TIDM96ES
RNS Number : 8362C
Barclays Bank PLC
13 February 2020
13 February 2020
Barclays Bank PLC
Annual Report and Accounts 2019
UK Listing Authority submission
In compliance with Disclosure Guidance & Transparency Rule
(DTR) 4.1, Barclays Bank PLC announces that its Annual Report 2019
will today be submitted to the National Storage Mechanism and will
shortly be available for inspection at:
http://www.morningstar.co.uk/uk/NSM
The document may also be accessed via Barclays PLC's website at
home.barclays/investorrelations
Additional information
The following information is extracted from the Barclays Bank
PLC Annual Report 2019 (page references are to pages in the Annual
Report) which can be found at home.barclays/investorrelations and
constitutes the material required by DTR 6.3.5 to be communicated
to the media in unedited full text through a Regulatory Information
Service. This material is not a substitute for reading the Barclays
Bank PLC Annual Report 2019 in full.
Strategic report
Performance review
The Strategic Report was approved by the Board of Directors on
12 February 2020 and signed on their behalf by the Chairman.
Overview
Barclays Bank PLC is a wholly-owned subsidiary of Barclays PLC
and consists of the Corporate and Investment Bank (CIB), Consumer,
Cards and Payments (CC&P) and the Head Office.
The consolidation of Barclays Bank PLC and its subsidiaries, is
referred to as the Barclays Bank Group. The consolidation of
Barclays Bank PLC's parent entity, Barclays PLC and its
subsidiaries, is referred to as the Barclays Group.
With relentless focus on delivering for customers and clients
around the world, Barclays Bank PLC's diversified business
portfolio provides balance, resilience and exciting growth
opportunities. Barclays Bank PLC has strong global market positions
and continues to invest in people and technology in order to
deliver sustainable improved returns.
Barclays Bank PLC offers customers and clients a range of
products and services spanning consumer and wholesale banking.
Our structure
Barclays Bank PLC consists of CIB and CC&P
CIB
Our CIB is one of the world's leading providers of funding,
financing, cash management, advisory and risk management products
and services. We work with money managers, financial institutions,
governments and corporate clients globally to help them innovate
and grow.
CC&P
CC&P includes the following key businesses:
In the UK, our payments business enables clients ranging from
small businesses to large corporates to make and receive payments.
We are a leading corporate card issuer for large and small
businesses, and have expanded into providing business-to-business
supplier payment solutions. We also help businesses accept payments
from their customers in-store, in-app and online. We are also one
of the UK's largest finance partners for retailers, providing point
of sale finance solutions to consumers.
In the US, our co-branded cards business provides credit cards
to consumers. Our partners include American Airlines, JetBlue and
Wyndham Hotels & Resorts.
In Germany, we offer market leading consumer credit cards(a) ,
while continuing to develop our lending offering.
Globally, our Private Bank provides a diverse range of personal
and institutional wealth management products and services,
including investments, credit and cash management solutions.
Notes
a Basis: Ranking by revolving balances. Sources: Bankenfachverband,
Statistisches Bundesamt, own calculations
Strategic priorities
Barclays Bank Group's business model provides a diversified
earnings portfolio to its shareholder, Barclays PLC.
Our diversification is a real strength, and we will maintain and
increase our diversity as we evolve. Our revenue today comes from
different businesses, different types of customer and client,
different types of income, and different geographies. We believe
this diversification creates the balance and resilience required to
deliver through the economic cycle.
CIB
Over the last few years, our US competitors have consolidated
their strong position, and our European peers have focused efforts
on a narrower product set.
Barclays Bank PLC is therefore able to differentiate itself as a
European headquartered provider of universal banking services. As
our clients look to diversify their service providers, and decrease
their exposure to the US credit cycle, we believe our ability to
provide this diversification is a real strength.
Our strategy is also shaped by the increasingly sophisticated
needs of our clients, and technological evolution across our
industry.
We are focused on three areas:
Adapting to the evolving needs of our clients
We are investing in technology that makes it easier for our
clients to do business with us. That includes the development of
our electronic offering in Markets and the digitalisation of our
Corporate Banking client service platform.
Running an efficient and effective business
Achieving better operational performance and driving
improvements in market share, while maintaining cost discipline and
driving more productive use of capital by recycling risk-weighted
assets to the highest returning opportunities.
Improving returns by growing high returning and capital
efficient businesses
Focused growth in areas such as transaction banking in Corporate
Banking and fee-led, advisory and equity origination work in
Banking. We are also developing other higher-returning businesses
where we see opportunities, such as securitised products.
CC&P
We plan to grow our payments business by deepening our
relationships where we have through tighter integration across
Barclays and through significant investment in our digital and
reporting capabilities, where we have historically had gaps.
We will also build upon our deep payments experience by
integrating with the software providers our clients use in order to
scale our payments solutions more quickly across the UK and into
Europe. Further investment in our digital infrastructure and
innovative solutions will be key to continuing to simplify
processes and make it easy for our clients to access an end-to-end
payment service from Barclays Bank PLC in the UK and across
Europe.
In the US, we are strengthening our foundations through platform
upgrades, infrastructure improvements and process automation to
meet evolving customer needs. Our co-branded business model is well
proven and is creating opportunities for growth. We continue to
target strong renewal activity and deeper engagement with current
partners, whilst expanding our reach with new strategic
opportunities.
Our Private Bank remains focused on delivering bespoke solutions
for global high-net-worth, ultra-high-net-worth and family office
clients. We have made a number of digital enhancements to
streamline onboarding for our Private Bank clients and this will
remain an area of focus.
Operating environment
CIB
The economic conditions of 2019 continued to provide a
challenging context for corporate and institutional banking and
financing activity. Features such as the low interest rate
environment, the UK's withdrawal from the EU and global trade
tensions combined to dampen and delay deal activity, particularly
primary issuance.
That meant the global Markets revenue pool shrank by 2%(a) .
Our Banking business has also seen its available fee pool
shrink, with declines of 14-18%(b) compared with 2018 in the UK and
Europe, and 2-3%(b) in the Americas and Asia.
We expect many of these macroeconomic trends to continue, and
are shaping our business accordingly.
CC&P
Market changes are primarily driven by changes in consumer
behaviour. For example, the UK card payment market is growing
significantly, with a shift from in-store to online payments.
Digital and e-commerce focused players are growing fast and gaining
market share.
The continued low interest rate environment means consumers are
borrowing more, creating opportunities for new entrants focused
solely on point of sale financing competing with traditional card
issuers like Barclays.
Private Banking continues to be highly fragmented, and while
digital penetration is lower than other segments, technology and
automation are playing an increasing role.
Notes
a Source: Coalition FY19 vs FY18 Preliminary Competitor Analysis
of total industry revenue pool
b Source: Dealogic
Our achievements in 2019
CIB
Despite the challenging conditions, many of our businesses have
performed well. We have continued to gain market share in Markets
and Banking and all of our businesses continue to deliver for our
clients. However, our CIB as a whole must make further progress in
generating the returns our shareholders expect.
In Markets we have helped clients navigate the volatile trading
environment and continued to grow, despite subdued financial
markets, with revenue share up 20 basis points(a) in a highly
competitive environment.
That was, in part, a result of continued investment in our
electronic capabilities, particularly through investment in our
BARX and options platforms. We are now part way through a
multi-year effort to provide our clients with market-leading
execution capabilities and liquidity access, and increase the
strength of our digital offering.
In Corporate Banking we have also invested in our digital
proposition with over 80% of our clients now using iPortal, our
digital self- service platform, creating a 'single window' for
clients to self-serve for many day-to-day corporate banking needs
through a reliable, easy to use interface.
We have also broadened our business across Europe, with our
single platform now live across seven of our nine target European
countries, without the overheads of a branch network. We continue
to focus on capital productivity and transaction banking revenue
growth to improve returns.
In Banking we saw notable improvements in share and revenue in
both advisory and equity underwriting. Our ambition is to continue
to deliver a more diversified product mix, and improve the
proportion of income generated by capital-light businesses. In this
context, we increased our global market fee share to 4.2%(b) ,
despite a declining market.
We also continued to invest and evolve to meet the changing
needs of our clients. This saw us create one of the first
Sustainable and Impact Banking (SIB) teams in the market, enabling
us to provide thoughtful content and execution capabilities to
serve the Environmental, Social and Governance (ESG) needs of our
clients.
CC&P
On top of strong renewal activity in the US, we launched a
refreshed Uber credit card with new reward features to maximise
customer engagement and value for our partner and cardholders. We
also launched a new American Airlines Aviator Red card and we
relaunched our Barclaycard Financing Visa, a simplified
financing-focused product for Apple consumers in the US.
We have also made progress in upgrading the US platform and data
infrastructure, which has both improved customer experience and
made our business more efficient.
In point-of-sale lending in the UK, we have worked with Apple to
launch the 'Trade-In- With-Instalment' solution. This offers
customers the opportunity to upgrade their iPhone through a
24-month instalment loan with 0% interest; it is a good example of
how we are providing value for both consumers and clients.
In the UK, we have retained key strategic clients and forged new
partnerships with companies like Coupa and TouchBistro,
highlighting our unique payments integration capabilities.
With a third of all card payments made in the UK(c) , Barclays
is one of the largest payment processors in Europe(d) , and is a
leading corporate card issuer. We recently won the B2B Payments
Innovation Award at the 2019 Payments Awards, which highlights the
strength of our franchise in payments.
Making it easier for small businesses to join our payments
network has been at the centre of our digital transformation. We
have successfully streamlined a paper-based journey into a digital
experience, now with same day onboarding for most of our
clients.
In the US, we continue to see strong net promoter scores. We
maintained our ranking in the top 10 of US credit card issuers(e)
.
Our role in society
Our success over the long-term us tied inextricably to the
prevention of our environment and the progress of our communties.
For detail on our integration of social and environmental issues
into our business, pease refer to pages 32 to 35 in the Barclays
PLC Annual Report 2019.
Notes
a Source: Coalition FY19 vs FY18 Preliminary Competitor Analysis.
Market share represents Barclays' share of the total industry revenue
pool
b Source: Dealogic
c Source: UK Finance
d Source: Nilson Report #1153
e Source: Nilson Report #1161
Strategic report
Managing risk
The Barclays Bank Group is exposed to internal and external
risks as part of our ongoing activities. These risks are managed as
part of our business model.
Enterprise Risk Management Framework
Within the Barclays Bank Group, risks are identified and
overseen through the Enterprise Risk Management Framework (ERMF),
which supports the business in its aim to embed effective risk
management and a strong risk management culture.
This ERMF governs the way in which the Barclays Bank Group
identifies and manages its risks. The ERMF is approved by the
Barclays PLC board on recommendation of the Barclays Group Chief
Risk Officer; it is then adopted by the Barclays Bank Group with
minor modifications where needed.
The management of risk is embedded into each level of the
business, with all colleagues being responsible for identifying and
controlling risk.
Risk appetite
Risk appetite defines the level of risk we are prepared to
accept across the different risk types, taking into consideration
varying levels of financial and operational stress. Risk appetite
is key for our decision making processes, including ongoing
business planning and setting of strategy, new product approvals
and business change initiatives. The Barclays Bank Group may choose
to adopt a lower risk appetite than allocated to it by Barclays
Group.
Three Lines of Defence
The first line of defence is comprised of the revenue generating
and client facing areas, along with all associated support
functions, including Finance, Treasury, Human Resources and
Operations and Technology. The First Line identifies the risks,
sets the controls and escalates risk events to the second line of
defence.
The second line of defence is made up of Risk and Compliance and
oversees the First Line by setting limits, rules and constraints on
their operations, consistent with the risk appetite.
The third line of defence is comprised of Internal Audit,
providing independent assurance over the effectiveness of
governance, risk management and control over current, systemic and
evolving risks.
Although the Legal function does not sit in any of the three
lines, it works to support them all and plays a key role in
overseeing Legal risk throughout the bank. The Legal function is
also subject to oversight from the Risk and Compliance functions
(second line) with respect to the management of operational and
conduct risks.
Monitoring the risk profile
Together with a strong governance process, using business and
Group level Risk Committees as well as Board level forums, the
Barclays Bank PLC Board receives regular information in respect of
the risk profile of the Barclays Bank Group. Information received
includes measures of risk profile against risk appetite as well as
the identification of new and emerging risks.
We believe that our structure and governance supports us in
managing risk in the changing economic, political and market
environments.
The ERMF defines eight Principal Risks How risks are managed
--------------------------------------------------------------------------------------- -----------------------------
Financial Principal Risks Credit Risk The risk of loss to the Credit risk teams identify,
Barclays Bank Group from evaluate, sanction, limit
the failure of clients, and monitor various forms of
customers or credit
counterparties, exposure, individually and
including sovereigns, to in aggregate.
fully honour their
obligations to Barclays
Bank Group, including
the whole and timely
payment of principal,
interest, collateral and
other receivables.
----------------------------- -------------------------- ---------------------------- -----------------------------
Market Risk The risk of loss arising A range of complementary
from potential adverse approaches to identify and
changes in the value of the evaluate market risk are
Barclays Bank used to capture
Group's assets and exposure to market risk.
liabilities from These are measured, limited
fluctuation in market and monitored by market risk
variables including, but specialists.
not limited
to, interest rates, foreign
exchange, equity prices,
commodity prices, credit
spreads, implied
volatilities and asset
correlations.
----------------------------- -------------------------- ---------------------------- -----------------------------
Treasury and Capital Risk Liquidity risk: Treasury and capital risk is
The risk that the Barclays identified and managed by
Bank Group is unable to specialists in Capital
meet its contractual or Planning, Liquidity,
contingent obligations Asset and Liability
or that it does not have Management and Market risk.
the appropriate amount, A range of approaches are
tenor and composition of used appropriate
funding and liquidity to the risk, such as;
to support its assets. limits; plan monitoring;
Capital risk: internal and external stress
The risk that the Barclays testing.
Bank Group has an
insufficient level or
composition of capital
to support its normal
business activities and to
meet its regulatory capital
requirements
under normal operating
environments or stressed
conditions (both actual and
as defined for
internal planning or
regulatory testing
purposes). This includes
the risk from the Barclays
Bank Group's pension plans.
Interest rate risk in the
Banking Book:
The risk that the Barclays
Bank Group is exposed to
capital or income
volatility because of
a mismatch between the
interest rate exposures of
its (non-traded) assets and
liabilities.
----------------------------- -------------------------- ---------------------------- -----------------------------
Non-Financial Principal Operational Risk The risk of loss to the Operational risk comprises
Risks Barclays Bank Group from the following risks; data
inadequate or failed management and information,
processes or systems, execution
human factors or due to risk, financial reporting,
external events (for fraud, payments processing,
example fraud) where the people, physical security,
root cause is not due premises,
to credit or market risks. prudential regulation,
supplier, tax, technology
and transaction operations.
It is not always cost
effective or possible to
attempt to eliminate all
operational risks.
Operational risk is managed
across the businesses and
functions through an
internal control
environment with a view to
limiting the risk to
acceptable residual levels.
----------------------------- -------------------------- ---------------------------- -----------------------------
Model Risk The risk of the potential Models are independently
adverse consequences from validated and approved prior
financial assessments or to implementation and their
decisions based performance
on incorrect or misused is monitored on a continual
model outputs and reports. basis.
----------------------------- -------------------------- ---------------------------- -----------------------------
Conduct Risk The risk of detriment to The Compliance function sets
customers, clients, market the minimum standards
integrity, effective required, and provides
competition or the oversight to monitor
Barclays Bank Group from that these risks are
the inappropriate supply of effectively managed and
financial services, escalated where appropriate.
including instances
of wilful or negligent
misconduct.
-------------------------- ---------------------------- -----------------------------
Reputation Risk The risk that an action, Reputation risk is managed
transaction, investment or by embedding our purpose and
event, decision or business values and maintaining a
relationship controlled
will reduce trust in the culture within the Barclays
Barclays Bank Group's Bank Group, with the
integrity and/or objective of acting with
competence. integrity, enabling
strong and trusted
relationships with customers
and clients, colleagues and
broader society.
-------------------------- ---------------------------- -----------------------------
Legal Risk The risk of loss or The Legal function supports
imposition of penalties, colleagues in identifying
damages or fines from the and limiting legal risks.
failure of the Barclays
Bank Group to meet its
legal obligations including
regulatory or contractual
requirements.
----------------------------- -------------------------- ---------------------------- -----------------------------
Strategic report
Performance measures
Financial performance measures
The performance of Barclays Bank PLC contributes to the Barclays
PLC Group, upon which the delivery of strategy is measured.
Income Statement
Barclays Bank Group results 2019 2018 2017
For the year ended 31 December GBPm GBPm GBPm
------------------------------------------------------------------- ------- -------- --------
Total income 14,151 13,600 13,730
Credit impairment charges (1,202) (643) (1,553)
------------------------------------------------------------------- ------- -------- --------
Net operating income 12,949 12,957 12,177
Operating expenses (9,718) (9,893) (10,230)
GMP charge(a) - (140) -
Litigation and conduct (264) (1,706) (448)
------------------------------------------------------------------- ------- -------- --------
Total operating expenses (9,982) (11,739) (10,678)
Other net income 145 68 259
------------------------------------------------------------------- ------- -------- --------
Profit before tax 3,112 1,286 1,758
Tax charge(b) (332) (229) (1,352)
------------------------------------------------------------------- ------- -------- --------
Profit after tax in respect of continuing operations 2,780 1,057 406
(Loss)/profit after tax in respect of discontinued operations(c) - (47) (1,386)
Non-controlling interests in respect of continuing operations - - (4)
Non-controlling interests in respect of discontinued operations(c) - - (140)
Other equity instrument holders (660) (647) (639)
------------------------------------------------------------------- ------- -------- --------
Attributable profit/(loss) 2,120 363 (1,763)
------------------------------------------------------------------- ------- -------- --------
Notes
a A GBP140m charge for Guaranteed Minimum Pensions in relation to
the equalisation of obligations for members of the Barclays Bank
UKRF. There was no capital impact of this charge as at 31 December
2018, as the Barclays Bank UKRF remained in accounting surplus.
b From 2019, due to an IAS 12 update, the tax relief on payments
in relation to equity instruments has been recognised in the tax
charge of the income statement, whereas it was previously recorded
within retained earnings. Comparatives have been restated, reducing
the tax charge for FY18 and FY17 by GBP175m and GBP174m respectively.
Further detail can be found in Note 1.
c Barclays Bank PLC transferred its UK banking business on 1 April
2018 to Barclays Bank UK PLC. Results relating to the UK banking
business for the three months ended 31 March 2018 and for the year
ended 31 December 2017 have been reported as a discontinued operation.
2017 also included results relating to Barclays Africa Group Limited
(BAGL) for the five months ended 31 May 2017.
Income Statement commentary
2019 compared to 2018
Profit before tax increased 142% to GBP3,112m driven by reduced
losses in Head Office of GBP598m (2018: GBP2,245m), primarily due
to a non-recurrence of the GBP1.4bn settlement with US Department
of Justice (DoJ) relating to Residential Mortgage-Backed Securities
(RMBS), and an 8% increase in CIB to GBP2,590m (2018: 2,394m). This
was partially offset by a decrease in CC&P to GBP1,120m (2018:
GBP1,137m).
The 4% appreciation of average USD against GBP positively
impacted income and profits, and adversely impacted credit
impairment charges and operating expenses.
Total Income increased 4% to GBP14,151m. CIB income increased 3%
to GBP10,009m. Within CIB, Markets income increased 3%, reflecting
further gains in market share in a declining revenue pool(a) , and
Banking fees income increased 1%. The Banking business also
continued to gain market share in a declining fee pool(b) .
CC&P income increased 5% to GBP4,462m reflecting growth in US
co-branded cards and payments partnerships.
Head Office income expense improved 22% to GBP320m (2018:
GBP408m) driven by lower hedge accounting losses and legacy capital
funding costs, partially offset by a non-recurrence of a prior year
gain of GBP155m from the settlement of receivables relating to the
Lehman Brothers acquisition and the Absa Group Limited (formerly
known as BAGL) dividend income.
Credit impairment charges increased 87% to GBP1,202m. CIB credit
impairment charges increased to GBP157m (2018: release of GBP152m)
due to the non-recurrence of favourable macroeconomic scenario
updates and single name recoveries in 2018. CC&P credit
impairment charges increased to GBP1,016m (2018: GBP808m) due to
cards balance growth and the non-recurrence of favourable US
macroeconomic scenario updates in 2018. Credit metrics remained
stable, with US cards 30 and 90 day arrears of 2.7% (Q418: 2.7%)
and 1.4% (Q418: 1.4%) respectively.
Total operating expenses decreased 15% to GBP9,982m. Head Office
total operating expenses decreased to GBP241m (2018: GBP1,849m) due
to the non-recurrence of a settlement relating to RMBS with the US
DoJ of GBP1.4bn and the GBP140m charge for the GMP in relation to
the equalisation of obligations for members of the Barclays Bank
UKRF.
CIB total operating expenses decreased 2% to GBP7,375m as cost
efficiencies were partially offset by continued investment.
CC&P total operating expenses were stable at GBP2,366m (2018:
GBP2,363m) reflecting continued investment and efficiencies.
Other net income increased to GBP145m (2018: GBP68m) reflecting
gains on disposals following the sale of number of subsidiaries to
Barclays Principal Investment Limited in Q4 2019.
Notes
a Data Source: Coalition, FY19 Preliminary Competitor Analysis. Market
share represents Barclays share of the total industry Revenue Pool.
Analysis is based on Barclays internal business structure and internal
revenues.
b Data Source: Dealogic, for the period covering 1 January to 31
December 2019.
Balance Sheet Information
The following assets and liabilities represent key balance sheet items for Barclays Bank Group.
2019 2018
As at 31 December GBPm GBPm
------------------------------------------------------------------------------------------------ ------- -------
Assets
Cash and balances at central banks 125,940 136,359
Loans and advances at amortised cost 141,636 136,959
Trading portfolio assets 113,337 104,038
Financial assets at fair value through the income statement 129,470 145,250
Derivative financial instruments 229,641 222,683
Liabilities
Deposits at amortised cost 213,881 199,337
Financial liabilities designated at fair value 204,446 217,741
Derivative financial instruments 228,940 219,592
------------------------------------------------------------------------------------------------ ------- -------
Balance Sheet commentary
-- Cash and balances at central banks decreased GBP10.4bn to GBP125.9bn
predominantly due to a reduction in cash at central banks held
as part of the liquidity pool
-- Loans and advances increased GBP4.7bn to GBP141.6bn mainly due
to an increase in debt securities
-- Trading portfolio assets increased GBP9.3bn to GBP113.3bn due to
increased trading activity, principally relating to the Equities
business
-- Financial assets at fair value through the income statement decreased
GBP15.8bn to GBP129.5bn driven by a focus on capital-efficient
secured financing
-- Derivative financial instrument assets and liabilities increased
GBP7.0bn to GBP229.6bn and GBP9.3bn to GBP228.9bn respectively
driven by a decrease in major interest rate curves, partially offset
by a decrease in foreign exchange volumes
-- Deposits at amortised cost increased GBP14.5bn to GBP213.9bn due
to increased deposits within CIB including the broadening of the
business across Europe
-- Financial liabilities designated at fair value decreased GBP13.3bn
to GBP204.4bn as a result of more capital-efficient secured lending
partially offset by increased issuances of equity linked notes.
The financial information above is extracted from the financial
statements. This information should be read together with the
information included in the accompanying consolidated financial
statements.
Other Metrics and Capital(a)
Barclays Bank PLC is regulated by the Prudential Regulation Authority (PRA) on a solo-consolidated
basis. Barclays Bank PLC solo-consolidated comprises Barclays Bank PLC plus certain additional
subsidiaries, subject to PRA approval. The disclosures below provide key metrics for Barclays
Bank PLC solo-consolidated.
2019 2018 2017
---------------------------------------------------------------- ------------ ------------ -----------
Common equity tier 1 (CET1) ratio 13.9% 13.5% 13.6%
Total risk weighted assets (RWAs) GBP158.4bn GBP173.2bn GBP261.4bn
Capital Requirements Regulation (CRR) leverage ratio 3.9% 4.0% 4.5%
---------------------------------------------------------------- ------------ ------------ -----------
Note
a Capital, RWAs and leverage are calculated applying the IFRS 9 transitional
arrangement of the Capital Requirement Regulation (CRR) as amended
by the Capital Requirements Regulation II (CRR II) applicable as
at the reporting date. For further information on the implementation
of CRR II see page 100.
Capital commentary
As at 31 December 2019, Barclays Bank PLC Solo's transitional
CET1 ratio was 13.9% which exceeded the 2019 minimum
requirement.
Non-financial performance measures
Barclays Bank PLC is part of the Barclays Group which uses a
variety of quantitative and qualitative measures to track and
assess holistic strategic delivery. Barclays Group maintains a
robust internal and external assurance process for our key metrics,
ensuring that we have strong controls and clear data management in
place.
Barclays Bank PLC has addressed the Non-Financial Reporting
requirements contained in sections 414CA and 414CB of the Companies
Act 2006 through the disclosure contained in Barclays PLC Annual
report on pages 39 to 40.
Strategic report
Our people and culture
We believe that the culture of Barclays is built and shaped by
the thousands of professionals around the world who serve our
customers and clients with a shared purpose and values. Our people
make a critical difference to our success, and our investment in
them protects and strengthens our culture. The following
sub-sections are therefore consistent with those detailed in the
People Section of the Barclays PLC Annual Report and figures
mentioned are for Barclays Group other than specifically
mentioned.
Colleague engagement
We have an established approach to engaging colleagues which
includes the majority of mechanisms recommended by the UK's
Financial Reporting Council and with new governance requirements in
2019. This ensures that we understand their perspective, take it
into account in our decision making at the most senior level, and
share with them our strategy and progress.
That extends to those who work for us indirectly as well, such
as contractors, although in a more limited way. In 2020, our
supplier code of conduct will require organisations with more than
250 employees to demonstrate that they have an effective workforce
engagement approach of their own.
It's important to us that our Board members are engaged with our
people - directly, and indirectly through our management team. The
Board regularly receives reports on colleague engagement.
Together with direct engagement, this reporting approach and
dedicated time at board meetings helps our Board take the issues of
interest to our colleagues into account in their decision making.
This has enabled them to confirm that our workforce engagement
approach is effective.
Listening to our people
Our regular colleague survey formally captures the views of our
people and is a key part of how we track colleague engagement,
alongside more granular colleague sentiment tracking across our
businesses. Barclays Bank PLC overall engagement score reduced
slightly to 73% in 2019, but 77% of our colleagues would still
recommend Barclays as a good place to work.
The results from the survey are an important part of the
conversations our leaders have about how we run the business, and
it's a specific focus for our Executive Committee and our
Board.
We monitor our culture across the organisation, and in
individual business areas, through Culture Dashboards. These
combine colleague survey data with other metrics about our
business, so that we can see the effect our people's engagement has
on our performance, and on the continued strength of our culture.
82% of our people have heard or read the speeches of senior leaders
across the Barclays Group talking about the character and culture
of Barclays.
Keeping our people informed
In addition to these data sources, our leaders, including our
Board, engage face to face with colleagues to hear what they think.
That might be through site visits, large-scale town halls, training
and development activity, mentoring, informal breakfast sessions,
committee membership, diversity and wellbeing programmes, or focus
and consultative groups.
We make sure we're regularly keeping everyone up to date on the
strategy, performance and progress of the organisation through a
strategically-coordinated, multichannel approach across a
combination of leader-led engagement, and digital and print
communication, including blogs, vlogs and podcasts.
We also engage with our people collectively through a strong and
effective partnership with Unite, in the parts of BBPLC where they
are recognised as well as the Barclays Group European Forum, which
represents all Barclays Group colleagues within the European
Union.
These conversations help us to deliver things like a collective
pay deal for our Unite covered colleagues, who represent 84% of our
UK-based colleagues, as well as more complex business change and
our long-term focus on colleague wellbeing. We regularly brief our
union partners on the strategy and progress of the business and
seek their input on ways in which we can improve the colleague
experience of working in Barclays.
Building a supportive culture
Diversity of thought and experience works best when everyone
feels included. People who feel they can be themselves at work are
happier and more productive, so we believe that creating an
inclusive and diverse culture isn't just the right thing to do, but
is also best for our business.
Our policies require managers to give full and fair
consideration to those with a disability on the basis of their
aptitudes and abilities; both when hiring and through ongoing
people management, as well as ensuring opportunities for training,
career development and promotion are available to all. As part of
our commitment to the UK government Disability Confident scheme, we
encourage applications from people with a disability, or a physical
or mental health condition.
We encourage our people to benefit from Barclays' performance by
enrolling in our share plans, further strengthening their
commitment to the organisation.
Section 172(1) statement
The directors of large organisations like Barclays are required
by law to consider a range of factors when making decisions, and to
make a clear statement about how they have done that.
The Directors have acted in a way that they considered, in good
faith, to be most likely to promote the success of the Company for
the benefit of its members as a whole, and in doing so had regard,
amongst other matters, to:
-- the likely consequences of any decision in the long term,
-- the interests of the Company's employees,
-- the need to foster the Company's business relationships with suppliers,
customers and others,
-- the impact of the Company's operations on the community and the
environment
-- the desirability of the Company maintaining a reputation for high
standards of business conduct, and
-- the need to act fairly as between members of the Company.
Details on who our stakeholders are, how management and/or the
Directors engaged with them, the key issues raised and actions
taken are set out in the 2019 Barclays PLC Annual Report on pages
12 to 17 and is incorporated by reference into this statement. The
Directors also took into account the views and interests of a wider
set of stakeholders, including our pensioners, regulators, the
Government, and non-governmental organisations.
Considering this broad range of interests is an important part
of the way the Board makes decisions, although in balancing those
different perspectives it won't always be possible to deliver
everyone's desired outcome.
How does the Board engage with stakeholders
The Board will sometimes engage directly with certain
stakeholders on certain issues, but the size and distribution of
our stakeholders and of Barclays means that stakeholder engagement
often takes place at an operational level.
The Board considers and discusses information from across the
organisation to help it understand the impact of Barclays'
operations, and the interests and views of our key stakeholders. It
also reviews strategy, financial and operational performance, as
well as information covering areas such as key risks, and legal and
regulatory compliance. This information is provided to the Board
through reports sent in advance of each Board meeting, and through
in-person presentations.
As a result of these activities, the Board has an overview of
engagement with stakeholders, and other relevant factors, which
enables the Directors to comply with their legal duty under section
172 of the Companies Act 2006.
For more details on how our Board operates, and the way in which
it reaches decisions, including the matters it discussed and
debated during the year, please see page 16.
Engagement in action
Mitigating Customer impact
In reviewing Barclays' plans for the Barclays Group in the
context of the planned UK withdrawal from the European Union, the
Board received regular updates on the business transfers into
Barclays Bank Ireland PLC and considered how to minimise the
resultant impacts on a range of stakeholders including customers
and clients, colleagues and suppliers. The Board's decision to use
a banking business transfer scheme (under Part VII of the Financial
Services and Markets Act 2000) gave the Directors the flexibility
to oversee key decision points in line with developments in the
political environment, in particular "go/no-go" decisions for
business transfers in March and October 2019, in order to minimise
unnecessary disruption to customers and clients.
Improving the quality of our decision-making
The Board's agenda in 2019 was aligned to the board agenda of
Barclays PLC in respect of matters which were relevant to the
Barclays Bank Group. Following his appointment, Nigel Higgins,
Chairman of Barclays PLC and the Company, undertook a comprehensive
"listening tour" before he became Chairman in May. Nigel Higgins
held around 50 meetings with Barclays PLC shareholders and other
stakeholders as part of this "listening tour" and has also
subsequently spent considerable time this year meeting with
stakeholders across the globe, including our investors, customers
and colleagues. The Board, together with the Barclays PLC board and
Group Executive Committee used all this feedback to agree a
prioritised series of deep dives which now form a significant part
of each Board meeting. These deep dives have helped to facilitate
an in-depth understanding of issues relevant to the Barclays Bank
Group with a view to helping management and the Board make
well-informed decisions both now and in the future. The deep dives
conducted in 2019 covered a wide range of topics including focus on
particular business areas within the Barclays Bank Group, capital
allocation, our culture, our societal purpose and environmental
matters.
Nigel Higgins
Chairman - Barclays Bank Group
12 February 2020
Directors' responsibility statement
The Directors have responsibility for ensuring that the Company
and the Barclays Bank Group keeps accounting records which disclose
with reasonable accuracy the financial position of the Company and
the Barclays Bank Group and which enable them to ensure that the
accounts comply with the Act.
The Directors are also responsible for preparing a Strategic
Report, Directors' Report and Corporate Governance Statement in
accordance with applicable law and regulations.
The Directors are responsible for the maintenance and integrity
of the Annual Report and Financial Statements as they appear on the
Company's website. Legislation in the UK governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
The Directors have a general responsibility for taking such
steps as are reasonably open to them to safeguard the assets of the
Company and to prevent and detect fraud and other
irregularities.
The Directors, whose names are set out on page 16, confirm to
the best of their knowledge that:
(a) the financial statements, prepared in accordance with the applicable
set of accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company
and the undertakings included in the consolidation taken as a whole;
and
(b) the management report, on pages 1 to 9, which is incorporated in
the Directors' Report, includes a fair review of the development
and performance of the business and the position of the Company
and the undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and uncertainties
that they face.
By order of the Board
Stephen Shapiro
Company Secretary
12 February 2020
Barclays Bank PLC
Registered in England. Company No. 1026167
Risk review
Material existing and emerging risks
Material existing and emerging risks to the Barclays Bank
Group's future performance
The Barclays Bank Group has identified a broad range of risks to
which its businesses are exposed. Material risks are those to which
senior management pay particular attention and which could cause
the delivery of the Barclays Bank Group's strategy, results of
operations, financial condition and/or prospects to differ
materially from expectations. Emerging risks are those which have
unknown components, the impact of which could crystallise over a
longer time period. In addition, certain other factors beyond the
Barclays Bank Group's control, including escalation of terrorism or
global conflicts, natural disasters, epidemic outbreaks and similar
events, although not detailed below, could have a similar impact on
the Barclays Bank Group.
Material existing and emerging risks potentially impacting more
than one principal risk
i) Business conditions, general economy and geopolitical issues
The Barclays Bank Group's operations are subject to potentially
unfavourable global and local economic and market conditions, as
well as geopolitical developments, which may have a material effect
on the Barclays Bank Group's business, results of operations,
financial condition and prospects.
A deterioration in global or local economic and market
conditions may lead to (among other things): (i) deteriorating
business, consumer or investor confidence and lower levels of fixed
asset investment and productivity growth, which in turn may lead to
lower client activity, including lower demand for borrowing from
creditworthy customers; (ii) higher default rates, delinquencies,
write-offs and impairment charges as borrowers struggle with the
burden of additional debt; (iii) subdued asset prices and payment
patterns, including the value of any collateral held by the
Barclays Bank Group; (iv) mark-to-market losses in trading
portfolios resulting from changes in factors such as credit
ratings, share prices and solvency of counterparties; and (v)
revisions to calculated expected credit losses (ECLs) leading to
increases in impairment allowances. In addition, the Barclays Bank
Group's ability to borrow from other financial institutions or
raise funding from external investors may be affected by
deteriorating economic conditions and market disruption.
Geopolitical events may lead to further financial instability
and affect economic growth. In particular:
-- In the UK, the decision to leave the European Union (EU) may give
rise to further economic and political consequences including for
investment and market confidence in the UK and the remainder of
EU. See "(ii) Process of UK withdrawal from the EU" below for further
details.
-- A significant proportion of the Barclays Bank Group's portfolio
is located in the US, including a major credit card portfolio and
a range of corporate and investment banking exposures. The possibility
of significant continued changes in US policy in certain sectors
(including trade, healthcare and commodities), may have an impact
on the Barclays Bank Group's associated portfolios. Stress in the
US economy, weakening GDP and the associated exchange rate fluctuations,
heightened trade tensions (such as the current dispute between
the US and China), an unexpected rise in unemployment and/or an
increase in interest rates could lead to increased levels of impairment,
resulting in a negative impact on the Barclays Bank Group's profitability.
-- Global GDP growth weakened in 2019, as elevated policy uncertainty
weighed on manufacturing activity and investment. As a result,
a number of central banks, most notably the Federal Reserve and
European Central Bank (ECB), pursued monetary easing. Growth is
expected to stabilise in 2020, but macroeconomic risks remain skewed
to the downside, while concerns around the efficacy of existing
policy tools to counter these risks persist. An escalation in geopolitical
tensions, increased use of protectionist measures or a disorderly
withdrawal from the EU may negatively impact the Barclays Bank
Group's business in the affected regions.
-- In China the pace of credit growth remains a concern, given the
high level of leverage and despite government and regulatory action.
A stronger than expected slowdown could result if authorities fail
to appropriately manage growth during the transition from manufacturing
towards services and the end of the investment and credit-led boom.
Deterioration in emerging markets could affect the Barclays Bank
Group if it results in higher impairment charges via sovereign
or counterparty defaults.
ii) Process of UK withdrawal from the EU
The manner in which the UK withdraws from the EU will likely
have a marked impact on general economic conditions in the UK and
the EU. The UK's future relationship with the EU and its trading
relationships with the rest of the world could take a number of
years to resolve. This may lead to a prolonged period of
uncertainty, unstable economic conditions and market volatility,
including fluctuations in interest rates and foreign exchange
rates.
Whilst the exact impact of the UK's withdrawal from the EU is
unknown, the Barclays Bank Group continues to monitor the risks
that may have a more immediate impact for its business, including,
but not limited to:
-- Market volatility, including in currencies and interest rates,
might increase which could have an impact on the value of the Barclays
Bank Group's trading book positions.
-- Credit spreads could widen leading to reduced investor appetite
for the Barclays Bank Group's debt securities. This could negatively
impact the Barclays Bank Group's cost of and/or access to funding.
In addition, market and interest rate volatility could affect the
underlying value of assets in the banking book and securities held
by the Barclays Bank Group for liquidity purposes.
-- A credit rating agency downgrade applied directly to the Barclays
Bank Group, or indirectly as a result of a credit rating agency
downgrade to the UK Government, could significantly increase the
Barclays Bank Group's cost of and/or reduce its access to funding,
widen credit spreads and materially adversely affect the Barclays
Bank Group's interest margins and liquidity position.
-- A UK recession with lower growth, higher unemployment and falling
UK property prices could lead to increased impairments in relation
to a number of the Barclays Bank Group's portfolios, including,
but not limited to, its corporate portfolios and commercial real
estate exposures.
-- The ability to attract, or prevent the departure of, qualified
and skilled employees may be impacted by the UK's and the EU's
future approach to the EU freedom of movement and immigration from
the EU countries and this may impact the Barclays Bank Group's
access to the EU talent pool.
-- A disorderly exit from the EU may put a strain on the capabilities
of the Barclays Bank Group's systems, increasing the risk of failure
of those systems and potentially resulting in losses and reputational
damage for the Barclays Bank Group.
-- Changes to current EU 'Passporting' rights may require further
adjustment to the current model for the Barclays Bank Group's cross-border
banking operation which could increase operational complexity and/or
costs for the Barclays Bank Group.
-- The legal framework within which the Barclays Bank Group operates
could change and become more uncertain if the UK takes steps to
replace or repeal certain laws currently in force, which are based
on EU legislation and regulation (including EU regulation of the
banking sector) following its withdrawal from the EU. Certainty
around the ability to maintain existing contracts, enforceability
of certain legal obligations and uncertainty around the jurisdiction
of the UK courts may be affected until the impacts of the loss
of the current legal and regulatory arrangements between the UK
and EU and the enforceability of UK judgements across the EU are
fully known.
-- Should the UK see reduced access to financial markets infrastructures
(including exchanges, central counterparties and payments services,
or other support services provided by third party suppliers) service
provision for clients could be impacted, likely resulting in reduced
market share and revenue and increased operating costs for the
Barclays Bank Group.
iii) The impact of interest rate changes on the Barclays Bank Group's
profitability
Any changes to interest rates are significant for the Barclays
Bank Group, especially given the uncertainty as to the direction of
interest rates and the pace at which interest rates may change
particularly in the Barclays Bank Group's main markets of the UK
and the US.
A continued period of low interest rates and flat yield curves,
including any further cuts, may affect and continue to put pressure
on the Barclays Bank Group's net interest margins (the difference
between its lending income and borrowing costs) and could adversely
affect the profitability and prospects of the Barclays Bank
Group.
However, whilst interest rate rises could positively impact the
Barclays Bank Group's profitability as retail and corporate
business income increases due to margin de-compression, further
increases in interest rates, if larger or more frequent than
expected, could lead to generally weaker than expected growth,
reduced business confidence and higher unemployment, which in turn
could cause stress in the lending portfolio and underwriting
activity of the Barclays Bank Group. Resultant higher credit losses
driving an increased impairment charge would most notably impact
retail unsecured portfolios and wholesale non-investment grade
lending and could have a material effect on the Barclays Bank
Group's business, results of operations, financial condition and
prospects.
In addition, changes in interest rates could have an adverse
impact on the value of the securities held in the Barclays Bank
Group's liquid asset portfolio. Consequently, this could create
more volatility than expected through the Barclays Bank Group's
FVOCI reserves.
iv) The competitive environments of the banking and financial services
industry
The Barclays Bank Group's businesses are conducted in
competitive environments (in particular, in the UK and US), with
increased competition scrutiny, and the Barclays Bank Group's
financial performance depends upon the Barclays Bank Group's
ability to respond effectively to competitive pressures whether due
to competitor behaviour, new entrants to the market, consumer
demand, technological changes or otherwise.
This competitive environment, and the Barclays Bank Group's
response to it, may have a material adverse effect on the Barclays
Bank Group's ability to maintain existing or capture additional
market share, business, results of operations, financial condition
and prospects.
v) Regulatory change agenda and impact on business model
The Barclays Bank Group remains subject to ongoing significant
levels of regulatory change and scrutiny in many of the countries
in which it operates (including, in particular, the UK and the US).
As a result, regulatory risk will remain a focus for senior
management. Furthermore, a more intensive regulatory approach and
enhanced requirements together with the potential lack of
international regulatory co-ordination as enhanced supervisory
standards are developed and implemented may adversely affect the
Barclays Bank Group's business, capital and risk management
strategies and/or may result in the Barclays Bank Group deciding to
modify its legal entity, capital and funding structures and
business mix, or to exit certain business activities altogether or
not to expand in areas despite otherwise attractive potential.
There are several significant pieces of legislation and areas of
focus which will require significant management attention, cost and
resource, including:
-- Changes in prudential requirements may impact minimum requirements
for own funds and eligible liabilities (MREL) (including requirements
for internal MREL), leverage, liquidity or funding requirements,
applicable buffers and/or add-ons to such minimum requirements
and risk weighted assets calculation methodologies all as may
be set by international, EU or national authorities. Such or
similar changes to prudential requirements or additional supervisory
and prudential expectations, either individually or in aggregate,
may result in, among other things, a need for further management
actions to meet the changed requirements, such as:
-- increasing capital, MREL or liquidity resources, reducing leverage
and risk weighted assets;
-- restricting distributions on capital instruments;
-- modifying the terms of outstanding capital instruments;
-- modifying legal entity structure (including with regard to issuance
and deployment of capital, MREL and funding);
-- changing the Barclays Bank Group's business mix or exiting other
businesses;
-- and/or undertaking other actions to strengthen the Barclays Bank
Group's position.
-- The derivatives market has been the subject of particular focus
for regulators in recent years across the G20 countries and beyond,
with regulations introduced which require the reporting and clearing
of standardised over the counter (OTC) derivatives and the mandatory
margining of non-cleared OTC derivatives. These regulations may
increase costs for market participants, as well as reduce liquidity
in the derivatives markets. More broadly, changes to the regulatory
framework (in particular, the review of the second Markets in
Financial Instruments Directive and the implementation of the
Benchmarks Regulation) could entail significant costs for market
participants and may have a significant impact on certain markets
in which the Barclays Bank Group operates.
-- The Barclays Group and certain of its members including Barclays
Bank PLC are subject to supervisory stress testing exercises
in a number of jurisdictions. These exercises currently include
the programmes of the Bank of England (BoE), the European Banking
Authority (EBA), the Federal Deposit Insurance Corporation (FDIC)
and the Federal Reserve Board (FRB). Failure to meet the requirements
of regulatory stress tests, or the failure by regulators to approve
the stress test results and capital plans of the Barclays Group,
could result in the Barclays Group or certain of its members
including Barclays Bank PLC being required to enhance their capital
position, limit capital distributions or position additional
capital in specific subsidiaries.
For further details on the regulatory supervision of, and
regulations applicable to, the Barclays Bank Group, see Supervision
and regulation on pages 111 to 117.
vi) The impact of climate change on the Barclays Bank Group's business
The risks associated with climate change are subject to rapidly
increasing societal, regulatory and political focus, both in the UK
and internationally. Embedding climate risk into the Barclays Bank
Group's risk framework in line with regulatory expectations, and
adapting the Barclays Bank Group's operations and business strategy
to address both the financial risks resulting from: (i) the
physical risk of climate change; and (ii) the risk from the
transition to a low carbon economy, could have a significant impact
on the Barclays Bank Group's business.
Physical risks from climate change arise from a number of
factors and relate to specific weather events and longer-term
shifts in the climate. The nature and timing of extreme weather
events are uncertain but they are increasing in frequency and their
impact on the economy is predicted to be more acute in the future.
The potential impact on the economy includes, but is not limited
to, lower GDP growth, higher unemployment and significant changes
in asset prices and profitability of industries. Damage to the
properties and operations of borrowers could impair asset values
and the creditworthiness of customers leading to increased default
rates, delinquencies, write-offs and impairment charges in the
Barclays Bank Group's portfolios. In addition, the Barclays Bank
Group's premises and resilience may also suffer physical damage due
to weather events leading to increased costs for the Barclays Bank
Group.
As the economy transitions to a low-carbon economy, financial
institutions such as the Barclays Bank Group may face significant
and rapid developments in stakeholder expectations, policy, law and
regulation which could impact the lending activities the Barclays
Bank Group undertakes, as well as the risks associated with its
lending portfolios, and the value of the Barclays Bank Group's
financial assets. As sentiment towards climate change shifts and
societal preferences change, the Barclays Bank Group may face
greater scrutiny of the type of business it conducts, adverse media
coverage and reputational damage, which may in turn impact customer
demand for the Barclays Bank Group's products, returns on certain
business activities and the value of certain assets and trading
positions resulting in impairment charges.
In addition, the impacts of physical and transition climate
risks can lead to second order connected risks, which have the
potential to affect the Barclays Bank Group's retail and wholesale
portfolios. The impacts of climate change may increase losses for
those sectors sensitive to the effects of physical and transition
risks. Any subsequent increase in defaults and rising unemployment
could create recessionary pressures, which may lead to wider
deterioration in the creditworthiness of the Barclays Bank Group's
clients, higher ECLs, and increased charge-offs and defaults among
retail customers.
If the Barclays Bank Group does not adequately embed risks
associated with climate change into its risk framework to
appropriately measure, manage and disclose the various financial
and operational risks it faces as a result of climate change, or
fails to adapt its strategy and business model to the changing
regulatory requirements and market expectations on a timely basis,
it may have a material and adverse impact on the Barclays Bank
Group's level of business growth, competitiveness, profitability,
capital requirements, cost of funding, and financial condition.
For further details on the Barclays Bank Group's approach to
climate change, see page 43 of climate change risk management.
vii) Impact of benchmark interest rate reforms on the Barclays Bank
Group
For several years, global regulators and central banks have been
driving international efforts to reform key benchmark interest
rates and indices, such as the London Interbank Offered Rate
("LIBOR"), which are used to determine the amounts payable under a
wide range of transactions and make them more reliable and robust.
This has resulted in significant changes to the methodology and
operation of certain benchmarks and indices, the adoption of
alternative "risk-free" reference rates and the proposed
discontinuation of certain reference rates (including LIBOR), with
further changes anticipated.
Uncertainty as to the nature of such potential changes, the
availability and/or suitability of alternative "risk-free"
reference rates and other reforms may adversely affect a broad
range of transactions (including any securities, loans and
derivatives which use LIBOR to determine the amount of interest
payable that are included in the Barclays Bank Group's financial
assets and liabilities) that use these reference rates and indices
and introduce a number of risks for the Barclays Bank Group,
including, but not limited to:
-- Conduct risk: in undertaking actions to transition away from using
certain reference rates (including LIBOR), the Barclays Bank Group
faces conduct risks, which may lead to customer complaints, regulatory
sanctions or reputational impact if the Barclays Bank Group is
(i) considered to be undertaking market activities that are manipulative
or create a false or misleading impression, (ii) misusing sensitive
information or not identifying or appropriately managing or mitigating
conflicts of interest, (iii) providing customers with inadequate
advice, misleading information, unsuitable products or unacceptable
service, (iv) not taking an appropriate or consistent response
to remediation activity or customer complaints, (v) providing regulators
with inaccurate regulatory reporting or (vi) colluding or inappropriately
sharing information with competitors;
-- Financial risks: the valuation of certain Barclays Bank Group's
financial assets and liabilities may change. Moreover, transitioning
to alternative "risk-free" reference rates may impact the ability
of members of the Barclays Bank Group to calculate and model amounts
receivable by them on certain financial assets and determine the
amounts payable on certain financial liabilities (such as debt
securities issued by them) because currently alternative "risk-free"
reference rates (such as the Sterling Overnight Index Average (SONIA)
and the Secured Overnight Financing Rate (SOFR)) are look-back
rates whereas term rates (such as LIBOR) allow borrowers to calculate
at the start of any interest period exactly how much is payable
at the end of such interest period. This may have a material adverse
effect on the Barclays Bank Group's cashflows;
-- Pricing risk: changes to existing reference rates and indices,
discontinuation of any reference rate or indices and transition
to alternative "risk-free" reference rates may impact the pricing
mechanisms used by the Barclays Bank Group on certain transactions;
-- Operational risk: changes to existing reference rates and indices,
discontinuation of any reference rate or index and transition to
alternative "risk-free" reference rates may require changes to
the Barclays Bank Group's IT systems, trade reporting infrastructure,
operational processes, and controls. In addition, if any reference
rate or index (such as LIBOR) is no longer available to calculate
amounts payable, the Barclays Bank Group may incur additional expenses
in amending documentation for new and existing transactions and/or
effecting the transition from the original reference rate or index
to a new reference rate or index; and
-- Accounting risk: an inability to apply hedge accounting in accordance
with IFRS could lead to increased volatility in the Barclays Bank
Group's financial results and performance.
Any of these factors may have a material adverse effect on the
Barclays Bank Group's business, results of operations, financial
condition and prospects.
For further details on the impacts of benchmark interest rate
reforms on the Barclays Bank Group, see Note 13 of the Barclays
Bank PLC Annual Report.
Material existing and emerging risks impacting individual
principal risks
i) Credit risk
Credit risk is the risk of loss to the Barclays Bank Group from
the failure of clients, customers or counterparties, including
sovereigns, to fully honour their obligations to members of the
Barclays Bank Group, including the whole and timely payment of
principal, interest, collateral and other receivables.
a) Impairment
The introduction of the impairment requirements of IFRS 9
Financial Instruments, resulted in impairment loss allowances that
are recognised earlier, on a more forward-looking basis and on a
broader scope of financial instruments, and may continue to have, a
material impact on the Barclays Bank Group's business, results of
operations, financial condition and prospects.
Measurement involves complex judgement and impairment charges
could be volatile, particularly under stressed conditions.
Unsecured products with longer expected lives, such as credit
cards, are the most impacted. Taking into account the transitional
regime, the capital treatment on the increased reserves has the
potential to adversely impact the Barclays Bank Group's regulatory
capital ratios.
In addition, the move from incurred losses to ECLs has the
potential to impact the Barclays Bank Group's performance under
stressed economic conditions or regulatory stress tests. For more
information, refer to Note 1.
b) Specific sectors and concentrations
The Barclays Bank Group is subject to risks arising from changes
in credit quality and recovery rates of loans and advances due from
borrowers and counterparties in any specific portfolio. Any
deterioration in credit quality could lead to lower recoverability
and higher impairment in a specific sector. The following are areas
of uncertainties to the Barclays Bank Group's portfolio which could
have a material impact on performance:
-- UK retail, hospitality & leisure. Softening demand, rising costs
and a structural shift to online shopping is fuelling pressure
on the UK High Street and other sectors heavily reliant on consumer
discretionary spending. As these sectors continue to reposition
themselves, the trend represents a potential risk in the Barclays
Bank Group's UK corporate portfolio from the perspective of the
its interactions with both retailers and their landlords.
-- Consumer affordability has remained a key area of focus, particularly
in unsecured lending. Macroeconomic factors, such as rising unemployment,
that impact a customer's ability to service unsecured debt payments
could lead to increased arrears in unsecured products. Barclays
Bank Group is exposed to the adverse credit performance of unsecured
products, particularly in the US through its US Cards business.
-- UK real estate market. UK property represents a significant portion
of the Barclays Bank Group's overall corporate credit exposure.
In 2019, property price growth across the UK has slowed, particularly
in London and the South East where the Barclays Bank Group's exposure
has high concentration. The Barclays Bank Group is at risk of increased
impairment from a material fall in property prices.
-- Leverage finance underwriting. The Barclays Bank Group takes on
sub-investment grade underwriting exposure, including single name
risk, particularly in the US and Europe. The Barclays Bank Group
is exposed to credit events and market volatility during the underwriting
period. Any adverse events during this period may potentially result
in loss for the Barclays Bank Group, or an increased capital requirement
should there be a need to hold the exposure for an extended period.
-- Italian mortgage portfolio. The Barclays Bank Group is exposed
to a decline in the Italian economic environment through a mortgage
portfolio in run-off and positions to wholesale customers. Growth
in the Italian economy remained weak in 2019 and should the economy
deteriorate further, there could be a material adverse effect on
the Barclays Bank Group's results including, but not limited to,
increased credit losses and higher impairment charges.
The Barclays Bank Group also has large individual exposures to
single name counterparties, both in its lending activities and in
its financial services and trading activities, including
transactions in derivatives and transactions with brokers, central
clearing houses, dealers, other banks, mutual and hedge funds and
other institutional clients. The default of such counterparties
could have a significant impact on the carrying value of these
assets. In addition, where such counterparty risk has been
mitigated by taking collateral, credit risk may remain high if the
collateral held cannot be realised, or has to be liquidated at
prices which are insufficient to recover the full amount of the
loan or derivative exposure. Any such defaults could have a
material adverse effect on the Barclays Bank Group's results due
to, for example, increased credit losses and higher impairment
charges.
For further details on the Barclays Bank Group's approach to
credit risk, see credit risk management on pages 44 to 45 and
credit risk performance on pages 81 to 86.
ii) Market risk
Market risk is the risk of loss arising from potential adverse
change in the value of the Barclays Bank Group's assets and
liabilities from fluctuation in market variables including, but not
limited to, interest rates, foreign exchange, equity prices,
commodity prices, credit spreads, implied volatilities and asset
correlations.
A broadening in trade tensions between the US and its major
trading partners, slowing global growth and political concerns in
the US and Europe (including Brexit) are some of the factors that
could heighten market risks for the Barclays Bank Group's
portfolios. In addition, the Barclays Bank Group's trading business
is generally exposed to a prolonged period of elevated asset price
volatility, particularly if it negatively affects the depth of
marketplace liquidity. Such a scenario could impact the Barclays
Bank Group's ability to execute client trades and may also result
in lower client flow-driven income and/or market-based losses on
its existing portfolio of market risks. These can include having to
absorb higher hedging costs from rebalancing risks that need to be
managed dynamically as market levels and their associated
volatilities change.
It is difficult to predict changes in market conditions, and
such changes could have a material adverse effect on the Barclays
Bank Group's business, results of operations, financial condition
and prospects.
For further details on the Barclays Bank Group's approach to
market risk, see market risk management on page 45 and market risk
performance on pages 88 to 90.
iii) Treasury and capital risk
There are three primary types of treasury and capital risk faced
by the Barclays Bank Group:
a) Liquidity risk
Liquidity risk is the risk that the Barclays Bank Group is
unable to meet its contractual or contingent obligations or that it
does not have the appropriate amount, tenor and composition of
funding and liquidity to support its assets. This could cause the
Barclays Bank Group to fail to meet regulatory liquidity standards
or be unable to support day-to-day banking activities. Key
liquidity risks that the Barclays Bank Group faces include:
-- The stability of the Barclays Bank Group's current funding profile:
In particular, that part which is based on accounts and deposits
payable on demand or at short notice, could be affected by the
Barclays Bank Group failing to preserve the current level of customer
and investor confidence. The Barclays Bank Group also regularly
accesses the money and capital markets to provide short-term and
long-term funding to support its operations. Several factors, including
adverse macroeconomic conditions, adverse outcomes in conduct and
legal, competition and regulatory matters and loss of confidence
by investors, counterparties and/or customers in the Barclays Bank
Group, can affect the ability of the Barclays Bank Group to access
the capital markets and/or the cost and other terms upon which
the Barclays Bank Group is able to obtain market funding.
-- Credit rating changes and the impact on funding costs: Rating agencies
regularly review credit ratings given to Barclays Bank PLC and
certain members of the Barclays Bank Group. Credit ratings are
based on a number of factors, including some which are not within
the Barclays Bank Group's control (such as political and regulatory
developments, changes in rating methodologies, macro-economic conditions
and the sovereign credit ratings of the countries in which the
Barclays Bank Group operates).
Whilst the impact of a credit rating change will depend on a number
of factors (including the type of issuance and prevailing market
conditions), any reductions in a credit rating (in particular,
any downgrade below investment grade) may affect the Barclays Bank
Group's access to the money or capital markets and/or terms on
which the Barclays Bank Group is able to obtain market funding,
increase costs of funding and credit spreads, reduce the size of
the Barclays Bank Group's deposit base, trigger additional collateral
or other requirements in derivative contracts and other secured
funding arrangements or limit the range of counterparties who are
willing to enter into transactions with the Barclays Bank Group.
Any of these factors could have a material adverse effect on the
Barclays Bank Group's business, results of operations, financial
condition and prospects.
b) Capital risk
Capital risk is the risk that the Barclays Bank Group has an
insufficient level or composition of capital to support its normal
business activities and to meet its regulatory capital requirements
under normal operating environments or stressed conditions (both
actual and as defined for internal planning or regulatory stress
testing purposes). This includes the risk from the Barclays Bank
Group's pension plans. Key capital risks that the Barclays Bank
Group faces include:
-- Failure to meet prudential capital requirements: This could lead
to the Barclays Bank Group being unable to support some or all
of its business activities, a failure to pass regulatory stress
tests, increased cost of funding due to deterioration in investor
appetite or credit ratings, restrictions on distributions including
the ability to meet dividend targets, and/or the need to take additional
measures to strengthen the Barclays Bank Group's capital or leverage
position.
-- Adverse changes in FX rates impacting capital ratios: The Barclays
Bank Group has capital resources, risk weighted assets and leverage
exposures denominated in foreign currencies. Changes in foreign
currency exchange rates may adversely impact the Sterling equivalent
value of these items. As a result, the Barclays Bank Group's regulatory
capital ratios are sensitive to foreign currency movements. Failure
to appropriately manage the Barclays Bank Group's balance sheet
to take account of foreign currency movements could result in an
adverse impact on the Barclays Bank Group's regulatory capital
and leverage ratios.
-- Adverse movements in the pension fund: Adverse movements in pension
assets and liabilities for defined benefit pension schemes could
result in deficits on a funding and/or accounting basis. This could
lead to the Barclays Bank Group making substantial additional contributions
to its pension plans and/or a deterioration in its capital position.
Under IAS 19, the liabilities discount rate is derived from the
yields of high quality corporate bonds. Therefore, the valuation
of the Barclays Bank Group's defined benefits schemes would be
adversely affected by a prolonged fall in the discount rate due
to a persistent low interest rate and/or credit spread environment.
Inflation is another significant risk driver to the pension fund
as the liabilities are adversely impacted by an increase in long-term
inflation expectations.
c) Interest rate risk in the banking book
Interest rate risk in the banking book is the risk that the
Barclays Bank Group is exposed to capital or income volatility
because of a mismatch between the interest rate exposures of its
(non-traded) assets and liabilities. The Barclays Bank Group's
hedge programmes for interest rate risk in the banking book rely on
behavioural assumptions and, as a result, the success of the
hedging strategy cannot be guaranteed. A potential mismatch in the
balance or duration of the hedge assumptions could lead to earnings
deterioration. A decline in interest rates in G3 currencies may
also compress net interest margin on retail portfolios. In
addition, the Barclays Bank Group's liquidity pool is exposed to
potential capital and/or income volatility due to movements in
market rates and prices.
For further details on the Barclays Bank Group's approach to
treasury and capital risk, see treasury and capital risk management
on page 45 and treasury and capital risk performance on pages 92 to
106.
iv) Operational risk
Operational risk is the risk of loss to the Barclays Bank Group
from inadequate or failed processes or systems, human factors or
due to external events where the root cause is not due to credit or
market risks. Examples include:
a) Operational resilience
The loss of or disruption to business processing is a material
inherent risk within the Barclays Bank Group and across the financial
services industry, whether arising through impacts on the Barclays
Bank Group's technology systems or availability of personnel or
services supplied by third parties. Failure to build resilience
and recovery capabilities into business processes or into the services
of technology, real estate or suppliers on which the Barclays Bank
Group's business processes depend, may result in significant customer
detriment, costs to reimburse losses incurred by the Barclays Bank
Group's customers, and reputational damage.
b) Cyber threats
The frequency of cyber-attacks continues to grow and is a global
threat that is inherent across all industries. The financial sector
remains a primary target for cyber criminals, hostile nation states,
opportunists and hacktivists and there is an increasing level of
sophistication in criminal hacking for the purpose of stealing
money, stealing, destroying or manipulating data (including customer
data) and/or disrupting operations, where multiple threats exist
including threats arising from malicious emails, distributed denial
of service (DDoS) attacks, payment system compromises, insider
attackers, supply chain and vulnerability exploitation. Cyber events
have a compounding impact on services and customers, e.g. data
breaches in social networking sites, retail companies and payments
networks.
Any failure in the Barclays Bank Group's cyber-security
policies, procedures or controls and/or its IT systems, may result
in significant financial losses, major business disruption,
inability to deliver customer services, or loss of data or other
sensitive information (including as a result of an outage) and may
cause associated reputational damage. Any of these factors could
increase costs (including, but not limited to, costs relating to
notification of, or compensation for customers) or may affect the
Barclays Bank Group's ability to retain and attract customers.
Regulators in the UK, US and Europe continue to recognise
cyber-security as an increasing systemic risk to the financial
sector and have highlighted the need for financial institutions to
improve their monitoring and control of, and resilience
(particularly of critical services) to cyber-attacks, and to
provide timely notification of them, as appropriate. Given the
Barclays Bank Group's reliance on technology, a cyber-attack could
have a material adverse effect on its business, results of
operations, financial condition and prospects.
For further details on the Barclays Bank Group's approach to
cyber threats, see operational risk performance on pages 107 to
109.
c) New and emergent technology
Technological advancements present opportunities to develop new
and innovative ways of doing business across the Barclays Bank
Group, with new solutions being developed both in-house and in
association with third-party companies. Introducing new forms of
technology, however, also has the potential to increase inherent
risk. Failure to evaluate, actively manage and closely monitor
risk exposure during all phases of business development could introduce
new vulnerabilities and security flaws and have a material adverse
effect on the Barclays Bank Group's business, results of operations,
financial condition and prospects.
d) External fraud
The level and nature of fraud threats continues to evolve, particularly
with the increasing use of digital products and the greater functionality
available online. Criminals continue to adapt their techniques
and are increasingly focused on targeting customers and clients
through ever more sophisticated methods of social engineering.
External data breaches also provide criminals with the opportunity
to exploit the growing levels of compromised data. These fraud
threats could lead to customer detriment, loss of business, missed
business opportunity and reputational damage, all of which could
have a material adverse effect on the Barclays Bank Group's business,
results of operations, financial condition and prospects.
e) Data management and information protection
The Barclays Bank Group holds and processes large volumes of data,
including personally identifiable information, intellectual property,
and financial data. The General Data Protection Regulation (GDPR)
has strengthened the data protection rights of customers and increased
the accountability of the Barclays Bank Group in its management
of such data. Failure to accurately collect and maintain this data,
protect it from breaches of confidentiality and interference with
its availability exposes the Barclays Bank Group to the risk of
loss or unavailability of data (including customer data discussed
under "vi) Conduct risk, c) Data protection and privacy" below)
or data integrity issues. Any of these failures could have a material
adverse effect on the Barclays Bank Group's business, results of
operations, financial condition and prospects.
f) Algorithmic trading
In some areas of the investment banking business, trading algorithms
are used to price and risk manage client and principal transactions.
An algorithmic error could result in erroneous or duplicated transactions,
a system outage, or impact the Barclays Bank Group's pricing abilities,
which could have a material adverse effect on the Barclays Bank
Group's business, results of operations, financial condition and
prospects and reputation.
g) Processing error
As a large, complex financial institution, the Barclays Bank Group
faces the risk of material errors in existing operational processes,
or from new processes as a result of on-going change activity,
including payments and client transactions. Material operational
or payment errors could disadvantage the Barclays Bank Group's
customers, clients or counterparties and could have a material
adverse effect on the Barclays Bank Group's business, results of
operations, financial condition and prospects.
h) Supplier exposure
The Barclays Bank Group depends on suppliers, including Barclays
Execution Services Limited, for the provision of many of its services
and the development of technology. Whilst the Barclays Bank Group
depends on suppliers, it remains fully accountable for any risk
arising from the actions of suppliers. The dependency on suppliers
and sub-contracting of outsourced services introduces concentration
risk where the failure of specific suppliers could have an impact
on the Barclays Bank Group's ability to continue to provide material
services to its customers. Failure to adequately manage supplier
risk could have a material adverse effect on the Barclays Bank
Group's business, results of operations, financial condition and
prospects.
i) Critical accounting estimates and judgements
The preparation of financial statements in accordance with IFRS
requires the use of estimates. It also requires management to exercise
judgement in applying relevant accounting policies. The key areas
involving a higher degree of judgement or complexity, or areas
where assumptions are significant to the consolidated and individual
financial statements, include credit impairment charges for amortised
cost assets, taxes, fair value of financial instruments, pensions
and post-retirement benefits, and provisions including conduct
and legal, competition and regulatory matters. There is a risk
that if the judgement exercised, or the estimates or assumptions
used, subsequently turn out to be incorrect, this could result
in material losses to the Barclays Bank Group, beyond what was
anticipated or provided for. Further development of standards and
interpretations under IFRS could also materially impact the financial
results, condition and prospects of the Barclays Bank Group. For
further details on the accounting estimates and policies, see the
Notes to the audited financial statements on pages 139 to 236 of
the Barclays Bank PLC Annual Report.
j) Tax risk
The Barclays Bank Group is required to comply with the domestic
and international tax laws and practice of all countries in which
it has business operations. There is a risk that the Barclays Bank
Group could suffer losses due to additional tax charges, other
financial costs or reputational damage as a result of failing to
comply with such laws and practice, or by failing to manage its
tax affairs in an appropriate manner, with much of this risk attributable
to the international structure of the Barclays Bank Group. In addition,
increasing reporting and disclosure requirements around the world
and the digitisation of the administration of tax has potential
to increase the Barclays Bank Group's tax compliance obligations
further.
k) Ability to hire and retain appropriately qualified employees
As a regulated financial institution, the Barclays Bank Group requires
diversified and specialist skilled colleagues. The Barclays Bank
Group's ability to attract, develop and retain a diverse mix of
talent is key to the delivery of its core business activity and
strategy. This is impacted by a range of external and internal
factors, such as the UK's decision to leave the EU and the enhanced
individual accountability applicable to the banking industry. Failure
to attract or prevent the departure of appropriately qualified
and skilled employees could have a material adverse effect on the
Barclays Bank Group's business, results of operations, financial
condition and prospects. Additionally, this may result in disruption
to service which could in turn lead to disenfranchising certain
customer groups, customer detriment and reputational damage.
For further details on the Barclays Bank Group's approach to
operational risk, see operational risk management on page 47 and
operational risk performance on pages 107 to 109.
v) Model risk
Model risk is the risk of potential adverse consequences from
financial assessments or decisions based on incorrect or misused
model outputs and reports. The Barclays Bank Group relies on models
to support a broad range of business and risk management
activities, including informing business decisions and strategies,
measuring and limiting risk, valuing exposures (including the
calculation of impairment), conducting stress testing, assessing
capital adequacy, supporting new business acceptance and risk and
reward evaluation, managing client assets, and meeting reporting
requirements. Models are, by their nature, imperfect and incomplete
representations of reality because they rely on assumptions and
inputs, and so they may be subject to errors affecting the accuracy
of their outputs. For instance, the quality of the data used in
models across the Barclays Bank Group has a material impact on the
accuracy and completeness of its risk and financial metrics. Models
may also be misused. Model errors or misuse may result in (among
other things) the Barclays Bank Group making inappropriate business
decisions and/or inaccuracies or errors being identified in the
Barclays Bank Group's risk management and regulatory reporting
processes. This could result in significant financial loss,
imposition of additional capital requirements, enhanced regulatory
supervision and reputational damage, all of which could have a
material adverse effect on the Barclays Bank Group's business,
results of operations, financial condition and prospects.
For further details on the Barclays Bank Group's approach to
model risk, see model risk management on page 48 and model risk
performance on pages 110.
vi) Conduct risk
Conduct risk is the risk of detriment to customers, clients,
market integrity, effective competition or the Barclays Bank Group
from the inappropriate supply of financial services, including
instances of wilful or negligent misconduct. This risk could
manifest itself in a variety of ways:
a) Employee misconduct
The Barclays Bank Group's businesses are exposed to risk from potential
non-compliance with its policies and instances of wilful and negligent
misconduct by employees, all of which could result in enforcement
action or reputational harm. It is not always possible to deter
employee misconduct, and the precautions we take to prevent and
detect this activity may not always be effective. Employee misconduct
could have a material adverse effect on the Barclays Bank Group's
customers, clients, market integrity as well as reputation, financial
condition and prospects.
b) Product governance and life cycle
The ongoing review, management and governance of new and amended
products has come under increasing regulatory focus (for example,
the recast of the Markets in Financial Instruments Directive and
guidance in relation to the adoption of the EU Benchmarks Regulation)
and the Barclays Bank Group expects this to continue. The following
could lead to poor customer outcomes: (i) ineffective product governance,
including design, approval and review of products, and (ii) inappropriate
controls over internal and third party sales channels and post
sales services, such as complaints handling, collections and recoveries.
The Barclays Bank Group is at risk of financial loss and reputational
damage as a result.
c) Financial crime
The Barclays Bank Group may be adversely affected if it fails to
effectively mitigate the risk that third parties or its employees
facilitate, or that its products and services are used to facilitate,
financial crime (money laundering, terrorist financing and proliferation
financing, breaches of economic and financial sanctions, bribery
and corruption, and the facilitation of tax evasion). UK and US
regulations covering financial institutions continue to focus on
combating financial crime. Failure to comply may lead to enforcement
action by the Barclays Bank Group's regulators, including severe
penalties, which may have material adverse effect on the Barclays
Bank Group's business, financial condition and prospects.
d) Data protection and privacy
Proper handling of personal data is critical to sustaining long-term
relationships with our customers and clients and complying with
privacy laws and regulations. Failure to protect personal data
can lead to potential detriment to our customers and clients, reputational
damage, enforcement action and financial loss, which may be substantial
(see "iv) Operational risk, (e) Data management and information
protection" above).
e) Regulatory focus on culture and accountability
Regulators around the world continue to emphasise the importance
of culture and personal accountability and enforce the adoption
of adequate internal reporting and whistleblowing procedures to
help to promote appropriate conduct and drive positive outcomes
for customers, colleagues, clients and markets. The requirements
and expectations of the UK Senior Managers Regime, Certification
Regime and Conduct Rules have driven additional accountabilities
for individuals across the Barclays Bank Group with an increased
focus on governance and rigour. Failure to meet these requirements
and expectations may lead to regulatory sanctions, both for the
individuals and the Barclays Bank Group.
For further details on the Barclays Bank Group's approach to
conduct risk, see conduct risk management on page 48 and conduct
risk performance on page 110.
vii) Reputation risk
Reputation risk is the risk that an action, transaction,
investment, event, decision or business relationship will reduce
trust in the Barclays Bank Group's integrity and competence.
Any material lapse in standards of integrity, compliance,
customer service or operating efficiency may represent a potential
reputation risk. Stakeholder expectations constantly evolve, and so
reputation risk is dynamic and varies between geographical regions,
groups and individuals. A risk arising in one business area can
have an adverse effect upon the Barclays Bank Group's overall
reputation and any one transaction, investment or event (in the
perception of key stakeholders) can reduce trust in the Barclays
Bank Group's integrity and competence. The Barclays Bank Group's
association with sensitive topics and sectors has been, and in some
instances continues to be, an area of concern for stakeholders,
including (i) the financing of, and investments in, businesses
which operate in sectors that are sensitive because of their
relative carbon intensity or local environmental impact; (ii)
potential association with human rights violations (including
combating modern slavery) in the Barclays Bank Group's operations
or supply chain and by clients and customers; and (iii) the
financing of businesses which manufacture and export military and
riot control goods and services.
Reputation risk could also arise from negative public opinion
about the actual, or perceived, manner in which the Barclays Bank
Group conducts its business activities, or the Barclays Bank
Group's financial performance, as well as actual or perceived
practices in banking and the financial services industry generally.
Modern technologies, in particular online social media channels and
other broadcast tools that facilitate communication with large
audiences in short time frames and with minimal costs, may
significantly enhance and accelerate the distribution and effect of
damaging information and allegations. Negative public opinion may
adversely affect the Barclays Bank Group's ability to retain and
attract customers, in particular, corporate and retail depositors,
and to retain and motivate staff, and could have a material adverse
effect on the Barclays Bank Group's business, results of
operations, financial condition and prospects.
In addition to the above, reputation risk has the potential to
arise from operational issues or conduct matters which cause
detriment to customers, clients, market integrity, effective
competition or the Barclays Bank Group (see "iv) Operational risk"
above).
For further details on the Barclays Bank Group's approach to
reputation risk, see reputation risk management on page 48 and
reputation risk performance on pages 110.
viii) Legal risk and legal, competition and regulatory matters
The Barclays Bank Group conducts activities in a highly
regulated market which exposes it and its employees to legal risk
arising from (i) the multitude of laws and regulations that apply
to the businesses it operates, which are highly dynamic, may vary
between jurisdictions, and are often unclear in their application
to particular circumstances especially in new and emerging areas;
and (ii) the diversified and evolving nature of the Barclays Bank
Group's businesses and business practices. In each case, this
exposes the Barclays Bank Group and its employees to the risk of
loss or the imposition of penalties, damages or fines from the
failure of members of the Barclays Bank Group to meet their
respective legal obligations, including legal or contractual
requirements. Legal risk may arise in relation to a number of the
risk factors identified above, including (without limitation) as a
result of (i) the UK's withdrawal from the EU, (ii) benchmark
reform, (iii) the regulatory change agenda, and (iv) rapidly
evolving rules and regulations in relation to data protection,
privacy and cyber-security.
A breach of applicable legislation and/or regulations by the
Barclays Bank Group or its employees could result in criminal
prosecution, regulatory censure, potentially significant fines and
other sanctions in the jurisdictions in which the Barclays Bank
Group operates. Where clients, customers or other third parties are
harmed by the Barclays Bank Group's conduct, this may also give
rise to civil legal proceedings, including class actions. Other
legal disputes may also arise between the Barclays Bank Group and
third parties relating to matters such as breaches or enforcement
of legal rights or obligations arising under contracts, statutes or
common law. Adverse findings in any such matters may result in the
Barclays Bank Group being liable to third parties or may result in
the Barclays Bank Group's rights not being enforced as
intended.
Details of legal, competition and regulatory matters to which
the Barclays Bank Group is currently exposed are set out in Note 25
of the Barclays Bank PLC Annual Report. In addition to matters
specifically described in Note 25 of the Barclays Bank PLC Annual
Report, the Barclays Bank Group is engaged in various other legal
proceedings which arise in the ordinary course of business. The
Barclays Bank Group is also subject to requests for information,
investigations and other reviews by regulators, governmental and
other public bodies in connection with business activities in which
the Barclays Bank Group is, or has been, engaged.
The outcome of legal, competition and regulatory matters, both
those to which the Barclays Bank Group is currently exposed and any
others which may arise in the future, is difficult to predict. In
connection with such matters, the Barclays Bank Group may incur
significant expense, regardless of the ultimate outcome, and any
such matters could expose the Barclays Bank Group to any of the
following outcomes: substantial monetary damages, settlements
and/or fines; remediation of affected customers and clients; other
penalties and injunctive relief; additional litigation; criminal
prosecution; the loss of any existing agreed protection from
prosecution; regulatory restrictions on the Barclays Bank Group's
business operations including the withdrawal of authorisations;
increased regulatory compliance requirements or changes to laws or
regulations; suspension of operations; public reprimands; loss of
significant assets or business; a negative effect on the Barclays
Bank Group's reputation; loss of confidence by investors,
counterparties, clients and/or customers; risk of credit rating
agency downgrades; potential negative impact on the availability
and/or cost of funding and liquidity; and/or dismissal or
resignation of key individuals. In light of the uncertainties
involved in legal, competition and regulatory matters, there can be
no assurance that the outcome of a particular matter or matters
will not have a material adverse effect on the Barclays Bank
Group's business, results of operations, financial condition and
prospects.
Consolidated financial statements
Consolidated income statement
2019 2018(a) 2017(a,b)
For the year ended 31 December Notes GBPm GBPm GBPm
------------------------------------------------------------------ ----- ------- -------- ---------
Continuing operations
Interest income 3 8,085 7,459 6,917
Interest expense 3 (4,178) (4,329) (3,041)
------------------------------------------------------------------ ----- ------- -------- ---------
Net interest income 3,907 3,130 3,876
------------------------------------------------------------------ ----- ------- -------- ---------
Fee and commission income 4 7,664 7,392 7,424
Fee and commission expense 4 (1,992) (1,785) (1,726)
------------------------------------------------------------------ ----- ------- -------- ---------
Net fee and commission income 5,672 5,607 5,698
------------------------------------------------------------------ ----- ------- -------- ---------
Net trading income 5 4,073 4,364 3,396
Net investment income 6 420 394 699
Other income 79 105 61
------------------------------------------------------------------ ----- ------- -------- ---------
Total income 14,151 13,600 13,730
Credit impairment charges 7 (1,202) (643) (1,553)
------------------------------------------------------------------ ----- ------- -------- ---------
Net operating income 12,949 12,957 12,177
------------------------------------------------------------------ ----- ------- -------- ---------
Staff costs 30 (4,565) (4,874) (4,393)
Infrastructure costs 8 (835) (935) (1,696)
Administration and general expenses 8 (4,318) (4,224) (4,141)
Provision for litigation and conduct 8 (264) (1,706) (448)
------------------------------------------------------------------ ----- ------- -------- ---------
Operating expenses 8 (9,982) (11,739) (10,678)
------------------------------------------------------------------ ----- ------- -------- ---------
Share of post-tax results of associates and joint ventures 57 68 75
Profit on disposal of subsidiaries, associates and joint ventures 88 - 184
------------------------------------------------------------------ ----- ------- -------- ---------
Profit before tax 3,112 1,286 1,758
Taxation 9 (332) (229) (1,352)
------------------------------------------------------------------ ----- ------- -------- ---------
Profit after tax in respect of continuing operations 2,780 1,057 406
(Loss)/profit after tax in respect of discontinued operations 39 - (47) (1,386)
------------------------------------------------------------------ ----- ------- -------- ---------
Profit/(loss) after tax 2,780 1,010 (980)
------------------------------------------------------------------ ----- ------- -------- ---------
Attributable to:
------------------------------------------------------------------ ----- ------- -------- ---------
Equity holders of the parent 2,120 363 (1,763)
Other equity instrument holders 660 647 639
------------------------------------------------------------------ ----- ------- -------- ---------
Total equity holders of the parent 2,780 1,010 (1,124)
Non-controlling interests in respect of continuing operations 29 - - 4
Non-controlling interests in respect of discontinued operations 29 - - 140
------------------------------------------------------------------ ----- ------- -------- ---------
Profit/(loss) after tax 2,780 1,010 (980)
------------------------------------------------------------------ ----- ------- -------- ---------
Note
a From 2019, due to an IAS 12 update, the tax relief on payments
in relation to equity instruments has been recognised in the tax
charge of the income statement, whereas it was previously recorded
in retained earnings. Comparatives have been restated, reducing
the tax charge for 2018 by GBP175m and 2017 by GBP174m. This change
does not impact earnings per share or return on average tangible
shareholders' equity. Further detail can be found in Note 1.
b Following the sale of the UK banking business on 1 April 2018 by
the Group, the continuing operations for 2017 have been restated
to disclose the UK banking business as a discontinued operation.
Further detail on the discontinued operations can be found in Note
39 of the Barclays Bank PLC Annual Report.
Consolidated statement of comprehensive income
2019 2018 2017(a)
For the year ended 31 December GBPm GBPm GBPm
--------------------------------------------------------------------------------------------- ------- ----- -------
Profit/(loss) after tax 2,780 1,010 (980)
Profit after tax in respect of continuing operations 2,780 1,057 406
Loss after tax in respect of discontinuing operations - (47) (1,386)
--------------------------------------------------------------------------------------------- ------- ----- -------
Other comprehensive income/(loss) that may be recycled to profit or loss from continuing
operations:
Currency translation reserve
Currency translation differences(b) (544) 844 (1,310)
Fair value through other comprehensive income reserve movement relating to debt securities(c)
Net gains/(losses) from changes in fair value 2,465 (475) -
Net (gains)/losses transferred to net profit on disposal (454) 74 -
Net losses transferred to net profit due to impairment 1 4 -
Net (losses)/gains due to fair value hedging (1,782) 165 -
Other movements (8) (25) -
Tax (63) 53 -
Cash flow hedging reserve
Net gains/(losses) from changes in fair value 823 (197) (428)
Net gains transferred to net profit (141) (213) (602)
Tax (171) 103 256
Available for sale reserve(c) - - 429
Other 16 27 (7)
--------------------------------------------------------------------------------------------- ------- ----- -------
Other comprehensive income/(loss) that may be recycled to profit or loss from continuing
operations 142 360 (1,662)
Other comprehensive (loss)/income not recycled to profit or loss from continuing operations:
--------------------------------------------------------------------------------------------- ------- ----- -------
Retirement benefit remeasurements (280) 412 115
Fair value through other comprehensive income reserve movements relating to equity
instruments(c) - (141) -
Own credit (316) 77 (7)
Tax 150 (118) (66)
--------------------------------------------------------------------------------------------- ------- ----- -------
Other comprehensive (loss)/income not recycled to profit or loss from continuing operations (446) 230 42
--------------------------------------------------------------------------------------------- ------- ----- -------
Other comprehensive (loss)/income for the year from continuing operations (304) 590 (1,620)
--------------------------------------------------------------------------------------------- ------- ----- -------
Other comprehensive (loss)/gains for the year from discontinued operation - (3) 1,301
--------------------------------------------------------------------------------------------- ------- ----- -------
Total comprehensive income/(loss) for the year
--------------------------------------------------------------------------------------------- ------- ----- -------
Total comprehensive income/(loss) for the year, net of tax from continuing operations 2,476 1,647 (1,214)
Total comprehensive loss for the year, net of tax from discontinued operation - (50) (85)
--------------------------------------------------------------------------------------------- ------- ----- -------
Total comprehensive income/(loss) for the year 2,476 1,597 (1,299)
--------------------------------------------------------------------------------------------- ------- ----- -------
Attributable to:
Equity holders of the parent 2,476 1,597 (1,411)
Non-controlling interests - - 112
--------------------------------------------------------------------------------------------- ------- ----- -------
Total comprehensive income/(loss) for the year 2,476 1,597 (1,299)
--------------------------------------------------------------------------------------------- ------- ----- -------
Note
a Following the sale of the UK banking business on 1 April 2018 by
the Group, the continuing operations for 2017 have been restated
to disclose the UK banking business as a discontinued operation.
Further detail on the discontinued operations can be found in Note
39 of the Barclays Bank PLC Annual Report.
b Includes GBP15m profit (2018: GBP41m loss; 2017:GBP189m loss) on
recycling of currency translation differences.
c Following the adoption of IFRS 9, Financial Instruments on 1 January
2018, the fair value through other comprehensive income reserve
was introduced replacing the available for sale reserve.
Consolidated balance sheet
2019 2018
As at 31 December Notes GBPm GBPm
------------------------------------------------------------------ ----- ------- -------
Assets
Cash and balances at central banks 125,940 136,359
Cash collateral and settlement balances 79,486 74,352
Loans and advances at amortised cost 18 141,636 136,959
Reverse repurchase agreements and other similar secured lending 1,731 1,613
Trading portfolio assets 11 113,337 104,038
Financial assets at fair value through the income statement 12 129,470 145,250
Derivative financial instruments 13 229,641 222,683
Financial assets at fair value through other comprehensive income 14 45,406 44,994
Investments in associates and joint ventures 35 295 762
Goodwill and intangible assets 21 1,212 1,327
Property, plant and equipment 19 1,631 947
Current tax assets 9 898 1,713
Deferred tax assets 9 2,460 2,970
Retirement benefit assets 32 2,108 1,768
Other assets 1,421 1,965
------------------------------------------------------------------ ----- ------- -------
Total assets 876,672 877,700
------------------------------------------------------------------ ----- ------- -------
Liabilities
Deposits at amortised cost 18 213,881 199,337
Cash collateral and settlement balances 67,682 67,736
Repurchase agreements and other similar secured borrowing 2,032 7,378
Debt securities in issue 33,536 39,063
Subordinated liabilities 26 33,425 35,327
Trading portfolio liabilities 11 35,212 36,614
Financial liabilities designated at fair value 15 204,446 217,741
Derivative financial instruments 13 228,940 219,592
Current tax liabilities 9 320 621
Deferred tax liabilities 9 80 -
Retirement benefit liabilities 32 313 283
Other liabilities 22 5,239 5,170
Provisions 23 951 1,127
------------------------------------------------------------------ ----- ------- -------
Total liabilities 826,057 829,989
------------------------------------------------------------------ ----- ------- -------
Equity
Called up share capital and share premium 27 2,348 2,348
Other equity instruments 27 8,323 7,595
Other reserves 28 3,235 3,361
Retained earnings 36,709 34,405
------------------------------------------------------------------ ----- ------- -------
Total equity excluding non-controlling interests 50,615 47,709
Non-controlling interests 29 - 2
------------------------------------------------------------------ ----- ------- -------
Total equity 50,615 47,711
------------------------------------------------------------------ ----- ------- -------
Total liabilities and equity 876,672 877,700
------------------------------------------------------------------ ----- ------- -------
The Board of Directors approved the financial statements on
pages 127 to 240 on 12 February 2020.
James E Staley
Barclays Bank Group - Chief Executive Officer
Steven Ewart
Barclays Bank Group - Chief Financial Officer
Consolidated statement of changes in equity
Called up
share Total equity
capital Other excluding Non-
and share equity Retained non-controlling controlling Total
premium(a) instruments(a) Other reserves(b) earnings interests interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- ----------- --------------- ----------------- --------- ---------------- ------------ -------
Balance as at 1
January 2019 2,348 7,595 3,361 34,405 47,709 2 47,711
Profit after tax - 660 - 2,120 2,780 - 2,780
Currency
translation
movements - - (544) - (544) - (544)
Fair value
through other
comprehensive
income reserve - - 159 - 159 - 159
Cash flow hedges - - 511 - 511 - 511
Retirement
benefit
remeasurement - - - (194) (194) - (194)
Own credit
reserve - - (252) - (252) - (252)
Other - - - 16 16 - 16
----------------- ----------- --------------- ----------------- --------- ---------------- ------------ -------
Total
comprehensive
income for the
year - 660 (126) 1,942 2,476 - 2,476
Issue and
exchange of
other equity
instruments - 728 - (406) 322 - 322
Other equity
instruments
coupons paid - (660) - - (660) - (660)
Equity settled
share schemes - - - 392 392 - 392
Vesting of
Barclays PLC
shares under
share-based
payment schemes - - - (349) (349) - (349)
Dividends on
ordinary shares - - - (233) (233) - (233)
Dividends on
preference
shares and other
shareholders
equity - - - (41) (41) - (41)
Capital
contribution
from Barclays
Plc - - - 995 995 - 995
Other reserve
movements - - - 4 4 (2) 2
----------------- ----------- --------------- ----------------- --------- ---------------- ------------ -------
Balance as at 31
December 2019 2,348 8,323 3,235 36,709 50,615 - 50,615
----------------- ----------- --------------- ----------------- --------- ---------------- ------------ -------
Notes
a For further details refer to Note 27 of the Barclays Bank PLC Annual
Report.
b For further details refer to Note 28 of the Barclays Bank PLC Annual
Report.
Called up
share Total equity
capital Other excluding Non-
and share equity Other Retained non-controlling controlling Total
premium(a) instruments(a) reserves(b) earnings(c) interests interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------- ----------- -------------- ------------ ------------ --------------- ------------ --------
Balance as at 31
December 2017 14,453 8,982 3,808 38,490 65,733 1 65,734
Effects of changes
in accounting
policies(d) - - (136) (2,014) (2,150) - (2,150)
-------------------- ----------- -------------- ------------ ------------ --------------- ------------ --------
Balance as at 1
January 2018 14,453 8,982 3,672 36,476 63,583 1 63,584
Profit after tax - 647 - 410 1,057 - 1,057
Currency translation
movements - - 844 - 844 - 844
Fair value through
other comprehensive
income reserve - - (345) - (345) - (345)
Cash flow hedges - - (307) - (307) - (307)
Retirement benefit
remeasurement - - - 313 313 - 313
Own credit reserve - - 58 - 58 - 58
Other - - - 27 27 - 27
-------------------- ----------- -------------- ------------ ------------ --------------- ------------ --------
Total comprehensive
income net of tax
from continuing
operations - 647 250 750 1,647 - 1,647
Total comprehensive
income net of tax
from discontinued
operations - - (3) (47) (50) - (50)
-------------------- ----------- -------------- ------------ ------------ --------------- ------------ --------
Total comprehensive
income for the year - 647 247 703 1,597 - 1,597
-------------------- ----------- -------------- ------------ ------------ --------------- ------------ --------
Issue and exchange
of other equity
instruments - 683 - (312) 371 - 371
Capital
reorganisation (12,092) - - 12,092 - - -
Other equity
instruments coupons
paid - (647) - - (647) - (647)
Redemption of
preference shares (13) - 21 (2,048) (2,040) - (2,040)
Equity to debt
reclassification(e) - - (272) - (272) - (272)
Equity settled share
schemes - - - 373 373 - 373
Vesting of Barclays
PLC shares under
share-based payment
schemes - - - (418) (418) - (418)
Dividends on
ordinary shares - - - (14,585) (14,585) - (14,585)
Dividends on
preference shares
and other
shareholders equity - - - (204) (204) - (204)
Capital contribution
from Barclays Plc - - - 3,000 3,000 - 3,000
Net equity impact of
intra-group
transfers - (2,070) (307) (638) (3,015) - (3,015)
Other reserve
movements - - - (34) (34) 1 (33)
-------------------- ----------- -------------- ------------ ------------ --------------- ------------ --------
Balance as at 31
December 2018 2,348 7,595 3,361 34,405 47,709 2 47,711
-------------------- ----------- -------------- ------------ ------------ --------------- ------------ --------
Notes
a For further details refer to Note 27 of the Barclays Bank PLC Annual
Report.
b For further details refer to Note 28 of the Barclays Bank PLC Annual
Report.
c From 2019, due to an IAS 12 update, the tax relief on payments
in relation to equity instruments has been recognised in the tax
charge of the income statement, whereas it was previously recorded
in retained earnings. This change does not impact earnings per
share or return on average tangible shareholders' equity. Comparatives
have been restated, reducing the tax charge for 2018 by GBP175m.
Further detail can be found in Note 1.
d Effects of changes in accounting policies relate to the adoption
of IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts
with Customers on 1 January 2018. The impact of IFRS 15 Revenue
from Contracts with Customers was an increase to retained earnings
of GBP67m with the remainder due to the impact of IFRS 9 Financial
Instruments.
e Following a review of certain equity instruments, certain instruments
have been deemed to have characteristics that would qualify them
as debt and have subsequently been reclassified.
Consolidated cash flow statement
2019 2018 2017(a)
For the year ended 31 December Notes GBPm GBPm GBPm
-------------------------------------------------------------------------------- ----- -------- --------- --------
Continuing operations
Reconciliation of profit before tax to net cash flows from operating activities:
Profit before tax 3,112 1,286 1,758
Adjustment for non-cash items:
Credit impairment charges 1,202 643 1,553
Depreciation, amortisation and impairment of property, plant, equipment and
intangibles 459 397 663
Other provisions, including pensions 417 2,274 770
Net profit on disposal of investments and property, plant and equipment (84) - (314)
Other non-cash movements including exchange rate movements 1,060 (3,877) 1,565
Changes in operating assets and liabilities -
Net increase in cash collateral and settlement balances (6,427) (5,606) (3,912)
Net (increase)/decrease in loans and advances at amortised cost (5,125) (3,890) 26,062
Net increase in reverse repurchase agreements and other similar secured lending (118) (434) (1,827)
Net increase in deposits and debt securities in issue 8,782 16,330 938
Net (decrease)/increase in repurchase agreements and other similar secured
borrowing (5,346) 2 16,978
Net decrease/(increase) in derivative financial instruments 2,390 (6,419) 6,770
Net (increase)/decrease in trading assets (9,299) 10,102 (33,179)
Net (decrease)/increase in trading liabilities (1,402) 1,688 2,665
Net decrease/(increase) in financial assets and liabilities designated at fair
value 2,485 (6,284) 39,507
Net (increase)/decrease in other assets (44) 949 (721)
Net decrease in other liabilities (991) (6,099) (2,014)
Corporate income tax received/(paid) 9 894 (409) 59
-------------------------------------------------------------------------------- ----- -------- --------- --------
Net cash from operating activities (8,035) 653 57,321
-------------------------------------------------------------------------------- ----- -------- --------- --------
Purchase of financial assets at fair value through other comprehensive income (67,056) (106,330) -
Purchase of available for sale investments - - (83,233)
Proceeds from sale or redemption of financial assets at fair value through other
comprehensive
income 67,743 108,038 -
Proceeds from sale or redemption of available for sale investments - - 88,298
Purchase of property, plant and equipment and intangibles (610) (422) (714)
Proceeds from sale of property, plant and equipment and intangibles - 35 2,150
Disposal of discontinued operation, net of cash disposed - (39,703) (1,060)
Disposal of subsidiaries and associates, net of cash disposed 617 - 358
Other cash flows associated with investing activities 95 1,191 693
-------------------------------------------------------------------------------- ----- -------- --------- --------
Net cash from investing activities 789 (37,191) 6,492
-------------------------------------------------------------------------------- ----- -------- --------- --------
Dividends paid and coupon payments on other equity instruments (934) (1,142) (1,427)
Issuance of subordinated debt 26 6,785 221 3,041
Redemption of subordinated debt 26 (6,574) (3,246) (1,378)
Issue of shares and other equity instruments 2,292 1,925 2,495
Redemption of shares and other equity instruments (1,970) (3,588) (1,339)
Capital contribution from Barclays PLC - 2,000 -
Vesting of shares under employee share schemes (349) (418) -
-------------------------------------------------------------------------------- ----- -------- --------- --------
Net cash from financing activities (750) (4,248) 1,392
-------------------------------------------------------------------------------- ----- -------- --------- --------
Effect of exchange rates on cash and cash equivalents (3,345) 4,159 (4,773)
-------------------------------------------------------------------------------- ----- -------- --------- --------
Net (decrease)/increase in cash and cash equivalents from continuing operations (11,341) (36,627) 60,432
-------------------------------------------------------------------------------- ----- -------- --------- --------
Net cash from discontinued operation 40 - (468) 88
-------------------------------------------------------------------------------- ----- -------- --------- --------
Net (decrease)/increase in cash and cash equivalents (11,341) (37,095) 60,520
-------------------------------------------------------------------------------- ----- -------- --------- --------
Cash and cash equivalents at beginning of year 167,357 204,452 143,932
-------------------------------------------------------------------------------- ----- -------- --------- --------
Cash and cash equivalents at end of year 156,016 167,357 204,452
-------------------------------------------------------------------------------- ----- -------- --------- --------
Cash and cash equivalents comprise:
Cash and balances at central banks 125,940 136,359 171,036
Loans and advances to banks with original maturity less than three months 8,158 7,404 8,050
Cash collateral and settlement balances with banks with original maturity less
than three
months 21,438 22,677 24,656
Treasury and other eligible bills with original maturity less than three months 480 917 682
Trading portfolio assets with original maturity less than three months - - 28
-------------------------------------------------------------------------------- ----- -------- --------- --------
156,016 167,357 204,452
-------------------------------------------------------------------------------- ----- -------- --------- --------
Note
a Following the sale of the UK banking business on 1 April 2018 by
the Group, the continuing operations for 2017 have been restated
to disclose the UK banking business as a discontinued operation.
Further detail on the discontinued operations can be found in Note
39 of the Barclays Bank PLC Annual Report.
Interest received by Barclays Bank Group was GBP26,637m (2018:
GBP18,990m) and interest paid by Barclays Bank Group was GBP21,314m
(2018: GBP14,800m).
Barclays Bank Group is required to maintain balances with
central banks and other regulatory authorities and these amounted
to GBP4,505m (2018: GBP4,716m).
For the purposes of the cash flow statement, cash comprises cash
on hand and demand deposits and cash equivalents comprise highly
liquid investments that are convertible into cash with an
insignificant risk of changes in value with original maturities of
three months or less. Repurchase and reverse repurchase agreements
are not considered to be part of cash equivalents.
Barclays Bank PLC Balance Sheet
Balance sheet
------------------------------------------------------------------ ----- ----------------
2019 2018
As at 31 December Notes GBPm GBPm
------------------------------------------------------------------ ----- ------- -------
Assets
Cash and balances at central banks 112,287 126,002
Cash collateral and settlement balances 75,822 66,196
Loans and advances at amortised cost 18 161,663 156,764
Reverse repurchase agreements and other similar secured lending 4,939 5,766
Trading portfolio assets 11 79,079 73,480
Financial assets at fair value through the income statement 12 162,500 179,365
Derivative financial instruments 13 229,338 221,247
Financial assets at fair value through other comprehensive income 14 43,760 43,706
Investments in associates and joint ventures 35 119 140
Investment in subsidiaries 16,105 14,958
Goodwill and intangible assets 21 115 123
Property, plant and equipment 19 426 103
Current tax assets 9 946 1,439
Deferred tax assets 9 1,115 1,249
Retirement benefit assets 32 2,062 1,748
Other assets 845 1,110
------------------------------------------------------------------ ----- ------- -------
Total assets 891,121 893,396
------------------------------------------------------------------ ----- ------- -------
Liabilities
Deposits at amortised cost 18 240,631 231,017
Cash collateral and settlement balances 59,448 56,358
Repurchase agreements and other similar secured borrowing 9,185 11,113
Debt securities in issue 19,883 26,391
Subordinated liabilities 26 33,205 35,085
Trading portfolio liabilities 11 45,130 46,626
Financial liabilities designated at fair value 15 207,765 216,966
Derivative financial instruments 13 225,607 221,590
Current tax liabilities 9 221 376
Deferred tax liabilities 9 80 -
Retirement benefit liabilities 32 104 124
Other liabilities 22 2,807 3,295
Provisions 23 630 818
------------------------------------------------------------------ ----- ------- -------
Total liabilities 844,696 849,759
------------------------------------------------------------------ ----- ------- -------
Equity
Called up share capital and share premium 27 2,348 2,348
Other equity instruments 27 11,089 10,361
Other reserves 28 678 383
Retained earnings 32,310 30,545
------------------------------------------------------------------ ----- ------- -------
Total equity 46,425 43,637
------------------------------------------------------------------ ----- ------- -------
Total liabilities and equity 891,121 893,396
------------------------------------------------------------------ ----- ------- -------
Note
a As permitted by section 408 of the Companies Act 2006 an income
statement for the parent company has not been presented. Included
in shareholders' equity for 'Barclays Bank PLC' is a profit after
tax for the year ended 31 December 2019 of GBP2,409m (2018: GBP868m).
The Board of Directors approved the financial statements on
pages 127 to 240 on 12 February 2020.
James E Staley
Barclays Bank Group - Chief Executive Officer
Steven Ewart
Barclays Bank Group - Chief Financial Officer
Barclays Bank PLC Statement in changes in equity
Statement of changes in equity
-------------------------------------------------------------------------- ----------------- --------- ------------
Called up
share
capital Other
and share equity Retained
premium(a) instruments(a) Other reserves(b) earnings Total equity
GBPm GBPm GBPm GBPm GBPm
-------------------------------------------- ----------- --------------- ----------------- --------- ------------
Balance as at 1 January 2019 2,348 10,361 383 30,545 43,637
Profit after tax - 839 - 1,570 2,409
Currency translation movements - - (198) - (198)
Fair value through other comprehensive
income reserve - - 161 - 161
Cash flow hedges - - 526 - 526
Retirement benefit remeasurement - - - (184) (184)
Own credit reserve - - (213) - (213)
Other - - - 9 9
-------------------------------------------- ----------- --------------- ----------------- --------- ------------
Total comprehensive income for the year - 839 276 1,395 2,510
Issue and exchange of other equity
instruments - 728 - (406) 322
Other equity instruments coupons paid(c) - (839) - - (839)
Equity settled share schemes - - - 392 392
Vesting of Barclays PLC shares under
share-based payment schemes - - - (349) (349)
Dividends paid on ordinary shares - - - (233) (233)
Dividends paid on preference shares and
other shareholders' equity - - - (41) (41)
Capital contribution from Barclays PLC - - - 995 995
Net equity impact of intra-group transfers - - 19 (19) -
Other reserve movements - - - 31 31
-------------------------------------------- ----------- --------------- ----------------- --------- ------------
Balance as at 31 December 2019 2,348 11,089 678 32,310 46,425
-------------------------------------------- ----------- --------------- ----------------- --------- ------------
Notes
a For further details refer to Note 27 of the Barclays Bank PLC Annual
Report.
b For further details refer to Note 28 of the Barclays Bank PLC Annual
Report.
c Other equity instruments includes AT1 securities issued by Barclays
Bank PLC and borrowings of $3.5bn from a wholly-owned, indirect
subsidiary of BBPLC. The borrowings have been recorded as equity
since, under their terms, interest payments are non cumulative
and discretionary whilst repayment of principal is perpetually
deferrable by BBPLC. Should BBPLC make a discretionary dividend
payment on its ordinary shares in the 6 months preceding the date
of an interest payment, it will be obliged to make that interest
payment. In 2019, interest paid on these borrowings was GBP179m.
Statement of changes in equity
----------------------------------------------------------------------- ----------------- ------------ ------------
Called up
share
capital Other
and share equity Retained
premium(a) instruments(a) Other reserves(b) earnings(c) Total equity
GBPm GBPm GBPm GBPm GBPm
----------------------------------------- ----------- --------------- ----------------- ------------ ------------
Balance as at 31 December 2017 14,453 8,982 1,093 33,506 58,034
Effects of changes in accounting
policies(d) - - (117) (1,335) (1,452)
----------------------------------------- ----------- --------------- ----------------- ------------ ------------
Balance as at 1 January 2018 14,453 8,982 976 32,171 56,582
Profit after tax - 647 - 257 904
Currency translation movements - - 138 - 138
Fair value through other comprehensive
income reserve - - (179) - (179)
Cash flow hedges - - (308) - (308)
Retirement benefit remeasurement - - - 290 290
Own credit reserve - - 57 - 57
Other - - - 18 18
----------------------------------------- ----------- --------------- ----------------- ------------ ------------
Total comprehensive income net of tax
from continuing operations - 647 (292) 565 920
Total comprehensive income net of tax
from discontinued operations - - (3) (36) (39)
----------------------------------------- ----------- --------------- ----------------- ------------ ------------
Total comprehensive income for the year - 647 (295) 529 881
----------------------------------------- ----------- --------------- ----------------- ------------ ------------
Issue and exchange of other equity
instruments - 3,449 - (312) 3,137
Capital reorganisation (12,092) - - 12,092 -
Other equity instruments coupons paid(e) - (647) - - (647)
Redemption of preference shares (13) - 21 (2,048) (2,040)
Equity to debt reclassification(f) - - (335) - (335)
Equity settled share schemes - - - 373 373
Vesting of Barclays PLC shares under
share-based payment schemes - - - (418) (418)
Dividends paid on ordinary shares - - - (14,585) (14,585)
Dividends paid on preference shares and
other shareholders' equity - - - (204) (204)
Capital contribution from Barclays PLC - - - 3,000 3,000
Net equity impact of intra-group
transfers - (2,070) 16 (46) (2,100)
Other reserve movements - - - (7) (7)
----------------------------------------- ----------- --------------- ----------------- ------------ ------------
Balance as at 31 December 2018 2,348 10,361 383 30,545 43,637
----------------------------------------- ----------- --------------- ----------------- ------------ ------------
Notes
a For further details refer to Note 27 of the Barclays Bank PLC Annual
Report.
b For further details refer to Note 28 of the Barclays Bank PLC Annual
Report.
c From 2019, due to an IAS 12 update, the tax relief on payments
in relation to equity instruments has been recognised in the tax
charge of the income statement, whereas it was previously recorded
in retained earnings. This change does not impact earnings per
share or return on average tangible shareholders' equity. Comparatives
have been restated, reducing the tax charge for 2018 by GBP175m.
Further detail can be found in Note 1.
d Effects of changes in accounting policies relate to the adoption
of IFRS 9 Financial Instruments on 1 January 2018.
e Other equity instruments includes AT1 securities issued by Barclays
Bank PLC and borrowings of $3.5bn from a wholly-owned, indirect
subsidiary of BBPLC. The borrowings have been recorded as equity
since, under their terms, interest payments are non cumulative
and discretionary whilst repayment of principal is perpetually
deferrable by BBPLC. Should BBPLC make a discretionary dividend
payment on its ordinary shares in the 6 months preceding the date
of an interest payment, it will be obliged to make that interest
payment.
f Following a review of certain equity instruments, certain instruments
have been deemed to have characteristics that would qualify them
as debt and have subsequently been reclassified.
Barclays Bank PLC Cash flow statement
Cash flow statement
-------------------------------------------------------------------------------- ----- -----------------------------
2019 2018 2017(a)
For the year ended 31 December Notes GBPm GBPm GBPm
-------------------------------------------------------------------------------- ----- -------- --------- --------
Continuing operations
Reconciliation of profit before tax to net cash flows from operating activities:
Profit before tax 2,018 697 192
Adjustment for non-cash items:
Credit impairment charges 235 (123) 258
Depreciation, amortisation and impairment of property, plant, equipment and
intangibles 67 41 289
Other provisions, including pensions 268 1,312 766
Net profit on disposal of investments and property, plant and equipment (128) - (255)
Other non-cash movements including exchange rate movements 1,125 (4,111) 934
Changes in operating assets and liabilities
Net (increase)/decrease in cash collateral and settlement balances (9,231) (4,049) 7,407
Net (increase)/decrease in loans and advances (1,895) 8,246 31,575
Net decrease/ (increase) in reverse repurchase agreements and other similar
lending 1,551 2,870 (11)
Net (decrease)/increase in deposits and debt securities in issue (2,840) 18,100 666
Net increase/(decrease) in repurchase agreements and other similar borrowing 899 (6,034) 16,946
Net (increase)/decrease in derivative financial instruments (3,863) 9,242 6,452
Net (increase)/decrease in trading assets (5,599) 6,751 (43,284)
Net (decrease)/ increase in trading liabilities (1,496) 7,509 9,838
Net decrease/(increase) in financial assets and liabilities at fair value
through income statement 7,290 (30,019) 30,892
Net (increase)/decrease in other assets (349) 2,444 2,703
Net (decrease) in other liabilities (1,006) (6,463) (4,125)
Corporate income tax received/(paid) 9 919 (150) 462
-------------------------------------------------------------------------------- ----- -------- --------- --------
Net cash from operating activities (12,035) 6,263 61,705
-------------------------------------------------------------------------------- ----- -------- --------- --------
Purchase of financial assets at fair value through other comprehensive income (61,877) (101,046) -
Purchase of available for sale investments - (78,524)
Proceeds from sale or redemption of financial assets at fair value through other
comprehensive
income 62,915 101,683 -
Proceeds from sale or redemption of available for sale investments - 84,927
Purchase of property, plant and equipment and intangibles (139) (235) (406)
Proceeds from sale of property, plant and equipment and intangibles 63 2,074
Disposal of discontinued operation, net of cash disposed - (39,679) -
Disposal of subsidiaries and/or branches and/or associates, net of cash disposed 587 (2,189) 1,880
Net (increase)/decrease in investment in subsidiaries (1,494) (859) (183)
Other cash flows associated with investing activities - - 569
-------------------------------------------------------------------------------- ----- -------- --------- --------
Net cash from investing activities (8) (42,262) 10,337
-------------------------------------------------------------------------------- ----- -------- --------- --------
Dividends paid (1,113) (1,142) (1,428)
Issuance of subordinated debt 27 6,627 - 3,041
Redemption of subordinated debt 27 (6,402) (3,246) (1,371)
Issue of shares and other equity instruments 28 2,292 4,691 2,495
Redemption of shares and other equity instruments (1,970) (3,588) (1,339)
Capital contribution from Barclays PLC - 2,000 -
Vesting of shares under employee share schemes (349) (418) -
-------------------------------------------------------------------------------- ----- -------- --------- --------
Net cash from financing activities (915) (1,703) 1,398
-------------------------------------------------------------------------------- ----- -------- --------- --------
Effect of exchange rates on cash and cash equivalents (2,753) 3,580 (2,501)
-------------------------------------------------------------------------------- ----- -------- --------- --------
Net (decrease)/increase in cash and cash equivalents from continuing operations (15,711) (34,122) 70,939
-------------------------------------------------------------------------------- ----- -------- --------- --------
Net cash from discontinued operation 40 - (528) 604
-------------------------------------------------------------------------------- ----- -------- --------- --------
Net (decrease)/increase in cash and cash equivalents (15,711) (34,650) 71,543
-------------------------------------------------------------------------------- ----- -------- --------- --------
Cash and cash equivalents at beginning of year 159,043 193,693 122,150
-------------------------------------------------------------------------------- ----- -------- --------- --------
Cash and cash equivalents at end of year 143,332 159,043 193,693
-------------------------------------------------------------------------------- ----- -------- --------- --------
Cash and cash equivalents comprise:
Cash and balances at central banks 112,287 126,002 165,713
Loans and advances to banks with original maturity less than three months 11,823 10,648 8,996
Cash collateral and settlement balances with banks with original maturity less
than three
months 18,781 21,476 18,313
Treasury and other eligible bills with original maturity less than three months 441 917 643
Trading portfolio assets with original maturity less than three months - - 28
-------------------------------------------------------------------------------- ----- -------- --------- --------
143,332 159,043 193,693
-------------------------------------------------------------------------------- ----- -------- --------- --------
Note
a Following the sale of the UK banking business on 1 April 2018 by
the Group, the continuing operations for 2017 have been restated
to disclose the UK banking business as a discontinued operation.
Further detail on the discontinued operations can be found in Note
39 of the Barclays Bank PLC Annual Report.
Interest received by Barclays Bank PLC was GBP18,322m (2018:
GBP13,981m) and interest paid by Barclays Bank PLC was GBP16,320m
(2018: GBP12,571m). In relation to 2018, GBP4,039m income
previously reported as interest received and paid has been
reclassified to non-interest income.
Barclays Bank PLC was required to maintain balances with central
banks and other regulatory authorities of GBP2,457m (2018:
GBP2,261m).
For the purposes of the cash flow statement, cash comprises cash
on hand and demand deposits and cash equivalents comprise highly
liquid investments that are convertible into cash with an
insignificant risk of changes in value with original maturities of
three months or less. Repurchase and reverse repurchase agreements
are not considered to be part of cash equivalents.
Notes to the Financial Statements
1 Significant accounting policies
1. Reporting entity
Barclays Bank PLC is a public limited company, registered in
England under company number 1026167.
These financial statements are prepared for Barclays Bank PLC
and its subsidiaries (the Barclays Bank Group) under Section 399 of
the Companies Act 2006. The Barclays Bank Group is a major global
financial services provider engaged in credit cards, wholesale
banking, investment banking, wealth management and investment
management services. In addition, separate financial statements
have been presented for the holding company.
2. Compliance with International Financial Reporting Standards
The consolidated financial statements of the Barclays Bank
Group, and the separate financial statements of Barclays Bank PLC,
have been prepared in accordance with International Financial
Reporting Standards (IFRS) and interpretations (IFRICs) issued by
the Interpretations Committee, as published by the International
Accounting Standards Board (IASB). They are also in accordance with
IFRS and IFRIC interpretations endorsed by the European Union. The
principal accounting policies applied in the preparation of the
consolidated and separate financial statements are set out below,
and in the relevant notes to the financial statements. These
policies have been consistently applied with the exception of the
adoption of IFRS 16 Leases, IFRIC Interpretation 23 Uncertainty
over Income Tax Treatments, the amendments to IAS 12 Income Taxes,
the amendments to IAS 19 Employee Benefits, and the amendments to
IFRS 9, IAS 39 and IFRS 7 which were applied from 1 January
2019.
3. Basis of preparation
The consolidated and separate financial statements have been
prepared under the historical cost convention modified to include
the fair valuation of investment property, and particular financial
instruments, to the extent required or permitted under IFRS as set
out in the relevant accounting policies. They are stated in
millions of pounds Sterling (GBPm), the functional currency of
Barclays Bank PLC.
The financial statements have been prepared on a going concern
basis, in accordance with the Companies Act 2006 as applicable to
companies using IFRS.
4. Accounting policies
The Barclays Bank Group prepares financial statements in
accordance with IFRS. The Barclays Bank Group's significant
accounting policies relating to specific financial statement items,
together with a description of the accounting estimates and
judgements that were critical to preparing them, are set out under
the relevant notes. Accounting policies that affect the financial
statements as a whole are set out below.
(i) Consolidation
Barclays Bank Group applies IFRS 10 Consolidated financial
statements.
The consolidated financial statements combine the financial
statements of Barclays Bank PLC and all its subsidiaries.
Subsidiaries are entities over which Barclays Bank PLC has control.
The Barclays Bank Group has control over another entity when the
Barclays Bank Group has all of the following:
1) power over the relevant activities of the investee, for example
through voting or other rights
2) exposure to, or rights to, variable returns from its involvement
with the investee, and
3) the ability to affect those returns through its power over the
investee.
The assessment of control is based on the consideration of all
facts and circumstances. The Barclays Bank Group reassesses whether
it controls an investee if facts and circumstances indicate that
there are changes to one or more of the three elements of
control.
Intra-group transactions and balances are eliminated on
consolidation. Consistent accounting policies are used throughout
the Barclays Bank Group for the purposes of the consolidation.
Changes in ownership interests in subsidiaries are accounted for
as equity transactions if they occur after control has already been
obtained and they do not result in loss of control.
As the consolidated financial statements include partnerships
where the Barclays Bank Group member is a partner, advantage has
been taken of the exemption under Regulation 7 of the Partnership
(Accounts) Regulations 2008 with regard to preparing and filing of
individual partnership financial statements.
Details of the principal subsidiaries are given in Note 33 of
the Barclays Bank PLC Annual Report, and a complete list of all
subsidiaries is presented in Note 42 of the Barclays Bank PLC
Annual Report.
(ii) Foreign currency translation
The Barclays Bank Group applies IAS 21 The Effects of Changes in
Foreign Exchange Rates. Transactions in foreign currencies are
translated into Sterling at the rate ruling on the date of the
transaction. Foreign currency monetary balances are translated into
Sterling at the period end exchange rates. Exchange gains and
losses on such balances are taken to the income statement.
Non-monetary foreign currency balances are carried at historical
transaction date exchange rates.
The Barclays Bank Group's foreign operations (including
subsidiaries, joint ventures, associates and branches) based mainly
outside the UK may have different functional currencies. The
functional currency of an operation is the currency of the main
economy to which it is exposed.
Prior to consolidation (or equity accounting) the assets and
liabilities of non-Sterling operations are translated at the period
end exchange rate and items of income, expense and other
comprehensive income are translated into Sterling at the rate on
the date of the transactions. Exchange differences arising on the
translation of foreign operations are included in currency
translation reserves within equity. These are transferred to the
income statement when the Barclays Bank Group disposes of the
entire interest in a foreign operation, when partial disposal
results in the loss of control of an interest in a subsidiary, when
an investment previously accounted for using the equity method is
accounted for as a financial asset, or on the disposal of an
autonomous foreign operation within a branch.
(iii) Financial assets and liabilities
The Barclays Bank Group applies IFRS 9 Financial Instruments to
the recognition, classification and measurement, and derecognition
of financial assets and financial liabilities and the impairment of
financial assets. The Barclays Bank Group applies the requirements
of IAS 39 Financial Instruments: Recognition and Measurement for
hedge accounting purposes.
Recognition
The Barclays Bank Group recognises financial assets and
liabilities when it becomes a party to the terms of the contract.
Trade date or settlement date accounting is applied depending on
the classification of the financial asset.
Classification and measurement
Financial assets are classified on the basis of two
criteria:
i) the business model within which financial assets are managed, and
ii) their contractual cash flow characteristics (whether the cash flows
represent 'solely payments of principal and interest' (SPPI)).
The Barclays Bank Group assesses the business model criteria at
a portfolio level. Information that is considered in determining
the applicable business model includes (i) policies and objectives
for the relevant portfolio, (ii) how the performance and risks of
the portfolio are managed, evaluated and reported to management,
and (iii) the frequency, volume and timing of sales in prior
periods, sales expectation for future periods, and the reasons for
such sales.
The contractual cash flow characteristics of financial assets
are assessed with reference to whether the cash flows represent
SPPI. In assessing whether contractual cash flows are SPPI
compliant, interest is defined as consideration primarily for the
time value of money and the credit risk of the principal
outstanding. The time value of money is defined as the element of
interest that provides consideration only for the passage of time
and not consideration for other risks or costs associated with
holding the financial asset. Terms that could change the
contractual cash flows so that it would not meet the condition for
SPPI are considered, including: (i) contingent and leverage
features, (ii) non-recourse arrangements and (iii) features that
could modify the time value of money.
Financial assets are measured at amortised cost if they are held
within a business model whose objective is to hold financial assets
in order to collect contractual cash flows, and their contractual
cash flows represent SPPI.
Financial assets are measured at fair value through other
comprehensive income if they are held within a business model whose
objective is achieved by both collecting contractual cash flows and
selling financial assets, and their contractual cash flows
represent SPPI.
Other financial assets are measured at fair value through profit
and loss. There is an option to make an irrevocable election on
initial recognition for non traded equity investments to be
measured at fair value through other comprehensive income, in which
case dividends are recognised in profit or loss, but gains or
losses are not reclassified to profit or loss upon derecognition,
and the impairment requirements of IFRS 9 do not apply.
The accounting policy for each type of financial asset or
liability is included within the relevant note for the item. The
Barclays Bank Group's policies for determining the fair values of
the assets and liabilities are set out in Note 16 of the Barclays
Bank PLC Annual Report.
Derecognition
The Barclays Bank Group derecognises a financial asset, or a
portion of a financial asset, from its balance sheet where the
contractual rights to cash flows from the asset have expired, or
have been transferred, usually by sale, and with them either
substantially all the risks and rewards of the asset or significant
risks and rewards, along with the unconditional ability to sell or
pledge the asset.
Financial liabilities are de-recognised when the liability has
been settled, has expired or has been extinguished. An exchange of
an existing financial liability for a new liability with the same
lender on substantially different terms - generally a difference of
10% or more in the present value of the cash flows or a substantive
qualitative amendment - is accounted for as an extinguishment of
the original financial liability and the recognition of a new
financial liability.
Transactions in which the Barclays Bank Group transfers assets
and liabilities, portions of them, or financial risks associated
with them can be complex and it may not be obvious whether
substantially all of the risks and rewards have been transferred.
It is often necessary to perform a quantitative analysis. Such an
analysis compares the Barclays Bank Group's exposure to variability
in asset cash flows before the transfer with its retained exposure
after the transfer.
A cash flow analysis of this nature may require judgement. In
particular, it is necessary to estimate the asset's expected future
cash flows as well as potential variability around this
expectation. The method of estimating expected future cash flows
depends on the nature of the asset, with market and market-implied
data used to the greatest extent possible. The potential
variability around this expectation is typically determined by
stressing underlying parameters to create reasonable alternative
upside and downside scenarios. Probabilities are then assigned to
each scenario. Stressed parameters may include default rates, loss
severity, or prepayment rates.
Accounting for reverse repurchase and repurchase agreements
including other similar lending and borrowing
Reverse repurchase agreements (and stock borrowing or similar
transaction) are a form of secured lending whereby the Barclays
Bank Group provides a loan or cash collateral in exchange for the
transfer of collateral, generally in the form of marketable
securities subject to an agreement to transfer the securities back
at a fixed price in the future. Repurchase agreements are where the
Barclays Bank Group obtains such loans or cash collateral, in
exchange for the transfer of collateral.
The Barclays Bank Group purchases (a reverse repurchase
agreement) or borrows securities subject to a commitment to resell
or return them. The securities are not included in the balance
sheet as the Barclays Bank Group does not acquire the risks and
rewards of ownership. Consideration paid (or cash collateral
provided) is accounted for as a loan asset at amortised cost,
unless it is designated or mandatorily at fair value through profit
and loss.
The Barclays Bank Group may also sell (a repurchase agreement)
or lend securities subject to a commitment to repurchase or redeem
them. The securities are retained on the balance sheet as the
Barclays Bank Group retains substantially all the risks and rewards
of ownership. Consideration received (or cash collateral provided)
is accounted for as a financial liability at amortised cost, unless
it is designated at fair value through profit and loss.
(iv) Issued debt and equity instruments
The Barclays Bank Group applies IAS 32, Financial Instruments:
Presentation, to determine whether funding is either a financial
liability (debt) or equity.
Issued financial instruments or their components are classified
as liabilities if the contractual arrangement results in the
Barclays Bank Group having an obligation to either deliver cash or
another financial asset, or a variable number of equity shares, to
the holder of the instrument. If this is not the case, the
instrument is generally an equity instrument and the proceeds
included in equity, net of transaction costs. Dividends and other
returns to equity holders are recognised when paid or declared by
the members at the AGM and treated as a deduction from equity.
Where issued financial instruments contain both liability and
equity components, these are accounted for separately. The fair
value of the debt is estimated first and the balance of the
proceeds is included within equity.
5. New and amended standards and interpretations
The accounting policies adopted are consistent with those of the
previous financial year, with the exception of the adoption of IFRS
16 Leases, IFRIC Interpretation 23 Uncertainty over Income Tax
Treatment, the amendments to IAS 12 Income Taxes, the amendments to
IAS 19 Employee Benefits, and the amendments to IFRS 9, IAS 39 and
IFRS 7 which were applied from 1 January 2019.
IFRS 16 - Leases
IFRS 16 Leases, which replaced IAS 17 Leases, was applied
effective from 1 January 2019. IFRS 16 does not result in a
significant change to lessor accounting; however, for lessee
accounting there is no longer a distinction between operating and
finance leases. Instead, the lessee is required to recognise both a
right of use (ROU) asset and lease liability on-balance sheet.
There is a recognition exemption permitted for leases with a term
of 12 months or less.
The Barclays Bank Group applied IFRS 16 on a modified
retrospective basis and took advantage of the option not to restate
comparative periods. The Barclays Bank Group applied the following
transition options available under the modified retrospective
approach:
-- To calculate the right of use asset equal to the lease liability,
adjusted for prepaid or accrued payments
-- To rely on the previous assessment of whether leases are onerous
in accordance with IAS 37 immediately before the date of initial
application as an alternative to performing an impairment review.
The Barclays Bank Group adjusted the carrying amount of the ROU
asset at the date of initial application by the previous carrying
amount of its onerous lease provision
-- To apply the recognition exception for leases with a term not exceeding
12 months, and
-- To use hindsight in determining the lease term if the contract
contains options to extend or terminate the lease.
Upon adoption of IFRS 16, the Barclays Bank Group applied the
transition option which permitted the ROU asset to equal the lease
liability, adjusted for prepaid or accrued prepayments. This
approach resulted in a lease liability of GBP569m and an ROU asset
of GBP509m being recognised as at 1 January 2019. The difference in
the lease liability and the ROU asset was a result of the following
adjustments:
-- An increase in the ROU asset as a result of rental prepayments
of GBP14m, and
-- A decrease in the ROU asset as a result of onerous lease provisions
previously recognised of GBP46m, GBP25m of rent free adjustments
and GBP3m of finance sublease arrangements.
The ROU asset was recorded in property, plant and equipment and
the lease liability within other liabilitites.
When measuring lease liabilities, the Barclays Bank Group
discounted lease payments using the incremental borrowing rate at 1
January 2019. The weighted average applied was 4.59%.
The following shows a reconciliation between the operating lease
commitments as at 31 December 2018 and the lease liability recorded
as at 1 January 2019
GBPm
------------------------------------------------------------------------------------------ -----
Operating lease commitment as at 31 December 2018 as disclosed in the Barclays Bank Group
consolidated financial statements 1,071
Impact of discounting using the Barclays Bank Group's incremental borrowing rate (488)
Recognition exemption for short term leases (3)
Extension and termination options reasonably certain to be exercised (11)
------------------------------------------------------------------------------------------ -----
Lease liability recognised as at 1 January 2019 569
------------------------------------------------------------------------------------------ -----
IFRIC Interpretation 23 - Uncertainty over Income Tax
Treatment
IFRIC 23 clarifies the application of IAS 12 to accounting for
income tax treatments that have yet to be accepted by tax
authorities, in scenarios where it may be unclear how tax law
applies to a particular transaction or circumstance, or whether a
taxation authority will accept an entity's tax treatment. There was
no significant effect from the adoption of IFRIC 23 in relation to
accounting for uncertain tax positions.
IAS 12 - Income Taxes - Amendments to IAS 12
The IASB amended IAS 12 in order to clarify the accounting
treatment of the income tax consequences of dividends. As a result
of the amendment, the tax consequences of all payments on financial
instruments that are classified as equity for accounting purposes,
where those payments are considered to be a distribution of profit,
will be included in, and will reduce, the income statement tax
charge. The amendments of IAS 12 were applied to the income tax
consequences of dividends recognised on or after the beginning of
the earliest comparative period. This resulted in reducing the tax
charge and increasing profit after tax for 2019 by GBP171m, 2018 by
GBP175m and 2017 by GBP174m. This change does not impact retained
earnings.
IAS 19 - Employee Benefits - Amendments to IAS 19
The IASB issued amendments to the guidance in IAS 19, Employee
Benefits, in connection with accounting for plan amendments,
curtailments and settlements. There was no significant effect from
the adoption of the amendments of IAS 19.
IFRS 9, IAS 39 and IFRS 7 Amendments relating to Interest Rate
Benchmark Reform
IFRS 9, IAS 39 and IFRS 7 were amended in September 2019. The
amendments are effective for periods beginning on or after 1
January 2020 with earlier application permitted. The Barclays Bank
Group elected to early adopt the amendments with effect from 1
January 2019. The amendments have been endorsed by the EU.
IFRS 9 allows companies when they first apply IFRS 9, to choose
as an accounting policy to continue to apply the hedge accounting
requirements of IAS 39. The Barclays Bank Group made the election
to continue to apply the IAS 39 hedge accounting requirements, and
consequently, the amendments to IAS 39 have been adopted by the
Barclays Bank Group.
The objective of the amendments are to provide temporary
exceptions from applying specific hedge accounting requirements
during the period of uncertainty resulting from interest rate
benchmark reform. Each of the exceptions adopted by the Barclays
Bank Group are described below.
-- Highly probable requirement
When determining whether a forecast transaction or cash flow is
highly probable, the Barclays Bank Group assumes that the interest
rate benchmark on which the hedged cash flows are based is not
altered as a result of the reform. This amendment has also been
applied when cash flows are still expected to occur in respect
of amounts remaining in the cash flow hedge reserve.
-- Prospective assessments
When performing prospective assessments, the Barclays Bank Group
assumes that the interest rate benchmark on which the hedged risk
and/or hedging instrument are based is not altered as a result
of the interest rate benchmark reform.
-- Retrospective assessments
The Barclays Bank Group will not discontinue hedge accounting during
the period of IBOR-related uncertainty solely because the retrospective
effectiveness falls outside the required 80-125% range.
-- Hedge of a non-contractually specified benchmark portion of an
interest rate
The Barclays Bank Group only considers at inception of such a hedging
relationship whether the separately identifiable requirement is
met.
The amendments to IFRS 7 require certain disclosures to be made
in the first period that the amendments to IFRS 9 or IAS 39 are
adopted. Refer to Note 13 of the Barclays Bank PLC Annual Report
where these disclosures have been included.
Future accounting developments
The following accounting standards have been issued by the IASB
but are not yet effective:
IFRS 17 - Insurance contracts
In May 2017, the IASB issued IFRS 17 Insurance Contracts, a
comprehensive new accounting standard for insurance contracts
covering recognition and measurement, presentation and disclosure.
Once effective, IFRS 17 will replace IFRS 4 Insurance Contracts
that was issued in 2005.
IFRS 17 applies to all types of insurance contracts (i.e. life,
non-life, direct insurance and re-insurance), regardless of the
type of entities that issue them, as well as to certain guarantees
and financial instruments with discretionary participation
features. A few scope exceptions will apply.
In June 2019, the IASB published an exposure draft with proposed
amendments to IFRS 17. The proposed amendments that are expected to
be relevant to the Barclays Bank Group are changes to the scoping
of IFRS 17, changes in the effective date of IFRS 17 and changes to
IFRS 9 which were consequential amendments as a result of IFRS
17.
The standard is currently effective from 1 January 2021,
although the amendments would change the effective date to 1
January 2022, and the standard has not yet been endorsed by the EU.
The Barclays Bank Group is currently assessing the expected impact
of adopting this standard.
6. Critical accounting estimates and judgements
The preparation of financial statements in accordance with IFRS
requires the use of estimates. It also requires management to
exercise judgement in applying the accounting policies. The key
areas involving a higher degree of judgement or complexity, or
areas where assumptions are significant to the consolidated and
individual financial statements are highlighted under the relevant
note. Critical accounting estimates and judgements are disclosed
in:
-- Credit impairment charges on pages 149 to 153
-- Tax on pages 154 to 160
-- Fair value of financial instruments on pages 175 to 188
-- Pensions and post-retirement benefits - obligations on pages 215
to 220
-- Provisions including conduct and legal, competition and regulatory
matters on pages 199 to 205.
7. Other disclosures
To improve transparency and ease of reference, by concentrating
related information in one place, certain disclosures required
under IFRS have been included within the Risk review section as
follows:
-- Credit risk on pages 44 to 45 and on pages 52 to 86
-- Market risk on page 45
-- Treasury and capital risk - capital on pages 45 to 46 and on pages
90 to 99
-- Treasury and capital risk - liquidity on page 46 to 47 and on pages
100 to 106.
These disclosures are covered by the Audit opinion (included on
pages 119 to 126) where referenced as audited.
2 Segmental reporting
Presentation of segmental reporting
The Barclays Bank Group's segmental reporting is in accordance
with IFRS 8 Operating Segments. Operating segments are reported in
a manner consistent with the internal reporting provided to the
Executive Committee, which is responsible for allocating resources
and assessing performance of the operating segments, and has been
identified as the chief operating decision maker. All transactions
between business segments are conducted on an arm's-length basis,
with intra-segment revenue and costs being eliminated in Head
Office. Income and expenses directly associated with each segment
are included in determining business segment performance.
The Barclays Bank Group divisions have been for segmental
reporting purposes defined as Corporate and Investment Bank and
Consumer, Cards and Payments.
-- Corporate and Investment Bank which includes the international
Corporate business and the Investment Bank.
-- Consumer, Cards and Payments which includes Barclays US Consumer
Bank, Barclaycard Germany, Barclays Partner Finance, Barclaycard
Commercial Payments, Barclaycard Payment Solutions and the international
Wealth business.
The below table also includes Head Office which comprises head
office and central support functions.
Analysis of results by business
-------------------------------------------------------------------------------------- ------- -------------
Corporate and Consumer, Cards Head Barclays Bank
Investment Bank and Payments Office Group
GBPm GBPm GBPm GBPm
--------------------------------------------------- ---------------- --------------- ------- -------------
For the year ended 31 December 2019
Total income 10,009 4,462 (320) 14,151
Credit impairment charges (157) (1,016) (29) (1,202)
--------------------------------------------------- ---------------- --------------- ------- -------------
Net operating income/(expenses) 9,852 3,446 (349) 12,949
Operating expenses (7,267) (2,359) (92) (9,718)
Litigation and conduct (108) (7) (149) (264)
--------------------------------------------------- ---------------- --------------- ------- -------------
Total operating expenses (7,375) (2,366) (241) (9,982)
Other net income/(expenses)(a) 113 40 (8) 145
--------------------------------------------------- ---------------- --------------- ------- -------------
Profit/(loss) before tax 2,590 1,120 (598) 3,112
--------------------------------------------------- ---------------- --------------- ------- -------------
Total assets (GBPbn) 799.6 65.7 11.4 876.7
--------------------------------------------------- ---------------- --------------- ------- -------------
Number of employees (full time equivalent) 8,100 3,100 9,300 20,500
--------------------------------------------------- ---------------- --------------- ------- -------------
Average number of employees (full time equivalent)
--------------------------------------------------- ---------------- --------------- ------- -------------
Consumer, Cards Head Barclays Bank
Corporate and Investment Bank and Payments Office Group
GBPm GBPm GBPm GBPm
------------------------------------------- ----------------------------- --------------- ------- -------------
For the year ended 31 December 2018
Total income(b) 9,741 4,267 (408) 13,600
Credit impairment releases/(charges) 152 (808) 13 (643)
------------------------------------------- ----------------------------- --------------- ------- -------------
Net operating income/(expenses) 9,893 3,459 (395) 12,957
Operating expenses (7,459) (2,304) (130) (9,893)
GMP charge - - (140) (140)
Litigation and conduct (68) (59) (1,579) (1,706)
------------------------------------------- ----------------------------- --------------- ------- -------------
Total operating expenses (7,527) (2,363) (1,849) (11,739)
Other net income/(expenses)(a) 28 41 (1) 68
------------------------------------------- ----------------------------- --------------- ------- -------------
Profit/(loss) before tax 2,394 1,137 (2,245) 1,286
------------------------------------------- ----------------------------- --------------- ------- -------------
Total assets (GBPbn) 792.5 71.6 13.6 877.7
------------------------------------------- ----------------------------- --------------- ------- -------------
Number of employees (full time equivalent) 9,100 3,300 10,000 22,400
------------------------------------------- ----------------------------- --------------- ------- -------------
Notes
a Other net income/(expenses) represents the share of post-tax results
of associates and joint ventures, profit (or loss) on disposal
of subsidiaries, associates and joint ventures, and gains on acquisitions.
b GBP351m of certain capital instrument funding costs are now charged
to Head Office, the impact of which would have been materially
the same if the charges had been included in full year 2017.
Corporate and Consumer, Cards Head Barclays
Investment Bank and Payments Office Non-Core(a) Barclays Bank Group
GBPm GBPm GBPm GBPm GBPm
--------------------------------------- ---------------- --------------- ------- ------------ -------------------
For the year ended 31 December 2017
Total income 9,901 4,504 (148) (527) 13,730
Credit impairment charges (213) (1,293) (17) (30) (1,553)
--------------------------------------- ---------------- --------------- ------- ------------ -------------------
Net operating income/(expenses) 9,688 3,211 (165) (557) 12,177
Operating expenses (7,610) (2,167) (202) (251) (10,230)
Litigation and conduct (267) (2) (151) (28) (448)
--------------------------------------- ---------------- --------------- ------- ------------ -------------------
Total operating expenses (7,877) (2,169) (353) (279) (10,678)
Other net income(b) 133 121 (192) 197 259
--------------------------------------- ---------------- --------------- ------- ------------ -------------------
Profit before tax from continuing
operations 1,944 1,163 (710) (639) 1,758
--------------------------------------- ---------------- --------------- ------- ------------ -------------------
Total assets (GBPbn)(c) 788.7 67.4 35.8 - 1,129.3
--------------------------------------- ---------------- --------------- ------- ------------ -------------------
Number of employees (full time
equivalent) 8,800 2,700 10,300 - 21,800
--------------------------------------- ---------------- --------------- ------- ------------ -------------------
Notes
a Barclays Non-Core segment was closed on 1 July 2017, with financial
performance subsequently reported in Corporate and Investment Bank,
Head Office and UK banking business.
b Other net income/(expenses) represents the share of post-tax results
of associates and joint ventures, profit (or loss) on disposal
of subsidiaries, associates and joint ventures, and gains on acquisitions.
c Total assets for UK banking business are included within Barclays
Bank Group for 2017.
Income by geographic region(a)
--------------------------------------------------------------------------------- ------ ------ ------
2019 2018 2017
For the year ended 31 December GBPm GBPm GBPm
--------------------------------------------------------------------------------- ------ ------ ------
Continuing operations
United Kingdom 4,084 4,007 3,582
Europe 1,752 1,615 1,985
Americas 7,251 7,048 7,194
Africa and Middle East 62 44 137
Asia 1,002 886 832
--------------------------------------------------------------------------------- ------ ------ ------
Total 14,151 13,600 13,730
--------------------------------------------------------------------------------- ------ ------ ------
Income from individual countries which represent more than 5% of total income(a)
--------------------------------------------------------------------------------- ------ ------ ------
2019 2018 2017
For the year ended 31 December GBPm GBPm GBPm
--------------------------------------------------------------------------------- ------ ------ ------
Continuing operations
United Kingdom 4,084 4,007 3,582
United States 7,121 6,916 7,049
--------------------------------------------------------------------------------- ------ ------ ------
Note
a The geographical analysis is now based on the location of office
where the transactions are recorded, whereas it was previously
based on counterparty location. The new approach is better aligned
to the geographical view of the business following the implementation
of structural reform. Prior year comparatives have been restated.
3 Net fee and commission income
Accounting for net fee and commission income under IFRS 15
effective from 1 January 2018
The Barclays Bank Group applies IFRS 15 Revenue from Contracts
with Customers. The standard establishes a five-step model
governing revenue recognition. The five-step model requires the
Barclays Bank Group to (i) identify the contract with the customer,
(ii) identify each of the performance obligations included in the
contract, (iii) determine the amount of consideration in the
contract, (iv) allocate the consideration to each of the identified
performance obligations and (v) recognise revenue as each
performance obligation is satisfied.
The Barclays Bank Group recognises fee and commission income
charged for services provided by the Barclays Bank Group as the
services are provided, for example on completion of the underlying
transaction.
Accounting for net fee and commission income under IAS 18 for
2017
The Barclays Bank Group applies IAS 18 Revenue. Fees and
commissions charged for services provided or received by the
Barclays Bank Group are recognised as the services are provided,
for example on completion of the underlying transaction.
Fee and commission income is disaggregated below by fee types
that reflect the nature of the services offered across the Barclays
Bank Group and operating segments, in accordance with IFRS 15. It
includes a total for fees in scope of IFRS 15. Refer to Note 2 for
more detailed information about operating segments.
2019
---------------------------------------------------------------------------------
Corporate and Investment Bank Consumer, Cards and Payments Head Office Total
GBPm GBPm GBPm GBPm
----------------------------------- ----------------------------- ---------------------------- ----------- -------
Fee type
Transactional 391 2,418 - 2,809
Advisory 821 83 - 904
Brokerage and execution 1,082 49 - 1,131
Underwriting and syndication 2,358 - - 2,358
Other 90 227 30 347
----------------------------------- ----------------------------- ---------------------------- ----------- -------
Total revenue from contracts with
customers 4,742 2,777 30 7,549
Other non-contract fee income 110 5 - 115
----------------------------------- ----------------------------- ---------------------------- ----------- -------
Fee and commission income 4,852 2,782 30 7,664
----------------------------------- ----------------------------- ---------------------------- ----------- -------
Fee and commission expense (743) (1,249) - (1,992)
----------------------------------- ----------------------------- ---------------------------- ----------- -------
Net fee and commission income 4,109 1,533 30 5,672
----------------------------------- ----------------------------- ---------------------------- ----------- -------
2018
---------------------------------------------------------------------------------
Corporate and Investment Bank Consumer, Cards and Payments Head Office Total
GBPm GBPm GBPm GBPm
----------------------------------- ----------------------------- ---------------------------- ----------- -------
Fee type
Transactional 366 2,248 - 2,614
Advisory 772 78 - 850
Brokerage and execution 1,002 71 - 1,073
Underwriting and syndication 2,462 - - 2,462
Other 24 222 29 275
----------------------------------- ----------------------------- ---------------------------- ----------- -------
Total revenue from contracts with
customers 4,626 2,619 29 7,274
Other non-contract fee income 114 4 - 118
----------------------------------- ----------------------------- ---------------------------- ----------- -------
Fee and commission income 4,740 2,623 29 7,392
----------------------------------- ----------------------------- ---------------------------- ----------- -------
Fee and commission expense (657) (1,128) - (1,785)
----------------------------------- ----------------------------- ---------------------------- ----------- -------
Net fee and commission income 4,083 1,495 29 5,607
----------------------------------- ----------------------------- ---------------------------- ----------- -------
2017
GBPm
----------------------------------------------------------------------- -------
Fee and commission income
Banking, investment management and credit related fees and commissions 7,352
Foreign exchange commission 72
----------------------------------------------------------------------- -------
Fee and commission income 7,424
----------------------------------------------------------------------- -------
Fee and commission expense (1,726)
----------------------------------------------------------------------- -------
Net fee and commission income 5,698
----------------------------------------------------------------------- -------
Note
a The Barclays Group elected the cumulative effect transition method
on adoption of IFRS 15 for 1 January 2018, and recognised in retained
earnings without restating comparative periods. The comparative
figures are reported under IAS 18.
Fee types
Transactional
Transactional fees are service charges on deposit accounts, cash
management services and transactional processing fees including
interchange and merchant fee income generated from credit and bank
card usage. Transaction and processing fees are recognised at the
point in time the transaction occurs or service is performed. They
include banking services such as Automated Teller Machine (ATM)
fees, wire transfer fees, balance transfer fees, overdraft or late
fees and foreign exchange fees, among others. Interchange and
merchant fees are recognised upon settlement of the card
transaction payment.
Barclays incurs certain card related costs including those
related to cardholder reward programmes and various payments made
to co-brand partners. To the extent cardholder reward programmes
costs are attributed to customers that settle their outstanding
balance each period (transactors) they are expensed when incurred
and presented in fee and commission expense while costs related to
customers who continuously carry an outstanding balance (revolvers)
are included in the effective interest rate of the receivable
(refer to Note 3 of the Barclays Bank PLC Annual Report). Payments
to partners for new cardholder account originations for transactor
accounts are deferred as costs to obtain a contract under IFRS 15
while those costs related to revolver accounts are included in the
effective interest rate of the receivable (refer to Note 3 of the
Barclays Bank PLC Annual Report). Those costs deferred under IFRS
15 are capitalised and amortised over the estimated cardholder
relationship. Payments to co-brand partners based on revenue
sharing are presented as a reduction of fee and commission income
while payments based on profitability are presented in fee and
commission expense.
Advisory
Advisory fees are generated from wealth management services and
investment banking advisory services related to mergers,
acquisitions and financial restructurings. Wealth management
advisory fees primarily consists of asset-based fees for advisory
accounts of wealth management clients and are based on the market
value of client assets. They are earned over the period the
services are provided and are generally recognised quarterly when
the market value of client assets is determined. Investment banking
advisory fees are recognised at the point in time when the services
related to the transaction have been completed under the terms of
the engagement. Investment banking advisory costs are recognised as
incurred in fee and commission expense if direct and incremental to
the advisory services or otherwise recognised in operating
expenses.
Brokerage and execution
Brokerage and execution fees are earned for executing client
transactions with various exchanges and over-the-counter markets
and assisting clients in clearing transactions. Brokerage and
execution fees are recognised at the point in time the associated
service has been completed which is generally the trade date of the
transaction.
Underwriting and syndication
Underwriting and syndication fees are earned for the
distribution of client equity or debt securities and the
arrangement and administration of a loan syndication. This includes
commitment fees to provide loan financing. Underwriting fees are
generally recognised on trade date if there is no remaining
contingency, such as the transaction being conditional on the
closing of an acquisition or another transaction. Underwriting
costs are deferred and recognised in fee and commission expense
when the associated underwriting fees are recorded. Syndication
fees are earned for arranging and administering a loan syndication;
however, the associated fee may be subject to variability until the
loan has been syndicated to other syndicate members or until other
contingencies (such as a successful M&A closing) have been
resolved and therefore the fee revenue is deferred until the
uncertainty is resolved.
Included in underwriting and syndication, are commitment fees to
provide loan financing which are not presented as part of the
carrying value of the loan in accordance with IFRS 9, for example
as part of the effective interest rate. Loan commitment fees
included as IFRS 15 revenues are fees for loan commitments that are
not expected to fund, fees received as compensation for unfunded
commitments and the applicable portion of fees received for a
revolving loan facility, which for that period, are undrawn. Such
commitment fees are recognised over time through to the contractual
maturity of the commitment.
Contract assets and contract liabilities
The Barclays Bank Group had no material contract assets or
contract liabilities as at 31 December 2019 (2018: GBPnil).
Impairment on fee receivables and contract assets
During 2019, there have been no material impairments recognised
in relation to fees receivable and contract assets (2018: GBPnil).
Fees in relation to transactional business can be added to
outstanding customer balances. These amounts may be subsequently
impaired as part of the overall loans and advances balance.
Remaining performance obligations
The Barclays Bank Group applies the practical expedient of IFRS
15 and does not disclose information about remaining performance
obligations that have original expected durations of one year or
less or because the Barclays Bank Group has a right to
consideration that corresponds directly with the value of the
service provided to the client or customer.
Costs incurred in obtaining or fulfilling a contract
The Barclays Bank Group expects that incremental costs of
obtaining a contract such as success fee and commission fees paid
are recoverable and therefore capitalised such contract costs in
the amount of GBP153m at 31 December 2019 (2018: GBP125m).
Capitalised contract costs are amortised based on the transfer
of services to which the asset relates which typically ranges over
the expected life of the relationship. In 2019, the amount of
amortisation was GBP29m (2018: GBP30m) and there was no impairment
loss recognised in connection with the capitalised contract costs
(2018: GBPnil).
4 Tax
Accounting for income taxes
Barclays Bank Group applies IAS 12 Income Taxes in accounting
for taxes on income. Income tax payable on taxable profits (current
tax) is recognised as an expense in the periods in which the
profits arise. Withholding taxes are also treated as income taxes.
Income tax recoverable on tax allowable losses is recognised as a
current tax asset only to the extent that it is regarded as
recoverable by offsetting against taxable profits arising in the
current or prior periods. Current tax is measured using tax rates
and tax laws that have been enacted or substantively enacted at the
balance sheet date.
Deferred tax assets are recognised to the extent that it is
probable that taxable profit will be available against which the
deductible temporary differences, and the carry forward of unused
tax credits and unused tax losses can be utilised, except in
certain circumstances where the deferred tax asset relating to the
deductible temporary difference arises from the initial recognition
of an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither
the accounting profit nor taxable profit or loss. Deferred tax is
determined using tax rates and legislation enacted or substantively
enacted by the balance sheet date which are expected to apply when
the deferred tax asset is realised or the deferred tax liability is
settled. Deferred tax assets and liabilities are only offset when
there is both a legal right to set-off and an intention to settle
on a net basis.
Barclays Bank Group considers an uncertain tax position to exist
when it considers that ultimately, in the future, the amount of
profit subject to tax may be greater than the amount initially
reflected in the Barclays Bank Group's tax returns. The Barclays
Bank Group accounts for provisions in respect of uncertain tax
positions in two different ways.
A current tax provision is recognised when it is considered
probable that the outcome of a review by a tax authority of an
uncertain tax position will alter the amount of cash tax due to, or
from, a tax authority in the future. From recognition, the current
tax provision is then measured at the amount the Barclays Bank
Group ultimately expects to pay the tax authority to resolve the
position. Effective from 1 January 2019, the Barclays Bank Group
changed its accounting policy on the accrual of interest and
penalty amounts in respect of uncertain income tax positions and
now recognises such amounts as an expense within profit before tax
and will continue to do so in future periods. The prior periods'
tax charges have not been restated because the accrual for interest
and penalties in those periods in respect of uncertain tax
positions was not material.
Deferred tax provisions are adjustments made to the carrying
value of deferred tax assets in respect of uncertain tax positions.
A deferred tax provision is recognised when it is considered
probable that the outcome of a review by a tax authority of an
uncertain tax position will result in a reduction in the carrying
value of the deferred tax asset. From recognition of a provision,
measurement of the underlying deferred tax asset is adjusted to
take into account the expected impact of resolving the uncertain
tax position on the loss or temporary difference giving rise to the
deferred tax asset.
The approach taken to measurement takes account of whether the
uncertain tax position is a discrete position that will be reviewed
by the tax authority in isolation from any other position, or one
of a number of issues which are expected to be reviewed together
concurrently and resolved simultaneously with a tax authority. The
Barclays Bank Group's measurement of provisions is based upon its
best estimate of the additional profit that will become subject to
tax. For a discrete position, consideration is given only to the
merits of that position. Where a number of issues are expected to
be reviewed and resolved together, the Barclays Bank Group will
take into account not only the merits of its position in respect of
each particular issue but also the overall level of provision
relative to the aggregate of the uncertain tax positions across all
the issues that are expected to be resolved at the same time. In
addition, in assessing provision levels, it is assumed that tax
authorities will review uncertain tax positions and that all facts
will be fully and transparently disclosed.
Critical accounting estimates and judgements
There are two key areas of judgement that impact the reported
tax position. Firstly, the level of provisioning for uncertain tax
positions; and secondly, the recognition and measurement of
deferred tax assets.
The Barclays Bank Group does not consider there to be a
significant risk of a material adjustment to the carrying amount of
current and deferred tax balances, including provisions for
uncertain tax positions in the next financial year. The provisions
for uncertain tax positions cover a diverse range of issues and
reflect advice from external counsel where relevant. It should be
noted that only a proportion of the total uncertain tax positions
will be under audit at any point in time, and could therefore be
subject to challenge by a tax authority over the next year.
Deferred tax assets have been recognised based on business
profit forecasts. Details on the recognition of deferred tax assets
are provided in this note.
2019 2018 2017
GBPm GBPm GBPm
-------------------------------------- ----- ----- -----
Current tax charge/(credit)
Current year(a) 327 94 (489)
Adjustments in respect of prior years (50) (200) 44
-------------------------------------- ----- ----- -----
277 (106) (445)
-------------------------------------- ----- ----- -----
Deferred tax charge/(credit)
Current year 157 372 1,862
Adjustments in respect of prior years (102) (37) (65)
-------------------------------------- ----- ----- -----
55 335 1,797
-------------------------------------- ----- ----- -----
Tax charge 332 229 1,352
-------------------------------------- ----- ----- -----
Note
a From 2019, due to an IAS 12 update, the tax relief on payments
in relation to AT1 instruments has been recognised in the tax charge
of the income statement, whereas it was previously recorded in
retained earnings. Comparatives have been restated, reducing the
tax charge for 2018 by GBP175m and 2017 by GBP174m. Further detail
can be found in Note 1.
The table below shows the reconciliation between the actual tax
charge and the tax charge that would result from applying the
standard UK corporation tax rate to the Barclays Bank Group's
profit before tax.
2019 2019 2018 2018 2017 2017
GBPm % GBPm % GBPm %
----------------------------------------------------------------------- ----- ------ ----- ------- ----- -------
Profit before tax from continuing operations 3,112 1,286 1,758
----------------------------------------------------------------------- ----- ------ ----- ------- ----- -------
Tax charge based on the standard UK corporation tax rate of 19% (2018:
19%, 2017: 19.25%) 593 19.0% 244 19.0% 339 19.3%
Impact of profits/losses earned in territories with different statutory
rates to the UK (weighted
average tax rate is 26% (2018: 27.1%, 2017: 38.2%)) 217 7.0% 104 8.1% 333 18.9%
Recurring items:
Non-creditable taxes including withholding taxes 146 4.7% 156 12.1% 191 10.9%
Impact of UK bank levy being non-deductible 35 1.1% 42 3.3% 59 3.4%
Non-deductible expenses 34 1.1% 67 5.2% 76 4.3%
Impact of Barclays Bank PLC's overseas branches being taxed both
locally and in the UK 15 0.5% 16 1.2% (61) (3.5%)
Tax adjustments in respect of share-based payments (7) (0.2%) 11 0.9% 2 0.1%
Changes in recognition of deferred tax and effect of unrecognised tax
losses (85) (2.7%) (104) (8.1%) (72) (4.1%)
Banking surcharge and other items(a) (103) (3.3%) (69) (5.4%) (108) (6.1%)
AT1 tax credit(a) (121) (3.9%) (123) (9.6%) (123) (7.0%)
Adjustments in respect of prior years (152) (4.9%) (237) (18.4%) (21) (1.2%)
Non-taxable gains and income (240) (7.7%) (232) (18.0%) (191) (10.9%)
Non-recurring items:
One off re-measurement of US deferred tax assets - - - - 1,177 67.0%
Impact of the UK branch exemption on deferred tax assets - - - - (276) (15.7%)
Non-deductible provisions for UK customer redress - - 8 0.6% - -
Non-deductible provisions for investigations and litigation - - 346 26.9% 66 3.8%
Non-taxable gains and income on divestments - - - - (39) (2.2%)
Total tax charge 332 10.7% 229 17.8% 1,352 76.9%
----------------------------------------------------------------------- ----- ------ ----- ------- ----- -------
Note
a From 2019, due to an IAS 12 update, the tax relief on payments
in relation to AT1 instruments has been recognised in the tax charge
of the income statement, whereas it was previously recorded in
retained earnings. The tax charge for the current period has been
reduced by GBP171m (relief at the standard UK corporation tax rate
is GBP121m and the relief at the banking surcharge rate is GBP50m).
Comparatives have been restated, reducing the tax charge for 2018
by GBP175m and 2017 by GBP174m (relief at the standard UK corporation
tax rate is GBP123m (2017 and 2018) and the relief at the banking
surcharge rate is GBP52m (2018) and GBP51m (2017)). The table above
has the AT1 tax credit for the current year and prior periods split
between the AT1 tax credit line and the banking surcharge line.
Further detail can be found in Note 1.
Factors driving the effective tax rate
The effective tax rate of 10.7% is lower than the UK corporation
tax rate of 19% primarily due to the impact of non-taxable gains
and income in the period, adjustments in respect of prior periods
and tax relief on payments made under AT1 instruments. These
factors, which have each decreased the effective tax rate, are
partially offset by the impact of profits earned outside the UK
being taxed at local statutory tax rates that are higher than the
UK tax rate and non-creditable taxes.
Effective from 1 January 2019, a change in accounting standards
requires the tax consequences of all payments on financial
instruments that are classified as equity for accounting purposes,
where those payments are considered to be a distribution of profit,
to be included in the income statement tax charge. Excluding this
accounting change which resulted in tax relief on payments in
relation to AT1 instruments of GBP171m (2018: GBP175m) being
included in the income statement tax charge, the Barclays Bank
Group's effective tax rate would have been 16.2% (2018: 31.4%).
Barclays Bank Group's future tax charge will be sensitive to the
geographic mix of profits earned and the tax rates in force in the
jurisdictions that the Group operates in. In the UK, legislation to
reduce the corporation tax rate to 17% from 1 April 2020 has been
enacted. However, the UK Government has announced its intention to
introduce legislation to reverse the planned rate reduction and to
maintain the current rate of 19%.
Tax in other comprehensive income
Tax relating to each component of other comprehensive income on
page 128 can be found in the consolidated statement of
comprehensive income which includes within Other a tax credit of
GBP16m (2018: GBP27m credit) on other items including share based
payments.
Tax in respect of discontinued operations
Tax relating to the discontinued operations can be found in the
disposal groups income statement (see Note 39 of the Barclays Bank
PLC Annual Report). The tax charge of GBPnil (2018: GBP138m)
relates to the profit from the ordinary activities of the
discontinued operations.
Current tax assets and liabilities
Movements on current assets and liabilities were as follows:
Barclays Bank Group Barclays Bank PLC
--------------------- -------------------
2019 2018 2019 2018
GBPm GBPm GBPm GBPm
------------------------------------------------------- ---------- --------- --------- --------
Assets 1,713 376 1,439 115
Liabilities (621) (494) (376) (242)
------------------------------------------------------- ---------- --------- --------- --------
As at 1 January 1,092 (118) 1,063 (127)
Income statement from continuing operations(a) (277) 106 41 371
Income statement from discontinued UK banking business - (90) - (87)
Other comprehensive income and reserves(a) 293 (7) 288 (31)
Corporate income tax (received)/paid (894) 409 (919) 150
Transfer to Barclays Bank UK PLC(b) - 677 - 676
Other movements 364 115 252 111
------------------------------------------------------- ---------- --------- --------- --------
578 1,092 725 1,063
------------------------------------------------------- ---------- --------- --------- --------
Assets 898 1,713 946 1,439
Liabilities (320) (621) (221) (376)
------------------------------------------------------- ---------- --------- --------- --------
As at 31 December 578 1,092 725 1,063
------------------------------------------------------- ---------- --------- --------- --------
Note
a Due to the IAS 12 update impacting AT1 tax credits, the 2018 comparative
has been restated to reflect the GBP175m tax credit in the income
statement, whereas it was previously recorded in retained earnings.
Further detail can be found in Note 1.
b Related to the transfer of current tax liabilities to Barclays
Bank UK PLC as part of the disposal of the UK banking business.
Deferred tax assets and liabilities
The deferred tax amounts on the balance sheet were as
follows:
Barclays Bank Group Barclays Bank PLC
--------------------- -------------------
2019 2018 2019 2018
GBPm GBPm GBPm GBPm
----------------------------------------------- ---------- --------- --------- --------
Intermediate Holding Company ("IHC Tax Group") 1,037 1,454 - -
US Branch Tax Group 1,015 1,087 1,015 1,087
UK Tax Group - 3 - 5
Other 408 426 100 157
----------------------------------------------- ---------- --------- --------- --------
Deferred tax asset 2,460 2,970 1,115 1,249
Deferred tax liability - UK Tax Group (80) - (80) -
----------------------------------------------- ---------- --------- --------- --------
Net deferred tax 2,380 2,970 1,035 1,249
----------------------------------------------- ---------- --------- --------- --------
US deferred tax assets in the IHC and the US Branch
The deferred tax asset in the IHC Tax Group of GBP1,037m (2018:
GBP1,454m) includes GBP54m (2018: GBP220m) relating to tax losses
and the deferred tax asset in Barclays Bank PLC's US Branch Tax
Group of GBP1,015m (2018: GBP1,087m) includes GBP84m (2018:
GBP167m) relating to tax losses. Under US tax rules, losses
occurring prior to 1 January 2018 can be carried forward and offset
against profits for a period of 20 years. The losses first arose in
2011 in the IHC Tax Group and 2008 in the US Branch Tax Group and
therefore, any unused amounts may begin to expire in 2031 and 2028
respectively. The deferred tax assets for the IHC and the US Branch
Tax Groups' tax losses are currently projected to be fully utilised
by 2020.
UK Tax Group deferred tax assets/liabilities
The deferred tax liability in the UK Tax Group of GBP80m (2018:
GBP3m deferred tax asset) includes a deferred tax asset of GBP268m
(2018: GBPnil) relating to tax losses which is offset by a GBP348m
deferred tax liability relating to temporary differences. There is
no time limit on utilisation of UK tax losses and business profit
forecasts indicate these will be fully recovered.
Other deferred tax assets
The deferred tax asset of GBP408m (2018: GBP426m) in other
entities within the Barclays Bank Group includes GBP117m (2018:
GBP142m) relating to tax losses. These deferred tax assets relate
to a number of different territories and their recognition is based
on profit forecasts or local country law which indicate that it is
probable that the losses and temporary differences will be
utilised.
Of the deferred tax asset of GBP408m (2018: GBP426m), an amount
of GBP148m (2018: GBP245m) relates to entities which have suffered
a loss in either the current or prior year. This has been taken
into account in reaching the above conclusion that these deferred
tax assets will be fully recovered in the future.
The table below shows movements on deferred tax assets and
liabilities during the year. The amounts are different from those
disclosed on the balance sheet and in the preceding table as they
are presented before offsetting asset and liability balances where
there is a legal right to set-off and an intention to settle on a
net basis.
Barclays Bank Fair value Tax Share based
Group Fixed asset through other Cash Retirement Loan losses payments and
timing comprehensive flow benefit impairment Other carried deferred
differences income hedges obligations allowance provisions forward compensation Other Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- ----------- ------------- ------ ----------- ---------- ---------- ------- ------------ ----- -------
Assets 758 175 38 39 359 112 529 309 1,336 3,655
Liabilities (16) (35) (2) (434) - - - - (198) (685)
-------------- ----------- ------------- ------ ----------- ---------- ---------- ------- ------------ ----- -------
At 1 January
2019 742 140 36 (395) 359 112 529 309 1,138 2,970
Income
statement 66 - - (5) (55) 23 17 (7) (94) (55)
Other
comprehensive
income and
reserves - (46) (175) (205) (10) 2 - 8 71 (355)
Other
movements (118) (2) - (4) (10) (10) (23) (5) (8) (180)
-------------- ----------- ------------- ------ ----------- ---------- ---------- ------- ------------ ----- -------
690 92 (139) (609) 284 127 523 305 1,107 2,380
-------------- ----------- ------------- ------ ----------- ---------- ---------- ------- ------------ ----- -------
Assets 719 110 - 31 284 127 523 305 1,329 3,428
Liabilities (29) (18) (139) (640) - - - - (222) (1,048)
-------------- ----------- ------------- ------ ----------- ---------- ---------- ------- ------------ ----- -------
At 31 December
2019 690 92 (139) (609) 284 127 523 305 1,107 2,380
-------------- ----------- ------------- ------ ----------- ---------- ---------- ------- ------------ ----- -------
Assets(a) 1,232 188 1 49 735 157 596 341 1,346 4,645
Liabilities (28) (143) (69) (218) - - - - (208) (666)
-------------- ----------- ------------- ------ ----------- ---------- ---------- ------- ------------ ----- -------
At 1 January
2018(a) 1,204 45 (68) (169) 735 157 596 341 1,138 3,979
Income
statement
from
continuing
operations 61 (9) - (124) (76) (62) (104) (28) 7 (335)
Income
statement
from
discontinued
UK banking
business (48) - - - - - - - - (48)
Other
comprehensive
income and
reserves - 97 103 (98) (18) 8 1 (10) (8) 75
Transfer to
Barclays Bank
UK PLC(b) (447) - - - (279) - - - (21) (747)
Other
movements (28) 7 1 (4) (3) 9 36 6 22 46
-------------- ----------- ------------- ------ ----------- ---------- ---------- ------- ------------ ----- -------
742 140 36 (395) 359 112 529 309 1,138 2,970
-------------- ----------- ------------- ------ ----------- ---------- ---------- ------- ------------ ----- -------
Assets 758 175 38 39 359 112 529 309 1,336 3,655
Liabilities (16) (35) (2) (434) - - - - (198) (685)
-------------- ----------- ------------- ------ ----------- ---------- ---------- ------- ------------ ----- -------
At 31 December
2018 742 140 36 (395) 359 112 529 309 1,138 2,970
-------------- ----------- ------------- ------ ----------- ---------- ---------- ------- ------------ ----- -------
Notes
a Due to the adoption of IFRS 9 and IFRS 15 on 1 January 2018, additional
deferred tax assets of GBP627m were recognised.
b Related to the transfer of deferred tax assets to Barclays Bank
UK PLC as part of the disposal of the UK banking business.
Barclays Bank Fair value Tax Share based
PLC Fixed asset through other Cash Retirement Loan losses payments and
timing comprehensive flow benefit impairment Other carried deferred
differences income hedges obligations allowance provisions forward compensation Other Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- ----------- ------------- ------ ----------- ---------- ---------- ------- ------------ ----- -----
Assets 651 171 38 20 182 61 167 79 475 1,844
Liabilities - (35) (2) (433) - - - - (125) (595)
-------------- ----------- ------------- ------ ----------- ---------- ---------- ------- ------------ ----- -----
At 1 January
2019 651 136 36 (413) 182 61 167 79 350 1,249
Income
statement 54 - - (7) 3 23 200 9 67 349
Other
comprehensive
income and
reserves - (47) (175) (206) (9) 2 - 2 71 (362)
Other
movements (115) 1 - (12) (4) (15) (15) - (41) (201)
-------------- ----------- ------------- ------ ----------- ---------- ---------- ------- ------------ ----- -----
590 90 (139) (638) 172 71 352 90 447 1,035
-------------- ----------- ------------- ------ ----------- ---------- ---------- ------- ------------ ----- -----
Assets 602 108 - - 172 71 352 90 618 2,013
Liabilities (12) (18) (139) (638) - - - - (171) (978)
-------------- ----------- ------------- ------ ----------- ---------- ---------- ------- ------------ ----- -----
At 31 December
2019 590 90 (139) (638) 172 71 352 90 447 1,035
-------------- ----------- ------------- ------ ----------- ---------- ---------- ------- ------------ ----- -----
Assets(a) 1,145 172 1 21 474 51 285 98 629 2,876
Liabilities - (142) (68) (218) - - - - (174) (602)
-------------- ----------- ------------- ------ ----------- ---------- ---------- ------- ------------ ----- -----
At 1 January
2018(a) 1,145 30 (67) (197) 474 51 285 98 455 2,274
Income
statement
from
continuing
operations 44 9 - (124) 7 (18) (119) (6) 43 (164)
Income
statement
from
discontinued
UK banking
business (48) - - - - - - - - (48)
Other
comprehensive
income and
reserves - 94 103 (93) (10) 25 - (4) (8) 107
Transfer to
Barclays Bank
UK PLC(b) (447) - - - (279) - - - (21) (747)
Other
movements (43) 3 - 1 (10) 3 1 (9) (119) (173)
-------------- ----------- ------------- ------ ----------- ---------- ---------- ------- ------------ ----- -----
651 136 36 (413) 182 61 167 79 350 1,249
-------------- ----------- ------------- ------ ----------- ---------- ---------- ------- ------------ ----- -----
Assets 651 171 38 20 182 61 167 79 475 1,844
Liabilities - (35) (2) (433) - - - - (125) (595)
-------------- ----------- ------------- ------ ----------- ---------- ---------- ------- ------------ ----- -----
At 31 December
2018 651 136 36 (413) 182 61 167 79 350 1,249
-------------- ----------- ------------- ------ ----------- ---------- ---------- ------- ------------ ----- -----
Notes
a Due to the adoption of IFRS 9 and IFRS 15 on 1 January 2018, additional
deferred tax assets of GBP411m were recognised.
b Related to the transfer of deferred tax assets to Barclays Bank
UK PLC as part of the disposal of the UK banking business.
Other movements include the impact of changes in foreign
exchange rates as well as deferred tax amounts relating to
acquisitions and disposals.
The amount of deferred tax liability expected to be settled
after more than 12 months for the Barclays Bank Group is GBP1,050m
(2018: GBP576m) and for Barclays Bank PLC is GBP973m (2018:
GBP551m). The amount of deferred tax asset expected to be recovered
after more than 12 months for the Barclays Bank Group is GBP2,958m
(2018: GBP2,932m) and for Barclays Bank PLC is GBP1,794m (2018:
GBP1,546m). These amounts are before offsetting asset and liability
balances where there is a legal right to set-off and an intention
to settle on a net basis.
Unrecognised deferred tax
Tax losses and temporary differences
Deferred tax assets have not been recognised in respect of gross
deductible temporary differences of GBP208m (2018: GBP174m), unused
tax credits of GBP247m (2018: GBP203m), and gross tax losses of
GBP18,582m (2018: GBP16,313m). The tax losses include capital
losses of GBP2,980m (2018: GBP3,225m). Of these tax losses, GBP41m
(2018: GBP240m) expire within five years, GBP239m (2018: GBP259m)
expire within six to ten years, GBP5,178m (2018: GBP948m) expire
within 11 to 20 years and GBP13,124m (2018: GBP14,866m) can be
carried forward indefinitely. Deferred tax assets have not been
recognised in respect of these items because it is not probable
that future taxable profits and gains will be available against
which they can be utilised.
For Barclays Bank PLC, deferred tax assets have not been
recognised in respect of gross deductible temporary differences of
GBP36m (2018: GBP82m), unused tax credits of GBP210m (2018:
GBP198m), and gross tax losses of GBP3,845m (2018: GBP7,235m) which
includes capital losses of GBP2,637m (2018: GBP2,473m). Of these
tax losses, GBPnil (2018: GBP214m) expire within five years, GBPnil
(2018: GBP247m) expire within six to ten years, GBPnil (2018:
GBPnil) expire within 11 to 20 years and GBP3,845m (2018:
GBP6,774m) can be carried forward indefinitely. Deferred tax assets
have not been recognised in respect of these items because it is
not probable that future taxable profits and gains will be
available against which they can be utilised.
Barclays Bank Group investments in subsidiaries, branches and
associates
Deferred tax is not recognised in respect of the value of
Barclays Bank Group's investments in subsidiaries, branches and
associates where the Barclays Bank Group is able to control the
timing of the reversal of the temporary differences and it is
probable that such differences will not reverse in the foreseeable
future. The aggregate amount of these temporary differences for
which deferred tax liabilities have not been recognised was
GBP0.7bn (2018: GBP0.6bn).
5 Dividends on ordinary shares and other equity instruments
The 2019 financial statements include GBP233m (2018: GBP14,585m)
of dividends paid. A half year dividend was paid of GBP233m (2018:
GBP149m). There was GBPnil final dividend paid in relation to the
prior year (2018: GBP142m) and GBPnil dividend in specie paid
(2018: GBP14,294m). These result in a total dividend for the year
of GBP0.10 (2018: GBP6.23) per ordinary share.
Dividends paid on preference shares amounted to GBP41m (2018:
GBP204m). Dividends paid on the 4.75% EUR100 preference shares
amounted to GBP409.44 per share (2018: GBP421.16). Dividends paid
on the 6.278% US$100 preference shares amounted to GBP485.94 per
share (2018: GBP446.17). Dividends paid on the 8.125% US$0.25
preference shares amounted to GBPnil per share (2018: GBP1.54).
Dividends paid on other equity instruments amounted to GBP660m
(2018: GBP647m). For further detail on other equity instruments,
please refer to Note 27 of the Barclays Bank PLC Annual Report.
The Directors have approved a full year dividend in respect of
2019 of GBP263m, which will be paid on 25 March 2020. The financial
statements for the year ended 31 December 2019 do not reflect this
dividend, which will be accounted for in shareholders' equity as an
appropriation of retained profits in the year ending 31 December
2020. Dividends are funded out of distributable reserves
6 Fair value of financial instruments
Accounting for financial assets and liabilities - fair
values
Financial instruments that are held for trading are recognised
at fair value through profit or loss. In addition, financial assets
are held at fair value through profit or loss if they do not
contain contractual terms that give rise on specified dates to cash
flows that are SPPI, or if the financial asset is not held in a
business model that is either (i) a business model to collect the
contractual cash flows or (ii) a business model that is achieved by
both collecting contractual cash flows and selling. Subsequent
changes in fair value for these instruments are recognised in the
income statement in net investment income, except if reporting it
in trading income reduces an accounting mismatch.
All financial instruments are initially recognised at fair value
on the date of initial recognition (including transaction costs,
other than financial instruments held at fair value through profit
or loss) and depending on the subsequent classification of the
financial asset or liability, may continue to be held at fair value
either through profit or loss or other comprehensive income. The
fair value of a financial instrument is the price that would be
received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement
date.
Wherever possible, fair value is determined by reference to a
quoted market price for that instrument. For many of the Barclays
Bank Group's financial assets and liabilities, especially
derivatives, quoted prices are not available and valuation models
are used to estimate fair value. The models calculate the expected
cash flows under the terms of each specific contract and then
discount these values back to a present value. These models use as
their basis independently sourced market inputs including, for
example, interest rate yield curves, equities and commodities
prices, option volatilities and currency rates.
For financial liabilities measured at fair value, the carrying
amount reflects the effect on fair value of changes in own credit
spreads derived from observable market data such as in primary
issuance and redemption activity for structured notes.
On initial recognition, it is presumed that the transaction
price is the fair value unless there is observable information
available in an active market to the contrary. The best evidence of
an instrument's fair value on initial recognition is typically the
transaction price. However, if fair value can be evidenced by
comparison with other observable current market transactions in the
same instrument, or is based on a valuation technique whose inputs
include only data from observable markets, then the instrument
should be recognised at the fair value derived from such observable
market data.
For valuations that have made use of unobservable inputs, the
difference between the model valuation and the initial transaction
price (Day One profit) is recognised in profit or loss either: on a
straight-line basis over the term of the transaction; or over the
period until all model inputs will become observable where
appropriate; or released in full when previously unobservable
inputs become observable.
Various factors influence the availability of observable inputs
and these may vary from product to product and change over time.
Factors include the depth of activity in the relevant market, the
type of product, whether the product is new and not widely traded
in the marketplace, the maturity of market modelling and the nature
of the transaction (bespoke or generic). To the extent that
valuation is based on models or inputs that are not observable in
the market, the determination of fair value can be more subjective,
dependent on the significance of the unobservable input to the
overall valuation. Unobservable inputs are determined based on the
best information available, for example by reference to similar
assets, similar maturities or other analytical techniques.
The sensitivity of valuations used in the financial statements
to possible changes in significant unobservable inputs is shown on
page 184.
Critical accounting estimates and judgements
The valuation of financial instruments often involves a
significant degree of judgement and complexity, in particular where
valuation models make use of unobservable inputs ('Level 3' assets
and liabilities). This note provides information on these
instruments, including the related unrealised gains and losses
recognised in the period, a description of significant valuation
techniques and unobservable inputs, and a sensitivity analysis.
Valuation
IFRS 13 Fair value measurement requires an entity to classify
its assets and liabilities according to a hierarchy that reflects
the observability of significant market inputs. The three levels of
the fair value hierarchy are defined below.
Quoted market prices - Level 1
Assets and liabilities are classified as Level 1 if their value
is observable in an active market. Such instruments are valued by
reference to unadjusted quoted prices for identical assets or
liabilities in active markets where the quoted price is readily
available, and the price represents actual and regularly occurring
market transactions. An active market is one in which transactions
occur with sufficient volume and frequency to provide pricing
information on an ongoing basis.
Valuation technique using observable inputs - Level 2
Assets and liabilities classified as Level 2 have been valued
using models whose inputs are observable either directly or
indirectly. Valuations based on observable inputs include assets
and liabilities such as swaps and forwards which are valued using
market standard pricing techniques, and options that are commonly
traded in markets where all the inputs to the market standard
pricing models are observable.
Valuation technique using significant unobservable inputs -
Level 3
Assets and liabilities are classified as Level 3 if their
valuation incorporates significant inputs that are not based on
observable market data (unobservable inputs). A valuation input is
considered observable if it can be directly observed from
transactions in an active market, or if there is compelling
external evidence demonstrating an executable exit price.
Unobservable input levels are generally determined via reference to
observable inputs, historical observations or using other
analytical techniques.
The following table shows Barclays Bank Group's assets and
liabilities that are held at fair value disaggregated by valuation
technique (fair value hierarchy) and balance sheet
classification:
Assets and liabilities held at fair
value
------------------------------------ --------------------------------------- ---------------------------------------
2019 2018
--------------------------------------- ---------------------------------------
Valuation technique using Valuation technique using
--------------------------------------- ---------------------------------------
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Barclays Bank Group GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------ -------- --------- ------- --------- -------- --------- ------- ---------
Trading portfolio assets 59,968 51,105 2,264 113,337 51,029 49,396 3,613 104,038
Financial assets at fair value
through the income statement 10,300 115,008 4,162 129,470 8,918 131,682 4,650 145,250
Derivative financial assets 5,439 221,048 3,154 229,641 6,813 210,655 5,215 222,683
Financial assets at fair value
through other comprehensive income 11,577 33,400 429 45,406 15,751 28,888 355 44,994
Investment property - - 13 13 - - 9 9
------------------------------------ -------- --------- ------- --------- -------- --------- ------- ---------
Total assets 87,284 420,561 10,022 517,867 82,511 420,621 13,842 516,974
------------------------------------ -------- --------- ------- --------- -------- --------- ------- ---------
Trading portfolio liabilities (19,645) (15,567) - (35,212) (19,401) (17,210) (3) (36,614)
Financial liabilities designated at
fair value (82) (204,021) (343) (204,446) (76) (217,404) (261) (217,741)
Derivative financial liabilities (5,305) (219,646) (3,989) (228,940) (6,152) (208,697) (4,743) (219,592)
------------------------------------ -------- --------- ------- --------- -------- --------- ------- ---------
Total liabilities (25,032) (439,234) (4,332) (468,598) (25,629) (443,311) (5,007) (473,947)
------------------------------------ -------- --------- ------- --------- -------- --------- ------- ---------
The following table shows Barclays Bank PLC's assets and
liabilities that are held at fair value disaggregated by valuation
technique (fair value hierarchy) and balance sheet
classification:
Assets and liabilities held at fair
value
------------------------------------ --------------------------------------- ---------------------------------------
2019 2018
--------------------------------------- ---------------------------------------
Valuation technique using Valuation technique using
--------------------------------------- ---------------------------------------
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Barclays Bank PLC GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------ -------- --------- ------- --------- -------- --------- ------- ---------
Trading portfolio assets 43,897 33,283 1,899 79,079 33,925 36,093 3,462 73,480
Financial assets at fair value
through the income statement 3,877 155,714 2,909 162,500 3,971 171,381 4,013 179,365
Derivative financial assets - 226,195 3,143 229,338 - 216,033 5,214 221,247
Financial assets at fair value
through other comprehensive income 9,991 33,340 429 43,760 14,571 28,780 355 43,706
Investment property - - 5 5 - - - -
------------------------------------ -------- --------- ------- --------- -------- --------- ------- ---------
Total assets 57,765 448,532 8,385 514,682 52,467 452,287 13,044 517,798
------------------------------------ -------- --------- ------- --------- -------- --------- ------- ---------
Trading portfolio liabilities (36,851) (8,279) - (45,130) (30,425) (16,201) - (46,626)
Financial liabilities designated at
fair value - (207,444) (321) (207,765) - (216,715) (251) (216,966)
Derivative financial liabilities - (221,758) (3,849) (225,607) - (216,792) (4,798) (221,590)
------------------------------------ -------- --------- ------- --------- -------- --------- ------- ---------
Total liabilities (36,851) (437,481) (4,170) (478,502) (30,425) (449,708) (5,049) (485,182)
------------------------------------ -------- --------- ------- --------- -------- --------- ------- ---------
The following table shows Barclays Bank Group's Level 3 assets
and liabilities that are held at fair value disaggregated by
product type:
Level 3 Assets and liabilities held at fair value by product type
---------------------------------------------------------------------------------------
2019 2018
------------------- -------------------
Assets Liabilities Assets Liabilities
Barclays Bank Group GBPm GBPm GBPm GBPm
--------------------------------------------- ------ ----------- ------ -----------
Interest rate derivatives 605 (812) 2,478 (2,456)
Foreign exchange derivatives 291 (298) 192 (185)
Credit derivatives 539 (342) 1,381 (331)
Equity derivatives 1,710 (2,528) 1,136 (1,743)
Commodity derivatives 9 (9) 28 (28)
Corporate debt 521 - 456 -
Reverse repurchase and repurchase agreements - (167) 768 -
Non-asset backed loans 3,280 - 4,452 -
Asset backed securities 756 - 688 -
Equity cash products 1,228 - 698 (3)
Private equity investments 112 - 190 -
Other(a) 971 (176) 1,375 (261)
--------------------------------------------- ------ ----------- ------ -----------
Total 10,022 (4,332) 13,842 (5,007)
--------------------------------------------- ------ ----------- ------ -----------
Note
a Other includes commercial real estate loans, funds and fund-linked
products, issued debt, government sponsored debt and investment
property.
Valuation techniques and sensitivity analysis
Sensitivity analysis is performed on products with significant
unobservable inputs (Level 3) to generate a range of reasonably
possible alternative valuations. The sensitivity methodologies
applied take account of the nature of the valuation techniques
used, as well as the availability and reliability of observable
proxy and historical data and the impact of using alternative
models.
Sensitivities are dynamically calculated on a monthly basis. The
calculation is based on range or spread data of a reliable
reference source or a scenario based on relevant market analysis
alongside the impact of using alternative models. Sensitivities are
calculated without reflecting the impact of any diversification in
the portfolio.
The valuation techniques used, observability and sensitivity
analysis for material products within Level 3, are described
below.
Interest rate derivatives
Description: Derivatives linked to interest rates or inflation
indices. The category includes futures, interest rate and inflation
swaps, swaptions, caps, floors, inflation options, balance
guaranteed swaps and other exotic interest rate derivatives.
Valuation: Interest rate and inflation derivatives are generally
valued using curves of forward rates constructed from market data
to project and discount the expected future cash flows of trades.
Instruments with optionality are valued using volatilities implied
from market inputs, and use industry standard or bespoke models
depending on the product type.
Observability: In general, inputs are considered observable up
to liquid maturities which are determined separately for each input
and underlying. Unobservable inputs are generally set by
referencing liquid market instruments and applying extrapolation
techniques or inferred via another reasonable method.
Foreign exchange derivatives
Description: Derivatives linked to the foreign exchange (FX)
market. The category includes FX forward contracts, FX swaps and FX
options. The majority are traded as over the counter (OTC)
derivatives.
Valuation: FX derivatives are valued using industry standard and
bespoke models depending on the product type. Valuation inputs
include FX rates, interest rates, FX volatilities, interest rate
volatilities, FX interest rate correlations and others as
appropriate.
Observability: FX correlations, forwards and volatilities are
generally observable up to liquid maturities which are determined
separately for each input and underlying. Unobservable inputs are
set by referencing liquid market instruments and applying
extrapolation techniques, or inferred via another reasonable
method.
Credit derivatives
Description: Derivatives linked to the credit spread of a
referenced entity, index or basket of referenced entities or a pool
of referenced assets (e.g. a securitised product). The category
includes single name and index credit default swaps (CDS) and asset
backed CDS.
Valuation: CDS are valued on industry standard models using
curves of credit spreads as the principal input. Credit spreads are
observed directly from broker data, third party vendors or priced
to proxies.
Observability: CDS contracts referencing entities that are
actively traded are generally considered observable. Other
valuation inputs are considered observable if products with
significant sensitivity to the inputs are actively traded in a
liquid market. Unobservable valuation inputs are generally
determined with reference to recent transactions or inferred from
observable trades of the same issuer or similar entities.
Equity derivatives
Description: Exchange traded or OTC derivatives linked to equity
indices and single names. The category includes vanilla and exotic
equity products.
Valuation: Equity derivatives are valued using industry standard
models. Valuation inputs include stock prices, dividends,
volatilities, interest rates, equity repurchase curves and, for
multi-asset products, correlations.
Observability: In general, valuation inputs are observable up to
liquid maturities which are determined separately for each input
and underlying. Unobservable inputs are set by referencing liquid
market instruments and applying extrapolation techniques, or
inferred via another reasonable method.
Commodity derivatives
Description: Exchange traded and OTC derivatives based on
underlying commodities such as metals, crude oil and refined
products, agricultural, power and natural gas.
Valuation: Commodity swaps and options are valued using models
incorporating discounting of cash flows and other industry standard
modelling techniques. Valuation inputs include forward curves,
volatilities implied from market observable inputs and
correlations.
Observability: Commodity correlations, forwards and volatilities
are generally observable up to liquid maturities which are
determined separately for each input and underlying. Unobservable
inputs are set with reference to similar observable products, or by
applying extrapolation techniques to observable inputs.
Corporate debt
Description: Primarily corporate bonds.
Valuation: Corporate bonds are valued using observable market
prices sourced from broker quotes, inter-dealer prices or other
reliable pricing sources.
Observability: Prices for actively traded bonds are considered
observable. Unobservable bonds prices are generally determined by
reference to bond yields or CDS spreads for actively traded
instruments issued by or referencing the same (or a similar)
issuer.
Level 3 sensitivity: Sensitivity is generally determined by
applying a shift to bond yields using the average ranges of
external levels observed in the market for similar bonds.
Reverse repurchase and repurchase agreements
Description: Includes securities purchased under resale
agreements, securities sold under repurchase agreements, and other
similar secured lending agreements. The agreements are primarily
short-term in nature.
Valuation: Repurchase and reverse repurchase agreements are
generally valued by discounting the expected future cash flows
using industry standard models that incorporate market interest
rates and repurchase rates, based on the specific details of the
transaction.
Observability: Inputs are deemed observable up to liquid
maturities, and are determined based on the specific features of
the transaction. Unobservable inputs are generally set by
referencing liquid market instruments and applying extrapolation
techniques, or inferred via another reasonable method.
Non-asset backed loans
Description: Largely made up of fixed rate loans.
Valuation: Fixed rate loans are valued using models that
discount expected future cash flows based on interest rates and
loan spreads.
Observability: Within this loan population, the loan spread is
generally unobservable. Unobservable loan spreads are determined by
incorporating funding costs, the level of comparable assets such as
gilts, issuer credit quality and other factors.
Asset backed securities
Description: Securities that are linked to the cash flows of a
pool of referenced assets via securitisation. The category includes
residential mortgage backed securities, commercial mortgage backed
securities, CDOs, collateralised loan obligations (CLOs) and other
asset backed securities.
Valuation: Where available, valuations are based on observable
market prices sourced from broker quotes and inter-dealer prices.
Otherwise, valuations are determined using industry standard
discounted cash flow analysis that calculates the fair value based
on valuation inputs such as constant default rate, conditional
prepayment rate, loss given default and yield. These inputs are
determined by reference to a number of sources including proxying
to observed transactions, market indices or market research, and by
assessing underlying collateral performance.
Proxying to observed transactions, indices or research requires
an assessment and comparison of the relevant securities' underlying
attributes including collateral, tranche, vintage, underlying asset
composition (historical losses, borrower characteristics and loan
attributes such as loan to value ratio and geographic
concentration) and credit ratings (original and current).
Observability: Where an asset backed product does not have an
observable market price and the valuation is determined using a
discounted cash flow analysis, the instrument is considered
unobservable.
Equity cash products
Description: Includes listed equities, Exchange Traded Funds
(ETF) and preference shares.
Valuation: Valuation of equity cash products is primarily
determined through market observable prices.
Observability: Prices for actively traded equity cash products
are considered observable. Unobservable equity prices are generally
determined by reference to actively traded instruments that are
similar in nature, or inferred via another reasonable method.
Private equity investments
Description: Includes private equity holdings and principal
investments.
Valuation: Private equity investments are valued in accordance
with the 'International Private Equity and Venture Capital
Valuation Guidelines' which require the use of a number of
individual pricing benchmarks such as the prices of recent
transactions in the same or similar entities, discounted cash flow
analysis and comparison with the earnings multiples of listed
companies. While the valuation of unquoted equity instruments is
subjective by nature, the relevant methodologies are commonly
applied by other market participants and have been consistently
applied over time.
Observability: Inputs are considered observable if there is
active trading in a liquid market of products with significant
sensitivity to the inputs. Unobservable inputs include earnings
estimates, multiples of comparative companies, marketability
discounts and discount rates.
Other
Description: Other includes commercial real estate loans, funds
and fund-linked products, asset backed loans, physical commodities
and investment property.
Assets and liabilities reclassified between Level 1 and Level
2
During the period, there were no material transfers between
Level 1 to Level 2 (2018: there were no material transfers between
Level 1 and Level 2).
Level 3 movement analysis
The following table summarises the movements in the Level 3
balances during the period. Transfers have been reflected as if
they had taken place at the beginning of the year.
Assets and liabilities included in disposal groups classified as
held for sale and measured at fair value less cost to sell are not
included as these are measured at fair value on a non-recurring
basis.
Asset and liability transfers between Level 2 and Level 3 are
primarily due to 1) an increase or decrease in observable market
activity related to an input or 2) a change in the significance of
the unobservable input, with assets and liabilities classified as
Level 3 if an unobservable input is deemed significant.
Analysis of movements in Level 3 assets and liabilities
----------------------------------------------------------------- ------- ---------- ---------- ----- ------- --------
Total gains and
losses in the
period recognised
in the income
statement Transfers
------------------- --------------
Total
gains or
As at 1 losses As at 31
January Trading Other recognised December
2019 Purchases Sales Issues Settlements income income in OCI In Out 2019
Barclays Bank
Group GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- ------- --------- ------- ------ ----------- ------- ---------- ---------- ----- ------- --------
Corporate debt 388 126 (52) - (311) 1 - - 45 (77) 120
Non-asset
backed loans 2,263 1,844 (2,799) - (134) 24 - - 200 (424) 974
Asset backed
securities 664 202 (166) - - (30) - - 16 (30) 656
Equity cash
products 136 62 (40) - - (31) - - 293 (28) 392
Other 162 - - - (1) (24) - - - (15) 122
--------------- ------- --------- ------- ------ ----------- ------- ---------- ---------- ----- ------- --------
Trading
portfolio
assets 3,613 2,234 (3,057) - (446) (60) - - 554 (574) 2,264
Non-asset
backed loans 1,836 235 - - (204) 99 (1) - - (1) 1,964
Equity cash
products 559 66 - - (2) 3 209 - - - 835
Private equity
investments 191 5 (9) - (2) - (17) - - (55) 113
Other 2,064 5,716 (5,720) - (9) 12 (33) - 24 (804) 1,250
--------------- ------- --------- ------- ------ ----------- ------- ---------- ---------- ----- ------- --------
Financial
assets at fair
value through
the income
statement 4,650 6,022 (5,729) - (217) 114 158 - 24 (860) 4,162
Non-asset
backed loans - 283 - - - - - 60 - - 343
Asset backed
securities - 116 (30) - - - - - - - 86
Equity cash
products 2 - (1) - - - - (1) - - -
Other 353 - - - (135) - - - - (218) -
--------------- ------- --------- ------- ------ ----------- ------- ---------- ---------- ----- ------- --------
Financial
assets at fair
value through
other
comprehensive
income 355 399 (31) - (135) - - 59 - (218) 429
Investment
property 9 5 - - - - (1) - - - 13
Trading
portfolio
liabilities (3) - - - - - - - - 3 -
Financial
liabilities
designated at
fair value (261) (179) 10 (42) 41 67 (2) - (27) 50 (343)
Interest rate
derivatives 22 (9) - - 88 (92) - - (177) (38) (206)
Foreign
exchange
derivatives 7 - - - 25 (12) - - (32) 5 (7)
Credit
derivatives 1,050 (59) 3 - (866) 76 - - (9) 3 198
Equity
derivatives (607) (296) (35) - (2) (296) - - (37) 453 (820)
--------------- ------- --------- ------- ------ ----------- ------- ---------- ---------- ----- ------- --------
Net derivative
financial
instruments(a) 472 (364) (32) - (755) (324) - - (255) 423 (835)
Total 8,835 8,117 (8,839) (42) (1,512) (203) 155 59 296 (1,176) 5,690
--------------- ------- --------- ------- ------ ----------- ------- ---------- ---------- ----- ------- --------
Analysis of movements in Level 3 assets and
liabilities
----------------------------------------------------- ----------- ------- ---------- ---------- ----- ----- --------
Total gains and
losses in the
period recognised
in the income
statement Transfers
------------------- ------------
Total
gains or
As at 1 losses As at 31
January Trading Other recognised December
2018 Purchases Sales Issues Settlements income income in OCI In Out 2018
Barclays Bank
Group GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- ------- --------- -------- ------ ----------- ------- ---------- ---------- ----- ----- --------
Corporate debt 871 108 (88) - (23) 9 - - 39 (528) 388
Non-asset
backed loans 166 5,514 (3,480) - - - - - 71 (8) 2,263
Asset backed
securities 627 205 (168) - (2) (21) - - 58 (35) 664
Equity cash
products 68 18 (9) - - (16) - - 107 (32) 136
Other 245 18 (55) - (20) (32) - - 145 (139) 162
---------------
Trading
portfolio
assets 1,977 5,863 (3,800) - (45) (60) - - 420 (742) 3,613
Non-asset
backed loans 6,073 364 (4,432) - (194) 25 - - - - 1,836
Private equity
investments 688 188 (7) - (231) 2 (10) - 60 (499) 191
Equity cash
products 398 87 (1) - - 1 74 - - - 559
Other 360 6,624 (4,920) - (47) 29 18 - - - 2,064
---------------
Financial
assets at fair
value through
the income
statement 7,519 7,263 (9,360) - (472) 57 82 - 60 (499) 4,650
Equity cash
products 36 - (16) - - - - - - (18) 2
Private equity
investments 129 - - - - - - - - (129) -
Other 40 - - - - - - (1) 314 - 353
---------------
Financial
assets at fair
value through
other
comprehensive
income 205 - (16) - - - - (1) 314 (147) 355
Investment
property 116 9 (115) - - - (1) - - - 9
Trading
portfolio
liabilities (4) - - - - (3) - - - 4 (3)
Financial
liabilities
designated at
fair value (480) - - (4) 14 33 (3) - (225) 404 (261)
Interest rate
derivatives (150) 1 (1) - 196 (25) - - (71) 72 22
Foreign
exchange
derivatives 37 - - - (9) 5 - - (13) (13) 7
Credit
derivatives 1,146 (6) 3 - (12) (85) - - 7 (3) 1,050
Equity
derivatives (896) 72 (570) - 125 73 1 - 128 460 (607)
Commodity
derivatives - - - - - - - - - - -
---------------
Net derivative
financial
instruments(a) 137 67 (568) - 300 (32) 1 - 51 516 472
Total 9,470 13,202 (13,859) (4) (203) (5) 79 (1) 620 (464) 8,835
Note
a The derivative financial instruments are represented on a net basis.
On a gross basis, derivative financial assets are GBP3,154m (2018:
GBP5,215m) and derivative financial liabilities are GBP3,989m (2018:
GBP4,743m).
Analysis of movements in Level 3 assets and liabilities
Total gains and
losses in the
period recognised
in the income
statement Transfers
Total
gains or
As at 1 losses As at 31
January Trading Other recognised December
2019 Purchases Sales Issues Settlements income income in OCI In Out 2019
Barclays Bank
PLC GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------- ----------- ---------- --------
Trading
portfolio
assets 3,462 2,098 (2,939) - (445) (80) - - 364 (561) 1,899
Financial
assets at fair
value through
the income
statement 4,013 5,903 (6,125) - (174) 109 (35) - 23 (805) 2,909
Fair value
through other
comprehensive
income 355 398 (30) - (135) 60 (1) - - (218) 429
Investment
property - 5 - - - - - - - - 5
Financial
liabilities
designated at
fair value (251) (221) 10 - 38 66 - - (13) 50 (321)
Net derivative
financial
instruments(a) 416 (363) 97 - (785) (296) - - (127) 352 (706)
Total 7,995 7,820 (8,987) - (1,501) (141) (36) - 247 (1,182) 4,215
Analysis of movements in Level 3 assets and liabilities
Total gains and
losses in the
period recognised
in the income
statement Transfers
Total
gains or
As at 1 losses As at 31
January Trading Other recognised December
2018 Purchases Sales Issues Settlements income income in OCI In Out 2019
Barclays Bank
PLC GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------- ----------- ---------- --------
Trading
portfolio
assets 1,929 5,722 (3,724) - (44) (45) - - 354 (730) 3,462
Financial
assets at fair
value through
the income
statement 7,404 6,867 (9,356) - (78) (6) 73 - 12 (903) 4,013
Fair value
through other
comprehensive
income 187 - (16) - - - - (1) 314 (129) 355
Financial
liabilities
designated at
fair value (226) - - (4) 6 33 - - (225) 165 (251)
Net derivative
financial
instruments(a) (16) 67 (568) - 354 11 1 - 51 516 416
Total 9,278 12,656 (13,664) (4) 238 (7) 74 (1) 506 (1,081) 7,995
Note
a The derivative financial instruments are represented on a net basis.
On a gross basis, derivative financial assets are GBP3,143m (2018:
GBP5,214m) and derivative financial liabilities are GBP3,849m (2018:
GBP4,798m).
Unrealised gains and losses on Level 3 financial assets and
liabilities
The following tables disclose the unrealised gains and losses
recognised in the year arising on Level 3 financial assets and
liabilities held at year end.
Unrealised gains and losses recognised during the period on Level 3 assets and liabilities
held at year end
2019 2018
Income statement Income statement
Other
Other compre- compre-
Barclays Bank hensive hensive
Group Trading income Other income income Total Trading income Other income income Total
As at 31
December GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Trading
portfolio
assets (57) - - (57) (60) - - (60)
Financial
assets at
fair value
through the
income
statement 101 199 - 300 44 68 - 112
Fair value
through other
comprehensive
income - - 60 60 - - (1) (1)
Investment
property - (1) - (1) - (1) - (1)
Trading
portfolio
liabilities - - - - (3) - - (3)
Financial
liabilities
designated at
fair value 64 - - 64 55 - - 55
Net derivative
financial
instruments (459) - - (459) (14) - - (14)
Total (351) 198 60 (93) 22 67 (1) 88
Unrealised gains and losses recognised during the period on Level 3 assets and liabilities
held at year end
----------------------------------------------------------------------------------------------------------------------
2019 2018
Income statement Income statement
Other Other
Barclays Bank Trading compre-hensive Trading compre-hensive
PLC income Other income income Total income Other income income Total
As at 31
December GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Trading
portfolio
assets (100) - - (100) (45) - - (45)
Financial
assets at
fair value
through the
income
statement 99 212 - 311 40 58 - 98
Fair value
through other
comprehensive
income - - 60 60 - - (1) (1)
Financial
liabilities
designated at
fair value 66 - - 66 55 - - 55
Net derivative
financial
instruments (430) - - (430) 29 - - 29
Total (365) 212 60 (93) 79 58 (1) 136
Significant unobservable inputs
The following table discloses the valuation techniques and
significant unobservable inputs for assets and liabilities
recognised at fair value and classified as Level 3 along with the
range of values used for those significant unobservable inputs:
2019 2018
Range Range
Significant unobservable
Valuation technique(s) (a) inputs Min Max Min Max Units(b)
Derivative financial
instruments(c)
Interest rate derivatives Discounted cash flows Inflation forwards 1 3 1 2%
Credit spread 41 1,620 6 897 bps
Comparable pricing Price - 37 - 100 points
Option model Inflation volatility 47 190 33 174 bps vol
Interest rate volatility 8 431 10 199 bps vol
IR - IR correlation (30) 100 (26) 100%
Credit derivatives Discounted cash flows Credit spread 72 200 142 209 bps
Comparable pricing Price - 155 10 96 points
Equity derivatives Option model Equity volatility 1 200 2 81%
Equity - equity correlation (20) 100 (100) 100%
Discounted cash flow Discounted margin (500) 1,100 (171) 301 bps
Non-derivative financial
instruments
Non-asset backed loans Discounted cash flows Loan spread 31 624 30 196 bps
Credit spread 180 1,223 25 800 bps
Price - 133 - 118 points
Comparable pricing Price - 123 - 100 points
Asset backed securities Comparable pricing Price - 99 - 102 points
Other(d) Discounted cash flows Credit spread 126 649 143 575 bps
Notes
a A range has not been provided for Net Asset Value as there would
be a wide range reflecting the diverse nature of the positions.
b The units used to disclose ranges for significant unobservable
inputs are percentages, points and basis points. Points are a percentage
of par; for example, 100 points equals 100% of par. A basis point
equals 1/100th of 1%; for example, 150 basis points equals 1.5%.
c Certain derivative instruments are classified as Level 3 due to
a significant unobservable credit spread input into the calculation
of the Credit Valuation Adjustment for the instruments. The range
of significant unobservable credit spreads is between 41-1,620bps
(2018: 6-897bps).
d Other includes commercial real estate loans, funds and fund-linked
products, issued debt, government sponsored debt and investment
property.
The following section describes the significant unobservable
inputs identified in the table above, and the sensitivity of fair
value measurement of the instruments categorised as Level 3 assets
or liabilities to increases in significant unobservable inputs.
Where sensitivities are described, the inverse relationship will
also generally apply.
Where reliable interrelationships can be identified between
significant unobservable inputs used in fair value measurement, a
description of those interrelationships is included below.
Forwards
A price or rate that is applicable to a financial transaction
that will take place in the future.
In general, a significant increase in a forward in isolation
will result in a fair value increase for the contracted receiver of
the underlying (currency, bond, commodity, etc.), but the
sensitivity is dependent on the specific terms of the
instrument.
Credit spread
Credit spreads typically represent the difference in yield
between an instrument and a benchmark security or reference rate.
Credit spreads reflect the additional yield that a market
participant demands for taking on exposure to the credit risk of an
instrument and form part of the yield used in a discounted cash
flow calculation.
In general, a significant increase in credit spread in isolation
will result in a movement in a fair value decrease for a cash
asset.
For a derivative instrument, a significant increase in credit
spread in isolation can result in a fair value increase or decrease
depending on the specific terms of the instrument.
Volatility
Volatility is a measure of the variability or uncertainty in
return for a given derivative underlying. It is an estimate of how
much a particular underlying instrument input or index will change
in value over time. In general, volatilities are implied from
observed option prices. For unobservable options the implied
volatility may reflect additional assumptions about the nature of
the underlying risk, and the strike/maturity profile of a specific
contract.
In general, a significant increase in volatility in isolation
will result in a fair value increase for the holder of a simple
option, but the sensitivity is dependent on the specific terms of
the instrument.
There may be interrelationships between unobservable
volatilities and other unobservable inputs (e.g. when equity prices
fall, implied equity volatilities generally rise) but these are
generally specific to individual markets and may vary over
time.
Correlation
Correlation is a measure of the relationship between the
movements of two variables. Correlation can be a significant input
into valuation of derivative contracts with more than one
underlying instrument. Credit correlation generally refers to the
correlation between default processes for the separate names that
make up the reference pool of a CDO structure.
A significant increase in correlation in isolation can result in
a fair value increase or decrease depending on the specific terms
of the instrument.
Comparable price
Comparable instrument prices are used in valuation by
calculating an implied yield (or spread over a liquid benchmark)
from the price of a comparable observable instrument, then
adjusting that yield (or spread) to account for relevant
differences such as maturity or credit quality. Alternatively, a
price-to-price basis can be assumed between the comparable and
unobservable instruments in order to establish a value.
In general, a significant increase in comparable price in
isolation will result in an increase in the price of the
unobservable instrument. For derivatives, a change in the
comparable price in isolation can result in a fair value increase
or decrease depending on the specific terms of the instrument.
Loan spread
Loan spreads typically represent the difference in yield between
an instrument and a benchmark security or reference rate. Loan
spreads typically reflect credit quality, the level of comparable
assets such as gilts and other factors, and form part of the yield
used in a discounted cash flow calculation.
The ESHLA portfolio primarily consists of long-dated fixed rate
loans extended to counterparties in the UK Education, Social
Housing and Local Authority sectors. The loans are categorised as
Level 3 in the fair value hierarchy due to their illiquid nature
and the significance of unobservable loan spreads to the valuation.
Valuation uncertainty arises from the long-dated nature of the
portfolio, the lack of secondary market in the loans and the lack
of observable loan spreads. The majority of ESHLA loans are to
borrowers in heavily regulated sectors that are considered
extremely low credit risk, and have a history of near zero defaults
since inception. While the overall loan spread range is from 31bps
to 624bps (2018: 30bps to 196bps), the vast majority of spreads are
concentrated towards the bottom end of this range, with 99% of the
loan notional being valued with spreads less than 200bps
consistently for both years.
In general, a significant increase in loan spreads in isolation
will result in a fair value decrease for a loan.
Sensitivity analysis of valuations using unobservable inputs
----------------------------------------------------------------------------------------------------------------------
2019 2018
Favourable changes Unfavourable changes Favourable changes Unfavourable changes
Income Income
statement Equity statement Equity Income statement Equity Income statement Equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Interest rate
derivatives 44 - (127) - 80 - (162) -
Foreign exchange
derivatives 5 - (7) - 7 - (10) -
Credit
derivatives 73 - (47) - 126 - (73) -
Equity
derivatives 114 - (119) - 110 - (112) -
Commodity
derivatives - - - - 1 - (1) -
Corporate debt 11 - (16) - 10 - (2) -
Non asset backed
loans 125 8 (228) (8) 141 - (210) -
Equity cash
products 123 - (175) - 121 - (155) -
Private equity
investments 16 - (25) - - - (10) -
Other(a) 1 - (1) - 2 - (2) -
Total 512 8 (745) (8) 598 - (737) -
Note
a Other includes commercial real estate loans, funds and fund-linked
products, issued debt, government sponsored debt and investment
property.
The effect of stressing unobservable inputs to a range of
reasonably possible alternatives, alongside considering the impact
of using alternative models, would be to increase fair values by up
to GBP520m (2018: GBP598m) or to decrease fair values by up to
GBP753m (2018: GBP737m) with substantially all the potential effect
impacting profit and loss rather than reserves.
Fair value adjustments
Key balance sheet valuation adjustments are quantified
below:
2019 2018
GBPm GBPm
Exit price adjustments derived from market bid-offer spreads (420) (451)
Uncollateralised derivative funding (57) (47)
Derivative credit valuation adjustments (135) (125)
Derivative debit valuation adjustments 155 237
Exit price adjustments derived from market bid-offer spreads
Barclays Bank Group uses mid-market pricing where it is a market
maker and has the ability to transact at, or better than, mid price
(which is the case for certain equity, bond and vanilla derivative
markets). For other financial assets and liabilities, bid-offer
adjustments are recorded to reflect the exit level for the expected
close out strategy. The methodology for determining the bid-offer
adjustment for a derivative portfolio involves calculating the net
risk exposure by offsetting long and short positions by strike and
term in accordance with the risk management and hedging
strategy.
Bid-offer levels are generally derived from market quotes such
as broker data. Less liquid instruments may not have a directly
observable bid-offer level. In such instances, an exit price
adjustment may be derived from an observable bid-offer level for a
comparable liquid instrument, or determined by calibrating to
derivative prices, or by scenario or historical analysis.
Exit price adjustments derived from market bid-offer spreads
have decreased by GBP31m to GBP420m as a result of movements in
market bid offer spreads.
Discounting approaches for derivative instruments
Collateralised
In line with market practice, the methodology for discounting
collateralised derivatives takes into account the nature and
currency of the collateral that can be posted within the relevant
credit support annex (CSA). The CSA aware discounting approach
recognises the 'cheapest to deliver' option that reflects the
ability of the party posting collateral to change the currency of
the collateral.
Uncollateralised
A fair value adjustment of GBP57m is applied to account for the
impact of incorporating the cost of funding into the valuation of
uncollateralised and partially collateralised derivative portfolios
and collateralised derivatives where the terms of the agreement do
not allow the rehypothecation of collateral received. This
adjustment is referred to as the Funding Fair Value Adjustment
(FFVA). FFVA has increased by GBP10m to GBP57m as a result of
increase in underlying derivative exposures.
FFVA incorporates a scaling factor which is an estimate of the
extent to which the cost of funding is incorporated into observed
traded levels. On calibrating the scaling factor, it is with the
assumption that Credit Valuation Adjustments (CVA) and Debit
Valuation Adjustments (DVA) are retained as valuation components
incorporated into such levels. The effect of incorporating this
scaling factor at 31 December 2019 was to reduce FFVA by GBP170m
(2018: GBP141m).
Derivative credit and debit valuation adjustments
CVA and DVA are incorporated into derivative valuations to
reflect the impact on fair value of counterparty credit risk and
Barclays Bank Group's own credit quality respectively. These
adjustments are calculated for uncollateralised and partially
collateralised derivatives across all asset classes. CVA and DVA
are calculated using estimates of exposure at default, probability
of default and recovery rates, at a counterparty level.
Counterparties include (but are not limited to) corporates,
sovereigns and sovereign agencies and supranationals.
Exposure at default is generally estimated through the
simulation of underlying risk factors through approximating with a
more vanilla structure, or by using current or scenario-based mark
to market as an estimate of future exposure.
Probability of default and recovery rate information is
generally sourced from the CDS markets. Where this information is
not available, or considered unreliable, alternative approaches are
taken based on mapping internal counterparty ratings onto
historical or market-based default and recovery information. In
particular, this applies to sovereign related names where the
effect of using the recovery assumptions implied in CDS levels
would imply a GBP36m (2018: GBP50m) increase in CVA.
Correlation between counterparty credit and underlying
derivative risk factors, termed 'wrong-way,' or 'right-way' risk,
is not systematically incorporated into the CVA calculation but is
adjusted where the underlying exposure is directly related to the
counterparty.
CVA increased by GBP10m to GBP135m as a result of increase in
underlying derivative exposures offset by general tightening in
Credit Spreads. DVA decreased by GBP82m to GBP155m, as a result of
tightening in Barclays' credit spreads.
Barclays continues to monitor market practices and activity to
ensure the approach to uncollateralised derivative valuation
remains appropriate.
Portfolio exemptions
Barclays Bank Group uses the portfolio exemption in IFRS 13 Fair
Value Measurement to measure the fair value of groups of financial
assets and liabilities. Instruments are measured using the price
that would be received to sell a net long position (i.e. an asset)
for a particular risk exposure or to transfer a net short position
(i.e. a liability) for a particular risk exposure in an orderly
transaction between market participants at the balance sheet date
under current market conditions. Accordingly, Barclays Bank Group
measures the fair value of the group of financial assets and
liabilities consistently with how market participants would price
the net risk exposure at the measurement date.
Unrecognised gains as a result of the use of valuation models
using unobservable inputs
The amount that has yet to be recognised in income that relates
to the difference between the transaction price (the fair value at
initial recognition) and the amount that would have arisen had
valuation models using unobservable inputs been used on initial
recognition, less amounts subsequently recognised, is GBP100m
(2018: GBP127m) for financial instruments measured at fair value
and GBP31m (2018: GBP31m) for financial instruments carried at
amortised cost. The decrease in financial instruments measured at
fair value of GBP27m (2018: GBP32m increase) was driven by
additions GBP40m (2018: GBP65m) offset by a transfer out of GBPnil
(2018: GBP15m) to Barclays Bank UK PLC and GBP67m (2018: GBP18m) of
amortisation and releases. The decrease of GBPnil (2018: GBP222m)
in financial instruments carried at amortised cost was driven by
the transfer out of GBPnil (2018: GBP222m) to Barclays Bank UK PLC
and GBP2m (2018: GBP2m) of amortization and releases offset by
additions of GBP2m (2018: GBP2m).
Third party credit enhancements
Structured and brokered certificates of deposit issued by
Barclays Bank Group are insured up to $250,000 per depositor by the
Federal Deposit Insurance Corporation (FDIC) in the US. The FDIC is
funded by premiums that Barclays Bank Group and other banks pay for
deposit insurance coverage. The carrying value of these issued
certificates of deposit that are designated under the IFRS 9 fair
value option includes this third party credit enhancement. The
on-balance sheet value of these brokered certificates of deposit
amounted to GBP3,218m (2018: GBP4,797m).
Comparison of carrying amounts and fair values
The following tables summarises the fair value of financial
assets and liabilities measured at amortised cost on Barclays Bank
Group's and Barclays Bank PLC's balance sheet:
Barclays Bank
Group 2019 2018
Carrying Fair Carrying
amount value Level 1 Level 2 Level 3 amount Fair value Level 1 Level 2 Level 3
As at 31
December GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Financial
assets
Loans and
advances at
amortised
cost(a) 141,636 141,251 6,827 69,289 63,133 136,959 137,435 223 66,703 68,452
Reverse
repurchase
agreements
and other
similar
secured
lending 1,731 1,731 - 1,731 - 1,613 1,613 - 1,613 -
Financial
liabilities
Deposits at
amortised
cost (213,881) (213,897) (135,398) (78,494) (5) (199,337) (199,337) (157,440) (41,897) -
Repurchase
agreements
and other
similar
secured
borrowing (2,032) (2,032) - (2,032) - (7,378) (7,378) - (7,378) -
Debt
securities
in issue (33,536) (33,529) - (31,652) (1,877) (39,063) (39,083) - (36,967) (2,116)
Subordinated
liabilities (33,425) (34,861) - (34,861) - (35,327) (36,174) - (36,174) -
Note
a The fair value hierarchy for finance lease receivables presented
within loans and advances at amortised cost, with fair value amounting
to GBP2,002m (2018: GBP2,057m), is not required as part of the
standard.
Barclays Bank
PLC 2019 2018
Carrying Fair Carrying Fair
amount value Level 1 Level 2 Level 3 amount value Level 1 Level 2 Level 3
As at 31
December GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Financial
assets
Loans and
advances at
amortised
cost 161,663 161,007 6,827 124,665 29,515 156,764 156,012 223 118,005 37,784
Reverse
repurchase
agreements
and other
similar
secured
lending 4,939 4,939 - 4,939 - 5,766 5,766 - 5,766 -
Financial
liabilities
Deposits at
amortised
cost (240,631) (240,630) (111,940) (128,685) (5) (231,017) (231,017) (141,536) (89,481) -
Repurchase
agreements
and other
similar
secured
borrowing (9,185) (9,185) - (9,185) - (11,113) (11,113) - (11,113) -
Debt
securities
in issue (19,883) (19,899) - (19,899) - (26,391) (26,428) - (26,249) (179)
Subordinated
liabilities (33,205) (34,616) - (34,616) - (35,085) (35,894) - (35,894) -
The fair value is an estimate of the price that would be
received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement
date. As a wide range of valuation techniques are available, it may
not be appropriate to directly compare this fair value information
to independent market sources or other financial institutions.
Different valuation methodologies and assumptions can have a
significant impact on fair values which are based on unobservable
inputs.
Financial assets
The carrying value of financial assets held at amortised cost
(including loans and advances to banks and customers, and other
lending such as reverse repurchase agreements and cash collateral
on securities borrowed) is determined in accordance with the
relevant accounting policy in Note 18 of the Barclays Bank PLC
Annual Report.
Loans and advances at amortised cost
The fair value of loans and advances, for the purpose of this
disclosure, is derived from discounting expected cash flows in a
way that reflects the current market price for lending to issuers
of similar credit quality. Where market data or credit information
on the underlying borrowers is unavailable, a number of
proxy/extrapolation techniques are employed to determine the
appropriate discount rates.
Reverse repurchase agreements and other similar secured
lending
The fair value of reverse repurchase agreements approximates
carrying amount as these balances are generally short dated and
fully collateralised.
Financial liabilities
The carrying value of financial liabilities held at amortised
cost (including customer accounts, other deposits, repurchase
agreements and cash collateral on securities lent, debt securities
in issue and subordinated liabilities) is determined in accordance
with the accounting policy in Note 1.
Deposits at amortised cost
In many cases, the fair value disclosed approximates carrying
value because the instruments are short term in nature or have
interest rates that reprice frequently, such as customer accounts
and other deposits and short-term debt securities.
The fair value for deposits with longer-term maturities, mainly
time deposits, are estimated using discounted cash flows applying
either market rates or current rates for deposits of similar
remaining maturities. Consequently the fair value discount is
minimal.
Repurchase agreements and other similar secured borrowing
The fair value of repurchase agreements approximates carrying
amounts as these balances are generally short dated.
Debt securities in issue
Fair values of other debt securities in issue are based on
quoted prices where available, or where the instruments are short
dated, carrying amount approximates fair value.
Subordinated liabilities
Fair values for dated and undated convertible and
non-convertible loan capital are based on quoted market rates for
the issuer concerned or issuers with similar terms and
conditions.
7 Provisions
Accounting for provisions
The Barclays Bank Group applies IAS 37 Provisions, Contingent
Liabilities and Contingent Assets in accounting for non-financial
liabilities.
Provisions are recognised for present obligations arising as
consequences of past events where it is more likely than not that a
transfer of economic benefit will be necessary to settle the
obligation, which can be reliably estimated. Provision is made for
the anticipated cost of restructuring, including redundancy costs
when an obligation exists; for example, when the Barclays Bank
Group has a detailed formal plan for restructuring a business and
has raised valid expectations in those affected by the
restructuring by announcing its main features or starting to
implement the plan. Provision is made for undrawn loan commitments
if it is probable that the facility will be drawn and result in the
recognition of an asset at an amount less than the amount
advanced.
Critical accounting estimates and judgements
The financial reporting of provisions involves a significant
degree of judgement and is complex. Identifying whether a present
obligation exists and estimating the probability, timing, nature
and quantum of the outflows that may arise from past events
requires judgements to be made based on the specific facts and
circumstances relating to individual events and often requires
specialist professional advice. When matters are at an early stage,
accounting judgements and estimates can be difficult because of the
high degree of uncertainty involved. Management continues to
monitor matters as they develop to re-evaluate on an ongoing basis
whether provisions should be recognised, however there can remain a
wide range of possible outcomes and uncertainties, particularly in
relation to legal, competition and regulatory matters, and as a
result it is often not practicable to make meaningful estimates
even when matters are at a more advanced stage.
The complexity of such matters often requires the input of
specialist professional advice in making assessments to produce
estimates. Customer redress and legal, competition and regulatory
matters are areas where a higher degree of professional judgement
is required. The amount that is recognised as a provision can also
be very sensitive to the assumptions made in calculating it. This
gives rise to a large range of potential outcomes which require
judgement in determining an appropriate provision level. See below
for information on payment protection redress and Note 25 of the
Barclays Bank PLC Annual Report for more detail of legal,
competition and regulatory matters.
Undrawn
contractually
committed Legal,
facilities and competition
Onerous Redundancy and guarantees Customer and regulatory Sundry
contracts restructuring provided(a) redress matters provisions Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Barclays Bank
Group
As at December
2018 90 68 217 127 411 214 1,127
Effects of
changes in
accounting
policies(b) (46) - - - - - (46)
As at 1 January
2019 44 68 217 127 411 214 1,081
Additions 11 86 373 20 286 35 811
Amounts
utilised (30) (60) - (66) (302) (48) (506)
Unused amounts
reversed - (29) (332) (15) (16) (13) (405)
Exchange and
other
movements (5) (2) (6) 5 (5) (17) (30)
As at 31
December 2019 20 63 252 71 374 171 951
Barclays Bank
PLC
As at December
2018 18 46 174 83 347 150 818
Effects of
changes in
accounting
policies(b) (5) - - - - - (5)
As at 1 January
2019 13 46 174 83 347 150 813
Additions 3 35 351 6 170 39 604
Amounts
utilised (10) (26) - (31) (273) (45) (385)
Unused amounts
reversed (1) (15) (300) (10) (14) (7) (347)
Exchange and
other
movements (1) (17) (11) - (2) (24) (55)
As at 31
December 2019 4 23 214 48 228 113 630
Note
a Undrawn contractually committed facilities and guarantees provisions
are accounted for under IFRS 9.
b Upon adoption of IFRS 16 on 1 January 2019, GBP46m of onerous lease
provisions in Barclays Bank Group and GBP5m in Barclays Bank PLC
were transferred to right of use asset impairment allowance. Please
see note 1 for further detail.
Provisions expected to be recovered or settled within no more
than 12 months after 31 December 2019 for Barclays Bank Group were
GBP739m (2018: GBP791m) and for Barclays Bank PLC were GBP491m
(2018: GBP625m).
Onerous contracts
Onerous contract provisions comprise an estimate of the costs
involved with fulfilling the terms and conditions of contracts net
of any expected benefits to be received.
Redundancy and restructuring
These provisions comprise the estimated cost of restructuring,
including redundancy costs where an obligation exists. Additions
made during the year relate to formal restructuring plans and have
either been utilised, or reversed, where total costs are now
expected to be lower than the original provision amount.
Undrawn contractually committed facilities and guarantees
Impairment allowance under IFRS 9 considers both the drawn and
the undrawn counterparty exposure. For retail portfolios, the total
impairment allowance is allocated to the drawn exposure to the
extent that the allowance does not exceed the exposure as ECL is
not reported separately. Any excess is reported on the liability
side of the balance sheet as a provision. For wholesale portfolios
the impairment allowance on the undrawn exposure is reported on the
liability side of the balance sheet as a provision. Provisions are
made if it is probable that a facility will be drawn and the
resulting asset is expected to have a realisable value that is less
than the amount advanced.
Customer redress
Customer redress provisions comprise the estimated cost of
making redress payments to customers, clients and counterparties
for losses or damages associated with inappropriate judgement in
the execution of Barclays Bank Group's business activities.
Provisions for other customer redress include smaller provisions
across the corporate businesses which are expected to be utilised
in the next 12-24 months.
Legal, competition and regulatory matters
The Barclays Bank Group is engaged in various legal proceedings,
both in the UK and a number of other overseas jurisdictions,
including the US. For further information in relation to legal
proceedings and discussion of the associated uncertainties, please
refer to Note 25 of the Barclays Bank PLC Annual Report.
Sundry provisions
This category includes provisions that do not fit into any of
the other categories, such as fraud losses and dilapidation
provisions.
8 Contingent liabilities and commitments
Accounting for contingent liabilities
Contingent liabilities are possible obligations whose existence
will be confirmed only by uncertain future events, and present
obligations where the transfer of economic resources is uncertain
or cannot be reliably measured. Contingent liabilities are not
recognised on the balance sheet but are disclosed unless the
likelihood of an outflow of economic resources is remote.
The following table summarises the nominal principal amount of
contingent liabilities and commitments which are not recorded
on-balance sheet:
Barclays Bank Group Barclays Bank PLC
2019 2018 2019 2018
GBPm GBPm GBPm GBPm
-------------------------------------------------------------------- ---------- --------- ---------
Guarantees and letters of credit pledged as collateral security 17,006 15,046 21,818 21,303
Performance guarantees, acceptances and endorsements 6,771 4,348 5,525 4,349
-------------------------------------------------------------------- ---------- --------- --------- --------
Total contingent liabilities 23,777 19,394 27,343 25,652
-------------------------------------------------------------------- ---------- --------- --------- --------
Of which: Financial guarantees carried at fair value 43 4 43 4
-------------------------------------------------------------------- ---------- --------- --------- --------
Documentary credits and other short-term trade related transactions 1,291 1,741 1,216 1,741
Standby facilities, credit lines and other commitments 268,736 256,027 189,634 189,991
-------------------------------------------------------------------- ---------- --------- --------- --------
Total commitments 270,027 257,768 190,850 191,732
-------------------------------------------------------------------- ---------- --------- --------- --------
Of which: Loan commitments carried at fair value 17,660 11,703 17,023 11,703
-------------------------------------------------------------------- ---------- --------- --------- --------
Provisions held against contingent liabilities and commitments
equal GBP252m (2018: GBP217m) for Barclays Bank Group and GBP214m
(2018: GBP174m) for Barclays Bank PLC.
Further details on contingent liabilities relating to legal and
competition and regulatory matters can be found in Note 25 of the
Barclays Bank PLC Annual Report.
9 Legal, competition and regulatory matters
Barclays Bank PLC and the Barclays Bank Group face legal,
competition and regulatory challenges, many of which are beyond our
control. The extent of the impact of these matters cannot always be
predicted but may materially impact our operations, financial
results, condition and prospects. Matters arising from a set of
similar circumstances can give rise to either a contingent
liability or a provision, or both, depending on the relevant facts
and circumstances.
The recognition of provisions in relation to such matters
involves critical accounting estimates and judgments in accordance
with the relevant accounting policies as described in Note 23,
Provisions, of the Barclays Bank PLC Annual Report. We have not
disclosed an estimate of the potential financial impact or effect
on the Barclays Bank Group of contingent liabilities where it is
not currently practicable to do so. Various matters detailed in
this note seek damages of an unspecified amount. While certain
matters specify the damages claimed, such claimed amounts do not
necessarily reflect the Barclays Bank Group's potential financial
exposure in respect of those matters.
Investigations into certain advisory services agreements and
other matters and civil action
FCA proceedings
In 2008, Barclays Bank PLC and Qatar Holdings LLC entered into
two advisory service agreements (the Agreements). The Financial
Conduct Authority (FCA), is conducting an investigation into
whether the Agreements may have related to Barclays PLC's capital
raisings in June and November 2008 (the Capital Raisings) and
therefore should have been disclosed in the announcements or public
documents relating to the Capital Raisings. In 2013, the FCA issued
warning notices (the Notices) finding that Barclays PLC and
Barclays Bank PLC acted recklessly and in breach of certain
disclosure-related listing rules, and that Barclays PLC was also in
breach of Listing Principle 3. The financial penalty provided in
the Notices is GBP50m. Barclays PLC and Barclays Bank PLC continue
to contest the findings. The FCA action has been stayed due to the
UK Serious Fraud Office (SFO) proceedings pending against certain
former Barclays executives. All charges brought by the SFO against
Barclays PLC and Barclays Bank PLC in relation to the Agreements
were dismissed in 2018.
Civil action
PCP Capital Partners LLP and PCP International Finance Limited
(PCP) are seeking damages of approximately GBP1.6bn from Barclays
Bank PLC for fraudulent misrepresentation and deceit, arising from
alleged statements made by Barclays Bank PLC to PCP in relation to
the terms on which securities were to be issued to potential
investors, allegedly including PCP, in the November 2008 capital
raising. Barclays Bank PLC is defending the claim and trial is
scheduled to commence in June 2020.
Investigation into historic hiring practices
In 2019, the Barclays Group reached a settlement of $6.4m with
the US Securities and Exchanges Commission (SEC) in relation to
certain of its hiring practices in Asia, resolving this matter.
Investigations into LIBOR and other benchmarks and related civil
actions
Regulators and law enforcement agencies, including certain
competition authorities, from a number of governments have been
conducting investigations relating to Barclays Bank PLC's
involvement in allegedly manipulating certain financial benchmarks,
such as LIBOR. The SFO has closed its investigation with no action
to be taken against the Barclays Group. Various individuals and
corporates in a range of jurisdictions have threatened or brought
civil actions against the Barclays Group and other banks in
relation to the alleged manipulation of LIBOR and/or other
benchmarks. Certain actions remain pending.
USD LIBOR civil actions
The majority of the USD LIBOR cases, which have been filed in
various US jurisdictions, have been consolidated for pre-trial
purposes in the US District Court in the Southern District of New
York (SDNY). The complaints are substantially similar and allege,
among other things, that Barclays PLC, Barclays Bank PLC, Barclays
Capital Inc. (BCI) and other financial institutions individually
and collectively violated provisions of the US Sherman Antitrust
Act (Antitrust Act), the US Commodity Exchange Act (CEA), the US
Racketeer Influenced and Corrupt Organizations Act (RICO), the
Securities Exchange Act of 1934 and various state laws by
manipulating USD LIBOR rates.
Putative class actions and individual actions seek unspecified
damages with the exception of five lawsuits, in which the
plaintiffs are seeking a combined total in excess of $1.25bn in
actual damages and additional punitive damages against all
defendants, including Barclays Bank PLC. Some of the lawsuits also
seek trebling of damages under the Antitrust Act and RICO. Barclays
has previously settled certain claims. Two of the class action
settlements where Barclays has paid $20m and $7.1m, respectively,
remain subject to final court approval and/or the right of class
members to opt out of the settlement to file their own claims.
Sterling LIBOR civil actions
In 2016, two putative class actions filed in the SDNY against
Barclays Bank PLC, BCI and other Sterling LIBOR panel banks
alleging, among other things, that the defendants manipulated the
Sterling LIBOR rate in violation of the Antitrust Act, CEA and
RICO, were consolidated. The defendants' motion to dismiss the
claims was granted in December 2018. The plaintiffs have appealed
the dismissal.
Japanese Yen LIBOR civil actions
In 2012, a putative class action was filed in the SDNY against
Barclays Bank PLC and other Japanese Yen LIBOR panel banks by a
lead plaintiff involved in exchange-traded derivatives and members
of the Japanese Bankers Association's Euroyen Tokyo Interbank
Offered Rate (Euroyen TIBOR) panel. The complaint alleges, among
other things, manipulation of the Euroyen TIBOR and Yen LIBOR rates
and breaches of the CEA and the Antitrust Act. In 2014, the court
dismissed the plaintiff's antitrust claims in full, but the
plaintiff's CEA claims remain pending.
In 2015, a second putative class action, making similar
allegations to the above class action, was filed in the SDNY
against Barclays PLC, Barclays Bank PLC and BCI. In 2017, this
action was dismissed in full and the plaintiffs have appealed the
dismissal.
SIBOR/SOR civil action
In 2016, a putative class action was filed in the SDNY against
Barclays PLC, Barclays Bank PLC, BCI and other defendants, alleging
manipulation of the Singapore Interbank Offered Rate (SIBOR) and
Singapore Swap Offer Rate (SOR). In October 2018, the court
dismissed all claims against Barclays PLC, Barclays Bank PLC and
BCI. The plaintiffs have appealed the dismissal.
ICE LIBOR civil actions
In 2019, several putative class actions have been filed in the
SDNY against Barclays PLC, Barclays Bank PLC, BCI, other financial
institution defendants and Intercontinental Exchange Inc. and
certain of its affiliates (ICE), asserting antitrust claims that
defendants manipulated USD LIBOR through defendants' submissions to
ICE. These actions have been consolidated. The defendants have
filed a motion to dismiss.
Non-US benchmarks civil actions
Legal proceedings (which include the claims referred to below in
'Local authority civil actions concerning LIBOR') have been brought
or threatened against Barclays Bank PLC (and, in certain cases,
Barclays Bank UK PLC) in the UK in connection with alleged
manipulation of LIBOR, EURIBOR and other benchmarks. Proceedings
have also been brought in a number of other jurisdictions in Europe
and Israel. Additional proceedings in other jurisdictions may be
brought in the future.
Foreign Exchange investigations and related civil actions
In 2015, the Barclays Group reached settlements totalling
approximately $2.38bn with various US federal and state authorities
and the FCA in relation to investigations into certain sales and
trading practices in the Foreign Exchange market. Under the related
plea agreement with the US Department of Justice (DoJ), which
received final court approval in January 2017, the Barclays Group
agreed to a term of probation of three years. The Barclays Group
also continues to provide relevant information to certain
authorities.
The European Commission is one of a number of authorities still
conducting an investigation into certain trading practices in
Foreign Exchange markets. The European Commission announced two
settlements in May 2019 and the Barclays Group paid penalties
totalling approximately EUR210m. In June 2019, the Swiss
Competition Commission announced two settlements and the Barclays
Group paid penalties totalling approximately CHF 27m. The financial
impact of the ongoing matters is not expected to be material to the
Barclays Bank Group's operating results, cash flows or financial
position.
A number of individuals and corporates in a range of
jurisdictions have also threatened or brought civil actions against
the Barclays Group and other banks in relation to alleged
manipulation of Foreign Exchange markets, and may do so in the
future. Certain actions remain pending.
FX opt out civil action
In 2018, Barclays Bank PLC and BCI settled a consolidated action
filed in the SDNY, alleging manipulation of Foreign Exchange
markets (Consolidated FX Action), for a total amount of $384m. Also
in 2018, a group of plaintiffs who opted out of the Consolidated FX
Action filed a complaint in the SDNY against Barclays PLC, Barclays
Bank PLC, BCI and other defendants.
Retail basis civil action
In 2015, a putative class action was filed against several
international banks, including Barclays PLC and BCI, on behalf of a
proposed class of individuals who exchanged currencies on a retail
basis at bank branches (Retail Basis Claims). The SDNY has ruled
that the Retail Basis Claims are not covered by the settlement
agreement in the Consolidated FX Action. The Court subsequently
dismissed all Retail Basis Claims against the Barclays Group and
all other defendants. The plaintiffs have filed an amended
complaint.
State law FX civil action
In 2017, the SDNY dismissed consolidated putative class actions
brought under federal and various state laws on behalf of proposed
classes of (i) stockholders of Exchange Traded Funds and others who
purportedly were indirect investors in FX instruments, and (ii)
investors who traded FX instruments through FX dealers or brokers
not alleged to have manipulated Foreign Exchange Rates. The
plaintiffs' amended complaint as to their state law claims is
pending.
Non-US FX civil actions
In addition to the actions described above, legal proceedings
have been brought or are threatened against Barclays PLC, Barclays
Bank PLC, BCI and Barclays Execution Services Limited (BX) in
connection with alleged manipulation of Foreign Exchange in the UK,
a number of other jurisdictions in Europe, Israel and Australia and
additional proceedings may be brought in the future.
Metals investigations and related civil actions
Barclays Bank PLC previously provided information to the DoJ,
the US Commodity Futures Trading Commission and other authorities
in connection with investigations into metals and metals-based
financial instruments.
A number of US civil complaints, each on behalf of a proposed
class of plaintiffs, have been consolidated and transferred to the
SDNY. The complaints allege that Barclays Bank PLC and other
members of The London Gold Market Fixing Ltd. manipulated the
prices of gold and gold derivative contracts in violation of US
antitrust and other federal laws. This consolidated putative class
action remains pending. A separate US civil complaint by a proposed
class of plaintiffs against a number of banks, including Barclays
Bank PLC, BCI and BX (formerly, Barclays Capital Services Limited),
alleging manipulation of the price of silver in violation of the
CEA, the Antitrust Act and state antitrust and consumer protection
laws, has been dismissed as against the Barclays entities. The
plaintiffs have the option to seek the court's permission to
appeal.
Civil actions have also been filed in Canadian courts against
Barclays PLC, Barclays Bank PLC, Barclays Capital Canada Inc. and
BCI on behalf of proposed classes of plaintiffs alleging
manipulation of gold and silver prices.
US residential mortgage related civil actions
There are various pending civil actions relating to US
Residential Mortgage-Backed Securities (RMBS), including four
actions arising from unresolved repurchase requests submitted by
Trustees for certain RMBS, alleging breaches of various loan-level
representations and warranties (R&Ws) made by Barclays Bank PLC
and/or a subsidiary acquired in 2007 (the Acquired Subsidiary). The
unresolved repurchase requests received as at 31 December 2019 had
an original unpaid principal balance of approximately $2.1bn. The
Trustees have also alleged that the relevant R&Ws may have been
breached with respect to a greater (but unspecified) amount of
loans than previously stated in the unresolved repurchase
requests.
These repurchase actions are ongoing. In one repurchase action,
the New York Court of Appeals held that claims related to certain
R&Ws are time-barred. Barclays Bank PLC has reached a
settlement to resolve two of the repurchase actions, which is
subject to final court approval. The financial impact of the
settlement is not expected to be material to the Barclays Bank
Group's operating results, cash flows or financial position. The
remaining two repurchase actions are pending.
Government and agency securities civil actions and related
matters
Certain governmental authorities are conducting investigations
into activities relating to the trading of certain government and
agency securities in various markets. The Barclays Group provided
information in cooperation with such investigations. Civil actions
have also been filed on the basis of similar allegations, as
described below.
Treasury auction securities civil actions
Consolidated putative class action complaints filed in US
federal court against Barclays Bank PLC, BCI and other financial
institutions under the Antitrust Act and state common law allege
that the defendants (i) conspired to manipulate the US Treasury
securities market and/or (ii) conspired to prevent the creation of
certain platforms by boycotting or threatening to boycott such
trading platforms. The defendants have filed a motion to
dismiss.
In addition, certain plaintiffs have filed a related, direct
action against BCI and certain other financial institutions,
alleging that defendants conspired to fix and manipulate the US
Treasury securities market in violation of the Antitrust Act, the
CEA and state common law.
Supranational, Sovereign and Agency bonds civil actions
Civil antitrust actions have been filed in the SDNY and Federal
Court of Canada in Toronto against Barclays Bank PLC, BCI, BX
(formerly, Barclays Services Limited), Barclays Capital Securities
Limited and, with respect to the civil action filed in Canada only,
Barclays Capital Canada, Inc. and other financial institutions
alleging that the defendants conspired to fix prices and restrain
competition in the market for US dollar-denominated Supranational,
Sovereign and Agency bonds.
In one of the actions filed in the SDNY, the court granted the
defendants' motion to dismiss the plaintiffs' complaint with
respect to Barclays Bank PLC and certain Barclays Group entities.
Defendants have filed a motion to dismiss those plaintiffs'
remaining claims against BCI. The remaining action filed in the
SDNY is stayed.
Variable Rate Demand Obligations civil actions
Civil actions have been filed against Barclays Bank PLC and BCI
and other financial institutions alleging the defendants conspired
or colluded to artificially inflate interest rates set for Variable
Rate Demand Obligations (VRDOs). VRDOs are municipal bonds with
interest rates that reset on a periodic basis, most commonly
weekly. Two actions in state court have been filed by private
plaintiffs on behalf of the states of Illinois and California. Two
putative class action complaints, which have been consolidated,
have been filed in the SDNY.
Government bond civil actions
In a putative class action filed in the SDNY in 2019, plaintiffs
alleged that BCI and certain other bond dealers conspired to fix
the prices of US government sponsored entity bonds in violation of
US antitrust law. BCI has agreed a settlement of $87m, subject to
court approval. In 2019, the Louisiana Attorney General and the
City of Baton Rouge each filed a complaint against Barclays Bank
PLC and other financial institutions making similar allegations as
the class action plaintiffs.
In 2018, a separate putative class action against various
financial institutions including Barclays PLC, Barclays Bank PLC,
BCI, Barclays Bank Mexico, S.A., and certain other subsidiaries of
the Group was consolidated in the SDNY. The plaintiffs asserted
antitrust and state law claims arising out of an alleged conspiracy
to fix the prices of Mexican Government bonds. Barclays PLC has
settled the claim, subject to court approval. The financial impact
of the settlement is not material to the Barclays Bank Group's
operating results, cash flows or financial position.
BDC Finance L.L.C.
In 2008, BDC Finance L.L.C. (BDC) filed a complaint in the NY
Supreme Court, demanding damages of $298m, alleging that Barclays
Bank PLC had breached a contract in connection with a portfolio of
total return swaps governed by an ISDA Master Agreement
(collectively, the Agreement). Following a trial on certain
liability issues, the court ruled in December 2018 that Barclays
Bank PLC was not a defaulting party, which was affirmed on
appeal.
In 2011, BDC's investment advisor, BDCM Fund Adviser, L.L.C. and
its parent company, Black Diamond Capital Holdings, L.L.C. also
sued Barclays Bank PLC and BCI in Connecticut State Court for
unspecified damages allegedly resulting from Barclays Bank PLC's
conduct relating to the Agreement, asserting claims for violation
of the Connecticut Unfair Trade Practices Act and tortious
interference with business and prospective business relations. This
case is currently stayed.
Civil actions in respect of the US Anti-Terrorism Act
There are a number of civil actions, on behalf of more than
4,000 plaintiffs, filed in US federal courts in the US District
Court in the Eastern District of New York (EDNY) and SDNY against
Barclays Bank PLC and a number of other banks. The complaints
generally allege that Barclays Bank PLC and those banks engaged in
a conspiracy to facilitate US dollar-denominated transactions for
the Government of Iran and various Iranian banks, which in turn
funded acts of terrorism that injured or killed plaintiffs or
plaintiffs' family members. The plaintiffs seek to recover damages
for pain, suffering and mental anguish under the provisions of the
US Anti-Terrorism Act, which allow for the trebling of any proven
damages.
The court granted the defendants' motion to dismiss one action
in the EDNY, and plaintiffs have filed a notice of appeal. The
defendants have moved to dismiss two other EDNY actions. The court
also granted the defendants' motion to dismiss another action in
the SDNY, but the plaintiffs have moved to file an amended
complaint. The remaining actions are stayed pending decisions in
these cases.
Interest rate swap and credit default swap US civil actions
Barclays PLC, Barclays Bank PLC and BCI, together with other
financial institutions that act as market makers for interest rate
swaps (IRS) are named as defendants in several antitrust class
actions which were consolidated in the SDNY in 2016. The complaints
allege the defendants conspired to prevent the development of
exchanges for IRS and demand unspecified money damages.
In 2018, trueEX LLC filed an antitrust class action in the SDNY
against a number of financial institutions including Barclays PLC,
Barclays Bank PLC and BCI based on similar allegations with respect
to trueEX LLC's development of an IRS platform. In 2017, Tera Group
Inc. filed a separate civil antitrust action in the SDNY claiming
that certain conduct alleged in the IRS cases also caused the
plaintiff to suffer harm with respect to the Credit Default Swaps
market. In November 2018 and July 2019, respectively, the court
dismissed certain claims in both cases for unjust enrichment and
tortious interference but denied motions to dismiss the federal and
state antitrust claims, which remain pending.
Portuguese Competition Authority investigation
The Portuguese Competition Authority found that a subsidiary of
Barclays Bank PLC and other banks violated competition law by
exchanging information about retail credit products relating to
mortgages, consumer lending and lending to small and medium
enterprises. The Barclays Group applied for immunity and received
no fine.
Investigation into collections and recoveries relating to
unsecured lending
Since February 2018, the FCA has been investigating whether the
Barclays Group implemented effective systems and controls with
respect to collections and recoveries and whether it paid due
consideration to the interests of customers in default and arrears.
The FCA investigation is at an advanced stage.
HM Revenue & Customs (HMRC) assessments concerning UK Value
Added Tax
In 2018, HMRC issued notices that have the effect of removing
certain overseas subsidiaries that have operations in the UK from
Barclays' UK VAT group, in which group supplies between members are
generally free from VAT. The notices have retrospective effect and
correspond to assessments of GBP181m (inclusive of interest), of
which Barclays would expect to attribute an amount of approximately
GBP128m to Barclays Bank UK PLC and GBP53m to Barclays Bank PLC.
HMRC's decision has been appealed to the First Tier Tribunal (Tax
Chamber).
Local authority civil actions concerning LIBOR
Following settlement by Barclays Bank PLC of various
governmental investigations concerning certain benchmark interest
rate submissions referred to above in 'Investigations into LIBOR
and other benchmarks and related civil actions', in the UK, certain
local authorities have brought claims against Barclays Bank PLC
(and, in certain cases, Barclays Bank UK PLC) asserting that they
entered into loans in reliance on misrepresentations made by
Barclays Bank PLC in respect of its conduct in relation to LIBOR.
Barclays has applied to strike out the claims.
General
The Barclays Bank Group is engaged in various other legal,
competition and regulatory matters in the UK, the US and a number
of other overseas jurisdictions. It is subject to legal proceedings
brought by and against the Barclays Bank Group which arise in the
ordinary course of business from time to time, including (but not
limited to) disputes in relation to contracts, securities, debt
collection, consumer credit, fraud, trusts, client assets,
competition, data management and protection, money laundering,
financial crime, employment, environmental and other statutory and
common law issues.
The Barclays Bank Group is also subject to enquiries and
examinations, requests for information, audits, investigations and
legal and other proceedings by regulators, governmental and other
public bodies in connection with (but not limited to) consumer
protection measures, compliance with legislation and regulation,
wholesale trading activity and other areas of banking and business
activities in which the Barclays Bank Group is or has been engaged.
The Barclays Bank Group is cooperating with the relevant
authorities and keeping all relevant agencies briefed as
appropriate in relation to these matters and others described in
this note on an ongoing basis.
At the present time, Barclays Bank PLC does not expect the
ultimate resolution of any of these other matters to have a
material adverse effect on its financial position. However, in
light of the uncertainties involved in such matters and the matters
specifically described in this note, there can be no assurance that
the outcome of a particular matter or matters (including formerly
active matters or those matters arising after the date of this
note) will not be material to Barclays Bank PLC's results,
operations or cash flow for a particular period, depending on,
among other things, the amount of the loss resulting from the
matter(s) and the amount of profit otherwise reported for the
reporting period.
10 Subordinated liabilities
Accounting for subordinated liabilities
Subordinated liabilities are measured at amortised cost using
the effective interest method under IFRS 9.
Barclays Bank Group Barclays Bank PLC
2019 2018 2019 2018
GBPm GBPm GBPm GBPm
As at 1 January 35,327 24,193 35,085 24,203
Issuances 6,785 221 6,627 -
Redemptions (7,804) (3,246) (7,632) (3,246)
Other (883) 14,159 (875) 14,128
As at 31 December 33,425 35,327 33,205 35,085
Issuances of GBP6,785m comprises GBP3,534m intra-group loans
from and GBP3,093m intra-group notes to Barclays PLC as well as
GBP158m externally issued USD Floating Rate Notes.
Redemptions of GBP7,804m comprises GBP3,033m externally issued
Step-up Callable Perpetual Reserve Capital Instruments, GBP43m
externally issued EUR Floating Rate Notes, GBP4,556m intra-group
loans from Barclays PLC, GBP158m externally issued USD Floating
Rate Notes and GBP14m externally issued JPY Floating Rate
Loans.
Other movements predominantly include foreign exchange and
accrued interest, partially offset by fair value hedge
adjustments.
Subordinated liabilities include accrued interest and comprise
undated and dated subordinated liabilities as follows:
Barclays Bank Group Barclays Bank PLC
2019 2018 2019 2018
GBPm GBPm GBPm GBPm
Undated subordinated liabilities 1,073 4,313 1,211 4,454
Dated subordinated liabilities 32,352 31,014 31,994 30,631
Total subordinated liabilities 33,425 35,327 33,205 35,085
None of the Barclays Bank Group's subordinated liabilities are
secured.
Undated subordinated liabilities Barclays Bank Group Barclays Bank PLC
2019 2018 2019 2018
Initial call date GBPm GBPm GBPm GBPm
Barclays Bank PLC externally issued
subordinated liabilities
Tier One Notes (TONs)
6% Callable Perpetual Core Tier One Notes 2032 16 16 16 16
6.86% Callable Perpetual Core Tier One Notes
(USD 179m) 2032 203 199 203 199
Reserve Capital Instruments (RCIs)
6.3688% Step-up Callable Perpetual Reserve
Capital Instruments 2019 - 34 - 34
14% Step-up Callable Perpetual Reserve Capital
Instruments 2019 - 3,189 - 3,189
5.3304% Step-up Callable Perpetual Reserve
Capital Instruments 2036 53 51 53 51
Undated Notes
7.125% Undated Subordinated Notes 2020 165 173 165 173
6.125% Undated Subordinated Notes 2027 42 42 42 42
Junior Undated Floating Rate Notes (USD 38m) Any interest payment date 29 30 100 104
Undated Floating Rate Primary Capital Notes
Series 1 (USD 167m) Any interest payment date 92 95 126 130
Undated Floating Rate Primary Capital Notes
Series 2 (USD 295m) Any interest payment date 191 199 224 231
Undated Floating Rate Primary Capital Notes
Series 3 Any interest payment date 21 21 21 21
Bonds
9.25% Perpetual Subordinated Bonds
(ex-Woolwich Plc) 2021 81 83 81 83
9% Permanent Interest Bearing Capital Bonds At any time 44 44 44 44
Loans
5.03% Reverse Dual Currency Undated
Subordinated Loan (JPY 8,000m) 2028 55 56 55 56
5% Reverse Dual Currency Undated Subordinated
Loan (JPY 12,000m) 2028 81 81 81 81
Total undated subordinated liabilities 1,073 4,313 1,211 4,454
Undated subordinated liabilities
Undated subordinated liabilities are issued by Barclays Bank PLC
and its subsidiaries for the development and expansion of their
business and to strengthen their capital bases. The principal terms
of the undated subordinated liabilities are described below:
Subordination
All undated subordinated liabilities rank behind the claims
against the bank of depositors and other unsecured unsubordinated
creditors and holders of dated subordinated liabilities in the
following order: Junior Undated Floating Rate Notes; other issues
of Undated Notes, Bonds and Loans ranking pari passu with each
other; followed by TONs and RCIs ranking pari passu with each
other.
Interest
All undated subordinated liabilities bear a fixed rate of
interest until the initial call date, with the exception of the 9%
Bonds which are fixed for the life of the issue, and the Junior and
Series 1, Series 2 and Series 3 Undated Notes which are floating
rate at rates fixed periodically in advance based on the related
interbank rate.
After the initial call date, in the event that they are not
redeemed, the 7.125%, 6.125% Undated Notes, and the 9.25% Bonds
will bear interest at rates fixed periodically in advance for
five-year periods based on market rates. All other undated
subordinated liabilities will bear interest at rates fixed
periodically in advance based on London interbank rates.
Payment of interest
Barclays Bank PLC is not obliged to make a payment of interest
on its Undated Notes, Bonds and Loans excluding the 9.25% Bonds if,
in the preceding six months, a dividend has not been declared or
paid on any class of shares of Barclays PLC or, in certain cases,
any class of preference shares of Barclays Bank PLC. Barclays Bank
PLC is not obliged to make a payment of interest on its 9.25%
Perpetual Subordinated Bonds if, in the immediately preceding 12
month interest period, a dividend has not been paid on any class of
its share capital. Interest not paid becomes payable in each case
if such a dividend is subsequently paid or in certain other
circumstances. During the year, Barclays Bank PLC and Barclays PLC
declared and paid dividends on its ordinary shares and on all
classes of preference shares.
No payment of principal or any interest may be made unless
Barclays Bank PLC satisfies a specified solvency test.
Barclays Bank PLC may elect to defer any payment of interest on
the RCIs. Any such deferred payment of interest must be paid on the
earlier of: (i) the date of redemption of the RCIs, and (ii) the
coupon payment date falling on or nearest to the tenth anniversary
of the date of deferral of such payment. Whilst such deferral is
continuing, neither Barclays Bank PLC nor Barclays PLC may (i)
declare or pay a dividend, subject to certain exceptions, on any of
its ordinary shares or preference shares and (ii) certain
restrictions on the redemption, purchase or reduction of their
respective share capital and certain other securities also
apply.
Barclays Bank PLC may elect to defer any payment of interest on
the TONs if it determines that it is, or such payment would result
in it being, in non-compliance with capital adequacy requirements
and policies of the PRA. Any such deferred payment of interest will
only be payable on a redemption of the TONs. Until such time as
Barclays Bank PLC next makes a payment of interest on the TONs,
neither Barclays Bank PLC nor Barclays PLC may (i) declare or pay a
dividend, subject to certain exceptions, on any of their respective
ordinary shares or Preference Shares, or make payments of interest
in respect of Barclays Bank PLC's Reserve Capital Instruments and
(ii) certain restrictions on the redemption, purchase or reduction
of their respective share capital and certain other securities also
apply.
Repayment
All undated subordinated liabilities are repayable, at the
option of Barclays Bank PLC generally in whole at the initial call
date and on any subsequent coupon or interest payment date or in
the case of the 7.125%, 6.125% Undated Notes and the 9.25% Bonds on
any fifth anniversary after the initial call date. In addition,
each issue of undated subordinated liabilities is repayable, at the
option of Barclays Bank PLC, in whole for certain tax reasons,
either at any time, or on an interest payment date. There are no
events of default except non-payment of principal or mandatory
interest. Any repayments require the prior approval of the PRA.
Other
All issues of undated subordinated liabilities are
non-convertible.
Dated subordinated liabilities Barclays Bank Group Barclays Bank PLC
2019 2018 2019 2018
Initial call date Maturity date GBPm GBPm GBPm GBPm
Barclays Bank PLC externally issued
subordinated liabilities
Floating Rate Subordinated Notes (EUR 50m) 2019 - 45 - 45
5.14% Lower Tier 2 Notes (USD 1,094m) 2020 832 851 832 851
6% Fixed Rate Subordinated Notes (EUR 1,500m) 2021 1,375 1,474 1,375 1,474
9.5% Subordinated Bonds (ex-Woolwich Plc) 2021 239 256 239 256
Subordinated Floating Rate Notes (EUR 100m) 2021 85 89 85 89
10% Fixed Rate Subordinated Notes 2021 2,157 2,194 2,157 2,194
10.179% Fixed Rate Subordinated Notes (USD 1,521m) 2021 1,123 1,143 1,123 1,143
Subordinated Floating Rate Notes (EUR 50m) 2022 43 45 43 45
6.625% Fixed Rate Subordinated Notes (EUR 1,000m) 2022 957 1,032 957 1,032
7.625% Contingent Capital Notes (USD 3,000m) 2022 2,453 2,502 2,453 2,502
Subordinated Floating Rate Notes (EUR 50m) 2023 42 45 42 45
5.75% Fixed Rate Subordinated Notes 2026 350 351 350 351
5.4% Reverse Dual Currency Subordinated Loan (JPY
15,000m) 2027 105 107 105 107
6.33% Subordinated Notes 2032 62 61 62 61
Subordinated Floating Rate Notes (EUR 68m) 2040 58 61 58 61
External issuances by other subsidiaries 2021-2024 358 384 - -
Barclays Bank PLC notes issued
intra-group to Barclays PLC
2% Fixed Rate Subordinated Callable
Notes (EUR 1,500m) 2023 2028 1,309 1,361 1,309 1,361
3.75% Fixed Rate Resetting
Subordinated Callable Notes (SGD
200m) 2025 2030 116 116 116 116
5.20% Fixed Rate Subordinated Notes (USD 1,367m) 2026 1,036 1,001 1,036 1,001
4.836% Fixed Rate Subordinated
Callable Notes (USD 1,200m) 2027 2028 944 911 944 911
5.088% Fixed-to-Floating Rate
Subordinated Callable Notes (USD
1,300m) 2029 2030 994 - 994 -
5.25% Fixed Rate Subordinated Notes (USD 827m) 2045 651 - 651 -
4.95% Fixed Rate Subordinated Notes (USD 1,250m) 2047 849 - 849 -
Floating Rate Subordinated Notes (USD 456m) 2047 350 - 350 -
Barclays Bank PLC intra-group loans
from Barclays PLC
Various Fixed Rate Subordinated Loans 7,548 10,147 7,548 10,147
Various Subordinated Floating Rate Loans 1,094 1,023 1,094 1,023
Various Fixed Rate Subordinated Callable Loans 5,225 3,754 5,225 3,754
Various Subordinated Floating Rate Callable Loans 1,997 2,061 1,997 2,061
Total dated subordinated liabilities 32,352 31,014 31,994 30,630
Dated subordinated liabilities
Dated subordinated liabilities are issued by Barclays Bank PLC
and respective subsidiaries for the development and expansion of
their business and to strengthen their respective capital bases.
The principal terms of the dated subordinated liabilities are
described below:
Currency and maturity
In addition to the individual dated subordinated liabilities
listed in the table, the GBP15,864m of intra-group loans is made up
of various fixed, fixed to floating and floating rate loans from
Barclays PLC with notional amounts denominated in USD 13,187m, EUR
3,024m, GBP 250m, JPY 233,600m, AUD 1,715m, SEK 500m, NOK 970m and
CHF 175m, with maturities ranging from 2020 to 2047. Certain
intra-group loans have a call date one year prior to their
maturity.
Subordination
All dated subordinated liabilities, both externally issued and
issued intra-group to Barclays PLC, rank behind the claims against
the bank of depositors and other unsecured unsubordinated creditors
but before the claims of the undated subordinated liabilities and
the holders of their equity. The Barclays Bank PLC intra-group
loans from Barclays PLC rank pari passu amongst themselves but
ahead of the Barclays Bank PLC notes issued intra-group to Barclays
PLC and the Barclays Bank PLC externally issued subordinated
liabilities. The external dated subordinated liabilities issued by
subsidiaries, are similarly subordinated as the external
subordinated liabilities issued by Barclays Bank PLC.
Interest
Interest on floating rate notes and loans is set by reference to
market rates at the time of issuance and fixed periodically in
advance, based on the related interbank or local bank rates.
Interest on fixed rate notes and loans is set by reference to
market rates at the time of issuance and fixed until maturity.
Interest on fixed rate callable notes and loans is set by
reference to market rates at the time of issuance and fixed until
the call date. After the call date, in the event that the notes or
loans are not redeemed, the interest rate will be re-set to either
a fixed or floating rate until maturity based on market rates.
Repayment
Those subordinated liabilities with a call date are repayable at
the option of the issuer, on conditions governing the respective
debt obligations, some in whole or in part, and some only in whole.
The remaining dated subordinated liabilities outstanding at 31
December 2019 are redeemable only on maturity, subject in
particular cases, to provisions allowing an early redemption in the
event of certain changes in tax law or, to certain changes in
legislation or regulations.
Any repayments prior to maturity may require, in the case of
Barclays Bank PLC, the prior approval of the PRA, or in the case of
the overseas issues, the approval of the local regulator for that
jurisdiction and of the PRA in certain circumstances.
There are no committed facilities in existence at the balance
sheet date which permit the refinancing of debt beyond the date of
maturity.
Other
The 7.625% Contingent Capital Notes will be automatically
transferred from investors to Barclays PLC (or another entity
within the Barclays Group) for nil consideration in the event the
Barclays PLC consolidated CRD IV CET1 ratio (FSA October 2012
transitional statement) falls below 7.0%.
11 Ordinary shares, share premium, and other equity
Called up share
capital, allotted
and fully paid
Ordinary share Preference share Total share capital Other equity
capital capital Share premium and share premium instruments
GBPm GBPm GBPm GBPm GBPm
As at 1 January
2019 2,342 6 - 2,348 7,595
AT1 securities
issuance - - - - 2,302
AT1 securities
redemption - - - - (1,574)
As at 31 December
2019 2,342 6 - 2,348 8,323
As at 1 January
2018 2,342 19 12,092 14,453 8,982
AT1 securities
issuance - - - - 1,925
AT1 securities
redemption - - - - (1,242)
Redemption of
preference shares - (13) - (13) -
Capital
reorganisation - - (12,092) (12,092) -
Net equity impact
of intra-group
transfers - - - - (2,070)
As at 31 December
2018 2,342 6 - 2,348 7,595
Ordinary shares
The issued ordinary share capital of Barclays Bank PLC, as at 31
December 2019, comprised 2,342m (2018: 2,342m) ordinary shares of
GBP1 each.
Preference shares
The issued preference share capital of Barclays Bank PLC, as at
31 December 2019, comprised 1,000 Sterling Preference Shares of
GBP1 each (2018: 1,000); 31,856 Euro Preference Shares of EUR100
each (2018: 31,856); and 58,133 US Dollar Preference Shares of $100
each (2018: 58,133).
Ordinary share capital, preference share Capital and share
premium constitutes 100% (2018: 100%) of total share capital and
share premium issued.
Sterling GBP1 Preference Shares
1,000 Sterling cumulative callable preference shares of GBP1
each (the GBP1 Preference Shares) were issued on 31 December 2004
at nil premium.
The GBP1 Preference Shares entitle the holders thereof to
receive Sterling cumulative cash dividends out of distributable
profits of Barclays Bank PLC, semi-annually at a rate reset
semi-annually equal to the Sterling interbank offered rate for
six-month sterling deposits.
Barclays Bank PLC shall be obliged to pay such dividends if: (1)
it has profits available for the purpose of distribution under the
Companies Act 2006 as at each dividend payment date; and (2) it is
solvent on the relevant dividend payment date, provided that a
capital regulations condition is satisfied on such dividend payment
date. The dividends shall not be due and payable on the relevant
dividend payment date except to the extent that Barclays Bank PLC
could make such payment and still be solvent immediately
thereafter. Barclays Bank PLC shall be considered solvent on any
date if: (1) it is able to pay its debts to senior creditors as
they fall due; and (2) its auditors have reported within the
previous six months that its assets exceed its liabilities. If
Barclays Bank PLC shall not pay, or shall pay only in part, a
dividend for a period of seven days or more after the due date for
payment, the holders of the GBP1 Preference Shares may institute
proceedings for the winding-up of Barclays Bank PLC. No remedy
against Barclays Bank PLC shall be available to the holder of any
GBP1 Preference Shares for the recovery of amounts owing in respect
of GBP1 Preference Shares other than the institution of proceedings
for the winding-up of Barclays Bank PLC and/or proving in such
winding-up.
On a winding-up or other return of capital (other than a
redemption or purchase by Barclays Bank PLC of any of its issued
shares, or a reduction of share capital, permitted by the Articles
of Barclays Bank PLC and under applicable law), the assets of
Barclays Bank PLC available to shareholders shall be applied in
priority to any payment to the holders of ordinary shares and any
other class of shares in the capital of Barclays Bank PLC then in
issue ranking junior to the GBP1 Preference Shares on such a return
of capital and pari passu on such a return of capital with the
holders of any other class of shares in the capital of Barclays
Bank PLC then in issue (other than any class of shares in the
capital of Barclays Bank PLC then in issue ranking in priority to
the GBP1 Preference Shares on a winding-up or other such return of
capital), in payment to the holders of the GBP1 Preference Shares
of a sum equal to the aggregate of: (1) an amount equal to the
dividends accrued thereon for the then current dividend period (and
any accumulated arrears thereof) to the date of the commencement of
the winding-up or other such return of capital; and (2) an amount
equal to GBP1 per GBP1 Preference Share. After payment of the full
amount of the liquidating distributions to which they are entitled,
the holders of the GBP1 Preference Shares will have no right or
claim to any of the remaining assets of Barclays Bank PLC and will
not be entitled to any further participation in such return of
capital.
The GBP1 Preference Shares are redeemable at the option of
Barclays Bank PLC, in whole but not in part only, subject to the
Companies Act 2006 and its Articles. Holders of the GBP1 Preference
Shares are not entitled to receive notice of, or to attend, or vote
at, any general meeting of Barclays Bank PLC.
Euro Preference Shares
140,000 Euro 4.75% non-cumulative callable preference shares of
EUR100 each (the 4.75% Preference Shares) were issued on 15 March
2005 for a consideration of EUR1,383.3m (GBP966.7m), of which the
nominal value was EUR14m and the balance was share premium. The
4.75% Preference Shares entitle the holders thereof to receive Euro
non-cumulative cash dividends out of distributable profits of
Barclays Bank PLC, annually at a fixed rate of 4.75% per annum on
the amount of EUR10,000 per preference share until 15 March 2020,
and thereafter quarterly at a rate reset quarterly equal to 0.71%
per annum above the Euro interbank offered rate for three-month
Euro deposits.
The 4.75% Preference Shares are redeemable at the option of
Barclays Bank PLC, in whole but not in part only, on 15 March 2020,
and on each dividend payment date thereafter at EUR10,000 per share
plus any dividends accrued for the then current dividend period to
the date fixed for redemption.
US Dollar Preference Shares
100,000 US Dollar 6.278% non-cumulative callable preference
shares of $100 each (the 6.278% Preference Shares), represented by
100,000 American Depositary Shares, Series 1, were issued on 8 June
2005 for a consideration of $995.4m (GBP548.1m), of which the
nominal value was $10m and the balance was share premium. The
6.278% Preference Shares entitle the holders thereof to receive US
Dollar non-cumulative cash dividends out of distributable profits
of Barclays Bank PLC, semi-annually at a fixed rate of 6.278% per
annum on the amount of $10,000 per preference share until 15
December 2034, and thereafter quarterly at a rate reset quarterly
equal to 1.55% per annum above the London interbank offered rate
for three-month US Dollar deposits.
The 6.278% Preference Shares are redeemable at the option of
Barclays Bank PLC, in whole but not in part only, on 15 December
2034, and on each dividend payment date thereafter at $10,000 per
share plus any dividends accrued for the then current dividend
period to the date fixed for redemption.
106 million US Dollar 8.125% non-cumulative callable preference
shares of $0.25 each (the 8.125% Preference Shares), represented by
106 million American Depositary Shares, Series 5, were issued on 11
April 2008 and 25 April 2008 for a total consideration of $2,650m
(GBP1,345m), of which the nominal value was $26.5m and the balance
was share premium. The 8.125% Preference Shares entitle the holders
thereof to receive US Dollar non-cumulative cash dividends out of
distributable profits of Barclays Bank PLC, quarterly at a fixed
rate of 8.125% per annum on the amount of $25 per preference
share.
The 8.125% Preference Shares were redeemed in full on December
15, 2018, with payment being made on Monday, December 17, 2018.
No redemption or purchase of any 4.75% Preference Shares and the
6.278% Preference Shares (together, the Preference Shares) may be
made by Barclays Bank PLC without the prior approval of the UK PRA
and any such redemption will be subject to the Companies Act 2006
and the Articles of Barclays Bank PLC.
On a winding-up of Barclays Bank PLC or other return of capital
(other than a redemption or purchase of shares of Barclays Bank
PLC, or a reduction of share capital), a holder of Preference
Shares will rank in the application of assets of Barclays Bank PLC
available to shareholders: (1) junior to the holder of any shares
of Barclays Bank PLC in issue ranking in priority to the Preference
Shares; (2) equally in all respects with holders of other
preference shares and any other shares of Barclays Bank PLC in
issue ranking pari passu with the Preference Shares; and (3) in
priority to the holders of ordinary shares and any other shares of
Barclays Bank PLC in issue ranking junior to the Preference
Shares.
The holders of the GBP13m 6% Callable Perpetual Core Tier One
Notes and the $179m 6.86% Callable Perpetual Core Tier One Notes of
Barclays Bank PLC (together, the TONs) and the holders of the
GBP35m 5.3304% Step-up Callable Perpetual Reserve Capital
Instruments, the GBP33m 6.3688% Step-up Callable Perpetual Reserve
Capital Instruments and the GBP3,000m 14% Step-up Callable
Perpetual Reserve Capital Instruments of Barclays Bank PLC
(together, the RCIs) would, for the purposes only of calculating
the amounts payable in respect of such securities on a winding-up
of Barclays Bank PLC, subject to limited exceptions and to the
extent that the TONs and the RCIs are then in issue, rank pari
passu with the holders of the most senior class or classes of
preference shares then in issue in the capital of Barclays Bank
PLC. Accordingly, the holders of the preference shares would rank
equally with the holders of such TONs and RCIs on such a winding-up
of Barclays Bank PLC (unless one or more classes of shares of
Barclays Bank PLC ranking in priority to the preference shares are
in issue at the time of such winding-up, in which event the holders
of such TONs and RCIs would rank equally with the holders of such
shares and in priority to the holders of the preference
shares).
Subject to such ranking, in such event, holders of the
preference shares will be entitled to receive out of assets of
Barclays Bank PLC available for distributions to shareholders,
liquidating distributions in the amount of EUR10,000 per 4.75%
Preference Share and $10,000 per 6.278% Preference Share, plus, in
each case, an amount equal to the accrued dividend for the then
current dividend period to the date of the commencement of the
winding-up or other such return of capital. If a dividend is not
paid in full on any preference shares on any dividend payment date,
then a dividend restriction shall apply.
This dividend restriction will mean that neither Barclays Bank
PLC nor Barclays PLC may (a) declare or pay a dividend (other than
payment by Barclays PLC of a final dividend declared by its
shareholders prior to the relevant dividend payment date, or a
dividend paid by Barclays Bank PLC to Barclays PLC) on any of their
respective ordinary shares, other preference shares or other share
capital or (b) redeem, purchase, reduce or otherwise acquire any of
their respective share capital, other than shares of Barclays Bank
PLC held by Barclays PLC or a wholly owned subsidiary, until the
earlier of: (1) the date on which Barclays Bank PLC next declares
and pays in full a preference dividend; and (2) the date on or by
which all the preference shares are redeemed in full or purchased
by Barclays Bank PLC.
Holders of the preference shares are not entitled to receive
notice of, or to attend, or vote at, any general meeting of
Barclays Bank PLC. Barclays Bank PLC is not permitted to create a
class of shares ranking as regards participation in the profits or
assets of Barclays Bank PLC in priority to the preference shares,
save with the sanction of a special resolution of a separate
general meeting of the holders of the preference shares (requiring
a majority of not less than three-fourths of the holders of the
preference shares voting at the separate general meeting) or with
the consent in writing of the holders of three-fourths of the
preference shares.
Except as described above, the holders of the preference shares
have no right to participate in the surplus assets of Barclays Bank
PLC.
Capital Reorganisation
On 11 September 2018, the High Court of Justice in England and
Wales confirmed the cancellation of the share premium account of
Barclays Bank PLC, with the balance of GBP12,092m credited to
retained earnings.
Other equity instruments
Other equity instruments of GBP8,323m (2018: GBP7,595m) include
AT1 securities that are issued to the market by Barclays PLC.
Barclays PLC uses funds from the market issuance to purchase AT1
from Barclays Bank Group. The AT1 securities are perpetual
securities with no fixed maturity and are structured to qualify as
AT1 instruments under prevailing capital rules applicable as at the
relevant issue date.
In 2019, there were three issuances of AT1 instruments, in the
form of Fixed Rate Resetting Perpetual Subordinated Contingent
Convertible Securities (2018: one issuance) totalling GBP2,302m
(2018: GBP1,925m). There were also two redemptions in 2019 (2018:
one redemption) totalling GBP1,574m (2018: GBP1,242m).
AT1 equity instruments
2019 2018
Initial call date GBPm GBPm
------------------ ----- -----
AT1 equity instruments - Barclays Bank Group
6.625% Perpetual Subordinated Contingent Convertible Securities (USD 1,211m) 2019 - 715
6.5% Perpetual Subordinated Contingent Convertible Securities (EUR 1,077m) 2019 - 860
8.0% Perpetual Subordinated Contingent Convertible Securities (EUR 1,000m) 2020 836 836
7.875% Perpetual Subordinated Contingent Convertible Securities 2022 1,000 1,000
7.875% Perpetual Subordinated Contingent Convertible Securities (USD 1,500m) 2022 1,136 1,136
7.25% Perpetual Subordinated Contingent Convertible Securities 2023 500 500
7.75% Perpetual Subordinated Contingent Convertible Securities (USD 2,500m) 2023 1,925 1,925
5.875% Perpetual Subordinated Contingent Convertible Securities 2024 623 623
8% Perpetual Subordinated Contingent Convertible Securities (USD 2,000m) 2024 1,509 -
7.125% Perpetual Subordinated Contingent Convertible Securities 2025 299 -
6.375% Perpetual Subordinated Contingent Convertible Securities 2025 495 -
Total AT1 equity instruments 8,323 7,595
-------------------------------------------------------------------------------------------------
12 Reserves
Currency translation reserve
The currency translation reserve represents the cumulative gains
and losses on the retranslation of the Barclays Bank Group net
investment in foreign operations, net of the effects of
hedging.
Fair value through other comprehensive income reserve
The fair value through other comprehensive income reserve
represents the changes in the fair value of fair value through
other comprehensive income investments since initial
recognition.
Cash flow hedging reserve
The cash flow hedging reserve represents the cumulative gains
and losses on effective cash flow hedging instruments that will be
recycled to the income statement when the hedged transactions
affect profit or loss.
Own credit reserve
The own credit reserve reflects the cumulative own credit gains
and losses on financial liabilities at fair value. Amounts in the
own credit reserve are not recycled to profit or loss in future
periods.
Other reserves and other shareholders' equity
Other reserves relate to redeemed ordinary and preference shares
issued by the Barclays Bank Group.
Included in other shareholders' equity are capital notes which
bear interest at rates fixed periodically in advance, based on
London interbank rates. These notes are repayable at the option of
the Barclays Bank PLC, in whole on any interest payment date.
Barclays Bank PLC is not obliged to make a payment of interest on
its capital notes if, in the preceding six months, a dividend has
not been declared or paid on any class of shares of Barclays
PLC.
Barclays Bank Group Barclays Bank PLC
2019 2018 2019 2018
GBPm GBPm GBPm GBPm
---------- --------- --------- --------
Currency translation reserve 3,383 3,927 659 857
Fair value through other comprehensive income reserve (139) (298) (141) (302)
Cash flow hedging reserve 388 (123) 403 (123)
Own credit reserve (373) (121) (315) (121)
Other reserves and other shareholders' equity (24) (24) 72 72
---------- --------- --------- --------
Total 3,235 3,361 678 383
---------- --------- --------- --------
13 Non-controlling interests
Profit attributable to Equity attributable to Dividends paid to
non-controlling interest non-controlling interest non-controlling interest
2019 2018 2019 2018 2019 2018
GBPm GBPm GBPm GBPm GBPm GBPm
--------------- ---------------
Other
non-controlling
interests - - - 2 - -
14 Pensions and post-retirement benefits
Accounting for pensions and post-retirement benefits
The Barclays Bank Group operates a number of pension schemes and
post-employment benefit schemes.
Defined contribution schemes - the Barclays Bank Group
recognises contributions due in respect of the accounting period in
the income statement. Any contributions unpaid at the balance sheet
date are included as a liability.
Defined benefit schemes - the Barclays Bank Group recognises its
obligations to members of each scheme at the period end, less the
fair value of the scheme assets after applying the asset ceiling
test.
Each scheme's obligations are calculated using the projected
unit credit method. Scheme assets are stated at fair value as at
the period end.
Changes in pension scheme liabilities or assets (remeasurements)
that do not arise from regular pension cost, net interest on net
defined benefit liabilities or assets, past service costs,
settlements or contributions to the scheme, are recognised in other
comprehensive income. Remeasurements comprise experience
adjustments (differences between previous actuarial assumptions and
what has actually occurred), the effects of changes in actuarial
assumptions, return on scheme assets (excluding amounts included in
the interest on the assets) and any changes in the effect of the
asset ceiling restriction (excluding amounts included in the
interest on the restriction).
Post-employment benefit schemes - the cost of providing
healthcare benefits to retired employees is accrued as a liability
in the financial statements over the period that the employees
provide services to the Barclays Bank Group, using a methodology
similar to that for defined benefit pension schemes.
Pension schemes
UK Retirement Fund (UKRF)
The UKRF is Barclays Bank Group's main scheme, representing 97%
of Barclays Bank Group's total retirement benefit obligations.
Barclays Bank PLC is the principal employer of the UKRF. The UKRF
was closed to new entrants on 1 October 2012, and comprises 10
sections, the two most significant of which are:
-- Afterwork, which comprises a contributory cash balance defined
benefit element, and a voluntary defined contribution element.
The cash balance element is accrued each year and revalued until
Normal Retirement Age in line with the increase in Retail Price
Index (RPI) (up to a maximum of 5% p.a.). An increase of up to
2% a year may also be added at Barclays' discretion. The costs
of ill-health retirements and death in service benefits for Afterwork
members are borne by the UKRF. The main risks that Barclays runs
in relation to Afterwork are limited although additional contributions
are required if pre-retirement investment returns are not sufficient
to provide for the benefits.
-- The 1964 Pension Scheme. Most employees recruited before July 1997
built up benefits in this non-contributory defined benefit scheme
in respect of service up to 31 March 2010. Pensions were calculated
by reference to service and pensionable salary. From 1 April 2010,
members became eligible to accrue future service benefits in either
Afterwork or the Pension Investment Plan (PIP), a historic defined
contribution section which is now closed to future contributions.
The risks that Barclays runs in relation to the 1964 section are
typical of final salary pension schemes, principally that investment
returns fall short of expectations, that inflation exceeds expectations,
and that retirees live longer than expected.
Barclays Pension Savings Plan (BPSP)
The BPSP is a defined contribution scheme providing benefits for
all new UK hires from 1 October 2012, BPSP is not subject to the
same investment return, inflation or life expectancy risks for
Barclays that defined benefit schemes are. Members' benefits
reflect contributions paid and the level of investment returns
achieved.
Other
Apart from the UKRF and the BPSP, Barclays operates a number of
smaller pension and long-term employee benefits and post-retirement
health care plans globally, the largest of which are the US defined
benefit schemes. Many of the schemes are funded, with assets
backing the obligations held in separate legal vehicles such as
trusts. Others are operated on an unfunded basis. The benefits
provided, the approach to funding, and the legal basis of the
schemes, reflect local environments.
Governance
The UKRF operates under trust law and is managed and
administered on behalf of the members in accordance with the terms
of the Trust Deed and Rules and all relevant legislation. The
Corporate Trustee is Barclays Pension Funds Trustees Limited, a
private limited company and a wholly owned subsidiary of Barclays
Bank PLC. The Trustee is the legal owner of the assets of the UKRF
which are held separately from the assets of Barclays Bank Plc.
The Trustee Board comprises six Management Directors selected by
Barclays, of whom three are independent Directors with no
relationship with Barclays (and who are not members of the UKRF),
plus three Member Nominated Directors selected from eligible active
staff, deferred and pensioner members who apply for the role.
The BPSP is a Group Personal Pension arrangement which operates
as a collection of personal pension plans. Each personal pension
plan is a direct contract between the employee and the BPSP
provider (Legal & General Assurance Society Limited), and is
regulated by the FCA.
Similar principles of pension governance apply to Barclays Bank
PLC's other pension schemes, depending on local legislation.
Amounts recognised
The following tables include amounts recognised in the income
statement and an analysis of benefit obligations and scheme assets
for all Barclays Bank Group defined benefit schemes. The net
position is reconciled to the assets and liabilities recognised on
the balance sheet. The tables include funded and unfunded
post-retirement benefits.
Income statement charge
---- ----
2019 2018
GBPm GBPm
---- ----
Current service cost 58 64
Net finance cost (48) (24)
Past service cost - 134
Other movements 1 5
---- ----
Total 11 179
---- ----
The Barclays Bank Group is the principal employer of the UKRF
and hence Scheme Assets and Defined Benefit Obligations relating to
the UKRF are recognised within the Barclays Bank Group. Barclays
Bank UK Plc and Barclays Execution services Limited are
participating employers in the UKRF and their share of the UKRF
service cost is borne by them. Of the GBP226m current service cost
in the below table, GBP90m relates to Barclays Bank UK Plc and
GBP78m relates to Barclays Execution services Limited. While the
entire current service cost is accounted for in the Barclays Bank
Group on balance sheet, the income statement charge is accounted
for across all the participating employers.
Balance sheet
reconciliation 2019 2018
Of which Of which
Barclays Bank Barclays Bank relates to Barclays Bank Barclays Bank relates to
Group Total PLC Total UKRF Group Total PLC Total UKRF
GBPm GBPm GBPm GBPm GBPm GBPm
Benefit obligation at
beginning of the
year (28,237) (27,635) (27,301) (30,243) (29,554) (29,160)
Current service cost (226) (212) (210) (240) (230) (226)
Interest costs on
scheme liabilities (747) (721) (718) (705) (688) (677)
Past service cost - - - (134) (139) (140)
Remeasurement
(loss)/gain -
financial (3,087) (2,987) (2,964) 1,129 1,092 1,075
Remeasurement
(loss)/gain -
demographic 223 211 214 (242) (243) (245)
Remeasurement
(loss)/gain -
experience 277 275 266 (75) (92) (94)
Employee
contributions (5) (1) (1) (4) (1) (1)
Benefits paid 1,459 1,427 1,410 2,205 2,169 2,167
Exchange and other
movements 45 181 - 72 51 -
-------------- -------------- -------------- --------------- --------------
Benefit obligation at
end of the year (30,298) (29,462) (29,304) (28,237) (27,635) (27,301)
-------------- -------------- -------------- --------------- --------------
Fair value of scheme
assets at beginning
of the year 29,722 29,259 29,036 30,922 30,364 30,112
Interest income on
scheme assets 795 774 774 729 716 709
Employer contribution 755 740 731 754 746 741
Settlements (2) - - (106) (58) -
Remeasurement -
return on plan
assets greater than
discount rate 2,312 2,228 2,230 (400) (371) (360)
Employee
contributions 5 1 1 4 1 1
Benefits paid (1,459) (1,427) (1,410) (2,205) (2,169) (2,167)
Exchange and other
movements (35) (155) - 24 30 -
-------------- -------------- -------------- --------------- --------------
Fair value of scheme
assets at the end of
the year 32,093 31,420 31,362 29,722 29,259 29,036
-------------- -------------- -------------- --------------- --------------
Net surplus/(deficit) 1,795 1,958 2,058 1,485 1,624 1,735
-------------- -------------- -------------- --------------- --------------
Retirement benefit
assets 2,108 2,062 2,058 1,768 1,748 1,735
Retirement benefit
liabilities (313) (104) - (283) (124) -
-------------- -------------- -------------- --------------- --------------
Net retirement
benefit
assets/(liabilities) 1,795 1,958 2,058 1,485 1,624 1,735
-------------- -------------- -------------- --------------- --------------
Included within the Barclays Bank Group's benefit obligation was
GBP760m (2018: GBP757m) relating to overseas pensions and GBP166m
(2018: GBP172m) relating to other post-employment benefits.
Included within the Barclays Bank PLC's benefit obligation was
GBP18m (2018: GBP238m) relating to overseas pensions and GBP73m
(2018: GBP89m) relating to other post-employment benefits.
As at 31 December 2019, the UKRF's scheme assets were in surplus
versus IAS 19 obligations by GBP2,058m (2018: GBP1,735m). The
movement for the UKRF was driven by higher than assumed asset
returns, payment of deficit reduction contributions, updated
mortality assumptions, and lower than expected inflation, partially
offset by a decrease in the discount rate.
Of the GBP1,410m (2018: GBP2,167m) UKRF benefits paid out,
GBP580m (2018: GBP1,420m) related to transfers out of the fund.
Where a scheme's assets exceed its obligation, an asset is
recognised to the extent that it does not exceed the present value
of future contribution holidays or refunds of contributions (the
asset ceiling). In the case of the UKRF the asset ceiling is not
applied as, in certain specified circumstances such as wind-up, the
Barclays Bank Group expects to be able to recover any surplus.
Similarly, a liability in respect of future minimum funding
requirements is not recognised. The Trustee does not have a
substantive right to augment benefits, nor do they have the right
to wind up the plan except in the dissolution of the Barclays Bank
Group or termination of contributions by the Barclays Bank Group.
The application of the asset ceiling to other plans and recognition
of additional liabilities in respect of future minimum funding
requirements are considered on an individual plan basis.
Critical accounting estimates and judgements
Actuarial valuation of the schemes' obligation is dependent upon
a series of assumptions. Below is a summary of the main financial
and demographic assumptions adopted for the UKRF.
Key UKRF financial assumptions 2019 2018
% p.a. % p.a.
------ ------
Discount rate 1.92 2.71
Inflation rate (RPI) 3.02 3.25
------
The UKRF discount rate assumption for 2019 was based on a
variant of the standard Willis Towers Watson RATE Link model. This
variant includes all bonds rated AA by at least one of the four
major ratings agencies, and assumes that forward rates after year
30 are flat. The RPI inflation assumption for 2019 was set by
reference to the Bank of England's implied inflation curve,
assuming the forward rates remain flat after 30 years. The
inflation assumption incorporates a deduction of 20 basis points as
an allowance for an inflation risk premium. The methodology used to
derive the discount rate and price inflation assumptions is
consistent with that used at the prior year end, except for a
switch to holding forward rates rather spot rates flat after year
30.
The UKRF's post-retirement mortality assumptions are based on a
best estimate assumption derived from an analysis in 2019 of the
UKRF's own post-retirement mortality experience, and taking account
of recent evidence from published mortality surveys. An allowance
has been made for future mortality improvements based on the 2018
core projection model published by the Continuous Mortality
Investigation Bureau subject to a long-term trend of 1.5% per annum
in future improvements. The methodology used is consistent with the
prior year end, except that the 2017 core projection model was used
at 2018, and a long-trend of 1.25% per annum was applied. The table
below shows how the assumed life expectancy at 60, for members of
the UKRF, has varied over the past three years:
Assumed life expectancy 2019 2018 2017
----------------------------------------------------------------------
Life expectancy at 60 for current pensioners (years)
- Males 27.1 27.7 27.8
- Females 29.3 29.4 29.4
---------------------------------------------------------------------- ---- ---- ----
Life expectancy at 60 for future pensioners currently aged 40 (years)
- Males 28.9 29.2 29.3
- Females 31.1 31.0 31.0
---------------------------------------------------------------------- ---- ---- ----
The assumption for future transfers out has been removed, to
reflect lower volumes experienced in 2019 and immaterial volumes
expected going forwards. The previous assumption was that 5% of the
benefit obligation in respect of deferred members will transfer out
during 2020, 2.5% in 2021, tapering down to 0% from 2022
onwards.
Sensitivity analysis on actuarial assumptions
The sensitivity analysis has been calculated by valuing the UKRF
liabilities using the amended assumptions shown in the table below
and keeping the remaining assumptions the same as disclosed in the
table above, except in the case of the inflation sensitivity where
other assumptions that depend on assumed inflation have also been
amended correspondingly. The difference between the recalculated
liability figure and that stated in the balance sheet
reconciliation table above is the figure shown. The selection of
these movements to illustrate the sensitivity of the defined
benefit obligation to key assumptions should not be interpreted as
Barclays expressing any specific view of the probability of such
movements happening.
Change in key assumptions
2019 2018
(Decrease)/Increase in UKRF defined benefit (Decrease)/Increase in UKRF defined benefit
obligation obligation
GBPbn GBPbn
Discount rate
0.50% p.a. increase (2.3) (2.1)
0.25% p.a. increase (1.2) (1.1)
0.25% p.a. decrease 1.2 1.1
0.50% p.a. decrease 2.6 2.4
Assumed RPI
0.50% p.a. increase 1.5 1.3
0.25% p.a. increase 0.8 0.7
0.25% p.a. decrease (0.7) (0.6)
0.50% p.a. decrease (1.4) (1.3)
Life expectancy at 60
One year increase 1.0 0.9
One year decrease (1.0) (0.9)
The weighted average duration of the benefit payments reflected
in the defined benefit obligation for the UKRF is 17 years.
Assets
A long-term investment strategy has been set for the UKRF, with
its asset allocation comprising a mixture of equities, bonds,
property and other appropriate assets. This recognises that
different asset classes are likely to produce different long-term
returns and some asset classes may be more volatile than others.
The long-term investment strategy ensures, among other aims, that
investments are adequately diversified.
The UKRF also employs derivative instruments, where appropriate,
to achieve a desired exposure or return, or to match assets more
closely to liabilities. The value of assets shown reflects the
assets held by the scheme, with any derivative holdings reflected
on a fair value basis.
The value of the assets of the schemes and their percentage in
relation to total scheme assets were as follows:
Analysis of scheme assets
-------- ----------------- ------- ---------------- -------- ----------------
Barclays Bank Group Total Barclays Bank PLC Total Of which relates to UKRF
% of total % of total % of total
fair value of fair value of fair value of
scheme scheme scheme
Value assets Value assets Value assets
GBPm % GBPm % GBPm %
-------- ----------------- ------- ---------------- --------
As at 31 December 2019
Equities 2,349 7.3 2,184 7.0 2,174 6.9
Private equities 2,083 6.5 2,083 6.6 2,083 6.6
Bonds - fixed government 3,447 10.7 3,193 10.2 3,175 10.1
Bonds - index-linked government 11,036 34.4 11,027 35.1 11,027 35.2
Bonds - corporate and other 9,234 28.8 9,056 28.8 9,042 28.8
Property 1,644 5.1 1,633 5.2 1,633 5.2
Infrastructure 1,558 4.9 1,558 5.0 1,558 5.0
Cash and liquid assets 742 2.3 686 2.1 670 2.2
-------- ----------------- ------- ---------------- -------- ----------------
Fair value of scheme assets 32,093 100.0 31,420 100.0 31,362 100.0
-------- ----------------- ------- ---------------- -------- ----------------
As at 31 December 2018
Equities 3,349 11.3 3,246 11.1 3,211 11.1
Private equities 1,995 6.7 1,995 6.8 1,995 6.9
Bonds - fixed government 3,320 11.2 3,149 10.8 3,062 10.5
Bonds - index-linked government 10,945 36.8 10,936 37.4 10,936 37.7
Bonds - corporate and other 6,371 21.4 6,261 21.4 6,197 21.3
Property 1,712 5.8 1,702 5.8 1,702 5.9
Infrastructure 1,196 4.0 1,196 4.1 1,196 4.1
Cash and liquid assets 834 2.8 774 2.6 737 2.5
-------- ----------------- ------- ---------------- -------- ----------------
Fair value of scheme assets 29,722 100.0 29,259 100.0 29,036 100.0
-------- ----------------- ------- ---------------- -------- ----------------
Included within the fair value of scheme assets were GBPnil
(2018: GBPnil) relating to shares in Barclays PLC and GBPnil (2018:
GBPnil) relating to bonds issued by Barclays PLC. The UKRF also
invests in pooled investment vehicles which may hold shares or debt
issued by Barclays PLC.
The UKRF assets above do not include the Senior Notes asset
referred to in the section below on Triennial Valuation, as these
are non-transferable instruments and not recognised under
IAS19.
Approximately 44% of the UKRF assets are invested in
liability-driven investment strategies; primarily UK gilts as well
as interest rate and inflation swaps. These are used to better
match the assets to its liabilities. The swaps are used to reduce
the scheme's inflation and duration risks against its
liabilities.
Triennial Valuation
The latest triennial actuarial valuation of the UKRF with an
effective date of 30 September 2019 has been completed. This
valuation showed a funding deficit of GBP2.3bn and a funding level
of 94%, versus GBP4.0bn funding deficit at the 30 September 2018
update. The decrease in funding deficit over that period was mainly
driven by payment of deficit reduction contributions and changes in
mortality assumptions.
The Bank and UKRF Trustee have agreed a revised statement of
funding principles, schedule of contributions, and recovery plan to
seek to eliminate the funding deficit.
The main differences between the funding and accounting
assumptions are a different approach to setting the discount rate
and a more conservative longevity assumption for funding.
The deficit reduction contributions agreed with the UKRF Trustee
as part of the 30 September 2019 triennial valuation recovery plan
are shown alongside the deficit reduction contributions agreed in
2017 for the prior 30 September 2016 triennial valuation.
Deficit reduction contributions under Deficit reduction contributions under
the the
30 September 2016 valuation 30 September 2019 valuation
Year GBPm GBPm
Cash paid:
2019 - paid in two installments of
GBP250m in April and September 500 -
2019 - paid in December - 500
Future Commitments:
2020 500 500
2021 1,000 700
2022 1,000 294
2023 1,000 286
2024 - 2026 1,000 each year -
As part of the triennial actuarial valuation, Barclays Bank PLC
agreed to pay a GBP500m contribution on 11 December 2019 and at the
same time the UKRF subscribed for non-transferrable listed senior
fixed rate notes for GBP500m, backed by UK gilts (the Senior
Notes). The Senior Notes were issued by Heron Issuer Limited
(Heron), an entity that is consolidated within the Barclays Group
under IFRS10. The Senior Notes entitle the UKRF to semi-annual
coupon payments for five years, and full repayment of the
subscription in cash at maturity in 2024. Heron acquired the gilts
from BBPLC for cash of GBP600m to support these payments. BBPLC
also subscribed for Junior notes issued by Heron for GBP100m. The
contribution forms part of the recovery plan agreed as part of the
2019 valuation of the UKRF. No liability is recognised under IAS19
for the obligation to make deficit reduction contributions, for the
obligation of Heron to repay the Senior Notes, or for the cash
received by BBPLC from Heron for the transfer of the gilts, as
settlement in 2024 gives rise to both a reduction in cash and a
corresponding increase in net defined benefit assets.
The deficit reduction contributions are in addition to the
regular contributions to meet the Barclays Bank Group's share of
the cost of benefits accruing over each year. The next funding
valuation of the UKRF is due to be completed in 2023 with an
effective date of 30 September 2022.
Other support measures agreed which remain in place
Collateral - The UKRF Trustee and Barclays Bank PLC have entered
into an arrangement whereby a collateral pool has been put in place
to provide security for the UKRF funding deficit as it increases or
decreases over time. The collateral pool is currently made up of
government securities, and agreement was made with the Trustee to
cover 100% of the funding deficit with an overall cap of GBP9bn.
The arrangement provides the UKRF Trustee with dedicated access to
the pool of assets in the event of Barclays Bank PLC not paying a
deficit reduction contribution to the UKRF or in the event of
Barclays Bank PLC's insolvency. These assets are included within
Note 37 Assets pledged, collateral received and assets transferred
of the Barclays Bank PLC Annual Report.
Support from Barclays PLC - In the event of Barclays Bank PLC
not paying a deficit reduction contribution payment required by a
specified pre-payment date, Barclays PLC has entered into an
arrangement whereby it will be required to use, in first priority,
dividends received from Barclays Bank UK PLC (if any) to invest the
proceeds in Barclays Bank PLC (up to the maximum amount of the
deficit reduction contribution unpaid by Barclays Bank PLC). The
proceeds of the investment will be used to discharge Barclays Bank
PLC's unpaid deficit reduction contribution.
Participation - As permitted under the Financial Services and
Markets Act 2000 (Banking Reform) (Pensions) Regulations 2015,
Barclays Bank UK PLC is a participating employer in the UKRF and
will remain so during a transitional phase until September 2025 as
set out in a deed of participation. Barclays Bank UK PLC will make
contributions for the future service of its employees who are
currently Afterwork members and, in the event of Barclays Bank
PLC's insolvency during this period provision has been made to
require Barclays Bank UK PLC to become the principal employer of
the UKRF. Barclays Bank PLC's Section 75 debt would be triggered by
the insolvency (the debt would be calculated after allowing for the
payment to the UKRF of the collateral above).
Defined benefit contributions paid with respect to the UKRF were
as follows:
Contributions paid
-----
GBPm
-----
2019 1,231
2018 741
2017 1,124
-----
There were GBPnil (2018: GBPnil; 2017: GBP153m) Section 75
contributions included within the Barclays Bank Group's
contributions paid as no participating employers left the UKRF
scheme in 2019.
The Barclays Bank Group's expected contribution to the UKRF in
respect of defined benefits in 2020 is GBP560m (2019: GBP562m). In
addition, the expected contributions to UK defined contribution
schemes in 2020 is GBP7m (2019: GBP7m) to the UKRF and GBP41m
(2019: GBP37m) to the BPSP.
The section presents information on the Barclays Bank Group's
investments in subsidiaries, joint ventures and associates and its
interests in structured entities. Detail is also given on
securitisation transactions the Barclays Bank Group has entered
into and arrangements that are held off-balance sheet.
15 Related party transactions and Directors' remuneration
Related party transactions
Parties are considered to be related if one party has the
ability to control the other party or exercise significant
influence over the other party in making financial or operational
decisions, or one other party controls both.
The transfer of European operations to Barclays Bank Ireland PLC
has materially affected the financial statements of Barclays Bank
PLC during the year with regards to its related party transactions.
There was no impact on the consolidated financial statements of the
Barclays Bank Group. Refer to Note 39 of the Barclays Bank PLC
Annual Report for further details, including intra-group
balances.
Parent company
The parent company, which is also the ultimate parent company,
is Barclays PLC, which holds 100% of the issued ordinary shares of
Barclays Bank PLC.
Subsidiaries
Transactions between Barclays Bank PLC and its subsidiaries also
meet the definition of related party transactions. Where these are
eliminated on consolidation, they are not disclosed in the Barclays
Bank Group's financial statements. A list of the Barclays Bank
Group's principal subsidiaries is shown in Note 33 of the Barclays
Bank PLC Annual Report.
Fellow subsidiaries
Transactions between the Barclays Bank Group and other
subsidiaries of the parent company also meet the definition of
related party transactions.
Associates, joint ventures and other entities
The Barclays Bank Group provides banking services to its
associates, joint ventures and the Barclays Bank Group pension
funds (principally the UK Retirement Fund), providing loans,
overdrafts, interest and non-interest bearing deposits and current
accounts to these entities as well as other services. Barclays Bank
Group companies also provide investment management and custodian
services to the Barclays Bank Group pension schemes. All of these
transactions are conducted on the same terms as third party
transactions. Summarised financial information for the Barclays
Bank Group's investments in associates and joint ventures is set
out in Note 35 of the Barclays Bank PLC Annual Report.
Amounts included in the Barclays Bank Group's financial
statements, in aggregate, by category of related party entity are
as follows:
Parent Fellow subsidiaries Associates Joint ventures Pension funds
GBPm GBPm GBPm GBPm GBPm
For the year ended and as at 31 December 2019
Total income (717) 53 - 12 3
Credit impairment charges - - - - -
Operating expenses (90) (3,023) (5) - -
Total assets 2,097 2,165 - 1,303 3
Total liabilities 24,876 1,600 - - 75
For the year ended and as at 31 December 2018
Total income (416) (3) - 7 3
Credit impairment charges - - - - -
Operating expenses (122) (3,630) (1) (7) -
Total assets 727 1,091 12 1,288 3
Total liabilities 21,405 2,058 85 2 139
An entity that is consolidated within the Group under IFRS 10
has issued Senior Notes to the UKRF with a nominal value of
GBP500m. This is not included within the table above. Refer to Note
32 of the Barclays Bank PLC Annual Report for further details.
Total liabilities includes total liabilities are derivatives
transacted on behalf of the pensions funds of GBP6m (2018:
GBP3m).
Amounts included in Barclays Bank PLC's financial statements, in
aggregate, by category of related party entity are as follows:
Parent Subsidiaries Fellow subsidiaries Associates Joint ventures Pension funds
GBPm GBPm GBPm GBPm GBPm GBPm
------ ------------ ------------------- ---------- -------------- -------------
As at 31 December 2019
Total assets 2,096 209,910 2,155 - 1,303 -
Total liabilities 24,876 147,472 1,480 - - 72
As at 31 December 2018
Total assets 721 178,571 1,069 8 1,282 3
Total liabilities 21,405 122,546 2,000 85 2 139
It is the normal practice of Barclays Bank PLC to provide its
subsidiaries with support and assistance by way of guarantees,
indemnities, letters of comfort and commitments, as may be
appropriate, with a view to enabling them to meet their obligations
and to maintain their good standing, including commitment of
capital and facilities. For dividends paid to Barclays PLC see Note
10 of the Barclays Bank PLC Annual Report.
Key Management Personnel
Key Management Personnel are defined as those persons having
authority and responsibility for planning, directing and
controlling the activities of Barclays Bank PLC (directly or
indirectly) and comprise the Directors and Officers of Barclays
Bank PLC, certain direct reports of the Chief Executive Officer and
the heads of major business units and functions.
The Barclays Bank Group provides banking services to Key
Management Personnel and persons connected to them. Transactions
during the year and the balances outstanding were as follows:
Loans outstanding
------ -----
2019 2018
GBPm GBPm
------ -----
As at 1 January 14.6 4.8
Loans issued during the year(a) 0.1 12.6
Loan repayments during the year(b) (14.7) (2.8)
------ -----
As at 31 December - 14.6
------ -----
Notes
a Includes loans issued to existing Key Management Personnel and
new or existing loans issued to newly appointed Key Management
Personnel.
b Includes loan repayments by existing Key Management Personnel and
loans to former Key Management Personnel.
No allowances for impairment were recognised in respect of loans
to Key Management Personnel (or any connected person).
Deposits outstanding
------ ------
2019 2018
GBPm GBPm
------ ------
As at 1 January 2.9 6.9
Deposits received during the year(a) 11.5 17.4
Deposits repaid during the year(b) (10.2) (21.4)
------ ------
As at 31 December 4.2 2.9
------ ------
Notes
a Includes deposits received from existing Key Management Personnel
and new or existing deposits received from newly appointed Key
Management Personnel.
b Includes deposits repaid by existing Key Management Personnel and
deposits of former Key Management Personnel.
Total commitments outstanding
Total commitments outstanding refer to the total of any undrawn
amounts on credit card and/or overdraft facilities provided to Key
Management Personnel. Total commitments outstanding as at 31
December 2019 were GBP0.1m (2018: GBP0.5m).
Loans to Key Management Personnel (and persons connected to
them) were made in the ordinary course of business; were made on
substantially the same terms, including interest rates and
collateral, as those prevailing at the same time for comparable
transactions with other persons; and did not involve more than a
normal risk of collectability or present other unfavourable
features.
Remuneration of Key Management Personnel
Total remuneration awarded to Key Management Personnel below
represents the awards made to individuals that have been approved
by the Board Remuneration Committee as part of the latest
remuneration decisions. Costs recognised in the income statement
reflect the accounting charge for the year included within
operating expenses. The difference between the values awarded and
the recognised income statement charge principally relates to the
recognition of deferred costs for prior year awards. Figures are
provided for the period that individuals met the definition of Key
Management Personnel.
2019 2018
GBPm GBPm
----- -----
Salaries and other short-term benefits 37.6 50.7
Pension costs 0.2 0.3
Other long-term benefits 9.1 12.6
Share-based payments 14.2 24.8
Employer social security charges on emoluments 6.0 8.5
-----
Costs recognised for accounting purposes 67.1 96.9
Employer social security charges on emoluments (6.0) (8.5)
Other long-term benefits - difference between awards granted and costs recognised (1.0) 4.5
Share-based payments - difference between awards granted and costs recognised (0.7) (2.1)
-----
Total remuneration awarded 59.4 90.8
-----
Disclosure required by the Companies Act 2006
The following information regarding Barclays Bank PLC Board of
Directors is presented in accordance with the Companies Act
2006:
2019 2018
GBPm GBPm
---- ----
Aggregate emoluments(a) 7.6 10.5
Amounts paid under LTIPs(b) 0.2 0.6
----
7.8 11.1
----
Notes
a The aggregate emoluments include amounts paid for the 2019 year.
In addition, deferred cash and share awards for 2019 with a total
value at grant of GBP1.9m will be made to Directors which will
only vest subject to meeting certain conditions.
b The figure above for 'Amounts paid under LTIPs' for 2019 relates
to an LTIP award released to a Director in 2019. Dividend shares
released on the award are excluded.
Pension contributions totalling GBP11,932 were paid to defined
contribution schemes on behalf of Directors (2018: GBP11,848).
There were no notional pension contributions to defined
contribution schemes.
As at 31 December 2019, there were no Directors accruing
benefits under a defined benefit scheme (2018: GBPnil).
The aggregate amount of compensation payable to departing
officers in respect of loss of office was GBP3,929,875.
Of the figures in the table above, the amounts attributable to
the highest paid Director in respect of qualifying services are as
follows:
2019 2018
GBPm GBPm
---- ----
Aggregate emoluments(a) 3.2 3.6
Amounts paid under LTIPs - -
----
3.2 3.6
----
Note
a The aggregate emoluments include amounts paid for the 2019 year.
In addition, a deferred share award for 2019 with a value at grant
of GBP1.2m will be made to the highest paid Director which will
only vest subject to meeting certain conditions.
There were no actual pension contributions to defined
contribution schemes on behalf of the highest paid Director (2018:
GBPnil). There were no notional pension contributions to defined
contribution schemes.
Advances and credit to Directors and guarantees on behalf of
Directors
In accordance with Section 413 of the Companies Act 2006, the
total amount of advances and credits made available in 2019 to
persons who served as Directors during the year was GBPnil (2018:
GBPnil). The total value of guarantees entered into on behalf of
Directors during 2019 was GBPnil (2018: GBPnil).
16 Discontinued operations and assets included in disposal groups
classified as held for sale and associated liabilities
Accounting for non-current assets held for sale and associated
liabilities
The Barclays Bank Group applies IFRS 5 Non-current Assets Held
for Sale and Discontinued Operations.
Non-current assets (or disposal groups) are classified as held
for sale when their carrying amount is to be recovered principally
through a sale transaction rather than continuing use. In order to
be classified as held for sale, the asset must be available for
immediate sale in its present condition subject only to terms that
are usual and customary and the sale must be highly probable.
Non-current assets (or disposal groups) held for sale are measured
at the lower of carrying amount and fair value less cost to
sell.
A component of the Barclays Bank Group that has either been
disposed of or is classified as held for sale is presented as a
discontinued operation if it represents a separate major line of
business or geographical area of operations, is part of a single
coordinated plan to dispose of the separate major line or
geographical area of operations, or if it is a subsidiary acquired
exclusively with a view to re-sale.
Barclays Bank Group
On 21 November 2019 Barclays Bank PLC sold its investment in The
Logic Group Holdings Limited to Barclays Principal Investments
Limited at its fair value of GBP112m. On 26 December 2019 Barclays
Bank PLC sold its investment in Barclays Funds Investments Limited
to Barclays Equity Holdings Limited at its fair value of GBP505m.
Barclays Bank PLC recorded profit on disposal of GBP56m and GBP23m
respectively.
UK banking business
Following the court approval of the ring-fencing transfer scheme
on 9 March 2018, the UK banking business largely comprising
Personal Banking, Barclaycard Consumer UK and Business Banking
customers, and related assets and liabilities was transferred to
Barclays Bank UK PLC on 1 April 2018, to meet the regulatory
ring-fencing requirement under the Financial Services (Banking
Reform) Act 2013 and related legislation. Following the transfer of
the UK banking business, Barclays Bank PLC transferred the equity
ownership in Barclays Bank UK PLC to Barclays PLC through a
dividend in specie on the same day. Accordingly, Barclays Bank UK
PLC ceased to be a subsidiary of Barclays Bank PLC and became a
direct subsidiary of the ultimate parent, Barclays PLC.
The results of Barclays Bank UK PLC and its subsidiaries for the
three months ended 31 March 2018, the date prior to the transfer of
ownership to Barclays PLC, are included in the consolidated
financial statements of Barclays Bank Group.
The transfer of the ownership of Barclays Bank UK PLC to
Barclays PLC resulted in a material change to the consolidated
financial position and results of Barclays Bank Group in 2018, in
comparison to prior periods. It had no impact on the share capital
and share premium of Barclays Bank Group. Other equity instruments
reduced by GBP2,070m relating to additional tier 1 (AT1) securities
transferred to Barclays Bank UK PLC. The fair value through other
comprehensive income reserve increased by GBP16m and retained
earnings reduced by GBP14,187m.
Upon disposal of the equity ownership of Barclays Bank UK PLC on
1 April 2018, the UK banking business met the requirements for
presentation as a discontinued operation. As such, the results,
which have been presented as the profit after tax in respect of
discontinued operations on the face of the Barclays Bank Group
income statement, are analysed in the income statement below. In
2018, discontinued operations relating to the UK banking business
incurred a loss after tax of GBP47m and in 2017 discontinued
operations related to the UK banking business generated a profit of
GBP809m (discontinued operations in total incurred a loss after tax
of GBP1,386m, which includes a loss of GBP2,195m loss relating to
BAGL). The income statement and cash flow statement below represent
three months of results as a discontinued operation to 31 March
2018, compared to the full year ended 31 December 2017.
UK banking business disposal group income statement
2019 2018 2017
For the year ended 31 December GBPm GBPm GBPm
Net interest income - 1,449 5,872
Net fee and commission income - 296 1,176
Net trading income - (5) (9)
Net investment income - 6 160
Other income - 2 8
Total income - 1,748 7,207
Credit impairment charges and other provisions - (201) (783)
Net operating income - 1,547 6,424
Staff costs - (321) (2,052)
Administration and general expenses - (1,135) (2,959)
Operating expenses - (1,456) (5,011)
Share of post-tax results of associates and joint ventures - - (5)
Profit before tax - 91 1,408
Taxation - (138) (599)
(Loss)/profit after tax - (47) 809
Attributable to:
Equity holders of the parent - (47) 809
Non-controlling interests - - -
(Loss)/profit after tax - (47) 809
The cash flows attributed to the UK banking business discontinued operation are as follows:
2019 2018 2017
For the year ended 31 December GBPm GBPm GBPm
Net cash flows from operating activities - (522) (355)
Net cash flows from investing activities - 54 470
Net cash flows from financing activities - - (128)
---- ----- -----
Net (decrease)/increase in cash and cash equivalents - (468) (13)
---- ----- -----
Barclays Africa Group Holdings Limited and Barclays Africa Group
Limited
On 1 August 2018 Barclays Bank PLC transferred the equity
ownership of its subsidiary Barclays Africa Group Holdings Limited
(BAGHL) to Barclays PLC through a dividend in specie. Accordingly,
BAGHL ceased to be a subsidiary of Barclays Bank PLC and became a
direct subsidiary of the ultimate parent, Barclays PLC. The value
of this dividend, representing the historic cost of investment of
Barclays Bank PLC in BAGHL was GBP269m. BAGHL was subsequently
renamed Barclays Principal Investments Limited.
Following the reduction of the Barclays Bank Group's interest in
BAGL in 2017, Barclays Bank Group's remaining interest in BAGL was
reported as a financial asset at fair value through other
comprehensive income. Prior to the disposal of shares on 1 June
2017, BAGL met the requirements for presentation as a discontinued
operation. As such, the results, which have been presented as the
profit after tax and non-controlling interest in respect of the
discontinued operation on the face of the Barclays Bank Group
income statement, are analysed in the income statement below, which
represents five months of results as a discontinued operation to 31
May 2017.
Barclays Africa disposal group income statement
2019 2018 2017
For the year ended 31 December GBPm GBPm GBPm
Net interest income - - 1,024
Net fee and commission income - - 522
Net trading income - - 149
Net investment income - - 30
Other income - - 61
Total income - - 1,786
Credit impairment charges and other provisions - - (177)
Net operating income - - 1,609
Staff costs - - (586)
Administration and general expenses(a) - - (1,634)
Operating expenses - - (2,220)
Share of post-tax results of associates and joint ventures - - 5
Loss before tax - - (606)
Taxation - - (154)
Loss after tax(b) - - (760)
Attributable to:
Equity holders of the parent - - (900)
Non-controlling interests - - 140
Loss after tax(b) - - (760)
Notes
a Includes impairment of GBP1,090 in 2017.
b Total loss in respect of the discontinued operation in 2017 was
GBP2,195m, which included the GBP60m loss on sale and GBP1,375m
loss on recycling of other comprehensive loss on reserves.
Barclays Bank PLC
Following a decision to transfer Barclays Group's European
businesses to Barclays Bank Ireland PLC, Barclays Bank PLC
transferred its German business in Q4 2018. The net assets
transferred were GBP312m in exchange for 350m ordinary shares
issued by Barclays Bank Ireland PLC and GBP1.3m of cash.
In Q1 2019 Barclays Bank PLC transferred its branches in France,
Italy, Netherlands, Portugal, Spain and Sweden. The net assets
transferred in 2019 were GBP181m in exchange for 99.4m ordinary
shares issued by Barclays Bank Ireland PLC. The assets and
liabilities were recognised by Barclays Bank Ireland PLC at their
predecessor book values in the consolidated financial statements of
the Barclays Bank Group on the date of transfer and therefore there
was no impact on the consolidated financial statements of the
Barclays Bank Group. The most material impacts on the balance sheet
of Barclays Bank PLC affect loans and advances at amortised cost of
GBP7,043m (2018: GBP3,287m), deposits at amortised cost of
GBP3,455m (2018: GBP5,418m) and repurchase agreements and other
similar secured lending of GBP2,827m (2018: GBPnil).
In March 2019, Barclays Bank PLC transferred financial
liabilities designated at fair value of GBP2,676m and deposits at
amortised cost of GBP1,104m to Barclays Bank Ireland PLC, in
exchange for cash consideration.
In addition to these transfers, Barclays Bank PLC transferred
positions facing European clients to Barclays Bank Ireland PLC, at
the clients' request. The most material impacts on the balance
sheet of Barclays Bank PLC comprise loans and advances at amortised
cost of GBP1,196m and deposits at amortised cost of GBP1,566m. The
positions were transferred in exchange for cash consideration.
Barclays Bank PLC transferred derivative financial instrument
assets of GBP11,685m and derivative financial instrument
liabilities of GBP13,880m to Barclays Bank Ireland PLC.
Concurrently, Barclays Bank PLC entered into new derivative
positions with Barclays Bank Ireland PLC to hedge the risk on the
transferring positions. Therefore, there was no impact on the
balance sheet of Barclays Bank PLC.
Please refer to the Barclays Bank Group section for information
on the disposal of The Logic Group Holdings Limited and Barclays
Funds Investments Limited.
Notes
The term Barclays Bank Group refers to Barclays Bank PLC
together with its subsidiaries. Unless otherwise stated, the income
statement analysis compares the year ended 31 December 2019 to the
corresponding twelve months of 2018 and balance sheet analysis as
at 31 December 2019 with comparatives relating to 31 December 2018.
The abbreviations 'GBPm' and 'GBPbn' 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 'EURm'
and 'EURbn' represent millions and thousands of millions of Euros
respectively.
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.
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 that can be accessed at
home.barclays/investor-relations/reports-and-events/latest-financial-results.
The information in this announcement, which was approved by the
Board of Directors on 12 February 2020, does not comprise statutory
accounts within the meaning of Section 434 of the Companies Act
2006. Statutory accounts for the year ended 31 December 2019, which
contain an unmodified audit report under Section 495 of the
Companies Act 2006 (which does not make any statements under
Section 498 of the Companies Act 2006) will be delivered to the
Registrar of Companies in accordance with Section 441 of the
Companies Act 2006.
These results will be furnished as a Form 20-F to the US
Securities and Exchange Commission (SEC) as soon as practicable
following their publication. Once furnished with the SEC, a copy of
the Form 20-F will be available from the Barclays Investor
Relations website at home.barclays/annualreport and from the SEC's
website at www.sec.gov.
Barclays Bank Group 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 Bank Group expects that from time to time over the coming
half year it will meet with investors globally to discuss these
results and other matters relating to the Barclays Bank Group.
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 Barclays Bank 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. Forward-looking statements can be made in
writing but also may be made verbally by members of the management
of the Barclays Bank Group (including, without limitation, during
management presentations to financial analysts) in connection with
this document. Examples of forward-looking statements include,
among others, statements or guidance regarding or relating to the
Barclays Bank Group's future financial position, income growth,
assets, impairment charges, provisions, business strategy, capital,
leverage and other regulatory ratios, payment of dividends
(including dividend payout ratios and expected payment strategies),
projected levels of growth in the banking and financial markets,
projected costs or savings, any commitments and targets, estimates
of capital expenditures, plans and objectives for future
operations, projected employee numbers, IFRS impacts 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. The forward-looking
statements speak only as at the date on which they are made and
such statements may be affected by changes in legislation, the
development of standards and interpretations under IFRS, including
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, 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 applicable to past, current and future
periods; UK, US, Eurozone and global macroeconomic and business
conditions; the effects of any 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 entity within the
Barclays Bank Group or any securities issued by such entities; the
potential for one or more countries exiting the Eurozone;
instability as a result of the exit by the UK from the European
Union and the disruption that may subsequently result in the UK and
globally; and the success of future acquisitions, disposals and
other strategic transactions. A number of these influences and
factors are beyond the Barclays Bank Group's control. As a result,
the Barclays Bank Group's actual financial position, future
results, dividend payments, capital, leverage or other regulatory
ratios or other financial and non-financial metrics or performance
measures may differ materially from the statements or guidance set
forth in the Barclays Bank Group's forward-looking statements.
Additional risks and factors which may impact the Barclays Bank
Group's future financial condition and performance are identified
in our filings with the SEC (including, without limitation, our
Annual Report on Form 20-F for the fiscal year ended 31 December
2019), which are available on the SEC's website at www.sec.gov.
Subject to our obligations under the applicable laws and
regulations of any relevant jurisdiction, (including, without
limitation, 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.
For further information, please contact:
Investor Relations Media Relations
Adam Strachan Tom Hoskin
+1 212 526 8442 +44 (0) 20 7116 4755
James Johnson
+44 (0) 20 7116 7233
About Barclays
Barclays is a British universal bank. We are diversified by
business, by different types of customer and client, and geography.
Our businesses include consumer banking and payments operations
around the world, as well as a top-tier, full service, global
corporate and investment bank, all of which are supported by our
service company which provides technology, operations and
functional services across the Group.
For further information about Barclays, please visit our website
www.barclays.com
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR UUORRRKUUAUR
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