directors   

 

 

 

LOGO

  

 

1

  

 

Chairman

     

 

 

 

1

 

 

   2    Executive Directors         2  
   3   

Non-executive Directors

 

 

 

 

        10  

 

 

 

Gender balance      

 

Male: Female    9:4   

 

Length of tenure
(Chairman and non-executive Directors)

 

 

0-3 years

  

 

6

 

  

 

LOGO

 

 

3-6 years

  

 

3

 

  

 

LOGO

 

 

 

6-9 years

  

 

2

 

  

 

LOGO

 

 

Geographical mix
(Chairman and non-executive Directors)

 

 

UK

  

 

6

 

  

 

LOGO

 

 

US   

3

 

   LOGO

 

 

Continental Europe

  

1

 

  

 

LOGO

 

 

 

Other

  

 

1

 

  

 

LOGO

 

 

Industry/background experience

(Chairman and non-executive Directors)a

  
  

 

 
Financial Services      10 (91%)  
Political/regulatory contacts      11 (100%)  
Current/recent Chair/CEO      3 (27%)  
Accountancy/financial      1 (9%)  
International (US)      3 (27%)  
International (Europe)      1 (9%)  
International (Rest of the World)      3 (27%)  

Operations and Technology

 

    

 

1 (9%)

 

 

 

 

 

Note

a Individual Directors may fall into one or more categories

 

 

 

 

 

 

 



 

   Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F  |  5


Governance: Directors’ report

What we did in 2016

Chairman’s introduction

 

 

LOGO

LOGO  Strong and effective governance… benefits companies and the UK economy more generally, by instilling public confidence and respect for the corporate sector, making the UK an attractive place to do business.  LOGO

Dear Fellow Shareholders

Welcome to my 2016 corporate governance report. When I think about corporate governance, I inevitably focus on how strong and effective governance acts to provide the necessary checks and balances at the very top of companies, thus supporting better decision-making and accountability. In turn, this benefits companies and the UK economy more generally, by instilling public confidence and respect for the corporate sector and making the UK an attractive place to do business, something that has grown in importance post the EU Referendum. As a bank, gaining this confidence and respect is paramount. Our business is founded on and operates on trust – the trust of our customers and clients, our employees and the wider public. Strong and effective corporate governance has a vital role in ensuring that we earn and keep that trust.

What is the role of the Board?

I firmly believe that the role of the Board is to focus on long-term, sustainable value creation. At the heart of our strategy, which we announced in March 2016, is building on our strength as a transatlantic consumer, corporate and investment bank, with global reach. To this end, the Board has provided critical oversight of executive management in developing and delivering this strategy, creating a smaller, simplified bank capable of producing high quality returns for our shareholders on a sustainable basis.

What were the Board’s key areas of focus in 2016?

During 2016, the Board focused its activity to support management in delivery of the agreed strategy. A summary of key items considered by the Board can be found pages 8 to 9. The main areas of Board activity have been on ensuring that we have strong foundations in place by focusing on the performance of our Core businesses, and on completing the restructuring of Barclays by accelerating the run-down of the Non-Core businesses. We also took the difficult, but important, decision to sell-down our holding in Barclays Africa. Progress in these areas is enabling us to build the Barclays of the future. As part of ensuring we are well-positioned, and to meet regulatory requirements, we have aligned our business more closely with our legal entity structure and geographic locations. You can read more about the Board’s role in preparing Barclays for Structural Reform in the case study on page 9. We also had to deal with the impacts of the UK’s vote to leave the EU and held a special meeting in the days following the EU Referendum result to assess the position for Barclays. You can read more about how we prepared for the EU Referendum in the case study on page 24.

How effective is the Board?

Effective delivery of long-term, sustainable value for shareholders requires an effective Board. It is an important part of my role as Chairman to satisfy myself that the Board – both collectively and its individual members – operates effectively. Each year, we conduct a self-assessment of our performance, with the aid of an independent facilitator, and you can read a report on the outcomes of the 2016 self-assessment on pages 34 to 35. We also describe the actions we took during 2016 in response to any matters identified for improvement during the 2015 self-assessment. I hope this provides a flavour of how seriously the Board regards this important exercise.

The working relationship between the Board and executive management is, of course, critical to the effectiveness of the Board and I am pleased to report that we enjoy a healthy, constructive relationship, with an appropriate level of creative tension that helps drive productive discussions in the boardroom.

 

 

6  |  Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F   


    

    

    

 

 

How did the Board change in 2016?

To be effective, the Board needs the right people and, in particular, it needs to have the right balance and diversity of skills, experience and perspectives. It is important that the composition of the Board brings to bear a broad range of social perspectives and talent on decision-making and that the Board is able to connect with the demographics of Barclays’ customers and clients and employees. We have a healthy non-executive presence on the Board, which was strengthened further during 2016 with the appointments of Sir Gerry Grimstone as Deputy Chairman and Senior Independent Director and Mary Francis as a non-executive Director. Both are highly-experienced non-executive Directors and add to the depth of experience and talent on the Board. During 2016, Wendy Lucas-Bull and Frits van Paasschen, both non-executive Directors, left the Board and I thank them on behalf of the Board for their service.

In early 2016, we set ourselves a new Board diversity target, which is to have 33% women on the Board by 2020. We currently have 31% women on the Board and are pleased with the progress we are making towards our target. Of course, diversity is not just about gender and although we have not set any other Board diversity targets, such as ethnicity, when it discusses and assesses Board composition and prospective candidates the Board Nominations Committee considers a number of factors before making its recommendations. Ultimately, maintaining the overall effectiveness of the Board is paramount and we maintain the position that all appointments to the Board are made on merit. More information on the Board appointments process can be found on page 32.

How does the Board ensure that high standards of business conduct are maintained?

There can be no argument that to be successful and to create long-term, sustainable value, we must maintain consumer and market trust and confidence. We need to act with transparency and integrity in every interaction we have with all of our stakeholders and this behaviour is integral to the way in which we operate. This is why as a Board we have continued to wholeheartedly support Barclays’ shared purpose and common values. The Barclays Way, which is endorsed by me, as Chairman, outlines the purpose and values that govern our way of working across our businesses globally. Of course, the challenge we have, in a large organisation such as Barclays, is to ensure that all employees do the right thing day in, day out. To address this challenge, all employees continue to be required to undertake training on The Barclays Way annually, with the Board Reputation Committee tracking completion rates. Additionally, the Board Reputation Committee hears directly from the senior management in each business on how they are addressing any conduct and cultural matters specific to that business, thus holding senior management to account for the values and behaviours in their business. You can read more about the work of the Board Reputation Committee on pages 25 to 28.

How does the Board take account of Barclays’ wider stakeholders?

I’ve referred a number of times to the Board’s role in creating and delivering shareholder value in a long-term, sustainable way. This can only be achieved by being acutely alive to the impact that our business decisions might have on our customers, clients, employees and others and by fully understanding and appreciating the wider societal obligations that we have. These issues are important for the Board and the Board Reputation Committee fulfils a vital role on behalf of the Board by monitoring key indicators across the areas of conduct, culture, citizenship and customer complaints. This includes, for example, assessing not only the volumes of customer complaints that we receive, but also the way in which they are handled. It covers assessing the results from regular employee opinion surveys and the actions being taken to address any common issues or themes that arise across the business. It also includes oversight of the delivery of our citizenship strategy, the Shared Growth Ambition, where our long-term aim is to create and grow a collection of products, services and partnerships that improve the lives of people in the communities that we serve. All of this activity can and does support the Board’s over-arching objective of delivering sustainable returns for our shareholders.

 

LOGO

  

You can read more about the Shared Growth Ambition at

home.barclays/citizenship

Looking ahead

I expect 2017 to be a pivotal year for Barclays in the delivery of its strategy; a year when we will complete our restructuring and establish ourselves as a bank that is recognised for financial strength, financial transparency, operational stability, underpinned by a values-driven culture. We are incredibly focused and working hard as your Board to engender respect and trust for our Company and the profession of banking, in order to support our customers and clients, to contribute to the UK’s reputation as a place to do business and to deliver long-term value to shareholders.

 

LOGO

 

John McFarlane

Chairman
22 February 2017
 

 

   Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F  |  7


Governance: Directors’ report

Board activity in 2016

 

 

During 2016 the Board focused on a number of specific areas, outlined in the table below, in line with Barclays three strategic goals and five principal risks:

Strategic goals

LOGO Have strong foundations in place
LOGO Accelerate the completion of restructuring
LOGO Build the Barclays of the future

Principal risks

LOGO Credit
LOGO Market
LOGO Funding
LOGO Operational
LOGO Conduct
  

 

Board allocation of time (%)

 

  

 

 
        2016        2015  
  

 

 
  

 

LOGO

 

  

 

 

 

1

 

 

 

 

Strategy formulation and implementation monitoring

  

 

 

 

55

 

 

  

 

 

 

56

 

 

        2     Finance (incl. capital and liquidity)      17        11  
        3     Governance and Risk (incl. regulatory issues)      26        29  
        4     Other (incl. compensation)      2        4  
             
             
             
             
             
 

 

     Strategic Goal      Principal Risks

 

Strategy formulation and monitoring

 

           

§  Debated the potential impact of the EU Referendum and the contingency plans being developed. Following the result of the Referendum, discussed and assessed the implications for the UK, the banking sector and for Barclays, including a presentation from a third party on the political aspects and their potential implications

   LOGO LOGO LOGO      LOGO LOGO LOGO LOGO LOGO

§  Regularly debated and monitored the progress of Barclays preparations for Structural Reform – see the case study on page 9 for further details

   LOGO LOGO LOGO      LOGO LOGO LOGO LOGO LOGO

§  Reflected on the position of Barclays Africa in the Barclays Group and its impact on Barclays’ capital position, deciding to sell-down Barclays’ holding to a position where Barclays Africa accounting and regulatory de-consolidation could be achieved

   LOGO LOGO LOGO      LOGO LOGO LOGO

§  Assessed the progress of strategy execution in each of Barclays UK, Barclays International’s investment bank and corporate business and the Cards business, via presentations from the heads of each business

   LOGO LOGO LOGO      LOGO LOGO LOGO LOGO LOGO

§  Monitored the progress of the run-down of Barclays Non-Core via regular presentations from the heads of the Non-Core business

   LOGO      LOGO LOGO LOGO LOGO LOGO

§  Discussed regular updates from the Group Chief Executive on the progress being made against the Group’s execution priorities and received insights on stakeholder issues (including those arising from customers and clients, employees, regulators and governments) and cultural matters, including results from employee opinion surveys

   LOGO LOGO LOGO      LOGO LOGO LOGO LOGO LOGO

§  Debated and provided input to management on the formulation of overall Group strategy, including

   LOGO LOGO LOGO      LOGO LOGO LOGO LOGO LOGO

–  the impact of structural change and the creation of new subsidiary legal entities in the Group

       

–  the progress of the sell-down of Barclays Africa, including potential options, costs of separation, potential conduct risks and customer impacts

       

–  the impact of the EU Referendum result, taking into account an assessment of possible political scenarios and the potential impacts on each of Barclays businesses in terms of capital, operations, economics, regulation, clients and customers

       

–  a strategic approach to costs optimisation

       

–  constraints and risks to strategy execution, covering economic assumptions; expected regulatory requirements on capital and solvency ratios at Group and subsidiary legal entity level; anticipated changes to accounting rules; investor expectations; and potential impacts for clients and customers

       

–  potential growth opportunities, covering an assessment of the competitive landscape for Barclays UK, Barclays International and the Cards business; key trends and risks for each business in terms of economics, regulation, customers, employees and technology; near-term focus areas and potential transformational opportunities

       

 

Finance, including capital and liquidity

 

           

§  Debated and approved the Group’s Medium Term Plan for 2016-2018 and short-term plan for 2016, with a focus on producing increased returns in future

   LOGO LOGO LOGO      LOGO LOGO LOGO

§  Regularly assessed financial performance of the Group and its main businesses via reports from the Group Finance Director

   LOGO LOGO LOGO      LOGO LOGO LOGO

§  Reviewed and approved Barclays’ financial results prior to publication, including approving final and interim dividends

   LOGO LOGO LOGO      LOGO LOGO LOGO

§  Discussed market and investor reaction to Barclays’ strategic and financial results announcements, with insights provided by the Head of Investor Relations

   LOGO LOGO LOGO      LOGO LOGO LOGO

§  Provided input, guidance and advice to senior management on the high-level shape of Barclays 2017-2019 Medium Term Plan and subsequently approved the final plan

   LOGO LOGO LOGO      LOGO LOGO LOGO

 

8  |  Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F   


        

        

        

 

 

     Strategic Goal      Principal Risks

 

Governance and risk, including regulatory issues

 

           

§  Debated and approved 2016 risk appetite for the Barclays Group

   LOGO LOGO LOGO      LOGO LOGO LOGO LOGO LOGO

§  Regularly assessed Barclays overall risk profile and emerging risk themes, hearing directly from the Chief Risk Officer and the Chairman of the Board Risk Committee

   LOGO LOGO LOGO      LOGO LOGO LOGO LOGO LOGO

§  Evaluated Barclays operational and technology capability, including specific updates on cyber-risk capability and the strategy for infrastructure services. Approved Barclays International’s investment bank’s IT and Data Global Strategy

   LOGO LOGO LOGO      LOGO

§  Approved the Group’s 2016 Recovery Plan and US Resolution Plan

   LOGO LOGO LOGO      LOGO LOGO LOGO LOGO LOGO

§  Held specific meetings with representatives of Barclays’ UK and US regulators to hear first-hand about regulatory expectations and their specific views on Barclays

   LOGO LOGO LOGO      LOGO LOGO LOGO LOGO LOGO

§  Evaluated the status of Barclays’ risk and control environment and the plans in place to enhance the risk and control framework and approved a revised Enterprise Risk Management Framework (ERMF)

   LOGO LOGO LOGO      LOGO LOGO LOGO LOGO LOGO

§  Considered regular updates from the Group General Counsel on the legal risks facing Barclays

   LOGO LOGO LOGO      LOGO LOGO

§  Heard regularly from the chairmen of the Board’s principal Board Committees on the matters discussed at Board Committee meetings

   LOGO LOGO LOGO      LOGO LOGO LOGO LOGO LOGO

§  Received updates from the chairman of Barclays US IHC on matters discussed at its board meetings

   LOGO LOGO LOGO      LOGO LOGO LOGO LOGO LOGO

§  Heard directly from representatives of the Banking Standards Board on its assessment of the culture in Barclays and the banking sector as a whole

   LOGO LOGO LOGO      LOGO

 

Other, including compensation

 

           

§  Reviewed Barclays’ Talent Management strategy and the process for succession planning for key executive positions, hearing directly from the Group HR Director and the Chairman of the Board Nominations Committee

   LOGO LOGO LOGO      LOGO LOGO

§  Received and debated a presentation from the independent facilitator of the 2016 Board effectiveness review on the outcomes and potential areas of focus for improvement

   LOGO LOGO LOGO      LOGO LOGO

The above analysis reflects the ERMF that was in place during 2016.

 

 

 

Governance in Action –

Preparing for Structural Reform

 

    
 

Law and regulation in the UK, and associated regulatory rules, require Barclays to separate its retail banking operations into a separate, independent legal entity (known as ‘ring-fencing’). Barclays has an internal Structural Reform Programme in place to implement these required changes in the UK. A new UK banking entity is being established as the ring-fenced bank (Barclays UK) and will serve retail and small business customers, as well as UK wealth and credit card customers. Barclays International will continue to serve corporate, institutional and investment banking clients and will also serve international wealth and credit card customers. A Group Service Company will be established to support the revised operating entity structure.

 

These structural changes will have a material impact on the way in which Barclays operates in future. Consequently, the progress of the Structural Reform Programme featured heavily on the Board’s agenda during 2016, given the scale of change required and the potential material risks associated with transitioning to the new structure and with the new structure itself. The Board evaluated progress of the Structural Reform Programme at seven of the eight Board meetings held during 2016, including specifically evaluating the impact of structural change as part of the annual Group strategy Board meeting. Specific matters addressed by the Board included:

 

§   structural Reform design and implementation plans, including evaluating any identified risks and challenges; considering regulatory feedback on the plans and the status of actions arising from regulatory engagement; and agreeing the internal accountability framework

 

§  assessing the progress being made with establishing the new legal entity for Barclays UK, including any necessary regulatory licencing requirements and preparations for the ring-fence transfer scheme

 

§   monitoring the creation of the Group Service Company, including assessing its design, its board governance structure, its control and oversight framework and the execution milestones to be achieved

 

  

§   debating the potential implications of Structural Reform on Barclays’ pension scheme, both in terms of the potential impact on Barclays and on pension scheme members

 

§  conducting an assessment of the overall conduct risk considerations associated with Structural Reform, focusing on the potential impacts for clients and customers

 

§  evaluating the work being conducted to address sort-code migration, covering technology planning and implementation and customer impact considerations.

 

Separately, during 2016, Barclays’ US businesses were organised under an Intermediate Holding Company (IHC) in order to meet US legal requirements. The IHC became operational from 1 July 2016. The Board was regularly updated on progress of implementation, any risks and challenges and how they were being managed.

 

Board Committees have supported the Board in overseeing the implementation of Structural Reform on matters that fall directly within their remit. For example, the Board Nominations Committee determined the proposed composition of the boards of the new operating entities and is in the process of identifying and evaluating proposed candidates for appointment to those boards. It also discussed and endorsed a set of Governance Guiding Principles, which will govern the relationship between the parent company and its new operating entities. The Board Risk Committee spends time at each meeting assessing the prospective capital and liquidity impacts of Structural Reform, while the Board Audit Committee has evaluated the potential accounting implications. More information can be found in the individual Board Committee reports on the pages that follow.

 

 

   Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F  |  9


Governance: Directors’ report

What we did in 2016

Board Audit Committee report

 

 

 

 

LOGO

 

LOGO Change has continued apace and it has been critical to focus on ensuring that the commitment to strengthening the control environment is maintained throughout this transformational period. LOGO

 

  

 

Dear Fellow Shareholders

My report to you last year highlighted the significant degree of change that Barclays was facing, driven by its own strategic aims and by the demands of Structural Reform. Change has continued apace and it has been critical for the Committee to focus on ensuring the commitment to strengthening the control environment is maintained throughout this transformational period. Barclays has during 2016 put in place a significantly changed senior management team and my Committee colleagues and I are greatly encouraged by the renewed focus and vigour with which the control environment is being addressed and the sense of personal accountability that we are seeing. A significant development in the fourth quarter of 2016 was the creation of a chief controls office and the appointment of a Chief Controls Officer, which will drive forward the delivery of an enhanced programme designed to strengthen the control environment and remediate any known issues. Although the new controls office structure is in its infancy, I welcome the more strategic approach that is now being taken to embed accountability for a strong control environment into the first line of management. Such is the importance of this programme to Barclays that, for its initial phase, progress on the framework will be reported directly to the full Board. In assessing control issues for disclosure in the Annual Report, the Committee has continued to apply similar definitions to those used for assessing internal financial controls for the purposes of Sarbanes-Oxley. The conclusion we have reached is that there are no control issues that are considered to be a material weakness, which merit specific disclosure. Further details may be found in the Risk Management and Internal Control section on page 40.

 

Our busy agenda in 2016 continued to include our responsibilities for overseeing the performance and effectiveness of internal and external audit, the main independent assurance mechanisms that serve to protect shareholders’ interests. The Committee also continued to exercise its responsibilities for ensuring the integrity of Barclays’ published financial information by debating and challenging the judgements made by management and the assumptions and estimates on which they are based. The exercise of appropriate judgement in preparing the financial statements is critical in ensuring that Barclays reports to its shareholders in a fair, balanced and transparent way. The report that follows sets out details of the material matters considered by the Committee since my last report.

 

A significant change that the Committee has been overseeing is the transition to KPMG as Barclays’ statutory auditor, following the audit tender concluded in 2015. I met regularly with the PwC lead audit partner and his KPMG successor during 2016. KPMG has been shadowing the current auditor, PwC, during the 2016 year-end audit and the Committee is already seeing some value from the new perspective provided by KPMG on accounting estimates and policies. You can read more about auditor transition in the case study on page 19.

 

The introduction in March 2016 of the UK’s Senior Managers Regime allocated to me specific prescribed responsibilities for safeguarding the independence of and overseeing the performance of the internal audit function, including the performance of the Chief Internal Auditor, in line with regulatory requirements. In practice, little has changed in the way in which I fulfil my responsibilities: I continue to hold regular meetings with the Chief Internal Auditor and members of her senior management team to ensure I am aware of current work programmes and any emerging issues and I also agree the Chief Internal Auditor’s objectives and the outcomes of her performance assessment. During 2016, the PRA undertook a review of Barclays Internal Audit (BIA) and made a number of recommendations to increase its effectiveness and the Committee’s monitoring thereof. An action plan has been developed to address these recommendations. The Committee also held a networking event with BIA during 2016, enabling Committee members to meet less formally with senior members of the BIA team.

 

 

 

10  |  Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F   


    

    

    

 

 

 

An additional responsibility I have assumed under the Senior Managers Regime is that of Whistleblower’s Champion, a position required by the FCA to be held at Board level. As champion, I have specific responsibility for the integrity, independence and effectiveness of the Barclays’ policies and procedures on whistleblowing, including the procedures for protecting employees who raise concerns from detrimental treatment. During 2016, I recorded a video message to all employees Group-wide, highlighting my role as Whistleblower’s Champion and raising awareness of the policies and procedures we have in place.

I continued to work closely with my fellow Board Committee chairmen during 2016, particularly with the Board Risk Committee chairman on the question of operational risk issues, which each Committee has a role in overseeing. I attended meetings of the IHC audit committee to gain a first-hand insight into the issues being addressed by that committee and have invited its chairman to attend a Committee meeting in early 2017 by way of reciprocating. I met frequently with other members of senior management, including the Group Finance Director, and continued my engagement with Barclays’ regulators both in the UK and US.

Committee performance

The Committee’s performance during 2016 was assessed as part of the independently facilitated annual Board effectiveness review. The conclusion of my Board colleagues was that the Committee is regarded as thorough and the Board takes assurance from the quality of the Committee’s work. The main area identified for improvement was to ensure that the Committee continues to strike an appropriate balance between covering issues in appropriate detail and taking a strategic approach to its oversight and supervision of management. The review also commented on the need to strengthen the depth of financial and accounting expertise on the Committee via new appointments, which is a matter that was already under consideration during 2016, and the need to ensure that the way in which the Committee works with the Board Reputation and Board Risk Committees continues to capture all significant issues effectively while minimising any overlap. I will be seeking to address each of these areas over the coming year. You can read more about the outcomes of the Board effectiveness review on pages 33 to 35.

Looking ahead

The Committee is looking forward to working with both the new Chief Controls Officer and with the new auditor, KPMG, during 2017. In addition to overseeing management’s progress on enhancing the control environment, the Committee will be focusing on some significant accounting issues, including the Group’s preparedness for the implementation of IFRS9 and the accounting implications of Structural Reform. We will also be closely monitoring the implementation of the action plan to address the recommendations arising from the PRA’s review of BIA.

 

LOGO

Mike Ashley

Chairman, Board Audit Committee

22 February 2017

  

 

Board Audit Committee allocation of time (%)

 

  

 

 
        2016        2015  
  

 

 
  

 

LOGO

 

 

 

1

 

 

Control issues

  

 

 

 

23

 

 

  

 

 

 

18

 

 

     2   Business control environment      19        16  
     3   Financial results      36        27  
     4   Internal audit matters      11        7  
     5  

External audit matters

(including, in 2015, external audit tender)

     6        26  
     6   Other (including governance and compliance)      4        6  
            
            
            

Committee composition and meetings

The Committee is composed solely of independent non-executive Directors, with membership designed to provide the breadth of financial expertise and commercial acumen its needs to fulfil its responsibilities. Its members as a whole have experience of the banking and financial services sector in addition to general management and commercial experience. Diane Schueneman was appointed to the Committee with effect from 18 February 2016, bringing valuable insights into operational and technology risk and controls. Diane de Saint Victor retired from the Committee at the end of May 2016. Mike Ashley is the designated financial expert on the Committee for the purposes of the US Sarbanes-Oxley Act. Although each member of the Committee has financial and/ or financial services experience, the Board has identified that the Committee could be strengthened by the appointment of an additional member with direct accounting and auditing experience. Consideration is being given to further appointments to the Committee in this regard, however, given the impact of Structural Reform, the search for suitable candidates is being addressed in the context of overall Board composition requirements. You can find more details of the experience of Committee members in their biographies on pages 3 and 4.

The Committee met 12 times in 2016 and the chart above shows how it allocated its time. Meetings are generally arranged well in advance and are usually scheduled in line with Barclays’ financial reporting timetable. Two of the meetings were arranged specifically to provide the Committee opportunity to consider particular issues relevant to the financial statements, such as the viability statement and the proposed deadline for PPI claims. Committee meetings were attended by management, including the Group Chief Executive, Group Finance Director, Chief Internal Auditor, Chief Risk Officer, Chief Operating Officer, General Counsel and Head of Compliance, as well as representatives from the businesses and other functions. In future, the Chief Controls Officer will attend meetings on a regular basis. The lead audit partner of the external auditor attended all Committee meetings and the Committee held a number of private sessions with each of the Chief Internal Auditor or the lead auditor partner, which were not attended by management. From 1 July 2016, the lead audit partner of KPMG also attended meetings as part of the statutory auditor transition process. Representatives from the PRA also attended a meeting during 2016.

 

Member      Meetings attended/eligible to attend  
Mike Ashley      12/12  
Tim Breedon      12/12  
Crawford Gillies*      11/12  
Diane de Saint Victor (to 31 May 2016)      8/8  
Diane Schueneman (from 18 February 2016)      9/9  

 

* Did not attend one meeting convened at short notice owing to a prior commitment

Committee role and responsibilities

The Committee is responsible for:

 

§   assessing the integrity of the Group’s financial reporting and satisfying itself that any significant financial judgements made by management are sound

 

§   evaluating the effectiveness of the Group’s internal controls, including internal financial controls

 

§   scrutinising the activities and performance of the internal and external auditors, including monitoring their independence and objectivity.

 

LOGO    The Committee’s terms of reference are available at home.barclays/corporategovernance
 

 

 

 

   Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F  |  11


Governance: Directors’ report

What we did in 2016

Board Audit Committee report

 

 

 

The Committee’s work

The significant matters addressed by the Committee during 2016 and in evaluating Barclays’ 2016 annual report and financial statements, are described on the following pages.

Financial statement reporting issues

The Committee’s main responsibility in relation to Barclays’ financial reporting is to review with both management and the external auditor the appropriateness of Barclays’ financial statements, including quarterly results announcements and half-year and annual financial statements and supporting analyst presentations, with its primary focus being on:

 

§   the quality and acceptability of accounting policies and practices

 

§   any correspondence from financial reporting regulators in relation to Barclays’ financial reporting

 

§   material areas where significant judgements have been made, along with any significant assumptions or estimates, or where significant issues have been discussed with or challenged by the external auditor

 

§   an assessment of whether the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess Barclays’ position and performance, business model and strategy.

Accounting policies and practices

The Committee discussed reports from management in relation to the identification of critical accounting judgements and key sources of estimation uncertainty, significant accounting policies and the proposed disclosure of these in the 2016 Annual Report. Following discussions with both management and the external auditor, the Committee approved the critical accounting judgements, significant accounting policies and disclosures, which are set out in note 1, Significant accounting policies, to the consolidated financial statements. There were no significant changes in accounting policy during the period. During 2016, the Committee was regularly updated on Barclays’ preparations for the implementation of IFRS9 (Financial Instruments), which is effective from 1 January 2018, including the key technical decisions and interpretations required and Barclays’ proposed approach for each. The Committee also

considered the accounting implications of Structural Reform and the establishment of the ring-fenced bank. These will continue to be areas of focus in 2017.

Financial reporting regulators and Barclays

During the third quarter of 2016, Barclays received a comment letter from the Corporate Reporting Review Team (CRRT) of the Financial Reporting Council (FRC) in relation to its thematic review of tax disclosures. The comment letter covered the disclosure of uncertain tax provisions in Barclays’ 2015 annual report and financial statements. The CRRT requested and was provided with additional information in respect of Barclays’ disclosure of uncertain tax positions, including an advance copy of Barclays enhanced policy for such disclosure (see page 236), and subsequently confirmed in writing that it had closed its enquiries.*

The Committee from time to time considers comment letters from the SEC in relation to its reviews of Barclays’ annual report and other publicly filed financial statements. Such comment letters and Barclays’ responses are made publicly available by the SEC on its website, www.sec.gov, once it has closed each such review. The Committee sought to ensure that Barclays took due account of the SEC’s views in its external reporting.

Significant judgements and issues

The significant judgements and issues and actions taken by the Committee in relation to the 2016 annual report and financial statements are outlined below. The significant judgements and issues are broadly comparable in nature to prior years. Each of these matters was discussed with the external auditor during the year.

 

* The CRRT’s review was based on Barclays’ annual report and financial statements and did not benefit from detailed knowledge of Barclays’ business or the transactions entered into. The closure of the CRRT’s enquiries provides no assurance that Barclays’ annual report and accounts are correct in all material respects, as the FRC’s role is not to verify information but to ensure compliance with reporting requirements. The FRC accepts no liability for reliance on its closure letter from Barclays or any third party, including but not limited to investors and shareholders.
 

 

 

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).   

§   Regularly analysed the judgements and estimates made with regard to Barclays’ provisioning for PPI claims, taking into account forecasts and assumptions made for PPI complaints and actual claims experience for Barclays and the industry as a whole.

 

§   Debated the potential impact on the future range of provisions arising from the FCA’s proposed timebar on claims and the expected deadline of June 2019, discussing the levels of uncertainty in the projections.

 

§   Discussed 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 whether any increase in provisions was required.

 

§   Evaluated proposed additional provisions for PPI and whether the analysis performed by management was consistent with prior periods and reflected known trend data and whether Barclays’ approach was consistent with that taken by industry peers.

 

§   Assessed provisions for alternative PPI (card protection and payment break plan insurance) and the claims experience compared to the range of reasonable high and low end scenarios that had been determined.

 

   The Committee and management continue to monitor closely any changes in customer or claims management companies’ behaviour in light of the Plevin case and the proposed FCA timebar. Over the course of 2016, having assessed actual claims experience and the potential impact of the proposed timebar and the Plevin case, the Committee agreed to recognise additional provisions of £1000m in 2016, bringing Barclays’ total cumulative provisions against the cost of PPI redress and associated processing costs to £8.4bn, of which £2.0bn is remaining.

 

 

 

12  |  Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F   


    

    

    

 

 

 

 

Area of focus    Reporting issue    Role of the Committee    Conclusion/action taken

Legal, competition and regulatory provisions

(see Notes 27-29 to the financial statements).

   Barclays is engaged in various legal, competition and regulatory matters. The extent of the impact on Barclays of these matters cannot always be predicted, but matters can give rise to provisioning for contingent and other liabilities depending on the relevant facts and circumstances. The level of provisioning is subject to management judgement on the basis of legal advice and is therefore an area of focus for the Committee.   

§  Evaluated advice on the status of current legal, competition and regulatory matters.

 

§  Assessed management’s judgements and estimates of the levels of provisions to be taken and the adequacy of those provisions, based on available information and evidence.

 

§  Considered the adequacy of disclosure, recognising that any decision to set provisions involves significant judgement.

 

  

The Committee discussed provisions and utilisation. Having reviewed the information available to determine what was probable and could be reliably estimated, the Committee agreed that no additional provision should be made at the full year for ongoing investigations and litigation.

 

Further information may be found on pages 270 to 280.

Valuations

(see Notes 14-18 to the financial statements).

   Barclays exercises judgement in the valuation and disclosure of financial instruments, derivative assets and certain portfolios, particularly where quoted market prices are not available, including the Group’s Education, Social Housing and Local Authority (ESHLA) portfolio.   

§  Evaluated reports from Barclays’ Valuations Committee, with particular focus on the restructuring of the ESHLA portfolio and its subsequent de-recognition; a valuation disparity with a third party in respect of a specific long-dated derivative portfolio; and an assessment of the impact of negative interest rates on the valuation of derivatives.

 

§   Considered proposals from the Valuations Committee to revise the valuations approach for the remaining ESHLA portfolio and to revise the approach to the marking of Own Credit.

 

   The Committee confirmed its agreement to the restructuring and de-recognition of the ESHLA portfolio and concluded that it was a de-recognition event. It noted the lack of progress made in resolving the third-party valuation disparity, which has been outstanding for some time, and satisfied itself on the basis of the information available to it that Barclays’ valuation methodology remains appropriate. It approved a revision to the model used for valuing the remaining ESHLA portfolio recommended by the Valuations Committee.

Impairment

(see Note 7 to the financial statements).

   Where appropriate, Barclays models potential impairment performance, allowing for certain assumptions and sensitivities, to agree allowances for credit impairment, including agreeing the timing of the recognition of any impairment and estimating the size, particularly where forbearance has been granted.   

§  Assessed impairment experience against forecast and whether impairment provisions were appropriate.

 

§  Evaluated the appropriateness and timing of the impairment taken in connection with Barclays’ exposures to the oil and gas sectors, including the impact of single name losses in the oil and commodities sectors.

 

§  Debated the adjustment in impairment taken in the Cards business for informal forbearance arrangements and the potential impact of changes in emergence modelling.

 

§  Considered a report from the Group Impairment Committee on the adequacy of loan impairment allowances as at 31 December 2016, including assessing internal and external trends, methodologies and key management judgements.

 

   The Committee challenged the timing of the oil and gas impairment taken in the half-year results, although confirmed that the provision was adequate. It welcomed the proposal to create a new Group Impairment Committee and enhance the role of the Group Finance function in assessing impairment provisioning. It agreed a post-model adjustment of £250m for impairment in the UK and US Cards businesses during the third quarter of 2016 and obtained clarification on the impairment policy for the Cards business. At the full year, having debated the report from the Group Impairment Committee it confirmed the adequacy of the full year impairment charge of £2.4bn.

Tax

(see Note 10 to the financial statements).

   Barclays is subject to taxation in a number of jurisdictions globally and makes judgements with regard to provisioning for tax at risk and on the recognition and measurement of deferred tax assets.   

§  Evaluated the appropriateness of tax risk provisions to cover existing tax risk.

 

§  Debated the forecasts and assumptions supporting the recognition and valuation of deferred tax assets.

   The Committee confirmed the tax risk provisions for the full year and the treatment of deferred tax assets.

 

 

 

 

 

   Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F  |  13


Governance: Directors’ report

What we did in 2016

Board Audit Committee report

 

 

 

 

Area of focus    Reporting issue    Role of the Committee    Conclusion/action taken

Long-term viability

   The Directors are required to make a statement in the Annual Report as to the long-term viability of Barclays. The Committee provides advice to the Board on the form and content of the statement, including the underlying assumptions.   

§   Evaluated at year end a report from management setting out the view of Barclays’ long-term viability. This report was based on Barclays Medium Term Plan (MTP) and covered forecasts for capital, liquidity and leverage, including forecast performance against regulatory targets, outcomes of the stress test of the MTP and forecast capital and liquidity performance against stress hurdle rates, funding and liquidity forecasts and an assessment of global risk themes and the Group’s risk profile.

 

§   Considered the viability statement in conjunction with Barclays risk statements and strategy/business model disclosures.

 

§   Addressed specific feedback from investors and other stakeholders on viability statements in general.

 

   Taking into account the assessment by the Board Risk Committee of stress testing results and risk appetite, the Committee agreed to recommend the viability statement to the Board for approval.

 

Fair, balanced and understandable reporting

(including country-by-country reporting and Pillar 3 reporting).

  

 

Barclays is required to ensure that its external reporting is fair, balanced and understandable. The Committee undertakes an assessment on behalf of the Board in order to provide the Board with assurance that it can make the statement required by the Code.

  

 

§   Assessed, via discussion with and challenge of management, including the Group Chief Executive and Group Finance Director, whether disclosures in Barclays’ published financial statements were fair, balanced and understandable.

 

§   Evaluated reports from Barclays’ Disclosure Committee on its assessment of the content, accuracy and tone of the disclosures.

 

§   Established via reports from management that there were no indications of fraud relating to financial reporting matters.

 

§   Evaluated the outputs of Barclays’ internal control assessments and Sarbanes-Oxley s404 internal control process.

 

§   Assessed disclosure controls and procedures.

 

§   Confirmed that management had reported on and evidenced the basis on which representations to the external auditors were made.

  

 

Having evaluated all of the available information and the assurances provided by management, the Committee concluded that the processes underlying the preparation of Barclays’ published financial statements, including the 2016 annual report and financial statements, were appropriate in ensuring that those statements were fair, balanced and understandable.

 

In assessing Barclays’ financial results statements over the course of 2016, the Committee specifically addressed and provided input to management on the disclosure and presentation of:

 

§   Barclays restated financial results, including the allocations to Barclays UK and Barclays International and the separation of the Cards business.

 

§   the sell-down of Barclays holding in Barclays Africa and its classification as held for sale.

 

§   guidance provided to the market on the costs of Structural Reform.

 

§   the Group Finance Director’s presentations to analysts.

 

§   alternative performance measures in view of new guidance from the European Securities & Markets Association.

 

§   core performance and headcount.

 

§   operational risk capital and guidance on capital levels.

 

§   the level of segmental reporting.

 

The Committee recommended to the Board that the 2016 annual report and financial statements are fair, balanced and understandable.

 

 

 

 

 

14  |  Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F   


    

    

    

 

 

 

Other significant matters

Apart from financial reporting matters the Committee has responsibility for oversight of the effectiveness of Barclays’ internal controls, the performance and effectiveness of BIA and the performance, objectivity and independence of the external auditor. The most significant matters considered during 2016 are described below:

 

 

 

Area of focus

 

  

 

Matter addressed

 

  

 

Role of the Committee

 

  

 

Conclusion/action taken

 

 

Internal control

Read more about the Barclays’ internal control and risk management processes on pages 40 and 41

  

 

The effectiveness of the overall control environment, including the status of any material control issues and the progress of specific remediation plans.

  

 

§   Evaluated and tracked the status of the most material control issues identified by management via regular reports from the Head of Operational Risk and latterly from the Chief Controls Officer.

 

§   Evaluated the status of specific material control issues and associated remediation plans, including in particular those relating to Security of Secret and Confidential Data; Infrastructure Access Management; Group Resilience; IT Security; Data Governance; Model Risk Management; and Unsupported Infrastructure and Applications, all of which remained open at the end of 2016.

 

§   Discussed lessons learned from specific control incidents and how these could be applied to Barclays’ business globally, via an enhanced lessons-learned process.

 

§   Debated any regulatory reports or other feedback received from regulators on Barclays’ overall control environment.

 

§   Assessed the status of the enhancements being made to Barclays risk and control self-assessment (RCSA) process to support disclosures in Barclays annual report.

 

  

 

The Committee requested enhancements to reporting to make clear where operational risk was outside appetite and the actions being taken. The Committee welcomed the improvements made to the lessons-learned process and proposed that the new Group Controls Committee should play a role in setting standards for lessons-learned exercises and deciding when they should be conducted. The Committee endorsed the work being taken forward, under the leadership of the Chief Controls Officer, to address any feedback from regulators on Barclays’ control environment, noting that the Board would directly oversee the progress being made to address specific regulatory feedback. The Committee also challenged management to ensure that the RCSA process was sufficiently robust in light of some specific control issues that had emerged after certain RCSAs had been completed.

    

 

The effectiveness of the management control approach and control environment in each individual business, including the status of any material control issues and the progress of specific remediation plans.

  

 

§   Assessed individual reports from Barclays UK, Barclays International, the Cards business, Barclays’ Non Core operations, Barclays International’s US investment banking operations and Barclays Africa, including questioning directly the heads of those businesses on their management control approach/culture and control environment, including any specific control issues, resilience issues, the status and progress of any remediation plans or workstreams and plans to enhance the control environment.

 

§   Tracked plans for implementing revised control governance structures in each business to align with changes in Barclays’ organisational structure.

 

§   Provided feedback on the 2016 control objectives for each member of the Group Executive Committee.

 

  

 

The Committee welcomed the decision by Barclaycard to redirect strategic investment towards enhancing its control environment and to restrict growth in new business while certain control issues, such as fraud levels in the US, were addressed. To make clear the levels of personal accountability expected, the Committee asked for the control objectives for each member of the Group Executive Committee for 2016 to be made more specific, with an emphasis on prioritising control issues.

 

 

 

 

   Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F  |  15


Governance: Directors’ report

What we did in 2016

Board Audit Committee report

 

 

 

 

Area of focus    Matter addressed    Role of the Committee    Conclusion/action taken
     The effectiveness of the control environment in the Chief Operating Office (COO) and the status and remediation of any material control issues.   

§  Scrutinised on a regular basis the COO control environment, taking the opportunity to directly challenge and question functional leaders, including the Chief Operating Officer on the progress of remediation plans.

 

§  Debated the clarity of accountability and standards of consistency needed, given decentralisation of the business.

 

§  Addressed the issue of resilience and associated risk appetite, discussing in particular the impact of change on resilience initiatives.

 

§  Discussed the impact of the proposed sell-down of Barclays holding in Barclays Africa, including any ongoing support requirements on COO-related material control issues.

  

The Committee emphasised the need for clear ownership and accountability between the business and COO for technology control issues, which has been addressed via the implementation of the new organisational management structure. In view of the volume of technology and change remediation required, the Committee tasked the Chief Operating Officer with enhancing the processes for self-identification and logging of risk and control issues. The Committee also asked the new Chief Information Officer to conduct a deep dive into Technology control issues, the outputs of which were evaluated by the Committee in the fourth quarter of 2016. The Committee welcomed the improved clarity of the plans to enhance the COO control environment and will receive further regular updates throughout 2017.

 

     The adequacy of the Group’s arrangements to allow employees to raise concerns in confidence without fear of retaliation and the outcomes of any substantiated cases.   

§  Evaluated the results of benchmarking exercise to compare Barclays’ processes and case volumes to 40 peer companies.

 

§  Tracked the progress of the internal campaign to raise awareness among employees on raising concerns.

 

§  Monitored the trends in reported and substantiated whistleblowing cases, including any information on any instances of retaliation.

  

The Committee concluded that Barclays’ processes were appropriate and in line with peers. It noted that the successful internal campaign had generated an increase in the number of whistleblowing reports, all of which were investigated. Volumes of cases remain proportionate to Barclays’ size and footprint. The Committee asked management to provide additional detail in its future reports where any whistleblowing investigation was outstanding for more than six months. In future, as Barclays Whistleblowing Champion, the Chairman of the Committee will make an annual report to the Board on whistleblowing matters.

 

 

 

 

 

16  |  Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F   


    

    

    

 

 

 

 

 

Area of focus

 

  

 

Matter addressed

 

  

 

Role of the Committee

 

  

 

Conclusion/action taken

 

 

Internal audit

  

 

The performance of BIA and delivery of the internal audit plan, including scope of work performed, the level of resources and the methodology and coverage of the internal audit plan.

  

 

§   Scrutinised and agreed internal audit plans and deliverables for 2016, including agreeing the areas of focus, such as technology, data, change, execution risk, and the resources required.

 

§   Monitored delivery of the agreed audit plans, including assessing internal audit resources and attrition levels and any impacts on the plan.

 

§   Debated audit risk appetite and issue validation.

 

§   Tracked the levels of unsatisfactory audits, including discussing the time taken to issue audit reports and the reasons for any delays.

 

§   Discussed BIA’s assessment of the management control approach and control environment in Barclays UK, Barclays International and the COO.

 

§   Debated with BIA the possibility of auditing culture.

 

§   Evaluated the outcomes from BIA’s annual self-assessment.

 

§   Debated feedback received from the PRA on the performance of BIA and discussed the increased regulatory expectations of BIA and the impact on internal audit plans and resources.

 

  

 

The Committee approved an increase in headcount to ensure appropriate audit coverage of technology and change and agreed an interim audit risk appetite level pending recruitment, subject to the delivery of mitigating actions assigned to the Chief Operating Officer. The Committee emphasised to management that it was not content with the number of unsatisfactory audits and considered setting a target for management. It also asked BIA to disclose in its reports the reasons for any delay in issuing audit reports, along with details of any audit work that was deferred or cancelled. In view of the additional expectations placed on BIA, the Committee requested details of internal audit vacancies, business areas and skills sets and encouraged the Chief Internal Auditor to consider internal transfers and other creative solutions to fill resourcing gaps. It agreed with BIA the action plan to address the recommendations arising from the PRA review of BIA’s performance. The Committee confirmed that it was satisfied with the outcomes of the self-assessment of BIA performance, which evidenced that the function generally conforms to the standards set by the Institute of Internal Auditors. It further confirmed that it felt able to reply on the work of BIA in discharging its own responsibilities.

 

 

External audit

  

 

The work and performance of PwC, including the maintenance of audit quality during the period of transition to a new auditor.

  

 

§   Met with key members of the PwC audit team to discuss the 2016 audit plan and agree areas of focus.

 

§   Assessed regular reports from PwC on the progress of the 2016 audit and any material issues identified, including debating with PwC whether any changes to the audit plan were needed following the UK’s vote to leave the EU.

 

§   Discussed PwC’s report on certain control areas and the control environment, including a specific report on controls over access to payment systems requested by the Committee.

 

§   Discussed the draft audit opinion ahead of 2016 year end.

 

  

 

The Committee approved the audit plan and the main areas of focus.

 

Read more about the Committee’s role in assessing the performance, effectiveness and independence of the external auditor and the quality of the external audit below.

 

 

 

   Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F  |  17


Governance: Directors’ report

What we did in 2016

Board Audit Committee report

 

 

 

The Committee also covered the following matters:

§  tracked the progress of specific work being done to enhance Barclays’ financial crime controls and the deployment of a revised financial crime operating model. The Committee also assessed the Group Money Laundering Officer’s annual report and was briefed on any issues arising from the publication of the information known as the “Panama Papers”

§  assessed the status of the programme in place to ensure Barclays’ compliance with client assets regulatory requirements, including approving the annual client assets audit report and discussing the potential impact of Structural Reform on client assets

§  evaluated the outcomes of the assessment of the Committee’s performance and any areas of Committee performance that needed to be enhanced

§  reviewed and updated its terms of reference, recommending them to the Board for approval.

External auditor

PwC, and its predecessor firms, has been Barclays’ external auditor since 1896. An external audit tender was conducted in 2015, with a view to rotating the external audit firm for the 2017 audit onwards. PwC was not asked to tender. The tender process completed in summer 2015 and the Board announced in July 2015 that it had appointed KPMG as Barclays’ statutory auditor with effect from the 2017 financial year. Henry Daubeney of PwC has been Barclays’ senior statutory auditor with effect from the audit for the 2015 financial year. He will be succeeded by an audit partner from KPMG with effect from the audit for the 2017 financial year.

Assessing external auditor effectiveness, auditor objectivity and independence and non-audit services

The Committee is responsible for assessing the effectiveness, objectivity and independence of the Group’s auditor, PwC. This responsibility was discharged throughout the year at formal Committee meetings, during private meetings with PwC and via discussions with key executive stakeholders. In addition to the matters noted above, during 2016 the Committee:

§  approved the terms of the audit engagement letter and associated fees, on behalf of the Board

§  discussed and agreed revisions to the Group Policy on the Provision of Services by the Group Statutory Auditor and regularly analysed reports from management on the non-audit services provided to Barclays. Read more about non-audit services below

§  evaluated and approved revisions to the Group Policy on Employment of Employees or Workers from the Statutory Auditor and ensured compliance with the policy by regularly assessing reports from management detailing any appointments made

§  assessed the draft report to the PRA prepared by PwC regarding its detailed audit work on specific topics

§  was briefed by PwC on critical accounting estimates, where significant judgement is needed

§  assessed any potential threats to its independence self-identified and reported by PwC

§  reviewed the report on PwC issued by the FRC’s Audit Quality Review team.

PwC’s performance, independence and objectivity during 2016 were formally assessed at the beginning of 2017 by way of a questionnaire completed by key stakeholders across the Group. The questionnaire was designed to evaluate PwC’s audit process and addressed matters including the quality of planning and communication, technical knowledge, the level of scrutiny and challenge applied and PwC’s understanding of the business. The Committee was particularly interested in assessing whether audit quality was being maintained throughout the period of transition to a new auditor and that the appropriate degree of challenge and scepticism was being maintained. The results of the evaluation confirmed that both PwC and the audit process were effective. In view of the external audit tender conducted in 2015 and the decision to appoint KPMG as Barclays’ external auditor with effect from the 2017 financial year, PwC will resign as the Group’s statutory auditor at the conclusion of the 2016 audit and the Board will resolve to appoint KPMG to fill the vacancy. A resolution to appoint KPMG as auditor will be proposed at Barclays’ 2017 AGM. PwC will be available at the 2017 AGM to answer any questions.

Non-audit services

In order to safeguard the auditor’s independence and objectivity, Barclays has in place a policy setting out the circumstances in which the auditor may be engaged to provide services other than those covered by the Group audit. The Group Policy on the Provision of Services by the Group Statutory Auditor (the Policy) applies to all Barclays’ subsidiaries and other material entities over which Barclays has significant influence. The core principle of the Policy is that non-audit services (other than those legally required to be carried out by the Group’s auditor) should only be performed by the auditor in certain, controlled circumstances. The Policy sets out those types of services that are strictly prohibited and those that are allowable in principle. Any service types that do not fall within either list are considered by the Committee Chairman on a case by case basis, supported by a risk assessment provided by management. Since October 2015, the Committee has also required all new engagements of KPMG for non-audit services to be considered in light of the Policy and has maintained oversight of such services on the same basis as for PwC. In particular, KPMG was not permitted to provide any non-audit service that might have continued beyond mid-2016 if it had potential to cause independence issues.

During 2016, the Policy was revised to reflect the FRC’s draft Ethical Standard for Auditors published in September 2015, which implemented the EU’s revised Statutory Audit Directive. The new Ethical Standard is effective from financial years commencing on or after 17 June 2016, meaning that Barclays must comply with effect from 1 January 2017. However, the Committee decided to early adopt the requirements of the new Ethical Standard from 1 July 2016, to align with the point at which KPMG started its required period of independence. In order to comply with the new Ethical Standard, significant amendments were made to the list of services that are strictly prohibited by the Policy. A number of services being undertaken by PwC or KPMG were required to be exited following adoption of the new Policy, with any exceptions being approved by the Chairman and notified to the Committee.

Under the Policy, the Committee has pre-approved all allowable services up to £100,000, or £25,000 for tax advisory services, however, all proposed work, regardless of the fees, must be sponsored by a senior executive and recorded on a centralised online system, with a detailed explanation of the clear commercial benefit arising from engaging the auditor over other potential service providers. The audit firm engagement partner must also confirm that the engagement has been approved in accordance with the auditor’s own internal ethical standards and does not pose any threat to the auditor’s independence or objectivity. All requests to engage the auditor are assessed by independent management before work can commence. Requests for allowable service types in respect of which the fees are expected to meet or exceed the above thresholds must be approved by the Chairman of the Committee before work is permitted to begin. Services where the fees are expected to be £250,000 or higher must be approved by the Committee as a whole. All expenses and disbursements must be included in the fees calculation. The thresholds were not amended when the Policy was revised in 2016.

 

 

 

 

18 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F   


    

    

    

 

 

                      

 

During 2016, all engagements where expected fees met or exceeded the above thresholds were evaluated by either the Committee Chairman or the Committee as a whole who, before confirming any approval, assured themselves that there was justifiable reason for engaging the auditor and that its independence and objectivity would not be threatened. No requests to use PwC were declined in 2016 (2015: two), with one request to use KPMG declined (2015: n/a). On a quarterly basis, the Committee scrutinised details of individually approved and pre-approved services undertaken by PwC and KPMG in order to satisfy itself that they posed no risk to independence, either in isolation or on an aggregated basis. For the purposes of the Policy, the Committee has determined that any pre-approved service of a value of under £50,000 is to be regarded as clearly trivial in terms of its impact on Barclays’ financial statements and has required the Group Financial Controller to specifically review and confirm to the Committee that any pre-approved service with a value of £50,000 - £100,000 (or up to £25,000 for tax advisory services) may be regarded as clearly trivial. The Committee undertook a review of pre-approved services at its meeting in December 2016 and satisfied itself that such pre-approved services were clearly trivial in the context of their impact on the financial statements.

 

The fees paid to PwC for the year ended 31 December 2016 amounted to £49m (2015: £43m), of which £8m (2015: £9m) was payable in respect of non-audit services. Non-audit services represented 20.6% of the statutory audit fee (2015: 24.2%). A breakdown of the fees paid to the auditor for statutory audit and non-audit work can be found in Note 42 on page 304. Of the £8m of non-audit services provided by PwC during 2016, the significant categories of engagement, i.e. services where the fees amounted to more than £500,000, included:

 

§  audit-related services: additional work to facilitate the transition to KPMG as Barclays’ statutory auditor

 

§  transaction support: services provided in connection with the sell-down of Barclays’ holding in Barclays Africa, including acting as the reporting accountant on the circular issued to Barclays’ shareholders and providing comfort on associated documentation

 

§  quality assurance: performed on behalf of Barclays Africa over work conducted by Barclays in connection with the separation arrangements from Barclays.

 

The fees paid to KPMG for non-audit work during 2016 were £17.3m (2015: £38m). Significant categories of engagement approved in 2016 included:

 

§  Audit-related services: services provided in connection with minimum regulatory requirements for audits of benchmark interest rate submissions.

 

The Statutory Audit Services for Large Companies Market Investigation (Mandatory Use of Competitive Tender Processes and Audit Committee Responsibilities) Order 2014

As described in this report, Barclays is in compliance with the requirements of The Statutory Audit Services for Large Companies Market Investigation (Mandatory Use of Competitive Tender Processes and Audit Committee Responsibilities) Order 2014, which relates to the frequency and governance of tenders for the appointment of the external auditor and the setting of a policy on the provision of non-audit services.

     

 

Governance in Action – Statutory auditor transition

 

A significant activity for the Committee during 2016 has been overseeing the transition of Barclays’ statutory auditor from PwC to KPMG. Following the audit tender that concluded in mid-2015, KPMG will become Barclays statutory auditor with effect from the 2017 financial year onwards. The Committee has undertaken activity to manage the transition period to facilitate a smooth handover of responsibilities.

 

The Committee has overseen the steps required to enable KPMG to achieve independence by 1 July 2016. This included:

 

§  assigning a dedicated transition team to support operational activities, including progressing a global master services agreement and local jurisdictional agreements

 

§  agreeing with KPMG the overall plan to achieve independence and assessing regular reports from KPMG on the progress being made

 

§  monitoring the orderly termination of non-audit services being provided by KPMG to Barclays that would be prohibited when KPMG becomes statutory auditor

 

§  requiring KPMG to comply from 1 June 2016 with the provisions of the Group’s policies relating to the statutory auditor, specifically, The Group Policy on the Provision of Services by the Group Statutory Auditor and the Group Policy on Employment of Employees or Workers from the Statutory Auditor, and requiring management to report to the Committee on any services or appointments undertaken in line with these policies

 

§  accepting a formal independence letter from KPMG. This included a list of ongoing non-audit services that are deemed permissible and which have been approved in accordance with Barclays’ policy and confirmation of KPMG’s compliance with applicable ethics and independence rules.

 

Once independence was achieved, the Committee oversaw the handover plan and the transition to business as usual. This included:

 

§  inviting the lead audit partner of KPMG to attend Committee meetings as part of the process of shadowing PwC’s 2016 audit

 

§  arranging for the lead audit partner of KPMG to attend meetings of the Board Reputation Committee and Board Risk Committee

 

§  receiving a briefing from KPMG on accounting developments, covering: Impairment and the impact of IFRS9 (Financial Instruments); Valuations; Negative interest rates; Structural Reform; IFRS15 (Revenue from contracts with customers) and IFRS16 (Leases)

 

§  discussing with KPMG accounting policy interpretations following KPMG’s review of Barclays’ accounting policies

 

§  assessing regular reports from KPMG on the progress being made with key activities, including building the Barclays’ audit team and gaining an understanding of Barclays’ key processes, systems and controls

 

§  reviewing the report on KPMG issued by the FRC’s Audit Quality Review team

 

§  scheduling a planning meeting between the Committee and KPMG for the second quarter of 2017 to discuss the audit strategy and provide input.

 

 

   
                 

 

   Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F  |  19


Governance: Directors’ report

What we did in 2016

Board Risk Committee report

 

 

      

LOGO

 

LOGO  The Committee’s focus during 2016 has been driven by a number of key challenges, including emerging economic and political risks, notably those associated with the EU Referendum and the subsequent vote by the UK to leave the EU . LOGO

 

Dear Fellow Shareholders

 

The Committee’s focus during 2016 has been driven by a number of key challenges. First, Barclays has been implementing its new strategy and executing its Structural Reform Programme, which has some particular implications in terms of capital and liquidity management across Barclays’ legal entities. Second, there was continued focus on any emerging risks arising in our key markets in the UK, US and South Africa as a consequence of any macroeconomic deterioration or disruption in financial market conditions. Finally, there were the challenges presented by emerging economic and political risks, notably those associated with the EU Referendum and the subsequent vote by the UK to leave the EU.

 

Considerations for risk appetite for 2016 and the Medium Term Plan (MTP) included credit cycle conditions; the impact of ongoing low commodity prices; a potential slowdown in China; and the likelihood of interest rate rises. Consequently, the recommendation of the risk function, which was endorsed by the Committee, was that a conservative approach to growth should be maintained, with a focus on core products and markets. We expected continued volatility in external conditions and aimed to ensure that the Group was conservatively positioned. Headwinds developed during 2016 with the potential to have a significant first-order impact on Barclays’ businesses, including heightened economic risk in the UK post the EU Referendum; increased geo-political risk following the US presidential election; and the IAS19 position of Barclays’ pension scheme, which is vulnerable to market volatility. Other emerging risks with the potential to impact Barclays include interest rate and credit spread movements; UK property price stress; potential transmission impacts of any slowdown in China; and ongoing volatility in oil prices, which remain low. All of these potential risks continue to be actively managed and the risk profile and actions taken are subject to regular oversight by the Committee. In these circumstances, we were pleased with the capital and leverage performance for 2016, although impairment performance was adverse to plan, primarily as a result of one-off effects reflecting management’s review of impairment modelling in the UK and US Cards businesses.

 

In early 2016, Barclays appointed a new Chief Risk Officer, CS Venkatakrishnan, an appointment that was recommended to the Board by the Committee. The Committee oversaw the transition, specifically requesting information from the outgoing Chief Risk Officer on the transition plans and handover arrangements and seeking assurance from the new Chief Risk Officer that he had been provided with all of the information needed to enable him to fulfil his responsibilities. The Committee has welcomed the opportunity to work closely with the new Chief Risk Officer during 2016. We have also seen greater emphasis emerge over 2016 on the responsibilities of the first line of defence for

  

managing risk in their businesses, with the chief executives of each business attending Committee meetings to present directly to the Committee, with the support of their chief risk officers, on the risk profile of their business and how risk is being managed.

 

My own responsibilities as Chairman of the Committee were re-emphasised during 2016, with the introduction in March 2016 of the UK’s Senior Managers Regime. Under this regulatory regime, I have specific prescribed responsibilities for safeguarding the independence of and overseeing the performance of the risk function, including the performance of the Chief Risk Officer, in line with regulatory requirements. In addition to my regular meetings with the Chief Risk Officer and members of his senior management, I have led the Committee in encouraging the risk function to develop a way of assessing risk management capability, which we have also agreed will be subject to a periodic, external review. The risk function has also been encouraged to develop a way of measuring risk culture across the Group.

 

During 2016, I continued to liaise closely with the Chairman of the Board Audit Committee, particularly with regard to operational risk issues, where there is some degree of overlap between the remit of the two committees. I also attended a meeting of the risk committee of Barclays US IHC to gain a first-hand insight into the risk issues being addressed by management in that entity. I continued my practice of meeting regularly with other members of senior management and continued to engage with Barclays regulators in the UK and US.

 

Committee performance

The Committee’s performance during 2016 was assessed as part of the independently facilitated annual Board effectiveness review. I am pleased to report that the conclusion of my Board colleagues was that the Committee is regarded as thorough and effective and that the Board has a high degree of confidence in the diligence and coverage of the Committee. The main area identified for improvement was to ensure that the co-operation and collaboration between the Committee and the Board Audit and Board Reputation Committees continues to capture all significant risk issues effectively. I will be working even more closely with my fellow Board Committee chairmen on this over the coming year. You can read more about the outcomes of the Board effectiveness review on pages 33 to 35.

 

Looking ahead

2017 will be a key year for Barclays in delivering its strategy, as it completes its restructuring and makes significant steps in implementing the new legal entity structure required under Structural Reform. I expect the Committee to focus on strategic risk, with an emphasis on promoting even greater linkages between strategy formulation and risk management, and ensuring that there is appropriate global oversight of risk across the new Group structure.

 

LOGO

 

Tim Breedon

Chairman, Board Risk Committee

22 February 2017

      

 

20  |  Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F   


 

 

 

Board Risk Committee allocation of time (%)      
                   2016        2015  
LOGO     1     Risk profile/risk appetite (including capital and liquidity management)      52        43  
    2     Key risk issues      26        31  
    3     Internal control/risk policies      8        11  
    4     Other (including remuneration and governance issues)      14        15  
         
         
         

Committee composition and meetings

The Committee is comprised solely of independent non-executive Directors. Details of the skills and experience of the Committee members can be found in their biographies on pages 3 and 4.

The Committee met eight times in 2016, with one of the meetings held at Barclays’ New York offices. A meeting was held specifically to consider the risk considerations arising from the outcome of the EU Referendum result, further details of which can be found on page 24. The chart above shows how the Committee allocated its time during 2016. Committee meetings were attended by management, including the Group Chief Executive, Group Finance Director, Chief Internal Auditor, Chief Risk Officer, Barclays Treasurer and General Counsel, as well as representatives from the businesses and other representatives from the risk function. Representatives from the current external auditor, PwC and, from 1 July 2016, representatives from the incoming external auditor, KPMG, also attended meetings.

Member    Meetings attended/eligible to attend
Tim Breedon    8/8
Mike Ashley    8/8
Reuben Jeffery*    7/8
Diane Schueneman    8/8
Steve Thieke    8/8

 

*Did not attend one meeting owing to a prior commitment

Committee role and responsibilities

The Committee’s main responsibilities include:

 

§   recommending to the Board the total level of financial and operational risk the Group is prepared to take (risk appetite) to achieve the creation of long-term shareholder value

 

§   monitoring financial and operational risk appetite, including setting limits for individual types of risk, e.g., credit, market and funding risk

 

§   monitoring the Group’s financial and operational risk profile

 

§   ensuring that financial and operational risk is taken into account during the due diligence phase of any strategic transaction

 

§   providing input from a financial and operational risk perspective into the deliberations of the Board Remuneration Committee.

 

LOGO   The Committee’s terms of reference are available at home.barclays/corporategovernance
 

 

The Committee’s work

The significant matters addressed by the Committee during 2016 are described below:

 

Area of focus    Matter addressed    Role of the Committee    Conclusion/action taken
Risk appetite and stress testing, i.e. the level of risk the Group chooses to take in pursuit of its business objectives, including testing whether the Group’s financial position and risk profile provide sufficient resilience to withstand the impact of severe economic stress.    The risk context to MTP, the financial parameters and constraints and mandate and scale limits for specific business risk exposures; the Group’s internal stress testing exercises, including scenario selection and financial constraints, stress testing themes and the results and implications of stress tests, including those run by the Bank of England (BoE).   

§  Assessed the risk context for the 2016 MTP, including general economic and financial conditions and how these had been reflected in planning assumptions.

 

§  Debated the assumptions, parameters and results of the internal stress test of the risk appetite of the 2016 MTP.

 

§  Discussed and agreed mandate and scale limits for market and credit risk.

 

§  Approved the parameters for the European Banking Authority stress test.

 

§  Approved the parameters for BoE stress test scenario expansion.

 

§  Evaluated the BoE stress test results, including updates on stress testing governance and methodology and assessing potential contingency plan actions.

 

§  Debated regulatory and market reaction to the BoE stress test results.

 

§  Considered and approved internal stress test themes and the financial constraints and scenarios for stress testing risk appetite for the 2017 MTP.

 

§  Regularly monitored the progress of the US IHC in preparing for the Comprehensive Capital Analysis and Review (CCAR) stress test.

   The Committee recommended the proposed risk appetite for 2016 to the Board for approval, although asked management to develop a contingency plan with identified triggers and actions that could be implemented if the stress occurred. It also emphasised to management that mandate and scale limits should be set at appropriate levels, reflecting the desire to focus on conservative growth in core products and markets. The Committee approved credit and market risk limits and requested that additional limits were set for market risk in order to enhance monitoring and control. It also asked management to review limits and guidelines and develop a revised framework for single name risk management, which it subsequently considered and approved. The Committee approved the stress test results for submission to the BoE. After evaluating feedback from the BoE on the stress test, the Committee encouraged management to engage with the BoE on specific points where additional clarity on regulatory expectations was desirable.

 

 

 

 

   Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F  |  21


Governance: Directors’ report

What we did in 2016

Board Risk Committee report

 

 

 

 

Area of focus    Matter addressed    Role of the Committee    Conclusion/action taken
Capital and funding, i.e. having sufficient capital and financial resources to meet the Group’s regulatory requirements and its obligations as they fall due, to maintain its credit rating, to support growth and strategic options.    The trajectory to achieving required regulatory and internal targets and capital and leverage ratios, including the potential impact of Structural Reform and legal entity requirements.   

§  Debated on a regular basis, capital performance against plan, tracking the capital trajectory, any challenges and opportunities and regulatory policy developments.

 

§  Assessed on a regular basis liquidity performance against both internal and regulatory requirements.

 

§  Regularly monitored capital and funding requirements on a legal entity basis, including evaluating proposed capital and liquidity processes for Barclays UK.

 

§  Debated with management proposed actions to be taken to restructure the Group’s asset swaps and ESHLA portfolio in order to reduce the impact of market volatility on capital.

 

   The Committee supported the forecast capital and funding trajectory and the actions identified by management to manage the Group’s capital position, including the actions taken to restructure asset swaps and the ESHLA portfolio. The Committee approved the proposed capital and liquidity processes for Barclays UK for submission to the regulator.
Political and economic risk, i.e. the impact on the Group’s risk profile of political and economic developments and macroeconomic conditions.    The potential impact on the Group’s risk profile of political developments, such as the UK’s EU Referendum and the US Presidential election, political and economic risk in South Africa, and weakening macroeconomic conditions, such as disruption and volatility in financial markets.   

§  Closely monitored the potential impact of the UK’s EU Referendum on the Group’s risk profile and risk management – see the case study below for further details.

 

§  Requested an assessment of the potential impact of negative interest rates in the UK on Barclays and on UK banks generally, evaluating the potential impact on risk appetite, on customers and on Barclays’ models.

 

§  Continued to assess the economic and political situation in South Africa and the potential impact on the Group’s risk profile, including assessing the potential risk of a sovereign credit rating downgrade and the action taken by management to position the business appropriately.

 

§  Continued to assess Chinese economic metrics and the potential for the global impact of any economic slowdown in China.

 

§  Discussed the impact of market volatility on Barclays’ pension scheme.

 

§  Monitored Barclays’ exposures to certain European banks in view of potential specific stresses for individual banks and general economic and political conditions in the Eurozone.

 

  

The Committee identified interest rate risk as a potential area of emerging risk and asked management for an assessment of Barclays’ sensitivity to changes in interest rates and inflation, which was presented to the Committee in the fourth quarter. The Committee suggested that the Board was briefed on this subject and a briefing session is planned for 2017.

 

The Committee satisfied itself that the actions taken to position Barclays’ business in South Africa were appropriate in the context of the identified economic and political risk. It continues to keep the potential impact of a Chinese slowdown under active review and will be updated by management in early 2017 with an assessment of the risk horizon. Given the political and economic uncertainty in Italy that re-emerged in late 2016, the Committee asked management to renew its focus on reducing any redenomination risk arising from Barclays’ operations in Italy.

Specific sector risk, i.e. the Group’s risk profile in sectors showing signs of stress, such as the oil sector.    The Group’s exposures to the oil and commodities sectors in light of the ongoing price weakness and volatility in these sectors during 2016.   

§  Continued to regularly assess the Group’s exposures to the oil sector, including how the portfolio was performing and whether this was in line with expectations given the actions that had been taken to manage or restructure Barclays’ exposures.

 

  

The Committee satisfied itself that the actions taken by management were appropriate. Given ongoing volatility in this sector it will continue to monitor the portfolio for any further signs of stress that may require additional action.

 

 

 

22  |  Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F     


    

    

    

 

 

 

 

 

Area of focus

 

  

 

Matter addressed

 

  

 

Role of the Committee

 

  

 

Conclusion/action taken

 

 

Credit risk, i.e. the potential for financial loss if customers fail to fulfil their contractual obligations.

  

 

Conditions in the UK housing market, particularly in London and the South East and the Group’s risk appetite for and management of sectors such as the buy-to-let sector, given changes in taxation; levels of UK consumer indebtedness, particularly in the context of the risk of rising interest rates; and the performance of the Cards business, particularly the US Cards business, including levels of impairment.

  

 

§   Continued to assess conditions in the UK property market for any signs of stress.

 

§   Evaluated how management was tracking and responding to rising levels of consumer indebtedness.

 

§   Scrutinised the performance of the Cards business, including reviewing performance against risk appetite, evaluating the drivers of impairment in the UK and US businesses and assessing actions being taken to ensure that the performance of certain business segments remained within agreed risk appetite.

 

  

 

The Committee continued to encourage management to carry on with its conservative approach to UK mortgage lending, particularly in view of signs of slowdown the market post the EU Referendum. It also encouraged management to continue its close monitoring of overall levels of consumer indebtedness. The Committee challenged the credit performance of certain business segments in the US Cards business and encouraged management to complete the actions that had been identified to improve credit performance. It also emphasised to management the need to strengthen the linkages between business strategy and risk appetite.

 

 

Operational risk, i.e. costs arising from human factors, inadequate processes and systems or external events.

  

 

The Group’s operational risk capital requirements and any material changes to the Group’s operational risk profile and performance of specific operational risks against agreed risk appetite.

  

 

§   Tracked operational risk key indicators via regular reports from the Head of Operational Risk.

 

§   Evaluated the potential impact of regulatory developments on operational risk capital requirements.

 

§   Debated specific areas of operational risk, including fraud; transaction operations; technology; payments; and cyber-risk, evaluating the extent of any losses, the overall threat landscape, risk trends and the controls in place, in order to assess the potential impact on operational risk capital requirements.

 

  

 

The Committee focused its attention on the financial and capital impacts of operational risk, with specific attention on key risks that were outside appetite. It encouraged management to implement greater links between the control environment in each business and the operational risk capital allocated to that business. It also emphasised to management that there should be greater co-ordination between the key risks highlighted to the Committee and the operational risk control issues escalated to the Board Audit Committee, which is being addressed via the new chief controls office.

 

 

Risk framework and governance

  

 

The frameworks, policies and talent and tools in place to support effective risk management and oversight.

  

 

§   Evaluated model risk and plans in place to enhance Barclays’ models and modelling capabilities.

 

§   Tracked the progress of significant risk management projects, including the plans in place to achieve compliance with BCBS239 risk data aggregation principles.

 

§   Debated any risk management matters raised by Barclays’ regulators and the actions being taken by management to respond.

 

§   Discussed and endorsed the revised Enterprise Risk Management Framework (ERMF) from the perspective of financial and operational risk.

 

§   Oversaw the transition and handover to a new Chief Risk Officer.

 

§   Encouraged management to find ways of assessing risk capability and risk management culture.

 

  

 

The Committee will continue to track the delivery of plans to enhance modelling and will focus on this during 2017 as part of its oversight of the model risk principal risk. The Committee encouraged management to continue to improve risk data quality, including embedding accountability for risk data quality with the business chief risk officers. The Committee will continue to track management’s response to any risk management matters raised by the Group’s regulators.

 

The Committee was satisfied that the handover to the new Chief Risk Officer was appropriate. The Committee welcomed the development of a risk management capability scorecard and asked for risk management capability to be evaluated by an external third party on a periodic basis, with a view to starting in 2017. It also welcomed the proposal to measure risk culture and asked for this to be fed into the Board Reputation Committee’s overall assessment of Barclays’ culture.

 

 

Remuneration

  

 

The scope of any risk adjustments to be taken into account by the Board Remuneration Committee when making remuneration decisions for 2016.

  

 

§   Debated the Risk function’s view of 2016 performance, making a recommendation to the Board Remuneration Committee on the financial and operational risk factors to be taken into account in remuneration decisions for 2016.

 

  

 

The Committee asked for capital and liquidity on a stressed basis to be taken into account when finalising the risk input to remuneration decisions.

 

 

     Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F  |  23


Governance: Directors’ report

What we did in 2016

Board Risk Committee report

 

 

 

In addition, the Committee also covered the following matters in 2016:

 

§   assessed Barclays’ exposures to the leveraged finance market and general conditions in that market

 

§   was briefed by PwC on any risk matters associated with the 2015 year-end audit, specifically impairment; the valuation of the ESHLA portfolio; and a valuation disparity with a third party

 

§  evaluated the outcomes of the assessment of the Committee’s performance and any areas of Committee performance that needed to be enhanced

 

§  reviewed and updated its terms of reference, recommending them to the Board for approval

 

        

 

Governance in Action –

contingency planning for the UK’s EU Referendum

 

   

A significant external risk event in 2016 was the UK’s Referendum on its continued membership of the EU. The Board Risk Committee actively tracked this emerging risk throughout 2016, both before and after the vote.

 

      

Pre-EU Referendum activity by the Committee included:

 

§  debating the UK’s potential exit from the EU, including evaluating an assessment of the potential impacts on Barclays of a leave vote and discussing the key messages for policymakers and prudential authorities on the risks

 

§   evaluating Barclays’ potential exposures if there were to be a vote to leave the EU, including assessing the steps taken by management to mitigate any risk (such as reducing any currency mismatches) in order to position Barclays defensively to manage the impact of any volatility on market and funding risk

 

§   assessing the likelihood of any operational risk issues that might arise if there was a period of market volatility following a leave vote

 

§   conducting an overall review of the appropriateness of Barclays’ preparations for any market dislocation

 

§   reporting to the Board on the Committee’s deliberations.

 

In addition to the activities undertaken by the Committee, Board members, including certain non-executive Directors, participated in a Group crisis management planning exercise based on the UK voting to leave the EU. The exercise focused on Barclays’ response and communications planning in the event of a vote to leave; articulating some of the high level impact scenarios following a vote to leave; and determining the decisions and ensuing direction required from Barclays’ Crisis Leadership Team.

  

Post-EU Referendum activity by the Committee included:

 

§  convening a special meeting to discuss and evaluate the effectiveness of Barclays’ preparations, concluding that the plans developed had been executed satisfactorily

 

§   assessing the performance of the actions taken to manage the impact of volatility on market and funding risk

 

§   evaluating a revised stressed outlook, based on revised economic assumptions, and its impact on Barclays’ risk profile, deliberating the effect of the revised outlook on forecast impairment and on capital and funding, market risk and credit risk

 

§   considering Barclays’ exposures to European banks in anticipation of potential market disruption in the Eurozone and the actions that had been taken to limit such exposures

 

§  discussing with management the actions that had been taken to reduce risk appetite and limits on exposures to residential property development, high loan-to-value mortgages and buy to-let lending and other actions that had been implemented to manage risk in higher risk retail segments and corporate portfolios

 

§   encouraging management to consider the strategic implications of the leave vote

 

§   emphasising to management the need to fully and openly engage on matters of mutual concern with the UK government and regulators given the new political and economic environment

 

§  continuing to track the potential impact of the leave vote and the actions being taken by management to deal with any emerging signs of stress in Barclays’ portfolios

 

§   reporting to the Board on the Committee’s deliberations.

 

The full Board also met in the aftermath of the vote result to be briefed on how Barclays had performed during the period of volatility immediately following the result, including discussing Barclays’ capital and liquidity position; market conditions; communications with employees and with customers and clients; contact with regulators and the UK government; the outlook for the UK economy; share price performance and potential strategic impacts.

 

   
   

LOGO

  

Read more about Barclays’ risk management on pages 342 to 403.

 

     
                      

 


 

24  |  Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F   


Governance: Directors’ report

What we did in 2016

Board Reputation Committee report

 

 

 

LOGO

 

LOGO  Achieving and sustaining a culture where all of our people demonstrate consistent behaviours and conduct underpinned by the Barclays’ values is key to delivering high performance for all our stakeholders and, therefore, to our long-term success.  LOGO

 

 

Dear Fellow Shareholders

One of the key areas of focus for the Committee during 2016 was encouraging management to develop a way of better understanding and measuring intangible areas such as behaviour and culture. Barclays has a strong and resonant purpose, Helping people achieve their ambitions in the right way, and a well understood set of values, Respect, Integrity, Service, Excellence and Stewardship. This culture is firmly endorsed from the top: achieving and sustaining a culture where all of our people demonstrate consistent behaviours and conduct, underpinned by Barclays’ values, is key to delivering high performance for all our stakeholders and, therefore, to our long-term success.

 

Our challenge has been how to co-ordinate the efforts to build culture across the Group and obtain assurance that progress is being made. Significant focus was given during 2016 to developing consistent measurement and reporting of culture and you can read about the Committee’s role in this important initiative in the case study on page 28. A similar approach has been taken to developing a set of indicators to allow us to measure progress across the Committee’s other areas of responsibility: conduct, complaints and citizenship.

 

During 2016, the Committee continued to track the exposure of Barclays, and the financial sector in general, to reputational risks. It also placed a renewed focus on the initiatives under way to build and manage Barclays’ reputation with its key stakeholders. We also continued to exercise oversight of the Barclays’ Compliance function, including approving its annual business plan, budget and resources.

 

Under the UK’s Senior Manager Regime, which was introduced in March 2016, I have specific responsibilities with regard to safeguarding the independence and integrity of Barclays’ Compliance function and for overseeing its performance, including that of the Head of Compliance. To this end, I regularly meet with the Head of Compliance to receive briefings on the work of Compliance and provide support when necessary. I also meet regularly with other members of senior management, including those in the Corporate Relations, Citizenship and Reputation Risk teams.

 

 

  

 

This is my first report as Chairman of the Board Reputation Committee and I wish to record my thanks to Sir Michael Rake, who I succeeded as Chairman on 1 January 2016, and to Wendy Lucas-Bull and Frits van Paasschen, who both stepped down from the Committee on their retirement from the Barclays Board during 2016. Mike Ashley and Mary Francis subsequently joined the Committee to ensure we have the right balance of skills and experience and appropriate cross-membership with other Board Committees.

 

The report on pages 26 to 28 sets out details of the material matters considered by the Committee during 2016.

 

Committee performance

The Committee’s performance during 2016 was assessed as part of the independently facilitated annual Board effectiveness review. I can report that my fellow Board members considered that the Committee has made progress in defining its role and is performing well. The main area identified for improvement was around ensuring that Board members have greater awareness of the Committee’s mandate and core agenda. You can read more about the outcomes of the Board effectiveness review on pages 33 to 35.

 

Looking ahead

Cultural transformation remains firmly on the Committee’s agenda and we will continue to track key indicators and measure the progress being made. This will be increasingly important as Barclays implements its Structural Reform Programme and begins to establish separate legal entities within the Group. My key objective in 2016 was to put the Committee at the centre of Barclays’ drive to be a leader in conduct, culture and reputation - matters at which we have not always excelled in the past. There is still lots to do, but I believe that the leadership and processes that we have now put in place give us a great foundation on which to build.

 

LOGO

 

Sir Gerry Grimstone

Chairman, Board Reputation Committee

22 February 2017

 

   Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F  |  25


Governance: Directors’ report

What we did in 2016

Board Reputation Committee report

 

 

 

 

Board Reputation Committee allocation of time (%)

 

                 
                   2016        2015    
LOGO  

 

 

 

1

 

 

 

 

Citizenship

  

 

 

 

8

 

 

  

 

 

 

6  

 

 

    2     Reputational issues      27        13    
    3     Culture, conduct and compliance      57        57    
    4     Operational risk*      0        19    
    5     Other      8        6    
         
         
         
         

 

* Oversight of operational risk now falls within the remit of the Board Risk Committee

Committee composition and meetings

The Committee comprises independent non-executive Directors. During 2016 there were a number of changes to the membership of the Committee, which are set out in the table opposite.

The Committee met five times during 2016 with one of the meetings held at Barclays’ New York offices. The chart above shows how it allocated its time. Committee meetings were attended by representatives from management, including the Group Chief Executive, Chief Internal Auditor, Chief Risk Officer, General Counsel, Group Corporate Relations Director and Heads of Compliance, Conduct Risk and Operational Risk, as well as representatives from the businesses and other functions. Representatives from the FCA also attended a meeting during 2016.

Member      Meetings attended/eligible to attend  
Sir Gerry Grimstone (from 1 January 2016)      5/5  
Mike Ashley (from 1 May 2016)      4/4  
Mary Francis (from 1 November 2016)      2/2  
Wendy Lucas-Bull (to 1 March 2016)      0/0
Dambisa Moyo      5/5  
Diane de Saint Victor      5/5  
Frits van Paasschen (to 28 April 2016)      1/1  

 

* There were no Committee meetings held prior to 1 March 2016, when Wendy Lucas-Bull left the Committee

Committee role and responsibilities

The principal purpose of the Committee is to:

 

§   support the Board in promoting its collective vision of Barclays’ purpose, values, culture and behaviours

 

§   ensure, on behalf of the Board, the efficiency of the processes for identification and management of conduct and reputational risk

 

§   oversee Barclays’ conduct in relation to its corporate and societal obligations, including setting the guidance, direction and policies for Barclays’ approach to customer and regulatory matters and Barclays’ Citizenship Strategy, including the management of Barclays’ economic, social and environmental contribution.

 

LOGO  

The Committee’s terms of reference are available at

home.barclays/corporategovernance

 

 

 

The Committee’s work

The significant matters addressed by the Committee during 2016 are described below:

 

Area of focus    Matter addressed    Role of the Committee    Conclusion/action taken
Conduct risk    The risk of detriment to customers, clients, market integrity, competition or Barclays from the inappropriate supply of financial services, including instances of wilful or negligent misconduct.   

§  Discussed updates from management on conduct risk and requested the development of a dashboard report of conduct indicators to be presented to each meeting.

 

§  Monitored on a regular basis performance against agreed conduct risk indicators.

 

§  Debated the indicators that had been developed to measure material conduct risks and issues, including providing feedback on indicators for policy breaches.

 

§  Discussed with BIA its view of the management of conduct risk across the Group, with particular emphasis on maintaining focus on conduct risk through periods of change.

 

§  Provided input, via the Committee Chairman, to the scope of BIA’s review of the conduct risk programme.

 

§  Discussed directly with the senior management of Barclays International and Barclays UK their view of conduct and cultural issues in those businesses and the status of any initiatives in place to strengthen conduct and culture.

 

§  Confirmed with management that reviews had been undertaken to learn lessons from issues that had arisen at other banks and financial institutions, e.g. sales-based incentive schemes.

 

§  Tracked the levels of attestation by colleagues globally to The Barclays Way, the Group’s code of conduct.

 

   The Committee requested further focus on product propositions and suitability and updates on product development and controls. In 2017, it will receive a quarterly report on new products. It provided input on the development of the dashboard, including requesting that it incorporates reports from BIA and draws on external data points where available. The Committee reiterated to management the importance of ensuring that the focus on conduct is maintained in those businesses or jurisdictions that Barclays is exiting or where it is reducing its presence. The Committee encouraged management to bring contingent workers into the scope of The Barclays Way training and arrangements are being made for all Committee members to complete the training themselves.
    

The scope of any conduct risk adjustments to be taken into account by the Board Remuneration Committee when making remuneration decisions for 2016.

 

  

§  Considered the proposed adjustments to be made to the incentive pool from a conduct risk perspective.

   The Committee endorsed the methodology used and the resulting adjustments proposed.

 

26  |  Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F     


    

    

    

 

 

 

 

 

Area of focus

   Matter addressed    Role of the Committee    Conclusion/action taken
Cultural change    The progress being made on embedding of cultural change.   

§  Debated reports on the progress being made to effect cultural change across Barclays globally, discussing the measures being taken to define the desired culture and how it would be measured.

 

§  Requested that a single report of cultural indicators was developed for reporting to each meeting and monitored on a regular basis performance against the agreed indicators.

 

§  Discussed the status of the actions arising from the Banking Standards Board’s (BSB) 2015 assessment of Barclays, the progress of the 2016 assessment and the resulting 2016 assessment report, asking management for greater co-ordination between the BSB’s work and internal employee surveys.

 

   Read more about the development of the culture measurement framework in the case study on page 28.
Complaints    Ensuring fair outcomes for customers by monitoring volumes of complaints received and the standard and quality of complaints handling processes.   

§  Requested the development of a dashboard report of complaints indicators to be presented to each meeting.

 

§  Monitored on a regular basis performance against agreed complaints indicators.

 

§  Discussed the way in which complaints are handled and the focus on resolving complaints at first point of contact.

 

§  Debated imminent industry-wide changes in the way in which reportable complaints are recorded and the potential for reputation risk.

 

   The Committee encouraged management to develop a way of defining and reporting on complaints in the Barclays International’s investment bank and a standard on complaint handling in that business will be issued in the first quarter of 2017. The Committee requested that additional information on the top root causes of complaints was included in future reports.
Citizenship    The status of Barclays’ Citizenship Plan 2016-2018, the Shared Growth Ambition.   

§  Debated the targets to be set for the Shared Growth initiatives.

 

§  Agreed with the proposal to focus activity around the themes of access to employment, to financial and digital empowerment and to financing.

 

§  Assessed status updates on the progress of the Shared Growth Ambition.

 

§  Requested the development of a dashboard report of citizenship indicators to be presented to each meeting and monitored on a regular basis performance against agreed indicators.

 

§  Considered and recommended to the Board for approval Barclays statement under the UK’s Modern Slavery Act, which can be found on Barclays’ website.

 

  

The Committee provided feedback on how the Shared Growth Ambition was articulated and requested additional information on the focus areas and metrics and how progress would be measured and reported. Its feedback was incorporated into the plan, which was launched in June 2016.

Reputation risk    Ensuring that Barclays anticipates, identifies and manages reputational issues that may impact it or the industry now or in the future.   

§  Monitored current reputation risk issues, including Barclays’ involvement in sensitive sectors such as defence or energy and fossil fuels.

 

§  Assessed emerging reputational issues, such as climate change and the relaxation of certain sanctions against Iran.

 

§  Evaluated the measures being taken to proactively build and manage Barclays’ reputation with stakeholders.

 

§  Assessed external opinion survey results, the trends in indicators and factors influencing the survey results, including the potential impact of the EU Referendum and government leadership changes in the UK and US.

 

§  Discussed the reputational risks associated with tax and how this was being managed across the Group, including the effectiveness of Barclays’ Tax Principles and Code of Conduct.

 

   The Committee provided feedback on the form and content of the reputation risk reports and how Barclays-specific and systemic risks might be monitored. It approved changes to Barclays’ Sanctions Policy with regard to sanctions with Iran. The Committee requested a regular report setting out a rolling 12-month view of Barclays’ communications campaigns. It also requested and received an update on Barclays’ crisis management plans. It requested and received further information on Barclays’ business in low tax jurisdictions. It asked for and receives regular reports from the Tax Management Oversight Committee on the transactions it has reviewed.

 

 

 

 

   Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F  |  27


Governance: Directors’ report

What we did in 2016

Board Reputation Committee Report

 

 

   

 

The Committee also covered the following matters:

 

§   discussed the progress of plans to develop the Barclays brand

 

§   endorsed the 2017 priorities for Barclays Corporate Relations team

 

§   assessed the revised ERMF from a conduct and reputation risk perspective and recommended it to the Board for approval

 

§   approved the 2016 Compliance business plan and tracked progress, including updates on resourcing and attrition levels

      

 

§   received a report on management’s annual review of the effectiveness of compliance with the Volcker Rule (restrictions on proprietary trading and certain fund investments by banks operating in the US)

 

§   assessed and discussed a report on the Committee’s performance during 2015

 

§   approved revisions to its terms of reference and recommended them to the Board for approval.

 

   
             LOGO    Read more about Barclays’ risk management on pages 342 to 403.    
 
                   
 

 

Governance in Action –

measuring cultural progress

 

A primary area of focus for the Committee in 2016 was providing challenge and support to management in its delivery of cultural change. The Group Executive Committee confirmed conduct, culture and values as one of its execution priorities for 2016, with the aim of monitoring cultural change and bringing together different cultural indicators to form a coherent and consolidated view of culture across Barclays.

 

Senior representatives from Compliance, Risk, HR and BIA presented to the Committee in early 2016 on the progress of implementing cultural change and proposals for developing a set of key indicators, along with clear governance structures and accountability for monitoring and sustaining cultural progress. The Committee debated and endorsed the following objectives:

 

§  identify the desired culture end-state and how to measure progress towards achieving it

 

§  develop a cultural measurement tool that provides simple and consistent reporting relevant to all stakeholders

 

§  use the insights obtained to drive actions and further embed and sustain the desired values-based culture.

 

Ten cultural outcomes were identified, firmly linked to Barclays’ values:

 

     

 

 

For each desired cultural outcome, a set of internal qualitative and quantitative indicators was identified, along with external perception indicators. The indicators proposed were drawn from existing indicators used in the Group, such as the results from Your View (the employee opinion survey), results from Barrett Values Surveys of Barclays’ Executive and Senior Leadership Group, external opinion survey results, BIA reports, performance reviews and indicators relating to risk management and compliance. Assessing these indicators will ensure that ongoing efforts are focused on priority issues and challenges that may impede cultural transformation.

 

In debating and endorsing the proposed cultural outcomes and indicators, the Committee provided feedback to management. It discussed in particular:

 

§   how to embed the desired culture across middle-management and whether a targeted action plan was needed for this population

 

§   how structuring incentives in the right way, based on personal accountability, could help drive the right culture and behaviours

 

§   whether a more holistic approach was needed to performance reviews, with even more focus on rewarding how things were done, rather than what was achieved

 

§   that indicators based around the ‘how’ assessments from performance reviews might be incorporated as a measure of success

 

§   that existing indicators on audit issues and regulatory actions could be incorporated as a measure of success.

 

Feedback from the Committee was subsequently incorporated into the measurement tool. The Committee also requested the development of a culture dashboard, setting out quarterly performance against the agreed indicators. The first such report was made in September 2016, with a further report in December 2016, allowing the Committee to debate the results and trends and the areas identified for potential deep dive reviews or targeted action. During 2017, the Committee will continue to assess the quarterly indicators, the potential themes emerging and any specific challenges identified at a business and functional level.

   
 

 

Value

 

  

 

Cultural outcomes            

 

         
  Respect    Inclusion    Collaboration          
  Integrity    Speaking up    Personal accountability          
  Service    Customer/client centricity    Balanced short and long-term needs          
  Excellence    Simplicity and efficiency    High performance          
  Stewardship    Continuous improvement    Strong reputation          
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                             

 

28  |  Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F   


Governance: Directors’ report

What we did in 2016

Board Nominations Committee report

 

 

 

LOGO

 

LOGO  It is a key part of our role to be satisfied that there are proper processes in place for executive succession.  LOGO

 

 

Dear Fellow Shareholders

Following his appointment as Group Chief Executive at the end of 2015, Jes Staley has been building his Group Executive Committee. Board level consideration is required for appointments to the Group Executive Committee and throughout 2016 the Board Nominations Committee continued to embed its oversight of Group Executive Committee succession planning. The Committee was updated on Barclays’ talent and succession strategy and presented with role profiles and outputs from reviews of internal successors to Group Executive Committee roles.

It is a key part of our role to be satisfied that there are proper processes in place for executive succession and at our regular meetings we discussed how potential successors are being provided with wider, relevant experience as part of their development.

 

Another ongoing area of focus for the Committee in 2016 was the composition of our subsidiary boards in light of the legal, regulatory and governance requirements of Structural Reform. A great deal of consideration has been given to ensuring the independence of the board and board committees of Barclays’ strategically significant subsidiaries, while allowing for collaboration between those boards and the Barclays Board. We have deliberated at length on the structure of the subsidiary boards and how they will report into and interact with our Group Board, which must continue to have appropriate oversight to ensure the effective operation of the Group and the protection of shareholder interests. During 2016, we finalised and recommended to the Board a set of Governance Guiding Principles, which document the high level expectations of the relationship that will exist between Barclays and its strategically significant subsidiaries.

 

The Committee regularly considered the balance of skills, experience and diversity needed on the Board during 2016. We refreshed the Board skills matrix to reflect the future strategy of the Group, identifying the attributes required to further strengthen and enhance the Board’s effectiveness. We conducted searches for new non-executive Directors, approving the appointment of Mary Francis as non-executive Director: Mary brings both financial services experience and significant non-executive directorship experience to the Board. We also considered subsidiary board composition at each of our Committee meetings, with a particular focus on populating the strategically significant subsidiary boards as we continue to embed Structural Reform. It is fair to say that attracting candidates with the skills, experience and qualities we need remains a considerable task: serving on a bank board is not an undertaking that anyone considers lightly and our success in securing the right candidates has been necessarily limited by the challenges they perceive.

 

  

 

When considering Board and Board Committee composition and succession plans diversity remains at the front of our minds. We continued to receive regular updates on diversity and inclusion during 2016 and were pleased to hear that the number of women in senior leadership positions had increased for the third successive year. As a Board we met our target of 25% female representation by 2015 and are progressing towards the target we set ourselves last year of 33% female representation by 2020. Diversity is not just about gender, however, and we are always mindful of diversity in all of its forms, even where we have not set specific targets.

 

Certain responsibilities for me as Chairman of the Committee have been prescribed by the Senior Managers Regime that was introduced in the UK in March 2016. Under that regime, I am responsible for ensuring that the Committee remains independent and that it performs effectively, fulfilling the responsibilities expected of it by our regulators in terms of overseeing decisions around the structure, size, composition, diversity and performance of the Board. The report that follows describes how these responsibilities have been fulfilled. I would like to take this opportunity to thank my fellow Committee members for their continued support during 2016.

 

Committee performance

The performance of the Committee was assessed as part of the annual Board effectiveness review and I am pleased to report that is was assessed to be performing effectively. An area identified for improvement was around ensuring that there are more regular reports to the Board on the status of recruitment of new non-executive Directors, which I will address. The report on the Board effectiveness review contains more information and can be found on pages 33 to 35.

 

Looking ahead

In 2017 we will continue to support the implementation of the new Group structure, ensuring that we have the right people in place to take Barclays forward. As appropriate, we will continue to make recommendations to the Board to ensure that we remain at the forefront of best practice corporate governance standards.

 

LOGO

 

John McFarlane

Chairman, Board Nominations Committee

22 February 2017

 

   Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F  |  29


Governance: Directors’ report

What we did in 2016

Board Nominations Committee report

 

 

 

 

 

Board Nominations Committee allocation of time (%)

 

  
               

 

 

 

2016

 

 

     2015     
  LOGO   1 Corporate governance matters      20        17     
    2 Board and Committee composition      36        24     
    3 Succession planning and talent      31        47     
    4 Board effectiveness      8        6     
   

5 Other

 

     5        6     

Committee composition and meetings

The Committee is composed solely of independent non-executive Directors. John McFarlane, as Chairman of the Board, is also Chairman of the Committee. Mike Ashley, Tim Breedon, Crawford Gillies, and Sir Gerry Grimstone, being the Chairmen of each of the other Board Committees, and Reuben Jeffery, are also members of the Committee. Details of the skills and experience of the Committee members can be found in their biographies on pages 3 and 4.

During 2016 there were seven meetings of the Committee, including one joint meeting with the Board Remuneration Committee. Three of these meetings were held at short notice to deal with specific matters. Attendance by members at Committee meetings is shown opposite and the chart above shows how the Committee allocated its time. Committee meetings were attended by the Group Chief Executive, with the Group HR Director, the Head of Talent, and the Global Head of Diversity and Inclusion attending as appropriate.

Member   

 

 

 

Meetings attended/eligible to attend

 

 

John McFarlane      7/7  
Mike Ashley      7/7  
Tim Breedon*      4/7  
Crawford Gillies      7/7  
Sir Gerry Grimstone*      6/7  
Reuben Jeffery*      6/7  
* Did not attend certain meetings arranged and held at short notice owing to prior commitments

Note

The Chairman and the Group Chief Executive excuse themselves from meetings when the Committee focuses on the matter of succession to their roles.

Committee role and responsibilities

The principal purpose of the Committee is to:

§  support and advise the Board in ensuring that the composition of the Board and its Committees is appropriate and enables them to function effectively

§  examine the skills, experience and diversity on the Board and plan succession for key Board appointments, planning ahead to deal with upcoming retirements and to fill any expected skills gaps

§  provide Board level oversight of the Group’s talent management programme and diversity and inclusion initiatives

§  agree the annual Board effectiveness review process and monitor the progress of any actions arising.

 

LOGO

   You can find the Committee’s terms of reference at
   home.barclays/corporategovernance
 

 

The Committee’s work

The significant matters addressed by the Committee during 2016 are described below:

 

 

Area of focus

   Matter considered    Role of the Committee    Conclusion/action taken

Board and Board

Committee composition

   The membership of the Board and the current and future composition of the Board and its Committees.   

§  Debated a forward-looking plan of the expected skills and experience needed on the Board in the context of future strategic direction.

 

§  Evaluated the revised Board skills matrix and, in consideration of known and expected changes to the Board, conducted a search for non-executive Directors.

 

§  Reviewed the membership of Board Committees.

 

§  Considered and provided input to Board Committee Chairman succession plans.

  

The Committee approved the revised skills matrix and agreed to conduct a search for new non-executive Directors in line with the requirements identified. It recommended the appointment of Mary Francis to the Board as non-executive Director and she subsequently joined the Board with effect from 1 October 2016. The Committee concluded that additional accounting and auditing experience was needed in order to provide further options for succession to the Board Audit Committee chairmanship over time and a search for potential candidates continues.

 

Please refer to page 32 for more details of the Board’s approach to the recruitment of new Directors.

 

 

 
30  |  Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F


 

 

 

 

Area of focus    Matter considered    Role of the Committee    Conclusion/action taken
Executive succession planning and talent management   

Group Executive Committee composition and succession following the appointment of the new Group Chief Executive in 2015.

 

Oversight of Group Chief Executive succession and appointments to key positions.

  

§  Discussed updates from the Group HR Director on Group Executive Committee succession plans, including assessing emergency cover and the existing talent pipeline.

 

§  Considered external assessments and benchmarking of internal talent.

 

§  Debated approval requirements for appointments to the Group Executive Committee and other key positions across the Group.

 

  

The Committee requested a presentation of key outputs from the Group Executive Committee offsite meeting on talent. It also asked to receive reports of the executive assessments carried out by an external facilitator. The Committee agreed the approval requirements for key positions, and subsequently approved the appointment of Tim Throsby as President of Barclays International in accordance with those requirements.

 

Governance implications of Structural Reform and strategically significant subsidiary board composition   

The board and board committee composition of strategically significant subsidiaries, including board size, structure and proposed interactions.

 

The governance principles for the relationship between Barclays and its strategically significant subsidiaries.

  

§  Finalised Governance Guiding Principles for the Group post-Structural Reform, which set out ultimate decision-making powers, while respecting the rights and responsibilities of the boards of the strategically significant subsidiaries.

 

§  Debated the required structure and composition of the strategically significant subsidiary boards and board committees in light of regulatory requirements and feedback.

 

§  Scrutinised the proposed board skills matrix for Barclays UK.

 

§  Considered candidates for the positions of chairman of Barclays UK and Barclays International.

 

§  Considered appointments to the Board of, and the associated fees for, the US IHC board.

 

§  Considered appointments to the Barclays Africa board.

 

   The Committee endorsed and recommended the Governance Guiding Principles to the Board for approval. It agreed the structure of the strategically significant subsidiary boards and commenced a search for non-executive directors, including for the position of chairman of Barclays UK, and agreed the process of the appointing of the chairman of Barclays International. The Committee approved the appointment of Directors to the US IHC board, including agreeing the fees to be paid to them. It also approved appointments to the Barclays Africa board.
Board effectiveness   

The progress made against the actions identified in the 2015

Board effectiveness review.

 

The 2016 effectiveness review of the Board and its Committees.

  

§  Discussed and agreed the proposed actions to be taken in response to the findings of the 2015 review.

 

§  Reassessed the status of the actions throughout the year and tracked the progress of the action plan.

 

§  Confirmed the process to be followed for the 2016 review.

 

   The Committee recommended the proposed action plan and 2016 Board objectives to the Board for approval. The Committee agreed and recommended the process for the 2016 effectiveness review, which proceeded as recommended.
Governance    Changes to the Board’s corporate governance framework following the implementation of the Senior Managers Regime in March 2016.   

§  Reviewed updates to Corporate Governance in Barclays and the Charter of Expectations following the implementation of the Senior Managers Regime in order to integrate the requirements into the existing corporate governance framework, applying particular focus to the updated individual role profiles.

 

   Approved and recommended to the Board for approval the updated corporate governance documents and role profiles for key positions on the Board.

 

 

 

 

   Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F  |  31


Governance: Directors’ report

What we did in 2016

Board Nominations Committee report

 

 

 

 

In addition the Committee covered the following matters:

 

§   received a presentation from the PRA on its annual review of Barclays

 

§   proposals for the 2016 Corporate Governance Report

 

§   review of the Committee’s effectiveness and its terms of reference.

Appointment and re-election of Directors

Board and Board Committee composition is a standing item for consideration at each Committee meeting. This includes the consideration of potential new non-executive Director appointments, both in respect of planned succession for known retirements and as a result of the ongoing review of the skills and experience needed on the Board in order for it to continue to operate effectively.

The Committee frequently considers a skills matrix for the Board, which identifies the core competencies, skills, diversity and experience required for the Board to deliver its strategic aims and govern the Group effectively. Each attribute identified in the skills matrix has a target weighting attached to it and these are regularly updated over time to reflect the needs of the Group. The Committee reviews the skills matrix when considering a new appointment to the Board, as well as reviewing the current and expected Board and Board Committee composition. This helps to determine a timeline for proposed appointments to the Board.

When recruiting a new non-executive Director the specific skills that are needed are identified, for example, an individual with international experience, or recent history serving on a particular board committee. The Charter of Expectations contains the key competencies and skills expected of non-executive Directors, and these, in addition to other details such as expected time commitment, will be included in an individual specification. The Committee as a whole then considers curriculum vitae and references for potential candidates. Any candidates who are shortlisted will be interviewed by members of the Committee and, if applicable, key shareholders and Barclays’ regulators may be asked to provide feedback on the proposed appointment. The Board is updated on the progress of the recruitment and interview process, and any feedback from the interviews is provided to the Board alongside a recommendation for appointment.

Executive search firms Egon Zehnder, JCA Group and MWM Consulting were instructed to assist with the search for non-executive Directors during 2016. None of these firms has any other connection to Barclays, other than to provide recruitment services. Open advertising for Board positions was not used in 2016, as the Committee believes that targeted recruitment is the optimal way of recruiting for Board positions. All of the firms used for non-executive Director recruitment have signed up to the voluntary code of conduct for executive search firms, which include measures designed to improve gender diversity on boards.

In 2016, Barclays announced the appointment of Mary Francis as non-executive Director and she joined the Board with effect from 1 October 2016. As previously reported, Mary has extensive board level experience across a range of industries. Wendy Lucas-Bull stood down from the Board in March 2016 following the announcement of Barclays’ intention to reduce its shareholding in Barclays Africa Group Limited, and Frits van Paasschen did not stand for re-election at the 2016 AGM.

The Directors in office at the end of 2016 were subject to an effectiveness review, as described on page 33. Based on the results of the review the Board accepted the view of the Committee that each Director proposed for re-election continues to be effective and that they each demonstrated the level of commitment required in connection with their role on the Board and the needs of the business. Diane de Saint Victor and Steve Thieke have each signalled their intention to retire from the Board at the 2017 AGM.

Diversity statement

The Board has had regard to two important publications that were issued in 2016: the Hampton-Alexander Review recommendations to improve gender balance in FTSE leadership teams and the Parker Review recommendations on the ethnic diversity of UK boards. The Committee reported last year that the Board had exceeded its target of 25% female Directors by the end of 2015 and had set a new target of 33% gender Board representation by 2020. This target has been formally reflected in the Board Diversity Policy, which can be found online at home.barclays/ corporategovernance. Below Board level the Group met its 2016 target of 24% female senior leaders. The Committee is mindful that the Group Executive Committee does not currently include any women, but is satisfied with the level of diversity across that Committee and with the percentage of women amongst the direct reports of Group Executive Committee members (25% at the end of 2016). To broaden the scope of the perspectives and contributions made to Group Executive Committee meetings an initiative was implemented by the Group Chief Executive during 2016 to create one ex-officio position on the Committee, with each appointee serving for a four-month rotation. The first appointee was Kathryn McLeland, Head of Investor Relations. With regard to ethnic diversity, the Board considers that Barclays is currently well-positioned in terms of representation at Board level and also at Group Executive Committee level when taking into account the Parker Review definition (being individuals of Black, East Asian, Latin American, Middle Eastern or South Asian ethno-cultural backgrounds).

During 2016, the Committee received regular updates from the Global Head of Diversity and Inclusion covering the full spectrum of Barclays’ diversity and inclusion agenda. For 2017, the Committee has requested additional information regarding social inclusion.

The Committee recognises the importance of ensuring that there is diversity of gender, ethnicity, geography and business experience on the Board, while continuing to recommend all appointments based on merit in the context of the skills and experience required. The Barclays Board female diversity target is noted in the Board skills matrix, which identifies the core competencies and skills needed for an effective Board. When executive search firms are engaged to assist with the recruitment of a new Director diversity is identified as a key factor. In addition, the external Board evaluation considered diversity when assessing the effectiveness of the Board.

 

LOGO    More details on Barclays’ diversity and inclusion strategy can be found on page 48
 

 

 

 

32  |  Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F   


    

    

    

 

 

 

 

Review of Board and Board Committee effectiveness

Each year the Board conducts an externally facilitated self-assessment of the effectiveness of the Board, the Board Committees and the individual Directors. Independent Board Evaluation facilitated the effectiveness review for 2015 and was engaged to conduct the 2016 review, which built on the findings of the 2015 review, including assessing the progress of the actions that had been identified. Independent Board Evaluation is an independent external consultancy with no other connection to Barclays. In order to ensure that high quality feedback was received, Ffion Hague, the consultant, based the review on face-to-face interviews with the Directors. The Directors received an agenda prior to their interview, which focused on areas for improvement identified in the 2015 effectiveness review as well as any new issues that had emerged since that review was conducted. In addition to the interviews, Ffion Hague attended Board and Board Committee meetings as an observer, met with members of the Group Executive Committee, the Company Secretary and other members of senior management, along with seeking feedback from external stakeholders.

In December 2016, Independent Board Evaluation presented a report to the Board on the findings of the effectiveness review. In addition, the Chairman was provided with a report and feedback on the performance of each of the Directors, and the Senior Independent Director received a report on the Chairman. Board Committee chairmen received individual reports on the performance of the Board Committees.

Following consideration of the findings of the 2016 effectiveness review the Directors remain satisfied that the Board and each of the Board Committees are operating effectively. Progress relative to 2015 was good and the Board remains committed to making further changes to ensure that it is considered to be at the top of the range of effectiveness for a FTSE100 company. Following the conclusion of the review the Board Nominations Committee, with support from the Company Secretary, prepared a detailed action planning document. An overview of actions that were identified to help the Board to maintain and improve its effectiveness have been disclosed on the following pages 34 and 35, as well as an update on the actions taken following the 2015 effectiveness review.

 

 

 

 

   Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F  |  33


Governance: Directors’ report

What we did in 2016

Board Nominations Committee report

 

 

 

Review of Board and Board Committee Effectiveness

 

 

Board priorities

 

   

 

Leveraging Board experience in support of executives

 

   

 

Greater awareness of Board Committee work

 

 
     

2015 findings

To ensure that the Board agenda is optimised, including time for ‘blue-sky’ discussion of major risks.

   

2015 findings

To continue to ensure that all non-executive Directors have the opportunity to contribute to strategic debate.

   

2015 findings

To continue to raise awareness across all Board members of the significant issues considered by Board Committees and to continue to refine the remit and scope of the Board Reputation Committee.

 

 
     

Actions taken in 2016

In early 2016 a set of Board objectives was agreed in order to track progress against the Board’s priorities.

 

Board agendas were updated to allow more time for discussion of strategic options. This was also the focus for the 2016 Board Strategy Offsite. Board dinners were used for more free-ranging discussions, with suggested topics notified to the Directors in advance. No decisions were taken or required as part of these discussions, which were used to inform the broader debate at subsequent Board meetings.

   

Actions taken in 2016

John McFarlane and Sir Gerry Grimstone took responsibility for ensuring that all non-executive Directors were involved in strategic decision making.

 

In the course of the year, it was decided that partnering non-executive Directors with members of the Group Executive Committee would not be taken forward. However, the experience of non-executive Directors has been leveraged as appropriate, e.g. the appointments of Steve Thieke and Diane Schueneman to the board of Barclays US IHC. Non-executive Directors continue to make a valuable contribution to the Board and its Committees.

   

Actions taken in 2016

All Directors have access to Board Committee meeting papers and minutes, and have been reminded that they may attend Board Committee meetings whether or not they are members. Some Directors made use of this option during 2016. Board Committee Chairmen have continued to report to the Board on specific matters discussed at Board Committee meetings.

 

During 2016 Sir Gerry Grimstone, chairman of the Board Reputation Committee took action to define and focus its role and scope more clearly, including implementing new reporting initiatives such as the development of dashboard reports.

 

 
     

2016 findings

Create regular broad-based risk oversight sessions for the Board to allow Directors to look across the risk spectrum.

 

Schedule a debate on the role of the Board and non-executive Directors and link the conclusions to revised Board objectives to help focus the Board’s agenda over the coming year.

   

2016 findings

The Board effectiveness review reported on positive and constructive relations between the new Board and the new management team.

   

2016 findings

Continue to optimise the information flow between Directors in the run-up to Structural Reform in 2018.

 

Consider agreeing common values for the Group and the banking subsidiary boards in the new structure.

 

For 2017 this finding will be renamed as ‘Optimise communication and collaboration between directors, boards and committees.’

 

 
  &