UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 20-F/A
Amendment No. 1
(Mark One)
| ¨ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
OR
| þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the fiscal year ended 31 December 2021
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the transition period from _______________ to _______________
OR
| ¨ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
Date of event requiring this shell company report _______________
| Commission file number | Barclays Bank PLC | 1-10257 | ||||||
BARCLAYS BANK PLC
(Exact Name of Registrant as Specified in its Charter)
England
(Jurisdiction of Incorporation or Organization)
1 CHURCHILL PLACE, LONDON E14 5HP, England
(Address of Principal Executive Offices)
GARTH WRIGHT, +44 (0)20 7116 3170, GARTH.WRIGHT@BARCLAYS.COM
1 CHURCHILL PLACE, LONDON E14 5HP, England
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
As a wholly-owned subsidiary of Barclays PLC, which is a reporting company under the Securities Exchange Act of 1934, Barclays Bank PLC meets the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K, as applied to annual reports on Form 20-F, and is therefore filing this Form 20-F with a reduced disclosure format.
Securities registered or to be registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange On Which Registered | |||||||||
| 1.700% Fixed Rate Senior Notes due 2022 | BCS22A | New York Stock Exchange | |||||||||
iPath® Bloomberg Commodity Index Total ReturnSM ETN | DJP | NYSE Arca | |||||||||
iPath® Series B Bloomberg Agriculture Subindex Total ReturnSM ETN | JJA | NYSE Arca | |||||||||
iPath® Series B Bloomberg Aluminum Subindex Total ReturnSM ETN | JJU | NYSE Arca | |||||||||
iPath® Bloomberg Cocoa Subindex Total ReturnSM ETN | NIB | NYSE Arca | |||||||||
iPath® Series B Bloomberg Coffee Subindex Total ReturnSM ETN | JO | NYSE Arca | |||||||||
iPath® Series B Bloomberg Copper Subindex Total ReturnSM ETN | JJC | NYSE Arca | |||||||||
iPath® Series B Bloomberg Cotton Subindex Total ReturnSM ETN | BAL | NYSE Arca | |||||||||
iPath® Series B Bloomberg Energy Subindex Total ReturnSM ETN | JJE | NYSE Arca | |||||||||
iPath® Series B Bloomberg Grains Subindex Total ReturnSM ETN | JJG | NYSE Arca | |||||||||
iPath® Series B Bloomberg Industrial Metals Subindex Total ReturnSM ETN | JJM | NYSE Arca | |||||||||
iPath® Bloomberg Lead Subindex Total ReturnSM ETN | LD | NYSE Arca | |||||||||
iPath® Series B Bloomberg Livestock Subindex Total ReturnSM ETN | COW | NYSE Arca | |||||||||
iPath® Series B Bloomberg Nickel Subindex Total ReturnSM ETN | JJN | NYSE Arca | |||||||||
iPath® Series B Bloomberg Platinum Subindex Total ReturnSM ETN | PGM | NYSE Arca | |||||||||
iPath® Series B Bloomberg Precious Metals Subindex Total ReturnSM ETN | JJP | NYSE Arca | |||||||||
iPath® Series B Bloomberg Softs Subindex Total ReturnSM ETN | JJS | NYSE Arca | |||||||||
iPath® Series B Bloomberg Sugar Subindex Total ReturnSM ETN | SGG | NYSE Arca | |||||||||
iPath® Series B Bloomberg Tin Subindex Total ReturnSM ETN | JJT | NYSE Arca | |||||||||
iPath® Series B Bloomberg Natural Gas Subindex Total ReturnSM ETN | GAZ | NYSE Arca | |||||||||
iPath® S&P GSCI® Total Return Index ETN | GSP | NYSE Arca | |||||||||
iPath® Pure Beta Broad Commodity ETN | BCM | NYSE Arca | |||||||||
iPath® Pure Beta Crude Oil ETN | OLEM | NYSE Arca | |||||||||
iPath® Series B Carbon ETN | GRN | NYSE Arca | |||||||||
Pacer® iPath® Gold ETN | GBUG | NYSE Arca | |||||||||
iPath® Silver ETN | SBUG | NYSE Arca | |||||||||
iPath® Shiller CAPETM ETNs | CAPE | NYSE Arca | |||||||||
Pacer® iPath® Gold Trendpilot ETN | PBUG | NYSE Arca | |||||||||
iPath® Series B S&P 500 VIX Short-Term FuturesTM ETNs | VXX | CBOE BZX Exchange | |||||||||
iPath® Series B S&P 500 VIX Mid-Term FuturesTM ETNs | VXZ | CBOE BZX Exchange | |||||||||
iPath® S&P MLP ETN | IMLP | CBOE BZX Exchange | |||||||||
| iPath® Select MLP ETN | ATMP | CBOE BZX Exchange | |||||||||
| Barclays Women in Leadership ETN | WIL | CBOE BZX Exchange | |||||||||
| Barclays Return on Disability ETN | RODI | CBOE BZX Exchange | |||||||||
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
| £1 ordinary shares | 2,342,558,515 | ||||
| £1 preference shares | 1,000 | ||||
| €100 preference shares | 31,856 | ||||
| $100 preference shares | 58,133 | ||||
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes þ No ¨
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act 1934.
Yes ¨ No þ
Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
| Large Accelerated Filer | ¨ | Accelerated Filer | ¨ | Non-Accelerated Filer | þ | Emerging growth company | ¨ | ||||||||||||||||
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ¨
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ¨
*Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ¨
International Financial Reporting Standards as issued by the International Accounting Standards Board þ
Other ¨
*If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:
Item 17 ¨
Item 18 ¨
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No þ
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Yes ¨ No ¨
EXPLANATORY NOTE
Barclays Bank PLC (the Company) is filing this Amendment No. 1 on Form 20-F/A (Amendment No. 1) to amend its Annual Report on Form 20-F for the fiscal year ended 31 December 2021 (Original Filing) that was filed with the US Securities and Exchange Commission (SEC) on 23 February 2022 (Original Filing Date). The purpose of this Amendment No. 1 is to:
•reflect the restatement of the Company’s financial statements and consolidated financial statements as at and for the year ended 31 December 2021, including the notes thereto (Restated Financial Statements), which are hereby refiled to reflect both a £220m litigation and conduct provision and associated income statement charge recognised in the year ended 31 December 2021 and a contingent liability disclosure in respect of the impact of the c.$15bn over-issuance of securities in excess of the maximum aggregate offering price registered under the Company’s Registration Statement on Form F-3, as declared effective by the SEC in August 2019 (2019 F-3) (the Over-issuance of Securities), and related potential claims and enforcement actions against the Company and its affiliates, as well as a small number of non-adjusting post-balance sheet events as described in further detail under Note 1a to the Restated Financial Statements;
•amend related disclosures in the Original Filing to reflect the Restated Financial Statements;
•amend the disclosure under the headings ‘Governance—Corporate Governance Statement—Audit, Risk and Internal Control,’ ‘Governance—Corporate Governance Statement—Changes in internal control over financial reporting’ and ‘Additional unaudited information—Disclosure controls and procedures’ and include disclosure under the heading ‘Governance—Corporate Governance Statement—Material Weakness,’ to reflect management’s conclusion that the Company’s internal control over financial reporting and disclosure controls and procedures were not
effective under the applicable Committee of Sponsoring Organizations (COSO) Framework as at 31 December 2021 due to a material weakness in the Company’s internal control over financial reporting identified subsequent to the Original Filing Date as a result of the Over-issuance of Securities having occurred and not been immediately identified, as publicly disclosed by the Company in its announcement of 28 March 2022, and to disclose the remediation efforts undertaken by the Company’s management as at the date of this filing;
•amend disclosure under the heading ‘Risk review—Material existing and emerging risks’ to include a risk factor on the material weakness in the Company’s internal control over financial reporting identified subsequent to the Original Filing Date and a risk factor on the Over-issuance of Securities;
•include the revised Report of Independent Registered Public Accounting Firm of KPMG LLP (KPMG) on the Restated Financial Statements;
•include currently-dated certifications from the Chief Executive and Chief Financial Officer, as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, included in this Amendment No. 1 as Exhibits 12.1 and 13.1;
•include a currently-dated consent letter from the Company’s independent registered public accounting firm, KPMG, as Exhibit 15.1;
•include 'Articles of Association of Barclays Bank PLC' as Exhibit 1.1; and
•amend Exhibit 99.1 to reflect the Restated Financial Statements.
Other disclosure in this Amendment No. 1 is included for the convenience of the reader only and has not been updated from the Original Filing. Therefore, except for the changes expressly described above, this Amendment No. 1 continues to present information as at the Original Filing Date and does not amend, supplement or update any information contained in the Original Filing to give effect to any subsequent events. Accordingly, this Amendment No. 1 should be read in conjunction with the Company's reports filed with the SEC subsequent to the Original Filing Date. The filing of this Amendment No. 1, and the inclusion of newly executed certifications, should not be understood to mean that any other statements or disclosure contained in the Original Filing are true and complete as of any date subsequent to the Original Filing Date, except as expressly noted above.
See Restatement of financial statements (Note 1a) on page 118 for further details on the Over-issuance of Securities.
SEC Form 20-F Cross reference information
| Form 20-F item number | Page and caption references in this document* | ||||
1Identity of Directors, Senior Management and Advisers | Not applicable | ||||
2Offer Statistics and Expected Timetable | Not applicable | ||||
3Key Information | |||||
A.Reserved | |||||
B.Capitalization and indebtedness | Not applicable | ||||
C.Reason for the offer and use of proceeds | Not applicable | ||||
D.Risk factors** | 26-38 | ||||
4.Information on the Company | |||||
A.History and development of the company | Omitted | ||||
B.Business overview** | i (Market and other data), 95-100,121-122 (Note 2), 215 | ||||
C.Organizational structure | 184-188 (Notes 32 and 33), 211-214 | ||||
D.Property, plants and equipment | 158-159 (Note 19) | ||||
4AUnresolved staff comments | Not applicable | ||||
5Operating and Financial Review and Prospects | |||||
A.Operating results** | 26-38, 39-46, 86, 91-94, 95-100, 135-143 (Note 13), 193, 215-216 | ||||
B.Liquidity and capital resources | Omitted | ||||
C.Research and development, patents and licenses, etc. | Omitted | ||||
D.Trend information** | 26-38, 209-210 | ||||
E.Critical accounting estimates** | 118 | ||||
F.Reserved | |||||
G.Reserved | |||||
6Directors, Senior Management and Employees | |||||
A.Directors and senior management | Omitted | ||||
B.Compensation | Omitted | ||||
C.Board practice | 6-8, 12 | ||||
D.Employee | Omitted | ||||
E.Share ownership | Omitted | ||||
7Major Shareholders and Related Party Transactions | |||||
A.Major shareholders | Omitted | ||||
B.Related party transactions | Omitted | ||||
C.Interests of experts and counsel | Not applicable | ||||
8Financial Information | |||||
A.Consolidated statements and other financial information** | 105-214 | ||||
B.Significant changes | Not applicable | ||||
9The Offer and Listing | |||||
A.Offer and listing details | Not applicable | ||||
B.Plan of distribution | Not applicable | ||||
C.Market | Not applicable | ||||
D.Selling shareholders | Not applicable | ||||
E.Dilution | Not applicable | ||||
F.Expenses of the issue | Not applicable | ||||
10Additional Information | |||||
A.Share capital | Not applicable | ||||
B.Memorandum and Articles of Association | 203-205 | ||||
C.Material contracts | Not applicable | ||||
D.Exchange controls | 208 | ||||
E.Taxation | 205-208 | ||||
F.Dividends and paying assets | Not applicable | ||||
G.Statement by experts | Not applicable | ||||
H.Documents on display | 208 | ||||
I.Subsidiary information | 184-185 (Note 32), 211-214 | ||||
11Quantitative and Qualitative Disclosure about Market Risk** | 22-100, 134-155 (Notes 12-16) | ||||
12Description of Securities Other than Equity Securities | |||||
A.Debt Securities | Not applicable | ||||
B.Warrants and Right | Not applicable | ||||
C.Other Securities | Not applicable | ||||
D.American Depositary Share | Not applicable | ||||
13Defaults, Dividends Arrearages and Delinquencies | Not applicable | ||||
14Material Modifications to the Rights of Security Holders and Use of Proceeds | Not applicable | ||||
15Controls and Procedures | |||||
A.Disclosure controls and procedures** | 208 | ||||
B.Management’s annual report on internal control over financial reporting** | 13 | ||||
C.Attestation report of the registered public accounting firm | Not applicable | ||||
D.Changes in internal control over financial reporting** | 14 | ||||
16AAudit Committee Financial Expert | Omitted | ||||
16BCode of Ethics | Omitted | ||||
16CPrincipal Accountant Fees and Services | 12, 195 (Note 39) | ||||
16DExemptions from the Listing Standards for Audit Committees | Not applicable | ||||
16EPurchases of Equity Securities by the Issuer and Affiliated Purchasers | 15 | ||||
16FChange in Registrant’s Certifying Accountant | Not applicable | ||||
16GCorporate Governance** | 2-14 | ||||
16H Mine Safety Disclosure | Not applicable | ||||
16I Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | Not applicable | ||||
17Financial Statements | Not applicable (See Item 8) | ||||
18Financial Statements | Not applicable (See Item 8) | ||||
19Exhibits** | Exhibit Index | ||||
*Certain items are indicated as omitted as Barclays Bank PLC is a wholly owned subsidiary of Barclays PLC, which is a reporting company under the Securities Exchange Act of 1934, and meets the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K, as applied to annual reports on Form 20-F, and is therefore filing this Form 20-F with a reduced disclosure format.
** Item amended pursuant to this Amendment No. 1.
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 2021 to the corresponding twelve months of 2020 and balance sheet analysis as at 31 December 2021 with comparatives relating to 31 December 2020. The abbreviations ‘£m’ and ‘£bn’ represent millions and thousands of millions of Pounds Sterling respectively; the abbreviations ‘$m’ and ‘$bn’ represent millions and thousands of millions of US Dollars respectively; and the abbreviations ‘€m’ and ‘€bn’ represent millions and thousands of millions of Euros respectively.
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 Bank Group 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, capital distributions (including dividend pay-out ratios and expected payment strategies), projected levels of growth in the banking and financial markets, projected costs or savings, any commitments and targets (including, without limitation, environmental, social and governance (ESG) 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. Forward-looking statements may be affected by a number of factors, including, without limitation: 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, emerging and developing ESG reporting 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, the Barclays Bank Group’s ability along with governments and other stakeholders to measure, manage and mitigate the impacts of climate change effectively, environmental, social and 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 direct and indirect consequences of the Russia-Ukraine War on European and global macroeconomic conditions, political stability and financial markets; direct and indirect impacts of the coronavirus (COVID-19) pandemic; instability as a result of the UK’s exit from the European Union (EU), the effects of the EU-UK Trade and Cooperation Agreement and the disruption that may subsequently result in the UK and globally; the risk of cyber-attacks, information or security breaches or technology failures on the Group’s reputation, business or operations; 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, capital distributions, capital, leverage or other regulatory ratios or other financial and non-financial metrics or performance measures or ability to meet commitments and targets 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 Barclays Bank PLC’s filings with the SEC (including, without limitation, Barclays Bank PLC’s Annual Report on Form 20-F for the fiscal year ended 31 December 2021, as amended), which are available on the SEC’s website at www.sec.gov.
Subject to Barclays Bank Group's ’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.
References to Strategic Report
This document contains references throughout to the Barclays Bank PLC Strategic Report and Pillar 3 Report. References to the aforementioned reports are made for information purposes only, and information found in said reports is not incorporated by reference into this document
Market and other data
This document contains information, including statistical data, about certain Barclays markets and its competitive position. Except as otherwise indicated, this information is taken or derived from Datastream and other external sources. Barclays cannot guarantee the accuracy of information taken from external sources, or that, in respect of internal estimates, a third party using different methods would obtain the same estimates as Barclays.
Uses of Internet addresses
This document contains inactive textual addresses to internet websites operated by us and third parties. Reference to such websites is made for information purposes only, and information found at such websites is not incorporated by reference into this document.
Governance
Contents
Our corporate governance processes and the role they play in supporting the delivery of our strategy.
| Governance | Page | |||||||
▪Chairman’s introduction | 2 | |||||||
▪Corporate Governance Statement | 3 | |||||||
▪Directors’ report | 15 | |||||||
▪Our people and culture | 19 | |||||||
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 1 | ||||
Governance
Chairman’s introduction
The 2021 corporate governance report (Governance Report) for Barclays Bank PLC (BBPLC or the Company) provides an overview of how the BBPLC governance framework operates and of the Board’s key areas of focus during the year.
Strategy and performance
The continuation and evolution of the COVID-19 pandemic was the defining backdrop to 2021, together with the associated economic uncertainties. Colleagues have continued to work hard and adapted to the mixed home/office environment. It is hoped we can settle in to a clearer working pattern in 2022 and fully expect that to encompass a greater degree of choice and flexibility than in the past.
The COVID-19 pandemic and low interest rate environment had a significant impact on our Consumer, Cards and Payment (CC&P) businesses, as we faced declines in consumer spending and card balances, with consumers saving more and paying down existing debt. With cash use declining and online transactions growing, the shift towards digital services and payments continues.
On the other hand, our Corporate and Investment Bank (CIB) saw significant levels of investment banking activity with both M&A and volumes in the IPO market up on 2020 levels.
In terms of our strategic priorities, our aim in CIB is to provide comprehensive and integrated services to clients, delivering solutions across Investment Banking, Corporate Banking and Global Markets. Within CC&P, we strive to deliver next-generation consumer businesses, offering best-in-class consumer finance, private banking and payment solutions.
There are also important issues ahead of us on the environment and we will remain focused on the Barclays Group's net zero ambition and committed to Paris alignment across all our financing activities.
The Board
We welcomed C.S. Venkatakrishnan (known as Venkat) to the BBPLC Board in his capacity as BBPLC Chief Executive at the same time as Venkat took on the role of Barclays Group Chief Executive on 1 November 2021, following Jes Staley stepping down on 31 October 2021. As a result of an effective succession plan in place we had no hesitation in asking Venkat to take on this leadership role. Venkat previously served as Head of Global Markets and Co-President of BBPLC from October 2020 and as Barclays Group Chief Risk Officer from 2016 to 2020. He is extremely well qualified and experienced to take on the overall leadership of both BBPLC and the Barclays Group.
Tushar Morzaria has informed the Board of his intention to retire and the Board is delighted to have, in Anna Cross, such a strong internal successor. Anna was identified over a year ago as the Board’s preferred successor, following a review of potential internal and external candidates. Tushar has been an outstanding Finance Director and colleague, as well as playing broader roles inside and outside Barclays. The Board is both grateful for his immense hard work and delighted that he will have a continuing role with Barclays as Chairman of Global Financial Institutions Group in our Investment Bank. Our clients will be able to benefit further from his deep knowledge of our industry.
We welcomed Robert Berry to the BBPLC Board as a Non-Executive Director on 8 February 2022, reflecting our commitment to strengthening the Board through the addition of further highly respected individuals with strong financial services expertise. Robert brings to the Board robust risk management expertise and a proven track record of risk management for a global financial institution and will take on the role of Chair of the Board Risk Committee with effect from 1 March 2022 (subject to regulatory approval).
Tim Breedon will retire as a member of the BBPLC Board and as Chair of the Board Risk Committee with effect from 28 February 2022. The Board would like to express its thanks to Tim for the valuable contribution he has made to BBPLC and the Board Risk Committee during his tenure.
I am extremely grateful for the ongoing support and hard work of all my Board colleagues during 2021. Scheduled Board and Committee meetings were supplemented by additional meetings (including a number at short notice) in order to discuss key issues arising throughout the year.
The future
The Board continues to believe that the diversification of the Barclays Bank Group remains a key strength and we intend to maintain and look to increase our diversity as we evolve, driving revenues from across multiple businesses, different types of customers and clients and across different geographies.
As ever, on behalf of myself and my fellow Board members, our sincere thanks to all those with whom we have worked alongside this year - our colleagues, clients, customers, regulators and governments.
Nigel Higgins
Chairman – Barclays Bank Group
22 February 2022
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 2 | ||||
Governance
Corporate Governance Statement
Overview of Governance Framework
Following the structural reform programme to realign the Barclays Group and ring-fence the Barclays Group's UK consumer banking business in April 2018, and a further review (post the structural reform programme) of the corporate governance structure of BBPLC and Barclays PLC (BPLC) (reflecting outcomes of discussions with the Barclays Group's regulators) in 2019, the membership of the BBPLC and BPLC boards was partially consolidated, such that membership of the BBPLC Board now comprises a subset of the BPLC Board, with all members of the BPLC board, except the Barclays Group Senior Independent Director, the Chair of Barclays Bank UK PLC (BBUKPLC) and one other Non-Executive Director, also serving on the board of BBPLC. This improved the coordination and efficiency between the two boards and reduced complexity and unnecessary duplication. This structure vests oversight over the activities of BBPLC in a board the members of which also have direct accountability to BPLC’s shareholders through their separate responsibilities as members of the BPLC board.
The Board aspires to have high standards of corporate governance and, in accordance with the Companies (Miscellaneous Reporting) Regulations 2018 (the 2018 Regulations), has adopted its own corporate governance arrangements, which it believes are appropriate to apply and are designed to ensure effective decision-making to promote the Company’s success for the long term.
The Board chose not to adopt and report against the 2018 UK Corporate Governance Code (Code), which is designed for premium listed companies and, whilst fully supportive of the Wates Corporate Governance Principles for Large Private Companies (in particular the focus on purpose, culture and employee and stakeholder engagement), the Board considers that those Principles are less appropriate for a wholly-owned subsidiary of a premium listed company, which is also a complex financial institution subject to a comprehensive regulatory regime. This approach is consistent with the approach of other significant subsidiaries within the Barclays Group, which are subject to the 2018 Regulations.
The Board’s primary aim is that our governance:
•seeks to ensure that our decision-making is aligned to our Purpose, Values and Mindset
•is effective in providing constructive challenge, advice and support to management
•provides checks and balances and drives informed, collaborative and accountable decision-making
•creates long-term sustainable value for the Company’s shareholder and the ultimate shareholders of BPLC, having regard to the interests of all our stakeholders.
Set out below are the principles which underpin our corporate governance arrangements and how these principles have been applied during 2021. Certain additional information, signposted throughout this section, will be available in the Board and Committee Governance section on pages 6 to 14.
Our Group-wide governance framework is set by BPLC and has been designed to facilitate the effective management of the Barclays Group. This includes the setting of Barclays Bank Group policies and approach in relation to matters such as Barclays’ Purpose, Values and Mindset, Barclays’ Remuneration Policy and the Barclays’ Charter of Expectations. Where appropriate, this corporate governance statement makes reference to those Barclays Group-wide policies, which are relevant to the way in which the Company is governed.
The Company’s corporate governance principles and how the Company has applied them during 2021 and to the date of this report
A successful company is led by an effective and entrepreneurial board, whose role is to establish the company’s purpose, values and strategy, aligned to its culture and make decisions to promote its success for the long term benefit of its shareholder, having regard to the interests of other relevant stakeholders and factors.
▪Through the leadership of the Board, a clear vision for the Company’s Purpose, Values and Mindset is articulated, underpinning and defining the strategy and culture of the organisation. This is embedded at every level of management.
▪During 2020, the Board adopted a new, extended narrative of the Barclays Group’s Purpose and the refreshed descriptions of our Values to make sure they are still relevant for the challenges ahead. In early 2021, the Board adopted the new Barclays Mindset - Empower, Challenge and Drive -which defines the way we want to get things done at Barclays. The Board reviewed the newly created Mindset Dashboard which highlights early insights and areas of focus, as well as management actions that are being taken to embed and enact the Barclays Mindset going forward.
▪The Board believes that positive culture, supported by effective leadership and a consistent ‘tone from the top’ is crucial to our success. Culture remains a core area of focus for the Board and is reviewed in a number of ways. The Board supports The Barclays Way which sets the framework for achieving a dynamic and positive culture. The Board receives feedback on our culture through a number of channels, including receiving reports on the outcome of colleague surveys and direct engagement with colleagues locally, such as town hall meetings and office visits. Refer to Our people and culture section on pages 19 to 21 for more information on workforce matters.
▪During 2021, the Board continued to monitor Barclays' response to the impact of the COVID-19 pandemic on the Company's activities across the globe, making decisions to support key stakeholder groups, including customers and clients, colleagues and wider society.
▪Given its fundamental importance, the Board considered strategy matters at each of its 2021 meetings, continuing to deepen its understanding of the Barclays Bank Group's business and the risks and opportunities the Barclays Group and the wider banking industry faces with a prioritised series of ‘deep dives’ sessions throughout the year. This enabled the Board to spend a good proportion of its time considering longer-term and strategic issues. Deep dive topics were informed by discussions with BPLC's shareholders and other stakeholders, as well as formal and informal Board discussions and included a broad range of topics, including Payments and US Consumer Bank and risk areas such as Cyber, Ransomware and Cloud, as well as Conduct Risk.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 3 | ||||
Governance
Corporate Governance Statement
An effective board requires a clear division of responsibilities with the Chair leading the board and being responsible for its overall effectiveness, and the executive leadership of the company’s business being delegated to the Chief Executive. The board should consist of an appropriate combination of executive and independent non-executive directors, each with a clear understanding of their accountability and responsibilities. The board’s policies and procedures should support effective decision-making and independent challenge.
▪There is a clear division of responsibilities between the Chair and Chief Executive. Details of the role of each can be found on page 6 of this report. Page 6 sets out details of who is on the Board with a majority of the Board comprised of independent Non-Executive Directors.
▪Policies and protocols are in place to support effective decision-making and independent challenge, including the Barclays' Charter of Expectations, setting out clearly the role and responsibilities of each Director. In accordance with the Charter of Expectations, Non-Executive Directors are responsible for providing effective oversight and scrutiny, strategic guidance and constructive challenge whilst holding the Executive Directors to account. The Chairman meets privately with the Non-Executive Directors when appropriate, to promote required independence.
▪The Board’s responsibilities are executed in part through Board Committees, each of which has its own Committee terms of reference which clearly set out its remit and decision-making powers. The Chairs of each of the Board Committees provide a report on the work of the Committee at every Board meeting. Details of the principal Committees and their core responsibilities and activities in 2021 are set out on pages 8 to 11 of this report.
▪Appropriate information and support is provided to the Board, to enable it to undertake its work with due care and discharge its responsibilities. See page 7 for further details.
▪The Barclays Group corporate governance manual sets out guidelines as to how the Barclays Group entities and their respective Boards and Board Committees should interact, while also providing guidance and clarity for management and directors as to how these relationships and processes should work in practice. It is a dynamic document that continues to evolve with the changing nature of the Barclays Group.
A board with the right balance of skills, experience and diversity is critical to the sustainable delivery of value to the company’s shareholder and broader stakeholders. The size of the board should be guided by the scale and complexity of the company and appointments should be based on merit and objective criteria, with a view to promoting diversity and subject to a formal, rigorous and transparent procedure, which is underpinned by an effective succession plan for board and senior management. A successful board is a cohesive board that provides informed and constructive challenge to the management team and measures its effectiveness.
▪The size and composition of the Board is considered appropriate for the business of the Barclays Bank Group. There is a good balance between Executive and independent Non-Executive Directors, with the Non-Executive Directors providing independent challenge. The Board members have a strong combination of technical, finance (including significant financial services experience) and commercial skills and have broader experience in culture and colleague engagement.
▪The membership of the Board is drawn exclusively from the BPLC Board. On 1 November 2021, the Board appointed Venkat as BBPLC Chief Executive, following Jes Staley's departure on 31 October 2021. On 22 February 2022, Tushar Morzaria notified the Board of his intention to retire from the Board and as Group Finance Director and it has been agreed that this will take effect on 22 April 2022, with Anna Cross succeeding him as a member of the Board and as Group Finance Director on 23 April 2022. The Board appointed Robert Berry as a Non-Executive Director with effect from 8 February 2022, and announced that Tim Breedon would be retiring as a member of the Board with effect from 28 February 2022.
▪All appointments to the Board and senior management are based on merit and objective criteria, with a continued strong belief in the benefits of diversity (of gender, social and ethnic backgrounds, cognitive and personal strengths) for an effective Board and organisation. This will remain a key area of focus as the Company continues to strive to build a workforce that reflects the diversity of its customers and the communities it serves.
▪There is regular review of the leadership and succession needs of the business to maintain the depth and diversity of the talent and succession pipeline at the Board, Executive and key management level. This remains a key focus to maintain the quality of leadership that is in place to lead the business in the delivery of the strategy, against a challenging economic and operating environment.
▪The Board approved a number of changes to our Executive Committee during 2021. You can read more about these on page 12 of this report.
▪Effectiveness is supported through routine evaluations of the Board and Board Committees. In 2021, the Board and Committee effectiveness evaluations were externally facilitated by Christopher Saul Associates (CSA), an independent, external corporate governance advisory firm with no connection to the Barclays Bank Group or any individual BBPLC Director other than as disclosed on page 129 of the BPLC Annual Report 2021, in parallel with the external review of the BPLC Board and Committees. Key findings are included for the Board and each Board Committee on pages 8 to 12 of this report.
▪Ongoing training and professional development is a key focus to provide Board members with a deeper and more granular understanding of the business, contributing to informed and sound decision-making. Further detail on 'training and induction' can be found on page 14 of this report.
▪Diversity and inclusion (D&I) across the Barclays Group remains a key area of focus. Further information can be found in Barclays’ D&I report, which will be made available on the Barclays' website. The report explains Barclays’ D&I strategy and progress in this area.
A board should establish formal and transparent policies and procedures to (i) identify the nature and extent of principal risks the company is willing to take in order to achieve its long-term strategic objectives; (ii) manage such risks effectively; (iii) oversee the internal control framework; (iv) promote the independence and effectiveness of internal and external audit functions; and (v) satisfy itself on the integrity of financial reporting.a
▪The Company is committed to operating within a strong system of internal control that enables business to be transacted and risks taken without exposure to unacceptable potential losses or reputational damage. The principal risks facing the Barclays Bank Group have been identified and robust processes are in in place to evaluate and manage such risks including regular reporting to, and oversight by, the Risk Committee and the Board. A key component of the risk management framework is the Enterprise Risk Management Framework (ERMF), which supports the business in
a.See "Audit, Risk and Internal Control", "Material Weakness" and "Changes in internal control over financial reporting" on pages 13 to 14 for a discussion of the material weakness in the Company's internal control over financial reporting identified subsequent to the Original Filing Date as a result of the Over-issuance of Securities having occurred and not being immediately identified, as publicly disclosed by the Company in its announcement of 28 March 2022, and the remediation efforts undertaken by the Company's management as at the date of this filing.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 4 | ||||
Governance
Corporate Governance Statement
its aim to embed effective risk management and a strong risk management culture. The ERMF is designed to identify and set minimum requirements, in respect of the main risks, to achieve the Company’s strategic objectives and to provide reasonable assurance that internal controls are effective. An updated ERMF was adopted by the Board in December 2021 which reflects that Climate Risk became a Principal Risk under the ERMF from 1 January 2022.
▪The Board approves the Company's risk appetite (the level of risk the Company is prepared to accept across different risk types) within the parameters set by the BPLC Risk Committee. Significant steps have been taken in recent years to de-risk the business in order to support sustainable growth and value creation in the future.
▪Effectiveness of risk management and internal controls is reviewed regularly by the Risk Committee (responsible for providing oversight on current and potential future risk exposures) and the Audit Committee (responsible for controls, including reviewing audit reports, internal controls and risk management systems). Please see pages 8 to 11 for further detail on the role of these Committees.
▪The Audit Committee continues to provide its oversight of the financial reporting processes and the work of the external and internal auditors (including independence and effectiveness). Further detail can be found on pages 12 to 14 of this report.
The remuneration policies and practices should support strategy and promote long-term sustainable success, and be developed in accordance with formal and transparent procedures, ensuring no director is involved in deciding their own remuneration outcome. Executive remuneration should be aligned to the company’s purpose and values and the successful delivery of the strategy; with outcomes taking account of company and individual performance, and wider circumstances such as pay across the Company’s workforce and Barclays’ Fair Pay agenda.
▪Barclays’ Remuneration Policy is set by the BPLC Remuneration Committee, but adopted by the Company’s independent Remuneration Committee. Remuneration is aligned to the Company’s strategy and risk management approach and designed to promote the long-term success of the Company.
▪Executive and senior management remuneration approaches are developed in accordance with the Group’s formal procedures (ensuring no Director is involved in deciding their own remuneration outcome) and having regard to workforce remuneration policies and alignment of incentives and rewards with culture and performance as reviewed annually by the BPLC Remuneration Committee and shared with the Company’s Remuneration Committee.
▪The Remuneration Committee has clearly defined terms of reference, with responsibility for the development of a remuneration approval framework to ensure an appropriate level of oversight of senior remuneration decisions, as well as annual consideration of the Company incentive pool to ensure alignment with delivery of the Company’s strategic ambitions.
▪The Company remains focused on closing its gender and ethnicity pay gaps, where they exist. Barclays is due to publish its 2021 gender pay gap statistics on the government's gender pay gap reporting portal and the Barclays website on 23 February 2022. This will include the voluntary disclosure of Barclays' ethnicity pay gaps in the UK. For 2021, Barclays will also publish a Fair Pay report summarising its approach to pay fairness, and a separate D&I report explaining Barclays' D&I strategy and progress during 2021.
Directors should foster effective stakeholder relationships aligned to the company’s purpose. The board should recognise the importance of listening to, and understanding the views of its stakeholders, including the workforce, and specifically the impact of the company’s behaviour and business on customers and clients, colleagues, suppliers, communities and society more broadly; having regard to these views and impact when taking decisions.
▪As described under Principle One, the Company has a defined Purpose and strategy; through this the Board has identified key stakeholders on whom the success of the Company depends.
▪The Board seeks to understand the views of key stakeholders and the impact of the Company’s behaviour and business on customers and clients, colleagues, suppliers, communities and society more broadly.
▪The Company’s long-standing commitment to the importance and value of colleague engagement continues; the Company’s people are its most valuable asset.
▪The Board and management engage throughout the year with the Company's stakeholders.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 5 | ||||
Governance
Corporate Governance Statement
The Board
The Directors who served during the financial year ended 31 December 2021 are set out in the table below, together with the composition of each of the Board’s Committees.
| Board | Audit Committee | Risk Committee | Remuneration Committee | Nominations Committee | |||||||||||||
Nigel Higgins Chairman of the Board | C | C | |||||||||||||||
Mike Ashley Independent Non-Executive Director | M | C | M | M | |||||||||||||
Tim Breedon Independent Non-Executive Director | M | M* | C | M* | M | ||||||||||||
Mohamed El-Erian Independent Non-Executive Director | M | M | |||||||||||||||
Dawn Fitzpatrick Independent Non-Executive Director | M | M | M+ | ||||||||||||||
Mary Francis Independent Non-Executive Director | M | C++ | |||||||||||||||
Diane Schueneman Independent Non-Executive Director | M | M | M | M | |||||||||||||
C.S. Venkatakrishnan Executive Director | M+++ | ||||||||||||||||
Tushar Morzaria Executive Director | M | ||||||||||||||||
| Former Directors | |||||||||||||||||
| Jes Staley Executive Director | M** | ||||||||||||||||
| Director appointed post 31 December 2021 but prior to publication of this report | |||||||||||||||||
| Robert Berry Independent Non-Executive Director | M | ||||||||||||||||
C Chair of Board or Committee
M Member of Board or Committee
* Tim Breedon stepped down from each of the Audit Committee and Remuneration Committee on 31 October 2021
** Jes Staley stepped down from the Board on 31 October 2021
+ Dawn Fitzpatrick joined the Remuneration Committee with effect from 1 July 2021
++ Mary Francis was appointed to the role of Remuneration Committee Chair with effect from 24 May 2021, with Tim Breedon stepping down from this role
+++ With effect 1 November 2021, C.S. Venkatakrishnan took over as Chief Executive, and was appointed as an Executive Director
On 22 February 2022, Tushar Morzaria notified the Board of his intention to retire from the Board and it has been agreed that this will take effect on 22 April 2022, with Anna Cross succeeding him as a member of the Board on 23 April 2022.
We welcomed Robert Berry to the Board as a Non-Executive Director on 8 February 2022. Robert will take on the role of Chair of the Board Risk Committee with effect from 1 March 2022 (subject to regulatory approval), when he will also join the Board Audit Committee as an additional member. Tim Breedon will retire as a member of the Board and as Chair of the Board Risk Committee with effect from 28 February 2022. The Board is grateful to Tim for the valuable contribution he has made to BBPLC and the Board Risk Committee during his tenure.
Executive and Non-Executive Directors share the same duties and are subject to the same constraints. However, a clear division of responsibilities has been established. The Chair is responsible for leading the Board and its overall effectiveness, demonstrating objective judgement and promoting a culture of openness and constructive debate between all Directors. The Chair facilitates the effective contribution of all Non-Executive Directors and ensures Directors receive accurate, clear and timely information. It is the Board’s responsibility to ensure that management deliver on short-term objectives, whilst promoting the long-term success of the Company and the Barclays Bank Group. The Board is also responsible for ensuring that management maintains an effective system of internal control which should provide assurance of effective and efficient operations, internal financial controls and compliance with law and regulation. In meeting this responsibility, the Board considers what is appropriate for the Company’s business and reputation, the materiality of financial and other risks and the relevant costs and benefits of implementing controls.
The Board is responsible for the Barclays Bank Group, which contains the majority of the Barclays Group’s Barclays International division, which is comprised of the CIB and CC&P businesses.
The BBPLC Matters Reserved to the Board ensures that appropriate coordination with the governance of the partially consolidated boards is in place. The Matters Reserved to the Board specifies those decisions to be taken by the Board, including but not limited to material decisions relating to strategy, risk appetite, medium term plans, capital and liquidity plans, risk management and controls frameworks, approval of financial statements, approval of large transactions, approval of share allotments and dividends. The Board has delegated the responsibility for making and implementing operational decisions and running the Company’s business on a day-to-day basis to the Chief Executive and his senior management team.
The current Board comprises a Chairman, who was independent on appointment, two Executive Directors and seven independent Non-Executive Directors. The majority of the Board are independent Non-Executive Directors bringing significant expertise (including external perspectives) and independent challenge. The independence of the Non-Executive Directors is considered annually.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 6 | ||||
Governance
Corporate Governance Statement
Attendance
Directors are expected to attend every Board meeting. During 2021 there was one ad hoc Board meeting convened at short notice in addition to the usual schedule of Board meetings. Attendance was very strong at both the scheduled and ad hoc meetings, as reflected in the table below:
| Director | Scheduled eligible meetings attendance | Additional eligible meetings attendance | Effective Date | ||||||||
| Nigel Higgins | 14/14 | 1/1 | Appointed 1 March 2019 | ||||||||
| Mike Ashley | 14/14 | 1/1 | Appointed 25 September 2019 | ||||||||
| Tim Breedon | 13/14 | 1/1 | Appointed 25 September 2019 | ||||||||
| Mohamed El-Erian | 14/14 | 1/1 | Appointed 1 January 2020 | ||||||||
| Mary Francis | 14/14 | 1/1 | Appointed 25 September 2019 | ||||||||
| Dawn Fitzpatrick | 14/14 | 1/1 | Appointed 25 September 2019 | ||||||||
| Tushar Morzaria | 14/14 | 0/0 | Appointed 7 February 2020 | ||||||||
| Diane Schueneman | 14/14 | 1/1 | Appointed 25 September 2019 | ||||||||
| C.S. Venkatakrishnan | 4/4 | 0/0 | Appointed 1 November 2021 | ||||||||
| Former Director | |||||||||||
| Jes Staley | 10/10 | 0/0 | Stepped down 31 October 2021 | ||||||||
What the Board did in 2021
During 2021, the Board focused on the following specific areas:
▪Continued to monitor our response to the impact of the COVID-19 pandemic on our activities and decisions to support our key stakeholders - customers and clients, colleagues and society. One of the Board's key considerations in 2021 was the consideration of the strategy regarding the return to office of our colleagues and how the Barclays Bank Group would move to future ways of working, ensuring a balanced and flexible approach which will meet the needs of the business whilst also preserving the benefits of flexible working.
▪Received updates on sustainability, and reviewed progress against the Barclays climate strategy and policies and discussed in detail its evolution, including expanded ambitions and social responsibility. The Board also reviewed the potential financial, operational, commercial and legal implications of Barclays Bank Group's approach to climate strategy.
▪Discussed regular updates from the Chief Executive and BBPLC (Co-) President(s) on the progress being made against the BBPLC strategy and business performance, operational and technology matters. These strategy reviews included a prioritised series of deep dives throughout the year which covered a wide range of topics, including Payments and US Consumer Bank and risk areas including Cyber, Ransomware and Cloud, as well as Conduct Risk. The Board also held an extensive strategy deep dive to consider the big trends that will impact the wider banking industry over the next decade and the implications of these and how they are reflected in the strategy.
▪Adopted the new Barclays Group-wide Mindset - Empower, Challenge and Drive - which defines how we want to get things done at Barclays, and reviewed the implementation and embedment of Barclays Mindset. As a core part of the Barclays Group culture and significant focus for the Board, the Board received feedback on culture through various channels, including reports on the outcome of colleague survey results and direct engagement with colleagues via town halls.
▪Adopted the Barclays Group's Race at Work ambitions and reviewed progress that has been made against the Race at Work Action plan.
▪Regularly assessed the financial performance of the various businesses and the Barclays Bank Group results through reports from the BBPLC Chief Financial Officer and through business specific updates to the Board.
▪Reviewed and approved BBPLC’s financial results prior to publication.
▪Reviewed and approved the payment by BBPLC of the 2020 full year dividend paid in March 2021 and the 2021 interim dividends paid in March 2021 and August 2021. Details of dividends paid in 2021 are set out in Note 10 of the financial statements.
▪Considered and approved the BBPLC elements of the Barclays Group Recovery Plan.
▪Considered and approved the BBPLC Medium Term Plan (MTP).
▪Delegated authority to the Risk Committee to consider and recommend, on behalf of the Board, the adoption by the Company of the Internal Capital Adequacy Assessment Process and Internal Liquidity Adequacy Assessment Process.
▪Received regular updates on key risk themes, including on the continued impact of the COVID-19 pandemic, and approved the Company’s risk appetite.
▪Received reports on operational resilience.
▪Considered and approved appointments of senior executives following recommendation from the Nominations Committee. The Board also approved changes to the BBPLC Executive Committee with effect from November 2021. On Venkat's appointment as Chief Executive, Paul Compton assumed the role of Global Head of the Corporate and Investment Bank and sole President of BBPLC.
▪Received regular reports from the Chair of each Board Committee. Please see the reports from the Committee Chairs which set out the principal activities of each Committee, below on pages 8 to 11.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 7 | ||||
Governance
Corporate Governance Statement
▪Received and considered the feedback from the Barclays Group’s principal regulators.
▪Considered the results of the externally facilitated Board effectiveness evaluation.
Board Committees
The main Board Committees are the Audit Committee, the Nominations Committee, the Remuneration Committee and the Risk Committee. Pursuant to authority granted under the Company’s Articles of Association, each Board Committee has had specific responsibilities delegated to it by the Board. You can read about what each of the Committees did during 2021 on the following pages.
The Chair of each Board Committee provides a report on Committee business at each Board meeting, including any matters being recommended by the Committee for Board approval.
Board Audit Committee
The Audit Committee is comprised solely of independent Non-Executive Directors, with membership of the Audit Committee largely aligned with the BPLC Audit Committee and designed to provide the breadth of financial expertise and commercial acumen it needs to fulfil its responsibilities. Its members as a whole have recent and relevant experience of the banking and financial services sector, in addition to general management and commercial experience, and are financially literate. The Audit Committee is chaired by Mike Ashley who has over 20 years accounting and audit experience. Diane Schueneman is the other member of the Committee. Tim Breedon was a member of the Committee until he stepped down with effect from 31 October 2021. Robert Berry will join the Committee as an additional member with effect from 1 March 2022, further to his appointment to the Board as a Non-Executive Director on 8 February 2022.
Audit Committee meetings were attended by representatives from Barclays Group and/or BBPLC management in respect of matters relevant to their function or business area, including the Chief Executive, Chief Financial Officer, President of BBPLC, Barclays Group and/or BBPLC Chief Compliance Officer , Chief Controls Officer, Barclays Group Chief Operating Officer, Barclays Group Chief Internal Auditor and the BBPLC Chief Internal Auditor, and the Barclays Group General Counsel, as appropriate, and the Company’s statutory auditors, KPMG.
The Audit Committee held a number of separate private sessions with the Group Chief Internal Auditor and the BBPLC Chief Internal Auditor and with the lead audit engagement partner of the statutory auditor, which were not attended by management.
As part of the Company’s commitment to effective oversight and allocation of responsibilities between the BPLC Audit Committee, the BBUKPLC Audit Committee and the Committee, Mike Ashley held frequent meetings during 2021 with the BBUKPLC Audit Committee Chair to share relevant information and to ensure embedment of information flows and governance practice. In addition, discussions were held with the Audit Committee Chairs of the Company’s major subsidiaries, Barclays Bank Ireland PLC and Barclays US LLC.
Attendance at the Audit Committee during 2021 was as follows:
| Member | Meetings attended/eligible to attend | Effective Date | ||||||
| Mike Ashley (Chair) | 11/11 | Appointed 25 September 2019 | ||||||
| Diane Schueneman | 11/11 | Appointed 25 September 2019 | ||||||
| Tim Breedon | 10/10 | Stepped down 31 October 2021 | ||||||
The principal role and responsibilities of the Audit Committee, pursuant to its Terms of Reference, are:
▪Assessing the integrity of the Barclays Bank Group’s financial reporting and satisfying itself that any significant financial judgements made by management are sound.
▪Evaluating the effectiveness of the Barclays Bank Group’s internal controls, including internal financial controls.
▪Scrutinising the activities and performance of the internal and statutory auditors, including monitoring their independence and objectivity.
▪Overseeing the relationship with the Barclays Bank Group’s statutory auditor.
▪Reviewing and monitoring the effectiveness of the Barclays Bank Group’s whistleblowing procedures.
▪Overseeing significant legal and regulatory investigations, including the proposed litigation statement for inclusion in the Company’s statutory accounts.
During 2021, the principal activities of the Audit Committee included:
▪Financial reporting: assessing the appropriateness of financial disclosures, paying particular attention to the Expected Credit Loss (ECL) judgements and related IFRS 9 disclosures, having regard to guidance issued by regulators as part of their response to the COVID-19 pandemic.
▪Impairment: assessing the appropriateness of impairment experience against forecast and considering whether impairment provisions were appropriate. As part of its monitoring, the Committee considered a number of reports from management, including the continuing economic impact of the COVID-19 pandemic on model performance and outcomes, the impact of the ongoing uncertain macro-economic environment and model changes and model validation.
▪Conduct provisions: analysing the judgements and estimates made with regard to the Barclays Bank Group’s material conduct provisions.
▪Legal, competition and regulatory provisions: evaluating advice on the status of current legal, competition and regulatory matters and considering management’s judgements on the level of provisions.
▪Valuations: monitoring the valuation methods applied by management to significant valuation items and areas of judgement and, in particular, considering valuations in the light of IBOR transition.
▪Tax: overseeing tax matters relating to the Barclays Bank Group, including tax risk provisions and regulatory matters.
▪Internal controls and business control environment: monitoring and evaluating the status of significant control issues through regular reports from the Chief Controls Officer, including updates on progress of remediation programmes relevant to the Barclays Bank Group, ongoing COVID-19 related issues, return to office planning, the annual data protection update, an update on operational resilience, and monitoring Client Asset Sourcebook (CASS) updates and compliance with CASS.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 8 | ||||
Governance
Corporate Governance Statement
▪Raising concerns: reviewing management's reports on whistleblowing matters; monitoring whistleblowing metrics and retaliation reports, as well as considering potential whistleblowing trends which might emerge.
▪Internal audit: receiving reports from Barclays Internal Audit in relation to specific audits, key areas of focus and themes; overseeing issues arising from unsatisfactory audit reports and monitoring related remediation plans; discussing Barclays Internal Audit’s assessment of the management control approach and control environment in the Barclays Bank Group; approving the appointment of the Chief Internal Auditor for BBPLC.
▪External audit: reviewing and approving the annual audit plan for the Barclays Bank Group, including the main areas of focus, and assessing the progress of the 2021 audit. The Audit Committee also reviewed audit quality and discussed KPMG’s feedback on the Barclays Bank Group's critical accounting estimates and judgements.
The 2021 Committee effectiveness review was externally facilitated by CSA. The review of the Committee was carried out in conjunction with the review of the BPLC Audit Committee. Feedback from the review confirms that the Committee is operating effectively, with constructive engagement with management observed in meetings and appropriate challenge. The review also confirms that concurrent meetings of the BPLC Audit Committee and the Committee continue to be effective, with reporting of Committee proceedings at Board meetings pitched at an appropriate level of detail.
It was noted that the Board’s strategic priorities for Non-Executive Director recruitment included those with recent and relevant financial experience, which would be of benefit to the Committee. The review recommended that consideration be given to how the Committee’s future agendas might be shaped more towards ‘bigger picture’ issues, whilst acknowledging the Committee’s broad remit, the complexity of Barclays and the expectations of the Barclays Group’s regulators. A continued focus on the split of work between the Board and the Committee, and potential overlap between the work of the Committee and the other Board Audit Committees within the Barclays Group, was considered to be beneficial.
Board Nominations Committee
The Nominations Committee is comprised solely of independent Non-Executive Directors. The Nominations Committee members are Nigel Higgins, as Chairman of the BBPLC Board, along with Mike Ashley, Tim Breedon and Diane Schueneman. Tim Breedon will retire as a member of the Nominations Committee with effect from 28 February 2022, when he will also step down from the BBPLC Board and Board Risk Committee.
In addition to scheduled meetings, the Nominations Committee also held three ad hoc meetings during 2021. Attendance by the Nominations Committee members is shown in the table below. Owing to a prior commitment, Tim Breedon was unable to attend one ad hoc meeting of the Committee which had been scheduled at short notice. Nominations Committee meetings were attended during the year by the Chief Executive, the BPLC HR Director and the BBPLC HR Director, as appropriate.
Attendance at the Nominations Committee during 2021 was as follows:
| Member | Meetings attended/eligible to attend | Effective Date | ||||||
| Nigel Higgins (Chair) | 6/6 | Appointed 1 March 2019 | ||||||
| Mike Ashley | 6/6 | Appointed 25 September 2019 | ||||||
| Tim Breedon | 5/6 | Appointed 25 September 2019 | ||||||
| Diane Schueneman | 6/6 | Appointed 25 September 2019 | ||||||
The principal role and responsibilities of the Nominations Committee, pursuant to its Terms of Reference, are:
▪Considering appointments to the Board, its Committees and boards of BBPLC's significant subsidiaries.
▪Considering the composition of the Board and its Committees.
▪Considering succession planning and talent management.
▪Evaluating Board effectiveness.
▪Assessing the length of Directors’ tenure.
▪Considering Board induction and training.
▪Evaluating conflicts of interest.
▪Evaluating governance matters.
During 2021, the principal activities of the Committee included:
▪Reviewing and approving Board and Board Committee size, composition and succession planning, taking into account tenure, time commitment, skills, knowledge, experience and diversity of the Directors, and identifying any desirable skills to aid the Company in operating and competing effectively (and leading the search and recruitment process).
▪Receiving updates on the Company’s executive governance framework, talent and succession management, and reviewing and approving proposed changes to Executive Committee composition (further to the appointment of Venkat as Chief Executive on 1 November 2021), and Executive Committee succession planning.
▪Continuing to champion, alongside the Board, the Group’s Race at Work Action Plan, designed to increase the number of under-represented minority employees in our wider workforce; providing more Black and ethnically diverse colleagues with access to career and development opportunities; creating a culture of allyship; and being transparent and measuring our outcomes. You can read more about D&I, including Barclays’ Global Race at Work Action Plan and data on gender and ethnic diversity, in the Barclays D&I report which will be made available on the Barclays website.
▪Reviewing and updating the Board Diversity Policy in February 2021, including re-affirming the existing gender diversity target (33% female) and adopting a new ethnic diversity target aligned with the Parker Review on the ethnic diversity of UK Boards (at least one Board member to be a Person of Colour). Please refer to page 14 for further information.
▪Receiving updates on succession planning for the Company's main subsidiary company Boards.
▪Considering Director training and development.
▪Review of recommendations arising from the 2020 Board effectiveness review, and overseeing the externally facilitated 2021 Board Effectiveness Review undertaken by CSA.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 9 | ||||
Governance
Corporate Governance Statement
The 2021 Committee effectiveness review was externally facilitated by CSA. The review of the Committee was carried out in conjunction with the review of the BPLC Nominations Committee. Feedback from the review indicated that the Committee is operating effectively, with a good level of debate and clear decision-making. The Committee is considered well chaired, with a good level of engagement by other Committee members and constructive challenge of management observed. Succession planning for the Board and Executive Committee was recognised as having been at the core of the Committee’s role during the year, noting that the Committee also considered matters relating to Board succession for its key subsidiaries such as Barclays Bank Ireland PLC.
The review recommended that there may be benefit in further reflection upon Committee membership and the desired composition and scope of activities of the Committee, given that other Non-Executive Directors attended a number of Committee meetings in 2021 in light of there having been some important matters to be considered regarding succession planning and the desire to hear from all Non-Executive Directors on these matters. While routine matters were covered in line with the Committee’s Terms of Reference, it was noted that the Committee may benefit from a more formalised meeting schedule and training sessions for members, as suggested in previous evaluations. It was acknowledged, however, that a more formalised meeting schedule might not always be possible in the context of the nature of the Committee’s roles and responsibilities and that opportunities for in-person training had remained limited in 2021 as a result of the ongoing COVID-19 pandemic. Further consideration will be given to these points during 2022.
Board Remuneration Committee
The Remuneration Committee is comprised solely of independent Non-Executive Directors. The Remuneration Committee is chaired by Mary Francis with Dawn Fitzpatrick as the other member. Tim Breedon stepped down as Chair of the Committee in May 2021 and remained a member until he stepped down from the Committee with effect from 31 October 2021.
The principal role and responsibilities of the Remuneration Committee, pursuant to its Terms of Reference, are to:
▪Adopt the over-arching principles of remuneration policy for the Barclays Bank Group within the parameters set by the BPLC Remuneration Committee.
▪Consider and endorse the incentive pool for the Company and its subsidiaries and the remuneration of key BBPLC executives and other specified individuals as determined by the Remuneration Committee from time to time.
▪Exercise oversight of remuneration issues within the Barclays Bank Group.
▪Approve the remuneration and compensation arrangement of employees that fall within the remit of the Remuneration Committee.
In addition to scheduled meetings, the Remuneration Committee also held a number of ad hoc meetings during 2021. Attendance by the Remuneration Committee members is shown in the table below. Remuneration Committee meetings are attended by management, including the Chief Executive and the BPLC HR Director.
Attendance at the Remuneration Committee during 2021 was as follows:
| Member | Meetings attended/eligible to attend | Effective Date | ||||||
| Mary Francis (Chair, effective 24 May 2021) | 7/7 | Appointed 25 September 2019 | ||||||
| Tim Breedon | 5/5 | Stepped down 31 October 2021 | ||||||
| Dawn Fitzpatrick | 3/3 | Appointed 1 July 2021 | ||||||
During 2021, the principal activities of the Committee included:
▪Reviewing and adopting the Barclays Group People Risk Reward Policy, Material Risk Taker Identification Methodology and 2021 Incentive Funding Frameworks.
▪Adopting the funding ratio.
▪Reviewing Fair Pay agenda and pay gaps, and Ethnicity pay gaps reporting.
▪Endorsing the 2021 ex-ante risk adjustments.
▪Considering regular updates on stakeholders, regulatory and legal, financial and risk performance, pay round timings and approach.
▪Reviewing specific remuneration proposals for individuals within the Remuneration Committee’s remit.
▪Reviewing Committee effectiveness.
The 2021 Committee effectiveness review was externally facilitated by CSA. Feedback from the review confirms that the Committee is operating effectively, with constructive engagement with management and appropriate challenge observed in meetings, coupled with balanced contributions from Committee members during meetings. Feedback also highlights that the Committee is able to make important decisions at pace. In addition, feedback noted that consideration was still being given to adding an additional member to the Committee.
Board Risk Committee
The Risk Committee is comprised solely of independent Non-Executive Directors with membership of the Committee broadly aligned with the BPLC Risk Committee. The Risk Committee is chaired by Tim Breedon. Mike Ashley, Mohamed El-Erian, Dawn Fitzpatrick and Diane Schueneman are the other members of the Committee. In addition to scheduled meetings, the Risk Committee also held a number of additional meetings during 2021. Robert Berry will join the Committee as Chair with effect from 1 March 2022 (subject to regulatory approval), further to his appointment as a Non-Executive Director on 8 February 2022. Tim Breedon will retire as a member and Chair of the Committee with effect from 28 February 2022.
One of the key roles of the Risk Committee is to review and challenge the risk profile and risk appetite of the Barclays Bank Group and to consider key risk issues and internal control and risk policies concerning the Barclays Bank Group. Risk Committee meetings are attended by management, including the Chief Executive, Barclays Group Finance Director, BBPLC Chief Financial Officer, BBPLC President, Barclays Group Chief Risk Officer, BBPLC Chief Risk Officer, Barclays Group Chief Compliance Officer, BBPLC Chief Compliance Officer, Barclays Group Chief Internal Auditor, Barclays Group General Counsel, as appropriate, and the Company’s statutory auditors, KPMG.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 10 | ||||
Governance
Corporate Governance Statement
In addition to scheduled meetings, the Risk Committee also held two ad hoc meetings during 2021. Attendance by the Risk Committee members is shown in the table below. Mohamed El-Erian was unable to attend the one ad hoc meeting of the Committee called at short notice.
Attendance at the Risk Committee during 2021 was as follows:
| Member | Meetings attended/eligible to attend | Effective Date | ||||||
| Tim Breedon (Chair) | 11/11 | Appointed 25 September 2019 | ||||||
| Mike Ashley | 11/11 | Appointed 25 September 2019 | ||||||
| Mohamed El-Erian | 10/11 | Appointed 1 July 2020 | ||||||
| Dawn Fitzpatrick | 11/11 | Appointed 1 January 2020 | ||||||
| Diane Schueneman | 11/11 | Appointed 25 September 2019 | ||||||
The principal role and responsibilities of the Risk Committee, pursuant to its Terms of Reference, are to:
▪Review, on behalf of the Board, the management of the principal risks as set out in the ERMF with the exception of Reputation risk which is a matter reserved to the Board.
▪Consider and recommend to the Board, within the risk parameters set by the Risk Committee, the Company’s risk appetite and tolerance for those principal risks.
▪Review, on behalf of the Board, the Barclays Bank Group’s risk profile for those principal risks.
▪Commission, receive and consider reports on key risk issues.
During 2021, the principal activities of the Risk Committee included:
▪Advising the Board on the appropriate risk appetite and risk tolerance for the principal risks in the ERMF when determining strategy, including recommending to the Board for approval the proposed overall risk appetite statement for the Company; reviewing and/or approving (as appropriate) risk limits throughout the year.
▪Reviewing reports on key themes arising from the current and prospective macro-economic, geopolitical, macro-prudential and financial environment and their impact on the Company’s risk appetite and risk profile.
▪Considering and approving the Company’s internal stress test themes and the results of an internal stress test.
▪Reviewing enhancements to the stress testing process and models.
▪Receiving updates on the positive quantitative and qualitative results of Barclays US LLC’s submission to the Federal Reserve Bank (FRB) of its Comprehensive Capital Analysis and Review.
▪Ensuring that the Company has enough capital, liquidity and financial resources to meet its regulatory requirements and obligations, taking into account potential impacts of the COVID-19 pandemic and other macro-economic factors.
▪Reviewing and considering the operational risks arising from the Company’s procedures, processes, systems and policies.
▪Evaluating the appropriateness of Barclays’ Model Risk Management framework and receiving and considering reports from management in relation to managing model risk.
▪Overseeing the management of Conduct risk within BBPLC, and the performance of the Compliance function.
▪Overseeing the Company’s regulatory requirements, as they relate to risk management, including regulatory and internal capital and funding requirements, approving the Company’s Internal Capital Adequacy Assessment Process and Internal Liquidity Adequacy Assessment Process.
▪Reviewing the frameworks, policies and resources in place to support effective risk management and oversight of the Barclays Bank Group, including reviewing and recommending to the Board for adoption (following approval by the BPLC Board) the updated ERMF which, from 1 January 2022, has been expanded to include Climate risk.
▪Advising the BBPLC Remuneration Committee when making remuneration decisions for 2021.
▪Discussing reports on key risk areas specific to the Barclays Bank Group which were provided to the Risk Committee throughout the year including, amongst others, reports on cryptocurrency, structured products, the risk management implications of growth initiatives in emerging markets, as well as our business plan for China.
The Risk Committee continually considers the impact of issues on the Barclays Bank Group and the risk environment in which it operates. It reviews steps taken by the business to manage exposures in this context. The Risk Committee also received focused presentations on a number of areas specific to the business and activities of Barclays Bank Group (including through joint presentations with the BPLC Risk Committee), including a training session focusing on the financial and operational risks of climate change and one concerned with operational resilience.
The 2021 Committee effectiveness review was externally facilitated by CSA. The review of the Committee was carried out in conjunction with the review of the BPLC Risk Committee. Feedback from the review confirms that the Committee is operating effectively, considering Barclays’ risk appetite and risk profile in a thoughtful and forensic way, with its core mandate well understood by its members and pro-active challenge of management. It was noted that more recent additions to the Committee in 2019 and 2020 brought valuable markets insight and experience. A continued focus on the split of work between the Board and the Committee, and potential overlap between the work of the Committee and the other Board Risk Committees within the Barclays Group, was considered to be beneficial. Feedback noted that there was no undue duplication between the Committee and the Board Audit Committee. The review suggested that there may be benefit in the Committee taking time to reflect further upon likely major risk themes in the macro-environment over the next three to five years, and how future Committee agendas might be shaped towards bigger picture issues.
Leadership
Individual roles on the Board and their responsibilities are set out in Barclays' Charter of Expectations. This includes role profiles and the behaviours and competencies required for each role on the Board, namely the Chair, Non-Executive Directors, Executive Directors and Committee Chairs. In accordance with the Barclays Charter of Expectations, Non-Executive Directors provide effective oversight and scrutiny, strategic guidance and constructive challenge whilst holding the Executive Directors to account against their agreed performance objectives. A copy of the Barclays Charter of Expectations can be found at home.barclays/who-we-are/ourgovernance/board-responsibilities.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 11 | ||||
Governance
Corporate Governance Statement
Appointment and retirement of Directors
The appointment and retirement of Directors is governed by the Company’s Articles of Association (the Articles), the Companies Act 2006 (the Act) and related legislation.
The Articles may be amended only by a special resolution of the shareholders. The Board has the power to appoint additional Directors or to fill a casual vacancy amongst the Directors. Any such Director holds office only until the next Annual General Meeting (AGM) and may offer himself/herself for re-election.
All appointments to the Board and senior management are viewed through a diversity lens and are based on merit and objective criteria, which focus on the skills and experience required for the Board’s effectiveness and the delivery of the Company’s strategy. Board appointments are made following a rigorous and transparent process facilitated by the Nominations Committee, with the aid of an external search consultancy firm. You can read more about the work of the Nominations Committee on pages 9 to 10.
Diversity across the Barclays Group remains a key area of focus. For more detail on the Barclays Bank Group actions to increase diversity please see page 14.
The Nominations Committee regularly reviews the composition of the Board, Board Committees and Executive Committee and the core competencies, diversity and experience required. For the Board, it is standard practice to appoint any new Non-Executive Director or Chair for an initial three-year term, which may be extended for up to a further three-year term. As such, Non-Executive Directors typically serve up to a minimum of six years but this period may be extended where the Nominations Committee considers it appropriate.
Effectiveness
Appointments to the Board are made via a formal, rigorous and transparent process, based on merit, taking into account the skills, experience and diversity needed on the Board in the context of the Company’s strategic direction.
The Company considers the composition of principal Board Committees to meet the independence criteria of the Code, notwithstanding that the Company has chosen not to adopt and report against the Code, as stated above, and there is appropriate cross-membership on the Board Committees to further promote effectiveness.
All Directors are expected to commit sufficient time to fulfil their duties to the Company. This includes attending, and being well-prepared for, all Board and Committee meetings, as well as making time to understand the business and meet with executives. Barclays' Charter of Expectations sets out responsibilities for providing the Board with accurate, timely and high-quality information necessary for it to fulfil its duties.
An externally facilitated effectiveness review of the Board and Board Committees, led by CSA, has been concluded, relating to 2021 activity. Feedback from the review indicated that the Board is operating effectively, that the Board is collegiate, positive, professional and supportive, yet challenging, and that concurrent meetings of the BPLC and BBPLC Boards remain effective and work well in practice.
The Board is responsible for setting the Barclays Bank Group risk appetite within the overall parameters set by the Barclays Group, being the level of risk it is prepared to take in the context of achieving the Barclays Group's strategic objectives. The ERMF is designed to identify and set minimum requirements in respect of the main risks to achieving Barclays’ strategic objectives and to provide reasonable assurance that internal controls are effective.
The Board, assisted by the Risk Committee, conducts robust assessments of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity.
The Audit Committee oversees the effectiveness of BBPLC internal and statutory auditors. The Directors also review the effectiveness of the Barclays Bank Group’s systems of internal control and risk management.
The Board has put in place processes to support the presentation to stakeholders of fair, balanced and understandable information.
Remuneration
The Remuneration Committee reviews and adopts the Barclays Group’s Remuneration Policy for use in the Barclays Bank Group. The purpose and activities of this Committee are contained in the Remuneration Committee report on page 10 of this report.
The Board has delegated responsibility to the Remuneration Committee for the consideration and approval of the remuneration arrangements of the Chair, Executive Directors, other senior executives and certain Barclays Bank Group employees. The Remuneration Committee, when considering the remuneration policies and practices, seeks to ensure that it supports the Company’s strategy and promotes the long-term success of the Company and that it is aligned to successful delivery of the Barclays Group’s strategy. All executive and senior management remuneration policies are developed only in accordance with the Barclays Group’s formal and transparent procedures (ensuring that no Director is involved in deciding his/her own remuneration outcome) and having regard to workforce remuneration and related policies and the alignment of incentives and rewards with culture. All Remuneration Committee members are expected to demonstrate independent judgement and discretion when determining and approving remuneration outcomes. The Board as a whole, with the Non-Executive Directors abstaining, considers annually the fees paid to Non-Executive Directors.
Controls over financial reporting
A framework of disclosure controls and procedures is in place to support the approval of the financial statements of the Barclays Bank Group. Specific governance committees are responsible for examining the financial reports and disclosures to ensure that they have been subject to adequate verification and comply with applicable standards and legislation.
These committees report their conclusions to the Audit Committee, which debates the conclusions and provides further challenge. Finally, the Board scrutinises and approves results announcements and the BBPLC Annual Report, and ensures that appropriate disclosures have been made. This governance process ensures that both management and the Board are given sufficient opportunity to debate and challenge the financial statements of the Barclays Bank Group and other significant disclosures before they are made public.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 12 | ||||
Governance
Corporate Governance Statement
Audit, Risk and Internal Control
The Company is committed to operating within a strong system of internal control that enables business to be transacted and risk taken without exposure to unacceptable potential losses or reputational damage.
As referenced above, the Board is responsible for ensuring that management maintains an effective system of risk management and internal control and for assessing its effectiveness. Such a system is designed to identify, evaluate and manage, rather than eliminate, the risk of failure to achieve business objectives and can provide only reasonable, rather than absolute, assurance against material misstatement or loss.
Processes are in place for identifying, evaluating and managing the Principal Risks facing the Company. A key component of the framework is the ERMF which supports the business in its aim to embed effective risk management and a strong risk management culture. The ERMF is designed to identify and set minimum requirements, in respect of the main risks, to achieve the Company’s strategic objectives and to provide reasonable assurance that internal controls are effective.
The effectiveness of the risk management and internal control systems is reviewed regularly by the Risk Committee and the Audit Committee (as detailed above).
The Risk Committee is responsible for providing oversight and advice to the Board in relation to current and potential future risk exposures, examining reports covering the Principal Risks including those that would threaten its business model, future performance, solvency or liquidity, as well as reports on risk measurement methodologies and risk appetite. Further detail of the work of the Risk Committee can be found on pages 10 to 11 of this report.
As referenced above, the Audit Committee carries out several duties, delegated to it by the Board, including oversight of financial reporting processes, reviewing the effectiveness of internal controls, considering whistle-blowing arrangements and oversight of the work of the external and internal auditors. Save as disclosed in 'Material Weakness' below, throughout the year ended 31 December 2021 and to date, the Company has operated a system of internal control that provides reasonable assurance of effective operations covering all controls, including financial and operational controls and compliance with laws and regulations.
The Board, together with the Audit Committee, is responsible for ensuring the independence and effectiveness of the internal and external audit functions. For this reason, the Audit Committee members met regularly with both the Group Chief Internal Auditor and the BBPLC Chief Internal Auditor and the Lead Audit Engagement Partner of the statutory auditor without management present. Further details of the work of the Audit Committee can be found on pages 8 to 9 of this report.
Management is responsible for establishing and maintaining adequate internal controls over financial reporting under the supervision of the principal executive and financial officers, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements, in accordance with (a) UK-adopted international accounting standards; (b) International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), including interpretations issued by the IFRS Interpretations Committee; and (c) IFRS adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. Internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail:
▪Accurately and fairly reflect transactions and dispositions of assets.
▪Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS (as detailed above) and that receipts and expenditures are being made only in accordance with authorisations of management and the respective Directors.
▪Provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use or disposition of assets that could have a material effect on the financial statements.
Internal control systems, no matter how well designed, have inherent limitations and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that internal controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management has assessed the internal control over financial reporting as at 31 December 2021. In making its assessment, management utilised the criteria set out in the 2013 COSO framework and identified a control deficiency that constitutes a material weakness as described below. A material weakness is a deficiency, or a combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. As a result of this material weakness, management has concluded that the Company’s internal control over financial reporting and disclosure controls and procedures were not effective as at 31 December 2021.
The system of internal financial and operational controls is also subject to regulatory oversight in the UK and overseas. Further information on supervision by the financial services regulators is provided under Supervision and Regulation in the Risk review section on pages 95 to 100.
Material Weakness
The Company maintains US shelf registration statements with the SEC in order to issue securities to US investors. Until May 2017, the Company was a “well known seasoned issuer” (WKSI), which (among other things) permitted the Company to register and issue an unlimited number of securities under its US shelf registration statements and pay filing fees to the SEC on a “pay-as-you-go” basis.
As a result of a resolution of an SEC enforcement action, the Company became an “ineligible issuer” as defined in Rule 405 under the Securities Act in May 2017 for a period of three years. Thus, the Company was no longer a WKSI and was required to register upfront a certain amount of securities with the SEC (thereby imposing an effective issuance limit on the US shelf registration statements) and pre-pay the associated issuance fees to the SEC.
As part of the Company’s processes in filing its shelf registration statements in 2018 and 2019 following the loss of WKSI status, a control mechanism should have been established to monitor securities issued under these registration statements against their respective issuance limits. Whilst analysis was undertaken to establish a limit for the securities issued under those shelf registration statements, referencing historic issuance volumes, no tracking control was established to monitor issuances against this limit.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 13 | ||||
Governance
Corporate Governance Statement
In March 2022, the Company’s management became aware that the Company had issued securities in excess of the limit of $20.8bn since February 2021 and the potential impact of unregistered issuance was not properly reflected in the Company’s financial statements during the year ended 31 December 2021.
The fact that such over-issuance occurred and was not immediately identified highlighted a weakness in controls over the identification of external regulatory limits related to securities issuance and monitoring against these limits that constituted a material weakness in internal control over financial reporting under “COSO Principle 9: Identifies and Analyses Significant Change - The organisation identifies and assesses changes that could significantly impact the system of internal control”.
Changes in internal control over financial reporting
As noted above, subsequent to the issuance of the consolidated financial statements as at and for the financial year ended 31 December 2021, management determined that there was a material weakness in internal control over financial reporting.
As at the date of this filing, remediation efforts have begun and management is undertaking steps to strengthen the internal controls relating to the tracking of issuance programme limits. In particular, as a compensating control, all securities issuances across the Barclays Group are now conditional on regular monitoring of capacity under applicable issuance limits. The material weakness existed under the COSO framework from the time the Company filed its shelf registration statement in 2018 and as at 31 December 2021, and the material weakness continues to exist as at the date of filing of this Amendment No. 1 as it will not be considered by the Company to be fully remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
Management is committed to maintaining a strong internal control environment and believes the remediation efforts will represent significant improvements to the Company’s internal control environment.
Executive Committee
Following Venkat's appointment as Chief Executive in November 2021, Paul Compton became sole President of BBPLC and the Global Head of the CIB. Additional changes to the Executive Committee structure and membership followed which included Stephen Dainton moving into the role of Co-Head of Global Markets alongside Adeel Khan, and Investment Banking being run by Global Co-Heads, under JF Astier and John Miller, reporting into Paul Compton. Another change to a key role was Alistair Currie taking over as Global Head of Consumer Banking and Payments from Ashok Vaswani who stepped down in order to take on a new role within the Barclays Group as Chief Digital Strategy Officer. During 2021, membership of Executive Committee also included the Chief Financial Officer, Chief Operating Officer, Chief Risk Officer and other functional partners.
The Executive Committee meets quarterly and is chaired by the Chief Executive. In addition to the day-to-day management of the Company, the Executive Committee supports the Chief Executive in ensuring that the values, strategy and culture align, are implemented and are communicated consistently to colleagues – for example through regular leadership team conferences, and communications that are available to all colleagues.
Non-Executive Directors time commitment and conflict of interest
Non-Executive Directors, including the Chair, are informed of the minimum time commitment prior to their appointment and they are required to devote sufficient time to the Company to discharge their responsibilities effectively.
The time commitments of Directors are considered by the Board on appointment and are reviewed when appropriate. External appointments must be agreed with the Chair and disclosed to the Board, before appointment, with an indication of the time involved. The Board is satisfied that there are no Directors whose time commitment is considered to be a matter for concern.
In accordance with the Act and the Articles, the Board has authority to authorise conflicts of interest, and this ensures that the influence of third parties does not compromise or override the independent judgement of the Board. The Company Secretary maintains a conflicts register, which is a record of actual and potential conflicts, together with any Board authorisation of the conflict.
Training and induction
Directors are regularly provided with the opportunity to take part in ongoing training and development and can also request specific training they may consider necessary or useful. Whilst opportunities for in-person Director training remained limited in 2021 due to the impact of the COVID-19 pandemic and ongoing social distancing guidance, training and development was supported through Board deep dives, briefings for Board members on key risk topics, and Function reviews. The Board also received an annual briefing on regulatory responsibilities including the Senior Managers Regime and on Barclays’ conduct and financial crime policies and standards.
There is an induction programme for all new Directors which is tailored to their specific experience and knowledge, providing access to all parts of the business, to support Directors in understanding the nature of the business and the key issues the Company faces. When a Director joins a Board Committee, the schedule includes an induction to the operation of that Board Committee.
Diversity and inclusion
The Board recognises the importance of ensuring that there is broad diversity among the Directors inclusive of, but not limited to, gender, ethnicity, geography and business experience. With this in mind, the Board adopted a revised version of the Board Diversity Policy on 9 February 2021, re-affirming the existing gender diversity target (33% female) and adopting a new diversity target aligned with the Parker Review on the ethnic diversity of UK boards (at least one Board member to be a Person of Colour). The Board reconfirmed its commitment to these targets on 9 February 2022.
Further to the appointment of Robert Berry on 8 February 2022 and as at the date of this report, BBPLC Board gender diversity stands at 30% female (with three female directors on the Board) and we exceed the Board's target of having at least one Board member who is a Person of Colour. Following the retirement of Tim Breedon from the Board on 28 February 2022, BBPLC Board gender diversity will return to 33% female, meeting the gender diversity target as set out in the Board Diversity Policy.
In addition, the Company aims to ensure that employees of all backgrounds are treated equally and have the opportunity to be successful. The Barclays Group’s Global D&I strategy sets objectives, initiatives and plans across six areas of focus: Gender, LGBT+, Disability, Multicultural and Multigenerational and Socioeconomic inclusion, in support of that ambition. Further information on the Barclays Group’s Board Diversity Policy, as adopted by the Board, and D&I strategy can be found on page 129 of the BPLC Annual Report 2021.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 14 | ||||
Governance
Directors’ report
The Directors present their report together with the audited accounts for the Company for the year ended 31 December 2021.
Other information that is relevant to the Directors’ Report, and which is incorporated by reference into this report, can be located at:
| Pages | |||||
| Corporate Governance Report | 3 | ||||
| Risk Management | 24 | ||||
| Principal Risks | 39 | ||||
| Disclosures required pursuant to Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 as updated by the 2018 Regulations can be found on the following pages: | |||||
| Engagement with employees (Sch.7 Para 11 and 11A Regs 2008/2018 and S172(1) Statement) | 20 | ||||
| Policy concerning the employment of disabled persons (Sch.7 Para 10 Regs 2008) | 20 | ||||
| Financial Instruments (Sch.7 Para 6 Regs 2008 ) | 135 | ||||
| Hedge accounting policy (Sch.7 Para 6 Regs 2008 ) | 135 | ||||
Profits and dividends
The results of the Barclays Bank Group show statutory profit after tax of £4,588m (2020: £2,451m). The Barclays Bank Group had net assets of £56,317m as at 31 December 2021 (2020: £53,710m).
The Company has paid a £200m dividend to its parent, BPLC. Further details on dividends on ordinary shares paid in 2021 are set out in Note 10 to the financial statements.
Dividends paid on preference shares for the year ended 31 December 2021 amounted to £27m (2020: £42m).
Share Capital
There was no increase in ordinary share capital during the year. BPLC owns 100% of the issued ordinary shares. There are no restrictions on the transfer of ordinary shares or agreements between holders of ordinary shares known to the Company which may result in restrictions on the transfer of securities or voting rights. Further information on the Company’s share capital, including preference shares can be found in Note 27 of the financial statements.
Powers of Directors to issue or buy back the Company’s shares
The powers of the Directors are determined by the Act and the Articles. No shares were issued or bought back in 2021. The Directors are authorised to issue and allot shares and to buy back shares subject to annual shareholder approval at the AGM. Such authorities were granted by shareholders at the 2021 AGM. It will be proposed at the 2022 AGM that the Directors be granted new authorities to allot and buy-back shares.
Repurchase of preference shares
No preference shares were redeemed by the Company during 2021.
Directors
The list of current Directors of the Company can be found in the Corporate Governance Statement. Changes to Directors during the year and up to the date of signing this report are set out below.
| Name | Role | Effective date | |||||||||
| Jes Staley | Chief Executive Officer | Stepped down 31 October 2021 | |||||||||
| C.S. Venkatakrishnan | Chief Executive | Appointed 1 November 2021 | |||||||||
| Robert Berry | Non-Executive Director | Appointed 8 February 2022 | |||||||||
Directors’ indemnities
Qualifying third party indemnity provisions (as defined by section 234 of the Act) were in force during the course of the financial year ended 31 December 2021 for the benefit of the then Directors of the Company and the then Directors of certain of the Company's subsidiaries and, at the date of this report, are in force for the benefit of the Directors of the Company and the Directors of certain of the Company's subsidiaries in relation to certain losses and liabilities which they may incur (or have incurred) in connection with their duties, powers or office. The Group also maintains Directors’ & Officers’ Liability Insurance which gives appropriate cover for legal action brought against its Directors.
Qualifying pension scheme indemnity provisions (as defined by section 235 of the Act) were in force during the course of the financial year ended 31 December 2021 for the benefit of the then directors and, at the date of this report are in force for the benefit of directors of Barclays Pension Funds Trustees Limited as trustee of the Barclays Bank UK Retirement Fund, and Barclays Executive Schemes Trustees Limited as Trustee of Barclays Capital International Pension Scheme (No.1) and Barclays PLC Funded Unapproved Retirement Benefits Scheme. The directors of the trustees are indemnified against liability incurred in connection with the trustee’s activities in relation to the aforementioned schemes.
Political donations
The Barclays Bank Group did not give any money for political purposes in the UK or outside the UK, nor did it make any political donations to political parties or other political organisations or to any independent election candidates, or incur any political expenditure during the year. Details of any political contributions made by the wider Barclays Group can be found in the BPLC Annual Report 2021.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 15 | ||||
Governance
Directors’ report
Environment
As part of the overall strategy of the Barclays Group, the Barclays Bank Group is determined to play its part in taking a leading role in helping accelerate the transition to a low-carbon economy. In March 2020, the Barclays Group announced our ambition to be a net zero bank by 2050. We have a strategy, in three parts, to turn that ambition into action:
•Achieving net zero operations - Barclays is working to achieve net zero operations, investing in the continued decarbonisation of our operations. Please see the BPLC 2021 Annual Report for further detail on how we are defining our approach to net zero operations.
•Reducing our financed emissions - Barclays is committed to aligning its financing with the goals and timelines of the Paris Agreement.
•Financing the transition - Barclays is providing the green and sustainable finance required to transform the economies we serve.
Our strategy is underpinned by the way we assess and manage our exposure to climate-related risks, and Climate Risk is included as a Principal Risk under Barclays’ ERMF from 2022.
Scenario analysis forms a key part of the Barclays Group’s, and therefore the Barclays Bank Group’s, approach to assessing and quantifying the impact from climate change. We have developed our approach to scenario analysis through detailed quantitative and qualitative risk assessments of particular portfolios and activities. The Barclays Group has developed key metrics and targets to track progress against its climate strategy. The adoption of consistent and relevant climate-related metrics is crucial for financial sector stakeholders to properly price and manage climate-related risks. Please see the BPLC 2021 TCFD Report for further details on scenario analysis and key metrics.
Barclays has relationships with customers and clients across a wide range of sectors and geographies, who face risks to their operations, supply chains and markets from biodiversity loss and land-use change. Recognising the importance of this agenda, we are developing our understanding and evaluating where our business impacts and depends on nature, and where we can support our customers and clients. For more information about how the Barclays Group is helping to tackle climate change please refer to the BPLC Annual Report 2021.
Engagement with customers, suppliers and others in a business relationship with the Company
Our engagement with suppliers is important. The Directors have regard, via management oversight, to the need to foster business relationships with suppliers and, as such, engage with them to seek adherence to the Barclays' Third Party Code of Conduct (TPCoC) and Supplier Control Obligations (SCO) which cover our expectations of suppliers. For our higher risk suppliers, their adherence to the SCO and TPCoC is captured pre-contractually via a Pre-Contract Supplier Assurance Attestation. Further, Barclays is a signatory to the Prompt Payment Code in the UK, aiming to pay our suppliers within clearly defined terms.
Further information on 'Managing our supply chain' is set out in the BPLC Annual Report 2021.
Branches and Country-by-Country reporting
The Barclays Bank Group operates through branches, offices and subsidiaries in the UK and overseas. Those branches are in a number of different jurisdictions including in Hong Kong, Singapore and New York.
The Company is exempt from publishing information required by The Capital Requirements (Country-by-Country Reporting) Regulations 2013 as this information is published by its parent BPLC. This information is available on the Barclays website: home.barclays/annualreport.
Research and development
In the ordinary course of business, the Barclays Bank Group develops new products and services in each of its business divisions.
Change of control
There are no significant agreements to which the Company is a party that are affected by a change of control of the Company following a takeover bid. There are no agreements between the Company and its Directors or employees providing for compensation for loss of office or employment that occurs because of a takeover bid.
The Auditors
The BPLC Audit Committee reviews the appointment of the statutory auditors, as well as their relationship with the Barclays Group, including monitoring the Barclays Group’s use of the statutory auditors for non-audit services and the balance of audit and non-audit fees paid to them. The BBPLC Audit Committee also monitors the use of the statutory auditors for non-audit services within the Barclays Bank Group.
An external audit tender was conducted in 2015 and the decision was made to appoint KPMG as Barclays Group’s statutory auditor with effect from the 2017 financial year, with PwC resigning as Barclays Group’s statutory auditor at the conclusion of the 2016 audit.
The Company is in compliance with the requirements of The Statutory Audit Services for Large Companies Market Investigation (Mandatory Use of Competitive Tender Processes and Audit Committee Responsibilities) Order 2014, which relates to the frequency and governance of tenders for the appointment of the statutory auditor and the setting of a policy on the provision of non-audit services.
Provided that KPMG continues to maintain its independence and objectivity, and the BPLC Audit Committee remains satisfied with its performance, the Barclays Group has no intention of tendering for an alternative statutory auditor before the end of the current required period of 10 years. Accordingly, any tender would be in respect of the 2027 financial year onwards and is likely to take place in 2025. The BPLC Audit Committee believes it would not be appropriate to tender before this date as it recognises that whilst it is important to ensure the audit firm remains objective and does not become overly familiar with management, there is an important balance to be struck with the investment of time required both from management and any completely new audit team for them to gain sufficient understanding of such a large complex organisation to ensure a top quality audit. The BPLC Committee is also conscious that the lead engagement partner will have changed twice since KPMG's tenure and that there have also been significant changes of senior management - both of which serve to reduce any threat of over-familiarity. The BPLC Audit Committee will give further consideration over the next two years to its audit tendering strategy to take account, as appropriate, of the outcome of the UK audit reform proposals.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 16 | ||||
Governance
Directors’ report
Non-audit services
In order to safeguard the statutory auditor’s independence and objectivity, the Barclays Group has in place a policy setting out the circumstances in which the statutory auditor may be engaged to provide services other than those covered by the Barclays Group audit. The Barclays Group Policy on the Provision of Services by the Barclays Group Statutory Auditor (the Policy) applies to all Barclays’ subsidiaries and other material entities over which Barclays has significant influence. The core principle of the Policy is that non-audit services (other than those legally required to be carried out by the Barclays Group’s auditor) should be performed by the statutory auditor only in certain controlled circumstances. The Policy sets out those types of services that are strictly permitted.
Under the Policy, except for specific categories of ‘permitted’ services that require explicit Committee approval, the BPLC audit committee has pre-approved all permitted services for which fees are less than £100,000. All requests to engage the statutory auditor are assessed by independent management before work can commence. Requests for permitted service types in respect of which the fees are expected to meet or exceed the above threshold must be approved by the Chair of the BPLC Audit Committee before work is permitted to begin. Services where the fees are expected to be £250,000 or higher must be approved by the BPLC Audit Committee as a whole. All expenses and disbursements must be included in the fees calculation. More information on this can be found in the BPLC Annual Report 2021.
The fees payable to KPMG for the year ended 31 December 2021 amounted to £41m (2020:£38m), of which £8m (2020:£8m) was payable in respect of non-audit services. A breakdown of the fees payable to the auditor for statutory audit and non-audit work can be found in Note 39 to the financial statements.
Disclosure of information to the Auditor
Each Director confirms that, so far as he/she is aware, there is no relevant audit information of which the Company’s auditor is unaware and that each of the Directors has taken all the steps that he/she ought to have taken as a Director to make himself/herself aware of any relevant audit information and to establish that the Company's auditor is aware of that information. This confirmation is given pursuant to section 418 of the Act and should be interpreted in accordance with and subject to those provisions.
Directors’ responsibilities
The following statement, which should be read in conjunction with the auditor’s report set out on pages 102 to 104, is made with a view to distinguishing for shareholders the respective responsibilities of the Directors and of the auditor in relation to the accounts.
Going concern
In preparing each of the Barclays Bank Group and Company financial statements, the Directors are required to:
•assess the Barclays Bank Group and Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and
•use the going concern basis of accounting unless they either intend to liquidate the Barclays Bank Group or to cease operations, or have no realistic alternative but to do so.
The Barclays Bank Group’s business activities, financial position, capital, factors likely to affect its future development and performance, and its objectives and policies in managing the financial risks to which it is exposed.
The Directors have evaluated these risks in the preparation of the financial statements and consider it appropriate to prepare the financial statements on a going concern basis.
Preparation of accounts
The Directors are required by the Act to prepare the Company and the Barclays Bank Group accounts for each financial year and, with regard to Barclays Bank Group accounts, in accordance with UK-adopted international accounting standards. The Directors have prepared these accounts in accordance with (a) UK-adopted international accounting standards; (b) IFRS as issued by the IASB, including interpretations issued by the IFRS Interpretations Committee; and (c) IFRS adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. Pursuant to the Act, the Directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Barclays Bank Group and the Company and of their profit or loss for that period.
The Directors consider that, in preparing the financial statements, the Barclays Bank Group and the Company have used appropriate accounting policies, supported by reasonable judgements and estimates, and that all accounting standards which they consider to be applicable have been followed.
The Directors are satisfied that the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable, and provide the information necessary for shareholders to assess the Company’s position and performance, business model and strategy.
Directors are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
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 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.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 17 | ||||
Governance
Directors’ report
The Directors are responsible for preparing the financial statements in accordance with Commission Delegated Regulation (EU) 2019/815 with regard to regulatory technical standards on the specification of a single electronic reporting format.
The current Directors, whose names and functions are set out on page 6, confirm to the best of their knowledge that:
(a)the financial statements, prepared in accordance with (a) UK-adopted international accounting standards; (b) IFRS as issued by the IASB, including interpretations issued by the IFRS Interpretations Committee; and (c) IFRS adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union, 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, in the Strategic Report within Barclays Bank PLC Annual Report on pages 1 to 14, 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.
Approval of restated financial statements
The Restated Financial Statements included in this Amendment No. 1 have been approved on 22 May 2022 by the Directors of the Company on such date. The Directors of the Company on 22 May 2022 were: Nigel Higgins, C.S. Venkatakrishnan, Mike Ashley, Robert Berry, Anna Cross, Mohamed A. El-Erian, Dawn Fitzpatrick, Mary Francis and Diane Schueneman.
By order of the Board
Stephen Shapiro
Company Secretary
22 February 2022 except as revised in connection with this Amendment No.1 as to which the date is 22 May 2022
Barclays Bank PLC
Registered in England. Company No. 1026167
Registered office, 1Churchill Place, London E14 5HP
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 18 | ||||
Governance
Our people and culture
We want to recruit, retain and engage the talented people that Barclays needs to succeed, providing an environment that enables them to build their careers and achievements.
A culture of togetherness
Our colleagues are critical to our success. We know that the past two years have been challenging for a lot of our people, in different ways, impacting both our personal and professional lives. We are proud of the way colleagues responded to these challenges, and for the way they have continued to support our customers and clients around the world. We have learnt a lot about ourselves over this period, and we have invested in supporting people in a number of ways. In particular, our focus has been on culture, mindset, wellbeing and development. As ever, our approach is informed by the latest thinking in behavioural and data science, and our ability to track effectiveness and progress over time.
The following sub-sections are consistent with those detailed in the People Section of the Barclays PLC Annual Report 2021 and figures mentioned are for the Barclays Group other than where specifically mentioned.
The Barclays Mindset
At the beginning of the COVID-19 pandemic, we observed a number of improvements in the way people were working at Barclays. We reflected on how we could capture these positive developments for the long-term and responded this year by launching the Barclays Mindset.
Our Mindset acts as an operating manual for how to get things done at Barclays. It focuses on three key elements that are core to our success – Empower, Challenge and Drive. Our research shows that when we demonstrate behaviours aligned to these three elements, outcomes are better, colleagues are more engaged and they are more likely to stay longer to build their career at Barclays.
We have worked hard to encourage this new way of thinking across our organisation, including in the way we hire people, manage performance and recognise success. We have established a global network of over 330 Mindset Champions, working to support its rollout and communicate with colleagues. We have also developed a Mindset Dashboard to measure impact and to help leaders identify where we need to do more to embed this way of thinking.
Initial findings suggest our Mindset resonates with colleagues, with 83% telling us they believe it is the right Mindset to drive success at Barclays, and 89% of colleagues saying they believe their teams do a good job of role modelling our Mindset every day.
Hiring great people
We are focused on hiring people with the skills and capabilities to support our strategy. At the heart of our hiring approach is a focus on strengthening our relationships with local talent pools in the areas within which we are hiring, including reaching out to local communities and upskilling local students. For example, our partnerships with universities in Glasgow have been important in developing a robust pipeline of apprentices and graduates at the global campus we officially opened there this year. Our other global campuses in Whippany and Pune leverage similar local hiring arrangements.
The COVID-19 pandemic has required us to adapt to changes in hiring demands and volumes. This has been particularly important in customer-facing areas where we know it is critical that we are providing support to our customers. We have also taken steps to enhance our candidate assessment processes, including factoring in the new Barclays Mindset so we can ensure we're attracting and hiring candidates with the capability to Empower, Challenge and Drive.
People with different perspectives and life experiences make our organisation stronger, so we are committed to attracting, developing and retaining a workforce that is as diverse and inclusive as possible. We are an equal opportunities employer and give full and fair consideration to all populations based on their competencies, strengths and potential. You can find more information in our Diversity and Inclusion Report at home.barclays/annualreport.
We retain an emphasis on hiring from within. This year, we filled 39% of vacancies internally and added a further 851 graduates to our internal pipeline of future leaders. We also continue to invest in our flagship career development programmes, including our AFTER programme to support those who have been in the armed forces. After a period of in-depth research, we launched new global programmes this year, managing 2,039 graduates, interns and apprentices.
Developing people for the future
At Barclays, we believe that everyone has the potential to continuously grow. We are committed to cultivating a culture of lifelong learning and our development proposition is designed to support colleagues at every stage of their career.
A wide range of development opportunities are available to help colleagues build their careers, delivered through our digital learning platform, Learning Lab.
This year we launched a new partnership with LinkedIn Learning, providing extensive digital development to all colleagues globally. We also have a number of corporate memberships with industry experts, allowing our colleagues to remain up to date with the latest developments and trends. In line with our professional qualification guidance, Barclays encourages colleagues to study for degree programmes and professional qualifications that benefit the business and support their development.
We are also committed to cultivating leadership skills among colleagues, whether they are in a leadership role or not. The Barclays Leadership Framework provides a guide to support colleagues with their own leadership development, and applies across all levels – from new line managers to our Group Executive Committee. We also continue to operate three flagship leadership development programmes: our Enterprise Leaders Summit, our Strategic Leaders Programme and Aspire.
We measure the success of our development offering through our colleague surveys, Your View and Here to Listen, tracking the progression of participants from our leadership development programmes, as well as tracking our levels of retention, and internal mobility. These measures feed into our training and development approach, enabling us to focus action on the right areas for our workforce.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 19 | ||||
Governance
Our people and culture
We promote a culture of continuous feedback, encouraging all colleagues to have regular performance conversations with their line manager throughout the year. This happens in addition to the annual performance review process that applies to all permanent employees. In these conversations, both ‘what’ has been achieved as well as ‘how’ it has been achieved are reviewed. This ensures our colleagues are able to keep broadening their skills, emphasising their personal development and working in a way that reflects our Values and Mindset.
We also want to help colleagues balance their work life with their personal commitments, supporting career development opportunities at each life stage. We offer enhanced maternity, paternity, adoption and shared parental entitlements in all our major jurisdictions.
Building a supportive and inclusive culture
Building a supportive and inclusive culture is not only the right thing to do, but also what is best for our business. It creates a sense of belonging and enables colleagues to perform to their highest capability.
We focus on six areas of diversity and inclusion: disability, gender, LGBT+, multicultural, multigenerational and socioeconomic inclusion. We have Employee Resource Groups in place across each of these areas to provide support and advice, create development opportunities and raise awareness of issues and challenges. Membership of our Employee Resource Groups is at an all-time high, with over 25,000 colleagues now involved in one or more. Their insight and experiences help influence our people policies and inform the commitments and actions we take as an organisation to give our people the support they need to succeed.
We strive to embed a culture of inclusion through our allyship initiatives, encouraging colleagues to become allies and to focus on understanding and eliminating barriers faced by underrepresented groups. We provide a toolkit for these colleagues to help them take conscious, positive steps to make everyone feel that they belong. In our Your View survey, 79% of colleagues told us they believe we are all in this together at Barclays, while 82% say they believe leaders are committed to building a diverse workforce.
We remain committed to improving the diversity of our leaders and to closing pay gaps at Barclays. We aim for diverse promotion assessors and panels, helping us to ensure the widest available pool of talent is considered for promotion. We actively provide development opportunities for leaders of the future such as ex-officio roles and places on our development programmes. As of the end of 2021, 28% of our global Managing Directors and Directors were female, and 30% of our UK Managing Directors and Directors were female.
We closely track the ever-changing composition of our people through online dashboards that make sure our senior leaders understand the diverse makeup and needs of the organisation they lead. Our Inclusion Index, launched in 2020, continues to allow us to measure colleagues’ experience of how inclusive the Barclays culture is and gives us a benchmark for monitoring progress year on year. Our overall Inclusion Index score for 2021 is 79%, up from 76% last year. 88% of colleagues say they feel included in their team.
Through our Race at Work Action Plan, we are working to close the gaps in the UK and US where some ethnicities are significantly underrepresented at Barclays. We are focusing our efforts across four areas: increasing the number of underrepresented minority employees we hire; providing access to career and development opportunities; creating a culture of allyship across the organisation; and being transparent and measuring our outcomes, allowing us to see the impact our actions are having over time.
In the UK, we aim to increase the number of underrepresented minority employees by 25% by the end of 2025. This will take us to 5% overall. In the US, we aim to increase the number of underrepresented minority employees by 20% by the end of 2025. This will take us to 21% overall. In the UK and the US, we aim to at least double the number of Black employees at Managing Director and Director level by the end of 2022, which we are on track to meet.
This year, we continued to review the provision of Workplace Adjustments for colleagues with disabilities to further our strategy for a more globally consistent and supportive experience. We encourage managers to check in regularly with their teams and to emphasise the importance of safe working and appropriate workstation setup. As part of the UK Government Disability Confident scheme, we encourage applications from people with a disability, or a physical or mental health condition. We require managers to give full and fair consideration to those with a disability on the basis of strengths, potential and ability, both when hiring and managing. We also ensure opportunities for training, career development and promotion are available to all.
Mental health and wellbeing continues to be a major focus, with 88% of colleagues telling us their manager supports their efforts to maintain wellbeing. Through our Be Well programme, we continue to provide expert advice and guidance on the practical steps colleagues can take to look after their physical and mental health. In 2021, we focused on three key areas in particular: a continued commitment to make Barclays a ‘mental health confident’ organisation, further development of our supportive culture and a renewed emphasis on sustainable working.
This year, we launched a new Wellbeing Index, with a starting score of 84%, giving us a metric for measuring the wellbeing of colleagues and informing the Be Well programme. We are very pleased to see colleagues’ ability to balance their personal and work demands has improved from 78% in 2020 to 83% in 2021. In time, it will mean we can better understand the impact of particular activities on colleagues wellbeing and continue to evolve the Be Well programme offering.
We continue to promote our wellbeing offerings, including the global Be Well portal, with 43% of colleagues registered. Throughout the year, we executed leader-led campaigns to offer practical guidance on looking after physical and mental health, enhancing wellbeing and resilience and a continued focus on safe working. We also focused on stress manageability through ongoing campaigns, and the promotion of Health and Wellbeing workshops. We launched Developing our supportive culture e-learning with 89% completion. We were one of the first businesses to sign up to the Mental Health at Work Commitment and we continue to deploy Mental Health Awareness as required e-learning.
You can find more information in our Diversity and Inclusion Report available at home.barclays/annualreport
Beyond the pandemic
We continue to follow government guidance relating to COVID-19 in all the jurisdictions we operate in, taking a prudent and considered approach to return to office that prioritises the health, safety and wellbeing of colleagues.
Where possible, and in line with local government guidance, we have undertaken a programme to gradually increase the number of colleagues returning to working in the office at least some of the time.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 20 | ||||
Governance
Our people and culture
Throughout the pandemic, we have kept our buildings operating safely for key workers by maintaining health and safety measures. In advance of colleagues returning, we risk-assessed all our buildings and provided training to colleagues on the safety measures that would be in place as they returned. We continue to evaluate and adjust these measures in accordance with government guidance and the latest epidemiology.
In the early stages of the pandemic, Barclays put in place a set of global principles to ensure we were doing as much as possible to support our colleagues. We have kept these principles in place and evolved them with the changing nature of the pandemic. The principles and provisions have helped colleagues cope with some of the personal challenges the pandemic has created, including offering additional paid leave to support self-quarantine, isolation, vaccination, sickness or care for dependants, and advice made available to help support physical and mental health. Colleagues who have returned to on-site working did so on a voluntary basis and we have worked closely with any colleagues who have concerns about returning, to understand those concerns and support them.
We are also thinking carefully about the future of work at Barclays. We want to balance the best of the past with the best of what we have proved possible during the pandemic. We have adopted the principle that the optimal physical location for a role is largely determined by the nature and requirements of that role. At the same time, it is important to us that everyone at Barclays, no matter what their role, maintains a strong connection to their colleagues at a Barclays site.
In support of our approach to future ways of working, we have revised and relaunched our principles, process and guidance on Working Flexibly. At Barclays, we encourage colleagues to work flexibly to balance and integrate their work and other life commitments, enhance their wellbeing and effectiveness at work and feel included, irrespective of personal circumstances. We have expanded the opportunity for many colleagues to work in a hybrid pattern, spending part of their time working from a Barclays site and part of their time working from home. Over the course of the year, colleagues have begun to transition to this new, hybrid way of working. We are taking a test and learn approach, and ways of working will continue to iterate into 2022 as we focus on balancing the benefits of working on site with more flexible solutions.
Listening to colleagues and keeping them informed
We think colleague engagement should be a two-way exercise, with equal weight placed on listening to our people and on keeping them informed. We want to be able to consider our colleagues’ perspective when we make decisions, including at the most senior level.
Our Your View survey is the primary mechanism for how we track engagement and monitor our culture. In addition, this year we continued to run regular Here to Listen surveys, first launched in 2020, to make sure we're staying abreast of colleague feedback during the COVID-19 pandemic. Results from these regular surveys are shared directly with leadership, so action can be taken to continue to provide the appropriate support for colleagues.
The results from our surveys are also an important part of the conversations our Board and Executive Committee have about our culture and how we run Barclays. These survey results help our Board and Executive Committee take into account our colleagues' views in their decision-making. We update the Board and its relevant sub-committees throughout the year and in addition, our leaders engage regularly with colleagues to hear what they think, visiting branches, trading floors and offices as well as hosting virtual forums. Direct engagement, a comprehensive reporting approach and dedicated time at Board meetings, enables the Board to determine that our workforce engagement approach is effective. We make sure we are keeping everyone up to date on the strategy, performance and progress of the organisation, through a combination of leader-led engagement, digital and print communication, blogs, vlogs and podcasts.
Our people are also encouraged to seek the views of colleagues with different perspectives and experiences via a series of monthly events and podcasts called Courageous Conversations that provides a platform for meaningful conversations on diversity, equity and inclusion topics.
We engage with our people collectively through a strong and effective partnership with Unite, as well as the Barclays Group European Forum, representing colleagues within the European Union, and other colleague forums. We regularly brief our union partners on the strategy and progress of the business, seeking their input on ways in which we can improve the colleague experience of working for Barclays. The collective bargaining coverage of Unite in the UK represents 84% of our UK workforce and 48% of our global workforce. We consult in detail with colleague representatives on major change programmes affecting our people. We do this to help us minimise compulsory job losses, including through voluntary redundancy and redeployment, with a focus on reskilling.
We maintain an engagement approach that is in line with the UK’s Financial Reporting Council (FRC) governance recommendations. This extends to those who work for us indirectly as well, such as contractors. As of 2021, the Barclays Third Party Code of Conduct (TPCoC) states that all third parties with greater than 250 employees must demonstrate through annual reporting that effective workforce engagement mechanisms are in place to provide channels for the workforce to share ideas and concerns with senior management and the board.
Our policies
Our people policies are designed to recruit the best people, provide equal opportunities and create an inclusive culture, in line with our Values and in support of our long-term success. They also reflect relevant employment law, including the provisions of the Universal Declaration of Human Rights and International Labour Organisation (ILO) Declaration on the Fundamental Principles and Rights at Work.
We expect our people to treat each other with dignity and respect, and do not tolerate discrimination, bullying, harassment or victimisation on any grounds.
We are committed to paying our people fairly with regards to their specific role, seniority, responsibilities, skills and experience and other factors which properly affect pay, – in a way that balances the needs of all our stakeholders. That means our remuneration policies reward sustainable performance that is in line with our Purpose and Values, as well as our risk expectations. You can find more information in our Fair Pay Report in Barclays PLC Annual Report 2021 at home.barclays/annualreport.
We encourage our people to benefit from Barclays’ performance by enrolling in our share ownership plans, further strengthening their commitment to the organisation. You can find out more information in the Directors’ Remuneration Report in Barclays PLC Annual Report 2021 at home.barclays/annualreport.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 21 | ||||
Risk review
Contents
The management of risk is a critical underpinning to the execution of the Barclays Bank Group’s strategy. The material risks and uncertainties the Barclays Bank Group faces across its business and portfolios are key areas of management focus.
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| Overview of the Barclays Bank Group’s approach to risk management. | 24 | |||||||
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| Insight into the level of risk across our business and portfolios, the material existing and emerging risks and uncertainties we face and the key areas of management focus. | 26 | |||||||
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▪Legal risk and legal, competition and regulatory matters | 37 | |||||||
| The Barclays Bank Group’s approach to risk management for each principal risk with focus on organisation and structure and roles and responsibilities. | 39 | |||||||
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Credit risk: 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 the Barclays Bank Group, including the whole and timely payment of principal, interest, collateral and other receivables. | 48 | |||||||
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Market risk: The risk of loss arising from potential adverse changes 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. | 77 | |||||||
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Treasury and capital risk – Liquidity: 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. | 80 | |||||||
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| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 22 | ||||
Risk review
Contents
| Risk performance continued | Page | |||||||
Treasury and capital risk – Capital: 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 and stressed conditions (both actual and as defined for internal planning or regulatory testing purposes). This also includes the risk from the Barclays Bank Group’s pension plans. | 85 | |||||||
▪Foreign exchange risk (audited) | 86 | |||||||
▪Pension risk review | 87 | |||||||
Treasury and capital risk – 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. | 89 | |||||||
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Operational risk: The risk of loss to the Barclays Bank Group from inadequate or failed processes or systems, human factors or due to external events (for example fraud) where the root cause is not due to credit or market risks. | 91 | |||||||
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Model risk: The potential for adverse consequences from decisions based on incorrect or misused model outputs and reports. | 93 | |||||||
Conduct risk: The risk of poor outcomes for, or harm to, customers, clients and markets, arising from the delivery of the Barclays Bank Group's products and services. | 93 | |||||||
Reputation risk: The risk that an action, transaction, investment, event, decision, or business relationship will reduce trust in the Barclays Bank Group’s integrity and/or competence. | 93 | |||||||
Legal risk: The risk of loss or imposition of penalties, damages or fines from the failure of the Barclays Bank Group to meet its legal obligations including regulatory or contractual requirements. | 94 | |||||||
| Supervision and regulation | ||||||||
| The Barclays Bank Group’s operations, including its overseas offices, subsidiaries and associates, are subject to a significant body of rules and regulations. | 95 | |||||||
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 23 | ||||
Risk review
Risk management
Barclays’ risk management strategy
The Barclays Bank Group’s risk management strategy
This section introduces the Barclays Bank Group’s approach to managing and identifying risks, and for fostering a strong risk culture.
Enterprise Risk Management Framework (ERMF)
The ERMF outlines the highest level principles for risk management by setting out standards, objectives and key responsibilities of different groups of employees of the Barclays Bank Group. It is approved by the Barclays PLC Board on recommendation of the Barclays Group Board Risk Committee and the Barclays Bank Group Chief Risk Officer (CRO); it is then adopted by the Barclays Bank Group.
The ERMF sets out:
▪Risk Management and Segregation of duties: the ERMF defines a Three Lines of Defence model.
▪Principal risks faced by the Barclays Bank Group which guides the organisation of the risk management function.
▪Risk appetite requirements: this helps define the level of risk we are willing to undertake in our business.
▪Roles and responsibilities for key risk management and governance structure.
The ERMF is complemented by frameworks, policies and standards which are mainly aligned to individual principal risks:
▪Frameworks cover the management processes for a collection of related activities and define the associated policies used to govern them.
▪Policies set out principles, control objectives and other core requirements for the activities of the Barclays Bank Group. Policies describe “what” must be done.
▪Standards set out the key control requirements that describe ''how'' the requirements set out in the policy are met.
Segregation of duties - the "Three Lines of Defence" model
The ERMF sets out a clear lines of defence model. All colleagues are responsible for understanding and managing risks within the context of their individual roles and responsibilities, as set out below:
▪The First line comprises of all employees engaged in the revenue generating and client facing areas of the Barclays Bank Group and all associated support functions, including Finance, Operations, Treasury and Human Resources. The first line is responsible for identifying and managing the risks in which they are engaged , developing a control framework, and escalating risk events to Risk and Compliance.
▪The Second line is comprised of the Risk and Compliance functions. The role of the second line is to establish the limits, rules and constraints, Policies and Standards under which first line activities shall be performed, consistent with the risk appetite of the Barclays Bank Group, and to monitor the performance of the first line against these limits, rules and constraints. Controls for first line activities, especially those related to Operational Risk, will ordinarily be established by the Control Officers operating within the Control Framework of the Barclays Bank Group. These controls will remain subject to supervision by the second line.
▪The Third line of defence is Internal Audit, who are responsible for providing independent assurance over the effectiveness of governance, risk management and control over current, systemic and evolving risks.
▪The Legal function provides support to all areas of the Barclays Bank Group and is not formally part of any of the three lines. However, it is subject to second line oversight with respect to Operational and Conduct Risks.
Principal risks
The ERMF identifies nine principal risks namely: credit risk, market risk, treasury and capital risk, climate risk, operational risk, model risk, conduct risk, reputation risk and legal risk. Note that climate risk was added in January 2022; see page 31 for more information.
Each of the principal risks is overseen by an accountable executive at the Barclays Group level who is responsible for the framework, policies and standards that set out associated responsibilities and expectations, and detail the related requirements around risk management. In addition, certain risks span across more than one principal risk.
Risk appetite
Risk appetite is defined as the level of risk which the Barclays Bank Group is prepared to accept in the conduct of their activities. It provides a basis for ongoing dialogue between management and Board with respect to the Barclays Bank Group’s current and evolving risk profile, allowing strategic and financial decisions to be made on an informed basis.
Risk appetite is approved by the Barclays PLC Board in aggregate and disseminated across legal entities and businesses, including the Barclays Bank Group. The Barclays Bank PLC Board cannot approve a higher risk appetite than that determined by the Barclays PLC Board without the approval of the Barclays PLC Board but may choose to operate at a lower level of risk appetite than that approved by the Barclays Group.
The Barclays Group’s total risk appetite and its allocation to the Barclays Bank Group are supported by limits to enable and control, specific exposures and activities that have material concentration risk implications.
Risk Committees
The Barclays Bank Group product/risk type committees consider risk matters relevant to their business, and escalate as required to the Barclays Group Risk Committee, whose Chairman, in turn, escalates to the Barclays Bank PLC Board Committees and the Barclays Bank PLC Board.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 24 | ||||
Risk review
Risk management
Barclays’ risk management strategy
The Barclays Bank PLC Board receives regular information on the risk profile of Barclays Bank Group, and has ultimate responsibility for approval of risk appetite and capital plans, within the parameters set by the Barclays PLC Board. The Barclays Bank PLC Board is also responsible for the adoption of the ERMF.
Further, there are two Board-level committees which oversee the application of the ERMF and review and monitor risk across Barclays Bank PLC. These are: the Barclays Bank PLC Board Risk Committee and the Barclays Bank PLC Board Audit Committee. Additionally, the Barclays Bank PLC Board Remuneration Committee oversees pay practices focusing on aligning pay to sustainable performance:
▪The Barclays Bank PLC Board Risk Committee (BRC): The BRC monitors Barclays Bank Group’s risk profile against the agreed appetite. Where actual performance differs from expectations, the actions taken by management are reviewed to ascertain that the BRC is comfortable with them. The Barclays Bank Group CRO regularly presents a report to the BRC summarising developments in the risk environment and performance trends in the key portfolios. The BRC also reviews certain key risk methodologies, the effectiveness of risk management, and the Barclays Bank Group risk profile, including the material issues affecting each business portfolio and forward risk trends. The committee also commissions in-depth analyses of significant risk topics, which are presented by the Barclays Bank Group CRO or senior risk managers in the businesses.
▪The Barclays Bank PLC Board Audit Committee (BAC): The BAC receives regular reports on the effectiveness of internal control systems, on material control issues of significance, and on accounting judgements (including impairment), and a quarterly review of the adequacy of impairment allowances, relative to the risk inherent in the portfolios, the business environment, and Barclays policies and methodologies.
▪The Barclays Bank PLC Board Remuneration Committee (RemCo): The RemCo receives proposals on ex-ante and ex-post risk adjustments to variable remuneration based on risk management performance including events, issues and the wider risk profile. These inputs are considered in the setting of performance incentives.
Barclays’ risk culture
Risk culture can be defined as the norms, attitudes and behaviours related to risk awareness, risk taking and risk management. This is reflected in how the Barclays Group identifies, escalates and manages risk matters.
The Barclays Group is committed to maintaining a robust risk culture in which:
▪management expect, model and reward the right behaviours from a risk and control perspective; and
▪colleagues identify, manage and escalate risk and control matters, and meet their responsibilities around risk management.
The Group CEO works with the Executive Management to embed a strong risk culture within the Group, with particular regard to the identification, escalation and management of risk matters, in accordance with the ERMF. Specifically, all employees regardless of their positions, functions or locations must play their part in the Barclays Bank Group’s risk management. Employees are required to be familiar with risk management policies which are relevant to their responsibilities, know how to escalate actual or potential risk issues, and have a role-appropriate level of awareness of the risk management process as defined by the ERMF.
Our Code of Conduct – the Barclays Way
Globally, all colleagues must attest to the “Barclays Way”, our Code of Conduct, and comply with all frameworks, policies and standards applicable to their roles. The Code of Conduct outlines the Purpose, Values and Mindset which govern our ‘Barclays Way’ of working across our business globally. It constitutes a reference point covering all aspects of colleagues’ working relationships, and provides guidance on working with other Barclays employees, customers and clients, governments and regulators, business partners, suppliers, competitors and the broader community.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 25 | ||||
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, pandemics 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)Risks relating to the impact of COVID-19
The COVID-19 pandemic has had, and continues to have, a material impact on businesses around the world and the economic environments in which they operate. Additionally, the impacts of the economic downturn resulting from the COVID-19 pandemic and post-recovery environment, from a commercial, regulatory and risk perspective, could be significantly different to past crises and persist for a prolonged period. As a result, there are a number of factors associated with the COVID-19 pandemic and its impact on global economies that have had and could continue to have a material adverse effect on the profitability, capital and liquidity of the Barclays Bank Group.
The COVID-19 pandemic has caused disruption to the Barclays Bank Group's customers, suppliers and staff globally. Most jurisdictions in which the Barclays Bank Group operates implemented severe restrictions on the movement of their respective populations, with a resultant significant impact on economic activity in those jurisdictions. While a number of restrictions have been eased with the roll-out of COVID-19 vaccination programmes, others still remain in place and future developments are highly uncertain. In some jurisdictions, restrictions that had been previously lifted were re-imposed in response to a resurgence in cases. These decisions are being taken by the governments of individual jurisdictions (including through the implementation of emergency powers) and impacts (including any subsequent lifting, extension or reimposition of restrictions) may vary from jurisdiction to jurisdiction and/or within jurisdictions. It remains unclear how the COVID-19 pandemic will evolve through 2022 (including whether there will be further waves of the COVID-19 pandemic, whether COVID-19 vaccines continue to prove effective, whether further new strains of COVID-19 will emerge and whether, and in what manner, additional restrictions will be imposed and/or existing restrictions extended) and the Barclays Bank Group continues to monitor the situation closely. However, despite the COVID-19 contingency plans established by the Barclays Bank Group, the ability to conduct business may be adversely affected by disruptions to infrastructure and supply chains, business processes and technology services, resulting from the unavailability of staff due to illness or the failure of third parties to supply services. This may cause significant customer detriment, costs to reimburse losses incurred by the Barclays Bank Group’s customers, potential litigation costs (including regulatory fines, penalties and other sanctions), and reputational damage.
In many of the jurisdictions in which the Barclays Bank Group operates, schemes were initiated by central banks, national governments and regulators to provide financial support to parts of the economy most impacted by the COVID-19 pandemic. The rapid introduction and varying nature of these support schemes, as well as customer expectations, required the Barclays Bank Group to implement large-scale changes in a short period of time, leading to an increase in certain risks faced by the Barclays Bank Group, including operational risk, conduct risk, reputation risk and fraud risk. These risks are likely to be heightened further as and when those government and other support schemes expire, are withdrawn or are no longer supported. Furthermore, the impact from participating in government and central bank-supported loan and other financing schemes may be exacerbated if the Barclays Bank Group is required by any government or regulator to offer forbearance or additional financial relief to borrowers or if the Barclays Bank Group is unable to rely on guarantees provided by governments in connection with financial support schemes.
As these schemes and other financial support schemes provided by national governments (such as job retention and furlough schemes, payment deferrals and mass lending schemes) expire, are withdrawn or are no longer supported, there is a risk that economic growth and employment may be negatively impacted which may, in turn, impact the Barclays Bank Group’s results of operations and profitability. In addition, the Barclays Bank Group may experience a higher volume of defaults and delinquencies in certain portfolios which may negatively impact the Barclays Bank Group’s RWAs, level of impairment and, in turn, capital position, and may initiate collection and enforcement actions to recover defaulted debts. The inception of large scale collections and recovery programmes (including the use of third party debt collection agents) may also create significant risk if (because of the complexity, speed and scale of these programmes) defaulting borrowers are harmed by the Barclays Bank Group’s conduct which may also give rise to civil legal proceedings, including class actions, regulatory censure, potentially significant fines and other sanctions, and reputational damage. Other legal disputes may also arise between the Barclays Bank Group and defaulting borrowers relating to matters such as breaches or enforcement of legal rights or obligations arising under loan and other credit agreements. Adverse findings in any such matters may result in the Barclays Bank Group’s rights not being enforced as intended.
Changes in macroeconomic variables such as gross domestic product (GDP) and unemployment have a significant impact on the modelling of expected credit losses (ECLs) by the Barclays Bank Group. As a result, the Barclays Bank Group experienced higher ECLs in 2020 compared to prior periods though this trend was reversed in 2021 as economic conditions partially recovered. The economic environment remains uncertain and future impairment charges may be subject to further volatility (including from changes to macroeconomic variable forecasts) depending on the longevity of the COVID-19 pandemic and related containment measures and the continued efficacy of any COVID-19 vaccines, as well as the longer term effectiveness of central bank, government and other support measures. For further details on macroeconomic variables used in the calculation of ECLs, refer to the credit risk performance section. In addition, ECLs may be adversely impacted by increased levels of default for single name exposures in certain sectors directly impacted by the COVID-19 pandemic (such as the retail, airline, and hospitality and leisure sectors).
Furthermore, 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 and assessing capital adequacy. 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 and/or misused. This may be exacerbated when dealing with unprecedented scenarios, such as the COVID-19 pandemic, due to the lack of reliable historical reference points and data. For further details on model risk, refer to ‘(vi) Model risk’ below.
There can be no assurance that economic activity will return to pre-pandemic levels and, accordingly, there could be further adverse impacts on the Barclays Bank Group’s income and profitability caused by lower lending and transaction volumes due to volatility or weakness in the capital markets. Furthermore, in order to support lending activity to promote economic growth, governments and/or regulators may limit management’s flexibility in
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 26 | ||||
Risk review
Material existing and emerging risks
managing its business, require the deployment of capital in particular business lines or otherwise restrict or limit capital distributions and capital allocation.
Any and all such events mentioned above could have a material adverse effect on the Barclays Bank Group's business, results of operations, financial condition, prospects, liquidity, capital position and credit ratings (including potential credit rating agency changes of outlooks or ratings), as well as on the Barclays Bank Group's customers, employees and suppliers.
ii)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 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:
•Global GDP growth recovered in 2021 from the severe contraction in 2020 as a result of the COVID-19 pandemic. While government support packages, accommodative monetary policy and the lifting of certain restrictions on movement bolstered economic growth and confidence in 2021, the global outlook remains highly uncertain especially regarding: (a) ongoing concerns about how the COVID-19 pandemic may develop; (b) the disruptive impact of the COVID-19 pandemic on supply chains; and (c) how long inflationary pressures will persist and whether central banks will succeed in normalising monetary policy. These factors could adversely affect economic growth, affect specific industries or countries or affect the Barclays Bank Group’s employees and business operations in affected countries. Refer to 'i) Risks relating to the impact of COVID-19' above for further details.
•In the UK, the UK Government’s subsidised job retention and furlough schemes, which were implemented as a response to the COVID-19 pandemic, came to an end on 30 September 2021. Prior to the end of the job retention and furlough schemes, the UK labour market performed more favourably than initially predicted at the start of the COVID-19 pandemic, with low unemployment rates and the number of employees on UK company payrolls surpassing pre-pandemic levels. However, the end of the job retention and furlough schemes, exacerbated by further uncertainty arising from the impact of new strains of COVID-19 (including the Omicron variant), may cause upward pressure on unemployment which may result in higher impairment charges.
•Recent increases in inflation have been partly driven by a rebalancing of supply and demand, following the relaxation of restrictions on movement that were imposed during the COVID-19 pandemic. Monetary policy remains highly accommodative, increasing the risk that more abrupt government action will be necessary later if inflation does not prove transitory. A prolonged period of rising inflation may develop into slow or stagnant economic growth if combined with slowing economic expansion and elevated unemployment. Inflation may be further driven by supply chain disruptions and labour shortages, the imposition of further restrictions on movement due to the failure to contain the spread of COVID-19, and structural changes in the UK economy after the UK's exit from the European Union.
•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 between the US and China), an unexpected rise in unemployment and/or an increase in interest rates could lead to increased levels of impairment, which may have a material adverse effect on the Barclays Bank Group’s results of operations and profitability.
•An escalation in geopolitical tensions or increased use of protectionist measures may have a material adverse effect on 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 manage growth appropriately during the transition from manufacturing towards services and the end of the investment and credit-led boom. Deterioration in emerging markets could have a material adverse effect on the Barclays Bank Group's results of operations if contagion results in higher impairment charges via sovereign or counterparty defaults.
•Trading disruption between the EU and the UK may have a significant impact on economic activity in the EU and the UK which, in turn, could have a material adverse effect on the Barclays Bank Group’s business, results of operations, financial condition and prospects. Unstable economic conditions could result in (among other things):
◦a recession in the UK and/or one or more member states of the EEA in which it operates, with lower growth, higher unemployment and falling property prices, which could lead to increased impairments in relation to a number of the Barclays Bank Group’s portfolios (including, but not limited to, its unsecured lending portfolio (including credit cards) and commercial real estate exposures);
◦increased market volatility (in particular in currencies and interest rates), which could impact the Barclays Bank Group’s trading book positions and affect the underlying value of assets in the banking book and securities held by the Barclays Bank Group for liquidity purposes;
◦a credit rating downgrade for one or more members of the Barclays Bank Group (either directly or indirectly as a result of a downgrade in the UK sovereign credit ratings), which could significantly increase the Barclays Bank Group’s cost of and/or reduce
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 27 | ||||
Risk review
Material existing and emerging risks
its access to funding, widen credit spreads and materially adversely affect the Barclays Bank Group’s interest margins and liquidity position; and/or
◦a widening of credit spreads more generally or reduced investor appetite for the Barclays Bank Group’s debt securities, which could negatively impact the Barclays Bank Group’s cost of and/or access to funding.
iii)The impact of interest rate changes on the Barclays Bank Group’s profitability
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 they may change particularly in the Barclays Bank Group’s main markets of the UK and the US.
A period of low interest rates and flat yield curves, including any rate cuts and/or negative interest rates, may affect and 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.
Interest rate rises could positively impact the Barclays Bank Group’s profitability as retail and corporate business income increases due to margin decompression. However, 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. This, combined with the impact interest rate rises may have on the affordability of loan arrangements for borrowers, could cause stress in the lending portfolio and underwriting activity of the Barclays Bank Group with resultant higher credit losses driving an increased impairment charge which 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 Fair Value through Other Comprehensive Income (FVOCI) reserve.
iv)Competition in the banking and financial services industry
The Barclays Bank Group operates in a highly competitive environment (in particular, in the UK and US) in which it must evolve and adapt to the significant changes as a result of financial regulatory reform, technological advances, increased public scrutiny and prevailing economic conditions. The Barclays Bank Group expects that competition in the financial services industry will continue to be intense and may have a material adverse effect on the Barclays Bank Group’s future business, results of operations, financial condition and prospects.
New competitors in the financial services industry continue to emerge. Technological advances and the growth of e-commerce have made it possible for non-banks to offer products and services that traditionally were banking products such as electronic securities trading, payments processing and online automated algorithmic-based investment advice. Furthermore, payments processing and other services could be significantly disrupted by technologies, such as blockchain (used in cryptocurrency systems) and "buy now pay later" lending, both of which are currently subject to lower levels of regulatory oversight. Furthermore, the introduction of Central Bank Digital Currencies could potentially have significant impacts on the banking system and the role of commercial banks within it by disrupting the current provision of banking products and services. It could allow new competitors, some previously hindered by banking regulation (such as FinTechs), to provide customers with access to banking facilities and increase disintermediation of banking services.
New technologies have required and could require the Barclays Bank Group to spend more to modify or adapt its products or make additional capital investments in its businesses to attract and retain clients and customers or to match products and services offered by its competitors, including technology companies.
Ongoing or increased competition and/or disintermediation of banking services may put pressure on the pricing for the Barclays Bank Group’s products and services, which could reduce the Barclays Bank Group's revenues and profitability, or may cause the Barclays Bank Group to lose market share, particularly with respect to traditional banking products such as deposits, bank accounts and mortgage lending. This competition may be on the basis of quality and variety of products and services offered, transaction execution, innovation, reputation and price. The failure of any of the Barclays Bank Group’s businesses to meet the expectations of clients and customers, whether due to general market conditions, under-performance, a decision not to offer a particular product or service, changes in client and customer expectations or other factors, could affect the Barclays Bank Group’s ability to attract or retain clients and customers. Any such impact could, in turn, reduce the Barclays Bank Group’s revenues.
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 considerable 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. This includes the upcoming implementation of the remaining Basel III reforms, as well as the expected incorporation of risks associated with climate change into the prudential framework and increased scrutiny of firms’ governance and risk management frameworks (including in respect of climate change and Environmental, Social and Governance (ESG) risks). Such or similar changes to prudential requirements or additional supervisory and prudential expectations, as well as requirements imposed by the Barclays Bank Group's regulators under the resolution framework, 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;
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 28 | ||||
Risk review
Material existing and emerging risks
–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 or resolvability.
▪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 on-venue trading 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, in particular if there are areas of overlapping or conflicting regulation. More broadly, changes to the regulatory framework 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, the European Banking Authority (EBA) 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.
▪As a result of the on-shoring of EU legislation in the UK, UK-based entities within the Barclays Group are currently subject to substantially the same rules and regulations as prior to the UK’s withdrawal from the EU. It is the UK’s intention to recast on-shored EU legislation as part of UK legislation and PRA and FCA rules, which could result in changes to regulatory requirements in the UK. If the regulatory regimes for EU and UK financial services change further, the provision of cross-border banking and investment services across the Barclays Bank Group may become more complex and costly which could have a material adverse effect on the Barclays Bank Group’s business and results of operations and could result in the Barclays Bank Group modifying its legal entity, capital and funding structures and business mix, exiting certain business activities altogether or not expanding in areas despite otherwise attractive potential returns. This may also be exacerbated if Barclays Bank Ireland PLC expands further and, as a result of its growth and importance to the Barclays Bank Group and the EEA banking system as a whole, Barclays Bank Ireland PLC is made subject to higher capital requirements or restrictions are imposed by regulators, on capital allocation and capital distributions by Barclays Bank Ireland PLC.
For further details on the regulatory supervision of, and regulations applicable to, the Barclays Bank Group, refer to the Supervision and regulation section.
vi)Impact of benchmark interest rate reforms on the Barclays Bank Group
Global regulators and central banks in the UK, US and EU 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. These benchmark reforms have resulted in significant changes to the methodology and operation of certain benchmarks and indices, the adoption of alternative risk-free reference rates (RFRs), the discontinuation of certain reference rates (including LIBOR), and the introduction of implementing legislation and regulations. Specifically, regulators in the UK, US and EU directed that certain non-US dollar LIBOR tenors would cease at the end of 2021. Furthermore, certain US dollar LIBOR tenors are to cease by the end of June 2023, and restrictions have been imposed on new use of US dollar LIBOR. Notwithstanding these developments, given the unpredictable consequences of benchmark reform, any of these developments could have an adverse impact on market participants, including the Barclays Bank Group, in respect of any financial instruments linked to, or referencing, any of these benchmark interest rates.
Uncertainty associated with such potential changes, including the availability and/or suitability of alternative RFRs, the participation of customers and third-party market participants in the transition process, challenges with respect to required documentation changes, and impact of legislation to deal with certain legacy contracts that cannot convert into or add fall-back RFRs before cessation of the benchmark they reference, may adversely affect a broad range of transactions (including any securities, loans and derivatives which use LIBOR or any other affected benchmark to determine the interest payable which are included in the Barclays Bank Group’s financial assets and liabilities) that use these reference rates and indices, and present 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 (such as LIBOR) to new alternative RFRs, the Barclays Bank Group faces conduct risks. These may lead to customer complaints, regulatory sanctions or reputational impact if the Barclays Bank Group is considered to be (among other things): (i) 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 a consistent approach to remediation for customers in similar circumstances; (v) unduly delaying the communication and migration activities in relation to client exposure, leaving them insufficient time to prepare; or (vi) colluding or inappropriately sharing information with competitors.
▪Litigation risk: members of the Barclays Bank Group may face legal proceedings, regulatory investigations and/or other actions or proceedings regarding (among other things): (i) the conduct risks identified above, (ii) the interpretation and enforceability of provisions in LIBOR-based contracts, and (iii) the Barclays Bank Group’s preparation and readiness for the replacement of LIBOR with alternative RFRs.
▪Financial risk: the valuation of certain of the Barclays Bank Group’s financial assets and liabilities may change. Moreover, transitioning to alternative RFRs 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 certain alternative RFRs (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 cash flows.
▪Pricing risk: changes to existing reference rates and indices, discontinuation of any reference rate or indices and transition to alternative RFRs may impact the pricing mechanisms used by the Barclays Bank Group on certain transactions.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 29 | ||||
Risk review
Material existing and emerging risks
▪Operational risk: changes to existing reference rates and indices, discontinuation of any reference rate or index and transition to alternative RFRs 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.
▪Accounting risk: an inability to apply hedge accounting in accordance with IAS 39 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, prospects and reputation.
For further details on the impacts of benchmark interest rate reforms on the Barclays Bank Group, refer to Note 40.
vii) Change delivery and execution risks
The Barclays Bank Group will need to adapt and/or transform the way it conducts business in response to changing customer behaviour and needs, technological developments, regulatory expectations, increased competition and cost management initiatives. Accordingly, effective management of transformation projects is required to successfully deliver the Barclays Bank Group's strategic priorities, involving delivering both on externally driven programmes, as well as key business initiatives to deliver revenue growth, product enhancement and operational efficiency outcomes. The magnitude, complexity and, at times, concurrent demands of the projects required to meet these priorities can result in heightened execution risk.
The ability to execute the Barclays Bank Group’s strategy may be limited by operational capacity and the increasing complexity of the regulatory environment in which the Barclays Bank Group operates. In addition, whilst the Barclays Bank Group continues to pursue cost management initiatives, they may not be as effective as expected and cost saving targets may not be met.
The failure to successfully deliver or achieve any of the expected benefits of these strategic initiatives and/or the failure to meet customer and stakeholder expectations could have a material adverse effect on the Barclays Bank Group’s business, results of operations, financial condition, customer outcomes, prospects and reputation.
viii) Internal control over financial reporting and disclosure controls and procedures
The Company is subject to requirements under the Sarbanes-Oxley Act of 2002, as amended (the Sarbanes-Oxley Act) to perform system and process evaluation and testing of its internal control over financial reporting to allow management to assess the effectiveness of its internal controls. In connection with the offer and sale of securities by the Company in excess of the amounts registered under the Company's 2019 F-3 (see ‘Material existing and emerging risks impacting individual principal risks - ix) Legal risk and legal, competition and regulatory matters – a) Over-issuance of US securities under the Company's US Shelf’ below), management has concluded that the Company had a material weakness in relation to certain aspects of its internal control environment and, as a consequence, its internal control over financial reporting as at 31 December 2021 was not effective under the applicable Committee of Sponsoring Organizations (COSO) Framework and its disclosure controls and procedures were not effective as at such date. The material weakness that has been identified relates to a weakness in controls over the identification of external regulatory limits related to securities issuance and monitoring against these limits. As a result of this weakness, the Company issued securities in excess of the amount under the 2019 F-3.
Remediation efforts have begun and the Company is taking steps to strengthen internal controls relating to securities issuance to address the material weakness. However, internal control systems (no matter how well designed) have inherent limitations and may not prevent or detect further misstatements or errors (whether of a similar or different character to the foregoing). If the Company fails to maintain an effective internal control environment or its disclosure controls and procedures are not effective, the Company could suffer material misstatements in its financial statements and fail to meet its reporting obligations, which could cause investors to lose confidence in the Company’s reported financial information. This could in turn limit the Company’s access to capital markets, negatively impact its results of operations, and lead to a negative impact on the trading price of its securities. Additionally, ineffective internal control over financial reporting could expose the Company to increased risk of fraud or misuse of corporate assets and subject it to potential regulatory investigations and civil or criminal sanctions. Any of the foregoing could have a material adverse effect on the Company’s and the Barclays Bank Group’s business, financial condition, results of operations and reputation as a frequent issuer in the securities markets.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 30 | ||||
Risk review
Material existing and emerging risks
Material existing and emerging risks impacting individual principal risks
i)Climate risk
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 requirements, and adapting the Barclays Bank Group’s operations and strategy to address the financial risks resulting from both: (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 results of operations, financial condition and prospects, the Barclays Bank Group’s customers and clients and the creditworthiness of the Barclays Bank Group’s counterparties.
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 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.
With effect from 1 January 2022, climate risk became one of the principal risks within the Barclays Bank Group’s Enterprise Risk Management Framework. Failure to 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 failure to adapt the Barclays Bank Group's strategy and business model to the changing regulatory requirements and market expectations on a timely basis, 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.
In March 2020, the Barclays Group announced its ambition to become a net zero bank by 2050 and its commitment to align all of its financing activities with the goals and timelines of the Paris Agreement. In order to reach these ambitions and targets or any other climate-related ambitions or targets the Barclays Group may commit to in future, the Barclays Bank Group will need to incorporate climate considerations into its strategy, business model, the products and services it provides to customers and its financial and non-financial risk management processes (including processes to measure and manage the various financial and non-financial risks the Barclays Bank Group faces as a result of climate change). The Barclays Bank Group also needs to ensure that its strategy and business model adapt to changing national and international standards, industry and scientific practices, regulatory requirements and market expectations regarding climate change, which remain under continuous development and are subject to different interpretations. There can be no assurance that these standards, practices, requirements and expectations will not be interpreted differently than what was the Barclays Group’s understanding when defining its climate-related ambitions and targets, or change in a manner that substantially increases the cost or effort for the Barclays Bank Group to achieve such ambitions and targets. In addition, the Barclays Group’s ambitions and targets may prove to be considerably more difficult or even impossible to achieve under such changing circumstances. This may be exacerbated if the Barclays Group chooses or is required to accelerate its climate-related ambitions or targets as a result of (among other things) UK or international regulatory developments or stakeholder expectations. Achieving the Barclays Group’s climate-related ambitions and targets will also depend on a number of factors outside the Barclays Bank Group’s control, including (among other things) availability of data to measure and assess the climate impact of the Barclays Bank Group’s customers, advancements of low-carbon technologies and supportive public policies in the markets where the Barclays Bank Group operates. If these external factors and other changes do not occur, or do not occur on a timely basis, the Barclays Group may fail to achieve its climate-related ambitions and targets and this could have a material adverse effect on the Barclays Bank Group’s business, results of operations, financial condition, prospects and reputation.
For further details on the Barclays Bank Group’s approach to climate change, refer to the climate change risk management section.
ii)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
Impairment is calculated in line with the requirements of IFRS9 which results in recognition of loss allowances, based on ECLs, on a forward-looking basis using a broad scope of financial instruments. Measurement involves complex judgement and impairment charges are potentially volatile, particularly under stressed conditions, which could have a material adverse effect on the Barclays Bank Group's business, results of operations, financial condition and prospects.
For further details, refer to Note 7.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 31 | ||||
Risk review
Material existing and emerging risks
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 and leisure: softening demand, rising costs and a structural shift to online shopping, which have been exacerbated due to restrictions imposed during the COVID-19 pandemic and changes in consumer behaviour, continue to pressurise 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 as a higher probability of default exists for retailers, hospitality providers and their landlords while this transition takes place.
▪Consumer affordability: this has remained a key area of focus, particularly in unsecured lending. Macroeconomic factors, such as unemployment, higher interest rates or broader inflationary pressures, that impact a customer’s ability to service debt payments, could lead to increased arrears in both unsecured and secured products. The 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: the Barclays Bank Group’s corporate credit exposure is vulnerable to weakness in retail property, for example, as a result of reduced rent collections and residential development, and faces the risk of increased impairment from a material fall in property prices. There can be no assurance that the significant increase in house prices seen during 2021 will continue in 2022. In addition, small segments of the housing market could be subject to specific valuation impacts such as requirements to remediate issues related to fire safety standards.
▪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 and wholesale exposure: 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. The Italian economy was severely impacted by the COVID-19 pandemic in 2020 and recovery has been slower than anticipated. Should the Italian economy deteriorate further or any recovery take longer to materialise, there could be a material adverse effect on the Barclays Bank Group’s results of operations including, but not limited to, increased credit losses and higher impairment charges.
▪Oil & Gas sector: the Barclays Bank Group’s corporate credit exposure includes companies whose performance is dependent on the oil and gas sector. Whilst market prices have recovered in 2021, a sustained period of lower energy prices in recent years has led to the erosion of balance sheet strength, particularly for higher cost producers and those businesses which supply goods and services to the oil and gas sector. In the longer term, costs associated with the transition towards renewable sources of energy may place greater financial demands on companies that the Barclays Bank Group has exposure to globally. These factors could have a material adverse effect on the Barclays Bank Group’s business, results of operations, financial condition and prospects through increased impairment charges.
▪Air travel: the COVID-19 pandemic has caused a significant reduction in demand for air travel as both the willingness and ability to travel have reduced, impacting revenues of the Barclays Bank Group’s clients and their ability to service their debt obligations. While the situation is expected to improve as travel restrictions are eased, changes in consumer behaviour both due to COVID-19 and climate change create uncertainty for the sector. Furthermore, the possibility of further global and regional pandemics pose additional risks for the sector.
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 monetised, 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, refer to the credit risk management and credit risk performance sections.
iii)Market risk
Market risk is the risk of loss arising from potential adverse changes 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.
Economic and financial market uncertainties remain elevated, as the path of the COVID-19 pandemic is inherently difficult to predict. Further waves of the COVID-19 pandemic, a disruptive adjustment to monetary policy normalisation, intensifying social unrest that weighs on market sentiment and deteriorating trade and geopolitical tensions 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 adversely affects market 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 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, refer to the market risk management and market risk performance sections.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 32 | ||||
Risk review
Material existing and emerging risks
iv)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 internal and/or regulatory liquidity requirements, make repayments as they fall due or be unable to support day-to-day banking activities. Key liquidity risks that the Barclays Bank Group faces include:
▪Stability of the Barclays Bank Group’s deposit funding profile: deposits which are 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.
▪Ongoing access to wholesale funding: the Barclays Bank Group regularly accesses the money and capital markets to provide short-term and long-term unsecured and secured funding to support its operations. A loss of counterparty confidence, or adverse market conditions could lead to a reduction in the tenor, or an increase in the costs, of the Barclays Bank Group's unsecured and secured wholesale funding.
▪Impacts of market volatility: adverse market conditions, with increased volatility in asset prices can negatively impact the Barclays Bank Group’s liquidity position through increased derivative margin requirements and/or wider haircuts when monetising liquidity pool securities, and make it more difficult to execute secured financing transactions.
▪Intraday liquidity usage: increased collateral requirements at payments and securities settlement systems could negatively impact the Barclays Bank Group’s liquidity position, as cash and liquid assets required for intraday purposes are unavailable to meet other outflows.
▪Off-balance sheet commitments: deterioration in economic and market conditions could cause customers to draw on off-balance sheet commitments provided to them, for example, revolving credit facilities, negatively affecting the Barclays Bank Group's liquidity position.
▪Credit rating changes and the impact on funding costs: 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 (for example, this could lead to increased costs of funding and wider credit spreads, the triggering of additional collateral or other requirements in derivative contracts and other secured funding arrangements, or limits on the range of counterparties who are willing to enter into transactions with the Barclays Bank Group).
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 and stressed conditions (both actual and as defined for internal planning or regulatory stress testing purposes). This also 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 technical provision and/or IAS 19 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 hedging programmes for interest rate risk in the banking book rely on behavioural assumptions and, as a result, the effectiveness of the hedging strategy cannot be guaranteed. A potential mismatch in the balance or duration of the hedging assumptions could lead to earnings deterioration. A decline in interest rates in sterling, US dollars or euros may also compress net interest margin on retail and corporate portfolios. In addition, the Barclays Bank Group’s liquid asset portfolio is exposed to potential capital and/or income volatility due to movements in market rates and prices which may have a material adverse effect on the capital position of the Barclays Bank Group.
For further details on the Barclays Bank Group’s approach to treasury and capital risk, refer to the treasury and capital risk management and treasury and capital risk performance sections.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 33 | ||||
Risk review
Material existing and emerging risks
v)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 Barclays Bank Group functions in a highly competitive market, with market participants that expect consistent and smooth business processes. 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)Cyberattacks
Cyberattacks continue to be a global threat that is inherent across all industries, with the number and severity of attacks continuing to rise. The financial sector remains a primary target for cybercriminals, hostile nation states, opportunists and hacktivists. The Barclays Bank Group, like other financial institutions, experiences numerous attempts to compromise its cybersecurity.
The Barclays Bank Group dedicates significant resources to reducing cybersecurity risks, but it cannot provide absolute security against cyberattacks. Malicious actors are increasingly sophisticated in their methods, seeking to steal money, gain unauthorised access to, destroy or manipulate data, and disrupt operations, and some of their attacks may not be recognised until launched, such as zero-day attacks that are launched before patches and defences can be readied. Cyberattacks can originate from a wide variety of sources and target the Barclays Bank Group in numerous ways, including attacks on networks, systems, or devices used by the Barclays Bank Group or parties such as service providers and other suppliers, counterparties, employees, contractors, customers or clients, presenting the Barclays Bank Group with a vast and complex defence perimeter. Moreover, the Barclays Bank Group does not have direct control over the cybersecurity of the systems of its clients, customers, counterparties and third-party service providers and suppliers, limiting the Barclays Bank Group’s ability to effectively defend against certain threats. Some of the Barclays Bank Group’s third-party service providers and suppliers have experienced successful attempts to compromise their cybersecurity. These included ransomware attacks that disrupted the service providers’ or suppliers’ operations and, in some cases, had a limited impact on the Barclays Bank Group’s operations. Such cyberattacks are likely to continue.
A failure in the Barclays Bank Group’s adherence to its cybersecurity policies, procedures or controls, employee malfeasance, and human, governance or technological error could also compromise the Barclays Bank Group’s ability to successfully defend against cyberattacks. Furthermore, certain legacy technologies that are at or approaching end-of-life may not be able to maintain acceptable levels of security. The Barclays Bank Group has experienced cybersecurity incidents and near-misses in the past, and it is inevitable that additional incidents will occur in the future. Cybersecurity risks will continue to increase, due to factors such as the increasing demand across the industry and customer expectations for continued expansion of services delivered over the Internet; increasing reliance on internet-based products, applications and data storage; and changes in ways of working by the Barclays Bank Group’s employees, contractors, and third party service providers and suppliers and their subcontractors as a potentially long-term consequence of the COVID-19 pandemic. Bad actors have taken advantage of remote working practices and modified customer behaviours that have taken hold during the COVID-19 pandemic, exploiting the situation in novel ways that may elude defences.
Common types of cyberattacks include deployment of malware to obtain covert access to systems and data; ransomware attacks that render systems and data unavailable through encryption; denial of service and distributed denial of service (DDoS) attacks; infiltration via business email compromise; social engineering, including phishing, vishing and smishing; automated attacks using botnets; and credential validation or stuffing attacks using login and password pairs from unrelated breaches. A successful cyberattack of any type has the potential to cause serious harm to the Barclays Bank Group or its clients and customers, including exposure to potential contractual liability, litigation, regulatory or other government action, loss of existing or potential customers, damage to the Barclays Bank Group’s brand and reputation, and other financial loss. The impact of a successful cyberattack is also likely to include operational consequences (such as unavailability of services, networks, systems, devices or data), remediation of which could come at significant cost.
Regulators worldwide continue to recognise cybersecurity 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 to, cyberattacks. A successful cyberattack may, therefore, result in significant regulatory fines for the Barclays Bank Group.
For further details on the Barclays Bank Group’s approach to cyberattacks, refer to the operational risk performance section. For further details on cyber security regulation applicable to the Barclays Bank Group, refer to the Supervision and regulation section.
c)New and emergent technology
Technology is fundamental to the Barclays Bank Group’s business and the financial services industry. 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. For example, payment services and securities, futures and options trading are increasingly occurring electronically, both on the Barclays Bank Group’s own systems and through other alternative systems, and becoming automated. Whilst increased use of electronic payment and trading systems and direct electronic access to trading markets could significantly reduce the Barclays Bank Group’s cost base, it may, conversely, reduce the commissions, fees and margins made by the Barclays Bank Group on these transactions which could have a material adverse effect on the Barclays Bank Group’s business, results of operations, financial condition and prospects.
Introducing new forms of technology, however, 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.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 34 | ||||
Risk review
Material existing and emerging risks
d)External fraud
The nature of fraud is wide-ranging and continues to evolve, as criminals continually seek opportunities to target the Barclays Bank Group’s business activities and exploit changes in customer behaviour and product and channel use (such as the increased use of digital products and enhanced online services). Fraud attacks can be very sophisticated and are often orchestrated by highly organised crime groups who use ever more sophisticated techniques to target customers and clients directly to obtain confidential or personal information that can be used to commit fraud. The impact from fraud can lead to customer detriment, financial losses (including the reimbursement of losses incurred by customers), loss of business, missed business opportunities and reputational damage, all of which could have a material adverse impact 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 personal information, intellectual property and financial data and the Barclays Bank Group’s businesses are subject to complex and evolving laws and regulations governing the privacy and protection of personal information of individuals. The protected parties can include: (i) the Barclays Bank Group’s clients and customers, and prospective clients and customers; (ii) clients and customers of the Barclays Bank Group’s clients and customers; (iii) employees and prospective employees; and (iv) employees of the Barclays Bank Group’s suppliers, counterparties and other external parties.
The international nature of both the Barclays Bank Group’s business and its IT infrastructure also means that personal information may be available in countries other than those from where it originated. Accordingly, the Barclays Bank Group needs to ensure that its collection, use, transfer and storage of personal information complies with all applicable laws and regulations in all relevant jurisdictions (including as such new and existing regulations continue to be implemented, interpreted and applied), which could: (i) increase the Barclays Bank Group’s compliance and operating costs, particularly in the context of ensuring that adequate data protection and data transfer mechanisms are in place; (ii) impact the development of new products or services, impact the offering of existing products or services, or affect how products and services are offered to clients and customers; (iii) demand significant oversight by the Barclays Bank Group’s management; and (iv) require the Barclays Bank Group to review some elements of the structure of its businesses, operations and systems in less efficient ways.
Concerns regarding the effectiveness of the Barclays Bank Group’s measures to safeguard personal information, or even the perception that those measures are inadequate, could expose the Barclays Bank Group to the risk of loss or unavailability of data or data integrity issues and/or cause the Barclays Bank Group to lose existing or potential clients and customers, and thereby reduce the Barclays Bank Group’s revenues. Furthermore, any failure or perceived failure by the Barclays Bank Group to comply with applicable privacy or data protection laws and regulations (and the evolving standards imposed by data protection authorities in connection therewith) may subject it to potential contractual liability, litigation, regulatory or other government investigation or action (including significant regulatory fines) and require changes to certain operations or practices which could also inhibit the Barclays Bank Group’s development or marketing of certain products or services, or increase the costs of offering them to customers. Any of these events could damage the Barclays Bank Group’s reputation, subject the Barclays Bank Group to material fines or other monetary penalties, make the Barclays Bank Group liable to the payment of compensatory damages, divert management’s time and attention, lead to enhanced regulatory oversight and otherwise materially adversely affect its business, results of operations, financial condition and prospects.
For further details on data protection regulation applicable to the Barclays Bank Group, refer to the supervision and regulation section.
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, prospects and reputation.
g)Processing errors
The Barclays Bank Group’s businesses are highly dependent on its ability to process and monitor, on a daily basis, a very large number of transactions, many of which are highly complex and occur at high volumes and frequencies, across numerous and diverse markets in many currencies. As the Barclays Bank Group’s customer base and geographical reach expand and the volume, speed, frequency and complexity of transactions, especially electronic transactions (as well as the requirements to report such transactions on a real-time basis to clients, regulators and exchanges) increase, developing, maintaining and upgrading operational systems and infrastructure becomes more challenging, and the risk of systems or human error in connection with such transactions increases, as well as the potential consequences of such errors due to the speed and volume of transactions involved and the potential difficulty associated with discovering errors quickly enough to limit the resulting consequences. Furthermore, events that are wholly or partially beyond the Barclays Bank Group’s control, such as a spike in transaction volume, could adversely affect the Barclays Bank Group’s ability to process transactions or provide banking and payment services.
Processing errors could result in the Barclays Bank Group, among other things: (i) failing to provide information, services and liquidity to clients and counterparties in a timely manner; (ii) failing to settle and/or confirm transactions; (iii) causing funds transfers, capital markets trades and/or other transactions to be executed erroneously, illegally or with unintended consequences; and (iv) adversely affecting financial, trading or currency markets. Any of these events could materially disadvantage the Barclays Bank Group’s customers, clients and counterparties (including them suffering financial loss) and/or result in a loss of confidence in the Barclays Bank Group which, in turn, 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 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.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 35 | ||||
Risk review
Material existing and emerging risks
i)Estimates and judgements relating to critical accounting policies and regulatory disclosures
The preparation of financial statements requires the application of accounting policies and judgements to be made in accordance with IFRS. Regulatory returns and capital disclosures are prepared in accordance with the relevant capital reporting requirements and also require assumptions and estimates to be made. 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 provisions, taxes, fair value of financial instruments, pensions and post-retirement benefits, and provisions including conduct and legal, competition and regulatory matters (refer to the notes to the audited financial statements for further details). 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 accounting standards and regulatory interpretations could also materially impact the Barclays Bank Group’s results of operations, financial condition and prospects.
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 tax authority focus on 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. For example, the OECD and G20 Inclusive Framework on Base Erosion and Profit Shifting has announced plans to introduce a global minimum tax from 2023 which, if enacted, will increase the Barclays Bank Group’s tax compliance obligations. In addition, the proposed Build Back Better Act includes proposals to implement changes to US international tax provisions which may require systems and process changes if enacted. Any systems and process changes associated with these changes introduce additional operational risk.
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 potential effects on employee engagement and wellbeing from long-term periods of working remotely. 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, refer to the operational risk management and operational risk performance sections.
vi)Model risk
Model risk is the potential for adverse consequences from 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 representations of reality and have some degree of uncertainty because they rely on assumptions and inputs, and so are subject to intrinsic uncertainty, errors and inappropriate use affecting the accuracy of their outputs. This may be exacerbated when dealing with unprecedented scenarios, such as the COVID-19 pandemic, due to the lack of reliable historical reference points and data. 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. Model uncertainty, errors and inappropriate use may result in (among other things) the Barclays Bank Group making inappropriate business decisions and/or inaccuracies or errors 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, refer to the model risk management and model risk performance sections.
vii)Conduct risk
Conduct risk is the risk of poor outcomes for, or harm to, customers, clients and markets, arising from the delivery of the Barclays Bank Group's products and services. This risk could manifest itself in a variety of ways, including:
a)Market integrity
The Barclays Bank Group’s businesses are exposed to risk from potential non-compliance with its policies and standards and instances of wilful and negligent misconduct by employees, all of which could result in potential customer and client detriment, enforcement action (including regulatory fines and/or sanctions), increased operation and compliance costs, redress or remediation or reputational damage which in turn could have a material adverse effect on the Barclays Bank Group’s business, results of operations, financial condition and prospects. Examples of employee misconduct which could have a material adverse effect on the Barclays Bank Group’s business include: (i) employees improperly selling or marketing the Barclays Bank Group’s products and services; (ii) employees engaging in insider trading, market manipulation or unauthorised trading; or (iii) employees misappropriating confidential or proprietary information belonging to the Barclays Bank Group, its customers or third parties. These risks may be exacerbated in circumstances where the Barclays Bank Group is unable to rely on physical oversight and supervision of employees (such as during the COVID-19 pandemic where employees have worked remotely).
b)Customer protection
The Barclays Bank Group must ensure that its customers, particularly those that are vulnerable, are able to make well-informed decisions on how best to use the Barclays Bank Group’s financial services and understand that they are appropriately protected if something goes wrong. Poor customer outcomes can result from the failure to: (i) communicate fairly and clearly with customers; (ii) provide services in a timely and fair manner; (iii) handle and protect customer data appropriately; and (iv) undertake appropriate activity to address customer detriment, including the adherence to regulatory and legal requirements on complaint handling. The Barclays Bank Group is at risk of financial loss and reputational damage as a result.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 36 | ||||
Risk review
Material existing and emerging risks
c)Product design and review risk
Products and services must meet the needs of clients, customers, markets and the Barclays Bank Group throughout their life cycle. However, there is a risk that the design and review of the Barclays Bank Group products and services fail to reasonably consider and address potential or actual negative outcomes, which may result in customer detriment, enforcement action (including regulatory fines and/or sanctions), redress and remediation and reputational damage. Both the design and review of products and services are a key area of focus for regulators and the Barclays Bank Group.
d)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, 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 a material adverse effect on the Barclays Bank Group’s business, financial condition and prospects.
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 reinforced additional accountabilities for individuals across the Barclays Bank Group with an increased focus on governance and rigour, with similar requirements also introduced in other jurisdictions globally. 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, refer to the conduct risk management and conduct risk performance sections.
viii)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/or 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 (including its employees, clients and other associations) 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 (refer to ‘v) Operational risk’ above).
For further details on the Barclays Bank Group’s approach to reputation risk, refer to the reputation risk management and reputation risk performance sections.
ix)Legal risk and legal, competition and regulatory matters
The Barclays Bank Group conducts activities in a highly regulated global 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/or conflict, 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 any number of the material existing and emerging risks identified above.
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. In addition to matters specifically described in Note 25, 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 and may (from time to time) be subject to legal proceedings and other investigations relating to financial and non-financial disclosures made by members of the Barclays Bank Group (including, but not limited to, in relation to ESG disclosures). Additionally, due to the increasing number of new climate and sustainability-related laws and regulations (or laws and regulatory processes seeking to protect the energy sector from any risks of divestment or challenges in accessing finance), growing
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 37 | ||||
Risk review
Material existing and emerging risks
demand from investors and customers for environmentally sustainable products and services, and regulatory scrutiny, financial institutions, including the Barclays Bank Group, may through their business activities face increasing litigation, conduct, enforcement and contract liability risks related to climate change, environmental degradation and other social, governance and sustainability-related issues. Furthermore, there is a risk that shareholders, campaign groups, customers and other interest groups could seek to take legal action against the Barclays Bank Group for financing or contributing to climate change and environmental degradation.
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 (including formerly active matters or those arising after the date of this Annual Report) will not have a material adverse effect on the Barclays Bank Group’s business, results of operations, financial condition and prospects.
a)Over-issuance of US securities under the Company's US Shelf
The Company may be subject to claims for rescission or damages and regulatory enforcement actions in connection with certain sales of securities issued by it in excess of the amount set forth in a prior registration statement.
In August 2019, the SEC declared effective the Company’s Registration Statement on Form F-3 (the 2019 F-3) covering the offer and sale of up to $20.8bn maximum aggregate offering price of securities registered thereunder. It has been estimated that the maximum aggregate offering price set forth in the Company's 2019 F-3 was exceeded in February 2021, with issuances through to 10 March 2022 exceeding the limit by approximately $15bn. The securities that were issued in this period comprise structured notes and exchange traded notes (ETNs). As such, certain offers and sales were not made in compliance with the Securities Act of 1933, as amended (the Securities Act), giving rise to rights of rescission for certain purchasers of the securities. As a result, the Company has elected to make a rescission offer (the Rescission Offer) to eligible purchasers of the relevant affected securities, which it intends to launch as soon as reasonably practicable. The Barclays Group is also engaged with, and responding to inquiries and requests for information from, various regulators, including the SEC.
The Barclays Group is conducting a review, assisted by external counsel, of the facts and circumstances relating to the sale of the relevant affected securities in excess of amounts registered under the Company's 2019 F-3 and, among other things, the control environment related to such sales. The Barclays Group is also conducting an internal review involving a five-year look-back at limits in other issuance programmes. Management has assessed as remote the risk of material financial impact associated with issuance limits other than where pre-registration of securities is required; therefore the focus of the review has been on programmes with external regulatory limits related to securities issuance. This review has not identified any other breach of a external regulatory limit in any issuance programme used by a member of the Barclays Group. Management has identified an instance where a limit imposed solely for internal governance reasons was exceeded when taking into account a large security held on the Barclays Group's own balance sheet issued under a non-SEC registered debt issuance programme which did not have an external limit, although the breach of the internal limit did not give rise to any rights on the part of investors and did not constitute a material weakness. Nevertheless, there can be no assurance that the ongoing internal or external counsel reviews will not identify additional facts and information that could be material to an evaluation of this aspect of the Barclays Group's control environment.
Under Section 12(a)(1) of the Securities Act, certain purchasers of unregistered securities have a right to recover, upon the tender of such security, the consideration paid for such security with interest, less the amount of any income received, or damages if the purchaser no longer owns the security (the Rescission Price). Pursuant to the Rescission Offer, the Company will offer to repurchase the relevant affected securities at the Rescission Price.
Although the Rescission Offer is expected to reduce liability with respect to potential private civil claims, it will not necessarily prevent such claims from being asserted against the Company and/or its affiliates, including claims under applicable US federal securities laws. Further, the Rescission Offer will not bar the SEC or other authorities from pursuing enforcement actions against the Company and its affiliates, which could result in fines, penalties and/or other sanctions.
As at 31 March 2022, the Company had a provision of £540m relating to this matter, £320m of which was recognised as at 31 March 2022 and £220m of which was recognised as at 31 December 2021 in relation to the c.$13bn over-issuance of structured notes, which represents the best estimate of the rescission right investors have for these securities. A contingent liability exists in relation to the c.$2bn over-issuance of ETNs due to evidentiary challenges and the high level of trading in the securities. A contingent liability also exists in relation to any potential civil claims or enforcement actions taken against the Company but the Company is unable to assess the likelihood of liabilities that may arise out of such claims or actions, there is currently no indication of the timetable for resolution and it is not practicable to provide an estimate of the financial effects.
The final cost of the Rescission Offer will be impacted by a number of factors, including prevailing market conditions. Prior to the completion of the Rescission Offer, the amount of the provision will fluctuate, perhaps materially, due, in part, to the volatility of the market prices for the structured notes subject to the Rescission Offer. While the Company and/or its affiliates have entered into hedging arrangements designed to minimise the volatility, such arrangements cannot by their very nature completely hedge the exposures, which may mean the final impact of the Rescission Offer may materially differ from the £540m provision reflected as at 31 March 2022. In addition, the hedging arrangements may be modified, may not prove effective (in existing or modified form), may expire prior to the end of the Rescission Offer and do not cover any other losses arising out of potential private civil claims or enforcement actions. Any of the foregoing could result in material additional losses for the Barclays Bank Group.
Any liabilities, claims or actions in connection with the over-issuance of securities under the 2019 F-3 could have a material adverse effect on the Company’s and the Barclays Bank Group’s business, financial condition, results of operations and reputation as a frequent issuer in the securities markets.
Management has concluded that, by virtue of the fact that there was a weakness in controls over the identification of external regulatory limits related to securities issuance and monitoring against these limits, the Company had a material weakness in relation to certain aspects of its internal control environment and, as a consequence, its internal control over financial reporting and disclosure controls and procedures as at 31 December 2021 were not effective. Further details on such material weakness are set out under ‘Material existing and emerging risks potentially impacting more than one principal risk - viii) Internal control over financial reporting and disclosure controls and procedures’ above. Further details on disclosure controls and procedures are set out under “Additional unaudited information - Additional information - Disclosure controls and procedures” below.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 38 | ||||
Risk review
Principal risk management
Climate risk management The impact on Financial and Operational Risks arising from climate change through, physical risks, risks associated with transitioning to a lower carbon economy and connected risks arising as a result of second order impacts on portfolios of these two drivers. | ||
Overview
Given the increasing risks associated with climate change, and to support the Barclays Group’s ambition to be a net zero bank by 2050, it was agreed that climate risk would become a Principal Risk from 2022.
To support this decision, in 2021 the Barclays Group delivered a Climate Risk Integration Plan with three overarching objectives:
1.Governance Framework: Develop a Principal Risk Framework and Risk Appetite Statement and integrate climate drivers into limit setting.
2.Scenario Analysis: Refine methodologies used for the 2020 scenario analysis to support the Bank of England Biennial Exploratory Scenario on climate change, with specific focus on wholesale credit and physical risk modelling.
3.Carbon Modelling: Enhance the BlueTrackTM model to further develop the approach for the Energy sector, expand coverage to Cement and Metals and consider the overall net zero ambition of the Barclays Group.
For more detail on how climate risks arise and their impact on the Barclays Bank Group, refer to the ‘material existing and emerging risks’ section.
Organisation and Structure
On behalf of the Barclays PLC Board, the Barclays PLC Board Risk Committee reviews and approves the Barclays Group’s approach to managing the financial and operational risks associated with climate change. Reputation risk is the responsibility of the Barclays PLC Board, which directly handles the most material issues facing the Barclays Group. Broader sustainability matters and other reputation risk issues associated with climate change are coordinated by the Sustainability team.
In 2021 the Head of Climate Risk took the role of Climate Principal Risk owner, reporting directly to Group Chief Risk Officer.
To support the oversight of Barclays Group climate risk profile a Climate Risk Committee (CRC) has been established. The CRC is a sub-committee of the Group Risk Committee (GRC), the most senior executive body responsible for review and challenge of risk practices and risk profile, for climate risk and other principal risk types. The authority of the CRC is delegated by the GRC.
Working groups support the management of climate risk at Barclays Bank Group and Barclays Bank UK Group.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 39 | ||||
Risk review
Principal risk management
The Climate Risk Framework (CRF) was developed in 2021 to support the Enterprise Risk Management Framework and outlines the key principles for managing climate risk.
Climate risk across certain other Principal Risk types is managed via a ‘Climate Change Financial Risk and Operational Risk Policy’, which is embedded in each of the following Principal Risk Frameworks and contains key principles for identifying and quantifying climate risk, with supporting reporting and governance.
| Risk Type | Risk Identification | Risk Measurement | ||||||
| Credit risk | Identified as part of sovereign, portfolio and obligor credit annual reviews. | Measured using a Credit Risk Materiality Matrix completed for obligor/obligee groups with elevated exposure to climate change risk. Retail portfolios are monitored through regular reporting of climate metrics and are assessed against mandate triggers where appropriate. | ||||||
| Market risk | Identified using stress tests, aggregate market risk exposures from climate related risks. | Measured by using adverse multi-asset stress scenarios applied to individual risk factors reflecting climate change risks across sectors, countries and regions. | ||||||
| Treasury and capital risk | Identified using stress tests and analysis to assess the exposures which may be impacted by climate related risks. | Measured as part of stress testing and key risk indicator monitoring. | ||||||
| Operational risk | Confirmed operational risks associated with climate change are included in the Barclays Bank Group's Operational Risk Taxonomy. Climate risk included within the Strategic Risk Assessment process. | Established reporting on internal and external climate related risk events to the Operational Risk Committee. Risk tolerances for premises and resilience risks are reviewed so these adequately capture climate related risk drivers. | ||||||
Risks resulting from climate change aligned to Model, Conduct, Reputation and Legal Principal Risks are out of the scope of the CRF and continue to be managed under their respective Principal Risk Frameworks. As climate risk continues to evolve, the effect upon these risks may change. Specific consideration of the impact of these changes will be covered as part of these frameworks.
A Climate Risk Appetite at Barclays Group level was introduced in line with the Barclays Group’s risk appetite approach. It establishes a direct link between strategic plans and risk appetite, supporting the Barclays Group's ambition to be a net zero bank by 2050.
Linking with ESG and Reputation Risk:
Barclays has published a Climate Change Statement, which sets out the strategic ambition to support economies and clients through the net zero transition, as well as appetite for conducting business with particularly sensitive energy sub-sectors. It is supported by an internal Climate Change Standard, which outlines the controls and approach to these sectors in more detail, including requirements for enhanced due diligence for restricted activities (such as outlined in the Barclays Group Forestry & Palm Oil Standard).
These standards are enforced through an existing transaction origination, review and approval process.
A dedicated Sustainability team considers how the Barclays Group approaches wider sustainability and environmental, social and governance (ESG) matters, working closely with the Environmental Risk Management function.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 40 | ||||
Risk review
Principal risk management
Credit risk management (audited) 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 the Barclays Bank Group, including the whole and timely payment of principal, interest, collateral and other receivables. | ||
Overview
The credit risk that the Barclays Bank Group faces arises from wholesale and retail loans and advances together with the counterparty credit risk arising from derivative contracts with clients; trading activities, including: debt securities, settlement balances with market counterparties, FVOCI assets and reverse repurchase loans.
Credit risk management objectives are to:
▪maintain a framework of controls to oversee credit risk;
▪identify, assess and measure credit risk clearly and accurately across the Barclays Bank Group and within each separate business, from the level of individual facilities up to the total portfolio;
▪control and plan credit risk taking in line with external stakeholder expectations and avoiding undesirable concentrations; and
▪monitor credit risk and adherence to agreed controls.
Organisation, roles and responsibilities
The first line of defence has primary responsibility for managing credit risk within the risk appetite and limits set by the Risk function, supported by a defined set of policies, standards and controls. In the Barclays Bank Group, business risk committees (attended by the first line) monitor and review the credit risk profile of each business unit where the most material issues are escalated to the Retail Credit Risk Management Committee, Wholesale Credit Risk Management Committee and the Barclays Group Risk Committee.
Wholesale and retail portfolios are managed separately to reflect the differing nature of the assets; wholesale balances tend to be larger and are managed on an individual basis, while retail balances are greater in number but lesser in value and are, therefore, managed in aggregated segments.
The responsibilities of the credit risk management teams in the businesses, the sanctioning team and other shared services include: sanctioning new credit agreements (principally wholesale); setting strategies for approval of transactions (principally retail); setting risk appetite; monitoring risk against limits and other parameters; maintaining robust processes, data gathering, quality, storage and reporting methods for effective credit risk management; performing effective turnaround and workout scenarios for wholesale portfolios via dedicated restructuring and recoveries teams; maintaining robust collections and recovery processes/units for retail portfolios; and review and validation of credit risk measurement models. The credit risk management teams in the Barclays Bank Group are accountable to the Barclays Bank PLC CRO, who reports to the Barclays Group CRO.
For wholesale portfolios, credit risk managers are organised in sanctioning teams by geography, industry and/or product. In wholesale portfolios, credit risk approval is undertaken by experienced credit risk professionals operating within a clearly defined delegated authority framework, with only the most senior credit officers assigned the higher levels of delegated authority. The largest credit exposures, which are outside the Risk Sanctioning Unit or Risk Distribution Committee authority, require the support of the Barclays Bank PLC Senior Credit Officers. For exposures in excess of the Barclays Bank PLC Senior Credit Officers’ authority, approval by the Barclays Group Senior Credit Officer/Barclays PLC Board Risk Committee is also required. The Barclays Group Credit Risk Committee, attended by the Barclays Bank PLC Senior Credit Officers, provides a formal mechanism for the Barclays Group Senior Credit Officer to exercise the highest level of credit authority over the most material Barclays Group single name exposures.
Credit risk mitigation
The Barclays Bank Group employs a range of techniques and strategies to actively mitigate credit risks. These can broadly be divided into three types:
▪Netting and set-off.
▪Collateral.
▪Risk transfer.
Netting and set-off
Credit risk exposures can be reduced by applying netting and set-off. For derivative transactions, the Barclays Bank Group’s normal practice is to enter into standard master agreements with counterparties (e.g. ISDAs). These master agreements typically allow for netting of credit risk exposure to a counterparty resulting from derivative transactions against the obligations to the counterparty in the event of default, and so produce a lower net credit exposure. These agreements may also reduce settlement exposure (e.g. for foreign exchange transactions) by allowing payments on the same day in the same currency to be set-off against one another.
Collateral
The Barclays Bank Group has the ability to call on collateral in the event of default of the counterparty, comprising:
▪Home loans: a fixed charge over residential property in the form of houses, flats and other dwellings.
▪Wholesale lending: a fixed charge over commercial property and other physical assets, in various forms.
▪Other retail lending: includes charges over motor vehicles and other physical assets; second lien charges over residential property and finance lease receivables.
▪Derivatives: the Barclays Bank Group also often seeks to enter into a margin agreement (e.g. Credit Support Annex) with counterparties with which the Barclays Bank Group has master netting agreements in place. These annexes to master agreements provide a mechanism for further reducing credit risk, whereby collateral (margin) is posted on a regular basis (typically daily) to collateralise the mark to market exposure of a derivative portfolio measured on a net basis.
▪Reverse repurchase agreements: collateral typically comprises highly liquid securities which have been legally transferred to the Barclays Bank Group subject to an agreement to return them for a fixed price.
▪Financial guarantees and similar off-balance sheet commitments: cash collateral may be held against these arrangements.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 41 | ||||
Risk review
Principal risk management
Risk transfer
A range of instruments including guarantees, credit insurance, credit derivatives and securitisation can be used to transfer credit risk from one counterparty to another. These mitigate credit risk in two main ways:
▪If the risk is transferred to a counterparty which is more creditworthy than the original counterparty, then overall credit risk is reduced.
▪Where recourse to the first counterparty remains, both counterparties must default before a loss materialises. This is less likely than the default of either counterparty individually so credit risk is reduced.
Market risk management (audited) The risk of loss arising from potential adverse changes 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. | ||
Overview
Market risk arises primarily as a result of client facilitation in wholesale markets, involving market making activities, risk management solutions and execution of syndications. Upon execution of a trade with a client, the Barclays Bank Group will look to hedge against the risk of the trade moving in an adverse direction. Mismatches between client transactions and hedges result in market risk due to changes in asset prices, volatility or correlations.
Organisation, roles and responsibilities
Market risk in the businesses resides primarily in CIB and Treasury. These businesses have the mandate to assume market risk. The front office and Treasury trading desks are responsible for managing market risk on a day-to-day basis, where they are required to understand and adhere to all limits applicable to their businesses. The Market Risk team support the trading desks with the day-to-day limit management of market risk exposures through governance processes which are outlined in supporting market risk policies and standards.
Market risk oversight and challenge is provided by business committees and Barclays Group committees, including the Market Risk Committee (MRC).
The objectives of market risk management are to:
▪Identify, understand and control market risk by robust measurement, limit setting, reporting and oversight.
▪Facilitate business growth within a controlled and transparent risk management framework.
▪Control market risk in the businesses according to the allocated appetite.
To meet the above objectives, a governance structure is in place to manage these risks consistent with the ERMF.
The Barclays Bank PLC Board Risk Committee recommends market risk appetite to the Barclays Bank PLC Board for their approval, within the parameters set by the Barclays PLC Board.
The Market Risk Committee (MRC) reviews and makes recommendations concerning the Barclays Group-wide market risk profile. This includes overseeing the operation of the Market Risk Framework and associated standards and policies; reviewing market or regulatory issues and reviewing limits and utilisation. The committee is chaired by the Market Risk Principal Risk Lead and attendees include the business heads of market risk and business aligned market risk managers.
In addition to MRC, the Corporate and Investment Bank Risk Committee (CIBRC) is the main forum in which market risk exposures are discussed and reviewed with senior business heads. The Committee is chaired by the CRO of Barclays International and meets weekly, covering current market events, notable market risk exposures, and key risk topics. New business initiatives are generally socialised at CIBRC before any changes to risk appetite or associated limits are considered in other governance committees.
Management value at risk (VaR)
VaR is an estimate of the potential loss arising from unfavourable market movements if the current positions were to be held unchanged for one business day. For internal market risk management purposes, a historical simulation methodology with a one-year equally weighted historical period, at the 95% confidence level is used for all trading books and some banking books.
Limits are applied at the total level as well as by risk factor type, which are then cascaded down to particular trading desks and businesses by the market risk management function.
See page 77 for a review of management VaR.
Treasury and capital risk management This comprises: Liquidity risk: 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. Capital risk: 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 and stressed conditions (both actual and as defined for internal planning or regulatory testing purposes). This also 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. | ||
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 42 | ||||
Risk review
Principal risk management
The Treasury function manages treasury and capital risk exposure on a day-to-day basis, acting as the principal management body for the Barclays Bank Group. The Treasury and Capital Risk function is responsible for oversight and provides insight into key capital, liquidity, interest rate risk in the banking book (IRRBB) and pension risk management activities.
Liquidity risk management (audited)
Overview
The efficient management of liquidity is essential to Barclays Bank PLC in order to retain the confidence of the financial markets and maintain the sustainability of the business. Treasury and Capital Risk have created a framework that is used to manage all liquidity risk exposures under both normal and stressed conditions. The framework is designed to maintain liquidity resources that are sufficient in amount, tenor, quality and composition to remain within the liquidity risk appetite as expressed by the Barclays Bank PLC Board. The liquidity risk appetite is monitored against both internal and regulatory liquidity metrics.
Organisation, roles and responsibilities
Treasury has the primary responsibility for managing liquidity risk within the set risk appetite. Both Risk and Treasury contribute to the production of the Internal Liquidity Adequacy Assessment Process (ILAAP). The Treasury and Capital Risk function is responsible for the management and governance of the liquidity risk mandate, as defined by the Barclays Bank PLC Board.
The framework established by Treasury and Capital Risk is designed to deliver the appropriate term and structure of funding, consistent with the liquidity risk appetite set by the Barclays Bank PLC Board.
The framework incorporates a range of ongoing business management tools to monitor, limit and stress test the Barclays Bank PLC balance sheet and contingent liabilities. Limit setting and stress testing are tools that are designed to control the level of liquidity risk taken and drive the appropriate mix of funds. In addition, Barclays maintains a Barclays Group recovery plan which includes application to Barclays Bank PLC. Together, these tools reduce the likelihood that a liquidity stress event could lead to an inability to meet Barclays Bank PLC obligations as they fall due.
The Barclays Bank PLC Board approves the Barclays Bank PLC funding plan, recovery plan and liquidity risk appetite. Barclays Bank PLC’s Treasury Committee is responsible for monitoring and managing liquidity risk in line with Barclays Bank PLC’s funding management objectives, funding plan and risk appetite. The Barclays Group Treasury and Capital Risk Committee monitors and reviews the liquidity risk profile and control environment, providing second line oversight of the management of liquidity risk. The Barclays Bank PLC Board Risk Committee reviews the risk profile, and reviews liquidity risk appetite at least annually and the impact of stress scenarios on Barclays Bank PLC’s funding plan/forecast in order to agree risk appetite in line with Barclays Bank PLC’s projected funding abilities.
Capital risk management (audited)
Overview
Capital risk is managed through ongoing monitoring and management of the capital position, regular stress testing and a robust capital governance framework. The objectives of the framework are to maintain adequate capital for the Barclays Bank Group and its legal entities to withstand the impact of the risks that may arise under normal and stressed conditions, and maintain adequate capital to cover current and forecast business needs and associated risks to provide a viable and sustainable business offering.
Organisation, roles and responsibilities
Treasury has the primary responsibility for managing and monitoring capital adequacy. The Barclays Bank Group Treasury and Capital Risk function provides oversight of capital risk. Production of the Barclays Bank PLC Internal Capital Adequacy Assessment Process (ICAAP) is the responsibility of Treasury.
Capital risk management is underpinned by a control framework and policy. The capital management strategy, outlined in the relevant legal entity capital plans, is developed in alignment with the control framework and policy for capital risk, and is implemented consistently in order to deliver on the Barclays Bank Group’s objectives, which are aligned to those of the Barclays Group.
The Barclays Bank PLC Board approves the Barclays Bank PLC capital plan, internal stress tests and results of regulatory stress tests and those of the relevant Barclays Bank Group entities. The Barclays PLC Board also approves the Barclays Group recovery plan which takes into account management actions identified at the Barclays Bank Group level. The Barclays Bank PLC Treasury Committee together with the Barclays Group Treasury Committee are responsible for monitoring and managing capital risk in line with Barclays Bank Group’s capital management objectives, capital plan and risk frameworks. The BRC monitors and reviews the capital risk profile and control environment, providing second line oversight of the management of capital risk.
For the relevant Barclays Bank Group subsidiaries, local management assures compliance with an entity’s minimum regulatory capital requirements by reporting to local Asset and Liability Committees (or equivalents) with oversight by the Barclays Bank PLC Treasury Committee and the Barclays Group Treasury Committee, as required. In 2021, Barclays complied with all regulatory minimum capital requirements.
Pension risk
The Barclays Bank Group maintains a number of defined benefit pension schemes for past and current employees. The ability of schemes to meet pension payments is achieved with investments and contributions.
Pension risk arises because the market value of pension fund assets might decline; investment returns might reduce; or the estimated value of pension liabilities might increase. The Barclays Bank Group monitors the pension risks arising from its defined benefit pension schemes and works with the relevant pension fund’s trustees to address shortfalls. In these circumstances the Barclays Bank Group could be required or might choose to make extra contributions to the pension fund. The Barclays Bank Group’s main defined benefit scheme was closed to new entrants in 2012.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 43 | ||||
Risk review
Principal risk management
Interest rate risk in the banking book management (IRRBB)
Overview
Interest rate risk in the banking book is driven by customer deposit taking and lending activities, investments in the liquid asset portfolio and funding activities. As per the Barclays Bank Group’s policy to remain within the defined risk appetite, hedging strategies are executed to mitigate the various IRRBB risks that result from these activities. However, the Barclays Bank Group remains susceptible to interest rate risk and other non-traded market risks from the following key sources:
▪Interest rate and repricing risk: the risk that net interest income could be adversely impacted by a change in interest rates, differences in the timing of interest rate changes between assets and liabilities, and other constraints on interest rate changes as per product terms and conditions.
▪Customer behavioural risk: the risk that net interest income could be adversely impacted by the discretion that customers and counterparties may have in respect of being able to vary their contractual obligations with the Barclays Bank Group. This risk is often referred to by industry regulators as ‘embedded option risk’.
▪Investment risks in the liquid asset portfolio: the risk that the fair value of assets held in the liquid asset portfolio and associated risk management portfolios could be adversely impacted by market volatility, creating volatility in capital directly.
Organisation, roles and responsibilities
The Barclays Bank PLC Treasury Committee, together with the Barclays Group Treasury Committee, are responsible for monitoring and managing IRRBB risk in line with the Barclays Bank Group’s management objectives and risk frameworks. The BRC and Treasury and Capital Risk Committee monitors and reviews the IRRBB risk profile and control environment, providing second line oversight of the management of IRRBB. The BRC reviews the interest rate risk profile, including review of the risk appetite at least annually and the impact of stress scenarios on the interest rate risk of the Barclays Bank PLC’s banking books.
In addition, the Barclays Bank Group’s IRRBB policy sets out the processes and key controls required to identify all IRRBB risks arising from banking book operations, to monitor the risk exposures via a set of metrics with a frequency in line with the risk management horizon, and to manage these risks within agreed risk appetite and limits.
Operational risk management The risk of loss to the Barclays Bank Group from inadequate or failed processes or systems, human factors or due to external events (for example fraud) where the root cause is not due to credit or market risks. | ||
Overview
The management of operational risk has three key objectives:
•deliver an operational risk capability owned and used by business leaders to enable sound risk decisions over the long term;
•provide the frameworks, policies and standards to enable management to meet their risk management responsibilities while the second line of defence provides robust, independent, and effective oversight and challenge; and
•deliver a consistent and aggregated measurement of operational risk that will provide clear and relevant insights, so that the right management actions can be taken to keep the operational risk profile consistent with the Barclays Bank Group’s strategy, the stated risk appetite and stakeholder needs.
The Barclays Bank Group operates within a system of internal controls that enables business to be transacted and risk taken without exposing it to unacceptable potential losses or reputational damages.
Organisation, roles and responsibilities
The prime responsibility for the management of operational risk and the compliance with control requirements rests within the business and functional units where the risk arises. The operational risk profile and control environment is reviewed by management through business risk committees and control committees. Operational risk issues escalated from these meetings are considered through the second line of defence review meetings. Depending on their nature, the outputs of these meetings are presented to the Operational Risk Profile Forum, the Operational Risk Committee, the Barclays Bank Risk Forum, the Barclays Bank PLC Board Risk Committee or the Barclays Bank PLC Board Audit Committee. In addition, specific reports are prepared by Operational Risk on a regular basis for the Barclays Bank Risk Forum, GRC and the BRC.
Businesses and functions are required to report their operational risks on both a regular and an event-driven basis. The reports include a profile of the material risks that may threaten the achievement of their objectives and the effectiveness of key controls, operational risk events and a review of scenarios.
The Barclays Group Head of Operational Risk is responsible for establishing, owning and maintaining an appropriate Barclays Group-wide Operational Risk Management Framework, meanwhile the Barclays Bank PLC Head of Operational Risk is responsible for overseeing the portfolio of operational risk across all Barclays Bank Group businesses.
The Operational Risk function acts in a second line of defence capacity, and is responsible for defining and overseeing the implementation of the framework and monitoring Barclays Bank Group’s operational risk profile. The Operational Risk function alerts management when risk levels exceed acceptable tolerance in order to drive timely decision making and actions by the first line of defence.
Operational risk categories
Operational risks are grouped into risk categories to support effective risk management, measurement and reporting. These comprise: Data Management Risk; Financial Reporting Risk; Fraud Risk; Information Security Risk; Operational Resilience Planning Risk; Payments Process Risk; People Risk; Premises Risk; Physical Security Risk; Strategic Investment Change Management Risk; Supplier Risk; Tax Risk; Technology Risk; and Transaction Operations Risk.
In addition to the above, operational risk encompasses risks associated with prudential regulation. This includes the risk of failing to: adhere to prudential regulatory requirements; provide regulatory submissions; or monitor and manage adherence to new prudential regulatory requirements.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 44 | ||||
Risk review
Principal risk management
Risk themes
The Barclays Bank Group also recognises that there are certain threats/risk drivers that are more thematic and have the potential to impact the Barclays Bank Group’s strategic objectives. These are risk themes which require an overarching and integrated risk management approach. The Barclays Bank Group’s risk themes include Cyber, Data and Resilience.
For definitions of the Barclays Bank Group’s operational risk categories and enterprise risk themes, refer to pages 202 to 204 of the Barclays PLC Pillar 3 Report 2021.
Model risk management The potential for adverse consequences from decisions based on incorrect or misused model outputs and reports. | ||
Overview
The Barclays Bank Group uses models to support a broad range of activities, including informing business decisions and strategies, measuring and limiting risk, valuing exposures, conducting stress testing, assessing capital adequacy, managing client assets, and meeting reporting requirements.
Organisation, roles and responsibilities
The Barclays Group has a dedicated Model Risk Management (MRM) function that consists of four teams: (i) Independent Validation Unit (IVU), responsible for model validation and approval; (ii) Model Governance (MG), responsible for model risk governance, controls and reporting, including ownership of Model Risk Framework, the Group Model Risk Policy, and the associated standards; (iii) Strategy and Transformation responsible for inventory, strategy, communications and business management; and (iv) Model Risk Measurement and Quantification (MRMQ), responsible for the design of the framework and methodology to measure and, where possible, quantify model risk. It is also responsible for the strategic Validation Centre of Excellence (VCoE), which is an independent quality assurance function within MRM with the mandate to review and challenge validation outcomes.
The model risk management framework consists of the model risk policy and standards. The policy prescribes the Barclays Group-wide, end-to-end requirements for the identification, measurement and management of model risk, covering model documentation, development, monitoring, annual review, independent validation and approval, change and reporting processes. The policy is supported by global standards covering model inventory, documentation, validation, complexity and materiality, testing and monitoring, overlays, risk appetite, as well as vendor models and stress testing challenger models.
The function reports to the Barclays Group CRO and operates a global framework. Implementation of best practice standards is a central objective of the Barclays Group.
The key model risk management activities include:
▪Correctly identifying models across all relevant areas of the Barclays Bank Group, and recording models in the Barclays Group Models Database (GMD), the Barclays Group-wide model inventory.
▪Enforcing that every model has a model owner who is accountable for the model. The model owner must sign off models prior to submission to IVU for validation and maintain that the model presented to IVU is and remains fit for purpose.
▪Overseeing that every model is subject to validation and approval by IVU, prior to being used and on a continual basis.
▪Defining model risk appetite in terms of risk tolerance, and qualitative metrics which are used to track and report model risk.
Conduct risk management The risk of poor outcomes for, or harm to, customers, clients and markets, arising from the delivery of the Barclays Bank Group's products and services. | ||
Overview
The Barclays Bank Group defines, manages and mitigates conduct risk with the objective of providing good customer and client outcomes, protecting market integrity and promoting effective competition.
Conduct risk incorporates market integrity, customer protection, financial crime and product design and review risks.
Organisation, roles and responsibilities
The Conduct Risk Management Framework (CRMF) outlines how the Barclays Bank Group manages and measures its conduct risk profile. The Barclays Group Chief Compliance Officer is accountable for developing, maintaining and overseeing the CRMF. The Barclays Bank Group Chief Compliance Officer is responsible for providing effective oversight, management and escalation of conduct risk in line with the CRMF. This includes overseeing the development and maintenance of the relevant conduct risk policies and standards and monitoring and reporting on the consistent application and effectiveness of the implementation of controls to manage conduct risk. It is the responsibility of the first line of defence to establish controls to manage its performance and assess conformance to these policies and controls.
Senior managers are accountable within their areas of responsibility for owning and managing conduct risk in accordance with the CRMF, as defined within their regulatory Statement of Responsibilities.
Compliance as an independent second line function helps to prevent, detect and manage breaches of applicable laws, rules, regulations and procedures and has a key role in helping Barclays Bank Group achieve the right conduct outcomes and evolve a conduct-focused culture.
The governance of conduct risk within the Barclays Bank Group is fulfilled through management committees and forums operated by the first and second lines of defence with clear escalation and reporting lines to the Board. The Barclays Group and Barclays Bank Group Risk Committees are the
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 45 | ||||
Risk review
Principal risk management
primary second line governance committees for the oversight of the Conduct Risk Profile. The risk committees' responsibilities include the identification and discussion of any emerging conduct risks exposures in the Barclays Group and Barclays Bank Group.
Reputation risk management The risk that an action, transaction, investment, event, decision, or business relationship will reduce trust in the Barclays Bank Group’s integrity and/or competence. | ||
Overview
A reduction of trust in the Barclays Bank Group’s integrity and competence may reduce the attractiveness of Barclays Bank Group to stakeholders and could lead to negative publicity, loss of revenue, regulatory or legislative action, loss of existing and potential client business, reduced workforce morale and difficulties in recruiting talent. Ultimately it may destroy shareholder value.
Organisation, roles and responsibilities
The governance of reputation risk within the Barclays Bank Group is fulfilled through management committees and forums operated by the First and Second Lines of Defence, with clear escalation and reporting lines to the relevant Barclays Bank Group Board committees.
The Barclays PLC Board is responsible for reviewing and monitoring the effectiveness of the Barclays Bank Group's management of reputation risk.
The Reputation Risk Management Framework (RRMF) comprises a number of elements that allow the Barclays Bank Group to manage and measure its reputation risk profile. The RRMF sets out what is required to manage reputation risk across the Barclays Bank Group.
The Barclays Bank PLC Chief Compliance Officer is responsible for providing independent second line oversight of Businesses' adherence to the RRMF.
Legal risk management The risk of loss or imposition of penalties, damages or fines from the failure of the Barclays Bank Group to meet its legal obligations, including regulatory or contractual requirements. | ||
Overview
The Barclays Bank Group has no tolerance for wilful breaches of laws, regulations or other legal obligations. However, the multitude of laws and regulations across the globe are highly dynamic and their application to particular circumstances is often unclear. This results in a high level of inherent legal risk which Barclays Bank Group seeks to mitigate through the operation of a Barclays Group-wide legal risk management framework, including the implementation of Barclays Group-wide legal risk policies requiring the engagement of legal professionals in situations that have the potential for legal risk. Notwithstanding these mitigating actions, Barclays Bank Group operates with a level of residual legal risk, for which the Barclays Bank Group has limited tolerance.
Organisation, roles and responsibilities
The Barclays Bank Group’s businesses and functions have primary responsibility for identifying and escalating legal risk in their area as well as responsibility for adherence to minimum control requirements.
The Legal function organisation and coverage model aligns legal expertise to businesses, functions, products, activities and geographic locations so that the Barclays Bank Group receives support from appropriate legal professionals, working in partnership to manage legal risk. The senior management of the Legal function oversees, challenges and monitors the legal risk profile and effectiveness of the legal risk control environment across the Barclays Group. The Legal function does not sit in any of the Three Lines of Defence but supports them all.
The Barclays Group General Counsel is responsible for developing and maintaining a Barclays Group-wide legal risk management framework. This includes defining the relevant legal risk policies, developing Barclays Group-wide risk appetite for legal risk, and oversight of the implementation of controls to manage and escalate legal risk.
The legal risk profile and control environment is reviewed by management through business risk committees and control committees. The Barclays Bank Group Risk Committee is incorporated in the Barclays Group Risk Committee and is the most senior executive body responsible for reviewing and monitoring the effectiveness of risk management across the Barclays Bank Group. Escalation paths from this committee exist to the Barclays Bank PLC Board Risk Committee.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 46 | ||||
Risk review
Risk performance
Credit risk
| Summary of Contents | Page | |||||||
| Credit risk represents a significant risk to the Barclays Bank Group and mainly arises from exposure to wholesale and retail loans and advances together with the counterparty credit risk arising from derivative contracts entered into with clients. | 48 | |||||||
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| This section outlines the expected credit loss allowances, the movements in allowances during the period, material management adjustments to model output and measurement uncertainty and sensitivity analysis. | 52 | |||||||
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| The Barclays Bank Group reviews and monitors risk concentrations in a variety of ways. This section outlines performance against key concentration risks. | 69 | |||||||
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| Credit Risk monitors exposure performance across a range of significant portfolios. | 75 | |||||||
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–Government supported loans | 75 | |||||||
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 47 | ||||
Risk review
Risk performance
Credit risk
All disclosures in this section pages 48 to 75 are unaudited unless otherwise stated.
Overview
Credit risk represents a significant risk to the Barclays Bank Group and mainly arises from exposure to wholesale and retail loans and advances together with the counterparty credit risk arising from derivative contracts entered into with clients.
The continued impact of the COVID-19 pandemic has meant that management was required to monitor economic uncertainty judgement over the course of 2021. Customer and client default rates have remained relatively stable despite the impact of the pandemic and volatile macroeconomic environment. In retail cards, credit profiles did not show material deterioration due to continued government support measures in some geographies and customer deleveraging. In wholesale, watch list balances continue to improve. However, the degree of economic uncertainty remains relatively high: credit deterioration may still occur when support measures are fully withdrawn; emerging supply chain disruption and inflationary pressures may challenge economic stability. Given this backdrop, management has maintained economic uncertainty adjustments to modelled outputs to address these sources of uncertainties and ensure that the potential impact of stress are provided for. This uncertainty continues to be captured in two distinct ways: firstly, the identification of customers and clients who may be more vulnerable to the withdrawal of support and emerging economic instability and secondly, model uncertainty which does not capture certain macroeconomic and risk parameter uncertainties which are applied at a portfolio level. Refer to the Management adjustment to models for impairment section on pages 57 to 58 for further details.
Further detail can be found in the financial statements section in Note 7 Credit impairment charges. Descriptions of terminology can be found in the glossary, available at home.barclays/annualreport.
Summary of performance in the period
Credit impairment release of £277m (2020: £3,377m charge) was driven by an improved macro-economic outlook. CIB credit impairment release of £461m (2020: £1,565m charge) was also supported by net single name wholesale loan release and a benign credit environment and CC&P credit impairment charges of £185m (2020: £1,720m charge) was supported by lower delinquencies and higher customer repayments. As at 31 December 2021, 30 and 90 days arrears rates in US cards were 1.6% (2020: 2.5%) and 0.8% (2020: 1.4%) respectively.
Key metrics
Decrease of £1,837m impairment allowance
Impairment allowances on loans and advances at amortised cost including off-balance sheet elements of the allowance in Barclays Bank Group decreased by £1,837m to £3,998m (2020: £5,835m) during the year. This is driven by a decrease in Wholesale Loans of £842m, Credit cards, unsecured loans and other retail lending of £677m and Home Loans £48m and further decrease in off-balance sheet provisions of £270m. Please refer to page 52 Expected Credit loss section for further details.
Please see risk management section on pages 41 to 43 for details of governance, policies and procedures.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 48 | ||||
Risk review
Risk performance
Credit risk
Analysis of the Balance Sheet
Barclays Bank Group’s maximum exposure and effects of netting, collateral and risk transfer
Basis of preparation
The following tables present a reconciliation between the Barclays Bank Group’s maximum exposure and its net exposure to credit risk, reflecting the financial effects of risk mitigation reducing the Barclays Bank Group’s exposure.
For financial assets recognised on the balance sheet, maximum exposure to credit risk represents the balance sheet carrying value after allowance for impairment. For off-balance sheet guarantees, the maximum exposure is the maximum amount that the Barclays Bank Group would have to pay if the guarantees were to be called upon. For loan and other credit related commitments that are irrevocable over the life of the respective facilities, the maximum exposure is the full amount of the committed facilities.
This and subsequent analyses of credit risk exclude other financial assets not subject to credit risk, mainly equity securities. For off-balance sheet exposures certain contingent liabilities not subject to credit risk such as performance guarantees are excluded.
The Barclays Bank Group mitigates the credit risk to which it is exposed through netting and set-off, collateral and risk transfer. Further detail on the Barclays Bank Group's policies to each of these forms of credit enhancement is presented on pages 41 to 42 of the credit risk management section.
Overview
As at 31 December 2021, the Barclays Bank Group’s net exposure to credit risk, after taking into account credit risk mitigation, increased 3% to £741.1bn (2020: £719.6bn). Overall, the extent to which the Barclays Bank Group holds mitigation against its total exposure slightly decreased to 42% (2020: 43%).
Of the unmitigated on balance sheet exposure, a significant portion relates to cash held at central banks, cash collateral and settlement balances, and debt securities issued by governments, all of which are considered to be lower risk. The increase in the Barclays Bank Group’s net exposure to credit risk has been mainly driven by increases in cash and balances at central banks and off-balance sheet loan commitments. Trading portfolio liability positions, which to a significant extent economically hedge trading portfolio assets but which are not held specifically for risk management purposes, are excluded from the analysis. The credit quality of counterparties to derivatives, financial investments and wholesale loan assets are predominantly investment grade and there are no significant changes from prior year. Further analysis on the credit quality of assets is presented on pages 71 to 75.
Collateral obtained
Where collateral has been obtained in the event of default, the Barclays Bank Group does not, ordinarily, use such assets for its own operations and they are usually sold on a timely basis. The carrying value of assets held by the Barclays Bank Group as at 31 December 2021, as a result of the enforcement of collateral, was £22m (2020: £6m).
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 49 | ||||
Risk review
Risk performance
Credit risk
Off-balance sheet exposures are shown gross of provisions of £499m (2020: £769m). See Note 24 for further details. In addition to the above, Barclays Bank Group holds forward starting reverse repos amounting to £39.3bn (2020: £30.8bn). The balances are fully collateralised. Wholesale loans and advances at amortised cost include £1.0bn (2020: £1.2bn) of CBILs and CLBILs supported by UK government guarantees of £0.8bn (2020: £0.9bn).
Barclays Bank Group has issued £1.7bn (2020: £2.6bn) of guarantees that have been provided to subsidiaries of Barclays PLC outside the Barclays Bank Group. These guarantees have not been reported in the prior periods and the comparatives have not been restated.
For further information on credit risk mitigation techniques, refer to the Credit risk management section.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 50 | ||||
Risk review
Risk performance
Credit risk
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 51 | ||||
Risk review
Risk performance
Credit risk
Expected Credit Losses
Loans and advances at amortised cost by product
The table below presents a breakdown of loans and advances at amortised cost and the impairment allowance with stage allocation by asset classification.
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.
| Barclays Bank Group (audited) | Stage 2 | ||||||||||||||||||||||
| As at 31 December 2021 | Stage 1 | Not past due | <=30 days past due | >30 days past due | Total | Stage 3 | Totala | ||||||||||||||||
| Gross exposure | £m | £m | £m | £m | £m | £m | £m | ||||||||||||||||
| Home loans | 9,760 | 548 | 22 | 83 | 653 | 958 | 11,371 | ||||||||||||||||
| Credit cards, unsecured loans and other retail lending | 24,011 | 2,402 | 198 | 182 | 2,782 | 1,469 | 28,262 | ||||||||||||||||
| Wholesale loans | 95,242 | 12,275 | 301 | 386 | 12,962 | 921 | 109,125 | ||||||||||||||||
| Total | 129,013 | 15,225 | 521 | 651 | 16,397 | 3,348 | 148,758 | ||||||||||||||||
| Impairment allowance | |||||||||||||||||||||||
| Home loans | 8 | 33 | 1 | 1 | 35 | 343 | 386 | ||||||||||||||||
| Credit cards, unsecured loans and other retail lending | 605 | 677 | 39 | 75 | 791 | 906 | 2,302 | ||||||||||||||||
| Wholesale loans | 183 | 188 | 3 | 2 | 193 | 435 | 811 | ||||||||||||||||
| Total | 796 | 898 | 43 | 78 | 1,019 | 1,684 | 3,499 | ||||||||||||||||
| Net exposure | |||||||||||||||||||||||
| Home loans | 9,752 | 515 | 21 | 82 | 618 | 615 | 10,985 | ||||||||||||||||
| Credit cards, unsecured loans and other retail lending | 23,406 | 1,725 | 159 | 107 | 1,991 | 563 | 25,960 | ||||||||||||||||
| Wholesale loans | 95,059 | 12,087 | 298 | 384 | 12,769 | 486 | 108,314 | ||||||||||||||||
| Total | 128,217 | 14,327 | 478 | 573 | 15,378 | 1,664 | 145,259 | ||||||||||||||||
| Coverage ratio | % | % | % | % | % | % | % | ||||||||||||||||
| Home loans | 0.1 | 6.0 | 4.5 | 1.2 | 5.4 | 35.8 | 3.4 | ||||||||||||||||
| Credit cards, unsecured loans and other retail lending | 2.5 | 28.2 | 19.7 | 41.2 | 28.4 | 61.7 | 8.1 | ||||||||||||||||
| Wholesale loans | 0.2 | 1.5 | 1.0 | 0.5 | 1.5 | 47.2 | 0.7 | ||||||||||||||||
| Total | 0.6 | 5.9 | 8.3 | 12.0 | 6.2 | 50.3 | 2.4 | ||||||||||||||||
| As at 31 December 2020 | |||||||||||||||||||||||
| Gross exposure | £m | £m | £m | £m | £m | £m | £m | ||||||||||||||||
| Home loans | 9,627 | 761 | 53 | 87 | 901 | 1,099 | 11,627 | ||||||||||||||||
| Credit cards, unsecured loans and other retail lending | 18,923 | 4,987 | 393 | 191 | 5,571 | 1,853 | 26,347 | ||||||||||||||||
| Wholesale loans | 83,254 | 14,184 | 1,066 | 688 | 15,938 | 2,167 | 101,359 | ||||||||||||||||
| Total | 111,804 | 19,932 | 1,512 | 966 | 22,410 | 5,119 | 139,333 | ||||||||||||||||
| Impairment allowance | |||||||||||||||||||||||
| Home loans | 6 | 40 | 6 | 6 | 52 | 376 | 434 | ||||||||||||||||
| Credit cards, unsecured loans and other retail lending | 399 | 1,092 | 111 | 124 | 1,327 | 1,253 | 2,979 | ||||||||||||||||
| Wholesale loans | 280 | 475 | 49 | 9 | 533 | 840 | 1,653 | ||||||||||||||||
| Total | 685 | 1,607 | 166 | 139 | 1,912 | 2,469 | 5,066 | ||||||||||||||||
| Net exposure | |||||||||||||||||||||||
| Home loans | 9,621 | 721 | 47 | 81 | 849 | 723 | 11,193 | ||||||||||||||||
| Credit cards, unsecured loans and other retail lending | 18,524 | 3,895 | 282 | 67 | 4,244 | 600 | 23,368 | ||||||||||||||||
| Wholesale loans | 82,974 | 13,709 | 1,017 | 679 | 15,405 | 1,327 | 99,706 | ||||||||||||||||
| Total | 111,119 | 18,325 | 1,346 | 827 | 20,498 | 2,650 | 134,267 | ||||||||||||||||
| Coverage ratio | % | % | % | % | % | % | % | ||||||||||||||||
| Home loans | 0.1 | 5.3 | 11.3 | 6.9 | 5.8 | 34.2 | 3.7 | ||||||||||||||||
| Credit cards, unsecured loans and other retail lending | 2.1 | 21.9 | 28.2 | 64.9 | 23.8 | 67.6 | 11.3 | ||||||||||||||||
| Wholesale loans | 0.3 | 3.3 | 4.6 | 1.3 | 3.3 | 38.8 | 1.6 | ||||||||||||||||
| Total | 0.6 | 8.1 | 11.0 | 14.4 | 8.5 | 48.2 | 3.6 | ||||||||||||||||
Note
a.Other financial assets subject to impairment excluded in the table above include cash collateral and settlement balances, financial assets at fair value through other comprehensive income, accrued income and sundry debtors. These have a total gross exposure of £135.5bn (2020: £150.3bn) and impairment allowance of £104m (2020: £145m). This comprises £4m (2020: £7m) ECL on £135.3bn (2020: £146.3bn) Stage 1 assets, £0m (2020: £6m) on £65m (2020: £3.8bn) Stage 2 fair value through other comprehensive income assets, cash collateral and settlement assets and £100m (2020: £132m) on £100m (2020: £132m) Stage 3 other assets. Loan commitments and financial guarantee contracts have total ECL of £499m (2020: £769m).
The increase in coverage on Credit cards, unsecured loans and other retail lending Stage 2 not past due is driven by a reduction in balances and the economic uncertainty adjustments held for specific customers and clients who may be more vulnerable to the full withdrawal of support and emerging economic uncertainty.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 52 | ||||
Risk review
Risk performance
Credit risk
Movement in gross exposures and impairment allowance including provisions for loan commitments and financial guarantees
The following tables present a reconciliation of the opening to the closing balance of the exposure and impairment allowance. An explanation of the methodology used to determine credit impairment provisions is included in page 126. Transfers between stages in the tables have been reflected as if they had taken place at the beginning of the year. The movements are measured over a 12-month period.
| Loans and advances at amortised cost (audited) | Stage 1 | Stage 2 | Stage 3 | Total | ||||||||||||||||||||||
| Barclays Bank Group | Gross | ECL | Gross | ECL | Gross | ECL | Gross | ECL | ||||||||||||||||||
| £m | £m | £m | £m | £m | £m | £m | £m | |||||||||||||||||||
| Home loans | ||||||||||||||||||||||||||
| As at 1 January 2021 | 9,627 | 6 | 901 | 52 | 1,099 | 376 | 11,627 | 434 | ||||||||||||||||||
| Transfers from Stage 1 to Stage 2 | (253) | — | 253 | — | — | — | — | — | ||||||||||||||||||
| Transfers from Stage 2 to Stage 1 | 331 | 22 | (331) | (22) | — | — | — | — | ||||||||||||||||||
| Transfers to Stage 3 | (80) | — | (52) | (5) | 132 | 5 | — | — | ||||||||||||||||||
| Transfers from Stage 3 | 22 | — | 49 | 4 | (71) | (4) | — | — | ||||||||||||||||||
Business activity in the yeara | 1,745 | 2 | — | — | — | — | 1,745 | 2 | ||||||||||||||||||
Refinements to models used for calculationb | — | — | — | (4) | — | 38 | — | 34 | ||||||||||||||||||
| Net drawdowns, repayments, net re-measurement and movements due to exposure and risk parameter changes | (742) | (22) | (25) | 11 | (70) | (50) | (837) | (61) | ||||||||||||||||||
| Final repayments | (890) | — | (142) | (1) | (114) | (4) | (1,146) | (5) | ||||||||||||||||||
| Disposals | — | — | — | — | — | — | — | — | ||||||||||||||||||
Write-offsc | — | — | — | — | (18) | (18) | (18) | (18) | ||||||||||||||||||
As at 31 December 2021d | 9,760 | 8 | 653 | 35 | 958 | 343 | 11,371 | 386 | ||||||||||||||||||
| Credit cards, unsecured loans and other retail lending | ||||||||||||||||||||||||||
| As at 1 January 2021 | 18,923 | 399 | 5,571 | 1,327 | 1,853 | 1,253 | 26,347 | 2,979 | ||||||||||||||||||
| Transfers from Stage 1 to Stage 2 | (897) | (41) | 897 | 41 | — | — | — | — | ||||||||||||||||||
| Transfers from Stage 2 to Stage 1 | 2,520 | 548 | (2,520) | (548) | — | — | — | — | ||||||||||||||||||
| Transfers to Stage 3 | (307) | (13) | (362) | (165) | 669 | 178 | — | — | ||||||||||||||||||
| Transfers from Stage 3 | 21 | 5 | 13 | 9 | (34) | (14) | — | — | ||||||||||||||||||
Business activity in the yeara | 4,731 | 84 | 106 | 23 | 16 | 5 | 4,853 | 112 | ||||||||||||||||||
Refinements to models used for calculationb | — | (3) | — | (27) | — | — | — | (30) | ||||||||||||||||||
| Net drawdowns, repayments, net re-measurement and movements due to exposure and risk parameter changes | 509 | (360) | (514) | 147 | (96) | 337 | (101) | 124 | ||||||||||||||||||
| Final repayments | (1,489) | (14) | (409) | (16) | (76) | (5) | (1,974) | (35) | ||||||||||||||||||
Disposalse | — | — | — | — | (37) | (22) | (37) | (22) | ||||||||||||||||||
Write-offsc | — | — | — | — | (826) | (826) | (826) | (826) | ||||||||||||||||||
As at 31 December 2021d | 24,011 | 605 | 2,782 | 791 | 1,469 | 906 | 28,262 | 2,302 | ||||||||||||||||||
| Wholesale loans | ||||||||||||||||||||||||||
| As at 1 January 2021 | 83,254 | 280 | 15,938 | 533 | 2,167 | 840 | 101,359 | 1,653 | ||||||||||||||||||
| Transfers from Stage 1 to Stage 2 | (4,122) | (14) | 4,122 | 14 | — | — | — | — | ||||||||||||||||||
| Transfers from Stage 2 to Stage 1 | 5,454 | 179 | (5,454) | (179) | — | — | — | — | ||||||||||||||||||
| Transfers to Stage 3 | (32) | (1) | (164) | (12) | 196 | 13 | — | — | ||||||||||||||||||
| Transfers from Stage 3 | 363 | 3 | 145 | 5 | (508) | (8) | — | — | ||||||||||||||||||
Business activity in the yeara | 27,946 | 74 | 1,674 | 15 | 37 | 23 | 29,657 | 112 | ||||||||||||||||||
Refinements to models used for calculationb | — | — | — | 3 | — | — | — | 3 | ||||||||||||||||||
| Net drawdowns, repayments, net re-measurement and movements due to exposure and risk parameter changes | 2,448 | (301) | 1,072 | (14) | (82) | 47 | 3,438 | (268) | ||||||||||||||||||
| Final repayments | (19,481) | (29) | (4,322) | (168) | (504) | (125) | (24,307) | (322) | ||||||||||||||||||
Disposalse | (588) | (8) | (49) | (4) | (71) | (41) | (708) | (53) | ||||||||||||||||||
Write-offsc | — | — | — | — | (314) | (314) | (314) | (314) | ||||||||||||||||||
As at 31 December 2021d | 95,242 | 183 | 12,962 | 193 | 921 | 435 | 109,125 | 811 | ||||||||||||||||||
Notes
a.Business activity in the year does not include additional drawdowns on the existing facility which are reported under “Net drawdowns, repayments, net re-measurement and movements due to exposure and risk parameter changes”.
b.Refinements to models used for calculation include a £34m movement in Home loans, £30m in Credit cards, unsecured loans and other retail lending and £3m in Wholesale loans. These reflect methodology changes made during the year. Barclays Bank Group continually reviews the output of models to determine accuracy of the ECL calculation including review of model monitoring, external benchmarking and experience of model operation over an extended period of time. This ensures that the models used continue to reflect the risks inherent across the businesses.
c.In 2021, gross write-offs amounted to £1,158m (2020: £1,337m) and post write-off recoveries amounted to £31m (2020: £4m). Net write-offs represent gross write-offs less post write-off recoveries and amounted to £1,127m (2020: £1,333m).
d.Other financial assets subject to impairment excluded in the table above include cash collateral and settlement balances, financial assets at fair value through other comprehensive income, accrued income and sundry debtors. These have a total gross exposure of £135.5bn (2020: £150.3bn) and impairment allowance of £104m (2020: £145m). This comprises £4m (2020: £7m) ECL on £135.3bn (2020: £146.3bn) Stage 1 assets, £0m (2020: £6m) on £65m (2020: £3.8bn) Stage 2 fair value through other comprehensive income assets, cash collateral and settlement assets and £100m (2020: £132m) on £100m (2020: £132m) Stage 3 other assets.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 53 | ||||
Risk review
Risk performance
Credit risk
e.The £37m of disposals reported within Credit cards, unsecured loans and other retail lending portfolio relate to debt sales undertaken during the year. The £708m of disposals reported within Wholesale loans include debt sales and sale of Barclays Asset Finance.
| Reconciliation of ECL movement to credit impairment (release)/charge for the period | £m | ||||
| Home loans | (30) | ||||
| Credit cards, unsecured loans and other retail lending | 171 | ||||
| Wholesale loans | (475) | ||||
| ECL movement excluding assets derecognised due to disposals and write-offs | (334) | ||||
Recoveries and reimbursementsa | 259 | ||||
Exchange and other adjustmentsb | 70 | ||||
| Credit impairment release on loan commitments and financial guarantees | (257) | ||||
Credit impairment release on other financial assetsc | (15) | ||||
| Credit impairment release for the year | (277) | ||||
Notes
aRecoveries and reimbursements includes a net reduction in amounts recoverable from financial guarantee contracts held with third parties of £290m and cash recoveries of previously written off amounts of £31m.
bIncludes foreign exchange and interest and fees in suspense.
cOther financial assets subject to impairment excluded in the table above include cash collateral and settlement balances, financial assets at fair value through other comprehensive income, accrued income and sundry debtors. These have a total gross exposure of £135.5bn (2020: £150.3bn) and impairment allowance of £104m (2020: £145m). This comprises £4m (2020: £7m) ECL on £135.3bn (2020: £146.3bn) Stage 1 assets, £0m (2020: £6m) on £65m (2020: £3.8bn) Stage 2 fair value through other comprehensive income assets, cash collateral and settlement assets and £100m (2020: £132m) on £100m (2020: £132m) Stage 3 other assets.
| Loan commitments and financial guarantees (audited) | Stage 1 | Stage 2 | Stage 3 | Total | ||||||||||||||||||||||
| Barclays Bank Group | Gross | ECL | Gross | ECL | Gross | ECL | Gross | ECL | ||||||||||||||||||
| £m | £m | £m | £m | £m | £m | £m | £m | |||||||||||||||||||
| Home loans | ||||||||||||||||||||||||||
| As at 1 January 2021 | 125 | — | 2 | — | 4 | — | 131 | — | ||||||||||||||||||
| Net transfers between stages | — | — | — | — | — | — | — | — | ||||||||||||||||||
| Business activity in the year | 19 | — | — | — | — | — | 19 | — | ||||||||||||||||||
| Net drawdowns, repayments, net re-measurement and movement due to exposure and risk parameter changes | (4) | — | — | — | — | — | (4) | — | ||||||||||||||||||
| Limit management and final repayments | (87) | — | (2) | — | (3) | — | (92) | — | ||||||||||||||||||
| As at 31 December 2021 | 53 | — | — | — | 1 | — | 54 | — | ||||||||||||||||||
| Credit cards, unsecured loans and other retail lending | ||||||||||||||||||||||||||
| As at 1 January 2021 | 68,211 | 34 | 6,244 | 33 | 30 | 23 | 74,485 | 90 | ||||||||||||||||||
| Net transfers between stages | 2,992 | (4) | (3,431) | (2) | 439 | 6 | — | — | ||||||||||||||||||
| Business activity in the year | 10,628 | — | 410 | — | 2 | — | 11,040 | — | ||||||||||||||||||
| Net drawdowns, repayments, net re-measurement and movement due to exposure and risk parameter changes | 3,712 | 6 | 585 | 2 | (437) | (9) | 3,860 | (1) | ||||||||||||||||||
| Limit management and final repayments | (6,888) | — | (594) | — | (2) | — | (7,484) | — | ||||||||||||||||||
| As at 31 December 2021 | 78,655 | 36 | 3,214 | 33 | 32 | 20 | 81,901 | 89 | ||||||||||||||||||
Wholesale loansd | ||||||||||||||||||||||||||
| As at 1 January 2021 | 160,404 | 205 | 39,426 | 446 | 2,031 | 28 | 201,861 | 679 | ||||||||||||||||||
| Net transfers between stages | 7,801 | 220 | (6,730) | (214) | (1,071) | (6) | — | — | ||||||||||||||||||
| Business activity in the year | 45,395 | 14 | 4,658 | 102 | 9 | — | 50,062 | 116 | ||||||||||||||||||
| Net drawdowns, repayments, net re-measurement and movement due to exposure and risk parameter changes | 10,551 | (232) | 2 | 12 | 539 | (13) | 11,092 | (233) | ||||||||||||||||||
| Limit management and final repayments | (46,145) | (40) | (8,939) | (105) | (491) | (7) | (55,575) | (152) | ||||||||||||||||||
| As at 31 December 2021 | 178,006 | 167 | 28,417 | 241 | 1,017 | 2 | 207,440 | 410 | ||||||||||||||||||
dBarclays Bank Group has issued £1.7bn (2020: £2.6bn) of guarantees that have been provided to subsidiaries of Barclays PLC outside the Barclays Bank Group. These guarantees have not been reported in the prior periods and the comparatives have not been restated.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 54 | ||||
Risk review
Risk performance
Credit risk
| Loans and advances at amortised cost (audited) | Stage 1 | Stage 2 | Stage 3 | Total | ||||||||||||||||||||||
| Barclays Bank Group | Gross | ECL | Gross | ECL | Gross | ECL | Gross | ECL | ||||||||||||||||||
| £m | £m | £m | £m | £m | £m | £m | £m | |||||||||||||||||||
| Home loans | ||||||||||||||||||||||||||
| As at 1 January 2020 | 9,604 | 16 | 674 | 40 | 1,056 | 292 | 11,334 | 348 | ||||||||||||||||||
| Transfers from Stage 1 to Stage 2 | (537) | (1) | 537 | 1 | — | — | — | — | ||||||||||||||||||
| Transfers from Stage 2 to Stage 1 | 204 | 7 | (204) | (7) | — | — | — | — | ||||||||||||||||||
| Transfers to Stage 3 | (157) | — | (52) | (7) | 209 | 7 | — | — | ||||||||||||||||||
| Transfers from Stage 3 | 29 | — | 55 | 1 | (84) | (1) | — | — | ||||||||||||||||||
Business activity in the yeara | 1,193 | 1 | — | — | 1 | — | 1,194 | 1 | ||||||||||||||||||
| Refinements to models used for calculation | — | — | — | — | — | — | — | — | ||||||||||||||||||
| Net drawdowns, repayments, net re-measurement and movements due to exposure and risk parameter changes | 133 | (17) | (62) | 25 | 32 | 96 | 103 | 104 | ||||||||||||||||||
| Final repayments | (842) | — | (47) | (1) | (98) | (1) | (987) | (2) | ||||||||||||||||||
Write-offsb | — | — | — | — | (17) | (17) | (17) | (17) | ||||||||||||||||||
As at 31 December 2020c | 9,627 | 6 | 901 | 52 | 1,099 | 376 | 11,627 | 434 | ||||||||||||||||||
| Credit cards, unsecured loans and other retail lending | ||||||||||||||||||||||||||
| As at 1 January 2020 | 29,541 | 362 | 4,450 | 784 | 2,129 | 1,471 | 36,120 | 2,617 | ||||||||||||||||||
| Transfers from Stage 1 to Stage 2 | (4,116) | (92) | 4,116 | 92 | — | — | — | — | ||||||||||||||||||
| Transfers from Stage 2 to Stage 1 | 994 | 139 | (994) | (139) | — | — | — | — | ||||||||||||||||||
| Transfers to Stage 3 | (464) | (19) | (516) | (188) | 980 | 207 | — | — | ||||||||||||||||||
| Transfers from Stage 3 | 21 | 12 | 59 | 8 | (80) | (20) | — | — | ||||||||||||||||||
Business activity in the yeara | 3,467 | 35 | 130 | 32 | 29 | 7 | 3,626 | 74 | ||||||||||||||||||
| Refinements to models used for calculation | — | — | — | — | — | — | — | — | ||||||||||||||||||
| Net drawdowns, repayments, net re-measurement and movements due to exposure and risk parameter changes | (4,613) | 15 | (1,231) | 806 | 38 | 731 | (5,806) | 1,552 | ||||||||||||||||||
| Final repayments | (2,232) | (29) | (168) | (23) | (68) | (8) | (2,468) | (60) | ||||||||||||||||||
Transfers to Barclays Groupd | (2,182) | (16) | (92) | (25) | (47) | (41) | (2,321) | (82) | ||||||||||||||||||
Disposalse | (1,493) | (8) | (183) | (20) | (92) | (58) | (1,768) | (86) | ||||||||||||||||||
Write-offsb | — | — | — | — | (1,036) | (1,036) | (1,036) | (1,036) | ||||||||||||||||||
As at 31 December 2020c | 18,923 | 399 | 5,571 | 1,327 | 1,853 | 1,253 | 26,347 | 2,979 | ||||||||||||||||||
| Wholesale loans | ||||||||||||||||||||||||||
| As at 1 January 2020 | 89,200 | 114 | 7,515 | 234 | 1,163 | 383 | 97,878 | 731 | ||||||||||||||||||
| Transfers from Stage 1 to Stage 2 | (10,213) | (31) | 10,213 | 31 | — | — | — | — | ||||||||||||||||||
| Transfers from Stage 2 to Stage 1 | 2,651 | 25 | (2,651) | (25) | — | — | — | — | ||||||||||||||||||
| Transfers to Stage 3 | (772) | (3) | (642) | (50) | 1,414 | 53 | — | — | ||||||||||||||||||
| Transfers from Stage 3 | 189 | — | 34 | 1 | (223) | (1) | — | — | ||||||||||||||||||
Business activity in the yeara | 19,773 | 44 | 1,954 | 144 | 393 | 67 | 22,120 | 255 | ||||||||||||||||||
| Refinements to models used for calculation | — | — | — | — | — | — | — | — | ||||||||||||||||||
| Net drawdowns, repayments, net re-measurement and movements due to exposure and risk parameter changes | 7,033 | 154 | 2,969 | 248 | 5 | 687 | 10,007 | 1,089 | ||||||||||||||||||
| Final repayments | (24,098) | (22) | (2,844) | (28) | (283) | (59) | (27,225) | (109) | ||||||||||||||||||
Transfers to Barclays Groupd | (509) | (1) | (600) | (22) | (18) | (6) | (1,127) | (29) | ||||||||||||||||||
Disposalse | — | — | (10) | — | — | — | (10) | — | ||||||||||||||||||
Write-offsb | — | — | — | — | (284) | (284) | (284) | (284) | ||||||||||||||||||
As at 31 December 2020c | 83,254 | 280 | 15,938 | 533 | 2,167 | 840 | 101,359 | 1,653 | ||||||||||||||||||
Notes
a.Business activity during the year does not include additional drawdowns on the existing facility which are reported under “Net drawdowns, repayments, net re-measurement and movements due to exposure and risk parameter changes”.
b.In 2020, gross write-offs amounted to £1,337m (2019: £1,293m) and post write-off recoveries amounted to £4m (2019: £73m). Net write-offs represent gross write-offs less post write-off recoveries and amounted to £1,333m (2019: £1,220m).
c.Other financial assets subject to impairment not included in the table above include cash collateral and settlement balances, financial assets at fair value through other comprehensive income, accrued income and sundry debtors. These have a total gross exposure of £150.3bn (2019: £125.5bn) and impairment allowance of £145m (2019: £22m). This comprises £7m ECL (2019 £10m) on £146.3bn stage 1 assets (2019: £124.7bn), £6m (2019: £2m) on £3.8bn stage 2 fair value through other comprehensive income assets, cash collateral and settlement assets (2019: £0.8bn) and £132m (2019: £10m) on £132m Stage 3 other assets (2019: £10m).
d.Transfers to Barclays Group include a £2.3bn transfer of the Barclays Partner Finance retail portfolio reported within Credit cards, unsecured loans and other retail lending and £1.1bn transfer of the Barclays Mercantile Business Finance Limited reported within loans to Barclays Principal Investments Limited.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 55 | ||||
Risk review
Risk performance
Credit risk
e.The £1.8bn disposals reported within Credit cards, unsecured loans and other retail lending portfolio include sale of motor financing business within Barclays Partner Finance business. Disposal within Wholesale loans include sale of debt securities as part of Group Treasury Operations.
| Reconciliation of ECL movement to credit impairment (release)/charge for the period | £m | ||||
| Home loans | 103 | ||||
| Credit cards, unsecured loans and other retail lending | 1,484 | ||||
| Wholesale loans | 1,206 | ||||
| ECL movement excluding assets derecognised due to disposals and write-offs | 2,793 | ||||
Recoveries and reimbursementsa | (368) | ||||
Exchange and other adjustmentsb | 267 | ||||
| Credit impairment charge on loan commitments and financial guarantees | 547 | ||||
Credit impairment charge on other financial assetsc | 138 | ||||
| Credit impairment charge for the year | 3,377 | ||||
Notes
aRecoveries and reimbursements includes £364m for reimbursements expected to be received under the arrangement where Group has entered into financial guarantee contracts which provide credit protection over certain loan assets with third parties. Cash recoveries of previously written off amounts to £4m.
bIncludes foreign exchange and interest and fees in suspense.
cOther financial assets subject to impairment not included in the table above include cash collateral and settlement balances, financial assets at fair value through other comprehensive income, accrued income and sundry debtors. These have a total gross exposure of £150.3bn (2019: £125.5bn) and impairment allowance of £145m (2019: £22m). This comprises £7m ECL (2019: £10m) on £146.3bn stage 1 assets (2019: £124.7bn), £6m (2019: £2m) on £3.8bn stage 2 fair value through other comprehensive income assets, cash collateral and settlement assets (2019: £0.8bn) and £132m (2019: £10m) on £132m Stage 3 other assets (2019: £10m).
| Loan commitments and financial guarantees (audited) | Stage 1 | Stage 2 | Stage 3 | Total | ||||||||||||||||||||||
| Barclays Bank Group | Gross | ECL | Gross | ECL | Gross | ECL | Gross | ECL | ||||||||||||||||||
| £m | £m | £m | £m | £m | £m | £m | £m | |||||||||||||||||||
| Home loans | ||||||||||||||||||||||||||
| As at 1 January 2020 | 34 | — | — | — | — | — | 34 | — | ||||||||||||||||||
| Net transfers between stages | (4) | — | 4 | — | — | — | — | — | ||||||||||||||||||
| Business activity in the year | 113 | — | — | — | — | — | 113 | — | ||||||||||||||||||
| Net drawdowns, repayments, net re-measurement and movement due to exposure and risk parameter changes | 1 | — | — | — | 4 | — | 5 | — | ||||||||||||||||||
| Limit management and final repayments | (19) | — | (2) | — | — | — | (21) | — | ||||||||||||||||||
| As at 31 December 2020 | 125 | — | 2 | — | 4 | — | 131 | — | ||||||||||||||||||
| Credit cards, unsecured loans and other retail lending | ||||||||||||||||||||||||||
| As at 1 January 2020 | 78,257 | 22 | 2,053 | 15 | 67 | 14 | 80,377 | 51 | ||||||||||||||||||
| Net transfers between stages | (4,124) | 6 | 3,603 | (2) | 521 | (4) | — | — | ||||||||||||||||||
| Business activity in the year | 4,591 | 2 | 128 | 1 | 1 | 1 | 4,720 | 4 | ||||||||||||||||||
| Net drawdowns, repayments, net re-measurement and movement due to exposure and risk parameter changes | 1,471 | 5 | 1,076 | 20 | (553) | 15 | 1,994 | 40 | ||||||||||||||||||
| Limit management and final repayments | (11,984) | (1) | (616) | (1) | (6) | (3) | (12,606) | (5) | ||||||||||||||||||
| As at 31 December 2020 | 68,211 | 34 | 6,244 | 33 | 30 | 23 | 74,485 | 90 | ||||||||||||||||||
Wholesale loansa | ||||||||||||||||||||||||||
| As at 1 January 2020 | 183,001 | 63 | 12,053 | 97 | 636 | 41 | 195,690 | 201 | ||||||||||||||||||
| Net transfers between stages | (28,048) | 67 | 27,052 | (72) | 996 | 5 | — | — | ||||||||||||||||||
| Business activity in the year | 42,904 | 32 | 4,705 | 102 | 774 | 2 | 48,383 | 136 | ||||||||||||||||||
| Net drawdowns, repayments, net re-measurement and movement due to exposure and risk parameter changes | 12,755 | 50 | (219) | 334 | (79) | (19) | 12,457 | 365 | ||||||||||||||||||
| Limit management and final repayments | (50,208) | (7) | (4,165) | (15) | (296) | (1) | (54,669) | (23) | ||||||||||||||||||
| As at 31 December 2020 | 160,404 | 205 | 39,426 | 446 | 2,031 | 28 | 201,861 | 679 | ||||||||||||||||||
Note
a Barclays Bank Group has issued £1.7bn (2020: £2.6bn) of guarantees that have been provided to subsidiaries of Barclays PLC outside the Barclays Bank Group. These guarantees have not been reported in the prior periods and the comparatives have not been restated.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 56 | ||||
Risk review
Risk performance
Credit risk
Stage 2 decomposition
Loans and advances at amortised costa | ||||||||||||||
| 2021 | 2020 | |||||||||||||
| Gross Exposure | Impairment allowance | Gross Exposure | Impairment allowance | |||||||||||
| As at 31 December | £m | £m | £m | £m | ||||||||||
| Quantitative test | 13,289 | 679 | 17,434 | 1,698 | ||||||||||
| Qualitative test | 2,593 | 314 | 3,228 | 180 | ||||||||||
| 30 days past due backstop | 515 | 26 | 1,748 | 34 | ||||||||||
| Total Stage 2 | 16,397 | 1,019 | 22,410 | 1,912 | ||||||||||
Note
aWhere balances satisfy more than one of the above three criteria for determining a significant increase in credit risk, the corresponding gross exposure and ECL has been assigned in order of categories presented.
Stage 2 exposures are predominantly identified using quantitative tests where the lifetime probability of default (PD) has deteriorated more than a pre-determined amount since origination during the year driven by changes in macro-economic variables. This is augmented by inclusion of accounts meeting the designated high risk criteria (including watchlist) for the portfolio under the qualitative test. Qualitative tests include £1.4bn (2020: £2.0bn) relating to Corporate and Investment Bank and £1.1bn (2020: £1.0bn) relating to Consumer, Cards and Payments.
A small number of other accounts (3% of impairment allowances and 3% of gross exposure) are included in Stage 2. These accounts are not otherwise identified by the quantitative or qualitative tests but are more than 30 days past due. The percentage triggered by these backstop criteria is a measure of the effectiveness of the Stage 2 criteria in identifying deterioration prior to delinquency. These balances include items in Corporate and Investment Bank for reasons such as outstanding interest and fees rather than principal balances.
For further detail on the three criteria for determining a significant increase in credit risk required for Stage 2 classification, refer to Note 7.
Stage 3 decomposition
| Loans and advances at amortised cost | ||||||||||||||
| 2021 | 2020 | |||||||||||||
| Gross Exposure | Impairment allowance | Gross Exposure | Impairment allowance | |||||||||||
| As at 31 December | £m | £m | £m | £m | ||||||||||
Exposures not charged-off including within cure perioda | 904 | 319 | 1,294 | 398 | ||||||||||
Exposures individually assessed or in recovery bookb | 2,444 | 1,365 | 3,825 | 2,071 | ||||||||||
| Total Stage 3 | 3,348 | 1,684 | 5,119 | 2,469 | ||||||||||
Notes
aIncludes £0.7bn (2020: £0.6bn) of gross exposure in a cure period that must remain in Stage 3 for a minimum of 12 months before moving to Stage 2.
bExposures individually assessed or in recovery book cannot cure out of Stage 3.
Management adjustments to models for impairment (audited)
Management adjustments to impairment models are applied in order to factor in certain conditions or changes in policy that are not fully incorporated into the impairment models, or to reflect additional facts and circumstances at the period end. Management adjustments are reviewed and incorporated into future model development where applicable.
Total management adjustments to impairment allowance are presented by product below:
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 57 | ||||
Risk review
Risk performance
Credit risk
| As at 31 December, 2020 | £m | £m | £m | £m | £m | ||||||||||||
| Home loans | 380 | 21 | 33 | 54 | 434 | ||||||||||||
| Credit cards, unsecured loans and other retail lending | 2,109 | 986 | (26) | 960 | 3,069 | ||||||||||||
| Wholesale loans | 2,410 | 379 | (457) | (78) | 2,332 | ||||||||||||
| Total | 4,899 | 1,386 | (450) | 936 | 5,835 | ||||||||||||
Notes:
a.Positive values reflect an increase in impairment allowance and negative values reflect a reduction in the impairment allowance.
b.Includes £2.2bn (2020: £3.9bn) of modelled ECL, £0.5bn (2020: £0.8bn) of individually assessed impairments and £0.2bn (2020: £0.2bn) ECL from non-modelled exposures.
c.Total impairment allowance consists of ECL stock on drawn and undrawn exposures.
Economic uncertainty adjustments
Throughout the COVID-19 pandemic in 2020 and 2021, macroeconomic forecasts anticipated lasting impacts to unemployment levels and customer and client stress. More recent macroeconomic forecasts indicated that the outlook has improved, with measures of government and bank support starting to taper down and no material deterioration in customer delinquencies observed to date. However, the degree of economic uncertainty remains relatively high: credit deterioration may still occur when support measures are fully withdrawn across geographies; emerging supply chain disruption and inflationary pressures may challenge economic stability; and economic consensus may not capture the range of economic uncertainty associated with fast moving new COVID-19 variants such as Omicron.
Given this backdrop, management has recognised economic uncertainty adjustments to modelled outputs to address these sources of uncertainties and ensure that the potential impacts of stress are provided for. This uncertainty continues to be captured in two distinct ways. Firstly, customer uncertainty: the identification of customers and clients who may be more vulnerable to the withdrawal of support schemes and emerging economic instability; and secondly, model uncertainty: to capture the impact from model limitations and sensitivities to specific macroeconomic parameters which are applied at a portfolio level.
The economic uncertainty adjustments of £1.0bn (2020 £1.4bn) include customer and client uncertainty provisions of £0.9bn (2020 £1.1bn) and model uncertainty provisions of £0.1bn (2020 £0.3bn).
Customer uncertainty provisions comprise:
a. An adjustment of £0.1bn (2020: £0.1bn) to adjust the probability of default (PDs) to pre-COVID-19 levels to offset the temporary improvement to PDs in light of reduced customer spend behaviour and support measures.
b. A vulnerable customer adjustment of £0.8bn (2020: £1.0bn) has been applied to customers and clients considered potentially vulnerable to the withdrawal of support schemes and emerging economic instability against which lifetime coverage is applied. This has marginally reduced considering the improved macro-economic and low customer delinquencies observed in 2021. This is split between credit cards, unsecured loans and other retail lending of £0.6bn (2020: £0.8bn) and wholesale loans of £0.2bn (2020: £0.2bn).
Model uncertainty provisions reduced by £0.2bn reflecting an update in adjustment in response to the modelled provisions following the update in the Q421 scenarios.
Other adjustments
Other adjustments are operational in nature and are expected to remain in place until they can be corrected in the underlying models. These adjustments result from data limitations and model performance related issues identified through established governance processes. The quantum of adjustments reduced in response to the Q421 scenarios as well as model enhancements made during the year. Material adjustments consist of the following:
Credit cards, unsecured loans and other retail lending: Includes an adjustment for model inaccuracies informed by model monitoring.
Wholesale loans: Represents the net adjustments for model inaccuracies informed by model monitoring. Further, it includes an adjustment to offset modelled ECL output in the Investment Bank to limit excessive ECL sensitivity to the macroeconomic variable for Federal Tax Receipts.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 58 | ||||
Risk review
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Credit risk
Measurement uncertainty and sensitivity analysis
Management has applied economic uncertainty and other adjustments to modelled ECL outputs. Economic uncertainty adjustments reflect the potential for specific customers and clients who may be more vulnerable to the full withdrawal of support and emerging economic instability and the degree to which economic consensus may not have captured the range of economic uncertainty associated with continued developments resulting from COVID-19. As a result, ECL is higher than would be the case if it were based on forecast economic scenarios alone.
The measurement of modelled ECL involves complexity and judgement, including estimation of probabilities of default (PD), loss given default (LGD), a range of unbiased future economic scenarios, estimation of expected lives, estimation of exposures at default (EAD) and assessing significant increases in credit risk. The Barclays Bank Group uses a five-scenario model to calculate ECL. An external consensus forecast is assembled from key sources, including HM Treasury (short and medium term forecasts), Bloomberg (based on median of economic forecasts) and the Urban Land Institute (for US House Prices), which forms the Baseline scenario. In addition, two adverse scenarios (Downside 1 and Downside 2) and two favourable scenarios (Upside 1 and Upside 2) are derived, with associated probability weightings. The adverse scenarios are calibrated to a broadly similar severity to Barclays' internal stress tests and stress scenarios provided by regulators whilst also considering IFRS 9 specific sensitivities and non-linearity. The favourable scenarios are designed to reflect plausible upside risks to the Baseline scenario which are broadly consistent with the economic narrative approved by the Senior Scenario Review Committee. All scenarios are regenerated at a minimum semi-annually. The scenarios include eight key economic variables, (GDP, unemployment, House Price Index (HPI) and base rates in both the UK and US markets), and expanded variables using statistical models based on historical correlations. The upside and downside shocks are designed to evolve over a five-year stress horizon, with all five scenarios converging to a steady state after approximately eight years.
Scenarios used to calculate the Barclays Bank Group’s ECL charge were reviewed and updated regularly throughout 2021, following the continuation of the COVID-19 pandemic throughout the year, including the emergence of the Omicron variant and the global vaccination rollout. The current Baseline scenario reflects the latest consensus economic forecasts; the steady recovery in GDP in both the UK and US continues with UK GDP returning to pre-COVID-19 pandemic levels by Q222. UK unemployment peaks at 5.0% in Q122 and US unemployment continues to decline. In the Downside 2 scenario, inflation continues to accelerate and the UK bank rate is increased to 4.0% and the US federal funds rate is increased to 3.5%, by the end of 2022, leading to a further downturn in GDP until Q323. Unemployment peaks in Q323 at 9.2% in the UK and 9.5% in the US. In the Upside 2 scenario, inflation expectations and global energy prices stabilise and GDP growth rises as COVID-19 risks continue to decline helping to release more of the pent-up demand and accumulated household savings into the economy. Unemployment rates decline gradually.
The methodology for estimating probability weights used in calculating ECL involves simulating a range of future paths for UK and US GDP using historical data. The five scenarios are mapped against the distribution of these future paths, with the median centred around the Baseline such that scenarios further from the Baseline attract a lower weighting. A single set of five scenarios is used across all portfolios and all five weights are normalised to equate to 100%. The same scenarios and weights that are used in the estimation of expected credit losses are also used for internal planning purposes. The impacts across the portfolios are different because of the sensitivities of each of the portfolios to specific macroeconomic variables, for example, mortgages are highly sensitive to house prices, and credit cards and unsecured consumer loans are highly sensitive to unemployment.
The changes to the scenario weights in 2021 primarily reflect changes made to the severity of the scenarios. The Downside 2 scenario has been aligned with the internal stress test, which is informed by a weaker GDP outlook. The effect of this is to move the Downside 2 scenario further away from the Baseline, resulting in a lower weighting. For further details see page 60.
Although the macroeconomic outlook has improved, the level of uncertainty remains relatively high. A key judgement is the extent to which economic uncertainty experienced throughout the COVID-19 pandemic now reflects additional challenges, namely inflationary pressures and global supply chain disruptions. Inflationary headwinds have yet to materially impact customer affordability and corporate profitability data. A balanced approach has therefore been adopted in the sizing of expert judgements as we move away from a period characterised by significant customer support.
The economic uncertainty adjustments of £1.0bn (FY20: £1.4bn) have been applied as overlays to the modelled ECL output. These adjustments consist of a customer and client uncertainty provision of £0.9bn (FY20 £1.1bn) and a model uncertainty provision of £0.1bn (FY20 £0.3bn). For further details see page 58.
The tables below show the key macroeconomic variables used in the five scenarios (5 year annual paths), the probability weights applied to each scenario and the macroeconomic variables by scenario using ‘specific bases’ i.e. the most extreme position of each variable in the context of the scenario, for example, the highest unemployment for downside scenarios and the lowest unemployment for upside scenarios. 5-year average tables and movement over time graphs provide additional transparency. Annual paths show quarterly averages for the year (unemployment and base rate) or change in the year (GDP and HPI).
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 59 | ||||
Risk review
Risk performance
Credit risk
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 60 | ||||
Risk review
Risk performance
Credit risk
| Downside 1 average macroeconomic variables used in the calculation of ECL | |||||||||||||||||
| 2021 | 2022 | 2023 | 2024 | 2025 | |||||||||||||
| As at 31 December 2021 | % | % | % | % | % | ||||||||||||
UK GDPa | 6.2 | 2.8 | (0.7) | 2.3 | 2.9 | ||||||||||||
UK unemploymentb | 4.8 | 6.2 | 6.8 | 6.0 | 5.3 | ||||||||||||
UK HPIc | 4.7 | (6.8) | (10.5) | 6.9 | 8.6 | ||||||||||||
| UK bank rate | 0.1 | 1.6 | 2.7 | 2.3 | 1.6 | ||||||||||||
US GDPa | 5.5 | 1.6 | (0.4) | 2.4 | 2.7 | ||||||||||||
US unemploymentd | 5.5 | 5.4 | 6.6 | 6.1 | 5.2 | ||||||||||||
US HPIe | 11.8 | (1.2) | (2.1) | 4.8 | 5.2 | ||||||||||||
| US federal funds rate | 0.2 | 1.3 | 2.3 | 2.1 | 1.8 | ||||||||||||
| 2020 | 2021 | 2022 | 2023 | 2024 | |||||||||||||
| As at 31 December 2020 | % | % | % | % | % | ||||||||||||
UK GDPa | (10.1) | (3.9) | 6.5 | 2.6 | 1.4 | ||||||||||||
UK unemploymentb | 4.5 | 8.0 | 9.3 | 7.8 | 6.3 | ||||||||||||
UK HPIc | 6.1 | (13.6) | (10.8) | 0.5 | 1.5 | ||||||||||||
| UK bank rate | 0.2 | (0.2) | (0.2) | (0.1) | (0.1) | ||||||||||||
US GDPa | (4.4) | (2.4) | 3.6 | 2.1 | 2.0 | ||||||||||||
US unemploymentd | 8.4 | 13.4 | 11.9 | 10.1 | 8.2 | ||||||||||||
US HPIe | 2.3 | (17.2) | (0.7) | 0.6 | 1.3 | ||||||||||||
| US federal funds rate | 0.5 | 0.3 | 0.3 | 0.3 | 0.3 | ||||||||||||
| Upside 2 average macroeconomic variables used in the calculation of ECL | |||||||||||||||||
| 2021 | 2022 | 2023 | 2024 | 2025 | |||||||||||||
| As at 31 December 2021 | % | % | % | % | % | ||||||||||||
UK GDPa | 6.2 | 7.2 | 4.0 | 2.7 | 2.1 | ||||||||||||
UK unemploymentb | 4.8 | 4.5 | 4.1 | 4.0 | 4.0 | ||||||||||||
UK HPIc | 4.7 | 8.5 | 9.0 | 5.2 | 4.2 | ||||||||||||
| UK bank rate | 0.1 | 0.2 | 0.5 | 0.5 | 0.3 | ||||||||||||
US GDPa | 5.5 | 5.3 | 4.1 | 3.5 | 3.4 | ||||||||||||
US unemploymentd | 5.5 | 3.9 | 3.4 | 3.3 | 3.3 | ||||||||||||
US HPIe | 11.8 | 10.6 | 8.5 | 7.2 | 6.6 | ||||||||||||
| US federal funds rate | 0.2 | 0.3 | 0.4 | 0.7 | 1.0 | ||||||||||||
| 2020 | 2021 | 2022 | 2023 | 2024 | |||||||||||||
| As at 31 December 2020 | % | % | % | % | % | ||||||||||||
UK GDPa | (10.1) | 12.2 | 5.3 | 3.9 | 2.9 | ||||||||||||
UK unemploymentb | 4.5 | 6.2 | 5.5 | 4.8 | 4.4 | ||||||||||||
UK HPIc | 6.1 | 6.6 | 10.4 | 10.8 | 7.3 | ||||||||||||
| UK bank rate | 0.2 | 0.1 | 0.3 | 0.3 | 0.5 | ||||||||||||
US GDPa | (4.4) | 7.1 | 4.6 | 4.0 | 3.5 | ||||||||||||
US unemploymentd | 8.4 | 5.5 | 4.3 | 4.1 | 4.1 | ||||||||||||
US HPIe | 2.3 | 8.8 | 9.1 | 8.9 | 7.5 | ||||||||||||
| US federal funds rate | 0.5 | 0.3 | 0.4 | 0.6 | 0.9 | ||||||||||||
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 61 | ||||
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| Upside 1 average macroeconomic variables used in the calculation of ECL | |||||||||||||||||
| 2021 | 2022 | 2023 | 2024 | 2025 | |||||||||||||
| As at 31 December 2021 | % | % | % | % | % | ||||||||||||
UK GDPa | 6.2 | 6.0 | 3.1 | 2.3 | 1.9 | ||||||||||||
UK unemploymentb | 4.8 | 4.6 | 4.3 | 4.2 | 4.1 | ||||||||||||
UK HPIc | 4.7 | 5.0 | 5.0 | 3.9 | 3.3 | ||||||||||||
| UK bank rate | 0.1 | 0.6 | 0.8 | 0.8 | 0.5 | ||||||||||||
US GDPa | 5.5 | 4.6 | 3.4 | 2.9 | 2.9 | ||||||||||||
US unemploymentd | 5.5 | 4.0 | 3.5 | 3.5 | 3.5 | ||||||||||||
US HPIe | 11.8 | 8.3 | 7.0 | 6.0 | 5.7 | ||||||||||||
| US federal funds rate | 0.2 | 0.3 | 0.6 | 1.0 | 1.1 | ||||||||||||
| 2020 | 2021 | 2022 | 2023 | 2024 | |||||||||||||
| As at 31 December 2020 | % | % | % | % | % | ||||||||||||
UK GDPa | (10.1) | 9.3 | 3.9 | 3.4 | 2.5 | ||||||||||||
UK unemploymentb | 4.5 | 6.4 | 6.0 | 5.2 | 4.7 | ||||||||||||
UK HPIc | 6.1 | 4.6 | 6.1 | 6.1 | 4.7 | ||||||||||||
| UK bank rate | 0.2 | 0.1 | 0.1 | 0.3 | 0.3 | ||||||||||||
US GDPa | (4.4) | 5.5 | 4.0 | 3.7 | 3.3 | ||||||||||||
US unemploymentd | 8.4 | 6.0 | 4.8 | 4.6 | 4.6 | ||||||||||||
US HPIe | 2.3 | 6.8 | 6.7 | 6.3 | 5.6 | ||||||||||||
| US federal funds rate | 0.5 | 0.3 | 0.3 | 0.5 | 0.8 | ||||||||||||
Notes
aAverage Real GDP seasonally adjusted change in year.
bAverage UK unemployment rate 16-year+.
cChange in year end UK HPI = Halifax All Houses, All Buyers index, relative to prior year end.
dAverage US civilian unemployment rate 16-year+.
eChange in year end US HPI = FHFA house price index, relative to prior year end.
| Scenario probability weighting (audited) | |||||||||||||||||
| Upside 2 | Upside 1 | Baseline | Downside 1 | Downside 2 | |||||||||||||
| % | % | % | % | % | |||||||||||||
| As at 31 December 2021 | |||||||||||||||||
| Scenario probability weighting | 20.9 | 27.2 | 30.1 | 14.8 | 7.0 | ||||||||||||
| As at 31 December 2020 | |||||||||||||||||
| Scenario probability weighting | 20.2 | 24.2 | 24.7 | 15.5 | 15.4 | ||||||||||||
Specific bases show the most extreme position of each variable in the context of the scenario, for example, the highest unemployment for downside scenarios, average unemployment for baseline scenarios and lowest unemployment for upside scenarios. GDP and HPI downside and upside scenario data represents the lowest and highest points relative to the start point in the 20 quarter period.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 62 | ||||
Risk review
Risk performance
Credit risk
Average basis represents the average quarterly value of variables in the 20 quarter period with GDP and HPI based on yearly average and quarterly CAGRs respectively.
Notes
aUK GDP = Real GDP growth seasonally adjusted; UK unemployment = UK unemployment rate 16-year+; UK HPI = Halifax All Houses, All Buyers Index; US GDP = Real GDP growth seasonally adjusted; US unemployment = US civilian unemployment rate 16-year+; US HPI = FHFA house price index. 20 quarter period starts from Q121 (2020: Q120).
bMaximum growth relative to Q420 (2020: Q419), based on 20 quarter period in Upside scenarios; 5-year yearly average CAGR in Baseline; minimum growth relative to Q420 (2020: Q419), based on 20 quarter period in Downside scenarios.
cLowest quarter in Upside scenarios; 5-year average in Baseline; highest quarter in Downside scenarios. Period based on 20 quarters from Q121 (2020: Q120).
dMaximum growth relative to Q420 (2020: Q419), based on 20 quarter period in Upside scenarios; 5-year quarter end CAGR in Baseline; minimum growth relative to Q420 (2020: Q419), based on 20 quarter period in Downside scenarios.
e5-year yearly average CAGR, starting 2020 (2020: 2019)
f5-year average. Period based on 20 quarters from Q121 (2020: Q120)
g5-year quarter end CAGR, starting Q420 (2020: Q419)
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 63 | ||||
Risk review
Risk performance
Credit risk
The graphs below plot the historical data for GDP growth rate and unemployment rate in the UK and US as well as the forecasted data under each of the five scenarios.
UK GDP
%
UK unemployment
%
US GDP
%
US unemployment
%
GDP growth based on year on year growth each quarter (Q/(Q-4))
ECL under 100% weighted scenarios for modelled portfolios (audited)
The table below shows the Expected Credit Loss (ECL) assuming scenarios have been 100% weighted. Model exposures are allocated to a stage based on the individual scenario rather than through a probability-weighted approach as required for Barclays Bank Group reported impairment allowances. As a result, it is not possible to back solve to the final reported weighted ECL from the individual scenarios as a balance may be assigned to a different stage dependent on the scenario. Model exposure uses Exposure At Default (EAD) values and is not directly comparable to gross exposure used in prior disclosures. For credit cards, unsecured loans and other retail lending, an average EAD measure is used (12 month or lifetime depending on stage allocation in each scenario). Therefore, the model exposure movement into Stage 2 is higher than the corresponding Stage 1 reduction.
All ECL using a model is included, with the exception of Treasury assets (£3.0m of ECL), Non-modelled exposures and management adjustments are excluded. Management adjustments can be found on page 57.
Model exposures allocated to Stage 3 do not change in any of the scenarios as the transition criteria relies only on observable evidence of default as at 31 December 2021 and not on macroeconomic scenarios.
The Downside 2 scenario represents a severe global recession with substantial falls in UK GDP. Unemployment rises towards 9.2% in UK markets and 9.5% in US markets and there are substantial falls in asset prices including housing.
Under the Downside 2 scenario, model exposure moves between stages as the economic environment weakens. This can be seen in the movement of £12.4bn of model exposure into Stage 2 between the Weighted and Downside 2 scenarios. ECL increases in Stage 2 predominantly due to unsecured portfolios as economic conditions deteriorate.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 64 | ||||
Risk review
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Credit risk
| Scenarios | ||||||||||||||||||||
| As at 31 December 2021 | Weighted | Upside 2 | Upside 1 | Baseline | Downside 1 | Downside 2 | ||||||||||||||
| Stage 1 Model exposure (£m) | ||||||||||||||||||||
| Home loans | 3,905 | 3,915 | 3,911 | 3,906 | 3,885 | 3,868 | ||||||||||||||
| Credit cards, unsecured loans and other retail lending | 19,001 | 19,357 | 19,284 | 19,201 | 17,445 | 13,785 | ||||||||||||||
| Wholesale loans | 142,804 | 145,097 | 144,688 | 143,967 | 140,402 | 135,764 | ||||||||||||||
| Stage 1 Model ECL (£m) | ||||||||||||||||||||
| Home loans | 2 | 2 | 2 | 2 | 3 | 3 | ||||||||||||||
| Credit cards, unsecured loans and other retail lending | 221 | 157 | 164 | 173 | 254 | 332 | ||||||||||||||
| Wholesale loans | 219 | 189 | 200 | 216 | 250 | 282 | ||||||||||||||
| Stage 1 Coverage (%) | ||||||||||||||||||||
| Home loans | 0.1 | 0.1 | 0.1 | 0.1 | 0.1 | 0.1 | ||||||||||||||
| Credit cards, unsecured loans and other retail lending | 1.2 | 0.8 | 0.9 | 0.9 | 1.5 | 2.4 | ||||||||||||||
| Wholesale loans | 0.2 | 0.1 | 0.1 | 0.2 | 0.2 | 0.2 | ||||||||||||||
| Stage 2 Model exposure (£m) | ||||||||||||||||||||
| Home loans | 228 | 219 | 222 | 227 | 249 | 266 | ||||||||||||||
| Credit cards, unsecured loans and other retail lending | 1,991 | 1,584 | 1,683 | 1,793 | 3,605 | 7,331 | ||||||||||||||
| Wholesale loans | 29,124 | 26,831 | 27,240 | 27,961 | 31,525 | 36,163 | ||||||||||||||
| Stage 2 Model ECL (£m) | ||||||||||||||||||||
| Home loans | 12 | 10 | 10 | 11 | 18 | 24 | ||||||||||||||
| Credit cards, unsecured loans and other retail lending | 365 | 264 | 295 | 333 | 599 | 2,278 | ||||||||||||||
| Wholesale loans | 506 | 395 | 420 | 462 | 712 | 1,229 | ||||||||||||||
| Stage 2 Coverage (%) | ||||||||||||||||||||
| Home loans | 5.3 | 4.6 | 4.5 | 4.8 | 7.2 | 9.0 | ||||||||||||||
| Credit cards, unsecured loans and other retail lending | 18.3 | 16.7 | 17.5 | 18.6 | 16.6 | 31.1 | ||||||||||||||
| Wholesale loans | 1.7 | 1.5 | 1.5 | 1.7 | 2.3 | 3.4 | ||||||||||||||
| Stage 3 Model exposure (£m) | ||||||||||||||||||||
| Home loans | 610 | 610 | 610 | 610 | 610 | 610 | ||||||||||||||
| Credit cards, unsecured loans and other retail lending | 1,028 | 1,028 | 1,028 | 1,028 | 1,028 | 1,028 | ||||||||||||||
Wholesale loansa | — | — | — | — | — | — | ||||||||||||||
| Stage 3 Model ECL (£m) | ||||||||||||||||||||
| Home loans | 297 | 290 | 292 | 296 | 310 | 320 | ||||||||||||||
| Credit cards, unsecured loans and other retail lending | 696 | 685 | 690 | 696 | 710 | 722 | ||||||||||||||
Wholesale loansa | — | — | — | — | — | — | ||||||||||||||
| Stage 3 Coverage (%) | ||||||||||||||||||||
| Home loans | 48.7 | 47.5 | 47.9 | 48.5 | 50.8 | 52.5 | ||||||||||||||
| Credit cards, unsecured loans and other retail lending | 67.7 | 66.6 | 67.1 | 67.7 | 69.1 | 70.2 | ||||||||||||||
Wholesale loansa | — | — | — | — | — | — | ||||||||||||||
| Total Model ECL (£m) | ||||||||||||||||||||
| Home loans | 311 | 302 | 304 | 309 | 331 | 347 | ||||||||||||||
| Credit cards, unsecured loans and other retail lending | 1,282 | 1,106 | 1,149 | 1,202 | 1,563 | 3,332 | ||||||||||||||
Wholesale loansa | 725 | 584 | 620 | 678 | 962 | 1,511 | ||||||||||||||
| Total ECL | 2,318 | 1,992 | 2,073 | 2,189 | 2,856 | 5,190 | ||||||||||||||
Note
aMaterial wholesale loan defaults are individually assessed across different recovery strategies. As a result, ECL of £463m is reported as individually assessed impairments in the table below.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 65 | ||||
Risk review
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Credit risk
| Reconciliation to total ECL | £m | ||||
| Total model ECL | 2,318 | ||||
| ECL from individually assessed impairments | 463 | ||||
ECL from non-modelled and other management adjustmentsa | 1,217 | ||||
| Total ECL | 3,998 | ||||
Note
aIncludes £1.1bn of post model adjustments of which £0.1bn is included as part of the total model ECL and £0.2bn ECL from non-modelled exposures.
The dispersion of results around the Baseline is an indication of uncertainty around the future projections. The disclosure highlights the results of the alternative scenarios enabling the reader to understand the extent of the impact on exposure and ECL from the upside/downside scenarios. Consequently, the use of five scenarios with associated weightings results in a total weighted ECL uplift from the Baseline ECL of 5.9%, largely driven by credit card losses which have more linear loss profiles than wholesale loan positions.
Home loans: Total weighted ECL of £311m represents a 0.6% increase over the Baseline ECL (£309m) reflecting the nature of the Italy portfolio.
Credit cards, unsecured loans and other retail lending: Total weighted ECL of £1,282m represents a 6.7% increase over the Baseline ECL (£1,202m) reflecting the range of economic scenarios used, mainly impacted by unemployment and key retail variables. Total ECL increases to £3,332m under the Downside 2 scenario, mainly driven by Stage 2, where coverage rates increase to 31.1% from a weighted scenario approach of 18.3% and a £5.3bn increase in model exposure that meets the Significant Increase in Credit Risk criteria and transitions from Stage 1to Stage 2.
Wholesale loans: Total weighted ECL of £725m represents a 6.9% increase over the Baseline ECL (£678m) reflecting the range of economic scenarios used, with exposures in the Investment Bank particularly sensitive to the Downside 2 scenario.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 66 | ||||
Risk review
Risk performance
Credit risk
| Scenarios | ||||||||||||||||||||
| As at 31 December 2020 | Weighted | Upside 2 | Upside 1 | Baseline | Downside 1 | Downside 2 | ||||||||||||||
| Stage 1 Model exposure (£m) | ||||||||||||||||||||
| Home loans | 4,404 | 4,422 | 4,416 | 4,407 | 4,387 | 4,365 | ||||||||||||||
| Credit cards, unsecured loans and other retail lending | 24,980 | 24,929 | 25,097 | 24,820 | 24,411 | 24,247 | ||||||||||||||
| Wholesale loans | 115,949 | 121,769 | 120,741 | 118,930 | 113,027 | 101,759 | ||||||||||||||
| Stage 1 Model ECL (£m) | ||||||||||||||||||||
| Home loans | 4 | 4 | 4 | 4 | 5 | 5 | ||||||||||||||
| Credit cards, unsecured loans and other retail lending | 236 | 187 | 204 | 230 | 258 | 263 | ||||||||||||||
| Wholesale loans | 219 | 239 | 231 | 205 | 218 | 221 | ||||||||||||||
| Stage 1 Coverage (%) | ||||||||||||||||||||
| Home loans | 0.1 | 0.1 | 0.1 | 0.1 | 0.1 | 0.1 | ||||||||||||||
| Credit cards, unsecured loans and other retail lending | 0.9 | 0.8 | 0.8 | 0.9 | 1.1 | 1.1 | ||||||||||||||
| Wholesale loans | 0.2 | 0.2 | 0.2 | 0.2 | 0.2 | 0.2 | ||||||||||||||
| Stage 2 Model exposure (£m) | ||||||||||||||||||||
| Home loans | 557 | 539 | 545 | 554 | 575 | 597 | ||||||||||||||
| Credit cards, unsecured loans and other retail lending | 3,171 | 2,111 | 2,462 | 3,215 | 4,721 | 5,796 | ||||||||||||||
| Wholesale loans | 29,834 | 24,015 | 25,043 | 26,853 | 32,757 | 44,024 | ||||||||||||||
| Stage 2 Model ECL (£m) | ||||||||||||||||||||
| Home loans | 33 | 31 | 31 | 32 | 36 | 40 | ||||||||||||||
| Credit cards, unsecured loans and other retail lending | 512 | 327 | 382 | 481 | 796 | 1,045 | ||||||||||||||
| Wholesale loans | 1,358 | 922 | 1,010 | 1,174 | 1,683 | 2,751 | ||||||||||||||
| Stage 2 Coverage (%) | ||||||||||||||||||||
| Home loans | 5.9 | 5.8 | 5.7 | 5.8 | 6.3 | 6.7 | ||||||||||||||
| Credit cards, unsecured loans and other retail lending | 16.1 | 15.5 | 15.5 | 15.0 | 16.9 | 18.0 | ||||||||||||||
| Wholesale loans | 4.6 | 3.8 | 4.0 | 4.4 | 5.1 | 6.2 | ||||||||||||||
| Stage 3 Model exposure (£m) | ||||||||||||||||||||
| Home loans | 728 | 728 | 728 | 728 | 728 | 728 | ||||||||||||||
| Credit cards, unsecured loans and other retail lending | 1,279 | 1,279 | 1,279 | 1,279 | 1,279 | 1,279 | ||||||||||||||
Wholesale loansa | 863 | 863 | 863 | 863 | 863 | 863 | ||||||||||||||
| Stage 3 Model ECL (£m) | ||||||||||||||||||||
| Home loans | 298 | 278 | 281 | 284 | 306 | 363 | ||||||||||||||
| Credit cards, unsecured loans and other retail lending | 1,190 | 1,170 | 1,180 | 1,191 | 1,211 | 1,210 | ||||||||||||||
Wholesale loansa | 25 | 20 | 21 | 23 | 29 | 40 | ||||||||||||||
| Stage 3 Coverage (%) | ||||||||||||||||||||
| Home loans | 40.9 | 38.2 | 38.6 | 39.0 | 42.0 | 49.9 | ||||||||||||||
| Credit cards, unsecured loans and other retail lending | 93.0 | 91.5 | 92.3 | 93.1 | 94.7 | 94.6 | ||||||||||||||
Wholesale loansa | 2.9 | 2.3 | 2.4 | 2.7 | 3.4 | 4.6 | ||||||||||||||
| Total Model ECL (£m) | ||||||||||||||||||||
| Home loans | 335 | 313 | 316 | 320 | 347 | 408 | ||||||||||||||
| Credit cards, unsecured loans and other retail lending | 1,938 | 1,684 | 1,766 | 1,902 | 2,265 | 2,518 | ||||||||||||||
Wholesale loansa | 1,602 | 1,181 | 1,262 | 1,402 | 1,930 | 3,012 | ||||||||||||||
| Total ECL | 3,875 | 3,178 | 3,344 | 3,624 | 4,542 | 5,938 | ||||||||||||||
Note
aMaterial wholesale loan defaults are individually assessed across different recovery strategies. As a result, ECL of £835m is reported as individually assessed impairments in the table below.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 67 | ||||
Risk review
Risk performance
Credit risk
Reconciliation to total ECLa | £m | ||||
| Total model ECL | 3,875 | ||||
| ECL from individually assessed impairments | 835 | ||||
| ECL from non-modelled and other management adjustments | 1,125 | ||||
| Total ECL | 5,835 | ||||
Note
aIncludes £0.9bn of post model adjustment and £0.2bn ECL from non-model exposures.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 68 | ||||
Risk review
Risk performance
Credit risk
Analysis of the concentration of credit risk
A concentration of credit risk exists when a number of counterparties are located in a common geographical region or are engaged in similar activities and have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. Barclays Bank Group implements limits on concentrations in order to mitigate the risk. The analyses of credit risk concentrations presented below are based on the location of the counterparty or customer or the industry in which they are engaged.
Geographic concentrations
Exposure is concentrated in the Americas 44% (2020: 41%), in the UK 25% (2020: 25%) and Europe 24% (2020: 26%).
| Credit risk concentrations by geography (audited) | ||||||||||||||||||||
| Barclays Bank Group | United Kingdom | Americas | Europe | Asia | Africa and Middle East | Total | ||||||||||||||
| As at 31 December 2021 | £m | £m | £m | £m | £m | £m | ||||||||||||||
| On-balance sheet: | ||||||||||||||||||||
| Cash and balances at central banks | 45,470 | 38,735 | 76,846 | 7,789 | 245 | 169,085 | ||||||||||||||
| Cash collateral and settlement balances | 30,107 | 28,272 | 21,754 | 7,210 | 742 | 88,085 | ||||||||||||||
| Loans and advances at amortised cost | 62,269 | 50,718 | 23,576 | 4,775 | 3,921 | 145,259 | ||||||||||||||
| Reverse repurchase agreements and other similar secured lending | 9 | 123 | 351 | 2,508 | 186 | 3,177 | ||||||||||||||
| Trading portfolio assets | 12,852 | 29,478 | 15,062 | 4,943 | 890 | 63,225 | ||||||||||||||
| Financial assets at fair value through the income statement | 26,096 | 95,456 | 30,080 | 21,798 | 9,998 | 183,428 | ||||||||||||||
| Derivative financial instruments | 78,449 | 91,992 | 75,245 | 14,709 | 1,896 | 262,291 | ||||||||||||||
| Financial assets at fair value through other comprehensive income | 4,525 | 20,750 | 15,603 | 4,666 | 363 | 45,907 | ||||||||||||||
| Other assets | 747 | 224 | 17 | 6 | — | 994 | ||||||||||||||
| Total on-balance sheet | 260,524 | 355,748 | 258,534 | 68,404 | 18,241 | 961,451 | ||||||||||||||
| Off-balance sheet: | ||||||||||||||||||||
| Contingent liabilities | 7,926 | 10,329 | 3,957 | 1,131 | 403 | 23,746 | ||||||||||||||
| Loan commitments | 46,616 | 192,270 | 38,567 | 5,079 | 1,919 | 284,451 | ||||||||||||||
| Total off-balance sheet | 54,542 | 202,599 | 42,524 | 6,210 | 2,322 | 308,197 | ||||||||||||||
| Total | 315,066 | 558,347 | 301,058 | 74,614 | 20,563 | 1,269,648 | ||||||||||||||
| As at 31 December 2020 | ||||||||||||||||||||
| On-balance sheet: | ||||||||||||||||||||
| Cash and balances at central banks | 31,235 | 36,063 | 69,962 | 17,987 | 655 | 155,902 | ||||||||||||||
| Cash collateral and settlement balances | 30,261 | 27,255 | 30,105 | 9,487 | 508 | 97,616 | ||||||||||||||
| Loans and advances at amortised cost | 61,754 | 40,403 | 23,931 | 4,859 | 3,320 | 134,267 | ||||||||||||||
| Reverse repurchase agreements and other similar secured lending | 10 | 152 | 323 | 8,285 | 211 | 8,981 | ||||||||||||||
| Trading portfolio assets | 9,787 | 31,003 | 16,861 | 5,947 | 946 | 64,544 | ||||||||||||||
| Financial assets at fair value through the income statement | 31,745 | 88,302 | 25,706 | 14,742 | 7,524 | 168,019 | ||||||||||||||
| Derivative financial instruments | 93,685 | 90,796 | 101,099 | 14,532 | 2,581 | 302,693 | ||||||||||||||
| Financial assets at fair value through other comprehensive income | 6,921 | 19,451 | 22,138 | 3,276 | 115 | 51,901 | ||||||||||||||
| Other assets | 392 | 185 | 37 | — | — | 614 | ||||||||||||||
| Total on-balance sheet | 265,790 | 333,610 | 290,162 | 79,115 | 15,860 | 984,537 | ||||||||||||||
| Off-balance sheet: | ||||||||||||||||||||
| Contingent liabilities | 5,200 | 10,121 | 3,809 | 1,222 | 580 | 20,932 | ||||||||||||||
| Loan commitments | 46,746 | 175,893 | 36,713 | 4,132 | 1,538 | 265,022 | ||||||||||||||
| Total off-balance sheet | 51,946 | 186,014 | 40,522 | 5,354 | 2,118 | 285,954 | ||||||||||||||
| Total | 317,736 | 519,624 | 330,684 | 84,469 | 17,978 | 1,270,491 | ||||||||||||||
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 69 | ||||
Risk review
Risk performance
Credit risk
Industry concentrations
Total exposures concentrated in banks and other financial institutions is 48% (2020: 51%), predominantly within derivative financial instruments and financial assets. The proportion of the overall exposure concentrated in governments and central banks is 22% (2020: 21%). Further details on material and emerging risks can be found on pages 26 to 38.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 70 | ||||
Risk review
Risk performance
Credit risk
Approach to management and representation of credit quality
Asset credit quality
The credit quality distribution is based on the IFRS 9 12 month probability of default (PD) at the reporting date to ensure comparability with other ECL disclosures in Expected Credit Losses section on pages 52 to 57.
The Barclays Bank Group uses the following internal measures to determine credit quality for loans:
| Default Grade | Retail and Wholesale lending Probability of default | Credit Quality Description | ||||||
| 1-3 | 0.0 to < 0.05% | Strong | ||||||
| 4-5 | 0.05 to < 0.15% | |||||||
| 6-8 | 0.15 to < 0.30% | |||||||
| 9-11 | 0.30 to < 0.60% | |||||||
| 12-14 | 0.60 to < 2.15% | Satisfactory | ||||||
| 15-19 | 2.15 to < 10% | |||||||
| 19 | 10 to < 11.35% | |||||||
| 20-21 | 11.35% to < 100% | Higher Risk | ||||||
| 22 | 100 | % | Credit Impaired | |||||
For retail clients, a range of analytical tools is used to derive the probability of default of clients at inception and on an ongoing basis.
These credit quality descriptions can be summarised as follows:
Strong: there is a very high likelihood of the asset being recovered in full.
Satisfactory: while there is a high likelihood that the asset will be recovered and therefore, of no cause for concern to the Barclays Bank Group, the asset may not be collateralised, or may relate to unsecured retail facilities. At the lower end of this grade there are customers that are being more carefully monitored, for example, corporate customers which are indicating some evidence of deterioration, mortgages with a high loan to value, and unsecured retail loans operating outside normal product guidelines.
Higher risk: there is concern over the obligor’s ability to make payments when due. However, these have not yet converted to actual delinquency. There may also be doubts over the value of collateral or security provided. However, the borrower or counterparty is continuing to make payments when due and is expected to settle all outstanding amounts of principal and interest.
Debt securities
For assets held at fair value, the carrying value on the balance sheet will include, among other things, the credit risk of the issuer. Most listed and some unlisted securities are rated by external rating agencies. The Barclays Bank Group mainly uses external credit ratings provided by Standard & Poor’s, Fitch or Moody’s. Where such ratings are not available or are not current, the Barclays Bank Group will use its own internal ratings for the securities.
Balance sheet credit quality
The following tables present the credit quality of Barclays Bank Group assets exposed to credit risk.
Overview
As at 31 December 2021, the ratio of the Barclays Bank Group’s on-balance sheet assets classified as strong (0.0 < 0.60%) remained stable at 86% (2020: 86%) of total assets exposed to credit risk.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 71 | ||||
Risk review
Risk performance
Credit risk
| Balance sheet credit quality (audited) | |||||||||||||||||||||||||||||
| Barclays Bank Group | PD Range | 0.0 to <0.60% | 0.60 to <11.35% | 11.35% to 100% | Total | 0.0 to <0.60% | 0.60 to <11.35% | 11.35% to 100% | Total | ||||||||||||||||||||
| As at 31 December 2021 | £m | £m | £m | £m | % | % | % | % | |||||||||||||||||||||
| Cash and balances at central banks | 169,085 | — | — | 169,085 | 100 | — | — | 100 | |||||||||||||||||||||
| Cash collateral and settlement balances | 78,881 | 9,194 | 10 | 88,085 | 90 | 10 | — | 100 | |||||||||||||||||||||
| Loans and advances at amortised cost | |||||||||||||||||||||||||||||
| Home loans | 9,519 | 809 | 657 | 10,985 | 87 | 7 | 6 | 100 | |||||||||||||||||||||
| Credit cards, unsecured loans and other retail lending | 18,460 | 6,178 | 1,322 | 25,960 | 71 | 24 | 5 | 100 | |||||||||||||||||||||
| Wholesale loans | 78,239 | 26,992 | 3,083 | 108,314 | 72 | 25 | 3 | 100 | |||||||||||||||||||||
| Total loans and advances at amortised cost | 106,218 | 33,979 | 5,062 | 145,259 | 73 | 23 | 4 | 100 | |||||||||||||||||||||
| Reverse repurchase agreements and other similar secured lending | 3,091 | 86 | — | 3,177 | 97 | 3 | — | 100 | |||||||||||||||||||||
| Trading portfolio assets: | |||||||||||||||||||||||||||||
| Debt securities | 44,488 | 5,735 | 477 | 50,700 | 88 | 11 | 1 | 100 | |||||||||||||||||||||
| Traded loans | 2,172 | 10,144 | 209 | 12,525 | 17 | 81 | 2 | 100 | |||||||||||||||||||||
| Total trading portfolio assets | 46,660 | 15,879 | 686 | 63,225 | 74 | 25 | 1 | 100 | |||||||||||||||||||||
| Financial assets at fair value through the income statement: | |||||||||||||||||||||||||||||
| Loans and advances | 16,977 | 18,896 | 28 | 35,901 | 47 | 53 | — | 100 | |||||||||||||||||||||
| Debt securities | 1346 | 858 | 52 | 2,256 | 60 | 38 | 2 | 100 | |||||||||||||||||||||
| Reverse repurchase agreements | 108,609 | 36,047 | 530 | 145,186 | 75 | 25 | — | 100 | |||||||||||||||||||||
| Other financial assets | 67 | 18 | — | 85 | 79 | 21 | — | 100 | |||||||||||||||||||||
| Total financial assets at fair value through the income statement | 126,999 | 55,819 | 610 | 183,428 | 70 | 30 | — | 100 | |||||||||||||||||||||
| Derivative financial instruments | 246,347 | 15,678 | 266 | 262,291 | 94 | 6 | — | 100 | |||||||||||||||||||||
| Financial assets at fair value through other comprehensive income | 45,901 | 6 | — | 45,907 | 100 | — | — | 100 | |||||||||||||||||||||
| Other assets | 948 | 46 | — | 994 | 95 | 5 | — | 100 | |||||||||||||||||||||
| Total on-balance sheet | 824,130 | 130,687 | 6,634 | 961,451 | 86 | 13 | 1 | 100 | |||||||||||||||||||||
| As at 31 December 2020 | |||||||||||||||||||||||||||||
| Cash and balances at central banks | 155,902 | — | — | 155,902 | 100 | — | — | 100 | |||||||||||||||||||||
| Cash collateral and settlement balances | 86,882 | 10,725 | 9 | 97,616 | 89 | 11 | — | 100 | |||||||||||||||||||||
| Loans and advances at amortised cost | |||||||||||||||||||||||||||||
| Home loans | 7,582 | 2,840 | 771 | 11,193 | 68 | 25 | 7 | 100 | |||||||||||||||||||||
| Credit cards, unsecured loans and other retail lending | 10,742 | 11,259 | 1,367 | 23,368 | 46 | 48 | 6 | 100 | |||||||||||||||||||||
| Wholesale loans | 75,672 | 20,828 | 3,206 | 99,706 | 76 | 21 | 3 | 100 | |||||||||||||||||||||
| Total loans and advances at amortised cost | 93,996 | 34,927 | 5,344 | 134,267 | 70 | 26 | 4 | 100 | |||||||||||||||||||||
| Reverse repurchase agreements and other similar secured lending | 8,969 | 12 | — | 8,981 | 100 | — | — | 100 | |||||||||||||||||||||
| Trading portfolio assets: | |||||||||||||||||||||||||||||
| Debt securities | 51,109 | 4,871 | 216 | 56,196 | 91 | 9 | — | 100 | |||||||||||||||||||||
| Traded loans | 704 | 5,107 | 2,537 | 8,348 | 9 | 61 | 30 | 100 | |||||||||||||||||||||
| Total trading portfolio assets | 51,813 | 9,978 | 2,753 | 64,544 | 80 | 16 | 4 | 100 | |||||||||||||||||||||
| Financial assets at fair value through the income statement: | |||||||||||||||||||||||||||||
| Loans and advances | 13,174 | 14,232 | 43 | 27,449 | 48 | 52 | — | 100 | |||||||||||||||||||||
| Debt securities | 1,136 | 515 | 46 | 1,697 | 67 | 30 | 3 | 100 | |||||||||||||||||||||
| Reverse repurchase agreements | 96,318 | 41,566 | 674 | 138,558 | 70 | 30 | — | 100 | |||||||||||||||||||||
| Other financial assets | 302 | 13 | — | 315 | 96 | 4 | — | 100 | |||||||||||||||||||||
| Total financial assets at fair value through the income statement | 110,930 | 56,326 | 763 | 168,019 | 66 | 34 | — | 100 | |||||||||||||||||||||
| Derivative financial instruments | 282,864 | 19,352 | 477 | 302,693 | 94 | 6 | — | 100 | |||||||||||||||||||||
| Financial assets at fair value through other comprehensive income | 51,893 | 8 | — | 51,901 | 100 | — | — | 100 | |||||||||||||||||||||
| Other assets | 572 | 42 | — | 614 | 93 | 7 | — | 100 | |||||||||||||||||||||
| Total on-balance sheet | 843,821 | 131,370 | 9,346 | 984,537 | 86 | 13 | 1 | 100 | |||||||||||||||||||||
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 72 | ||||
Risk review
Risk performance
Credit risk
Credit exposures by internal PD grade
The below tables represents credit risk profile by PD grade for loans and advances at amortised cost, contingent liabilities and loan commitments.
Stage 1 higher risk assets, presented gross of associated collateral held, are of weaker credit quality but have not significantly deteriorated since origination.
IFRS 9 Stage 1 and Stage 2 classification is not dependent solely on the absolute probability of default but on elements that determine a Significant Increase in Credit Risk (see Note 7 to the financial statements on page 126), including relative movement in probability of default since initial recognition. There is therefore no direct relationship between credit quality and IFRS 9 stage classification.
| Barclays Bank Group | ||||||||||||||||||||||||||||||||||||||
| As at 31 December 2021 | ||||||||||||||||||||||||||||||||||||||
| Credit risk profile by internal PD grade for loans and advances at amortised cost (audited) | ||||||||||||||||||||||||||||||||||||||
| Gross carrying amount | Allowance for ECL | Net exposure | Coverage ratio | |||||||||||||||||||||||||||||||||||
| PD range | Credit quality description | Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | |||||||||||||||||||||||||||||
| Grading | % | £m | £m | £m | £m | £m | £m | £m | £m | £m | % | |||||||||||||||||||||||||||
| 1-3 | 0.0 to < 0.05% | Strong | 52,756 | 855 | — | 53,611 | 280 | 6 | — | 286 | 53,325 | 0.5 | ||||||||||||||||||||||||||
| 4-5 | 0.05 to < 0.15% | Strong | 17,797 | 211 | — | 18,008 | 6 | 2 | — | 8 | 18,000 | — | ||||||||||||||||||||||||||
| 6-8 | 0.15 to < 0.30% | Strong | 10,764 | 1,220 | — | 11,984 | 15 | 7 | — | 22 | 11,962 | 0.2 | ||||||||||||||||||||||||||
| 9-11 | 0.30 to < 0.60% | Strong | 21,865 | 1,136 | — | 23,001 | 55 | 15 | — | 70 | 22,931 | 0.3 | ||||||||||||||||||||||||||
| 12-14 | 0.60 to < 2.15% | Satisfactory | 16,429 | 3,508 | — | 19,937 | 160 | 116 | — | 276 | 19,661 | 1.4 | ||||||||||||||||||||||||||
| 15-19 | 2.15 to < 10% | Satisfactory | 6,653 | 4,995 | — | 11,648 | 169 | 302 | — | 471 | 11,177 | 4.0 | ||||||||||||||||||||||||||
| 19 | 10 to < 11.35% | Satisfactory | 2,156 | 1,276 | — | 3,432 | 39 | 252 | — | 291 | 3,141 | 8.5 | ||||||||||||||||||||||||||
| 20-21 | 11.35 to < 100% | Higher Risk | 593 | 3,196 | — | 3,789 | 72 | 319 | — | 391 | 3,398 | 10.3 | ||||||||||||||||||||||||||
| 22 | 100 | % | Credit Impaired | — | — | 3,348 | 3,348 | — | — | 1,684 | 1,684 | 1,664 | 50.3 | |||||||||||||||||||||||||
| Total | 129,013 | 16,397 | 3,348 | 148,758 | 796 | 1,019 | 1,684 | 3,499 | 145,259 | 2.4 | ||||||||||||||||||||||||||||
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 73 | ||||
Risk review
Risk performance
Credit risk
Notes
aExcludes loan commitments and financial guarantees carried at fair value of £18.8bn (2020: £9.5bn) for Barclays Bank Group.
bBarclays Bank Group has issued £1.7bn (2020: £2.6bn) of guarantees that have been provided to subsidiaries of Barclays PLC outside the Barclays Bank Group. These guarantees have not been reported in the prior periods and the comparatives have not been restated.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 74 | ||||
Risk review
Risk performance
Credit risk
Analysis of specific portfolios and asset types
Credit cards, unsecured loans and other retail lending
The principal portfolios listed below accounted for 76% (2020: 77%) of Barclays Bank Group’s total credit cards, unsecured loans and other retail lending.
US cards: 30 and 90 day arrears rates improved and remain below pre-pandemic levels due to continued benefit from government support schemes throughout the pandemic and industry payment deferrals that were made available to consumers.
Germany consumer lending: 30 and 90 day arrears rates reduced in 2021 due to improved payment behaviour of formerly high-risk customers as unemployment eased, and the benefit from government support in the local market continued.
Government supported loans
Throughout the COVID-19 pandemic Barclays Group has supported its customers and clients by participating in the UK Government's Coronavirus Business Interruption Loan Scheme (CBILs), Coronavirus Large Business Interruption Loan Scheme (CLBILs) and the Recovery Loan Scheme (RLS).
The CBILs scheme was launched to provide financial support to smaller and medium-sized businesses and CLBILs for larger businesses in the UK who may experience financial difficulties as a result of the COVID-19 outbreak. The RLS aims to help UK businesses access finance as they recover and grow following the COVID-19 pandemic. These loans are guaranteed by the Government at 80% for CBILs, CLBILs and RLS as at the balance sheet date.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 75 | ||||
Risk review
Risk performance
Market risk
| Summary of Contents | Page | |||||||
| 77 | Outlines key measures used to summarise the market risk profile of the Barclays Bank Group such as VaR. | |||||||
| 77 | ||||||||
| 77 | ||||||||
| 77 | The Barclays Bank Group discloses details on management measures of market risk. Total management VaR includes all trading positions and is presented on a diversified basis by risk factor. | |||||||
| 77 | ||||||||
–The daily average, maximum and minimum values of management VaR | 77 | |||||||
–Business scenario stresses | 78 | This section also outlines the macroeconomic conditions modelled as part of the Barclays Bank Group’s risk management framework. | ||||||
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 76 | ||||
Risk review
Risk performance
Market risk
All disclosures in this section pages 77 to 100 are unaudited unless otherwise stated.
Overview
This section contains key statistics describing the market risk profile of the Barclays Bank Group:
•The market risk management section on page 42 provides a description of management VaR. Management measures are shown on page 77.
Measures of market risk in the Barclays Bank Group and accounting measures
Traded market risk measures such as VaR and balance sheet exposure measures have fundamental differences:
•Balance sheet measures show accruals-based balances or marked to market values as at the reporting date.
•VaR measures also take account of current marked to market values but, in addition, hedging effects between positions are considered.
•Market risk measures are expressed in terms of changes in value or volatilities as opposed to static values.
For these reasons, it is not possible to present direct reconciliations of traded market risk and accounting measures.
Summary of performance in the period
Average management VaR decreased by 39% to £19m (2020: £31m), driven by reduced risk taking, lower market volatility and the impact of a methodology update in March 2021 which changed the historical lookback period of the VaR model from two years to one year. The methodology change has increased the responsiveness of the model to changes over time in volatility levels in the lookback period.
Traded market risk review
Review of management measures
The following disclosures provide details of management measures of market risk.
The table below shows the total management VaR on a diversified basis by risk factor. Total management VaR includes all trading positions in CIB and the supporting Barclays Bank Group Treasury desks.
Limits are applied against each risk factor VaR as well as total management VaR, which are then cascaded further by risk managers to each business.
The daily average, maximum and minimum values of management VaR
Note
aDiversification effects recognise that forecast losses from different assets or businesses are unlikely to occur concurrently, hence the expected aggregate loss is lower than the sum of the expected losses from each area. Historical correlations between losses are taken into account in making these assessments. The high and low VaR figures reported for each category did not necessarily occur on the same day as the high and low VaR reported as a whole. Consequently, a diversification effect balance for the high and low VaR figures would not be meaningful and is therefore omitted from the above table.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 77 | ||||
Risk review
Risk performance
Market risk
Barclays Bank Group Management VaRa (£m)
Business scenario stresses
As part of the Barclays Bank Group’s risk management framework, on a regular basis the performance of the trading business in hypothetical scenarios characterised by severe macroeconomic conditions is modelled. Up to seven global scenarios are modelled on a regular basis, for example, a sharp deterioration in liquidity, a slowdown in the global economy, global recession and a sharp increase in economic growth.
In 2021, the scenario analyses showed that the largest market risk related impacts would be due to a severe deterioration in financial liquidity and a global recession.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 78 | ||||
Risk review
Risk performance
Treasury and Capital risk
| Summary of Contents | Page | |||||||
| Liquidity risk performance | ||||||||
The risk that the firm 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 section provides an overview of the Barclays Bank Group’s liquidity risk. | ||||||||
| Provides details on the contractual maturity of all financial instruments and other assets and liabilities. | ||||||||
| Capital risk performance | ||||||||
Capital risk is the risk that the firm 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 also includes the risk from the firm’s pension plans. This section details Barclays Bank Group’s capital and leverage position. | ||||||||
| Barclays Bank Group discloses the two sources of foreign exchange risk that it is exposed to. | ||||||||
| A review focusing on the UK retirement fund, which represents the majority of Barclays Bank Group’s total retirement benefit obligation. | ||||||||
| Interest rate risk in the banking book performance | ||||||||
A description of the non-traded market risk framework is provided. Barclays Bank Group discloses a sensitivity analysis on pre-tax net interest income for non-trading financial assets and liabilities. The analysis is carried out by currency. Barclays Bank Group discloses the overall impact of a parallel shift in interest rates on other comprehensive income and cash flow hedges. Barclays Bank Group measures the volatility of the value of the FVOCI instruments in the liquidity pool through non-traded market risk VaR. | ||||||||
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 79 | ||||
Risk review
Risk performance
Treasury and Capital risk
Liquidity risk
All disclosures in this section pages 80 to 84 are unaudited unless otherwise stated.
Overview
The efficient management of liquidity is essential to the Barclays Bank Group in order to retain the confidence of markets and maintain the sustainability of the business. The liquidity risk control framework is used to manage all liquidity risk exposures under both BAU and stressed conditions. The framework is designed to maintain liquidity resources that are sufficient in amount, quality and funding tenor profile to support the liquidity risk appetite as expressed by the Barclays Bank PLC Board. The liquidity risk appetite is monitored against both internal and regulatory liquidity metrics.
For the purpose of liquidity management, Barclays Bank PLC and its subsidiary Barclays Capital Securities Limited, a UK broker dealer entity, are monitored on a combined basis by the PRA under a Domestic Liquidity Sub-Group (Barclays Bank PLC DoLSub) arrangement.
Liquidity risk stress testing
The liquidity risk assessment measures the potential contractual and contingent stress outflows under a range of stress scenarios, which are then used to determine the size of the liquidity pool that is immediately available to meet anticipated outflows if a stress occurs. The scenarios include a 30 day Barclays-specific stress event, a 90 day market-wide stress event and a 30 day combined scenario consisting of both a Barclays specific and market-wide stress event.
The Liquidity Coverage Ratio (LCR) requirement takes into account the relative stability of different sources of funding and potential incremental funding requirements in a stress. The LCR is designed to promote short-term resilience of a bank’s liquidity risk profile by holding sufficient high quality liquid assets to survive an acute stress scenario lasting for 30 days.
As at 31 December 2021, Barclays Bank PLC DoLSub held eligible liquid assets well above 100% of net stressed outflows to its internal and regulatory requirements. The split of the liquidity pool between cash and deposits with central banks, government bonds and other eligible securities is broadly similar to the Barclays Group.
A significant proportion of the liquidity pool is located in Barclays Bank PLC and Barclays Bank Ireland PLC. The residual portion of the liquidity pool, which is predominantly in the US subsidiaries, is held against entity-specific stress outflows and local regulatory requirements.
The liquidity pool declined slightly to £205bn (December 2020: £206bn), while the LCR remained above the 100% regulatory requirement at 140% (December 2020:145%). The liquidity pool movement was driven by further growth in deposits, borrowing from the Bank of England's Term Funding Scheme with additional incentives for SMEs (TFSME) and an increase in wholesale funding, which were offset by an increase in business funding consumption.
| 2021 | 2020 | |||||||
| As at 31 December | £bn | £bn | ||||||
| Barclays Bank Group liquidity pool | 205 | 206 | ||||||
| % | % | |||||||
Barclays Bank PLC DoLSub Liquidity Coverage Ratioa | 140 | 145 | ||||||
Note
a.The LCR represents the size of the eligible liquidity buffer relative to net stress outflows measured over an acute stress scenario lasting 30 days. Liquidity outflows relating to the exercise of rescission rights by eligible purchasers of securities issuances identified as being in excess of the amounts registered under the Company's 2019 F-3 are not expected until settlement of the rescission offer. As at 31 December 2021, this was beyond the 30 day timeframe captured by the LCR.
The Barclays Bank Group has direct access to US, European and Asian capital markets through its global investment banking operations and to long-term investors through its clients worldwide. Key sources of wholesale funding include money markets, certificates of deposit, commercial paper, medium term issuances (including structured notes) and securitisations. This funding capacity enables the Barclays Bank Group to maintain a stable and diversified funding base.
The Barclays Bank Group also supports various central bank monetary initiatives, such as the Bank of England’s Term Funding Scheme (TFS) and Term Funding Scheme with additional incentives for SMEs (TFSME), and the European Central Bank’s Targeted Long-Term Refinancing Operations (TLTRO). These are reported under ‘repurchase agreements and other similar secured borrowing’ on the balance sheet. In 2021, Barclays Bank Group repaid the remaining £1.4bn TFS balance outstanding at the beginning of the year, and drew an additional £3.4bn under TFSME and an additional £0.5bn under TLTRO during the year; £7.0bn TFSME and £2.7bn TLTRO balances were outstanding at the year-end.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 80 | ||||
Risk review
Risk performance
Treasury and Capital risk
Contractual maturity of financial assets and liabilities
The table below provides detail on the contractual maturity of all financial instruments and other assets and liabilities. Derivatives (other than those designated in a hedging relationship) and trading portfolio assets and liabilities are included in the ‘on demand’ column at their fair value. Liquidity risk on these items is not managed on the basis of contractual maturity since these items are not held for settlement according to such maturity and will frequently be settled before contractual maturity at fair value. Derivatives designated in a hedging relationship are included according to their contractual maturity.
a.2021 financial metrics have been restated to reflect the over-issuance of securities under the Company's 2019 F-3. See Restatement of financial statements (Note 1a) on page 118 for further details. The contractual maturity profile of financial liabilities designated at fair value has been restated to reflect the impact of the over-issuance of securities. Securities issued by the Company in excess of the maximum aggregate offering price registered under the Company’s 2019 F-3 with a value of £6,997m have been classified as "on demand".
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 81 | ||||
Risk review
Risk performance
Treasury and Capital risk
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 82 | ||||
Risk review
Risk performance
Treasury and Capital risk
Expected maturity date may differ from the contractual dates, to account for:
▪Trading portfolio assets and liabilities and derivative financial instruments, which may not be held to maturity as part of the Barclays Bank Group’s trading strategies.
▪Corporate and retail deposits, reported under deposits at amortised cost, are repayable on demand or at short notice on a contractual basis. In practice, their behavioural maturity is typically longer than their contractual maturity, and therefore provide stable funding for the Barclays Bank Group’s operations and liquidity needs.
▪Loans to corporate and retail customers, which are included within loans and advances at amortised cost and financial assets at fair value, may be repaid earlier in line with terms and conditions of the contract.
▪Debt securities in issue, subordinated liabilities, and financial liabilities designated at fair value, may include early redemption features.
Contractual maturity of financial liabilities on an undiscounted basis
The following table presents the cash flows payable by the Barclays Bank Group under financial liabilities by remaining contractual maturities at the balance sheet date. The amounts disclosed in the table are the contractual undiscounted cash flows of all financial liabilities (i.e. nominal values).
The balances in the below table do not agree directly to the balances in the consolidated balance sheet as the table incorporates all cash flows, on an undiscounted basis, related to both principal as well as those associated with all future coupon payments.
Derivative financial instruments held for trading and trading portfolio liabilities are included in the on demand column at their fair value.
a.2021 financial metrics have been restated to reflect the over-issuance of securities under the Company's 2019 F-3. See Restatement of financial statements (Note 1a) on page 118 for further details. The contractual maturity profile of financial liabilities designated at fair value has been restated to reflect the impact of the over-issuance of securities. Securities issued by the Company in excess of the maximum aggregate offering price registered under the Company’s 2019 F-3 with a value of £6,997m have been classified as "on demand".
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 83 | ||||
Risk review
Risk performance
Treasury and Capital risk
Maturity of off-balance sheet commitments received and given
The table below presents the maturity split of the Barclays Bank Group’s off-balance sheet commitments received and given at the balance sheet date. The amounts disclosed in the table are the undiscounted cash flows (i.e. nominal values) on the basis of earliest opportunity at which they are available.
The above table on Maturity analysis of off-balance sheet commitments given for Barclays Bank Group includes £1.7bn (2020: £2.6bn) of guarantees that have been provided to subsidiaries of Barclays PLC outside the Barclays Bank Group. These guarantees have not been reported in the prior periods and the comparatives have not been restated. These are all On demand.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 84 | ||||
Risk review
Risk performance
Treasury and Capital risk
Capital risk
Overview
Barclays Bank PLC is currently regulated by the 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 capital metrics for Barclays Bank PLC solo-consolidated.
Following the withdrawal of the UK from the EU, any references to CRR as amended by CRR II mean, unless otherwise specified, CRR as amended by CRR II, as it forms part of UK law pursuant to the European Union (Withdrawal) Act 2018 and subject to the temporary transitional powers (TTP) available to UK regulators to delay or phase-in on-shoring changes to UK regulatory requirements arising at the end of the transition period until 31 March 2022, as at the applicable reporting date.
On 8 October 2021, the PRA published its Policy Statement on the UK leverage ratio framework. The Policy Statement confirms that UK banks will be subject to a single UK leverage ratio requirement meaning that the CRR leverage ratio will no longer apply for UK banks from 1 January 2022. Whilst largely upholding the existing framework, technical changes generally align to the Basel III standards with the exception of the qualifying claims on central banks exemption. From 1 January 2022 central bank claims can be excluded from the UK leverage ratio measure as long as they are matched by qualifying liabilities (rather than deposits). Minimum requirements are expected to be applied at the individual level from 1 January 2023. Individual requirements may be replaced with a sub-consolidated measure, subject to permission from the PRA.
Impact of the over-issuance of securities in the US
In March 2022, the Company became aware it had issued securities in excess of the amount it had pre-registered with the SEC under the the Company's 2019 F-3. The securities issued in excess of the registered amount comprised structured products and exchange traded notes. As these securities were not issued in compliance with the Securities Act, a right of rescission has arisen for certain purchasers of the securities. A proportion of the expected costs associated with the rescission offer are attributable to the financial statements for the year ended 31 December 2021. This omission in the financial statements has resulted in the restatement of the 2021 figures in the tables below.
Litigation and conduct charges in the income statement in relation to 2021 were under reported by £170m (post-tax). Total CET1 decreased by £200m from £24,128m to £23,928m, inclusive of the impact on regulatory threshold deductions. This resulted in reductions in the transitional CET1 ratio (13.0% to 12.9%), fully loaded CET1 ratio (12.7% to 12.6%), T1 ratio (17.6% to 17.5%) and total capital ratio (20.6% to 20.5%). Leverage exposure increased £1.9bn to recognise, on a regulatory basis, the potential commitment relating to the rescission offer. The CRR leverage ratio remained unchanged at 3.7%.
Capital ratiosa,b,c | ||||||||
Restatedd | ||||||||
| As at 31 December | 2021 | 2020 | ||||||
| CET1 | 12.9 | % | 14.2 | % | ||||
| Tier 1 (T1) | 17.5 | % | 18.1 | % | ||||
| Total regulatory capital | 20.5 | % | 21.0 | % | ||||
| Capital resources (audited) | ||||||||
Restatedd | ||||||||
| 2021 | 2020 | |||||||
| As at 31 December | £m | £m | ||||||
| CET1 capital | 23,928 | 25,227 | ||||||
| T1 capital | 32,395 | 32,172 | ||||||
| Total regulatory capital | 37,954 | 37,493 | ||||||
| Total risk weighted assets (RWAs) (unaudited) | 185,467 | 178,156 | ||||||
Capital Requirements Regulation (CRR) leverage ratio a | ||||||||
Restatedd | ||||||||
| 2021 | 2020 | |||||||
| As at 31 December | £m | £m | ||||||
| CRR leverage ratio | 3.7 | % | 3.9 | % | ||||
| T1 capital | 32,395 | 32,172 | ||||||
| CRR leverage exposure | 883,371 | 826,371 | ||||||
Notes
aCapital, RWAs and leverage are calculated applying the transitional arrangements of the CRR as amended by CRR II. This includes IFRS 9 transitional arrangements and the grandfathering of CRR and CRR II non-compliant capital instruments.
bThe fully loaded CET1 ratio was 12.6%, with £23.4bn of CET1 capital and £185bn of RWAs, calculated without applying the transitional arrangements of the CRR as amended by CRR II.
cThe Barclays PLC CET1 ratio, as is relevant for assessing against the conversion trigger in Barclays Bank PLC 7.625% Contingent Capital Notes, was 15.1%. For this calculation CET1 capital and RWAs are calculated applying the transitional arrangements under the CRR, as amended by CRR II, including the IFRS 9 transitional other metrics and capital arrangements. The benefit of the Financial Services Authority (FSA) October 2012 interpretation of the transitional provisions, relating to the implementation of CRD IV, expired in December 2017.
d2021 capital metrics have been restated to reflect the over-issuance of securities under the Company's 2019 F-3. See Impact of the over-issuance of securities in the US on this page for further details.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 85 | ||||
Risk review
Risk performance
Treasury and Capital risk
Foreign exchange risk (audited)
The Barclays Bank Group is exposed to two sources of foreign exchange risk.
a)Transactional foreign currency exposure
Transactional foreign currency exposures represent exposure on banking assets and liabilities, denominated in currencies other than the functional currency of the transacting entity.
The Barclays Bank Group’s risk management policies are designed to prevent the holding of significant open positions in foreign currencies outside the trading portfolio which is monitored through VaR.
Banking book transactional foreign exchange risk is monitored on a daily basis by the market risk function and minimised by the businesses.
b)Translational foreign exchange exposure
The Barclays Bank Group's investments in overseas subsidiaries and branches create capital resources denominated in foreign currencies, principally USD and EUR. Changes in the GBP value of the net investments due to foreign currency movements are captured in the currency translation reserve, resulting in a movement in shareholders’ equity.
Economic hedges relate to exposures arising on foreign currency denominated preference share and AT1 instruments. These instruments are accounted for at historical cost under IFRS and do not qualify as hedges for accounting purposes. The gain or loss arising from changes in the GBP value of these instruments is recognised on redemption in retained earnings.
During 2021, total structural currency exposure net of hedging instruments increased by £0.5bn to £20.3bn (2020: £19.8bn). Foreign currency net investments increased by £5.5bn to £37.1bn (2020: £31.6bn) driven predominantly by a £3.2bn increase in Euro, £1.8bn increase in US dollars and £0.5bn increase in other currencies. The hedges associated with these foreign currency investments increased by £3.8bn to £9.4bn (2020: £5.6bn).
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 86 | ||||
Risk review
Risk performance
Treasury and Capital risk
Pension risk review
The UK Retirement Fund (UKRF) represents approximately 97% (2020: 97%) of the Barclays Bank Group’s total retirement benefit obligations globally. As such this risk review section focuses exclusively on the UKRF. The UKRF is closed to new entrants and there is no new final salary benefit being accrued. Existing active members accrue a combination of a cash balance benefit and a defined contribution element. Pension risk arises as the market value of the pension fund assets may decline, investment returns may reduce or the estimated value of the pension liabilities may increase.
Assets
The Trustee Board of the UKRF defines its overall long-term investment strategy with investments across a broad range of asset classes. This results in an appropriate mix of return seeking assets as well as liability matching assets to better match future pension obligations. The two largest market risks within the asset portfolio are interest rates and equities. The split of scheme assets is shown within Note 31 to the financial statements. The fair value of the UKRF assets was £34.7bn as at 31 December 2021 (2020: £33.9bn).
Liabilities
The UKRF retirement benefit obligations are a series of future cash flows with relatively long duration. On an IAS 19 basis these cash flows are sensitive to changes in the expected long-term price inflation rate (RPI) and the discount rate (GBP AA corporate bond yield):
▪An increase in long-term expected inflation corresponds to an increase in liabilities.
▪A decrease in the discount rate corresponds to an increase in liabilities.
Pension risk is generated through the Barclays Bank Group’s defined benefit schemes and this risk is set to reduce over time as the main defined benefit scheme is closed to new entrants. The chart below outlines the shape of the UKRF’s liability cash flow profile as at 31 December 2021 that takes account of the future inflation indexing of payments to beneficiaries. The majority of the cash flows (approximately 95%) fall between 0 and 40 years, peaking between 11 and 20 years and reducing thereafter. The shape may vary depending on changes to inflation and longevity expectations and any members who elect to transfer out. Transfers out will bring forward the liability cash flows.
For more detail on the UKRF’s financial and demographic valuation assumptions see Note 31 to the financial statements.
Proportion of liability cash flows
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 87 | ||||
Risk review
Risk performance
Treasury and Capital risk
Net IAS 19 position
The graph above shows the evolution of the UKRF’s net IAS 19 position over the last two years. During 2021 the increase in the IAS 19 pension surplus was driven by high asset returns and scheduled deficit reduction contributions. Higher realised inflation over the year had a negative impact by increasing the projected liabilities, which was partially offset by updates to the demographic assumptions.
Refer to Note 31 to the financial statements for the sensitivity of the UKRF to changes in key assumptions.
Risk measurement
In line with the Barclays Bank Group's risk management framework the assets and liabilities of the UKRF are modelled within a VaR framework to show the volatility of the pension position at a total portfolio level. This enables the risks, diversification and liability matching characteristics of the UKRF obligations and investments to be adequately captured. VaR is measured and monitored on a monthly basis. Risks are reviewed and reported regularly at forums including the Barclays PLC Board Risk Committee, the Barclays Group Risk Committee, the Pensions Management Group and the Pension Executive Board. The VaR model takes into account the valuation of the liabilities on an IAS 19 basis (see Note 31 to the financial statements). The Trustee receives quarterly VaR measures on a funding basis.
The pension liability is also sensitive to post-retirement mortality assumptions which are reviewed regularly (See Note 31 to the financial statements).
To mitigate part of this risk the UKRF has entered into a longevity swap hedging approximately a quarter of current pensioner liabilities.
In addition, the impact of pension risk to the Barclays Bank Group is taken into account as part of the stress testing process. Stress testing is performed internally on at least an annual basis. The UKRF exposure is also included as part of regulatory stress tests.
The Barclays Bank Group's defined benefit pension schemes affect capital in two ways:
•An IAS 19 deficit is treated as a liability on the Barclays Bank Group’s balance sheet. Movement in a deficit due to remeasurements, including actuarial losses, are recognised immediately through Other Comprehensive Income and as such reduces shareholders’ equity and CET1 capital. An IAS 19 surplus is treated as an asset on the balance sheet and increases shareholders’ equity; however, it is deducted for the purposes of determining CET1 capital.
•In the Barclays Bank Group’s statutory balance sheet an IAS 19 surplus or deficit is partially offset by a deferred tax liability or asset respectively. These may or may not be recognised for calculating CET1 capital depending on the overall deferred tax position of the Barclays Bank Group at the particular time.
Pension risk is taken into account in the Pillar 2A capital assessment undertaken by the PRA at least annually. The Pillar 2A requirement forms part of the Barclays Bank Group’s Overall Capital Requirement for CET1 capital, Tier 1 capital and total capital. More detail on minimum regulatory requirements can be found in the Overall capital requirements section.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 88 | ||||
Risk review
Risk performance
Treasury and Capital risk
Interest rate risk in the banking book
Overview
The treasury and capital risk framework covers interest rate sensitive exposures held in the banking book, mostly relating to accrual accounted and FVOCI instruments. The potential volatility of net interest income (NII) is measured by an Annual Earnings at Risk (AEaR) metric which is monitored regularly and reported to senior management and the Barclays Bank PLC Board Risk Committee as part of the limit monitoring framework.
Summary of performance in the period
NII sensitivity to a -25bps shock to rates has decreased year on year due to reduced margin compression exposure driven by actual and expected central bank rate increases.
Key metrics
| -£99m | ||
AEaR across the Barclays Bank Group from a -25bps shock to forward interest rate curves.
Net interest income sensitivity
The table below shows a sensitivity analysis on pre-tax net interest income for non-traded financial assets and liabilities, including the effect of any hedging. This analysis is not a forward guidance on NII and is intended as a quantification of risk exposure utilising the AEaR metric as described on page 200 of the Barclays PLC Pillar 3 Report 2021 (unaudited). Note that this metric assumes an instantaneous parallel change to forward interest rate curves. The model does not apply floors to shocked market rates, but does recognise contractual product specific interest rate floors where relevant. The main model assumptions are: (i) one-year ahead time horizon; (ii) balance sheet is held constant; (iii) balances are adjusted for customer behaviour (i.e. considers that customers may prepay before the contractual maturity or withdraw their deposits) and (iv) behavioural assumptions are kept unchanged in all rate scenarios.
| Net Interest Income sensitivity (AEaR) by currency (audited) | 2021 | 2020 | ||||||||||||
| +25 basis points | -25 basis points | +25 basis points | -25 basis points | |||||||||||
| Barclays Bank Group | £m | £m | £m | £m | ||||||||||
| GBP | 21 | (37) | 32 | (169) | ||||||||||
| USD | 55 | (59) | 47 | (61) | ||||||||||
| EUR | (5) | (4) | 9 | (32) | ||||||||||
| Other currencies | (3) | 1 | (2) | (1) | ||||||||||
| Total | 68 | (99) | 86 | (263) | ||||||||||
Note
+25bps AEaR reflects refined modelling of pricing assumptions for 2021. Based on these assumptions, the 2020 scenario would have shown a GBP AEaR of £67m.
NII asymmetry arises due to the current low interest rate levels and the effect of embedded floors in customer products. NII sensitivity to a -25bps shock to rates has decreased year on year due to reduced margin compression exposure driven by actual and expected central bank rate increases. NII sensitivity to a +25bps shock has similarly decreased year on year driven by the expectation of rate rises in the outlook and the decompression of product margins in the base case.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 89 | ||||
Risk review
Risk performance
Treasury and Capital risk
Analysis of equity sensitivity
The analysis of equity sensitivity table measures the overall impact of a +/- 25bps movement in interest rates on retained earnings, FVOCI, cash flow hedge reserves and pensions. For non-NII items a DV01 metric is used, which is an indicator of the shift in value for a 1bp movement in the yield curve.
| Analysis of equity sensitivity (audited) | 31 December 2021 | 31 December 2020 | ||||||||||||
Restateda | ||||||||||||||
| +25 basis points | -25 basis points | +25 basis points | -25 basis points | |||||||||||
| Barclays Bank Group | £m | £m | £m | £m | ||||||||||
| Net interest income | 68 | (99) | 86 | (263) | ||||||||||
| Taxation effects on the above | (12) | 18 | (21) | 63 | ||||||||||
| Effect on profit for the year | 56 | (81) | 65 | (200) | ||||||||||
| As percentage of net profit after tax | 1.2% | (1.8%) | 2.7% | (8.2%) | ||||||||||
| Effect on profit for the year (per above) | 56 | (81) | 65 | (200) | ||||||||||
| Fair value through other comprehensive income reserve | (449) | 380 | (417) | 433 | ||||||||||
| Cash flow hedge reserve | (626) | 626 | (554) | 554 | ||||||||||
| Taxation effects on the above | 290 | (272) | 262 | (266) | ||||||||||
| Effect on equity | (729) | 653 | (644) | 521 | ||||||||||
| As percentage of equity | (1.3%) | 1.2% | (1.2%) | 1.0% | ||||||||||
Note
+25bps AEaR reflects refined modelling of pricing assumptions for 2021. Based on these assumptions, the 2020 scenario would have shown an effect on equity of £(617)m.
a.2021 financial metrics have been restated to reflect the over-issuance of securities under the Company's 2019 F-3. See Restatement of financial statements (Note 1a) on page 118 for further details.
Movements in the FVOCI reserve impact CET1 capital. However, movements in the cash flow hedge reserve and pensions remeasurement reserve recognised in FVOCI do not affect CET1 capital.
Volatility of the FVOCI portfolio in the liquidity pool
Changes in value of FVOCI exposures flow directly through capital via the FVOCI reserve. The volatility in the value of the FVOCI investments in the liquidity pool is captured and managed through a value measure rather than an earning measure, i.e. non-traded market risk VaR.
Although the underlying methodology to calculate the non-traded VaR is identical to the one used in traded management VaR, the two measures are not directly comparable. The non-traded VaR represents the volatility to capital driven by the FVOCI exposures. These exposures are in the banking book and do not meet the criteria for trading book treatment.
VaR remained in a ~£10m range in H1 2021. The range widened in H2 2021 and was generally driven by outright interest rates risk positioning, which was initially reduced before subsequently being increased. The portfolio de-risked in both outright and asset swap in Q4 2021 which caused a downward trend in VaR.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 90 | ||||
Risk review
Risk performance
Operational risk
All disclosures in this section (pages 91 - 92) are unaudited unless otherwise stated.
Overview
Operational risks are inherent in the Barclays Bank Group’s business activities and it is not cost effective or possible to attempt to eliminate all operational risks. The Operational Risk Framework is therefore focused on identifying operational risks, assessing them and managing them within the Barclays Bank Group’s approved risk appetite.
The Operational Risk principal risk comprises the following risks: Data Management Risk; Financial Reporting Risk; Fraud Risk; Information Security Risk; Operational Recovery Planning Risk; Payments Process Risk; People Risk; Physical Security Risk; Premises Risk; Risk Reporting; Strategic Investment Change Management Risk; Supplier Risk; Tax Risk; Technology Risk and Transaction Operations Risk. The operational risk profile is also informed by a number of risk themes: Cyber; Data; and Resilience. These themes represent threats to the Barclays Bank Group that extend across multiple risk types, and therefore require an integrated risk management approach.
For definitions of these risks refer to pages 202 to 203 of the Barclays PLC Pillar 3 Report 2021. In order to provide complete coverage of the potential adverse impacts on the Barclays Bank Group arising from operational risk, the operational risk taxonomy extends beyond the risks listed above to cover operational risks associated with other principal risks too.
This section provides an analysis of the Barclays Bank Group’s operational risk profile, including events above the Barclays Bank Group’s reportable threshold, which have had a financial impact in 2021. The Barclays Bank Group’s operational risk profile is informed by bottom-up risk assessments undertaken by each business unit and top-down qualitative review for each risk type. Fraud, Transaction Operations, Information Security and Technology continue to be highlighted as key operational risk exposures.
For information on conduct risk events, see the conduct risk section.
Summary of performance in the period
During 2021, total operational risk lossesa decreased to £54m (2020: £112m) and the number of recorded events for 2021 decreased to 588 from 870 events recorded during the prior year. The total operational risk losses for the year were mainly driven by events falling within the Execution, Delivery & Process Management and External Fraud categories, which tend to be high volume but low impact events.
Key metrics
| 71% | ||
| of the Barclays Bank Group’s net reportable operational risk events had a loss value of £50,000 or less | ||
| 53% | ||
| of events by number are due to Execution, Delivery and Process Management | ||
| 40% | ||
| of events by number are due to External Fraud | ||
| 81% | ||
| of losses are from events aligned to Execution, Delivery and Process Management | ||
Operational risk profile
Within operational risk, there are a large number of small value risk events. In 2021, 71% (2020: 71%) of the Barclays Bank Group’s reportable operational risk events by volume had a value of less than £50,000 each. Cumulatively, events under this £50,000 threshold accounted for only 16% (2020: 10%) of the Barclays Bank Group’s total net operational risk losses. A small proportion of operational risk events have a material impact on the financial results of the Barclays Bank Group.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 91 | ||||
Risk review
Risk performance
Operational risk
The analysis below presents the Barclays Bank Group’s operational risk events by Basel event categorya:
Note
aThe data disclosed includes operational risk losses for reportable events impacting the Barclays Bank Group business areas, having impact of > £10,000 and excludes Gain or Insurance Recovery impacts, events that are Conduct or Legal risk, aggregate and boundary events. A boundary event is an operational risk event that results in a credit risk impact. Due to the nature of risk events that keep evolving, data for prior year losses are updated.
▪Execution, Delivery and Process Management impacts during 2021 decreased to £44m (2020: £95m) and accounted for 81% of total operational risk losses (2020: 86%). The events in this category are typical of the banking industry as a whole where high volumes of transactions are processed on a daily basis, mapping mainly to Barclays Transaction Operations risk type. The overall frequency of events in this category remained stable in 2021 at 53% of total events by volume (2020: 55%).
▪External Fraud impacts and frequency remained broadly stable in 2021 compared to the previous year. Impacts of £8m accounted for 15% of total events by value (2020: £8m / 8%). Volume of events dropped to 237 accounting for 40% of total event volume (2020: 319 / 37%). In this category, high volume, low value events are driven by transactional fraud often related to debit and credit card usage.
Investment continues to be made in improving the control environment across the Barclays Bank Group. Particular areas of focus include new and enhanced fraud prevention systems and tools to combat the increasing level of fraud attempts being made whilst minimising disruption to genuine transactions. Fraud remains an industry wide threat and the Barclays Bank Group continues to work closely with external partners on various prevention initiatives.
Operational Resilience remains a key area of focus for the Barclays Bank Group. The COVID-19 pandemic is the most severe global health emergency the World Health Organization (WHO) has ever declared. While overall, the Barclays Bank Group has continued to prove resilient and actual losses have not materially increased due to the effects of the pandemic, the COVID-19 pandemic has caused disruption to the Barclays Bank Group’s customers, suppliers, and staff globally. The COVID-19 pandemic has reinforced our focus on resilience and the Barclays Bank Group continues to monitor potential operational disruptions associated with both the Barclays Bank Group’s and its suppliers’ transition to a Work-from-Home environment and in response to initially high market volatility. The Barclays Bank Group continues to strengthen its resilience approach across its most important business services to improve recoverability and assurance thereof.
Operational risk associated with cybersecurity remains a top focus for the Barclays Bank Group. The sophistication of threat actors continues to grow as noted by multiple external risk events observed throughout the year. Ransomware attacks across the global Barclays supplier base were observed and we worked closely with the affected suppliers to manage potential impacts to the Barclays Bank Group and its clients and customers. The Barclays Bank Group’s cybersecurity events were managed within its risk tolerances and there were no material loss events associated with cybersecurity recorded within the event categories above.
For further information, refer to the operational risk management section.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 92 | ||||
Risk review
Risk performance
Model risk, Conduct risk, Reputation risk and Legal risk
All disclosures in these model risk, conduct risk, reputation risk and legal risk sections on pages 93 to 95 are unaudited unless otherwise stated.
Model risk
The Barclays Bank Group is committed to continuously improving model risk management and made a number of enhancements in 2021, including:
•Strengthening the periodic assessment of the design and operating effectiveness of model risk controls to ensure adherence to model risk framework, policies and standards across the model risk lifecycle.
•Enhancing model risk assessment and appetite management with the design of a new Model Risk Uncertainty Assessment to measure and report model uncertainty, enabling risk-based decision making and remediation prioritisation.
•Improving model risk governance through the implementation and embedment of MRM led forums.
•Expanding its quality assurance function and its operating model to improve consistency and quality of the challenges raised, assess the relevance and soundness of the responses received from model owners, and continue to review the rationale for decisions made by validators.
•Improving model inventory data quality through enhanced platform controls and related processes.
In 2022, MRM will continue to focus on the validation of additional low materiality models, embedding of validation and governance activities, further roll-out of Model Risk Uncertainty Assessment across the model population and expanding the coverage of the MRM framework to new/emerging model types
Conduct risk
The Barclays Bank Group is committed to continuing to drive the right culture throughout all levels of the organisation. The Barclays Bank Group will continue to enhance effective management of conduct risk and appropriately consider the relevant tools, governance and management information in decision-making processes. Focus on management of conduct risk is ongoing and, alongside other relevant business and control management information, the Barclays Bank Group conduct risk dashboards is a key component of this.
The Barclays Bank Group continues to review the role and impact of conduct risk events and issues in remuneration decisions at both the individual and business level.
Throughout 2021, the Barclays Bank Group maintained focus on the new and heightened inherent conduct risk created by the coronavirus pandemic and continues to monitor these on an ongoing basis.
Businesses have continued to assess the potential customer, client and market impacts of strategic change. As part of the 2021 Medium-Term Planning Process and associated Strategic Risk Assessment, material conduct risks associated with strategic and financial plans were assessed.
Throughout 2021, conduct risks were raised by each business area for consideration by the Barclays PLC and Barclays Bank PLC Board Risk Committees. The Committees reviewed the risks raised and whether management’s proposed actions were appropriate to mitigate the risks effectively.
The Barclays Bank Group continued to incur costs in relation to litigation and conduct matters, please refer to Note 25 to the financial statements (Legal, competition and regulatory matters) and Note 23 to the financial statements (Provisions), for further details. Related costs include customer redress and remediation, as well as fines and settlements. Resolution of these litigation and conduct matters remains a necessary and important part of delivering the Barclays Bank Group’s strategy and an ongoing commitment to improve oversight of culture and conduct.
The Barclays Bank PLC Board Risk Committee and senior management received conduct risk dashboards setting out key indicators in relation to conduct risk. These continue to be evolved and enhanced to allow effective oversight and decision-making. The Barclays Bank Group has operated at the overall set tolerance for conduct risk throughout 2021. The tolerance adherence is assessed by the business through key indicators and reported to the Barclays Bank PLC Board Risk Committee as part of the conduct risk dashboard. The ratings included in the conduct risk dashboards may be subject to change pending the outcome of the review by external counsel of the facts and circumstances relating to the over-issuance of securities under the Company’s 2019 F-3 (as announced on 28 March 2022).
The Barclays Bank Group remains focused on continuous improvements being made to manage risk effectively with an emphasis on enhancing governance and management information to identify risk at earlier stages.
Reputation risk
The Barclays Bank Group is committed to continuing to drive the right culture throughout all levels of the organisation. The Barclays Bank Group will continue to enhance effective management of reputation risk and appropriately consider the relevant tools, governance and management information in decision-making processes.
The Barclays Bank PLC Board considers reputation risks raised by businesses. The Board has also considered whether management’s proposed actions have been appropriate to mitigate the risks effectively.
The Barclays Bank Group continued to incur costs in relation to litigation and conduct matters, please refer to Note 25 to the financial statements (Legal, competition and regulatory matters) and Note 23 to the financial statements (Provisions), for further details. Related costs include customer redress and remediation, as well as fines and settlements. Resolution of these matters remain an ongoing commitment to improve oversight of culture and conduct and management of reputation risks.
The Barclays Bank Group remains focused on the continuous improvements being made to manage risk effectively, with an emphasis on enhancing governance and management information to help identify risks at earlier stages.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 93 | ||||
Risk review
Risk performance
Model risk, Conduct risk, Reputation risk and Legal risk
Legal risk
Summary of performance in the year
The Barclays Bank Group remains committed to continuous improvements in managing legal risk effectively. During 2021, improvements included a refresh of the Barclays Group-wide legal risk management framework and a review and update of the supporting legal risk policies, standards and mandatory training, reinforced by ongoing engagement with and education of the Barclays Group’s businesses and functions by Legal function colleagues. Legal risk tolerances and legal risk appetite have also been reviewed.
Throughout 2021, the Barclays Bank Group has operated within set tolerances for legal risk. Tolerances adherence is assessed through key indicators, which are also used to evaluate the legal risk profile and are reviewed, at least annually, through the relevant risk and control committees. Minimum mandatory controls to manage legal risks are set out in the legal risk standards and are subject to ongoing monitoring. This assessment may be subject to change pending the outcome of the review by external counsel of the facts and circumstances relating to the over-issuance of securities under the Company’s 2019 F-3 (as announced on 28 March 2022).
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 94 | ||||
Risk review
Supervision and regulation
Supervision of the Barclays Bank Group
The Barclays Bank Group’s operations, including its overseas branches, subsidiaries and associates, are subject to a large number of rules and regulations that are a condition for authorisation to conduct banking and financial services business in each of the jurisdictions in which the Barclays Bank Group operates. These apply to business operations, impact financial returns and include capital, leverage and liquidity requirements, authorisation, registration and reporting requirements, restrictions on certain activities, conduct of business regulations and many others.
Regulatory developments impact the Barclays Bank Group globally. We focus particularly on UK, US and EU regulation due to the location of the Barclays Bank Group’s principal areas of business. Regulations elsewhere may also have a significant impact on the Barclays Bank Group due to the location of its branches, subsidiaries and, in some cases, clients. For more information on the risks related to the supervision and regulation of the Barclays Bank Group, including regulatory change, see the material existing and emerging risk entitled ‘Regulatory Change agenda and impact on Business Model’ in the Material existing and emerging risks section.
Supervision in the UK
In the UK, day-to-day regulation and supervision of the Barclays Bank Group is divided between the Prudential Regulation Authority (PRA) (a division of the Bank of England (BoE)) and the Financial Conduct Authority (FCA). In addition, the Financial Policy Committee (FPC) of the BoE has influence on the prudential requirements that may be imposed on the banking system through its powers of direction and recommendation. The Barclays Group is also subject to regulatory initiatives undertaken by the UK Payment Systems Regulator (PSR), as a participant in payment systems regulated by the PSR.
Barclays Bank PLC is an authorised credit institution and subject to prudential supervision by the PRA and subject to conduct regulation and supervision by the FCA. The Barclays Group is also subject to prudential supervision by the PRA on a group consolidated basis. Barclays PLC has submitted an application for approval by the PRA as a financial holding company. Barclays Capital Securities Limited is authorised and supervised by the PRA as a PRA-designated investment firm and subject to conduct regulation and supervision by the FCA. Barclays Execution Services Limited is an appointed representative of Barclays Bank PLC, Barclays Bank UK PLC and Clydesdale Financial Services Limited.
The PRA’s supervision of the Barclays Group is conducted through a variety of regulatory tools, including the collection of information by way of prudential returns or cross-firm reviews, reports obtained from skilled persons, regular supervisory visits to firms and regular meetings with management and directors to discuss issues such as strategy, governance, financial resilience, operational resilience, risk management, and recovery and resolution.
Both the PRA and the FCA apply standards that either anticipate or go beyond requirements established by global or EU standards, whether in relation to capital, leverage and liquidity, resolvability and resolution or matters of conduct.
The FCA’s supervision of the UK firms in the Barclays Group is carried out through a combination of proactive engagement, regular thematic work and project work based on the FCA’s sector assessments, which analyse the different areas of the market and the risks that may lie ahead.
The FCA and the PRA also apply the Senior Managers and Certification Regime (the SMCR) which imposes a regulatory approval, individual accountability and fitness and propriety framework in respect of senior or key individuals within relevant firms.
FCA supervision has focused on conduct risk and customer/client outcomes, including product design, customer behaviour, market operations, fair pricing, affordability, access to cash, and fair treatment of vulnerable customers.
PRA supervision has focused on financial resilience, credit risk management, Board effectiveness, operational resilience, climate risk and resolvability, where resolvability is reviewed in conjunction with the Resolution Directorate (a separate division of the BoE).
Both the PRA and the FCA have assessed the impact of COVID-19 and Brexit on UK financial markets and customers as well as the orderly transition away from LIBOR.
Supervision in the EU
The Barclays Bank Group’s operations in Europe are authorised and regulated by a combination of its home regulators and host regulators in the European countries where the Barclays Bank Group operates.
Barclays Bank Ireland PLC is licensed as a credit institution by the Central Bank of Ireland (CBI) and is designated as a significant institution falling under direct supervision on a solo basis by the European Central Bank (ECB) for prudential purposes. Barclays Bank Ireland PLC’s EU branches are supervised by the ECB and are also subject to direct supervision for local conduct purposes by national supervisory authorities in the jurisdictions where they are established. Barclays Bank Ireland PLC is also subject to supervision by the CBI as home state or competent authority under various EU financial services directives and regulations.
The Barclays Group provides the majority of its cross-border banking and investment services to EEA clients via Barclays Bank Ireland PLC. Additionally, in certain EEA Member States, Barclays Bank PLC and Barclays Capital Securities Limited (BCSL) have cross-border licences to enable them to continue to conduct a limited range of activities, including accessing EEA trading venues and interdealer trading. BBPLC also has a Paris branch (to facilitate access to Target 2), which is regulated by the ACPR.
Supervision in the US
Barclays PLC, Barclays Bank PLC and its New York branch, and Barclays Bank PLC’s US subsidiaries are subject to a comprehensive regulatory framework involving numerous statutes, rules and regulations in the US. For example, the Barclays Bank Group’s US activities and operations are subject to supervision and regulation by the Board of Governors of the Federal Reserve System (FRB), as well as additional supervision, requirements and restrictions imposed by other federal and state regulators and self-regulatory organisations (SROs). In some cases, US requirements may impose restrictions on the Barclays Bank Group’s global activities, in addition to its activities in the US.
Barclays PLC, Barclays Bank PLC, Barclays US Holdings Limited (BUSHL), Barclays US LLC (BUSL) and Barclays Group US Inc. (BGUS) are regulated as bank holding companies (BHCs) by the FRB. BUSL is the Barclays Bank Group’s top-tier US holding company that holds substantially all of the Barclays Bank Group’s US subsidiaries (including Barclays Capital Inc. and Barclays Bank Delaware). BUSL is subject to requirements in respect of capital
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 95 | ||||
Risk review
Supervision and regulation
adequacy, capital planning and stress testing, risk management and governance, liquidity, leverage limits, large exposure limits, activities restrictions and financial regulatory reporting. Barclays Bank PLC’s New York branch is also subject to enhanced prudential standards relating to, among other things, liquidity and risk management.
Barclays PLC, Barclays Bank PLC, BUSHL and BUSL have financial holding company (FHC) status under the Bank Holding Company Act of 1956. FHC status allows these entities to engage in a variety of financial and related activities, directly or through subsidiaries, including underwriting, dealing and market making in securities. Failure to maintain FHC status could result in increasingly stringent penalties and, ultimately, in the closure or cessation of certain operations in the US.
In addition to oversight by the FRB, Barclays Bank PLC’s New York branch and many of the Barclays Bank Group’s subsidiaries are regulated by additional authorities based on the location or activities of those entities. The New York branch of Barclays Bank PLC is subject to supervision and regulation by the New York State Department of Financial Services (NYSDFS). Barclays Bank Delaware, a Delaware chartered bank, is subject to supervision and regulation by the Delaware Office of the State Bank Commissioner, the Federal Deposit Insurance Corporation (FDIC), the FRB and the Consumer Financial Protection Bureau (CFPB). The deposits of Barclays Bank Delaware are insured by the FDIC. Barclays PLC, Barclays Bank PLC, BUSHL, BUSL, and BGUS are required to act as a source of strength for Barclays Bank Delaware. This could, among other things, require these entities to inject capital into Barclays Bank Delaware if it fails to meet applicable regulatory capital requirements.
The Barclays Bank Group’s US securities broker/dealer and investment banking operations, are conducted primarily through Barclays Capital Inc., and are also subject to ongoing supervision and regulation by the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA) and other government agencies and SROs under US federal and state securities laws. BCI is also registered as Futures Commission Merchant with the Commodity Futures Trading Commission (CFTC), through which the Barclays Group conducts its US futures and options on futures business, including client clearing operations, which are subject to ongoing supervision and regulation by the CFTC, the National Futures Association and other SROs.
Under the US framework for regulating swaps and security-based swaps established under Title VII of the Dodd-Frank Act, the Commodity Futures Trading Commission (CFTC) has regulatory authority over swaps, the SEC has regulatory authority over security-based swaps, and the Commissions jointly regulate mixed swaps. Accordingly, the Barclays Group’s US swaps and security-based swaps related activities are conducted by Barclays Bank PLC and are subject to ongoing supervision and regulation by, the CFTC and the National Futures Association, and the SEC and FINRA, respectively. Barclays Bank PLC is provisionally registered as a Swap Dealer with the CFTC and conditionally registered as a Security-based Swap Dealer with the SEC. Barclays Bank PLC is also subject to the FRB swaps rules with respect to margin and capital requirements.
Supervision in Asia Pacific
The Barclays Bank Group’s operations in Asia Pacific are supervised and regulated by a broad range of national banking and financial services regulators.
Prudential regulation
Certain Basel III standards were implemented in EU law through the Capital Requirements Regulation (CRR) and the Capital Requirements Directive IV (CRD IV), as amended by CRR II and CRD V. These standards were retained in the UK regulatory framework via a series of onshoring instruments as part of the UK’s withdrawal from the European Union. Beyond the minimum standards required by CRR, the PRA has expected the Barclays Group, in common with other major UK banks and building societies, to meet a 7% Common Equity Tier 1 (CET1) ratio at the level of the consolidated group since 1 January 2016.
Global systemically important banks (G-SIBs), such as the Barclays Group, are subject to a number of additional prudential requirements, including the requirement to hold additional loss-absorbing capacity and additional capital buffers above the level required by Basel III standards. The level of the G-SIB buffer is set by the Financial Stability Board (FSB) according to a bank’s systemic importance and can range from 1% to 3.5% of risk-weighted assets (RWAs). The G-SIB buffer must be met with CET1. In November 2021, the FSB published an update to its list of G-SIBs, maintaining the 1.5% G-SIB buffer that applies to the Barclays Group.
The Barclays Group is also subject to a ‘combined buffer requirement’ consisting of (i) a capital conservation buffer, and (ii) a countercyclical capital buffer (CCyB). The CCyB is based on rates determined by the regulatory authorities in each jurisdiction in which the Barclays Group maintains exposures. In March 2020, the FPC cut the UK CCyB rate to 0% with immediate effect in order to support the supply of credit expected as a result of the COVID-19 pandemic. At its meeting in December 2021 the FPC agreed that it would raise the UK CCyB rate to 1% with effect from 13 December 2022.
The PRA requires UK firms to hold additional capital to cover risks which the PRA assesses are not fully captured by the Pillar 1 capital requirement. The PRA sets this additional capital requirement (Pillar 2A) at least annually, derived from each firm's individual capital guidance. Under current PRA rules, the Pillar 2A must be met with at least 56.25% CET1 capital and no more than 25% tier 2 capital. In addition, the capital that firms use to meet their minimum requirements (Pillar 1 and Pillar 2A) cannot be counted towards meeting the combined buffer requirement.
The PRA may also impose a 'PRA buffer' to cover risks over a forward looking planning horizon, including with regard to firm-specific stresses or management and governance weaknesses. If the PRA buffer is imposed on a specific firm, it must be met separately to the combined buffer requirement, and must be met fully with CET1 capital.
In July 2021 and October 2021, the PRA, respectively published a policy statement and confirmation, setting out its planned implementation of certain Basel III standards, including the net stable funding ratio (NSFR), the new counterparty credit risk standard (SA-CCR) and rules on large exposures. As part of this policy statement, the PRA also confirmed that it would maintain its approach of requiring the deduction of software assets from capital. The PRA will consult shortly on the implementation of the remaining Basel III standards, which include a revised standardised approach for credit risk, the elimination of modelled approaches for certain credit risk exposure categories, a new standardised approach for operational risk, a new market risk approach and the implementation of an output floor requiring reported RWAs calculated under standardised and modelled approaches to be a minimum of 72.5% of fully standardised calculations. The EU has also launched its legislative process for implementing these remaining Basel III reforms. In October 2021, the FPC and PRA published a policy statement setting out changes to the leverage ratio framework, including applying the leverage ratio requirement on an individual basis and making sub-consolidation available as an alternative to individual application where a firm has subsidiaries that can be consolidated.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 96 | ||||
Risk review
Supervision and regulation
In the US, in October 2019, the FRB and other US regulatory agencies released final rules to tailor the applicability of prudential requirements for large domestic US banking organisations, foreign banking organisations and their intermediate holding companies (IHCs), including BUSL. BUSL is a “Category III” IHC. BUSL (and Barclays Bank Delaware) is therefore subject to reduced (calibrated at 85%) standardised liquidity requirements, including the liquidity coverage ratio and NSFR.
In June 2018 and October 2019, the FRB finalised rules regarding single counterparty credit limits (SCCL). The SCCL apply to the largest US BHCs and foreign banks’ (including the Barclays Bank Group’s) US operations. The SCCL creates two separate limits for foreign banks, the first on combined US operations (CUSO) and the second on the US IHC (BUSL). The SCCL for US BHCs, including BUSL, requires that exposure to an unaffiliated counterparty of BUSL not exceed 25% of BUSL’s tier 1 capital. With respect to the CUSO, the SCCL rule allows certification to the FRB that a foreign bank complies with comparable home country regulation.
Barclays Bank PLC was not required to comply with the CUSO requirement until 1 January 2022, with the first certification applicable for Q1 2022 results.
Stress testing
The Barclays Group and certain of its members, including Barclays Bank PLC, are subject to supervisory stress testing exercises in a number of jurisdictions, designed to assess the resilience of banks to adverse economic or financial developments and ensure that they have robust, forward-looking capital planning processes that account for the risks associated with their business profile. Assessment by regulators is on both a quantitative and qualitative basis, the latter focusing on such elements as data provision, stress testing capability including model risk management and internal management processes and controls.
Recovery and Resolution
Stabilisation and resolution framework
The UK framework for recovery and resolution was established by the Banking Act 2009, as amended. The EU framework was established by the 2014 Bank Recovery and Resolution Directive (BRRD), as amended by BRRD II.
The BoE, as the UK resolution authority, has the power to resolve a UK financial institution that is failing or likely to fail by exercising several stabilisation options, including transferring such institution’s business or securities to a commercial purchaser or a ‘bridge bank’ owned by the BoE or transferring the institution into temporary public ownership. When exercising any of its stabilisation powers, the BoE must generally provide that shareholders bear first losses, followed by creditors in accordance with the priority of their claims in insolvency.
In order to enable the exercise of its stabilisation powers, the BoE may impose a temporary stay on the rights of creditors to terminate, accelerate or close out contracts, or override events of default or termination rights that might otherwise be invoked as a result of a resolution action and modify contractual arrangements in certain circumstances (including a variation of the terms of any securities). HM Treasury may also amend the law for the purpose of enabling it to use its powers under this regime effectively, potentially with retrospective effect.
In addition, the BoE has the power to permanently write-down, or convert into equity, tier 1 capital instruments, tier 2 capital instruments and internal eligible liabilities at the point of non-viability of the bank.
The BoE’s preferred approach for the resolution of the Barclays Group is a bail-in strategy with a single point of entry at Barclays PLC. Under such a strategy, Barclays PLC’s subsidiaries would remain operational while Barclays PLC’s capital instruments and eligible liabilities would be written down or converted to equity in order to recapitalise the Barclays Group and allow for the continued provision of services and operations throughout the resolution. The order in which the bail-in tool is applied reflects the hierarchy of capital instruments under CRD IV and otherwise respecting the hierarchy of claims in an ordinary insolvency. Accordingly, the more subordinated the claim, the more likely losses will be suffered by owners of the claim.
The PRA has made rules that require authorised firms to draw up recovery plans and resolution packs, as required by the BRRD. Recovery plans are designed to outline credible actions that authorised firms could implement in the event of severe stress in order to restore their business to a stable and sustainable condition. Removal of potential impediments to an orderly resolution of a banking group or one or more of its subsidiaries is considered as part of the BoE’s and PRA’s supervisory strategy for each firm, and the PRA can require firms to make significant changes in order to enhance resolvability. The Barclays Group currently provides the PRA with a recovery plan annually and with a resolution pack as requested.
Under the Resolvability Assessment Framework (RAF), firms are required to have in place capabilities covering three resolvability outcomes: (i) adequate financial resources; (ii) being able to continue to do business through resolution and restructuring; and (iii) being able to communicate and co-ordinate within the firm and with authorities. The first self-assessment report on these capabilities was submitted by the Barclays Group to the PRA/BoE in 2021 with public disclosures required by both firms and the PRA/BoE in June 2022 (and every two years thereafter).
While regulators in many jurisdictions have indicated a preference for single point of entry resolution for the Barclays Group, additional resolution or bankruptcy provisions may apply to certain Barclays Bank Group entities or branches.
In the US, BUSL is subject to the Orderly Liquidation Authority established by Title II of the Dodd-Frank Act (DFA), a regime for the orderly liquidation of systemically important financial institutions by the FDIC, as an alternative to proceedings under the US Bankruptcy Code. In addition, the licensing authorities of Barclays Bank PLC New York branch and of Barclays Bank Delaware have the authority to take possession of the business and property of the applicable branch or entity they license and/or to revoke or suspend such licence.
In the US, Title I of the DFA, as amended, and the implementing regulations issued by the FRB and the FDIC require each bank holding company with assets of $250bn or more, including those within the Barclays Group, to prepare and submit a plan for the orderly resolution of subsidiaries and operations in the event of future material financial distress or failure. The Barclays Group submitted a “targeted plan” in December 2021. The Barclays Group’s next submission of the US Resolution Plan in respect of its US operations will be a “full plan” due in 2024.
Barclays Bank Ireland PLC, as a significant institution under the Single Resolution Mechanism Regulation (SRMR), is subject to the powers of the Single Resolution Board (SRB) as the Eurozone resolution authority. The CBI and the ECB require Barclays Bank Ireland PLC to submit a standalone BRRD-compliant recovery plan on an annual basis. The SRB has the power to require data submissions specific to Barclays Bank Ireland PLC under powers
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 97 | ||||
Risk review
Supervision and regulation
conferred upon it by the BRRD and the SRMR. The SRB will exercise these powers to determine the optimal resolution strategy for Barclays Bank Ireland PLC in the context of the BoE’s preferred resolution strategy of single point of entry with bail-in at Barclays PLC. The SRB also has the power under the BRRD and the SRMR to develop a resolution plan for Barclays Bank Ireland PLC.
TLAC and MREL
The Barclays Group is subject to a Minimum Requirement for own funds and Eligible Liabilities (MREL), which includes a component reflecting the FSB’s standards on total loss absorbency capacity (TLAC).
The MREL requirements were fully implemented by 1 January 2022, at which time G-SIBs with resolution entities incorporated in the UK will be required to meet an MREL equivalent to the higher of: (i) two times the sum of their Pillar 1 and Pillar 2A requirements; or (ii) the higher of two times their leverage ratio or 6.75% of leverage exposures. Internal MREL for operating subsidiaries is subject to a scalar in the 75-90% range of the external requirement that would apply to the subsidiary if it were a resolution entity. The starting point for the scalar is 90% for ring-fenced bank sub-groups.
Barclays Bank Ireland PLC is subject to the SRB’s MREL policy, as issued in May 2021, in respect of the internal MREL that it will be required to issue to Barclays Bank Group. The SRB’s current calibration of internal MREL for non-resolution entities is expressed as two ratios that have to be met in parallel: (a) two times the sum of: (i) the firm’s Pillar 1 requirement; (ii) its Pillar 2 requirement; and (b) two times the leverage ratio. The SRB’s policy does not envisage the application of any scalar in respect of the internal MREL requirement.
In the US, the FRB’s TLAC rule includes provisions that require BUSL to have: (i) a specified outstanding amount of eligible long-term debt; (ii) a specified outstanding amount of TLAC (consisting of common and preferred equity regulatory capital plus eligible long-term debt); and (iii) a specified common equity buffer. In addition, the FRB’s TLAC rule prohibits BUSL, for so long as the Barclays Group’s overall resolution plan treats BUSL as a non-resolution entity, from issuing TLAC to entities other than those within the Barclays Group.
Bank Levy and FSCS
The BRRD established a requirement for EU member states to set up a pre-funded resolution financing arrangement with funding equal to 1% of covered deposits by 31 December 2024 to cover the costs of bank resolutions. The UK has implemented this requirement by way of a tax on the balance sheets of banks known as the ‘Bank Levy’.
In addition, the UK has a statutory compensation fund called the Financial Services Compensation Scheme (FSCS), which is funded by way of annual levies on most authorised financial services firms.
Structural reform
In the UK, the Financial Services (Banking Reform) Act 2013 put in place a framework for ring-fencing certain operations of large banks. Ring-fencing requires, among other things, the separation of the retail and smaller deposit-taking business activities of UK banks into a legally distinct, operationally separate and economically independent entity, which is not permitted to undertake a range of activities.
US regulation places further substantive limits on the activities that may be conducted by banks and holding companies, including foreign banking organisations such as the Barclays Group. The ‘Volcker Rule’, which was part of the DFA and which came into effect in the US in 2015, prohibits banking entities from undertaking certain proprietary trading activities and limits such entities’ ability to sponsor or invest in certain private equity funds and hedge funds (in each case broadly defined). As required by the rule, the Barclays Group has developed and implemented an extensive compliance and monitoring programme addressing proprietary trading and covered fund activities (both inside and outside of the US).
Market infrastructure regulation
In recent years, regulators as well as global-standard setting bodies such as the International Organisation of Securities Commissions (IOSCO) have focused on improving transparency and reducing risk in markets, particularly risks related to over-the-counter (OTC) transactions. This focus has resulted in a variety of new regulations across the G20 countries and beyond that require or encourage on-venue trading, clearing, posting of margin and disclosure of pre-trade and post-trade information.
The European Market Infrastructure Regulation (EMIR) has introduced requirements designed to improve transparency and reduce the risks associated with the derivatives market. EMIR has potential operational and financial impacts on the Barclays Group, including by imposing new collateral requirements on a broader range of market participants from 2022. If not extended, the EU’s equivalence decision for UK Central Clearing Counterparties (CCPs), and exemption for certain intragroup transactions from the EMIR derivatives clearing and margin obligations, both due to expire at the end of June 2022, could also have operational and financial impacts on the Barclays Group.
The Markets in Financial Instruments Directive and Markets in Financial Instruments Regulation (collectively referred to as MiFID II) have affected many of the markets in which the Barclays Group operates, the instruments in which it trades and the way it transacts with market counterparties and other customers. MiFID II is currently undergoing a review process in both the EU and the UK, including as part of the EU’s ongoing focus on the development of a stronger Capital Markets Union and the UK’s Wholesale Markets Review.
The EU Regulation on Sustainability-Related Disclosures introduces disclosure obligations requiring financial institutions to explain how they integrate environmental, social and governance factors in their investment decisions for certain financial products. In addition, the EU Taxonomy Regulation provides for a general framework for the development of an EU-wide classification system for environmentally sustainable economic activities. In the UK, the FCA has announced that the UK Green Taxonomy Technical Screening Criteria will be finalised by the end of 2022. Reporting against the Taxonomy will form part of the UK’s new Sustainability Disclosure Requirements (SDR). Certain companies will be required to disclose which portion of their activities are Taxonomy-aligned. The structure of the Taxonomy draws on the EU approach and has six environmental objectives (climate change mitigation, climate change adaptation, sustainable use and protection of water and marine resources, transition to a circular economy, pollution prevention and control and protection and restoration of biodiversity). The UK regulators are also consulting on a new SDR Framework for firms as well as investment product disclosures, including a new sustainable investment labelling regime.
The EU and UK Benchmarks Regulation apply to the administration, contribution and use of benchmarks within the EU and the UK, respectively. Financial institutions within the EU or the UK, as applicable, are prohibited from using benchmarks unless their administrators are authorised, registered or otherwise recognised in the EU or the UK, respectively. The FCA has stated that it does not intend to support LIBOR after the end of 2021.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 98 | ||||
Risk review
Supervision and regulation
Global regulators in conjunction with the industry have developed and are continuing to develop alternative benchmarks and risk-free rate fallback arrangements, including updates to existing, as well as new, applicable legislation.
US regulators have imposed similar rules as the EU with respect to the mandatory on-venue trading and clearing of certain derivatives, and post-trade transparency, as well as in relation to the margining of OTC derivatives. US regulators have finalised certain aspects of their rules with respect to their application on a cross-border basis, including with respect to their registration requirements in relation to non-US swap dealers and security-based swap dealers. The regulators may adopt further rules, or provide further guidance, regarding cross-border applicability. In December 2017, the CFTC and the European Commission recognised the trading venues of each other’s jurisdiction to allow market participants to comply with mandatory on-venue trading requirements while trading on certain venues recognised by the other jurisdiction. In November 2021, the CFTC extended temporary relief that would permit trading venues and market participants located in the UK to continue to rely on this mutual recognition framework following the withdrawal of the UK from the EU.
Certain participants in US swap markets are required to register with the CFTC as ‘swap dealers’ or ‘major swap participants’ and with the SEC as ‘security-based swap dealers’ or ‘major security-based swap participants’. Such registrants are subject to CFTC and SEC regulation and oversight. Entities required to register as swap dealers and security-based swap dealers are subject to business conduct, record-keeping and reporting requirements under both CFTC and SEC rules. Barclays Bank PLC is also subject to regulation by the FRB, and is both provisionally registered with the CFTC as a swap dealer and conditionally registered with the SEC as a security-based swap dealer.
Accordingly, Barclays Bank PLC is subject to CFTC rules on business conduct, record-keeping and reporting and to FRB rules on capital and margin. The CFTC has approved certain comparability determinations that permit substituted compliance with non-US regulatory regimes for certain swap regulations. Substituted compliance is permitted for certain transaction-level requirements, where applicable, only with respect to transactions between a non-US swap dealer and certain non-US counterparties, whereas entity-level determinations generally apply on an entity-wide basis regardless of counterparty status. In November 2021, the CFTC extended temporary relief that would permit swap dealers located in the UK to continue to rely on existing CFTC substituted compliance determinations with respect to EU requirements in the event of a withdrawal of the UK from the EU. In July 2020 the CFTC adopted no-action relief from application of CFTC transaction level requirements to transactions between a non-US swap dealer and a non-US counterparty that are “arranged, negotiated or executed” by personnel of the swap dealer or its agent in the US. The final rules also codify certain aspects of the CFTC’s current cross-border framework with respect to internal and external business conduct requirements.
As of 1 November 2021, Barclays Bank PLC became conditionally registered as a security-based swap dealer with the SEC and subject to SEC rules on business conduct, recordkeeping and reporting, similar to the CFTC rules noted above. The SEC approved certain comparability determinations that permit conditional substituted compliance with non-US regulatory regimes for certain security-based swap regulations. Due to the conditionality of the determinations Barclays Bank PLC is relying on substituted compliance only with respect to a few entity-wide regulations. Many of the regulations under the CFTC and SEC regimes are complementary, however, the SEC does require non-US security-based swap dealers to comply with certain SEC rules in connection with transactions that are “arranged, negotiated or executed” from the US expanding the scope and impact of the SEC regime to transactions with a greater number of non-US counterparties. As noted above, Barclays Bank PLC is subject to FRB rules on capital and margin.
Other regulation
Consumer protection, culture and diversity and inclusion
In May 2021, the FCA published a consultation paper proposing the imposition of a new consumer duty on firms. The duty looks to set higher expectations for the standard of care that firms provide to customers and will impact all aspects of Barclays’ retail businesses, including every customer journey, product and service as well as our relationships with partners, suppliers and third parties. This will result in significant implementation costs and there will also be higher ongoing costs for the industry as a result of extensive monitoring and evidential requirements. Final rules are due to be published by July 2022.
Our regulators have enhanced their focus on the promotion of cultural values as a key area for banks, although they generally view the responsibility for reforming culture as primarily sitting with the industry. The UK regulators have also begun focusing on diversity and inclusion in financial services firms, with the Bank of England, PRA and FCA having published a joint discussion paper and the FCA having published a consultation paper on this topic in July 2021.
Data protection and PSD2
Most countries where Barclays Group operates have comprehensive laws requiring openness and transparency about the collection and use of personal information, and protection against loss and unauthorised or improper access. Regulations regarding data protection are increasing in number, as well as levels of enforcement, as manifested in increased amounts of fines and the severity of other penalties. We expect that personal privacy and data protection will continue to receive attention and focus from regulators, as well as public scrutiny and attention.
The EU’s General Data Protection Regulation (GDPR) created a broadly harmonised privacy regime across EU member states, introducing mandatory breach notification, enhanced individual rights, a need to openly demonstrate compliance, and significant penalties for breaches. The extraterritorial effect of the GDPR means entities established outside the EU may fall within the Regulation’s ambit when offering goods or services to European based customers or clients. Following the UK’s withdrawal from the EU, the UK continues to apply the GDPR framework (as onshored into UK law and hence now referred to as the ‘UK GDPR’ - this sits alongside an amended version of the UK Data Protection Act 2018). The GDPR has become the global touchstone as countries around the world either usher in or contemplate similar data privacy laws, or align their existing legislation. In 2020, the European Court of Justice (CJEU) invalidated the EU-US Privacy Shield as a mechanism for transferring EU personal data to the US and placed additional requirements on the use of standard contractual clauses (SCCs) for transfers of personal information to third countries. In 2021, the European Commission published new SCCs to meet the requirements of GDPR and the CJEU decision, known as Schrems II. Implementing the new SCCs, which involve case-by-case transfer impact assessments and other safeguards, is likely to result in increased compliance costs for the Barclays Bank Group. During 2020 and 2021 new privacy laws were passed in Switzerland, took effect in Brazil, Mainland China and Dubai, and were proposed in India. Noncompliance with any of these requirements could lead to regulatory fines and other penalties.
In the US, Barclays US Consumer Bank is subject to the US Federal Gramm-Leach-Bliley Act (GLBA) the California Consumer Privacy Act of 2018, which came into effect on 1 January 2020 (CCPA) and the California Privacy Rights Act which was passed in November 2020 (CPRA) and will take effect in January 2023 with respect to data collected as early as January 2022. The GLBA limits the use and disclosure of non-public personal information to non-affiliated third parties and requires financial institutions to provide written notice of their privacy policies and practices and implement certain information security policies and practices. Any violations of the GLBA could subject the US Consumer Bank to additional reporting requirements or
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 99 | ||||
Risk review
Supervision and regulation
regulatory investigation or audits by the financial regulators. The CCPA applies to personal information that is not collected, processed, sold or disclosed pursuant to the GLBA, and it requires the US Consumer Bank to provide California consumers (as defined in the law) with additional disclosures regarding the collection, use and sharing of personal information, and grants California consumers access, deletion, and other rights with respect to their personal information, including the right to opt-out of certain sales or transfers of such personal information. The CCPA subjects the US Consumer Bank to enforcement penalties by the Attorney General of the State of California, and grants a private right of action with respect to certain data breaches. The CPRA significantly modifies the CCPA, including by imposing additional obligations on covered companies and expanding consumers’ rights with respect to certain sensitive personal information, and creates a new state agency that will be vested with authority to implement and enforce both the CCPA and the CPRA, potentially resulting in further uncertainty in the interpretation and enforcement of both laws. In addition, all 50 states have laws including obligations to provide notification of security breaches of computer databases that contain personal information to affected individuals, state officers and others.
In addition, on 28 May 2020, the National People’s Congress of the PRC approved the PRC Civil Code, which took effect on 1 January 2021. Pursuant to the PRC Civil Code, the collection, storage, use, process, transmission, provision and disclosure of personal information shall follow the principles of legitimacy, properness and necessity.
From 2019, new rules apply under the revised Payment Services Directive (PSD2) that affect the way banks and other payment services providers check that the person requesting access to an account or trying to make a payment is permitted to do so. This is referred to as strong customer authentication (SCA). The deadline for implementing SCA for e-commerce has been extended by the FCA to 14 March 2022.
Cyber security and operational resilience
Regulators in the UK, the EU and the US continue to focus on cyber security risk management, organisational operational resilience and overall soundness across all financial services firms, with customer and market expectations of continuous access to financial services remaining at an all-time high.
The regulatory focus has been further heightened by the increasing number of high-profile ransomware and other supply chain attacks seen across the industry during the COVID-19 pandemic. This is evidenced by the continuing publication of laws and changes to regulatory frameworks globally. For example, legislation has been introduced in the US that aims to expand cyber security notification requirements for critical infrastructure, whilst in the UK a new framework for operational resilience focused on the identification of, and setting impact tolerances for, important business services came into effect in March 2021. In 2022, the European Union’s Digital Operational Resilience Act (DORA) is expected to introduce comprehensive and sector specific regulation on ICT incident reporting, testing and third party risk management, and provide for direct oversight of critical third party ICT providers servicing the EU financial services sector. However, such measures are likely to result in increased technology and compliance costs for the Barclays Bank Group.
Sanctions and financial crime
The UK Bribery Act 2010 introduced a new form of corporate criminal liability focused broadly on a company’s failure to prevent bribery on its behalf. The Criminal Finances Act 2017 introduced new corporate criminal offences of failing to prevent the facilitation of UK and overseas tax evasion. Both pieces of legislation have broad application and in certain circumstances may have extraterritorial impact on entities, persons or activities located outside the UK, including Barclays PLC’s subsidiaries outside the UK. The UK Bribery Act requires the Barclays Bank Group to have adequate procedures to prevent bribery which, due to the extraterritorial nature of the Act, makes this both complex and costly. Additionally, the Criminal Finances Act requires the Barclays Group to have reasonable prevention procedures in place to prevent the criminal facilitation of tax evasion by persons acting for, or on behalf of, the Barclays Group.
The Sanctions and Anti-Money Laundering Act became law in the UK in 2018. The Act allows for the adoption of an autonomous UK sanctions regime, as well as a more flexible licensing regime post-Brexit. On 6 July 2020, the UK Government announced the first sanctions that have been implemented independently by the UK outside the auspices of the UN and EU. The autonomous UK sanctions regime came into force on 1 January 2021. The sanctions apply within the UK and in relation to the conduct of all UK persons wherever they are in the world; they also apply to overseas branches of UK companies.
In the US, the Bank Secrecy Act, the USA PATRIOT Act 2001, the Anti-Money Laundering Act of 2020 and regulations thereunder contain numerous anti-money laundering and anti-terrorist financing requirements for financial institutions. In addition, the Barclays Bank Group is subject to the US Foreign Corrupt Practices Act, which prohibits, among other things, corrupt payments to foreign government officials. It is also subject to various economic sanctions laws, regulations and executive orders administered by the US government, which prohibit or restrict some or all business activities and other dealings with or involving certain individuals, entities, groups, countries and territories.
In some cases, US state and federal regulations addressing sanctions, money laundering and other financial crimes may impact entities, persons or activities located or undertaken outside the US, including Barclays PLC and its subsidiaries. US government authorities have aggressively enforced these laws against financial institutions in recent years. Failure of a financial institution to ensure compliance with such laws could have serious legal, financial and reputational consequences for the institution.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 100 | ||||
Financial statements
Contents
Detailed analysis of our consolidated financial statements, independently audited and providing in-depth disclosure on the financial performance of Barclays Bank Group.
| Consolidated financial statements | Page | Note | ||||||||||||
▪Report of independent registered public accounting firm ID 1118 | 102 | n/a | ||||||||||||
▪Consolidated income statement | 105 | n/a | ||||||||||||
▪Consolidated statement of comprehensive income | 106 | n/a | ||||||||||||
▪Consolidated balance sheet | 107 | n/a | ||||||||||||
▪Consolidated statement of changes in equity | 108 | n/a | ||||||||||||
▪Consolidated cash flow statement | 110 | n/a | ||||||||||||
| Parent financial statements | ||||||||||||||
| ▪ Parent balance sheet | 111 | n/a | ||||||||||||
| ▪ Parent statement of changes in equity | 112 | n/a | ||||||||||||
| ▪ Parent cash flow statement | 114 | n/a | ||||||||||||
| Notes to the financial statements | ||||||||||||||
▪Significant accounting policies | 115 | 1 | ||||||||||||
| Performance/return | ▪Segmental reporting | 121 | 2 | |||||||||||
▪Net interest income | 122 | 3 | ||||||||||||
▪Net fee and commission income | 123 | 4 | ||||||||||||
▪Net trading income | 125 | 5 | ||||||||||||
▪Net investment income | 126 | 6 | ||||||||||||
▪Credit impairment charges | 126 | 7 | ||||||||||||
▪Operating expenses | 130 | 8 | ||||||||||||
▪Tax | 130 | 9 | ||||||||||||
▪Dividends on ordinary shares and preference shares | 133 | 10 | ||||||||||||
| Assets and liabilities held at fair value | ▪Trading portfolio | 134 | 11 | |||||||||||
▪Financial assets at fair value through the income statement | 134 | 12 | ||||||||||||
▪Derivative financial instruments | 135 | 13 | ||||||||||||
▪Financial assets at fair value through other comprehensive income | 144 | 14 | ||||||||||||
▪Financial liabilities designated at fair value | 144 | 15 | ||||||||||||
▪Fair value of financial instruments | 145 | 16 | ||||||||||||
▪Offsetting financial assets and financial liabilities | 155 | 17 | ||||||||||||
| Assets at amortised cost and other investments | ▪Loans and advances and deposits at amortised cost | 157 | 18 | |||||||||||
▪Property, plant and equipment | 158 | 19 | ||||||||||||
▪Leases | 159 | 20 | ||||||||||||
▪Goodwill and intangible assets | 160 | 21 | ||||||||||||
| Accruals, provisions, contingent liabilities and legal proceedings | ▪Other liabilities | 163 | 22 | |||||||||||
▪Provisions | 163 | 23 | ||||||||||||
▪Contingent liabilities and commitments | 164 | 24 | ||||||||||||
▪Legal, competition and regulatory matters | 164 | 25 | ||||||||||||
| Capital instruments, equity and reserves | ▪Subordinated liabilities | 169 | 26 | |||||||||||
▪Ordinary shares, share premium and other equity | 172 | 27 | ||||||||||||
▪Reserves | 175 | 28 | ||||||||||||
| Employee benefits | ▪Staff costs | 176 | 29 | |||||||||||
▪Share-based payments | 176 | 30 | ||||||||||||
▪Pensions and post-retirement benefits | 178 | 31 | ||||||||||||
| Scope of consolidation | ▪Principal subsidiaries | 184 | 32 | |||||||||||
▪Structured entities | 185 | 33 | ||||||||||||
▪Investments in associates and joint ventures | 188 | 34 | ||||||||||||
▪Securitisations | 188 | 35 | ||||||||||||
▪Assets pledged, collateral received and assets transferred | 190 | 36 | ||||||||||||
| Other disclosure matters | ▪Related party transactions and Directors’ remuneration | 192 | 37 | |||||||||||
▪Disposal of businesses and discontinued operations | 195 | 38 | ||||||||||||
▪Auditor’s remuneration | 195 | 39 | ||||||||||||
▪Interest rate benchmark reform | 195 | 40 | ||||||||||||
▪Barclays Bank PLC (the Parent company) | 200 | 41 | ||||||||||||
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 101 | ||||
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors Barclays Bank PLC:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Barclays Bank PLC and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated income statements, consolidated statements of comprehensive income, consolidated statements of changes in equity, and consolidated cash flow statements for each of the years in the three‑year period ended December 31, 2021 and the related notes and specific disclosures described in Note 1 of the consolidated financial statements as being part of the consolidated financial statements (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three‑year period ended December 31, 2021, in conformity with International Financial Reporting Standards, as issued by the International Accounting Standards Board.
Correction of a Misstatement
As discussed in Note 1a to the consolidated financial statements, the 2021 consolidated financial statements have been restated to correct a misstatement.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgements. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Impairment allowance for loans and advances at amortized cost, including off-balance sheet elements of the allowance
As discussed in the credit risk disclosures on pages 48 to 75, the Company’s impairment allowance for loans and advances, including off-balance sheet elements at amortized cost was £4bn as at 31 December 2021.
We identified the assessment of impairment allowance for loans and advances at amortized cost, including off balance sheet elements as a critical audit matter. A high degree of audit effort, including specialized skills and knowledge was required because it involved significant measurement uncertainty. Complex and subjective auditor judgement was required to assess the following:
•Model estimations – Complex and subjective auditor judgement was applied in assessing the Company’s modelled estimations of Expected Credit Losses (“ECL”) due to the inherently judgemental nature of the underlying models and underlying assumptions, namely the IFRS 9 Probability of Default (“PD”) models, the Loss Given Default (“LGD”) models, the Probability of Survival (“PS”) models and the Exposure at Default (“EAD”) models. Certain IFRS 9 models and model assumptions are the key drivers of complexity and subjectivity, and minor changes to those models and model assumptions could have a significant effect on the Company’s calculation of the ECL estimate.
•Economic scenarios – Complex and subjective auditor judgement was applied in assessing the forward-looking economic scenarios used by the Company, the probability weightings applied to them and the complexity of models used to derive the probability weightings.
•Qualitative adjustments – Complex and subjective auditor judgement was applied in assessing qualitative adjustments to the model-driven impairment allowance due to the inherent estimation uncertainty associated with these adjustments, especially in relation to adjustments introduced to respond to the continuous impact of economic uncertainty.
In addition, auditor judgement was required to evaluate the sufficiency of audit evidence obtained.
The following are the primary procedures we performed to address this critical audit matter.
•We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s process for estimating the impairment allowance for loans and advances at amortized cost, including off-balance sheet elements. This included controls relating to the (1) application of the staging criteria, (2) model validation, implementation and monitoring, (3) authorization and calculation of qualitative
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 102 | ||||
Report of Independent Registered Public Accounting Firm
adjustments and management overlays, and (4) selection and implementation of economic variables and the controls over the economic scenario selection and probabilities.
•We involved credit risk modelling professionals with specialized skills and knowledge, who assisted in the following:
◦evaluating the Company’s impairment methodologies for compliance with IFRS 9;
◦inspecting model code for the calculation of certain components of the ECL model to assess its consistency with the Company’s approved staging criteria and the output of the model;
◦evaluating for a selection of models which were changed or updated during the year as to whether the changes (including the updated model code) were appropriate by assessing the updated model methodology against the applicable accounting standard;
◦reperforming the calculation of certain post model adjustments to assess consistency with the post model adjustment methodologies;
◦evaluating the model output for a selection of models by inspecting the corresponding model functionality and independently implementing the model by rebuilding the model code and comparing our independent output with management’s output; and
◦reperforming and assessing, for a selection of models, the reasonableness of the model predictions by comparing them against actual results and evaluating the resulting differences.
•In addition, we involved economic professionals with specialized skills and knowledge, who assisted in:
◦assessing the reasonableness of the Company’s methodology and models used for determining the economic scenarios used and the probability weightings applied to them;
◦assessing key economic variables which included comparing a selection of economic variables to external sources;
◦assessing the overall reasonableness of the economic forecasts by comparing the Company’s forecasts to our own modelled forecasts; and
◦assessing the reasonableness of the Company’s qualitative adjustments by challenging key economic assumptions applied in their calculation based on external sources.
We evaluated the collective results of the procedures performed to assess the sufficiency of the audit evidence obtained related to the Company’s impairment allowance for loans and advances at amortized cost, including off-balance sheet elements of the allowance.
Valuation of certain difficult-to-value financial instruments recorded at fair value
As discussed in Note 16 to the Company’s consolidated financial statements, the balance of financial assets and liabilities recorded at fair value as at December 31, 2021 was £643bn and £560.9bn, respectively. Of these amounts, Level 3 assets (£12.4bn) and liabilities (£6.5bn) represented 1.9% of the Company’s financial assets carried at fair value and 1.2% of the Company’s financial liabilities carried at fair value. The Company has Level 2 financial assets at fair value of £522.9bn and financial liabilities at fair value of £521bn. Included in these amounts are certain difficult-to-value fair value financial instruments for which the Company is required to apply valuation techniques which often involve the exercise of significant judgement and the use of assumptions and valuation models.
We identified the valuation of certain difficult-to-value financial instruments recorded at fair value as a critical audit matter. This is because there was significant measurement uncertainty associated with the fair value estimates of these instruments and subjective auditor judgement, including specialized skills and knowledge, was required to evaluate pricing data inputs, valuation models and fair value adjustments (“FVA”), including portfolio-level FVAs related to credit and funding (commonly referred to as “XVAs”).
The following are the primary procedures we performed to address this critical audit matter:
•We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s process to measure fair value of these portfolios. This included controls related to (1) the independent price verification (‘IPV’) of certain market pricing data inputs, (2) the determination or calculation of FVAs, including exit adjustments (to mark the portfolio to bid or offer prices), model shortcoming reserves to address model limitations and XVAs and (3) the validation, implementation and usage of valuation models including assessment of the impact of model limitations and assumptions;
•For a selection of collateral disputes identified through management’s control we challenged management’s valuation where significant fair value differences were observable through comparison with the market participant’s valuation on the other side of the trade;
•We performed a retrospective review by inspecting significant gains and losses on a selection of new trades, trade exits, novations and restructurings and evaluated whether these data points indicated elements of fair value not incorporated in the current valuation methodologies;
•We inspected movements in certain unobservable inputs throughout the period to assess whether gains or losses generated were in line with the accounting standards;
•We involved valuation professionals with specialized skills and knowledge who assisted in the following:
◦assessing the conceptual soundness of significant models and methodologies used in calculating fair values, risk exposures and in calculating FVAs;
◦utilising collateral dispute data to identify fair value financial instruments with significant fair value differences against market counterparties and developing an independent estimate of the fair value of such financial instruments; and developing an independent estimate of fair value for a selection of trades from the above portfolios and challenging the Company where their valuations were outside our tolerance.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 103 | ||||
Report of Independent Registered Public Accounting Firm
UK Pension Scheme – Defined Benefit Obligation (‘DBO’) assumptions
As discussed in Note 31 to the consolidated financial statements, the Company operates multiple defined benefit pension plans with the majority of the balance relating to the UKRF. The total fair value of the defined benefit pension obligation as of 31 December 2021 was £31.8bn. Of this amount, £30.9bn related to UKRF. The determination of the Company’s defined benefit pension obligation with respect to these plans is dependent on certain actuarial assumptions, including the discount rate, inflation rate (or retail price index) and mortality assumptions.
We identified the valuation of the defined benefit pension obligation in respect of UKRF as a critical audit matter. Subjective and complex auditor judgement, including specialized skills and knowledge, was required in evaluating the discount rates, retail price index (‘RPI’) and mortality assumptions used, as small changes would have a significant impact on the measurement of the defined benefit pension obligation.
The following are the primary procedures we performed to address this critical audit matter:
•We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s defined benefit pension obligation process. This included controls related to management’s review of IAS19 assumptions including discount rate, RPI and mortality assumptions;
•We involved actuarial professionals with specialized skills and knowledge who assisted in assessing the Company’s discount rate, RPI and mortality assumptions by evaluating those assumptions against expectations derived from external sources.
KPMG LLP
We have served as the Company’s auditor since 2017.
London, United Kingdom
22 May 2022
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 104 | ||||
Consolidated financial statements
Consolidated income statement
Restateda | ||||||||||||||
| 2021 | 2020 | 2019 | ||||||||||||
| For the year ended 31 December | Notes | £m | £m | £m | ||||||||||
| Continuing operations | ||||||||||||||
| Interest and similar income | 3 | 5,672 | 6,006 | 8,085 | ||||||||||
| Interest and similar expense | 3 | (2,599) | (2,846) | (4,178) | ||||||||||
| Net interest income | 3,073 | 3,160 | 3,907 | |||||||||||
| Fee and commission income | 4 | 8,581 | 7,417 | 7,664 | ||||||||||
| Fee and commission expense | 4 | (1,994) | (1,758) | (1,992) | ||||||||||
| Net fee and commission income | 6,587 | 5,659 | 5,672 | |||||||||||
| Net trading income | 5 | 5,788 | 7,076 | 4,073 | ||||||||||
| Net investment (expense)/income | 6 | (80) | (121) | 420 | ||||||||||
| Other income | 40 | 4 | 79 | |||||||||||
| Total income | 15,408 | 15,778 | 14,151 | |||||||||||
| Credit impairment releases/(charges) | 7 | 277 | (3,377) | (1,202) | ||||||||||
| Net operating income | 15,685 | 12,401 | 12,949 | |||||||||||
| Staff costs | 29 | (4,456) | (4,365) | (4,565) | ||||||||||
| Infrastructure costs | 8 | (1,054) | (816) | (835) | ||||||||||
| Administration and general expenses | 8 | (4,375) | (4,202) | (4,318) | ||||||||||
| Litigation and conduct | 8 | (374) | (76) | (264) | ||||||||||
| Operating expenses | 8 | (10,259) | (9,459) | (9,982) | ||||||||||
| Share of post-tax results of associates and joint ventures | 4 | 7 | 57 | |||||||||||
| (Loss)/ profit on disposal of subsidiaries, associates and joint ventures | (12) | 126 | 88 | |||||||||||
| Profit before tax | 5,418 | 3,075 | 3,112 | |||||||||||
| Taxation | 9 | (830) | (624) | (332) | ||||||||||
| Profit after tax | 4,588 | 2,451 | 2,780 | |||||||||||
| Attributable to: | ||||||||||||||
| Equity holders of the parent | 3,957 | 1,774 | 2,120 | |||||||||||
| Other equity instrument holders | 631 | 677 | 660 | |||||||||||
| Total equity holders of the parent | 4,588 | 2,451 | 2,780 | |||||||||||
| Profit after tax | 4,588 | 2,451 | 2,780 | |||||||||||
a.2021 financial metrics have been restated to reflect the over-issuance of securities under the Company's 2019 F-3. See Restatement of financial statements (Note 1a) on page 118 for further details.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 105 | ||||
Consolidated financial statements
Consolidated statement of comprehensive income
Restatedb | |||||||||||
| 2021 | 2020 | 2019 | |||||||||
| For the year ended 31 December | £m | £m | £m | ||||||||
| Profit after tax | 4,588 | 2,451 | 2,780 | ||||||||
| Other comprehensive income/(loss) that may be recycled to profit or loss: | |||||||||||
| Currency translation reserve | |||||||||||
Currency translation differencesa | (155) | (647) | (544) | ||||||||
| Fair value through other comprehensive income reserve movement relating to debt securities | |||||||||||
| Net (losses)/gains from changes in fair value | (1,383) | 2,402 | 2,465 | ||||||||
| Net gains transferred to net profit on disposal | (248) | (251) | (454) | ||||||||
| Net (gains)/losses related to (releases of) impairment | (6) | 1 | 1 | ||||||||
| Net gains/(losses) due to fair value hedging | 1,105 | (1,640) | (1,782) | ||||||||
Other movements | — | — | (8) | ||||||||
| Tax | 170 | (130) | (63) | ||||||||
| Cash flow hedging reserve | |||||||||||
| Net (losses)/gains from changes in fair value | (2,212) | 1,366 | 823 | ||||||||
| Net gains transferred to net profit | (327) | (282) | (141) | ||||||||
| Tax | 740 | (291) | (171) | ||||||||
| Other | — | 3 | 16 | ||||||||
| Other comprehensive (loss)/income that may be recycled to profit or loss | (2,316) | 531 | 142 | ||||||||
| Other comprehensive income/(loss) not recycled to profit or loss: | |||||||||||
| Retirement benefit remeasurements | 1,299 | (77) | (280) | ||||||||
| Fair value through other comprehensive income reserve movements relating to equity instruments | — | 1 | — | ||||||||
| Own credit | (105) | (810) | (316) | ||||||||
| Tax | (563) | 198 | 150 | ||||||||
| Other comprehensive income/(loss) not recycled to profit or loss | 631 | (688) | (446) | ||||||||
| Other comprehensive loss for the year | (1,685) | (157) | (304) | ||||||||
| Total comprehensive income for the year | 2,903 | 2,294 | 2,476 | ||||||||
| Attributable to: | |||||||||||
| Equity holders of the parent | 2,903 | 2,294 | 2,476 | ||||||||
| Total comprehensive income for the year | 2,903 | 2,294 | 2,476 | ||||||||
Note
aIncludes £28m loss (2020: £8m loss; 2019: £15m profit) on recycling of currency translation differences.
b2021 financial metrics have been restated to reflect the over-issuance of securities under the Company's 2019 F-3. See Restatement of financial statements (Note 1a) on page 118 for further details.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 106 | ||||
Consolidated financial statements
Consolidated balance sheet
Restateda | |||||||||||
| 2021 | 2020 | ||||||||||
| As at 31 December | Notes | £m | £m | ||||||||
| Assets | |||||||||||
| Cash and balances at central banks | 169,085 | 155,902 | |||||||||
| Cash collateral and settlement balances | 88,085 | 97,616 | |||||||||
| Loans and advances at amortised cost | 18 | 145,259 | 134,267 | ||||||||
| Reverse repurchase agreements and other similar secured lending | 3,177 | 8,981 | |||||||||
| Trading portfolio assets | 11 | 146,871 | 127,664 | ||||||||
| Financial assets at fair value through the income statement | 12 | 188,226 | 171,761 | ||||||||
| Derivative financial instruments | 13 | 262,291 | 302,693 | ||||||||
| Financial assets at fair value through other comprehensive income | 14 | 45,908 | 51,902 | ||||||||
| Investments in associates and joint ventures | 34 | 24 | 24 | ||||||||
| Goodwill and intangible assets | 21 | 1,449 | 1,154 | ||||||||
| Property, plant and equipment | 19 | 1,248 | 1,537 | ||||||||
| Current tax assets | 589 | 424 | |||||||||
| Deferred tax assets | 9 | 2,981 | 2,552 | ||||||||
| Retirement benefit assets | 31 | 3,879 | 1,814 | ||||||||
| Other assets | 2,706 | 1,440 | |||||||||
| Total assets | 1,061,778 | 1,059,731 | |||||||||
| Liabilities | |||||||||||
| Deposits at amortised cost | 18 | 262,828 | 244,696 | ||||||||
| Cash collateral and settlement balances | 79,047 | 85,549 | |||||||||
| Repurchase agreements and other similar secured borrowing | 12,769 | 10,443 | |||||||||
| Debt securities in issue | 48,388 | 29,423 | |||||||||
| Subordinated liabilities | 26 | 32,185 | 32,005 | ||||||||
| Trading portfolio liabilities | 11 | 53,291 | 46,139 | ||||||||
| Financial liabilities designated at fair value | 15 | 251,131 | 249,626 | ||||||||
| Derivative financial instruments | 13 | 256,523 | 300,580 | ||||||||
| Current tax liabilities | 688 | 644 | |||||||||
| Deferred tax liabilities | 9 | 6 | 225 | ||||||||
| Retirement benefit liabilities | 31 | 246 | 232 | ||||||||
| Other liabilities | 22 | 7,249 | 5,251 | ||||||||
| Provisions | 23 | 1,110 | 1,208 | ||||||||
| Total liabilities | 1,005,461 | 1,006,021 | |||||||||
| Equity | |||||||||||
| Called up share capital and share premium | 27 | 2,348 | 2,348 | ||||||||
| Other equity instruments | 27 | 9,693 | 8,621 | ||||||||
| Other reserves | 28 | 861 | 3,183 | ||||||||
| Retained earnings | 43,415 | 39,558 | |||||||||
| Total equity | 56,317 | 53,710 | |||||||||
| Total liabilities and equity | 1,061,778 | 1,059,731 | |||||||||
a.2021 financial metrics have been restated to reflect the over-issuance of securities under the Company's 2019 F-3. See Restatement of financial statements (Note 1a) on page 118 for further details.
The Board of Directors approved the financial statements on pages 105 to 202, as restated to the effects described in Note 1a, on 22 May 2022.
C.S. Venkatakrishnan
Barclays Bank Group – Chief Executive
Steven Ewart
Barclays Bank Group – Chief Financial Officer
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 107 | ||||
Consolidated financial statements
Consolidated statement of changes in equity
Restatedc | Restatedc | ||||||||||||||||
Called up share capital and share premiuma | Other equity instrumentsa | Other reservesb | Retained earnings | Total equity | |||||||||||||
| £m | £m | £m | £m | £m | |||||||||||||
| Balance as at 1 January 2021 | 2,348 | 8,621 | 3,183 | 39,558 | 53,710 | ||||||||||||
| Profit after tax | — | 631 | — | 3,957 | 4,588 | ||||||||||||
| Currency translation movements | — | — | (155) | — | (155) | ||||||||||||
| Fair value through other comprehensive income reserve | — | — | (362) | — | (362) | ||||||||||||
| Cash flow hedges | — | — | (1,799) | — | (1,799) | ||||||||||||
| Retirement benefit remeasurement | — | — | — | 644 | 644 | ||||||||||||
| Own credit reserve | — | — | (13) | — | (13) | ||||||||||||
| Other | — | — | — | — | — | ||||||||||||
| Total comprehensive income for the year | — | 631 | (2,329) | 4,601 | 2,903 | ||||||||||||
| Issue and redemption of other equity instruments | — | 1,072 | — | 3 | 1,075 | ||||||||||||
| Other equity instruments coupons paid | — | (631) | — | — | (631) | ||||||||||||
Employee share schemes | — | — | — | 436 | 436 | ||||||||||||
| Vesting of Barclays PLC shares under share-based payment schemes | — | — | — | (356) | (356) | ||||||||||||
| Dividends on ordinary shares | — | — | — | (794) | (794) | ||||||||||||
| Dividends on preference shares and other shareholders equity | — | — | — | (27) | (27) | ||||||||||||
| Capital contribution from Barclays Plc | — | — | — | — | — | ||||||||||||
| Other reserve movements | — | — | 7 | (6) | 1 | ||||||||||||
| Balance as at 31 December 2021 | 2,348 | 9,693 | 861 | 43,415 | 56,317 | ||||||||||||
Notes
aFor further details refer to Note 27.
bFor further details refer to Note 28.
c2021 financial metrics have been restated to reflect the over-issuance of securities under the Company's 2019 F-3. See Restatement of financial statements (Note 1a) on page 118 for further details.
The third interim dividend in respect of 2021 of £200m was paid on 24 March 2022. On 29 April 2022, Barclays PLC made a capital contribution of £750m to Barclays Bank PLC.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 108 | ||||
Consolidated financial statements
Consolidated statement of changes in equity
Called up share capital and share premiuma | Other equity instrumentsa | Other reservesb | Retained earnings | Total equity | |||||||||||||
| £m | £m | £m | £m | £m | |||||||||||||
| Balance as at 1 January 2020 | 2,348 | 8,323 | 3,235 | 36,709 | 50,615 | ||||||||||||
| Profit after tax | — | 677 | — | 1,774 | 2,451 | ||||||||||||
| Currency translation movements | — | — | (647) | — | (647) | ||||||||||||
| Fair value through other comprehensive income reserve | — | — | 383 | — | 383 | ||||||||||||
| Cash flow hedges | — | — | 793 | — | 793 | ||||||||||||
| Retirement benefit remeasurement | — | — | — | (108) | (108) | ||||||||||||
| Own credit reserve | — | — | (581) | — | (581) | ||||||||||||
| Other | — | — | — | 3 | 3 | ||||||||||||
| Total comprehensive income for the year | — | 677 | (52) | 1,669 | 2,294 | ||||||||||||
| Issue and redemption of other equity instruments | — | 298 | — | (53) | 245 | ||||||||||||
| Other equity instruments coupons paid | — | (677) | — | — | (677) | ||||||||||||
Employee share schemes | — | — | — | 349 | 349 | ||||||||||||
| Vesting of Barclays PLC shares under share-based payment schemes | — | — | — | (300) | (300) | ||||||||||||
| Dividends on ordinary shares | — | — | — | (263) | (263) | ||||||||||||
| Dividends on preference shares and other shareholders equity | — | — | — | (42) | (42) | ||||||||||||
| Capital contribution from Barclays Plc | — | — | — | 1,500 | 1,500 | ||||||||||||
| Other reserve movements | — | — | — | (11) | (11) | ||||||||||||
| Balance as at 31 December 2020 | 2,348 | 8,621 | 3,183 | 39,558 | 53,710 | ||||||||||||
Notes
aFor further details refer to Note 27.
bFor further details refer to Note 28.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 109 | ||||
Consolidated financial statements
Consolidated cash flow statement
Restateda | ||||||||||||||
| 2021 | 2020 | 2019 | ||||||||||||
| For the year ended 31 December | Notes | £m | £m | £m | ||||||||||
| Reconciliation of profit before tax to net cash flows from operating activities: | ||||||||||||||
| Profit before tax | 5,418 | 3,075 | 3,112 | |||||||||||
| Adjustment for non-cash items: | ||||||||||||||
| Credit impairment (releases)/charges | (277) | 3,377 | 1,202 | |||||||||||
| Depreciation, amortisation and impairment of property, plant, equipment and intangibles | 683 | 441 | 459 | |||||||||||
| Other provisions, including pensions | 85 | 634 | 417 | |||||||||||
| Net loss/(profit) on disposal of investments and property, plant and equipment | 12 | (119) | (84) | |||||||||||
| Other non-cash movements including exchange rate movements | 1,968 | (2,362) | (742) | |||||||||||
| Changes in operating assets and liabilities | ||||||||||||||
| Net decrease/(increase) in cash collateral and settlement balances | 3,633 | 4,098 | (5,762) | |||||||||||
| Net (increase)/decrease in loans and advances at amortised cost | (7,190) | 7,142 | 3,937 | |||||||||||
| Net decrease/(increase) in reverse repurchase agreements and other similar secured lending | 5,804 | (7,250) | (118) | |||||||||||
| Net increase in deposits at amortised cost | 18,132 | 31,148 | 14,544 | |||||||||||
| Net increase/(decrease) in debt securities in issue | 18,965 | (4,113) | (5,762) | |||||||||||
| Net increase/(decrease) in repurchase agreements and other similar secured borrowing | 2,326 | 8,411 | (5,346) | |||||||||||
| Net (increase)/decrease in derivative financial instruments | (3,655) | (1,604) | 2,390 | |||||||||||
| Net increase in trading portfolio assets | (19,207) | (14,327) | (9,299) | |||||||||||
| Net increase/(decrease) in trading portfolio liabilities | 7,152 | 10,927 | (1,402) | |||||||||||
| Net (increase)/decrease in financial assets and liabilities at fair value through the income statement | (14,960) | 2,889 | 2,485 | |||||||||||
| Net increase in other assets | (2,235) | (93) | (44) | |||||||||||
| Net increase/(decrease) in other liabilities | 2,082 | 13 | (991) | |||||||||||
| Corporate income tax (paid)/received | (1,239) | (12) | 894 | |||||||||||
| Net cash from operating activities | 17,497 | 42,275 | (110) | |||||||||||
| Purchase of debt securities at amortised cost | (6,931) | (7,890) | (8,565) | |||||||||||
| Proceeds from sale or redemption of debt securities at amortised cost | 2,424 | 3,527 | 1,305 | |||||||||||
| Purchase of financial assets at fair value through other comprehensive income | (44,058) | (57,640) | (67,056) | |||||||||||
| Proceeds from sale or redemption of financial assets at fair value through other comprehensive income | 47,601 | 53,367 | 67,743 | |||||||||||
| Purchase of property, plant and equipment and intangibles | (758) | (303) | (610) | |||||||||||
| Disposal of subsidiaries and associates, net of cash disposed | 65 | 736 | 617 | |||||||||||
| Other cash flows associated with investing activities | 4 | 11 | 95 | |||||||||||
| Net cash from investing activities | (1,653) | (8,192) | (6,471) | |||||||||||
| Dividends paid and other coupon payments on equity instruments | (1,452) | (982) | (934) | |||||||||||
| Issuance of subordinated liabilities | 26 | 9,099 | 3,856 | 6,785 | ||||||||||
| Redemption of subordinated liabilities | 26 | (7,241) | (4,746) | (6,574) | ||||||||||
| Issue of shares and other equity instruments | 1,072 | 1,134 | 2,292 | |||||||||||
| Repurchase of shares and other equity instruments | — | (903) | (1,970) | |||||||||||
| Vesting of employee share schemes | (356) | (300) | (349) | |||||||||||
| Net cash from financing activities | 1,122 | (1,941) | (750) | |||||||||||
| Effect of exchange rates on cash and cash equivalents | (4,231) | 1,669 | (3,345) | |||||||||||
| Net increase/(decrease) in cash and cash equivalents | 12,735 | 33,811 | (10,676) | |||||||||||
| Cash and cash equivalents at beginning of year | 173,125 | 139,314 | 149,990 | |||||||||||
| Cash and cash equivalents at end of year | 185,860 | 173,125 | 139,314 | |||||||||||
| Cash and cash equivalents comprise: | ||||||||||||||
| Cash and balances at central banks | 169,085 | 155,902 | 125,940 | |||||||||||
| Loans and advances to banks with original maturity less than three months | 6,473 | 7,281 | 8,158 | |||||||||||
| Cash collateral balances with central banks with original maturity less than three months | 9,690 | 9,086 | 4,736 | |||||||||||
| Treasury and other eligible bills with original maturity less than three months | 612 | 856 | 480 | |||||||||||
| Cash and cash equivalents at end of year | 185,860 | 173,125 | 139,314 | |||||||||||
a.2021 financial metrics have been restated to reflect the over-issuance of securities under the Company's 2019 F-3. See Restatement of financial statements (Note 1a) on page 118 for further details.
Interest received by the Barclays Bank Group was £11,616m (2020: £12,860m) and interest paid by the Barclays Bank Group was £7,493m (2020: £8,653m). These amounts include interest paid and received arising from trading activities.
The Barclays Bank Group is required to maintain balances with central banks and other regulatory authorities and these amounted to £4,260m (2020: £3,119m).
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 110 | ||||
Financial statements of Barclays Bank PLC
Parent company accounts
| Balance sheet | |||||||||||
Restateda | |||||||||||
| 2021 | 2020 | ||||||||||
| As at 31 December | Notes | £m | £m | ||||||||
| Assets | |||||||||||
| Cash and balances at central banks | 144,964 | 133,386 | |||||||||
| Cash collateral and settlement balances | 75,571 | 87,723 | |||||||||
| Loans and advances at amortised cost | 199,782 | 191,538 | |||||||||
| Reverse repurchase agreements and other similar secured lending | 4,982 | 11,535 | |||||||||
| Trading portfolio assets | 96,724 | 84,089 | |||||||||
| Financial assets at fair value through the income statement | 236,577 | 203,073 | |||||||||
| Derivative financial instruments | 234,409 | 297,129 | |||||||||
| Financial assets at fair value through other comprehensive income | 44,163 | 50,308 | |||||||||
| Investments in associates and joint ventures | 12 | 13 | |||||||||
| Investment in subsidiaries | 19,134 | 17,780 | |||||||||
| Goodwill and intangible assets | 109 | 112 | |||||||||
| Property, plant and equipment | 128 | 425 | |||||||||
| Current tax assets | 671 | 545 | |||||||||
| Deferred tax assets | 1,679 | 1,171 | |||||||||
| Retirement benefit assets | 3,825 | 1,812 | |||||||||
| Other assets | 1,941 | 913 | |||||||||
| Total assets | 1,064,671 | 1,081,552 | |||||||||
| Liabilities | |||||||||||
| Deposits at amortised cost | 286,761 | 272,190 | |||||||||
| Cash collateral and settlement balances | 56,419 | 68,862 | |||||||||
| Repurchase agreements and other similar secured borrowing | 29,202 | 27,722 | |||||||||
| Debt securities in issue | 32,585 | 17,221 | |||||||||
| Subordinated liabilities | 31,875 | 31,852 | |||||||||
| Trading portfolio liabilities | 50,116 | 48,093 | |||||||||
| Financial liabilities designated at fair value | 291,062 | 267,137 | |||||||||
| Derivative financial instruments | 227,991 | 292,538 | |||||||||
| Current tax liabilities | 342 | 336 | |||||||||
| Deferred tax liabilities | 6 | 225 | |||||||||
| Retirement benefit liabilities | 104 | 104 | |||||||||
| Other liabilities | 4,597 | 3,145 | |||||||||
| Provisions | 919 | 984 | |||||||||
| Total liabilities | 1,011,979 | 1,030,409 | |||||||||
| Equity | |||||||||||
| Called up share capital and share premium | 2,348 | 2,348 | |||||||||
| Other equity instruments | 14,400 | 13,328 | |||||||||
| Other reserves | (1,236) | 776 | |||||||||
| Retained earnings | 37,180 | 34,691 | |||||||||
| Total equity | 52,692 | 51,143 | |||||||||
| Total liabilities and equity | 1,064,671 | 1,081,552 | |||||||||
a.2021 financial metrics have been restated to reflect the over-issuance of securities under the Company's 2019 F-3. See Restatement of financial statements (Note 1a) on page 118 for further details.
The Board of Directors approved the financial statements on pages 105 to 202, as restated to the effects described in Note 1a, on 22 May 2022.
C.S. Venkatakrishnan
Barclays Bank Group – Chief Executive
Steven Ewart
Barclays Bank Group – Chief Financial Officer
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 111 | ||||
Financial statements of Barclays Bank PLC
Parent company accounts
| Statement of changes in equity | |||||||||||||||||
Restatedd | Restatedd | ||||||||||||||||
Called up share capital and share premiuma | Other equity instrumentsa, b | Other reservesc | Retained earnings | Total equity | |||||||||||||
| £m | £m | £m | £m | £m | |||||||||||||
| Balance as at 1 January 2021 | 2,348 | 13,328 | 776 | 34,691 | 51,143 | ||||||||||||
| Profit after tax | — | 795 | — | 2,641 | 3,436 | ||||||||||||
| Currency translation movements | — | — | 128 | — | 128 | ||||||||||||
| Fair value through other comprehensive income reserve | — | — | (363) | — | (363) | ||||||||||||
| Cash flow hedges | — | — | (1,815) | — | (1,815) | ||||||||||||
| Retirement benefit remeasurement | — | — | — | 612 | 612 | ||||||||||||
| Own credit reserve | — | — | 31 | — | 31 | ||||||||||||
| Total comprehensive income for the year | — | 795 | (2,019) | 3,253 | 2,029 | ||||||||||||
| Issue and redemption of other equity instruments | — | 1,072 | — | 3 | 1,075 | ||||||||||||
| Other equity instruments coupons paid | — | (795) | — | — | (795) | ||||||||||||
Employee share schemes | — | — | — | 418 | 418 | ||||||||||||
| Vesting of Barclays PLC shares under share-based payment schemes | — | — | — | (356) | (356) | ||||||||||||
| Dividends paid on ordinary shares | — | — | — | (794) | (794) | ||||||||||||
| Dividends paid on preference shares and other shareholders' equity | — | — | — | (27) | (27) | ||||||||||||
| Other reserve movements | — | — | 7 | (8) | (1) | ||||||||||||
| Balance as at 31 December 2021 | 2,348 | 14,400 | (1,236) | 37,180 | 52,692 | ||||||||||||
Notes
aFor further details refer to Note 27 in the Barclays Bank PLC Annual Report 2021.
bOther equity instruments includes AT1 securities issued by Barclays Bank PLC and borrowings of $6bn from a wholly-owned, indirect subsidiary of Barclays Bank PLC. 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 Barclays Bank PLC. Should Barclays Bank PLC make a discretionary dividend payment on its ordinary shares in the six months preceding the date of an interest payment, it will be obliged to make that interest payment. In 2021, interest paid on these borrowings was £164m.
cFor further details refer to Note 28 in the Barclays Bank PLC Annual Report 2021.
d2021 financial metrics have been restated to reflect the over-issuance of securities under the Company's 2019 F-3. See Restatement of financial statements (Note 1a) on page 118 for further details.
The third interim dividend in respect of 2021 of £200m was paid on 24 March 2022. On 29 April 2022, Barclays PLC made a capital contribution of £750m to Barclays Bank PLC.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 112 | ||||
Financial statements of Barclays Bank PLC
Parent company accounts
| Statement of changes in equity | |||||||||||||||||
Called up share capital and share premiuma | Other equity instrumentsa, b | Other reservesc | Retained earnings | Total equity | |||||||||||||
| £m | £m | £m | £m | £m | |||||||||||||
| Balance as at 1 January 2020 | 2,348 | 11,089 | 678 | 32,310 | 46,425 | ||||||||||||
| Profit after tax | — | 829 | — | 1,305 | 2,134 | ||||||||||||
| Currency translation movements | — | — | (519) | — | (519) | ||||||||||||
| Fair value through other comprehensive income reserve | — | — | 389 | — | 389 | ||||||||||||
| Cash flow hedges | — | — | 788 | — | 788 | ||||||||||||
| Retirement benefit remeasurement | — | — | — | (113) | (113) | ||||||||||||
| Own credit reserve | — | — | (560) | — | (560) | ||||||||||||
| Other | — | — | — | 2 | 2 | ||||||||||||
| Total comprehensive income for the year | — | 829 | 98 | 1,194 | 2,121 | ||||||||||||
| Issue and redemption of other equity instruments | — | 2,239 | — | (53) | 2,186 | ||||||||||||
| Other equity instruments coupons paid | — | (829) | — | — | (829) | ||||||||||||
Employee share schemes | — | — | — | 349 | 349 | ||||||||||||
| Vesting of Barclays PLC shares under share-based payment schemes | — | — | — | (300) | (300) | ||||||||||||
| Dividends paid on ordinary shares | — | — | — | (263) | (263) | ||||||||||||
| Dividends paid on preference shares and other shareholders' equity | — | — | — | (42) | (42) | ||||||||||||
| Capital contribution from Barclays PLC | — | — | — | 1,500 | 1,500 | ||||||||||||
| Other reserve movements | — | — | — | (4) | (4) | ||||||||||||
| Balance as at 31 December 2020 | 2,348 | 13,328 | 776 | 34,691 | 51,143 | ||||||||||||
Notes
aFor further details refer to Note 27 in the Barclays Bank PLC Annual Report 2021.
bOther equity instruments includes AT1 securities issued by Barclays Bank PLC and borrowings of $6bn from a wholly-owned, indirect subsidiary of Barclays Bank PLC. 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 Barclays Bank PLC. Should Barclays Bank PLC make a discretionary dividend payment on its ordinary shares in the six months preceding the date of an interest payment, it will be obliged to make that interest payment. In 2020, interest paid on these borrowings was £152m.
cFor further details refer to Note 28 in the Barclays Bank PLC Annual Report 2021.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 113 | ||||
Financial statements of Barclays Bank PLC
Parent company accounts
| Cash flow statement | Restateda | |||||||||||||
| 2021 | 2020 | 2019 | ||||||||||||
| For the year ended 31 December | Notes | £m | £m | £m | ||||||||||
| Reconciliation of profit before tax to net cash flows from operating activities: | ||||||||||||||
| Profit before tax | 3,323 | 2,155 | 2,018 | |||||||||||
| Adjustment for non-cash items: | ||||||||||||||
| Credit impairment (releases)/charges | (414) | 1,577 | 235 | |||||||||||
| Depreciation, amortisation and impairment of property, plant, equipment and intangibles | 331 | 66 | 67 | |||||||||||
| Other provisions, including pensions | 75 | 505 | 268 | |||||||||||
| Net profit on disposal of investments and property, plant and equipment | (49) | (397) | (128) | |||||||||||
| Other non-cash movements including exchange rate movements | 1,109 | (2,045) | 1,203 | |||||||||||
| Changes in operating assets and liabilities | ||||||||||||||
| Net decrease/(increase) in cash collateral and settlement balances | 313 | 1,863 | (7,110) | |||||||||||
| Net (increase)/decrease in loans and advances at amortised cost | (10,255) | (29,049) | 5,483 | |||||||||||
| Net decrease/(increase) in reverse repurchase agreements and other similar secured lending | 6,553 | (6,596) | 1,551 | |||||||||||
| Net increase in deposits at amortised cost | 14,571 | 32,059 | 9,614 | |||||||||||
| Net increase/(decrease) in debt securities in issue | 15,364 | (2,662) | (12,454) | |||||||||||
| Net increase in repurchase agreements and other similar secured borrowing | 1,480 | 18,537 | 899 | |||||||||||
| Net increase in derivative financial instruments | (1,827) | (860) | (3,863) | |||||||||||
| Net increase in trading portfolio assets | (12,635) | (5,010) | (5,599) | |||||||||||
| Net increase/(decrease) in trading portfolio liabilities | 2,023 | 2,963 | (1,496) | |||||||||||
| Net (increase)/decrease in financial assets and liabilities at fair value through the income statement | (9,579) | 18,799 | 7,290 | |||||||||||
| Net increase in other assets | (1,989) | (83) | (349) | |||||||||||
| Net increase/(decrease) in other liabilities | 1,557 | 380 | (1,006) | |||||||||||
| Corporate income tax (paid)/received | (373) | 354 | 919 | |||||||||||
| Net cash from operating activities | 9,578 | 32,556 | (2,458) | |||||||||||
| Purchase of debt securities at amortised cost | (5,442) | (7,129) | (7,688) | |||||||||||
| Proceeds from sale or redemption of debt securities at amortised cost | 1,278 | 3,054 | 232 | |||||||||||
| Purchase of financial assets at fair value through other comprehensive income | (37,842) | (51,368) | (61,877) | |||||||||||
| Proceeds from sale or redemption of financial assets at fair value through other comprehensive income | 41,544 | 47,254 | 62,915 | |||||||||||
| Purchase of property, plant and equipment and intangibles | (20) | (27) | (139) | |||||||||||
| Disposal of subsidiaries and associates, net of cash disposed | 65 | 736 | 587 | |||||||||||
| Increase in investment in subsidiaries | (1,473) | (1,907) | (1,494) | |||||||||||
| Other cash flows associated with investing activities | — | 8 | — | |||||||||||
| Net cash from investing activities | (1,890) | (9,379) | (7,464) | |||||||||||
| Dividends paid and other coupon payments on equity instruments | (1,616) | (1,134) | (1,113) | |||||||||||
| Issuance of subordinated liabilities | 8,788 | 3,700 | 6,627 | |||||||||||
| Redemption of subordinated liabilities | (7,095) | (4,580) | (6,402) | |||||||||||
| Issue of shares and other equity instruments | 1,072 | 3,075 | 2,292 | |||||||||||
| Repurchase of shares and other equity instruments | — | (903) | (1,970) | |||||||||||
| Vesting of shares under employee share schemes | (356) | (300) | (349) | |||||||||||
| Net cash from financing activities | 793 | (142) | (915) | |||||||||||
| Effect of exchange rates on cash and cash equivalents | (2,913) | 1,169 | (2,753) | |||||||||||
| Net increase/(decrease) in cash and cash equivalents | 5,568 | 24,204 | (13,590) | |||||||||||
| Cash and cash equivalents at beginning of year | 153,491 | 129,287 | 142,877 | |||||||||||
| Cash and cash equivalents at end of year | 159,059 | 153,491 | 129,287 | |||||||||||
| Cash and cash equivalents comprise: | ||||||||||||||
| Cash and balances at central banks | 144,964 | 133,386 | 112,287 | |||||||||||
| Loans and advances to banks with original maturity less than three months | 3,793 | 10,174 | 11,823 | |||||||||||
| Cash collateral balances with central banks with original maturity less than three months | 9,690 | 9,086 | 4,736 | |||||||||||
| Treasury and other eligible bills with original maturity less than three months | 612 | 845 | 441 | |||||||||||
| Cash and cash equivalents at end of year | 159,059 | 153,491 | 129,287 | |||||||||||
a.2021 financial metrics have been restated to reflect the over-issuance of securities under the Company's 2019 F-3. See Restatement of financial statements (Note 1a) on page 118 for further details.
Interest received by Barclays Bank PLC was £7,284m (2020: £7,921m) and interest paid by Barclays Bank PLC was £5,496m (2020: £6,441m). These amounts include interest paid and received arising from trading activities. Dividends received were £1,174m (2020: £610m).
Barclays Bank PLC was required to maintain balances with central banks and other regulatory authorities of £1,585m (2020: £1,353m).
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 114 | ||||
Notes to the financial statements
For the year ended 31 December 2021
This section describes Barclays Bank Group’s significant policies and critical accounting estimates that relate to the financial statements and notes as a whole. If an accounting policy or a critical accounting estimate relates to a particular note, the accounting policy and/or critical accounting estimate is contained with the relevant note. | ||
1Significant accounting policies
1.Reporting entity
Barclays Bank PLC is a public company limited by shares registered in England under company number 1026167, having its registered office at 1 Churchill Place, London, E14 5HP.
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 UK-adopted international accounting standards.
The consolidated financial statements of the Barclays Bank Group, and the separate financial statements of Barclays Bank PLC, have also been prepared in accordance with (1) International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), including interpretations issued by the IFRS Interpretations Committee, as there are no applicable differences from IFRS as issued by the IASB for the periods presented; and (2) IFRS adopted pursuant to Regulation (EC) No. 1606/2002 as it applies in the European Union (“IFRS as adopted by the EU”).
There are currently no differences between UK-adopted international accounting standards and IFRS as adopted by the EU and therefore no reconciliation of variances is provided.
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 Interest Rate Benchmark Reform Phase 2 amendments (amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) which were applied from 1 January 2020.
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. The financial statements are stated in millions of pounds Sterling (£m), 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. The financial statements are prepared on a going concern basis as the Board is satisfied that the Barclays Bank Group and parent company have the resources to continue in business for a period of at least 12 months from approval of the financial statements.
In making this assessment, the Board has considered a wide range of information relating to present and future conditions and includes a review of a working capital report (WCR). The WCR is used by the Board to assess the future performance of the Barclays Bank Group and whether it has the resources in place that are required to meet its ongoing regulatory requirements. The assessment is based upon business plans which contain future forecasts of profitability taken from the Barclays Bank Group’s medium term plan as well as projections of regulatory capital requirements and business funding needs. The WCR also includes an assessment the impact of internally generated stress testing scenarios on the liquidity and capital requirement forecasts. The stress tests used were based upon an assessment of reasonably possible downside economic scenarios that the Barclays Bank Group could experience.
The WCR showed that the Barclays Bank Group had sufficient capital and liquidity in place to support its future business requirements and remained above its regulatory minimum requirements in the stress scenarios. Accordingly, the Board concluded that there was a reasonable expectation that the Barclays Bank Group has adequate resources to continue as a going concern for a period of at least 12 months from the date of approval of the financial statements.
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 those items, are set out under the relevant notes. Accounting policies that affect the financial statements as a whole are set out below.
(i)Consolidation
The 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.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 115 | ||||
Notes to the financial statements
For the year ended 31 December 2021
Details of the principal subsidiaries are given in Note 32.
(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 in relation to items measured in terms of historical cost are carried at historical transaction date exchange rates. Non-monetary foreign currency balances in relation to items measured at fair value are translated using the exchange rate at the date when the fair value was measured.
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 a 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.
Derecognition
The Barclays Bank Group derecognises a financial asset, or a portion of a financial asset, from its balance sheet where (i) the contractual rights to cash flows from the asset have expired, or (ii) the contractual rights to the cash flows from the asset have been transferred (usually by sale) and with them either (a) substantially all the risks and rewards of the asset have been transferred, or (b) where neither substantially all the risks and rewards have been transferred or retained, where control over the asset has been lost.
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.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 116 | ||||
Notes to the financial statements
For the year ended 31 December 2021
Accounting for reverse repurchase and repurchase agreements including other similar lending and borrowing
Reverse repurchase agreements (and stock borrowing or similar transactions) 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 Annual General Meeting 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.
(v) Changes in the basis for determining contractual cash flows resulting from interest rate benchmark reform
A change in the basis for determining the contractual cash flows of a financial instrument that is required by interest rate benchmark reform is accounted for by updating the effective interest rate, without the recognition of an immediate gain or loss. This practical expedient is only applied where (1) the change to the contractual cash flows is necessary as a direct consequence of the reform and (2) the new basis for determining the contractual cash flows is economically equivalent to the previous basis. For changes made in addition to those required by the interest rate benchmark reform, the practical expedient is applied first, after which the normal IFRS 9 requirements for modifications of financial instruments is applied.
Refer to Note 13 for further details regarding hedge accounting policies in respect of interest rate benchmark reform.
Refer to Note 40 for further disclosure related to interest rate benchmark reform.
(vi) Cash flow statement
Cash comprises cash on hand and balances at central banks. Cash equivalents comprise loans and advances to banks, cash collateral balances with central banks related to payment schemes and treasury and other eligible bills, all with original maturities of three months or less. Repurchase and reverse repurchase agreements are not considered to be part of cash equivalents.
Investments in debt securities at amortised cost, presented within loans and advances on the balance sheet, are deemed to be investing activities for the purposes of the cash flow statement, except those instruments considered to be cash equivalents.
5.New and amended standards and interpretations
The accounting policies adopted have been consistently applied, with the exception of the Interest Rate Benchmark Reform Phase 2 amendments (amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) which were applied from 1 January 2020.
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 2020, the IASB published amendments to IFRS 17. The amendments that are relevant to the Barclays Bank Group are the scope exclusion for credit card contracts and similar contracts that provide insurance coverage, the optional scope exclusion for loan contracts that transfer significant insurance risk, and clarification that only financial guarantees issued are in scope of IFRS 9.
The amendments also defer the effective date of IFRS 17, including the above amendments, to annual reporting periods beginning on or after 1 January 2023.
IFRS 17, including the 2020 amendments to IFRS 17, has been endorsed by the EU. Following the UK’s withdrawal from the EU on 31 December 2020, the UK-adopted international accounting standards will be applicable. IFRS 17, including the amendments to IFRS 17, has not yet been endorsed by the UK. The Barclays Bank Group does not expect the impact of IFRS 17 to be material.
Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice Statement 2
In February 2021 the IASB issued amendments to IAS 1 that require entities to disclose their material accounting policies rather than their significant accounting policies. The amendments to IFRS Practice Statement 2 provide guidance on the concept of materiality and its application to accounting policy information.
Under the amendments, accounting policy information is material if, when considered together with other information included in an entity’s financial statements, it can reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements.
The amendments are effective for annual periods beginning on or after 1 January 2023, and will be applied from that date.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 117 | ||||
Notes to the financial statements
For the year ended 31 December 2021
Definition of Accounting Estimate - Amendments to IAS 8
In February 2021 the IASB issued amendments to IAS 8 that replace the definition of a change in accounting estimates with a definition of accounting estimates.
Under the new definition, accounting estimates are clarified as monetary amounts in financial statements that are subject to measurement uncertainty. Where an entity's accounting policy requires an item to be measured at monetary amounts that cannot be observed directly, it should develop an accounting estimate to achieve this objective.
The amendments are effective for annual periods beginning on or after 1 January 2023, and will be applied from that date.
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 126 to 129
▪Tax on pages 130 to 133
▪Fair value of financial instruments on pages 145 to 155
▪Provisions including conduct and legal, competition and regulatory matters on pages 163 to 168
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 41 to 43 and on pages 49 to 75
▪Market risk on page 42 and on pages 76 to 78
▪Treasury and capital risk – capital on page 42 and on page 85
These disclosures are covered by the Audit opinion (included on pages 102 to 104) where referenced as audited.
1a Restatement of financial statements
Barclays Bank PLC has restated these financial statements to reflect both a provision and a contingent liability disclosure in respect of the impact of an over-issuance of securities in excess of the maximum aggregate offering price registered under Barclays Bank PLC’s registration statement on Form F-3, as declared effective by the SEC in August 2019 (2019 F-3).
Due to an historic SEC settlement order, at the time the 2019 F-3 was filed, Barclays Bank PLC had ceased to be a “well-known seasoned issuer” (or WKSI) and had become an “ineligible issuer,” as defined in Rule 405 under the Securities Act of 1933, as amended (Securities Act), thus being required to register upfront a certain amount of securities with the SEC.
In March 2022, Barclays Bank PLC became aware that it had issued securities in the US in excess of the amount it had registered with the SEC under the 2019 F-3. It has been estimated that the maximum offering price set forth in the 2019 F-3 was exceeded in February 2021, with issuances through to March 2022 exceeding the $20.8bn limit by approximately $15bn. The securities that were issued in this period comprise structured notes and exchange traded notes (ETNs). As such, certain offers and sales of these securities were not made in compliance with the Securities Act, giving rise to rights of rescission for certain purchasers of the securities. Under Section 12(a)(1) of the Securities Act, certain purchasers of unregistered securities have a right to recover, upon the tender of such security, the consideration paid for such security with interest, less the amount of any income received, or damages if the purchaser no longer owns the security (the Rescission Price). As a result, Barclays Bank PLC has elected to make a rescission offer to eligible purchasers of the relevant affected securities at the Rescission Price.
A proportion of the expected costs associated with the rights of rescission of certain investors are attributable to Barclays Bank PLC’s financial statements for the year ended 31 December 2021. Accordingly, Barclays Bank PLC’s financial statements have been restated. The restatement impacts the consolidated income statement, the parent company income statement, the consolidated statement of comprehensive income, the parent company statement of comprehensive income, the consolidated balance sheet, the parent company balance sheet, the consolidated statement of changes in equity, the parent company statement of changes in equity, the consolidated cash flow statement, and the parent company cash flow statement for the year ended 31 December 2021. There was no effect on Barclays Bank PLC’s previously reported financial statements for the years ended 31 December 2020 and 2019.
The impacts of the restatement are as follows:
•Litigation and conduct charges in the consolidated income statement for the year ended 31 December 2021 were under-reported by £220m, increasing total operating expenses from a reported £10,039m to £10,259m.
•Litigation and conduct charges in the parent income statement for the year ended 31 December 2021 were under-reported by £220m, increasing total operating expenses from a reported £5,305m to £5,525m.
•Provisions on the consolidated balance sheet have increased from a reported £890m to £1,110m.
•Provisions on the parent balance sheet have increased from a reported £699m to £919m .
•The taxation charge in the consolidated income statement has reduced by £50m from a reported £880m to £830m with a corresponding decrease in current tax liabilities on the consolidated balance sheet from £738m to £688m.
•The taxation credit in the parent income statement has increased by £50m from a reported £63m to £113m with a corresponding decrease in current tax liabilities on the parent balance sheet from £392m to £342m.
•The overall impact of the restatement has been to reduce reported Barclays Bank Group profit after tax from £4,758m to £4,588m.
•The overall impact of the restatement has been to reduce reported Barclays Bank PLC profit after tax from £3,606m to £3,436m.
•The consolidated financial statements and parent company financial statements have been restated for the increased provision of £220m and lower tax charge of £50m.
•The contractual maturity profile of financial liabilities designated at fair value has been restated to reflect the over-issuance of securities.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 118 | ||||
Notes to the financial statements
For the year ended 31 December 2021
The table below reflects each of the consolidated financial statement line items that were affected by the restatement:
| For the year ended 31 December 2021 | As reported £m | Restatement £m | As restated £m | ||||||||||||||
| Impact on the consolidated income statement | |||||||||||||||||
| Litigation and conduct | (154) | (220) | (374) | ||||||||||||||
| Operating expenses | (10,039) | (220) | (10,259) | ||||||||||||||
| Profit before tax | 5,638 | (220) | 5,418 | ||||||||||||||
| Taxation | (880) | 50 | (830) | ||||||||||||||
| Profit after tax | 4,758 | (170) | 4,588 | ||||||||||||||
| Impact on the consolidated statement of comprehensive income | |||||||||||||||||
| Profit after tax | 4,758 | (170) | 4,588 | ||||||||||||||
| Total comprehensive income for the year | 3,073 | (170) | 2,903 | ||||||||||||||
| Impact on the consolidated balance sheet | |||||||||||||||||
| Liabilities | |||||||||||||||||
| Current tax liabilities | 738 | (50) | 688 | ||||||||||||||
| Provisions | 890 | 220 | 1,110 | ||||||||||||||
| Total liabilities | 1,005,291 | 170 | 1,005,461 | ||||||||||||||
| Equity | |||||||||||||||||
| Retained earnings | 43,585 | (170) | 43,415 | ||||||||||||||
| Total equity | 56,487 | (170) | 56,317 | ||||||||||||||
| Impact on the consolidated cash flow statement | |||||||||||||||||
| Profit before tax | 5,638 | (220) | 5,418 | ||||||||||||||
| Adjustment for non-cash items | |||||||||||||||||
| Other provisions, including pensions | (135) | 220 | 85 | ||||||||||||||
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 119 | ||||
Notes to the financial statements
For the year ended 31 December 2021
The table below reflects each of the line items of the parent company financial statement that were affected by the restatement:
| For the year ended 31 December 2021 | As reported £m | Restatement £m | As restated £m | ||||||||||||||
| Impact on the parent company income statement | |||||||||||||||||
| Litigation and conduct | (140) | (220) | (360) | ||||||||||||||
| Operating expenses | (5,305) | (220) | (5,525) | ||||||||||||||
| Profit before tax | 3,543 | (220) | 3,323 | ||||||||||||||
| Taxation | 63 | 50 | 113 | ||||||||||||||
| Profit after tax | 3,606 | (170) | 3,436 | ||||||||||||||
| Attributable to: | |||||||||||||||||
| Equity holders to the parent | 2,811 | (170) | 2,641 | ||||||||||||||
| Total equity holders of the parent | 3,606 | (170) | 3,436 | ||||||||||||||
| Impact on the parent company statement of comprehensive income | |||||||||||||||||
| Profit after tax | 3,606 | (170) | 3,436 | ||||||||||||||
| Total comprehensive income for the year | 2,199 | (170) | 2,029 | ||||||||||||||
| Impact on the parent company balance sheet | |||||||||||||||||
| Liabilities | |||||||||||||||||
| Current tax liabilities | 392 | (50) | 342 | ||||||||||||||
| Provisions | 699 | 220 | 919 | ||||||||||||||
| Total liabilities | 1,011,809 | 170 | 1,011,979 | ||||||||||||||
| Equity | |||||||||||||||||
| Retained earnings | 37,350 | (170) | 37,180 | ||||||||||||||
| Total equity | 52,862 | (170) | 52,692 | ||||||||||||||
| Impact on the parent company cash flow statement | |||||||||||||||||
| Profit before tax | 3,543 | (220) | 3,323 | ||||||||||||||
| Adjustment for non-cash items | |||||||||||||||||
| Other provisions, including pensions | (145) | 220 | 75 | ||||||||||||||
The financial impact of the restatement has been reflected in Notes 2, 8, 9, 10, 23 and 41. Further, Note 25 (Legal, competition and regulatory matters) has also been amended to reflect matters relating to the over-issuance of securities by Barclays Bank PLC.
Finally, other non-adjusting post-balance sheet events which have no impact on the restated amounts but have been disclosed include:
•Legacy Loan Portfolio: Further to a decision by Clydesdale Financial Services Limited (CFS) in March 2022 to extend the proactive remediation of Azure Services Limited (ASL) loans beyond those brokered between April 2014 to April 2016 to include the full portfolio of ASL Loans brokered between 2006 and 2018, as at 31 March 2022, a customer remediation provision of £181m has been recognised in relation to the remediation of the ASL Loans originated outside of the April 2014 to April 2016 period. The provision represents the best estimate as at 31 March 2022. CFS continues to review complaints regarding other legacy partner finance loans, however, it is not currently possible to predict the outcome of this review or the financial impact on the Barclays Bank Group. This update has been reflected in Note 25.
•Pensions: during 2019 and 2020, the UK Retirement Fund (UKRF), the Barclays Bank Group’s main pension scheme, subscribed for non-transferable listed senior fixed rate notes for £1.25bn. As a result of these transactions, the CET1 impact of the UKRF was deferred until 2023, 2024 and 2025 upon maturity of the notes. Following the PRA’s statement on 13 April 2022, Barclays Bank PLC is planning to unwind these transactions and to agree the terms and timing of this unwind with the UKRF Trustee as part of the next triennial actuarial valuation as at 30 September 2022. Upon unwind, this would result in a c.65bps reduction to the CET1 ratio potentially being accelerated to the fourth quarter of 2022 from 2023, 2024 and 2025. As at 31 March 2022, the UKRF was in an accounting surplus of £4.4bn on an IAS 19 basis and, as at 30 September 2021, it was in a funding surplus of £0.6bn. There may also be a pension related reduction in Pillar 2A requirements in 2022 which could partially mitigate the impact of the unwind on the Barclays Bank Group surplus capital position. Note 31 has been updated accordingly.
•Dividends paid and Capital Contribution: On 24 March 2022, the third interim dividend in respect of 2021 of £200m was paid to Barclays PLC and on 29 April 2022, Barclays PLC made a capital contribution of £750m into Barclays Bank PLC. These have been disclosed as non-adjusting post-balance sheet events in a footnote to the consolidated statement of comprehensive changes in equity and parent company statement of comprehensive changes in equity.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 120 | ||||
Notes to the financial statements
Financial performance and returns
The notes included in this section focus on the results and performance of the Barclays Bank Group. Information on the segmental performance, income generated, expenditure incurred, tax, and dividends are included here.
2Segmental 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 Global Markets, Investment Banking and Corporate Banking businesses.
▪Consumer, Cards and Payments which includes the International Cards and Consumer Bank, Private Bank and Unified Payments businesses.
The below table also includes Head Office which comprises head office and certain central support functions including the Barclays Bank Group service company full time equivalent employees.
| Analysis of results by business | ||||||||||||||
Restatedb | Restatedb | |||||||||||||
| Corporate and Investment Bank | Consumer, Cards and Payments | Head Office | Barclays Bank Group | |||||||||||
| £m | £m | £m | £m | |||||||||||
| For the year ended 31 December 2021 | ||||||||||||||
| Total income | 12,481 | 3,337 | (410) | 15,408 | ||||||||||
| Credit impairment releases/(charges) | 461 | (185) | 1 | 277 | ||||||||||
| Net operating income/(expenses) | 12,942 | 3,152 | (409) | 15,685 | ||||||||||
| Operating expenses | (7,169) | (2,316) | (400) | (9,885) | ||||||||||
| Litigation and conduct | (237) | (108) | (29) | (374) | ||||||||||
| Total operating expenses | (7,406) | (2,424) | (429) | (10,259) | ||||||||||
Other net (expenses)/incomea | (8) | 1 | (1) | (8) | ||||||||||
| Profit/(loss) before tax | 5,528 | 729 | (839) | 5,418 | ||||||||||
| Total assets (£bn) | 986.2 | 64.4 | 11.2 | 1,061.8 | ||||||||||
| Number of employees (full time equivalent) | 7,800 | 2,600 | 9,800 | 20,200 | ||||||||||
| Average number of employees (full time equivalent) | 20,300 | |||||||||||||
| Corporate and Investment Bank | Consumer, Cards and Payments | Head Office | Barclays Bank Group | |||||||||||
| £m | £m | £m | £m | |||||||||||
| For the year ended 31 December 2020 | ||||||||||||||
| Total income | 12,607 | 3,490 | (319) | 15,778 | ||||||||||
| Credit impairment charges | (1,565) | (1,720) | (92) | (3,377) | ||||||||||
| Net operating income/(expenses) | 11,042 | 1,770 | (411) | 12,401 | ||||||||||
| Operating expenses | (7,125) | (2,132) | (126) | (9,383) | ||||||||||
| Litigation and conduct | (4) | (44) | (28) | (76) | ||||||||||
| Total operating expenses | (7,129) | (2,176) | (154) | (9,459) | ||||||||||
Other net incomea | 16 | 114 | 3 | 133 | ||||||||||
| Profit/(loss) before tax | 3,929 | (292) | (562) | 3,075 | ||||||||||
| Total assets (£bn) | 990.9 | 57.8 | 11.0 | 1,059.7 | ||||||||||
| Number of employees (full time equivalent) | 7,800 | 3,000 | 10,100 | 20,900 | ||||||||||
| Average number of employees (full time equivalent) | 20,145 | |||||||||||||
Note
aOther 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.
b2021 financial metrics have been restated to reflect the over-issuance of securities under the Company's 2019 F-3. See Restatement of financial statements (Note 1a) on page 118 for further details.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 121 | ||||
Notes to the financial statements
Financial performance and returns
| Corporate and Investment Bank | Consumer, Cards and Payments | Head Office | Barclays Bank Group | |||||||||||
| £m | £m | £m | £m | |||||||||||
| 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 (£bn) | 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) | 21,700 | |||||||||||||
Note
aOther 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.
Income by geographic regiona | |||||||||||
| 2021 | 2020 | 2019 | |||||||||
| For the year ended 31 December | £m | £m | £m | ||||||||
| United Kingdom | 4,585 | 4,954 | 4,084 | ||||||||
| Europe | 2,358 | 2,119 | 1,752 | ||||||||
| Americas | 7,326 | 7,590 | 7,251 | ||||||||
| Africa and Middle East | 45 | 37 | 62 | ||||||||
| Asia | 1,094 | 1,078 | 1,002 | ||||||||
| Total | 15,408 | 15,778 | 14,151 | ||||||||
Income from individual countries which represent more than 5% of total incomea | |||||||||||
| 2021 | 2020 | 2019 | |||||||||
| For the year ended 31 December | £m | £m | £m | ||||||||
| United Kingdom | 4,585 | 4,954 | 4,084 | ||||||||
| United States | 7,162 | 7,471 | 7,121 | ||||||||
Note
aThe geographical analysis is based on the location of the office where the transactions are recorded.
3Net interest income
Accounting for interest income and expenses Interest income on loans and advances at amortised cost and financial assets at fair value through other comprehensive income, and interest expense on financial liabilities held at amortised cost, are calculated using the effective interest method which allocates interest, and direct and incremental fees and costs, over the expected lives of the assets and liabilities. The effective interest method requires the Barclays Bank Group to estimate future cash flows, in some cases based on its experience of customers’ behaviour, considering all contractual terms of the financial instrument, as well as the expected lives of the assets and liabilities. The Barclays Bank Group incurs certain costs to originate credit card balances with the most significant being co-brand partner fees. To the extent these costs are attributed to customers that continuously carry an outstanding balance (revolvers) and incremental to the origination of credit card balances, they are capitalised and subsequently included within the calculation of the effective interest rate. They are amortised to interest income over the period of expected repayment of the originated balance. Costs attributed to customers that settle their outstanding balances each period (transactors) are deferred on the balance sheet as a cost of obtaining a contract and amortised to fee and commission expense over the life of the customer relationship (refer to Note 4). There are no other individual estimates involved in the calculation of effective interest rates that are material to the results or financial position. | ||
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 122 | ||||
Notes to the financial statements
Financial performance and returns
| 2021 | 2020 | 2019 | |||||||||
| £m | £m | £m | |||||||||
| Cash and balances at central banks | 128 | 226 | 919 | ||||||||
| Loans and advances at amortised cost | 4,265 | 4,510 | 5,514 | ||||||||
| Fair value through other comprehensive income | 380 | 604 | 831 | ||||||||
| Negative interest on liabilities | 248 | 68 | 13 | ||||||||
| Other | 651 | 598 | 808 | ||||||||
| Interest and similar income | 5,672 | 6,006 | 8,085 | ||||||||
| Deposits at amortised cost | (331) | (644) | (1,778) | ||||||||
Debt securities in issuea | (413) | (424) | (873) | ||||||||
| Subordinated liabilities | (934) | (1,112) | (1,096) | ||||||||
| Negative interest on assets | (374) | (325) | (250) | ||||||||
| Other | (547) | (341) | (181) | ||||||||
| Interest and similar expense | (2,599) | (2,846) | (4,178) | ||||||||
| Net interest income | 3,073 | 3,160 | 3,907 | ||||||||
Notes
aBarclays Bank Group has amended the presentation of the premium paid for purchased financial guarantees which are embedded in notes it issues directly to the market. From 2020 onwards, the full note coupon is presented as interest and similar expense within net interest income. The financial guarantee element of the coupon had previously been recognised in net investment income. The comparative of £25m in 2019 has not been restated.
Interest and similar income presented above represents interest revenue calculated using the effective interest method. Costs to originate credit card balances of £623m (2020: £687m; 2019: £684m) have been amortised to interest and similar income during the period. Interest and similar income includes £7m (2020: £9m; 2019: £9m) accrued on impaired loans. Other interest expense includes £20m (2020: £23m, 2019: £25m) relating to IFRS 16 lease interest expenses.
4Net fee and commission income
Accounting for net fee and commission income The Barclays Bank Group applies IFRS 15 Revenue from Contracts with Customers. IFRS 15 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. Where the contractual arrangements also result in the Barclays Bank Group recognising financial instruments in scope of IFRS 9, such financial instruments are initially recognised at fair value in accordance with IFRS 9 before applying the provisions of IFRS 15. | ||
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. The below table includes a total for fees in scope of IFRS 15. Refer to Note 2 for more detailed information about operating segments.
| 2021 | ||||||||||||||
| Corporate and Investment Bank | Consumer, Cards and Payments | Head Office | Total | |||||||||||
| £m | £m | £m | £m | |||||||||||
| Fee type | ||||||||||||||
| Transactional | 390 | 2,158 | — | 2,548 | ||||||||||
| Advisory | 968 | 128 | — | 1,096 | ||||||||||
| Brokerage and execution | 1,082 | 53 | — | 1,135 | ||||||||||
| Underwriting and syndication | 3,425 | — | — | 3,425 | ||||||||||
| Other | 80 | 155 | 21 | 256 | ||||||||||
| Total revenue from contracts with customers | 5,945 | 2,494 | 21 | 8,460 | ||||||||||
| Other non-contract fee income | 116 | 5 | — | 121 | ||||||||||
| Fee and commission income | 6,061 | 2,499 | 21 | 8,581 | ||||||||||
| Fee and commission expense | (781) | (1,207) | (6) | (1,994) | ||||||||||
| Net fee and commission income | 5,280 | 1,292 | 15 | 6,587 | ||||||||||
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 123 | ||||
Notes to the financial statements
Financial performance and returns
| 2020 | ||||||||||||||
| Corporate and Investment Bank | Consumer, Cards and Payments | Head Office | Total | |||||||||||
| £m | £m | £m | £m | |||||||||||
| Fee type | ||||||||||||||
| Transactional | 357 | 1,973 | — | 2,330 | ||||||||||
| Advisory | 593 | 100 | — | 693 | ||||||||||
| Brokerage and execution | 1,116 | 57 | — | 1,173 | ||||||||||
| Underwriting and syndication | 2,867 | — | — | 2,867 | ||||||||||
| Other | 54 | 152 | 29 | 235 | ||||||||||
| Total revenue from contracts with customers | 4,987 | 2,282 | 29 | 7,298 | ||||||||||
| Other non-contract fee income | 114 | 5 | — | 119 | ||||||||||
| Fee and commission income | 5,101 | 2,287 | 29 | 7,417 | ||||||||||
| Fee and commission expense | (768) | (988) | (2) | (1,758) | ||||||||||
| Net fee and commission income | 4,333 | 1,299 | 27 | 5,659 | ||||||||||
| 2019 | ||||||||||||||
| Corporate and Investment Bank | Consumer, Cards and Payments | Head Office | Total | |||||||||||
| £m | £m | £m | £m | |||||||||||
| 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 | ||||||||||
Fee types
Transactional
Transactional fees are service charges on deposit accounts, cash management services and transactional processing fees. These include 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. Interchange and merchant fees are recognised upon settlement of the card transaction payment.
The Barclays Bank Group incurs certain card related costs including those related to cardholder reward programmes and payments to co-brand partners. Cardholder reward programmes costs related to customers that settle their outstanding balance each period (transactors) are expensed when incurred and presented in fee and commission expense while costs related to customers that continuously carry an outstanding balance (revolvers) are included in the effective interest rate of the receivable (refer to Note 3). Payments to partners for new cardholder account originations related to transactor accounts are deferred as costs to obtain a contract under IFRS 15, while costs related to revolver accounts are included in the effective interest rate of the receivable (refer to Note 3). Those costs deferred under IFRS 15 are capitalised and amortised over the estimated life of the customer 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 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 are 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.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 124 | ||||
Notes to the financial statements
Financial performance and returns
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 have been resolved and therefore the fee revenue is deferred until the uncertainty is resolved.
Included in underwriting and syndication fees are loan commitment fees which are not presented as part of the carrying value of the loan in accordance with IFRS 9. 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 2021 (2020: £nil; 2019: nil).
Impairment of fee receivables and contract assets
During 2021, there have been no material impairments recognised in relation to fees receivable and contract assets (2020: £nil; 2019: £nil). 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. Capitalised contract costs net of amortisation as at 31 December 2021 is £148m (2020: £135m; 2019: £153m).
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 2021, the amount of amortisation was £35m (2020: £35m; 2019: £29m) and there was no impairment loss recognised in connection with the capitalised contract costs (2020: £nil; 2019: £nil).
5Net trading income
Accounting for net trading income In accordance with IFRS 9, trading positions are held at fair value, and the resulting gains and losses are included in the income statement, together with interest and dividends arising from long and short positions and funding costs relating to trading activities. Income arises from both the sale and purchase of trading positions, margins which are achieved through market making and customer business and from changes in fair value caused by movements in interest and exchange rates, equity prices and other market variables. Gains or losses on non-trading financial instruments designated or mandatorily at fair value with changes in fair value recognised in the income statement are included in net trading income where the business model is to manage assets and liabilities on a fair value basis which includes use of derivatives or where an instrument is designated at fair value to eliminate an accounting mismatch and the related instrument's gain and losses are reported in trading income. | ||
| 2021 | 2020 | 2019 | |||||||||
| £m | £m | £m | |||||||||
| Net gains on financial instruments held for trading | 3,999 | 5,392 | 2,795 | ||||||||
| Net gains on financial instruments designated at fair value | 682 | 695 | 240 | ||||||||
| Net gains on financial instruments mandatorily at fair value | 1,107 | 989 | 1,038 | ||||||||
| Net trading income | 5,788 | 7,076 | 4,073 | ||||||||
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 125 | ||||
Notes to the financial statements
Financial performance and returns
6Net investment (expense)/income
Accounting for net investment income Dividends are recognised when the right to receive the dividend has been established. Other accounting policies relating to net investment income are set out in Note 12 and Note 14. | ||
Notes
aIncluded within the 2021 balance are gains of £25m relating to the sale of municipal bonds . Included within the 2020 balance are losses of £115m relating to partial redemption of contingent capital note.
bBarclays has amended the presentation of the premium paid for purchased financial guarantees which are embedded in notes it issues directly to the market. From 2020 onwards, the full note coupon is presented as interest expense within net interest income. The financial guarantee element of the coupon had previously been recognised in net investment income. The comparative of £25m in 2019 has not been restated.
7Credit impairment (release)/charge
Accounting for the impairment of financial assets
Impairment
In accordance with IFRS 9, the Barclays Bank Group is required to recognise expected credit losses (ECLs) based on unbiased forward-looking information for all financial assets at amortised cost, lease receivables, debt financial assets at fair value through other comprehensive income, loan commitments and financial guarantee contracts. Intercompany exposures in the individual financial statements, including loan commitments and financial guarantee contracts, are also in scope of IFRS 9 for ECL purposes.
At the reporting date, an allowance (or provision for loan commitments and financial guarantees) is required for the 12 month (Stage 1) ECLs. If the credit risk has significantly increased since initial recognition (Stage 2), or if the financial instrument is credit impaired (Stage 3), an allowance (or provision) should be recognised for the lifetime ECLs.
The measurement of ECL is calculated using three main components: (i) probability of default (PD) (ii) loss given default (LGD) and (iii) the exposure at default (EAD).
The 12 month and lifetime ECLs are calculated by multiplying the respective PD, LGD and the EAD. The 12 month and lifetime PDs represent the PD occurring over the next 12 months and the remaining maturity of the instrument respectively. The EAD represents the expected balance at default, taking into account the repayment of principal and interest from the balance sheet date to the default event together with any expected drawdowns of committed facilities. The LGD represents expected losses on the EAD given the event of default, taking into account, among other attributes, the mitigating effect of collateral value at the time it is expected to be realised and the time value of money.
Determining a significant increase in credit risk since initial recognition:
The Barclays Bank Group assesses when a significant increase in credit risk has occurred based on quantitative and qualitative assessments. The credit risk of an exposure is considered to have significantly increased when:
i)Quantitative test
The annualised lifetime PD has increased by more than an agreed threshold relative to the equivalent at origination.
PD deterioration thresholds are defined as percentage increases, and are set at an origination score band and segment level to ensure the test appropriately captures significant increases in credit risk at all risk levels. Generally, thresholds are inversely correlated to the origination PD, i.e. as the origination PD increases, the threshold value reduces.
The assessment of the point at which a PD increase is deemed ‘significant’, is based upon analysis of the portfolio’s risk profile against a common set of principles and performance metrics (consistent across both retail and wholesale businesses), incorporating expert credit judgement where appropriate. Application of quantitative PD floors does not represent the use of the low credit risk exemption as exposures can separately move into stage 2 via the qualitative route described below.
Wholesale assets apply a 100% increase in PD and 0.2% PD floor to determine a significant increase in credit risk.
Retail assets apply bespoke relative increase and absolute PD thresholds based on product type and origination PD. Thresholds are subject to maximums defined by Barclays Bank Group policy and typically apply minimum relative thresholds of 50%-100% and a maximum relative threshold of 400%.
For existing/historical exposures where origination point scores or data are no longer available or do not represent a comparable estimate of lifetime PD, a proxy origination score is defined, based upon:
▪back-population of the approved lifetime PD score either to origination date or, where this is not feasible, as far back as possible (subject to a data start point no later than 1 January 2015); or
▪use of available historical account performance data and other customer information, to derive a comparable ‘proxy’ estimation of origination PD.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 126 | ||||
Notes to the financial statements
Financial performance and returns
ii)Qualitative test
This is relevant for accounts that meet the portfolio’s ‘high risk’ criteria and are subject to closer credit monitoring.
High risk customers may not be in arrears but either through an event or an observed behaviour exhibit credit distress. The definition and assessment of high risk includes as wide a range of information as reasonably available, such as industry and Barclays Bank Group-wide customer level data, including but not limited to bureau scores and high consumer indebtedness index, wherever possible or relevant.
Whilst the high risk populations applied for IFRS 9 impairment purposes are aligned with risk management processes, they are also regularly reviewed and validated to ensure that they capture any incremental segments where there is evidence of credit deterioration.
iii)Backstop criteria
This is relevant for accounts that are more than 30 calendar days past due. The 30 days past due criteria is a backstop rather than a primary driver of moving exposures into Stage 2.
The criteria for determining a significant increase in credit risk for assets with bullet repayments follows the same principle as all other assets, i.e. quantitative, qualitative and backstop tests are all applied.
Exposures will move back to Stage 1 once they no longer meet the criteria for a significant increase in credit risk. This means that, at a minimum all payments must be up-to-date, the PD deterioration test is no longer met, the account is no longer classified as high risk, and the customer has evidenced an ability to maintain future payments.
Exposures are only removed from Stage 3 and re-assigned to Stage 2 once the original default trigger event no longer applies. Exposures being removed from Stage 3 must no longer qualify as credit impaired, and:
a)the obligor will also have demonstrated consistently good payment behaviour over a 12-month period, by making all consecutive contractual payments due and, for forborne exposures, the relevant EBA defined probationary period has also been successfully completed or;
b)(for non-forborne exposures) the performance conditions are defined and approved within an appropriately sanctioned restructure plan, including 12 months’ payment history have been met.
Management overlays and other exceptions to model outputs are applied only if consistent with the objective of identifying significant increases in credit risk.
Forward-looking information
The measurement of ECL involves complexity and judgement, including estimation of PD, LGD, a range of unbiased future economic scenarios, estimation of expected lives (where contractual life is not appropriate), and estimation of EAD and assessing significant increases in credit risk.
Credit losses are the expected cash shortfalls from what is contractually due over the expected life of the financial instrument, discounted at the original effective interest rate (EIR). ECLs are the unbiased probability-weighted credit losses determined by evaluating a range of possible outcomes and considering future economic conditions.
The Barclays Bank Group uses a five-scenario model to calculate ECL. An external consensus forecast is assembled from key sources, including HM Treasury (short and medium term forecasts), Bloomberg (based on median of economic forecasters) and the Urban Land Institute (for US House Prices), which forms the baseline scenario. In addition, two adverse scenarios (Downside 1 and Downside 2) and 2 favourable scenarios (Upside 1 and Upside 2) are derived, with associated probability weightings. The adverse scenarios are calibrated to a similar severity to internal stress tests, whilst also considering IFRS 9 specific sensitivities and non-linearity. Downside 2 is benchmarked to the Bank of England’s annual cyclical scenarios and to the most severe scenario from Moody’s inventory, but is not designed to be the same. The favourable scenarios are calibrated to be symmetric to the adverse scenarios, subject to a ceiling calibrated to relevant recent favourable benchmark scenarios. The scenarios include eight economic variables (GDP, unemployment, House Price Index (HPI) and base rates in both the UK and US markets) and expanded variables using statistical models based on historical correlations. The upside and downside shocks are designed to evolve over a five-year stress horizon, with all five scenarios converging to a steady state after approximately eight-years.
The methodology for estimating probability weights for each of the scenarios involves a comparison of the distribution of key historical UK and US macroeconomic variables against the forecast paths of the 5 scenarios. The methodology works such that the baseline (reflecting current consensus outlook) has the highest weight and the weights of adverse and favourable scenarios depend on the deviation from the baseline; the further from the baseline, the smaller the weight. A single set of five scenarios is used across all portfolios and all five weights are normalised to equate to 100%. The same scenarios and weights that are used in the estimation of expected credit losses are also used for the Barclays Bank Group’s internal planning purposes. The impacts across the portfolios are different because of the sensitivities of each of the portfolios to specific macroeconomic variables, for example, mortgages are highly sensitive to house prices, and credit cards and unsecured consumer loans are highly sensitive to unemployment.
Definition of default, credit impaired assets, write-offs, and interest income recognition
The definition of default for the purpose of determining ECLs, and for internal credit risk management purposes, has been aligned to the Regulatory Capital CRR Article 178 definition of default, to maintain a consistent approach with IFRS 9 and associated regulatory guidance. The Regulatory Capital CRR Article 178 definition of default considers indicators that the debtor is unlikely to pay, includes exposures in forbearance and is no later than when the exposure is more than 90 days past due or 180 days past due in the case of UK mortgages. When exposures are identified as credit impaired at the time when they are purchased or originated interest income is calculated on the carrying value net of the impairment allowance.
An asset is considered credit impaired when one or more events occur that have a detrimental impact on the estimated future cash flows of the financial asset. This comprises assets defined as defaulted and other individually assessed exposures where imminent default or actual loss is identified.
Uncollectible loans are written off against the related allowance for loan impairment on completion of the Barclays Bank Group’s internal processes and when all reasonably expected recoverable amounts have been collected. Subsequent recoveries of amounts previously written off are credited to the income statement. The timing and extent of write-offs may involve some element of subjective judgement. Nevertheless, a write-off will often be prompted by a specific event, such as the inception of insolvency proceedings or other formal recovery action, which makes it possible to establish that some or the entire advance is beyond realistic prospect of recovery.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 127 | ||||
Notes to the financial statements
Financial performance and returns
Accounting for purchased financial guarantee contracts
The Barclays Bank Group may enter into a financial guarantee contract which requires the issuer of such contract to reimburse the Barclays Bank Group for a loss it incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument. For these separate financial guarantee contracts, the Barclays Bank Group recognises a reimbursement asset aligned with the recognition of the underlying ECLs, if it is considered virtually certain that a reimbursement would be received if the specified debtor fails to make payment when due in accordance with the terms of the debt instrument.
Loan modifications and renegotiations that are not credit-impaired
When modification of a loan agreement occurs as a result of commercial restructuring activity rather than due to the credit risk of the borrower, an assessment must be performed to determine whether the terms of the new agreement are substantially different from the terms of the existing agreement. This assessment considers both the change in cash flows arising from the modified terms as well as the change in overall instrument risk profile. In respect of payment holidays granted to borrowers which are not due to forbearance, if the revised cash flows on a present value basis (based on the original EIR) are not substantially different from the original cash flows, the loan is not considered to be substantially modified.
Where terms are substantially different, the existing loan will be derecognised and a new loan will be recognised at fair value, with any difference in valuation recognised immediately within the income statement, subject to observability criteria.
Where terms are not substantially different, the loan carrying value will be adjusted to reflect the present value of modified cash flows discounted at the original EIR, with any resulting gain or loss recognised immediately within the income statement as a modification gain or loss.
Note 1 sets out details for changes in the basis of determining the contractual cash flows of a financial instrument that are required by interest rate benchmark reform.
Expected life
Lifetime ECLs must be measured over the expected life. This is restricted to the maximum contractual life and takes into account expected prepayment, extension, call and similar options. The exceptions are certain revolver financial instruments, such as credit cards and bank overdrafts, that include both a drawn and an undrawn component where the entity’s contractual ability to demand repayment and cancel the undrawn commitment does not limit the entity’s exposure to credit losses to the contractual notice period. For revolving facilities, expected life is analytically derived to reflect behavioural life of the asset, i.e. the full period over which the business expects to be exposed to credit risk. Behavioural life is typically based upon historical analysis of the average time to default, closure or withdrawal of facility. Where data is insufficient or analysis inconclusive, an additional ‘maturity factor’ may be incorporated to reflect the full estimated life of the exposures, based upon experienced judgement and/or peer analysis. Potential future modifications of contracts are not taken into account when determining the expected life or EAD until they occur.
Discounting
ECLs are discounted at the EIR at initial recognition or an approximation thereof and consistent with income recognition. For loan commitments the EIR is the rate that is expected to apply when the loan is drawn down and a financial asset is recognised. Issued financial guarantee contracts are discounted at the risk free rate. Lease receivables are discounted at the rate implicit in the lease. For variable/floating rate financial assets, the spot rate at the reporting date is used and projections of changes in the variable rate over the expected life are not made to estimate future interest cash flows or for discounting.
Modelling techniques
The regulatory Basel Committee of Banking Supervisors (BCBS) ECL calculations are leveraged for IFRS 9 modelling but adjusted for key differences which include:
▪BCBS requires 12 month through the economic cycle losses whereas IFRS 9 requires 12 months or lifetime point in time losses based on conditions at the reporting date and multiple forecasts of the future economic conditions over the expected lives;
▪IFRS 9 models do not include certain conservative BCBS model floors and downturn assessments and require discounting to the reporting date at the original EIR rather than using the cost of capital to the date of default;
▪management adjustments are made to modelled output to account for situations where known or expected risk factors and information have not been considered in the modelling process, for example forecast economic scenarios for uncertain political events; and
▪ECL is measured at the individual financial instrument level, however a collective approach where financial instruments with similar risk characteristics are grouped together, with apportionment to individual financial instruments, is used where effects can only be seen at a collective level, for example for forward-looking information.
For the IFRS 9 impairment assessment, the Barclays Bank Group’s risk models are used to determine the PD, LGD and EAD. For Stage 2 and 3, the Barclays Bank Group applies lifetime PDs but uses 12 month PDs for Stage 1. The ECL drivers of PD, EAD and LGD are modelled at an account level which considers vintage, among other credit factors. Also, the assessment of significant increase in credit risk is based on the initial lifetime PD curve, which accounts for the different credit risk underwritten over time.
Forbearance
A financial asset is subject to forbearance when it is modified due to the credit distress of the borrower. A modification made to the terms of an asset due to forbearance will typically be assessed as a non-substantial modification that does not result in derecognition of the original loan, except in circumstances where debt is exchanged for equity.
Both performing and non-performing forbearance assets are classified as Stage 3 except where it is established that the concession granted has not resulted in diminished financial obligation and that no other regulatory definitions of default criteria have been triggered, in which case the asset is classified as Stage 2. The minimum probationary period for non-performing forbearance is 12 months and for performing forbearance, 24 months. Hence, a minimum of 36 months is required for non-performing forbearance to move out of a forborne state.
No financial instrument in forbearance can transfer back to Stage 1 until all of the Stage 2 thresholds are no longer met and can only move out of Stage 3 when no longer credit impaired.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 128 | ||||
Notes to the financial statements
Financial performance and returns
Critical accounting estimates and judgements
IFRS 9 impairment involves several important areas of judgement, including estimating forward looking modelled parameters (PD, LGD and EAD), developing a range of unbiased future economic scenarios, estimating expected lives and assessing significant increases in credit risk, based on the Barclays Bank Group’s experience of managing credit risk. The determination of expected life is most material for Barclays credit card portfolios which is obtained via behavioural life analysis to materially capture the risk of these facilities.
Within the retail and small businesses portfolios, which comprise large numbers of small homogenous assets with similar risk characteristics where credit scoring techniques are generally used, the impairment allowance is calculated using forward looking modelled parameters which are typically run at account level. There are many models in use, each tailored to a product, line of business or customer category. Judgement and knowledge is needed in selecting the statistical methods to use when the models are developed or revised. Management adjustments to impairment models, which contain an element of subjectivity, are applied in order to factor in certain conditions or changes in policy that are not fully incorporated into the impairment models, or to reflect additional facts and circumstances at the period end. Management adjustments are reviewed and incorporated into future model development where appropriate.
For individually significant assets in Stage 3, impairment allowances are calculated on an individual basis and all relevant considerations that have a bearing on the expected future cash flows across a range of economic scenarios are taken into account. These considerations can be particularly subjective and can include the business prospects for the customer, the realisable value of collateral, the Barclays Bank Group’s position relative to other claimants, the reliability of customer information and the likely cost and duration of the work-out process. The level of the impairment allowance is the difference between the value of the discounted expected future cash flows (discounted at the loan’s original effective interest rate), and its carrying amount. Furthermore, judgements change with time as new information becomes available or as work-out strategies evolve, resulting in frequent revisions to the impairment allowance as individual decisions are taken. Changes in these estimates would result in a change in the allowances and have a direct impact on the impairment charge.
Temporary adjustments to calculated IFRS9 impairment allowances may be applied in limited circumstances to account for situations where known or expected risk factors or information have not been considered in the ECL assessment or modelling process. For further information please see page 57 in credit risk performance.
| 2021 | 2020 | 2019 | |||||||||||||||||||||||||||
| Impairment Charges | Recoveries and Reimbursementsa | Total | Impairment Charges | Recoveries and Reimbursements | Total | Impairment Charges | Recoveries and Reimbursements | Total | |||||||||||||||||||||
| £m | £m | £m | £m | £m | £m | £m | £m | £m | |||||||||||||||||||||
| Loans and advances | (264) | 259 | (5) | 3,060 | (368) | 2,692 | 1,214 | (73) | 1,141 | ||||||||||||||||||||
| Provision for undrawn contractually committed facilities and guarantees provided | (257) | — | (257) | 547 | — | 547 | 55 | — | 55 | ||||||||||||||||||||
| Loans impairment | (521) | 259 | (262) | 3,607 | (368) | 3,239 | 1,269 | (73) | 1,196 | ||||||||||||||||||||
| Cash collateral and settlement balances | (4) | — | (4) | 2 | — | 2 | 1 | — | 1 | ||||||||||||||||||||
| Financial instruments at fair value through OCI | (6) | — | (6) | — | — | — | — | — | — | ||||||||||||||||||||
| Other financial assets measured at cost | (5) | — | (5) | 136 | — | 136 | 5 | — | 5 | ||||||||||||||||||||
| Credit impairment (release)/charge | (536) | 259 | (277) | 3,745 | (368) | 3,377 | 1,275 | (73) | 1,202 | ||||||||||||||||||||
Notes
a.Recoveries and reimbursements include a net reduction in amounts recoverable from financial guarantee contracts held with third parties of £290m (2020: £364m) and cash recoveries of previously written off amounts of £31m (2020: £4m).
Write-offs that can be subjected to enforcement activity
The contractual amount outstanding on financial assets that were written off during the year and that can still be subjected to enforcement activity is £752m (2020: £816m). This is lower than the write-offs presented in the movement in gross exposures and impairment allowance table due to assets sold during the year post write-offs and post write-off recoveries.
Modification of financial assets
Financial assets of £3,260m (2020: £3,781m) were subject to non-substantial modification during the year, with a resulting loss of £2m (2020: £21m). The gross carrying amount at 31 December 2021 of financial assets subject to non-substantial modification for which the loss allowance has changed to a 12 month ECL during the year amounts to £419m (2020: £1,194m).
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 129 | ||||
Notes to the financial statements
Financial performance and returns
8Operating expenses
Restatedc | |||||||||||
| 2021 | 2020 | 2019 | |||||||||
| £m | £m | £m | |||||||||
| Infrastructure costs | |||||||||||
| Property and equipment | 367 | 373 | 368 | ||||||||
| Depreciation and amortisation | 403 | 421 | 457 | ||||||||
| Lease payments | 4 | 1 | 7 | ||||||||
Impairment of property, equipment and intangible assetsa | 280 | 21 | 3 | ||||||||
| Total infrastructure costs | 1,054 | 816 | 835 | ||||||||
| Administration and general expenses | |||||||||||
| Consultancy, legal and professional fees | 390 | 345 | 362 | ||||||||
| Marketing and advertising | 235 | 176 | 258 | ||||||||
| UK bank levy | 134 | 249 | 185 | ||||||||
| Other administration and general expenses | 3,616 | 3,432 | 3,513 | ||||||||
| Total administration and general expenses | 4,375 | 4,202 | 4,318 | ||||||||
Staff costsb | 4,456 | 4,365 | 4,565 | ||||||||
| Litigation and conduct | 374 | 76 | 264 | ||||||||
| Operating expenses | 10,259 | 9,459 | 9,982 | ||||||||
Note
aImpairment of property, equipment and intangible assets includes £266m relating to structural cost actions taken as part of the real estate review conducted in 2021 (see Note 19).
bFor further details on staff costs including accounting policies, refer to Note 29.
c2021 financial metrics have been restated to reflect the over-issuance of securities under the Company's 2019 F-3. See Restatement of financial statements (Note 1a) on page 118 for further details.
9Tax
Accounting for income taxes
The 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. Deferred tax liabilities are recognised for all taxable temporary differences except from the initial recognition of goodwill. Deferred tax is not recognised where the 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.
The 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. The accrual of interest and penalty amounts in respect of uncertain income tax positions is recognised as an expense within profit before tax.
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.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 130 | ||||
Notes to the financial statements
Financial performance and returns
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.
Restateda | |||||||||||
| 2021 | 2020 | 2019 | |||||||||
| £m | £m | £m | |||||||||
| Current tax charge/(credit) | |||||||||||
| Current year | 904 | 993 | 327 | ||||||||
| Adjustments in respect of prior years | 393 | 3 | (50) | ||||||||
| 1,297 | 996 | 277 | |||||||||
| Deferred tax (credit)/charge | |||||||||||
| Current year | (179) | (563) | 157 | ||||||||
| Adjustments in respect of prior years | (288) | 191 | (102) | ||||||||
| (467) | (372) | 55 | |||||||||
| Tax charge | 830 | 624 | 332 | ||||||||
a.2021 financial metrics have been restated to reflect the over-issuance of securities under the Company's 2019 F-3. See Restatement of financial statements (Note 1a) on page 118 for further details.
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.
Restateda | Restateda | |||||||||||||||||||
| 2021 | 2021 | 2020 | 2020 | 2019 | 2019 | |||||||||||||||
| £m | % | £m | % | £m | % | |||||||||||||||
| Profit before tax from continuing operations | 5,418 | 3,075 | 3,112 | |||||||||||||||||
Tax charge based on the standard UK corporation tax rate of 19% (2020: 19%, 2019: 19%) | 1,029 | 19.0 | % | 584 | 19.0 | % | 593 | 19.0 | % | |||||||||||
Impact of profits/losses earned in territories with different statutory rates to the UK (weighted average tax rate is 24.0% (2020: 25.0% , 2019: 26.0%)) | 273 | 5.0 | % | 183 | 6.0 | % | 217 | 7.0 | % | |||||||||||
| Recurring items: | ||||||||||||||||||||
| Non-creditable taxes including withholding taxes | 124 | 2.3 | % | 107 | 3.4 | % | 146 | 4.7 | % | |||||||||||
| Adjustments in respect of prior years | 105 | 1.9 | % | 194 | 6.3 | % | (152) | (4.9 | %) | |||||||||||
| Non-deductible expenses | 61 | 1.1 | % | 28 | 0.9 | % | 34 | 1.1 | % | |||||||||||
| Impact of UK bank levy being non-deductible | 25 | 0.5 | % | 48 | 1.6 | % | 35 | 1.1 | % | |||||||||||
| Impact of Barclays Bank PLC's overseas branches being taxed both locally and in the UK | 25 | 0.5 | % | 25 | 0.8 | % | 15 | 0.5 | % | |||||||||||
| Tax adjustments in respect of share-based payments | (5) | (0.1 | %) | 14 | 0.5 | % | (7) | (0.2 | %) | |||||||||||
| Banking surcharge and other items | (48) | (0.9 | %) | (70) | (2.3 | %) | (103) | (3.3 | %) | |||||||||||
| Tax relief on payments made under AT1 instruments | (113) | (2.1 | %) | (124) | (4.0 | %) | (121) | (3.9 | %) | |||||||||||
| Changes in recognition of deferred tax and effect of unrecognised tax losses | (140) | (2.6 | %) | (123) | (4.0 | %) | (85) | (2.7 | %) | |||||||||||
| Non-taxable gains and income | (309) | (5.7 | %) | (200) | (6.5 | %) | (240) | (7.7 | %) | |||||||||||
| Non-recurring items: | ||||||||||||||||||||
| Remeasurement of UK deferred tax assets due to tax rate changes | (218) | (4.0 | %) | (43) | (1.4 | %) | — | — | ||||||||||||
| Non-deductible provisions for UK customer redress | 21 | 0.4 | % | 7 | 0.2 | % | — | — | ||||||||||||
| Non-deductible provisions for investigations and litigation | — | — | (6) | (0.2 | %) | — | — | |||||||||||||
| Total tax charge | 830 | 15.3 | % | 624 | 20.3 | % | 332 | 10.7 | % | |||||||||||
a.2021 financial metrics have been restated to reflect the over-issuance of securities under the Company's 2019 F-3. See Restatement of financial statements (Note 1a) on page 118 for further details.
Factors driving the effective tax rate
The effective tax rate of 15.3% is lower than the UK corporation tax rate of 19% primarily due to the impact of non-taxable gains and income, adjustments for the remeasurement of UK deferred tax assets as a result of the enactment in 2021 of an increase in the UK corporation tax rate to 25% from 1 April 2023, the use of unrecognised tax losses in the period and tax relief on payments made under AT1 instruments. These factors, which have each decreased the effective tax rate, are partially offset by profits earned outside the UK being taxed at local statutory tax rates that are higher than the UK tax rate and non-creditable taxes.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 131 | ||||
Notes to the financial statements
Financial performance and returns
The Barclays Bank Group’s future tax charge will be sensitive to the geographic mix of profits earned, the tax rates in force and changes to the tax rules in the jurisdictions that the Barclays Bank Group operates in. In its Budget held in October 2021, the UK Government announced that the banking surcharge rate will be reduced from 8% to 3% from 1 April 2023. This reduction in the banking surcharge rate was substantively enacted on 2 February 2022 and is a non-adjusting post balance sheet event. If the reduction in the banking surcharge rate had been substantively enacted at the balance sheet date then this would have resulted in the Barclays Bank Group’s UK deferred tax assets being remeasured and decreasing with a tax charge in the income statement of £183m and tax credit within other comprehensive income of £122m.
In October 2021, the OECD and G20 Inclusive Framework on Base Erosion and Profit Shifting announced plans to introduce a global minimum tax rate of 15% from 2023. The model rules, which set out the scope of and the mechanism for calculating the global minimum tax, were released by the OECD on 20 December 2021. The Barclays Bank Group is reviewing the model rules and awaiting the OECD’s anticipated publication of further guidance, as well as new legislation expected to be released by governments implementing this new tax regime, and will assess the potential impact of new legislation during 2022.
In the USA, a proposed Build Back Better Act has been passed by the House of Representatives but has not been passed by the Senate and at this time it is uncertain whether the Act will progress further. The proposed Act passed by the House of Representatives included proposals to implement material changes to international tax provisions, including amendments to the Base Erosion and Anti-Abuse Tax and the imposition of an alternative minimum tax based on accounting profits. It is unclear at this time whether any of these proposals could have a significant impact on the Barclays Bank Group if enacted. The Barclays Bank Group will continue to monitor developments and assess the potential impact of any future legislative changes ultimately enacted.
Tax in the consolidated statement of comprehensive income
Tax relating to each component of other comprehensive income can be found in the consolidated statement of comprehensive income which includes within Other a tax credit of £nil (2020: £3m). The total amount recognised in relation to the remeasurement of UK deferred tax through other comprehensive income was a £148m charge (2020: £49m).
Tax included directly in equity
Tax included directly in equity comprises a £38m credit (2020: £14m) relating to share-based payments and deductible costs on issuing other equity instruments.
Deferred tax assets and liabilities
The deferred tax amounts on the balance sheet were as follows:
| Barclays Bank Group | ||||||||
| 2021 | 2020 | |||||||
| £m | £m | |||||||
| US Intermediate Holding Company Tax Group ("IHC Tax Group") | 1,004 | 1,001 | ||||||
| US Branch Tax Group | 1,002 | 1,048 | ||||||
| UK Tax Group | 576 | — | ||||||
| Other (outside the UK and US tax groups) | 399 | 503 | ||||||
| Deferred tax asset | 2,981 | 2,552 | ||||||
| Deferred tax liability | (6) | (225) | ||||||
| Net deferred tax | 2,975 | 2,327 | ||||||
US deferred tax assets in the IHC and the US Branch Tax Groups
The deferred tax asset in the IHC Tax Group of £1,004m (2020: £1,001m) includes £1m (2020: £nil) relating to tax losses, with the balance relating to temporary differences. The deferred tax asset in Barclays Bank PLC’s US Branch Tax Group of £1,002m (2020: £1,048m) relates entirely to temporary differences.
In relation to the IHC Tax Group, these temporary differences include £301m (2020: £330m) arising from New York State and City prior net operating loss conversion which can be carried forward and will expire in 2034. Business profit forecasts indicate these amounts will be fully recovered before expiry.
UK Tax Group deferred tax assets and liabilities
The net deferred tax asset in the UK Tax Group of £576m (2020: £225m liability) includes a deferred tax asset of £1,074m (2020: £541m) relating to tax losses which is offset by a deferred tax liability of £498m (2020: £766m) relating to temporary differences. There is no time limit on utilisation of UK tax losses and business profit forecasts indicate these losses will be fully recovered.
Other deferred tax assets (outside the UK and US tax groups)
The deferred tax asset of £399m (2020: £503m) in other entities within the Barclays Bank Group includes £121m (2020: £170m) 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 those deferred tax assets will be fully recovered.
Of the deferred tax asset of £399m (2020: £503m), an amount of £9m (2020: £8m) relates to entities which have suffered a loss in either the current or prior year and the utilisation of which is dependent upon future taxable profits. This has been taken into account in reaching the above conclusion that these deferred tax assets will be fully recovered in the future.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 132 | ||||
Notes to the financial statements
Financial performance and returns
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 Group | ||||||||||||||||||||||||||||||||
| Fixed asset timing differences | Fair value through other comprehensive income | Cash flow hedges | Retirement benefit obligations | Loan impairment allowance | Other provisions | Share based payments and deferred compensation | Other temporary differences | Tax losses carried forward | Total | |||||||||||||||||||||||
| £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | |||||||||||||||||||||||
| Assets | 659 | — | — | 30 | 455 | 139 | 317 | 1,377 | 711 | 3,688 | ||||||||||||||||||||||
| Liabilities | (33) | (21) | (441) | (826) | — | — | — | (40) | — | (1,361) | ||||||||||||||||||||||
| As at 1 January 2021 | 626 | (21) | (441) | (796) | 455 | 139 | 317 | 1,337 | 711 | 2,327 | ||||||||||||||||||||||
| Income statement | 14 | (6) | — | 1 | 38 | 3 | (13) | (55) | 485 | 467 | ||||||||||||||||||||||
| Other comprehensive income and reserves | — | 170 | 750 | (855) | — | — | 20 | 97 | — | 182 | ||||||||||||||||||||||
| Other movements | 8 | 1 | — | — | (12) | — | 3 | (1) | — | (1) | ||||||||||||||||||||||
| 648 | 144 | 309 | (1,650) | 481 | 142 | 327 | 1,378 | 1,196 | 2,975 | |||||||||||||||||||||||
| Assets | 678 | 144 | 309 | 24 | 481 | 142 | 327 | 1,418 | 1,196 | 4,719 | ||||||||||||||||||||||
| Liabilities | (30) | — | — | (1,674) | — | — | — | (40) | — | (1,744) | ||||||||||||||||||||||
| As at 31 December 2021 | 648 | 144 | 309 | (1,650) | 481 | 142 | 327 | 1,378 | 1,196 | 2,975 | ||||||||||||||||||||||
| Assets | 719 | 110 | — | 31 | 284 | 127 | 305 | 1,329 | 523 | 3,428 | ||||||||||||||||||||||
| Liabilities | (29) | (18) | (139) | (640) | — | — | — | (222) | — | (1,048) | ||||||||||||||||||||||
| As at 1 January 2020 | 690 | 92 | (139) | (609) | 284 | 127 | 305 | 1,107 | 523 | 2,380 | ||||||||||||||||||||||
| Income statement | (39) | — | — | — | 164 | 18 | 15 | 23 | 191 | 372 | ||||||||||||||||||||||
| Other comprehensive income and reserves | — | (112) | (291) | (191) | — | — | 3 | 238 | — | (353) | ||||||||||||||||||||||
| Other movements | (25) | (1) | (11) | 4 | 7 | (6) | (6) | (31) | (3) | (72) | ||||||||||||||||||||||
| 626 | (21) | (441) | (796) | 455 | 139 | 317 | 1,337 | 711 | 2,327 | |||||||||||||||||||||||
| Assets | 659 | — | — | 30 | 455 | 139 | 317 | 1,377 | 711 | 3,688 | ||||||||||||||||||||||
| Liabilities | (33) | (21) | (441) | (826) | — | — | — | (40) | — | (1,361) | ||||||||||||||||||||||
| As at 31 December 2020 | 626 | (21) | (441) | (796) | 455 | 139 | 317 | 1,337 | 711 | 2,327 | ||||||||||||||||||||||
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 asset expected to be recovered after more than 12 months for the Barclays Bank Group is £4,328m (2020: £3,356m). The amount of deferred tax liability expected to be settled after more than 12 months for the Barclays Bank Group is £1,740m (2020: £1,359m). 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
The Barclays Bank Group has deferred tax assets not recognised in respect of gross deductible temporary differences of £110m (2020: £123m), unused tax credits of £283m (2020: £236m), and gross tax losses of £22,496m (2020: £19,953m). The tax losses include capital losses of £3,642m (2020: £2,987m). Of these tax losses, £63m (2020: £139m) expire within five years, £370m (2020: £236m) expire within six to ten years, £10,529m (2020: £7,271m) expire within 11 to 20 years and £11,534m (2020: £12,307m) 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 £0.9bn (2020: £0.8bn).
10Dividends on ordinary shares and preference shares
The 2021 financial statements include £794m (2020: £263m) of dividends paid on ordinary shares. This comprises one interim dividend declared in relation to the prior year of £174m (2020: £263m) and two interim dividends in relation to 2021 of £520m, declared in February 2021, and £100m, declared in July 2021 (2020: nil ).
This results in a total dividend for the year of £0.34 (2020: £0.11) per ordinary share.
Dividends paid on preference shares amounted to £27m (2020: £42m). Dividends paid on the Euro preference shares amounted to £14.37 per share (2020: £439.21). Dividends paid on the 6.278% US$100 preference shares amounted to £459.69 per share (2020: £485.75).
The Directors approved a third interim dividend in respect of 2021 of £200m, which was paid on 24 March 2022.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 133 | ||||
Notes to the financial statements
Assets and liabilities held at fair value
The notes included in this section focus on assets and liabilities the Barclays Bank Group holds and recognises at fair value. Fair value refers to the price that would be received to sell an asset or the price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date, which may be an observable market price or, where there is no quoted price for the instrument, may be an estimate based on available market data. Details regarding the Barclays Bank Group’s approach to managing market risk can be found on page 42. | ||
11Trading portfolio
Accounting for trading portfolio assets and liabilities In accordance with IFRS 9, all assets and liabilities held for trading purposes are held at fair value with gains and losses in the changes in fair value taken to the income statement in net trading income (Note 5). | ||
| Barclays Bank Group | ||||||||
| 2021 | 2020 | |||||||
| £m | £m | |||||||
| Debt securities and other eligible bills | 50,700 | 56,196 | ||||||
| Equity securities | 83,113 | 62,192 | ||||||
| Traded loans | 12,525 | 8,348 | ||||||
| Commodities | 533 | 928 | ||||||
| Trading Portfolio Assets | 146,871 | 127,664 | ||||||
| Debt securities and other eligible bills | (34,079) | (28,836) | ||||||
| Equity securities | (19,212) | (17,303) | ||||||
| Trading Portfolio Liabilities | (53,291) | (46,139) | ||||||
12Financial assets at fair value through the income statement
Accounting for financial assets mandatorily at fair value Financial assets 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. | ||
Accounting for financial assets designated at fair value Financial assets, other than those held for trading, are classified in this category if they are so irrevocably designated at inception and the use of the designation removes or significantly reduces an accounting mismatch. 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. The details on how the fair value amounts are derived for financial assets at fair value are described in Note 16. | ||
| Barclays Bank Group | ||||||||
| 2021 | 2020 | |||||||
| £m | £m | |||||||
| Loans and advances | 2,813 | 2,170 | ||||||
| Debt securities | 318 | 291 | ||||||
| Reverse repurchase agreements and other similar secured lending | — | 19 | ||||||
| Financial assets designated at fair value | 3,131 | 2,480 | ||||||
| Loans and advances | 33,089 | 25,279 | ||||||
| Debt securities | 1,937 | 1,406 | ||||||
| Equity securities | 4,798 | 3,742 | ||||||
| Reverse repurchase agreements and other similar secured lending | 145,186 | 138,539 | ||||||
| Other financial assets | 85 | 315 | ||||||
| Financial assets mandatorily at fair value | 185,095 | 169,281 | ||||||
| Total | 188,226 | 171,761 | ||||||
Credit risk of financial assets designated at fair value and related credit derivatives
The following table shows the maximum exposure to credit risk, the changes in fair value attributable to changes in credit risk, and the cumulative changes in fair value since initial recognition for loans and advances. The table does not include debt securities and reverse repurchase agreements and
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 134 | ||||
Notes to the financial statements
Assets and liabilities held at fair value
other similar secured lending designated at fair value as they have minimal exposure to credit risk. Reverse repurchase agreements are collateralised and debt securities are primarily relating to high quality sovereigns.
| Barclays Bank Group | ||||||||||||||||||||
| Maximum exposure as at 31 December | Changes in fair value during the year ended | Cumulative changes in fair value from inception | ||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||
| £m | £m | £m | £m | £m | £m | |||||||||||||||
| Loans and advances designated at fair value, attributable to credit risk | 2,813 | 2,170 | 1 | (46) | (3) | (51) | ||||||||||||||
| Value mitigated by related credit derivatives | 1,617 | 795 | (3) | 3 | (3) | 3 | ||||||||||||||
13Derivative financial instruments
Accounting for derivatives
Derivative instruments are contracts whose value is derived from one or more underlying financial instruments or indices defined in the contract. They include swaps, forward-rate agreements, futures, options and combinations of these instruments and primarily affect the Barclays Bank Group’s net interest income, net trading income and derivative assets and liabilities. Notional amounts of the contracts are not recorded on the balance sheet. Derivatives are used to hedge interest rate, credit risk, inflation risk, exchange rate, commodity, equity exposures and exposures to certain indices such as house price indices and retail price indices related to non-trading positions.
All derivative instruments are held at fair value through profit or loss, except for derivatives that are in a designated cash flow or net investment hedge accounting relationship. Derivatives are classified as assets when their fair value is positive or as liabilities when their fair value is negative. This includes terms included in a contract or financial liability (the host) which, had they been a standalone contract, would have met the definition of a derivative. If these are separated from the host, i.e. when the economic characteristics of the embedded derivative are not closely related with those of the host contract and the combined instrument is not measured at fair value through profit or loss, then they are accounted for in the same way as derivatives. For financial assets, the requirements are whether the financial assets contain contractual terms that give rise on specified dates to cash flows that are SPPI, and consequently the requirements for accounting for embedded derivatives are not applicable to financial assets.
Hedge accounting
The Barclays Bank Group applies the requirements of IAS 39 Financial Instruments: Recognition and Measurement for hedge accounting purposes. The Barclays Bank Group applies hedge accounting to represent the economic effects of its interest rate, currency and contractually linked inflation risk management strategies. Where derivatives are held for risk management purposes, and when transactions meet the required criteria for documentation and hedge effectiveness, the Barclays Bank Group applies fair value hedge accounting, cash flow hedge accounting, or hedging of a net investment in a foreign operation, as appropriate to the risks being hedged.
The Barclays Bank Group applies the ‘Amendments to IFRS 9, IAS 39 and IFRS 7 Interest Rate Benchmark Reform’ issued in September 2019 (the Phase 1 amendments).
The amendments provide temporary relief from applying specific hedge accounting requirements to hedging relationships directly affected by IBOR (‘Interbank Offered Rates’) reform. The reliefs have the effect that IBOR reform should not generally cause hedge accounting to terminate. However, any hedge ineffectiveness continues to be recorded in the income statement. Furthermore, the amendments set out triggers for when the reliefs will end, which include the uncertainty arising from interest rate benchmark reform no longer being present.
In summary, the reliefs provided by the Phase 1 amendments are:
▪When considering the ‘highly probable’ requirement, the Barclays Bank Group has assumed that the IBOR interest rates upon which our hedged items are based do not change as a result of IBOR Reform.
▪In assessing whether the hedge is expected to be highly effective on a forward-looking basis the Barclays Bank Group has assumed that the IBOR interest rates upon which the cash flows of the hedged items and the interest rate swaps that hedge them are based are not altered by IBOR reform.
▪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.
▪The Barclays Bank Group has not recycled the cash flow hedge reserve relating to the period after the reforms are expected to take effect.
▪The Barclays Bank Group has assessed whether the hedged IBOR risk component is a separately identifiable risk only when it first designates a hedged item in a fair value hedge and not on an ongoing basis.
The Barclays Bank Group also applies the ‘Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform – Phase 2’ issued in August 2020. The Phase 2 amendments provide relief when changes are made to hedge relationships as a result of the interest rate benchmark reform.
In summary, the reliefs provided by the Phase 2 amendments are:
▪Under a temporary exception, the Barclays Bank Group has considered that changes to the hedge designation and hedge documentation due to the interest rate benchmark reform would not constitute the discontinuation of the hedge relationship nor the designation of a new hedging relationship.
▪In respect of the retrospective hedge effectiveness assessment, the Barclays Bank Group may elect, on a hedge-by-hedge basis, to reset the cumulative fair value changes to zero when the exception to the retrospective assessment ends (Phase 1 relief). Any hedge ineffectiveness will continue to be measured and recognised in full in profit or loss.
▪The Barclays Bank Group has deemed the amounts accumulated in the cash flow hedge reserve to be based on the alternative benchmark rate (on which the hedge future cash flows are determined) when there is a change in basis for determining the contractual cash flows.
▪For hedges of groups of items (such as those forming part of a macro cash flow hedging strategy), the amendments provide relief for items within a designated group of items that are amended for changes directly required by the reform.
▪In respect of whether a risk component of a hedged item is separately identifiable, the amendments provide temporary relief to entities to meet this requirement when an alternative risk free rate (RFR) financial instrument is designated as a risk component. These amendments allow the Barclays Bank Group upon designation of the hedge to assume that the separately identifiable requirement is met if the Barclays Bank Group reasonably
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 135 | ||||
Notes to the financial statements
Assets and liabilities held at fair value
expects the RFR risk will become separately identifiable within the next 24 months. The Barclays Bank Group applies this relief to each RFR on a rate-by-rate basis and starts when the Barclays Bank Group first designates the RFR as a non-contractually specified risk component.
Fair value hedge accounting
Changes in fair value of derivatives that qualify and are designated as fair value hedges are recorded in the income statement, together with changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The fair value changes adjust the carrying value of the hedged asset or liability held at amortised cost.
If hedge relationships no longer meet the criteria for hedge accounting, hedge accounting is discontinued. For fair value hedges of interest rate risk, the fair value adjustment to the hedged item is amortised to the income statement over the period to maturity of the previously designated hedge relationship using the effective interest method. If the hedged item is sold or repaid, the unamortised fair value adjustment is recognised immediately in the income statement. For items classified as fair value through other comprehensive income, the hedge accounting adjustment is included in other comprehensive income.
Cash flow hedge accounting
For qualifying cash flow hedges, the fair value gain or loss associated with the effective portion of the cash flow hedge is recognised initially in other comprehensive income, and then recycled to the income statement in the periods when the hedged item will affect profit or loss. Any ineffective portion of the gain or loss on the hedging instrument is recognised in the income statement immediately.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the hedged item is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was recognised in equity is immediately transferred to the income statement.
Hedges of net investments
The Barclays Bank Group’s net investments in foreign operations, including monetary items accounted for as part of the net investment, are hedged for foreign currency risks using both derivatives and foreign currency borrowings. Hedges of net investments are accounted for similarly to cash flow hedges; the effective portion of the gain or loss on the hedging instrument is being recognised directly in other comprehensive income and the ineffective portion being recognised immediately in the income statement. The cumulative gain or loss recognised in other comprehensive income is recognised in the income statement on the disposal or partial disposal of the foreign operation, or other reductions in the Barclays Bank Group’s investment in the operation.
| Barclays Bank Group | 2021 | 2020 | ||||||||||||||||||
| Notional contract amount | Fair value | Notional contract amount | Fair value | |||||||||||||||||
| Assets | Liabilities | Assets | Liabilities | |||||||||||||||||
| £m | £m | £m | £m | £m | £m | |||||||||||||||
| Total derivative assets/(liabilities) held for trading | 47,286,623 | 262,046 | (255,471) | 42,515,577 | 302,429 | (299,637) | ||||||||||||||
| Total derivative assets/(liabilities) held for risk management | 126,292 | 245 | (1,052) | 110,028 | 264 | (943) | ||||||||||||||
| Derivative assets/(liabilities) | 47,412,915 | 262,291 | (256,523) | 42,625,605 | 302,693 | (300,580) | ||||||||||||||
As part of the industry wide IBOR transition during the year, interest rate swap contracts held with Central Clearing Counterparties (CCPs) have been converted to alternative benchmarks. Operationally, this involved the CCPs splitting each contract into multiple component operational parts in order to preserve accrued IBOR cash flows. Legally, Barclays Bank Group remains party to only one contract, and as such all notionals amounts quoted in this disclosure reflect the legal contract notional. In total, 'operational-only' trade notionals of £1,717bn primarily with London Clearing House & Japan Securities Clearing Corporation have been explicitly excluded from these disclosures.
Further information on netting arrangements of derivative financial instruments can be found within Note 17.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 136 | ||||
Notes to the financial statements
Assets and liabilities held at fair value
The fair values and notional amounts of derivatives held for trading are set out in the following table:
| Derivatives held for trading and risk management | 2021 | 2020 | ||||||||||||||||||
| Barclays Bank Group | Notional contract amount | Fair value | Notional contract amount | Fair value | ||||||||||||||||
| Assets | Liabilities | Assets | Liabilities | |||||||||||||||||
| £m | £m | £m | £m | £m | £m | |||||||||||||||
| Derivatives held for trading | ||||||||||||||||||||
| Foreign exchange derivatives | ||||||||||||||||||||
| OTC derivatives | 5,700,055 | 76,055 | (74,014) | 5,463,632 | 84,518 | (83,912) | ||||||||||||||
| Derivatives cleared by central counterparty | 99,664 | 171 | (208) | 78,946 | 335 | (335) | ||||||||||||||
| Exchange traded derivatives | 20,084 | 10 | (3) | 14,034 | 3 | (3) | ||||||||||||||
| Foreign exchange derivatives | 5,819,803 | 76,236 | (74,225) | 5,556,612 | 84,856 | (84,250) | ||||||||||||||
| Interest rate derivatives | ||||||||||||||||||||
| OTC derivatives | 14,229,139 | 124,187 | (113,098) | 13,551,506 | 171,244 | (161,223) | ||||||||||||||
| Derivatives cleared by central counterparty | 18,865,670 | 1,055 | (762) | 18,330,003 | 965 | (795) | ||||||||||||||
| Exchange traded derivatives | 5,200,838 | 905 | (907) | 2,971,966 | 371 | (360) | ||||||||||||||
| Interest rate derivatives | 38,295,647 | 126,147 | (114,767) | 34,853,475 | 172,580 | (162,378) | ||||||||||||||
| Credit derivatives | ||||||||||||||||||||
| OTC derivatives | 606,504 | 4,007 | (4,752) | 384,900 | 3,674 | (3,909) | ||||||||||||||
| Derivatives cleared by central counterparty | 665,600 | 1,675 | (1,809) | 462,945 | 931 | (1,095) | ||||||||||||||
| Credit derivatives | 1,272,104 | 5,682 | (6,561) | 847,845 | 4,605 | (5,004) | ||||||||||||||
| Equity and stock index derivatives | ||||||||||||||||||||
| OTC derivatives | 278,370 | 18,793 | (24,440) | 213,078 | 18,803 | (26,091) | ||||||||||||||
| Exchange traded derivatives | 1,469,078 | 32,901 | (33,174) | 927,114 | 20,165 | (20,521) | ||||||||||||||
| Equity and stock index derivatives | 1,747,448 | 51,694 | (57,614) | 1,140,192 | 38,968 | (46,612) | ||||||||||||||
| Commodity derivatives | ||||||||||||||||||||
| OTC derivatives | 4,670 | 56 | (107) | 4,244 | 89 | (110) | ||||||||||||||
| Exchange traded derivatives | 146,951 | 2,231 | (2,197) | 113,209 | 1,331 | (1,283) | ||||||||||||||
| Commodity derivatives | 151,621 | 2,287 | (2,304) | 117,453 | 1,420 | (1,393) | ||||||||||||||
| Derivative assets/(liabilities) held for trading | 47,286,623 | 262,046 | (255,471) | 42,515,577 | 302,429 | (299,637) | ||||||||||||||
| Total OTC derivatives | 20,818,738 | 223,098 | (216,411) | 19,617,360 | 278,328 | (275,245) | ||||||||||||||
| Total derivatives cleared by central counterparty | 19,630,934 | 2,901 | (2,779) | 18,871,894 | 2,231 | (2,225) | ||||||||||||||
| Total exchange traded derivatives | 6,836,951 | 36,047 | (36,281) | 4,026,323 | 21,870 | (22,167) | ||||||||||||||
| Derivative assets/(liabilities) held for trading | 47,286,623 | 262,046 | (255,471) | 42,515,577 | 302,429 | (299,637) | ||||||||||||||
| Derivatives held for risk management | ||||||||||||||||||||
| Derivatives designated as cash flow hedges | ||||||||||||||||||||
| Currency Swaps | 1,000 | 155 | — | 1,000 | 67 | — | ||||||||||||||
| Interest rate swaps | 465 | — | (3) | 1,819 | 49 | — | ||||||||||||||
| Interest rate derivatives cleared by central counterparty | 63,584 | — | — | 43,499 | — | — | ||||||||||||||
| Derivatives designated as cash flow hedges | 65,049 | 155 | (3) | 46,318 | 116 | — | ||||||||||||||
| Derivatives designated as fair value hedges | ||||||||||||||||||||
| Interest rate swaps | 5,856 | 53 | (1,045) | 7,986 | 123 | (943) | ||||||||||||||
| Forward foreign exchange | — | — | — | — | — | — | ||||||||||||||
| Interest rate derivatives cleared by central counterparty | 52,964 | — | — | 54,933 | — | — | ||||||||||||||
| Derivatives designated as fair value hedges | 58,820 | 53 | (1,045) | 62,919 | 123 | (943) | ||||||||||||||
| Derivatives designated as hedges of net investments | ||||||||||||||||||||
| Forward foreign exchange | 2,423 | 37 | (4) | 791 | 25 | — | ||||||||||||||
| Derivatives designated as hedges of net investments | 2,423 | 37 | (4) | 791 | 25 | — | ||||||||||||||
| Derivative assets/(liabilities) held for risk management | 126,292 | 245 | (1,052) | 110,028 | 264 | (943) | ||||||||||||||
| Total OTC derivatives | 9,744 | 245 | (1,052) | 11,596 | 264 | (943) | ||||||||||||||
| Total derivatives cleared by central counterparty | 116,548 | — | — | 98,432 | — | — | ||||||||||||||
| Derivative assets/(liabilities) held for risk management | 126,292 | 245 | (1,052) | 110,028 | 264 | (943) | ||||||||||||||
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 137 | ||||
Notes to the financial statements
Assets and liabilities held at fair value
Hedge accounting
Hedge accounting is applied predominantly for the following risks:
▪Interest rate risk – arises due to a mismatch between fixed interest rates and floating interest rates. Interest rate risk also includes exposure to inflation risk for certain types of investments.
▪Currency risk – arises due to assets or liabilities being denominated in different currencies than the functional currency of the relevant entity. At a consolidated level, currency risk also arises when the functional currency of subsidiaries are different from the parent.
▪Contractually linked inflation risk – arises from financial instruments within contractually specified inflation risk. The Barclays Bank Group does not hedge inflation risk that arises from other activities.
In order to hedge these risks, the Barclays Bank Group uses the following hedging instruments:
▪Interest rate derivatives to swap interest rate exposure into either fixed or variable rates.
▪Currency derivatives to swap foreign currency exposures into the entity’s functional currency, and net investment exposure to local currency.
▪Inflation derivatives to swap inflation exposure into either fixed or variable interest rates.
In some cases, certain items which are economically hedged may be ineligible hedged items for the purposes of IAS 39, such as core deposits and equity. In these instances, a proxy hedging solution can be utilised whereby portfolios of floating rate assets are designated as eligible hedged items in cash flow hedges.
In some hedging relationships, the Barclays Bank Group designates risk components of hedged items as follows:
▪Benchmark interest rate risk as a component of interest rate risk, such as the LIBOR or Risk Free Rate (RFR) component.
▪Inflation risk as a contractually specified component of a debt instrument.
▪Spot exchange rate risk for foreign currency financial assets or financial liabilities.
▪Components of cash flows of hedged items, for example certain interest payments for part of the life of an instrument.
Using the benchmark interest rate risk results in other risks, such as credit risk and liquidity risk, being excluded from the hedge accounting relationship. Following market-wide interest rate benchmark reform, sensitivity to risk-free rates is considered to be the predominant interest rate risk and therefore the hedged items (which often reference risk-free or similar 'overnight' rates) change in fair value on a proportionate basis with reference to this risk.
In respect of many of the Barclays Bank Group’s hedge accounting relationships, the hedged item and hedging instrument change frequently due to the dynamic nature of the risk management and hedge accounting strategy. The Barclays Bank Group applies hedge accounting to dynamic scenarios, predominantly in relation to interest rate risk, with a combination of hedged items in order for its financial statements to reflect as closely as possible the economic risk management undertaken. In some cases, if the hedge accounting objective changes, the relevant hedge accounting relationship is de-designated and is replaced with a different hedge accounting relationship.
Changes in the GBP value of net investments due to foreign currency movements are captured in the currency translation reserve, resulting in a movement in CET1 capital. The Barclays Bank Group mitigates this by matching the CET1 capital movements to the revaluation of the foreign currency RWA exposures. Net investment hedges are designated where necessary to reduce the exposure to movement in a particular exchange rate to within limits mandated by Risk. As far as possible, existing external currency liabilities are designated as the hedging instruments.
The hedging instruments share the same risk exposures as the hedged items. Hedge effectiveness is determined with reference to quantitative tests, predominantly regression testing, but to the extent hedging instruments are exposed to different risks than the hedged items, this could result in hedge ineffectiveness or hedge accounting failures.
Sources of ineffectiveness include the following:
▪Mismatches between the contractual terms of the hedged item and hedging instrument, including basis differences.
▪Changes in credit risk of the hedging instruments.
▪If a hedging relationship becomes over-hedged, for example in hedges of net investments if the net asset value designated at the start of the period falls below the amount of the hedging instrument.
▪Cash flow hedges using external swaps with non-zero fair values.
▪The effects of the reforms to IBOR, because these might take effect at a different time and have a different impact on hedged items and hedging instruments.
The Barclays Bank Group's risk exposure continues, in part, to be affected by interest rate benchmark reform. In most cases, hedged items and hedging instruments are expected to transition to relevant risk-free rates at the end of their current cash flow period. For GBP LIBOR contracts, where uncertainty around the timing and effects of LIBOR reform continues beyond the end of the current cash flow period, financial instruments are generally expected to utilise 'synthetic LIBOR' (as permitted by the FCA on a temporary basis until their contracts are fully remediated). USD LIBOR linked hedge accounting relationships are still exposed to uncertainty regarding the precise timing and effects of benchmark reform. USD LIBOR benchmarks will cease to be published from 30 June 2023, but certain hedged items and hedging instruments continue to contractually reference these benchmarks beyond the cessation date.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 138 | ||||
Notes to the financial statements
Assets and liabilities held at fair value
The following table summarises the significant hedge accounting exposures impacted by the IBOR reform as at 31 December 2021:
| Barclays Bank Group | Nominal amount of hedged items directly impacted by IBOR reform | Nominal amount of hedging instruments directly impacted by IBOR reform | |||||||||
| Current benchmark rate | Expected convergence to RFR | £m | £m | ||||||||
| GBP London Interbank Offered rate (LIBOR) | Reformed Sterling Overnight Index Average (SONIA) | 9,718 | 200 | ||||||||
| USD LIBOR | Secured Overnight Financing Rate (SOFR) | 19,945 | 20,013 | ||||||||
| JPY LIBOR | Tokyo Overnight Average (TONA) | — | 52 | ||||||||
| Singapore Swap Offered Rate (SOR) | Singapore Overnight Rate Average (SORA) | 110 | 110 | ||||||||
| Total IBOR Notionals | 29,773 | 20,375 | |||||||||
The disparity in outstanding GBP notionals between hedged items and hedging instruments results from a temporary timing mismatch where derivative contracts have been transitioned to SONIA prior to 31 December 2021, whereas hedged items are expected to transition early 2022.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 139 | ||||
Notes to the financial statements
Assets and liabilities held at fair value
| Hedged items in fair value hedges | |||||||||||||||||
| Barclays Bank Group | Accumulated fair value adjustment included in carrying amount | ||||||||||||||||
| Carrying amount | Total | Of which: Accumulated fair value adjustment on items no longer in a hedge relationship | Change in fair value used as a basis to determine ineffectiveness | Hedge ineffectiveness recognised in the income statementa | |||||||||||||
| Hedged item statement of financial position classification and risk category | £m | £m | £m | £m | £m | ||||||||||||
| 2021 | |||||||||||||||||
| Assets | |||||||||||||||||
| Loans and advances at amortised cost | |||||||||||||||||
| - Interest rate risk | 1,257 | 24 | 6 | (77) | (1) | ||||||||||||
| - Inflation risk | 556 | 354 | — | 9 | — | ||||||||||||
| Debt securities classified as amortised cost | |||||||||||||||||
| - Interest rate risk | 1,378 | (39) | — | (75) | (18) | ||||||||||||
| - Inflation risk | 4,087 | 400 | — | (16) | (1) | ||||||||||||
Financial assets at fair value through other comprehensive incomeb | |||||||||||||||||
| - Interest rate risk | 22,895 | (293) | 28 | (1,122) | 35 | ||||||||||||
| - Inflation risk | 6,271 | 386 | (32) | 81 | 10 | ||||||||||||
| Total Assets | 36,444 | 832 | 2 | (1,200) | 25 | ||||||||||||
| Liabilities | |||||||||||||||||
| Debt securities in issue | |||||||||||||||||
| - Interest rate risk | (26,691) | (622) | (320) | 769 | 6 | ||||||||||||
| Total Liabilities | (26,691) | (622) | (320) | 769 | 6 | ||||||||||||
| Total Hedged Items | 9,753 | 210 | (318) | (431) | 31 | ||||||||||||
| 2020 | |||||||||||||||||
| Assets | |||||||||||||||||
| Loans and advances at amortised cost | |||||||||||||||||
| - Interest rate risk | 835 | 99 | 2 | 55 | — | ||||||||||||
| - Inflation risk | 545 | 345 | — | 25 | 3 | ||||||||||||
| Debt securities classified as amortised cost | |||||||||||||||||
| - Interest rate risk | 1,440 | 23 | — | 17 | (7) | ||||||||||||
| - Inflation risk | 4,071 | (43) | — | 453 | 3 | ||||||||||||
Financial assets at fair value through other comprehensive incomeb | |||||||||||||||||
| - Interest rate risk | 27,959 | 964 | 322 | 864 | (33) | ||||||||||||
| - Inflation risk | 7,782 | 319 | (9) | 249 | (9) | ||||||||||||
| Total Assets | 42,632 | 1,707 | 315 | 1,663 | (43) | ||||||||||||
| Liabilities | |||||||||||||||||
| Debt securities in issue | |||||||||||||||||
| - Interest rate risk | (26,978) | (1,477) | (414) | (797) | (6) | ||||||||||||
| Total Liabilities | (26,978) | (1,477) | (414) | (797) | (6) | ||||||||||||
| Total Hedged Items | 15,654 | 230 | (99) | 866 | (49) | ||||||||||||
Note
aHedge ineffectiveness is recognised in net interest income.
bFor items classified as fair value through other comprehensive income, the hedge accounting adjustment is not included in the carrying amount, but rather adjusts other comprehensive income.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 140 | ||||
Notes to the financial statements
Assets and liabilities held at fair value
Amount, timing and uncertainty of future cash flows
The following table shows the fair value hedging instruments which are carried on the Barclays Bank Group’s balance sheet:
| Barclays Bank Group | Carrying value | Nominal amount | Change in fair value used as a basis to determine ineffectiveness | Nominal amount directly impacted by IBOR reform | |||||||||||||||||||
| Derivative assets | Derivative liabilities | Loan liabilities | |||||||||||||||||||||
| Hedge type | Risk category | £m | £m | £m | £m | £m | £m | ||||||||||||||||
| As at 31 December 2021 | |||||||||||||||||||||||
| Fair value | Interest rate risk | 53 | — | — | 51,219 | 527 | 8,855 | ||||||||||||||||
| Inflation risk | — | (1,045) | — | 7,601 | (65) | 1,624 | |||||||||||||||||
| Total | 53 | (1,045) | — | 58,820 | 462 | 10,479 | |||||||||||||||||
| As at 31 December 2020 | |||||||||||||||||||||||
| Fair value | Interest rate risk | 117 | (164) | — | 55,093 | (185) | 17,697 | ||||||||||||||||
| Inflation risk | 6 | (779) | — | 7,826 | (730) | 1,487 | |||||||||||||||||
| Total | 123 | (943) | — | 62,919 | (915) | 19,184 | |||||||||||||||||
The following table profiles the expected notional values of current hedging instruments for fair value hedging in future years:
| 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 and later | |||||||||||||||||
| As at 31 December 2021 | £m | £m | £m | £m | £m | £m | £m | ||||||||||||||||
| Barclays Bank Group | |||||||||||||||||||||||
| Fair value hedges of: | |||||||||||||||||||||||
| Interest rate risk (outstanding notional amount) | 51,219 | 49,156 | 43,857 | 37,590 | 31,635 | 27,011 | 22,555 | ||||||||||||||||
| Inflation risk (outstanding notional amount) | 7,601 | 7,435 | 6,603 | 5,341 | 4,283 | 3,131 | 818 | ||||||||||||||||
For Barclays Bank Group, there are 618 (2020: 586) interest rate risk fair value hedges with an average fixed rate of 1.1% (2020: 1.2%) across the relationships and 60 (2020: 70) inflation risk fair value hedges with an average rate of 0.59% (2020: 0.52%) across the relationships.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 141 | ||||
Notes to the financial statements
Assets and liabilities held at fair value
Note
aHedge ineffectiveness is recognised in net interest income
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 142 | ||||
Notes to the financial statements
Assets and liabilities held at fair value
The following table shows the cash flow and net investment hedging instruments which are carried on the Barclays Bank Group’s balance sheet:
| Barclays Bank Group | Carrying value | Nominal amount | Change in fair value used as a basis to determine ineffectiveness | Nominal amount directly impacted by IBOR reform | |||||||||||||||||||
| Derivative assets | Derivative liabilities | Loan liabilities | |||||||||||||||||||||
| Hedge type | Risk category | £m | £m | £m | £m | £m | £m | ||||||||||||||||
| As at 31 December 2021 | |||||||||||||||||||||||
| Cash flow | Interest rate risk | — | — | — | 59,957 | (2,253) | 9,896 | ||||||||||||||||
| Foreign exchange risk | 155 | — | — | 1,000 | 89 | — | |||||||||||||||||
| Inflation risk | — | (3) | — | 4,092 | (274) | — | |||||||||||||||||
| Total | 155 | (3) | — | 65,049 | (2,438) | 9,896 | |||||||||||||||||
| Net investment | Foreign exchange risk | 37 | (4) | (6,933) | 9,356 | (91) | — | ||||||||||||||||
| As at 31 December 2020 | |||||||||||||||||||||||
| Cash flow | Interest rate risk | 47 | — | — | 42,520 | 1,300 | 27,160 | ||||||||||||||||
| Foreign exchange risk | 67 | — | — | 1,000 | 70 | — | |||||||||||||||||
| Inflation risk | 2 | — | — | 2,798 | 42 | 0 | |||||||||||||||||
| Total | 116 | — | — | 46,318 | 1,412 | 27,160 | |||||||||||||||||
| Net investment | Foreign exchange risk | 25 | — | (4,832) | 5,623 | 94 | — | ||||||||||||||||
The effect on the income statement and other comprehensive income of recycling amounts in respect of cash flow hedges and net investment hedges of foreign operations is set out in the following table:
A detailed reconciliation of the movements of the cash flow hedging reserve and the currency translation reserve is as follows:
| Barclays Bank Group | 2021 | 2020 | ||||||||||||
| Cash flow hedging reserve | Currency translation reserve | Cash flow hedging reserve | Currency translation reserve | |||||||||||
| £m | £m | £m | £m | |||||||||||
| Balance on 1 January | 1,181 | 2,736 | 388 | 3,383 | ||||||||||
| Currency translation movements | (6) | (92) | 50 | (745) | ||||||||||
| Hedging (losses)/gains for the year | (2,206) | (91) | 1,316 | 94 | ||||||||||
| Amounts reclassified in relation to cash flows affecting profit or loss | (327) | 28 | (282) | 4 | ||||||||||
| Tax | 740 | — | (291) | — | ||||||||||
| Balance on 31 December | (618) | 2,581 | 1,181 | 2,736 | ||||||||||
In 2020, amounts recycled from other comprehensive income £55m in respect of cash flow hedges of foreign exchange risk were presented within 'Hedging gains/(losses) for the year'. For 2021, the corresponding current year amounts of £87m were presented within 'Amounts reclassified in relation to cash flows affecting profit or loss'.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 143 | ||||
Notes to the financial statements
Assets and liabilities held at fair value
14Financial assets at fair value through other comprehensive income
Accounting for financial assets at fair value through other comprehensive income (FVOCI) Financial assets that are debt instruments held in a business model that is achieved by both collecting contractual cash flows and selling and that contain contractual terms that give rise on specified dates to cash flows that are SPPI are measured at FVOCI. They are subsequently re-measured at fair value and changes therein (except for those relating to impairment, interest income and foreign currency exchange gains and losses) are recognised in other comprehensive income until the assets are sold. Interest (calculated using the effective interest method) is recognised in the income statement in net interest income (Note 3). Upon disposal, the cumulative gain or loss recognised in other comprehensive income is included in net investment income (Note 6). In determining whether the business model is achieved by both collecting contractual cash flows and selling financial assets, it is determined that both collecting contractual cash flows and selling financial assets are integral to achieving the objective of the business model. The Barclays Bank Group will consider past sales and expectations about future sales to establish if the business model is achieved. For equity securities that are not held for trading, the Barclays Bank Group may make an irrevocable election on initial recognition to present subsequent changes in the fair value of the instrument in other comprehensive income (except for dividend income which is recognised in profit or loss). Gains or losses on the de-recognition of these equity securities are not transferred to profit or loss. These assets are also not subject to the impairment requirements and therefore no amounts are recycled to the income statement. Where the Barclays Bank Group has not made the irrevocable election to present subsequent changes in the fair value of the instrument in other comprehensive income, equity securities are measured at fair value through profit or loss. | ||
| Barclays Bank Group | ||||||||
| 2021 | 2020 | |||||||
| £m | £m | |||||||
| Debt securities and other eligible bills | 45,854 | 51,710 | ||||||
| Equity securities | 1 | 1 | ||||||
| Loans and advances | 53 | 191 | ||||||
| Financial assets at fair value through other comprehensive income | 45,908 | 51,902 | ||||||
15Financial liabilities designated at fair value
Accounting for liabilities designated at fair value through profit and loss In accordance with IFRS 9, financial liabilities may be designated at fair value, with gains and losses taken to the income statement within net trading income (Note 5) and net investment income (Note 6). Movements in own credit are reported through other comprehensive income, unless the effects of changes in the liability's credit risk would create or enlarge an accounting mismatch in profit and loss. In these scenarios, all gains and losses on that liability (including the effects of changes in the credit risk of the liability) are presented in profit and loss. On derecognition of the financial liability no amount relating to own credit risk are recycled to the income statement. The Barclays Bank Group has the ability to make the fair value designation when holding the instruments at fair value reduces an accounting mismatch (caused by an offsetting liability or asset being held at fair value), or is managed by the Barclays Bank Group on the basis of its fair value, or includes terms that have substantive derivative characteristics (Note 13). The details on how the fair value amounts are arrived at for financial liabilities designated at fair value are described in Note 16. | ||
| Barclays Bank Group | ||||||||||||||
| 2021 | 2020 | |||||||||||||
| Fair value | Contractual amount due on maturity | Fair value | Contractual amount due on maturity | |||||||||||
| £m | £m | £m | £m | |||||||||||
| Debt securities | 53,164 | 61,333 | 50,216 | 57,650 | ||||||||||
| Deposits | 29,409 | 29,836 | 21,718 | 22,120 | ||||||||||
| Repurchase agreements and other similar secured borrowing | 168,075 | 168,144 | 177,455 | 177,513 | ||||||||||
Subordinated debta | 483 | 613 | — | — | ||||||||||
| Other financial liabilities | — | — | 237 | 237 | ||||||||||
| Financial liabilities designated at fair value | 251,131 | 259,926 | 249,626 | 257,520 | ||||||||||
The cumulative own credit net loss recognised for Barclays Bank Group is £960m (2020: £954m).
Note
a.Subordinated debt measured at fair value (2020: £221m) was previously disclosed in Note 26 Subordinated Liabilities. For the current year, it is disclosed within Financial Liabilities designated at fair value to better reflect that it is accounted for at fair value.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 144 | ||||
Notes to the financial statements
Assets and liabilities held at fair value
16Fair 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 153.
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.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 145 | ||||
Notes to the financial statements
Assets and liabilities held at fair value
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:
The following table shows Barclays Bank Group’s Level 3 assets and liabilities that are held at fair value disaggregated by product type:
Note
aOther includes commercial real estate loans, asset backed loans, funds and fund-linked products, issued debt, government sponsored debt, commodity derivatives 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 nature of the valuation techniques used, as well as availability and reliability of observable proxy and historical data and 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.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 146 | ||||
Notes to the financial statements
Assets and liabilities held at fair value
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 total return swaps (TRS).
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.
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.
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.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 147 | ||||
Notes to the financial statements
Assets and liabilities held at fair value
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 investments in equity holdings in operating companies not quoted on a public exchange.
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, issued debt, Government sponsored debt, commodity derivatives and investment property.
Assets and liabilities reclassified between Level 1 and Level 2
During the year, there were no material transfers between Level 1 to Level 2 (2020: 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 year. 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.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 148 | ||||
Notes to the financial statements
Assets and liabilities held at fair value
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 149 | ||||
Notes to the financial statements
Assets and liabilities held at fair value
Note
aThe derivative financial instruments are represented on a net basis. On a gross basis, derivative financial assets are £4,010m (2020: £4,468m) and derivative financial liabilities are £6,059m (2020: £6,239m).
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 150 | ||||
Notes to the financial statements
Assets and liabilities held at fair value
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.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 151 | ||||
Notes to the financial statements
Assets and liabilities held at fair value
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:
Valuation technique(s)a | Significant unobservable inputs | 2021 | 2020 | ||||||||||||||||||||
| Range | Range | ||||||||||||||||||||||
| Barclays Bank Group | Min | Max | Min | Max | Unitsb | ||||||||||||||||||
Derivative financial instrumentsc | |||||||||||||||||||||||
| Interest rate derivatives | Discounted cash flows | Inflation forwards | — | 3 | 1 | 3 | % | ||||||||||||||||
| Credit spread | 9 | 1,848 | 17 | 1,831 | bps | ||||||||||||||||||
| Correlation Model | Inflation forwards | (20) | (13) | (20) | (13) | % | |||||||||||||||||
| Comparable pricing | Price | — | 38 | — | 84 | points | |||||||||||||||||
| Option model | Inflation volatility | 31 | 130 | 31 | 227 | bps vol | |||||||||||||||||
| Interest rate volatility | 5 | 600 | 6 | 489 | bps vol | ||||||||||||||||||
| FX - IR correlation | (20) | 78 | (30) | 78 | % | ||||||||||||||||||
| IR - IR correlation | (100) | 99 | (20) | 99 | % | ||||||||||||||||||
| Credit derivatives | Discounted cash flows | Credit spread | 2 | 2,925 | 5 | 480 | bps | ||||||||||||||||
| Comparable pricing | Price | — | — | — | 100 | points | |||||||||||||||||
| Equity derivatives | Option model | Equity volatility | 2 | 108 | 1 | 110 | % | ||||||||||||||||
| Equity - equity correlation | 10 | 100 | (45) | 100 | % | ||||||||||||||||||
| Discounted cash flow | Discounted margin | (129) | 93 | (225) | 3,000 | bps | |||||||||||||||||
| Foreign exchange derivatives | Option Model | Option Volatility | — | 100 | — | 30 | points | ||||||||||||||||
| Non-derivative financial instruments | |||||||||||||||||||||||
| Non-asset backed loans | Discounted cash flows | Loan spread | 31 | 811 | 32 | 477 | bps | ||||||||||||||||
| Credit spread | 200 | 300 | 200 | 300 | bps | ||||||||||||||||||
| Price | — | 112 | — | 104 | points | ||||||||||||||||||
| Yield | 3 | 10 | 5 | 8 | % | ||||||||||||||||||
| Comparable pricing | Price | — | 145 | — | 137 | points | |||||||||||||||||
| Asset backed securities | Comparable pricing | Price | — | 120 | — | 112 | points | ||||||||||||||||
| Corporate debt | Comparable pricing | Price | — | 284 | — | 127 | points | ||||||||||||||||
| Discounted cash flows | Loan spread | 229 | 854 | — | — | bps | |||||||||||||||||
| Price | — | 100 | — | 104 | points | ||||||||||||||||||
| Commercial Real Estate loans | Discounted cash flows | Credit spread | 68 | 543 | 146 | 483 | bps | ||||||||||||||||
| Equity cash products | Discounted cash flows | Discount margin | 26 | 34 | 49 | 49 | bps | ||||||||||||||||
Notes
aA range has not been provided for Net Asset Value as there would be a wide range reflecting the diverse nature of the positions.
bThe 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%.
cCertain 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 32bps- 1,848bps (2020: 17bps-1,831bps).
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.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 152 | ||||
Notes to the financial statements
Assets and liabilities held at fair value
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 601bps (2020: 32bps to 477bps), the vast majority of spreads are concentrated towards the bottom end of this range, with 99% (2020: 98%) 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.
Note
aOther includes commercial real estate loans, asset backed loans, funds and fund-linked products, issued debt, government sponsored debt, commodity derivatives 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 £555m (2020: £636m) or to decrease fair values by up to £651m (2020: £743m) with substantially all the potential effect impacting profit and loss rather than reserves.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 153 | ||||
Notes to the financial statements
Assets and liabilities held at fair value
Fair value adjustments
Key balance sheet valuation adjustments are quantified below:
| 2021 | 2020 | |||||||
| Barclays Bank Group | £m | £m | ||||||
| Exit price adjustments derived from market bid-offer spreads | (498) | (483) | ||||||
| Uncollateralised derivative funding | (127) | (115) | ||||||
| Derivative credit valuation adjustments | (212) | (268) | ||||||
| Derivative debit valuation adjustments | 91 | 113 | ||||||
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 increased by £15m to £498m.
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 £127m 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 £12m to £127m as a result of underlying moves in the exposure profile of the derivative portfolio in scope.
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.
CVA decreased by £56m to £212m as a result of tightening input counterparty credit spreads. DVA decreased by £22m to £91m, as a result of tightening input own credit spreads.
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.
Barclays Bank Group 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 £122m (2020: £103m) for financial instruments measured at fair value and £28m (2020: £30m) for financial instruments carried at amortised cost. The increase in financial instruments measured at fair value of £19m (2020: £3m increase) was driven by additions of £59m (2020: £26m) and £40m (2020: £23m) of amortisation and releases. The decrease of £2m (2020: £1m) in financial instruments carried at amortised cost was driven by £2m (2020: £2m) of amortisation and releases offset by additions of £nil (2020: £1m).
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.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 154 | ||||
Notes to the financial statements
Assets and liabilities held at fair value
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 £790m (2020: £1,494m).
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 | 2021 | 2020 | ||||||||||||||||||||||||||||||
| Carrying amount | Fair value | Level 1 | Level 2 | Level 3 | Carrying amount | Fair value | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||
| As at 31 December | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | ||||||||||||||||||||||
| Financial assets | ||||||||||||||||||||||||||||||||
| Loans and advances at amortised cost | 145,259 | 145,665 | 15,406 | 63,948 | 66,311 | 134,267 | 134,537 | 8,824 | 65,267 | 60,446 | ||||||||||||||||||||||
| Reverse repurchase agreements and other similar secured lending | 3,177 | 3,177 | — | 3,177 | — | 8,981 | 8,981 | — | 8,981 | — | ||||||||||||||||||||||
| Financial liabilities | ||||||||||||||||||||||||||||||||
| Deposits at amortised cost | (262,828) | (262,843) | (180,829) | (82,014) | — | (244,696) | (244,738) | (165,909) | (78,769) | (60) | ||||||||||||||||||||||
| Repurchase agreements and other similar secured borrowing | (12,769) | (12,776) | — | (12,776) | — | (10,443) | (10,443) | — | (10,443) | — | ||||||||||||||||||||||
| Debt securities in issue | (48,388) | (48,350) | — | (46,201) | (2,149) | (29,423) | (29,486) | — | (27,630) | (1,856) | ||||||||||||||||||||||
| Subordinated liabilities | (32,185) | (33,598) | — | (33,598) | — | (32,005) | (33,356) | — | (33,356) | — | ||||||||||||||||||||||
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.
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.
17Offsetting financial assets and financial liabilities
In accordance with IAS 32 Financial Instruments: Presentation, the Barclays Bank Group reports financial assets and financial liabilities on a net basis on the balance sheet only if there is a legally enforceable right to set-off the recognised amounts and there is intention to settle on a net basis, or to realise the asset and settle the liability simultaneously. The following table shows the impact of netting arrangements on:
▪All financial assets and liabilities that are reported net on the balance sheet.
▪All derivative financial instruments and reverse repurchase and repurchase agreements and other similar secured lending and borrowing agreements that are subject to enforceable master netting arrangements or similar agreements, but do not qualify for balance sheet netting.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 155 | ||||
Notes to the financial statements
Assets and liabilities held at fair value
The ‘Net amounts’ presented in the table below are not intended to represent the Barclays Bank Group’s actual exposure to credit risk, as a variety of credit mitigation strategies are employed in addition to netting and collateral arrangements.
| Barclays Bank Group | Amounts subject to enforceable netting arrangements | Amounts not subject to enforceable netting arrangementsc | Balance sheet totald | |||||||||||||||||||||||
| Effects of offsetting on-balance sheet | Related amounts not offset | |||||||||||||||||||||||||
| Gross amounts | Amounts offseta | Net amounts reported on the balance sheet | Financial instruments | Financial collateralb | Net amount | |||||||||||||||||||||
| As at 31 December 2021 | £m | £m | £m | £m | £m | £m | £m | £m | ||||||||||||||||||
| Derivative financial assets | 279,286 | (24,137) | 255,149 | (202,347) | (39,953) | 12,849 | 7,142 | 262,291 | ||||||||||||||||||
Reverse repurchase agreements and other similar secured lendinge | 519,855 | (375,376) | 144,479 | — | (143,976) | 503 | 3,884 | 148,363 | ||||||||||||||||||
| Total assets | 799,141 | (399,513) | 399,628 | (202,347) | (183,929) | 13,352 | 11,026 | 410,654 | ||||||||||||||||||
| Derivative financial liabilities | (273,996) | 23,606 | (250,390) | 202,347 | 34,151 | (13,892) | (6,133) | (256,523) | ||||||||||||||||||
Repurchase agreements and other similar secured borrowinge | (540,462) | 375,376 | (165,086) | — | 165,086 | — | (15,758) | (180,844) | ||||||||||||||||||
| Total liabilities | (814,458) | 398,982 | (415,476) | 202,347 | 199,237 | (13,892) | (21,891) | (437,367) | ||||||||||||||||||
| As at 31 December 2020 | ||||||||||||||||||||||||||
| Derivative financial assets | 342,896 | (44,305) | 298,591 | (233,088) | (47,820) | 17,683 | 4,102 | 302,693 | ||||||||||||||||||
Reverse repurchase agreements and other similar secured lendinge | 448,377 | (305,749) | 142,628 | — | (142,244) | 384 | 4,911 | 147,539 | ||||||||||||||||||
| Total assets | 791,273 | (350,054) | 441,219 | (233,088) | (190,064) | 18,067 | 9,013 | 450,232 | ||||||||||||||||||
| Derivative financial liabilities | (333,748) | 41,982 | (291,766) | 233,088 | 46,592 | (12,086) | (8,814) | (300,580) | ||||||||||||||||||
Repurchase agreements and other similar secured borrowinge | (475,616) | 305,749 | (169,867) | — | 169,867 | — | (18,031) | (187,898) | ||||||||||||||||||
| Total liabilities | (809,364) | 347,731 | (461,633) | 233,088 | 216,459 | (12,086) | (26,845) | (488,478) | ||||||||||||||||||
Notes
aAmounts offset for derivative financial assets additionally includes cash collateral netted of £3,815m (2020: £4,990m). Amounts offset for derivative financial liabilities additionally includes cash collateral netted of £4,346m (2020: £7,313m). Settlements assets and liabilities have been offset amounting to £22,837m (2020: £18,143m).
bFinancial collateral of £39,953m (2020: £47,820m) was received in respect of derivative assets, including £34,149m (2020: £43,164m) of cash collateral and £5,804m (2020: £4,656m) of non-cash collateral. Financial collateral of £34,151m (2020: £46,592m) was placed in respect of derivative liabilities, including £31,861m (2020: £42,518m) of cash collateral and £2,290m (2020: £4,074m) of non-cash collateral. The collateral amounts are limited to net balance sheet exposure so as to not include over-collateralisation.
cThis column includes contractual rights of set-off that are subject to uncertainty under the laws of the relevant jurisdiction.
dThe balance sheet total is the sum of ‘Net amounts reported on the balance sheet’ that are subject to enforceable netting arrangements and ‘Amounts not subject to enforceable netting arrangements’.
eReverse Repurchase agreements and other similar secured lending of £148,363m (2020: £147,539m) is split by fair value £145,186m (2020: £138,558m) and amortised cost £3,177m (2020: £8,981m). Repurchase agreements and other similar secured borrowing of £180,844m (2020: £187,898m) is split by fair value £168,075m (2020: £177,455m) and amortised cost £12,769m (2020: £10,443m).
Derivative assets and liabilities
The ‘Financial instruments’ column identifies financial assets and liabilities that are subject to set off under netting agreements, such as the ISDA Master Agreement or derivative exchange or clearing counterparty agreements, whereby all outstanding transactions with the same counterparty can be offset and close-out netting applied across all outstanding transactions covered by the agreements if an event of default or other predetermined events occur.
Financial collateral refers to cash and non-cash collateral obtained, typically daily or weekly, to cover the net exposure between counterparties by enabling the collateral to be realised in an event of default or if other predetermined events occur.
Reverse repurchase and repurchase agreements and other similar secured lending and borrowing
The ‘Financial instruments’ column identifies financial assets and liabilities that are subject to set off under netting agreements, such as Global Master Repurchase Agreements and Global Master Securities Lending Agreements, whereby all outstanding transactions with the same counterparty can be offset and close-out netting applied across all outstanding transactions covered by the agreements if an event of default or other predetermined events occur.
Financial collateral typically comprises highly liquid securities which are legally transferred and can be liquidated in the event of counterparty default.
These offsetting collateral arrangements and other credit risk mitigation strategies used by the Barclays Bank Group are further explained in the Credit risk mitigation section on pages 41 and 42.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 156 | ||||
Notes to the financial statements
Assets at amortised cost and other investments
| The notes included in this section focus on the Barclays Bank Group’s loans and advances and deposits at amortised cost, leases, property, plant and equipment and goodwill and intangible assets. Details regarding the Barclays Bank Group’s liquidity and capital position can be found on pages 79 to 85. | ||
18Loans and advances and deposits at amortised cost
Accounting for loans and advances and deposits held at amortised cost
Loans and advances to customers and banks, customer accounts, debt securities and most financial liabilities, are held at amortised cost. That is, the initial fair value (which is normally the amount advanced or borrowed) is adjusted for repayments and the amortisation of coupon, fees and expenses to represent the effective interest rate of the asset or liability. Balances deferred on-balance sheet as effective interest rate adjustments are amortised to interest income over the life of the financial instrument to which they relate.
Financial assets that are held in a business model to collect the contractual cash flows and that contain contractual terms that give rise on specified dates to cash flows that are SPPI are measured at amortised cost. The carrying value of these financial assets at initial recognition includes any directly attributable transaction costs. Refer to Note 1 for details of ‘solely payments of principal and interest’.
In determining whether the business model is a ‘hold to collect’ model, the objective of the business model must be to hold the financial asset to collect contractual cash flows rather than holding the financial asset for trading or short-term profit taking purposes. While the objective of the business model must be to hold the financial asset to collect contractual cash flows this does not mean the Barclays Bank Group is required to hold the financial assets until maturity. When determining if the business model objective is to collect contractual cash flows the Barclays Bank Group will consider past sales and expectations about future sales.
| Loans and advances and deposits at amortised cost | ||||||||
| Barclays Bank Group | ||||||||
| 2021 | 2020 | |||||||
| As at 31 December | £m | £m | ||||||
| Loans and advances at amortised cost to banks | 8,750 | 9,003 | ||||||
| Loans and advances at amortised cost to customers | 117,014 | 110,101 | ||||||
| Debt securities at amortised cost | 19,495 | 15,163 | ||||||
| Total loans and advances at amortised cost | 145,259 | 134,267 | ||||||
| Deposits at amortised cost from banks | 17,911 | 17,348 | ||||||
| Deposits at amortised cost from customers | 244,917 | 227,348 | ||||||
| Total deposits at amortised cost | 262,828 | 244,696 | ||||||
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 157 | ||||
Notes to the financial statements
Assets at amortised cost and other investments
19Property, plant and equipment
Accounting for property, plant and equipment
The Barclays Bank Group applies IAS 16 Property Plant and Equipment and IAS 40 Investment Properties.
Property, plant and equipment is stated at cost, which includes direct and incremental acquisition costs less accumulated depreciation and provisions for impairment, if required. Subsequent costs are capitalised if these result in enhancement of the asset.
Depreciation is provided on the depreciable amount of items of property, plant and equipment on a straight-line basis over their estimated useful economic lives. Depreciation rates, methods and the residual values underlying the calculation of depreciation of items of property, plant and equipment are kept under review to take account of any change in circumstances. The Barclays Bank Group uses the following annual rates in calculating depreciation:
| Annual rates in calculating depreciation | Depreciation rate | ||||
| Freehold land | Not depreciated | ||||
| Freehold buildings and long-leasehold property (more than 50 years to run) | 2%-3.3% | ||||
| Leasehold property over the remaining life of the lease (less than 50 years to run) | Over the remaining life of the lease | ||||
| Costs of adaptation of freehold and leasehold property | 6%-10% | ||||
| Equipment installed in freehold and leasehold property | 6%-10% | ||||
| Computers and similar equipment | 17%-33% | ||||
| Fixtures and fittings and other equipment | 9%-20% | ||||
Costs of adaptation and installed equipment are depreciated over the shorter of the life of the lease or the depreciation rates noted in the table above.
Investment property
The Barclays Bank Group initially recognises investment property at cost, and subsequently at fair value at each balance sheet date, reflecting market conditions at the reporting date. Gains and losses on remeasurement are included in the income statement.
| Barclays Bank Group | |||||||||||||||||
| Investment property | Property | Equipment | Right of use assetsa | Total | |||||||||||||
| £m | £m | £m | £m | £m | |||||||||||||
| Cost | |||||||||||||||||
| As at 1 January 2021 | 10 | 1,619 | 987 | 688 | 3,304 | ||||||||||||
| Additions | — | 85 | 70 | 27 | 182 | ||||||||||||
| Disposals | (2) | (32) | (12) | (58) | (104) | ||||||||||||
| Exchange and other movements | (1) | 30 | 13 | 58 | 100 | ||||||||||||
| As at 31 December 2021 | 7 | 1,702 | 1,058 | 715 | 3,482 | ||||||||||||
| Accumulated depreciation and impairment | |||||||||||||||||
| As at 1 January 2021 | — | (730) | (821) | (216) | (1,767) | ||||||||||||
| Depreciation charge | — | (70) | (55) | (68) | (193) | ||||||||||||
Impairment chargeb | — | (108) | — | (160) | (268) | ||||||||||||
| Disposals | — | 27 | 10 | 9 | 46 | ||||||||||||
| Exchange and other movements | — | (39) | (11) | (2) | (52) | ||||||||||||
| As at 31 December 2021 | — | (920) | (877) | (437) | (2,234) | ||||||||||||
| Net book value | 7 | 782 | 181 | 278 | 1,248 | ||||||||||||
| Cost | |||||||||||||||||
| As at 1 January 2020 | 13 | 1,635 | 1,080 | 621 | 3,349 | ||||||||||||
| Additions | — | 39 | 35 | 28 | 102 | ||||||||||||
| Disposals | (1) | (25) | (97) | (6) | (129) | ||||||||||||
| Exchange and other movements | (2) | (30) | (31) | 45 | (18) | ||||||||||||
| As at 31 December 2020 | 10 | 1,619 | 987 | 688 | 3,304 | ||||||||||||
| Accumulated depreciation and impairment | |||||||||||||||||
| As at 1 January 2020 | — | (697) | (875) | (146) | (1,718) | ||||||||||||
| Depreciation charge | — | (72) | (61) | (77) | (210) | ||||||||||||
| Impairment charge | — | — | — | (2) | (2) | ||||||||||||
| Disposals | — | 22 | 93 | 1 | 116 | ||||||||||||
| Exchange and other movements | — | 17 | 22 | 8 | 47 | ||||||||||||
| As at 31 December 2020 | — | (730) | (821) | (216) | (1,767) | ||||||||||||
| Net book value | 10 | 889 | 166 | 472 | 1,537 | ||||||||||||
Notes
aRight of use (ROU) asset balances relate to Property Leases under IFRS 16. Refer to Note 20 for further details.
bImpairment charge includes £266m related to structural cost action in relation to the real estate review.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 158 | ||||
Notes to the financial statements
Assets at amortised cost and other investments
Property rentals of £6m (2020: £8m) have been included in other income within The Barclays Bank Group.
The fair value of investment property is determined by reference to current market prices for similar properties, adjusted as necessary for condition and location, or by reference to recent transactions updated to reflect current economic conditions. Discounted cash flow techniques may be employed to calculate fair value where there have been no recent transactions, using current external market inputs such as market rents and interest rates. Valuations are carried out by management with the support of appropriately qualified independent valuers.
20Leases
Accounting for leases
IFRS 16 applies to all leases with the exception of licenses of intellectual property, rights held by licensing agreement within the scope of IAS 38 Intangible Assets, service concession arrangements, leases of biological assets within the scope of IAS 41 Agriculture and leases of minerals, oil, natural gas and similar non-regenerative resources. IFRS 16 includes an accounting policy choice for a lessee to elect not to apply IFRS 16 to remaining assets within the scope of IAS 38 Intangible Assets which the Barclays Bank Group has decided to apply.
When the Barclays Bank Group is the lessee, it is required to recognise both:
▪a lease liability, measured at the present value of remaining cash flows on the lease; and
▪a right of use (ROU) asset, measured at the amount of the initial measurement of the lease liability, plus any lease payments made prior to commencement date, initial direct costs, and estimated costs of restoring the underlying asset to the condition required by the lease, less any lease incentives received.
Subsequently the lease liability will increase for the accrual of interest, resulting in a constant rate of return throughout the life of the lease, and reduce when payments are made. The right of use asset will amortise to the income statement over the life of the lease. The lease liability is remeasured when there is a change in the one of the following:
▪future lease payments arising from a change in an index or rate;
▪the Barclays Bank Group’s estimate of the amount expected to be payable under a residual value guarantee; or
▪the Barclays Bank Group’s assessment of whether it will exercise a purchase, extension or termination option.
When the lease liability is remeasured a corresponding adjustment is made to the carrying amount of the ROU asset, or is recorded in the income statement if the carrying amount of the ROU asset has been reduced to nil.
On the balance sheet, the ROU assets are included within property, plant and equipment and the lease liabilities are included within other liabilities.
The Barclays Bank Group applies the recognition exemption in IFRS 16 for leases with a term not exceeding 12 months. For these leases the lease payments are recognised as an expense on a straight line basis over the lease term unless another systematic basis is more appropriate.
When the Barclays Bank Group is the lessor, the lease must be classified as either a finance lease or an operating lease. A finance lease is a lease which confers substantially all the risks and rewards of the leased assets on the lessee. An operating lease is a lease where substantially all of the risks and rewards of the leased asset remain with the lessor.
When the lease is deemed a finance lease, the leased asset is not held on the balance sheet; instead a finance lease receivable is recognised representing the minimum lease payments receivable under the terms of the lease, discounted at the rate of interest implicit in the lease.
When the lease is deemed an operating lease, the lease income is recognised on a straight-line basis over the period of the lease unless another systematic basis is more appropriate. The Barclays Bank Group holds the leased assets on-balance sheet within property, plant and equipment.
As a Lessor
Finance lease receivables are included within loans and advances at amortised cost. During the previous year, Barclays Partner Finance sold the majority of its motor point of sale finance portfolio and the remaining balance was transferred to the Barclays Group. The Barclays Bank Group does not have any material operating leases as a lessor.
Finance lease income
Finance lease income is included within interest income. The following table shows amounts recognised in the income statement during the year.
| Barclays Bank Group | ||||||||
| 2021 | 2020 | |||||||
| £m | £m | |||||||
| Finance income from net investment in lease | — | 10 | ||||||
| Loss on sales | — | (27) | ||||||
As a Lessee
The Barclays Bank Group leases various offices, branches and other premises under non-cancellable lease arrangements to meet its operational business requirements. In some instances, the Barclays Bank Group will sublease property to third parties when it is no longer needed to meet business requirements. Currently, the Barclays Bank Group does not have any material subleasing arrangements.
ROU asset balances relate to property leases only. Refer to Note 19 for a breakdown of the carrying amount of ROU assets.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 159 | ||||
Notes to the financial statements
Assets at amortised cost and other investments
The Barclays Bank Group has not recognised any expense related to short term leases during the current and previous year. The portfolio of short term leases to which the Barclays Bank Group is exposed at the end of the year is not dissimilar to the expenses recognised in the year.
| Lease liabilities | Barclays Bank Group | |||||||
| 2021 | 2020 | |||||||
| £m | £m | |||||||
| As at 1 January | 515 | 529 | ||||||
| Interest expense | 20 | 23 | ||||||
| New leases | 38 | 27 | ||||||
| Disposals | (45) | (5) | ||||||
| Cash payments | (92) | (114) | ||||||
| Exchange and other movements | 59 | 55 | ||||||
| As at 31 December (see Note 22) | 495 | 515 | ||||||
The below table sets out a maturity analysis of undiscounted lease liabilities, showing the lease payments to be paid after the reporting date.
| Undiscounted lease liabilities maturity analysis | Barclays Bank Group | |||||||
| 2021 | 2020 | |||||||
| £m | £m | |||||||
| Not more than one year | 81 | 91 | ||||||
| One to two years | 77 | 70 | ||||||
| Two to three years | 74 | 60 | ||||||
| Three to four years | 66 | 58 | ||||||
| Four to five years | 60 | 55 | ||||||
| Five to ten years | 210 | 227 | ||||||
| Greater than ten years | 30 | 68 | ||||||
| Total undiscounted lease liabilities as at 31 December | 598 | 629 | ||||||
In addition to the cash flows identified above, the Barclays Bank Group is exposed to:
•Variable lease payments: This variability will typically arise from either inflation index instruments or market based pricing adjustments.
Currently, the Barclays Bank Group has 47 leases (2020: 59 leases) out of the total 110 leases (2020: 121 leases) which have variable lease payment terms based on market based pricing adjustments. Of the gross cash flows identified above, £362m (2020: £121m) is attributable to leases with some degree of variability predominately linked to market based pricing adjustments.
•Extension and termination options: The table above represents the Barclays Bank Group’s best estimate of future cash out flows for leases, including assumptions regarding the exercising of contractual extension and termination options. The above gross cash flows have been reduced by £408m (2020: £395m)for leases where the Barclays Bank Group are highly expected to exercise an early termination option. However, there is no significant impact where the Barclays Bank Group is expected to exercise an extension option.
In 2021, the Barclays Bank Group recorded a gain on sale relating to a sale and leaseback transaction of the Monaco branch premises of £33m.
The Barclays Bank Group does not have any restrictions or covenants imposed by the lessor on its property leases which restrict its businesses.
21Goodwill and intangible assets
Accounting for goodwill and intangible assets
Goodwill
The carrying value of goodwill is determined in accordance with IFRS 3 Business Combinations and IAS 36 Impairment of Assets.
Goodwill arising on the acquisition of subsidiaries represents the excess of the fair value of the purchase consideration over the fair value of the Barclays Bank Group’s share of the assets acquired and the liabilities and contingent liabilities assumed on the date of the acquisition.
Goodwill is reviewed annually for impairment, or more frequently when there are indications that impairment may have occurred. The test involves comparing the carrying value of the cash generating unit (CGU) including goodwill with the present value of the pre-tax cash flows, discounted at a rate of interest that reflects the inherent risks, of the CGU to which the goodwill relates, or the CGU's fair value if this is higher.
Intangible assets
Intangible assets other than goodwill are accounted for in accordance with IFRS 3 Business Combinations and IAS 38 Intangible Assets.
Intangible assets are initially recognised when they are separable or arise from contractual or other legal rights, the cost can be measured reliably and, in the case of intangible assets not acquired in a business combination, where it is probable that future economic benefits attributable to the assets will flow from their use.
For internally generated intangible assets, only costs incurred during the development phase are capitalised. Expenditure in the research phase is expensed when it is incurred.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 160 | ||||
Notes to the financial statements
Assets at amortised cost and other investments
Intangible assets are stated at cost (which is, in the case of assets acquired in a business combination, the acquisition date fair value) less accumulated amortisation and provisions for impairment, if any, and are amortised over their useful lives in a manner that reflects the pattern to which they contribute to future cash flows, generally using the amortisation periods set out below:
| Annual rates in calculating amortisation | Amortisation period | ||||
| Goodwill | Not amortised | ||||
Internally generated softwarea | 12 months to 6 years | ||||
| Other software | 12 months to 6 years | ||||
| Customer lists | 12 months to 25 years | ||||
| Licences and other | 12 months to 25 years | ||||
aExceptions to the above period relate to useful lives of certain core banking platforms that are assessed individually and, if appropriate, amortised over longer periods ranging from 10 years to 15 years.
Intangible assets are reviewed for impairment when there are indications that impairment may have occurred. Intangible assets not yet available for use are reviewed annually for impairment.
| Intangible assets | ||||||||||||||||||||
| Goodwill | Internally generated software | Other software | Customer lists | Licences and other | Total | |||||||||||||||
| £m | £m | £m | £m | £m | £m | |||||||||||||||
| Barclays Bank Group | ||||||||||||||||||||
| Cost | ||||||||||||||||||||
| As at 1 January 2021 | 324 | 1,539 | 106 | 1,325 | 457 | 3,751 | ||||||||||||||
Additionsa | — | 195 | 1 | — | 405 | 601 | ||||||||||||||
| Disposals | — | (148) | (12) | (5) | (2) | (167) | ||||||||||||||
| Exchange and other movements | 2 | (78) | — | 19 | 16 | (41) | ||||||||||||||
| As at 31 December 2021 | 326 | 1,508 | 95 | 1,339 | 876 | 4,144 | ||||||||||||||
| Accumulated amortisation and impairment | ||||||||||||||||||||
| As at 1 January 2021 | (68) | (964) | (55) | (1,158) | (352) | (2,597) | ||||||||||||||
| Disposals | — | 148 | 12 | 5 | 2 | 167 | ||||||||||||||
| Amortisation charge | — | (126) | (6) | (36) | (42) | (210) | ||||||||||||||
| Impairment charge | — | (12) | — | — | — | (12) | ||||||||||||||
| Exchange and other movements | — | (12) | (3) | (18) | (10) | (43) | ||||||||||||||
| As at 31 December 2021 | (68) | (966) | (52) | (1,207) | (402) | (2,695) | ||||||||||||||
| Net book value | 258 | 542 | 43 | 132 | 474 | 1,449 | ||||||||||||||
Note
a.Additions in 'Licences and others' primarily relate to new and renewed long-term partnership agreements.
| Goodwill | Internally generated software | Other software | Customer lists | Licences and other | Total | |||||||||||||||
| £m | £m | £m | £m | £m | £m | |||||||||||||||
| Barclays Bank Group | ||||||||||||||||||||
| Cost | ||||||||||||||||||||
| As at 1 January 2020 | 406 | 1,430 | 81 | 1,371 | 458 | 3,746 | ||||||||||||||
| Additions and disposals | (77) | 169 | 21 | — | 20 | 133 | ||||||||||||||
| Exchange and other movements | (5) | (60) | 4 | (46) | (21) | (128) | ||||||||||||||
| As at 31 December 2020 | 324 | 1,539 | 106 | 1,325 | 457 | 3,751 | ||||||||||||||
| Accumulated amortisation and impairment | ||||||||||||||||||||
| As at 1 January 2020 | (111) | (870) | (54) | (1,159) | (340) | (2,534) | ||||||||||||||
| Disposals | 43 | 22 | 9 | — | 4 | 78 | ||||||||||||||
| Amortisation charge | — | (132) | (8) | (40) | (31) | (211) | ||||||||||||||
| Impairment charge | — | (18) | — | — | — | (18) | ||||||||||||||
| Exchange and other movements | — | 34 | (2) | 41 | 15 | 88 | ||||||||||||||
| As at 31 December 2020 | (68) | (964) | (55) | (1,158) | (352) | (2,597) | ||||||||||||||
| Net book value | 256 | 575 | 51 | 167 | 105 | 1,154 | ||||||||||||||
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 161 | ||||
Notes to the financial statements
Assets at amortised cost and other investments
Goodwill
Goodwill is allocated to business operations according to business segments as follows:
| Barclays Bank Group | ||||||||
| 2021 | 2020 | |||||||
| £m | £m | |||||||
| Consumer, Cards and Payments | 258 | 256 | ||||||
| Total net book value of goodwill | 258 | 256 | ||||||
2021 impairment review
The 2021 impairment review was performed during Q4 2021. A detailed assessment has been performed, with the approach and results of this analysis set out below.
Determining the carrying value of CGUs
The carrying value for each CGU is the sum of the tangible equity, goodwill and intangible asset balances associated with that CGU.
The Barclays Bank Group manages the assets and liabilities of its CGUs with reference to the tangible equity of the respective businesses. That tangible equity is derived from the level of risk weighted assets (RWAs) and capital required to be deployed in the CGU and therefore reflects its relative risk, as well as the level of capital that management considers a market participant would be required to hold and retain to support business growth.
The goodwill held across the Barclays Bank Group has been allocated to the CGU where it originated, based upon historical records. The intangible asset balances are allocated to the CGUs based upon their expected usage of these assets.
Cash flows
The 5-year cash flows used in the calculation of value in use are based on the formally agreed medium term plans approved by the Board. These are prepared using macroeconomic assumptions which management considers reasonable and supportable, and reflect business agreed initiatives for the forecast period.
Discount rates
IAS 36 requires that the discount rate used in a value in use calculation reflects the pre-tax rate an investor would require if they were to choose an investment that would generate similar cash flows to those that the entity expects to generate from the asset. In determining the discount rate, management has identified the cost of equity associated with market participants that closely resemble the Barclays Bank Group's CGUs and adjusted them for tax to arrive at the pre-tax equivalent rate. A range of discount rates have been used across the CGUs ranging from 12.5% to 14.7% (2020: 12.0% to 16.3%).
Terminal growth rate
The terminal growth rate is used to estimate the effect of projecting cash flows to the end of an asset’s useful economic life. It is management’s judgement that the cash flows associated with the CGUs will grow in line with the major economies in which the Barclays Bank Group operate. The UK inflation rate is used as an approximation for the future growth rates. The terminal growth rate used is 2.0% (2020: 2.0%).
Outcome of goodwill and intangibles review
Based on management’s plans and assumptions the value in use exceeds the carrying value of the CGUs and no impairment has been indicated by the 2021 impairment review.
Other intangible assets
Determining the estimated useful lives of intangible assets (such as those arising from contractual relationships) requires an analysis of circumstances. The assessment of whether an asset is exhibiting indicators of impairment as well as the calculation of impairment, which requires the estimate of future cash flows and fair values less costs to sell, also requires the preparation of cash flow forecasts and fair values for assets that may not be regularly bought and sold.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 162 | ||||
Notes to the financial statements
Accruals, provisions, contingent liabilities and legal proceedings
The notes included in this section focus on the Barclays Bank Group’s accruals, provisions and contingent liabilities. Provisions are recognised for present obligations arising as consequences of past events where it is probable that a transfer of economic benefit will be necessary to settle the obligation, and it can be reliably estimated. Contingent liabilities reflect potential liabilities that are not recognised on the balance sheet.
22Other liabilities
| Barclays Bank Group | ||||||||
| 2021 | 2020 | |||||||
| £m | £m | |||||||
| Accruals and deferred income | 2,657 | 2,428 | ||||||
| Other creditors | 4,030 | 2,250 | ||||||
| Items in the course of collection due to other banks | 67 | 58 | ||||||
| Lease liabilities (refer to Note 20) | 495 | 515 | ||||||
| Other liabilities | 7,249 | 5,251 | ||||||
23Provisions
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.
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 Note 25 for more detail of legal, competition and regulatory matters.
Restatedb | Restatedb | ||||||||||||||||||||||
| Onerous contracts | Redundancy and restructuring | Undrawn contractually committed facilities and guarantees provideda | Customer redress | Legal, competition and regulatory matters | Sundry provisions | Total | |||||||||||||||||
| £m | £m | £m | £m | £m | £m | £m | |||||||||||||||||
| Barclays Bank Group | |||||||||||||||||||||||
| As at 1 January 2021 | 6 | 44 | 769 | 44 | 222 | 123 | 1,208 | ||||||||||||||||
| Additions | 1 | 55 | 129 | 235 | 54 | 28 | 502 | ||||||||||||||||
| Amounts utilised | (2) | (39) | — | (4) | (45) | (29) | (119) | ||||||||||||||||
| Unused amounts reversed | (3) | (11) | (386) | (7) | (18) | (26) | (451) | ||||||||||||||||
| Exchange and other movements | — | (3) | (13) | (2) | (2) | (10) | (30) | ||||||||||||||||
| As at 31 December 2021 | 2 | 46 | 499 | 266 | 211 | 86 | 1,110 | ||||||||||||||||
Note
aUndrawn contractually committed facilities and guarantees provisions are accounted for under IFRS 9
b2021 financial metrics have been restated to reflect the over-issuance of securities under the Company's 2019 F-3. See Restatement of financial statements (Note 1a) on page 118 for further details.
Provisions expected to be recovered or settled within no more than 12 months after 31 December 2021 for Barclays Bank Group were £1,023m (2020: £787m).
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.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 163 | ||||
Notes to the financial statements
Accruals, provisions, contingent liabilities and legal proceedings
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. For further information, refer to the Credit Risk section for loan commitments and financial guarantees on pages 54 to 56.
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 the Barclays Bank Group’s business activities. Provisions for other customer redress include £220m (2020: nil) in respect of the c.US$13bn over-issuance of structured notes by Barclays Bank PLC, which represents the best estimate as at 31 December 2021 of the rescission right investors had for these securities, see Restatement of financial statements (Note 1a) on page 118 for further details and Legal, competition and commitments (Note 25) for further details on provision dependencies and sensitivity.
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.
Sundry provisions
This category includes provisions that do not fit into any of the other categories, such as fraud losses and dilapidation provisions.
24Contingent 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 | ||||||||
| 2021 | 2020 | |||||||
| £m | £m | |||||||
| Guarantees and letters of credit pledged as collateral security | 15,759 | 15,138 | ||||||
| Performance guarantees, acceptances and endorsements | 7,987 | 5,794 | ||||||
Total contingent liabilities and financial guaranteesa | 23,746 | 20,932 | ||||||
| Of which: Financial guarantees carried at fair value | 231 | 229 | ||||||
| Documentary credits and other short-term trade related transactions | 1,584 | 1,086 | ||||||
| Standby facilities, credit lines and other commitments | 282,867 | 263,936 | ||||||
| Total commitments | 284,451 | 265,022 | ||||||
| Of which: Loan commitments carried at fair value | 18,571 | 9,248 | ||||||
Note
a.Barclays Bank Group has issued £1.7bn (2020: £2.6bn) of guarantees that have been provided to subsidiaries of Barclays PLC outside the Barclays Bank Group. These guarantees have not been reported in the prior periods and the comparatives have not been restated.
Expected credit losses held against contingent liabilities and commitments equal £499m (2020: £769m) for Barclays Bank Group and are reported in Note 23.
Further details on contingent liabilities relating to legal and competition and regulatory matters can be found in Note 25.
25Legal, competition and regulatory matters
The Barclays Bank Group faces 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 applicable to Note 23, Provisions. 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
FCA proceedings
In 2008, Barclays Bank PLC and Qatar Holdings LLC entered into two advisory service agreements (the Agreements). The Financial Conduct Authority (FCA) conducted 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 £50m. Barclays PLC and Barclays Bank PLC continue to contest the findings.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 164 | ||||
Notes to the financial statements
Accruals, provisions, contingent liabilities and legal proceedings
Following the conclusion of the Serious Fraud Office (SFO) proceedings against certain former Barclays executives resulting in their acquittals, the FCA proceedings, which were stayed, have resumed and a hearing before the Regulatory Decisions Committee is scheduled for the first quarter of 2022.
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 conducted investigations relating to Barclays Bank PLC’s involvement in allegedly manipulating certain financial benchmarks, such as LIBOR. Various individuals and corporates in a range of jurisdictions have threatened or brought civil actions against the Barclays Bank Group and other banks in relation to the alleged manipulation of LIBOR and/or other benchmarks.
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 three lawsuits, in which the plaintiffs are seeking a combined total of approximately $100m 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 Bank PLC has previously settled certain claims. Two class action settlements where Barclays Bank PLC has respectively paid $7.1m and $20m have received final court approval. Barclays Bank PLC also settled a further matter for $7.5m.
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 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, and, in 2020, the court dismissed the plaintiff’s remaining CEA claims. The plaintiff has appealed the lower court’s dismissal of such claims.
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. The plaintiffs filed an amended complaint in 2020. In 2021, the case was dismissed as against most defendants, including the Barclays entities. The plaintiffs and remaining defendants are seeking reconsideration of the decision.
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 2018, the court dismissed all claims against Barclays PLC, Barclays Bank PLC and BCI. The plaintiffs’ appeal of the dismissal of their claims was granted in March 2021 and the matter has been remanded to the lower court for further proceedings. Defendants’ petition for US Supreme Court review was denied. Additionally, plaintiffs have filed an amended complaint, which defendants have moved to dismiss.
ICE LIBOR civil actions
In 2019, several putative class actions were filed in the SDNY against a panel of banks, including 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’ motion to dismiss was granted in 2020 and the plaintiffs appealed. In February 2022, the dismissal was affirmed on appeal.
In August 2020, an ICE LIBOR-related action was filed by a group of individual plaintiffs in the US District Court for the Northern District of California on behalf of individual borrowers and consumers of loans and credit cards with variable interest rates linked to USD ICE LIBOR. Plaintiffs’ motions seeking, among other things, preliminary and permanent injunctions to enjoin the defendants from continuing to set LIBOR or enforce any financial instrument that relies in whole or in part on USD LIBOR were denied. The defendants have moved to dismiss the case.
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) and other banks 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.
Credit Default Swap civil action
A putative antitrust class action is pending in New Mexico federal court against Barclays Bank PLC, BCI, and various other financial institutions. The plaintiffs, the New Mexico State Investment Council and certain New Mexico pension funds, allege that the defendants conspired to manipulate the benchmark price used to value Credit Default Swap (CDS) contracts at settlement (i.e. the CDS final auction price). The plaintiffs allege violations of US antitrust laws and the CEA, and unjust enrichment under state law.
Foreign Exchange investigations and related civil actions
In 2015, the Barclays Bank 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.
The European Commission announced two settlements in May 2019 and the Barclays Bank Group paid penalties totalling approximately €210m. In June 2019, the Swiss Competition Commission announced two settlements and the Barclays Bank Group paid penalties totalling approximately CHF27m. In December 2021, the European Commission announced a final settlement which required the Barclays Bank Group to pay penalties totalling approximately €54m, which amount has been provided for in previous periods. The financial impact of any ongoing matters is not expected to be material to the Barclays Bank Group’s operating results, cash flows or financial position.
Various individuals and corporates in a range of jurisdictions have threatened or brought civil actions against the Barclays Bank Group and other banks in relation to alleged manipulation of Foreign Exchange markets.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 165 | ||||
Notes to the financial statements
Accruals, provisions, contingent liabilities and legal proceedings
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. Some of the plaintiff’s claims were dismissed in 2020.
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 Bank Group and all other defendants. The plaintiffs have filed an amended complaint.
Non-US FX civil actions
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, Brazil and Australia and additional proceedings may be brought in the future.
These include two purported class actions filed against Barclays PLC, Barclays Bank PLC, BX, BCI and other financial institutions in the UK Competition Appeal Tribunal in 2019 following the settlements with the European Commission described above. Also in 2019, a separate claim was filed in the UK in the High Court of Justice (High Court), and subsequently transferred to the UK Competition Appeal Tribunal, by various banks and asset management firms against Barclays Bank PLC and other financial institutions alleging breaches of European and UK competition laws related to FX trading.
Metals related civil actions
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 the Antitrust Act and other federal laws. The parties have reached a joint settlement to resolve this matter for $50m, which is subject to court approval. The financial impact of Barclays’ share of the joint settlement is not expected to be material to the Barclays Bank Group’s operating results, cash flows or financial position. A separate US civil complaint by a proposed class of plaintiffs against a number of banks, including Barclays Bank PLC, BCI and BX, 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 unresolved repurchase requests had an original 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 settlements to resolve two of the repurchase actions, subject to final court approval. Final court approval has been granted in relation to one of those matters and payment will be completed in the first quarter of 2022. The other matter is scheduled for a hearing in 2022 to seek approval of the settlement. 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.
In 2020, a civil litigation claim was filed in the New Mexico First Judicial District Court by the State of New Mexico against six banks, including BCI, on behalf of two New Mexico state pension funds and the New Mexico State Investment Council relating to legacy RMBS purchases. As to BCI, the complaint alleges that the funds purchased approximately $22m in RMBS underwritten by BCI. The parties have reached a joint settlement to resolve this matter for $32.5m. The financial impact of BCI’s share of the joint settlement is not material to the Barclays Bank Group’s operating results, cash flows or financial position.
Government and agency securities civil actions
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 court dismissed the consolidated action in March 2021. The plaintiffs have filed an amended complaint, which the defendants have moved 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, 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’ motions to dismiss the plaintiffs’ complaint. The dismissal was affirmed on appeal and this matter is now concluded. The plaintiffs have voluntarily dismissed the other SDNY action. In the Federal Court of Canada action, the plaintiffs reached settlements with a small number of banks in 2020 (not including Barclays Capital Canada Inc.), but the plaintiffs have not commenced the class certification process and the action remains at an early stage.
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. Three putative class action complaints have been consolidated in the SDNY. In the consolidated SDNY class action, certain of the plaintiff’s claims were dismissed in November 2020 and defendants’ motion for partial dismissal of the amended consolidated complaint is pending. In the California action, the plaintiffs’ claims were dismissed in June 2021. The plaintiffs have appealed the dismissal.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 166 | ||||
Notes to the financial statements
Accruals, provisions, contingent liabilities and legal proceedings
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 agreed to a settlement of $87m, which received final court approval in 2020. Separately, various entities in Louisiana, including the Louisiana Attorney General and the City of Baton Rouge, commenced litigation against Barclays Bank PLC and other financial institutions making similar allegations as the SDNY class action plaintiffs. The parties have reached a settlement to resolve these matters. The financial impact of the settlement is not material to the Barclays Bank Group’s operating results, cash flows or financial position.
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 Barclays Bank 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. The Barclays entities have settled the claim for $5.7m, and the settlement has received final court approval.
Odd-lot corporate bonds antitrust class action
In 2020, BCI, together with other financial institutions, were named as defendants in a putative class action. The complaint alleges a conspiracy to boycott developing electronic trading platforms for odd-lots and price fixing. Plaintiffs demand unspecified money damages. The defendants’ motion to dismiss was granted in 2021. Plaintiffs have appealed the dismissal.
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 2018 and 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.
BDC Finance L.L.C.
In 2008, BDC Finance L.L.C. (BDC) filed a complaint in the Supreme Court of the State of New York (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 (the Agreement). Following a trial, the court ruled in 2018 that Barclays Bank PLC was not a defaulting party, which was affirmed on appeal. In April 2021, the trial court entered judgement in favour of Barclays Bank PLC for $3.3m and as yet to be determined legal fees and costs. BDC appealed. In January 2022, the appellate court reversed the trial court’s summary judgment decision in favour of Barclays Bank PLC and remanded the case to the lower court for further proceedings.
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 Iranian Government 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’ motions to dismiss three out of the six actions in the EDNY. Plaintiffs have appealed in one action. The remaining actions are stayed pending a decision on the appeal. Out of the two actions in the SDNY, the court also granted the defendants’ motion to dismiss the first action, which is stayed pending a decision on the EDNY appeal. The second SDNY action is stayed, pending any appeal on the dismissal of the first.
Shareholder derivative action
In November 2020, a purported Barclays shareholder filed a putative derivative action in New York state court against BCI and a number of current and former members of the Board of Directors of Barclays PLC and senior executives or employees of the Barclays Bank Group. The shareholder filed the claim on behalf of nominal defendant Barclays PLC, alleging that the individual defendants harmed the company through breaches of their duties, including under the Companies Act 2006. The plaintiff seeks damages on behalf of Barclays PLC for the losses that Barclays PLC allegedly suffered as a result of these alleged breaches. An amended complaint was filed in April 2021, which BCI and certain other defendants have moved to dismiss.
Derivative transactions civil action
In 2021, Vestia (a Dutch housing association) brought a claim against Barclays Bank PLC in the UK in the High Court in relation to a series of derivative transactions entered into with Barclays Bank PLC between 2008 and 2011, seeking damages of £329m. Barclays Bank PLC is defending the claim and has made a counterclaim.
Timeshare loans, skilled person review and associated matters
In August 2020, the FCA granted an application by Clydesdale Financial Services Limited (CFS), which trades as Barclays Partner Finance and houses Barclays’ point-of-sale finance business, for a validation order with respect to certain loans to customers brokered between April 2014 and April 2016 by Azure Services Limited (ASL), a timeshare operator, which did not, at the point of sale, hold the necessary broker licence. As a condition to the validation order, the FCA required CFS to undertake a skilled person review of the assessment of affordability processes for the loans brokered by ASL (ASL Loans) as well as CFS’ policies and procedures for assessing affordability and oversight of brokers more generally, and dictated a remediation methodology in the event that ASL Loans did not pass the affordability test. CFS has voluntarily agreed to remediate the ASL Loans, which is expected to amount to £37m, in accordance with the FCA’s methodology and the remediation exercise is at an advanced stage. The remaining scope of the skilled person review is complete. The skilled person made a number of observations, some of which were adverse, about both current and historic affordability practices as well as current oversight practices.
CFS is not required to conduct a full back book review but, following a review of certain cohorts of loans to determine historic affordability and/or broker oversight practices that may have caused customer harm, where harm is identified, CFS’ intention is to remediate. Separately, and notwithstanding this, CFS decided in March 2022 to extend the proactive remediation of ASL Loans beyond those brokered between April 2014 to April 2016 to include the full portfolio of ASL Loans brokered between 2006 and 2018. As at 31 March 2022, a customer remediation provision of £181m has been recognised in relation to the remediation of the ASL Loans originated outside the April 2014 to April 2016 period. CFS continues to review complaints about other legacy partner finance loans, however, it is not currently possible to predict the outcome of this review or the financial impact on the Barclays Bank Group.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 167 | ||||
Notes to the financial statements
Accruals, provisions, contingent liabilities and legal proceedings
Over-issuance of securities in the US
Barclays Bank PLC maintains a US shelf registration statement with the Securities and Exchange Commission (SEC) in order to issue securities to US investors. The current shelf registration statement was declared effective by the SEC and was valid for three years from 1 August 2019. At the time this shelf registration statement was filed, Barclays Bank PLC was not eligible to be a “well-known seasoned issuer” (or WKSI) due to an historic SEC settlement order and was required to pre-register a set amount of securities to be issued under the US shelf with the SEC.
On 10 March 2022, executive management became aware that Barclays Bank PLC had issued securities in excess of the set amount. It has been estimated that the Barclays Bank PLC US shelf limit was exceeded in February 2021, with issuances through to 10 March 2022 exceeding the $20.8bn limit by c.$15bn. The securities that have been over issued in this period comprise structured notes and exchange traded notes (ETNs). Securities issued in excess of the limit are considered to be “unregistered securities” for the purposes of US securities law with certain purchasers of those securities having the right to require Barclays Bank PLC to repurchase those securities at their original purchase price with compensatory interest and the potential for certain purchasers to bring civil claims and the SEC and other regulators to take enforcement actions against Barclays Bank PLC.
Barclays Bank PLC has recognised a provision of £220m as at 31 December 2021 in relation to the c.$13bn over-issuance of structured notes which represents the best estimate of the rescission right investors have for these securities. The potential amount of the provision ultimately required is determined by (among other things) the market value of the structured notes subject to any rescission offer, participation rates in the rescission offer, prevailing interest rates and movements in foreign exchange rates. The majority of the structured notes subject to rescission provides an equity linked return to investors. As such, the value of these notes is highly sensitive to movements in the price of individual securities and range of indices. As at 31 March 2022, the estimated provision had increased to £540m, with the incremental £320m to be recognised in the 2022 financial statements. The increase in provision post year-end predominantly reflected a reduction in the market value of structured notes. For example, using the S&P 500 index as a benchmark proxy for how the portfolio of securities subject to rescission respond to equity market price movements implies a sensitivity of a c.£300m increase in the provision for a 5% reduction in the index. The provision calculation is non-linear and the sensitivity to a 5% change in the S&P 500 index is an indicative impact using information available as at 31 March 2022. The US equity markets have been volatile during H1 2022 with significant reductions in the value of US equity indices such as the S&P 500 from the year end 2021 levels. The sensitivity to a 5% change in the S&P index does not include the impact of market hedges that have been entered into subsequent to the year-end and were initiated from the end of Q1 2022, to reduce the net volatility to the income statement. When determining these market hedges, consideration was given to changes in the rescission costs which would arise from volatility in the market along with the positioning of the Markets business.
The hedging arrangements may be modified, may not hedge all of the risks associated in the structured note population (in existing or modified form), may expire prior to the end of the Rescission Offer and do not cover any other losses arising out of potential private civil claims or enforcement actions. Any of the foregoing could result in material additional losses for the Barclays Bank Group.
A contingent liability exists in relation to the c.$2bn over-issuance of ETNs due to evidentiary challenges and the high level of trading in the securities. A contingent liability also exists in relation to any potential civil claims or enforcement actions taken against Barclays Bank PLC, but Barclays Bank PLC is unable to assess the likelihood of liabilities that may arise out of such claims or actions, there is currently no indication of the timetable for resolution and it is not practicable to provide an estimate of the financial effects. Any liabilities, claims or actions in connection with the over-issuance of securities under the US shelf could have an adverse effect on Barclays Bank PLC’s and the Barclays Bank Group’s business, financial condition, results of operations and reputation as a frequent issuer in the securities markets.
Investigation into UK cards’ affordability
The FCA has been investigating certain aspects of the affordability assessment processes used by Barclays Bank UK PLC and Barclays Bank PLC for credit card applications made to Barclays’ UK credit card business. In October 2021, the FCA confirmed that this investigation was closed with no further action.
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 £181m (inclusive of interest), of which Barclays would expect to attribute an amount of approximately £128m to Barclays Bank UK PLC and £53m 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 brought claims in 2018 against Barclays Bank PLC and Barclays Bank UK PLC asserting that they entered into loans between 2006 and 2008 in reliance on misrepresentations made by Barclays Bank PLC in respect of its conduct in relation to LIBOR. Barclays Bank PLC and Barclays Bank UK PLC were successful in their applications to strike out the claims. The claims have been settled on terms such that the parties have agreed not to pursue these claims further and to bear their own costs. The financial impact of the settlements is not material to the Barclays Bank Group's operating results, cash flows or financial position.
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, intellectual property, 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.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 168 | ||||
Notes to the financial statements
Capital instruments, equity and reserves
The notes included in this section focus on the Barclays Bank Group’s loan capital and shareholders’ equity including issued share capital, retained earnings, other equity balances and interests of minority shareholders in our subsidiary entities (non-controlling interests). For more information on capital management and how the Barclays Bank Group maintains sufficient capital to meet our regulatory requirements refer to pages 52 to 53.
26Subordinated liabilities
Accounting for subordinated liabilities
Subordinated liabilities are measured at amortised cost using the effective interest method under IFRS 9, unless they are irrevocably designated at fair value through profit or loss at initial recognition because such designation eliminates or significantly reduces an accounting mismatch. Refer to Note 15 for details about accounting for liabilities designated at fair value through profit or loss.
| Barclays Bank Group | ||||||||
| 2021 | 2020 | |||||||
| £m | £m | |||||||
| At amortised cost | ||||||||
| As at 1 January | 32,005 | 33,425 | ||||||
| Issuances | 9,099 | 3,856 | ||||||
| Redemptions | (7,241) | (5,954) | ||||||
| Other | (1,678) | 678 | ||||||
| As at 31 December | 32,185 | 32,005 | ||||||
| Designated at fair value (Note 15) | 483 | — | ||||||
| Total subordinated liabilities | 32,668 | 32,005 | ||||||
Issuances of £9,099m comprise £8,788m intra-group loans from Barclays PLC and £229m USD Floating Rate Notes and £82m ZAR Floating Rate Notes issued externally by Barclays Bank PLC subsidiaries.
Redemptions of £7,241m comprise £4,736m notes issued externally by Barclays Bank PLC, £2,359m intra-group loans from Barclays PLC and £146m USD Floating Rate Notes issued externally by a Barclays Bank PLC subsidiary. £4,736m notes issued externally by Barclays Bank PLC comprise £1,961m GBP 10% Fixed Rate Subordinated Notes, £1,339m EUR 6% Fixed Rate Subordinated Notes, £1,075m USD 10.179% Fixed Rate Subordinated Notes, £200m GBP 9.5% Subordinated Bonds, £86m EUR Subordinated Floating Rate Notes and £75m GBP 9.25% Perpetual Subordinated Bonds.
Other movements predominantly comprise fair value hedge adjustments, foreign exchange movements and reclassification of dated intra-group loans from Barclays PLC of £221m, and measured at fair value, from Subordinated liabilities to Financial liabilities designated at fair value (Note 15).
Subordinated liabilities include accrued interest and comprise undated and dated subordinated liabilities as follows:
| Barclays Bank Group | ||||||||
| 2021 | 2020 | |||||||
| £m | £m | |||||||
| Undated subordinated liabilities | 795 | 905 | ||||||
| Dated subordinated liabilities | 31,873 | 31,100 | ||||||
| Total subordinated liabilities | 32,668 | 32,005 | ||||||
None of the Barclays Bank Group’s subordinated liabilities are secured.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 169 | ||||
Notes to the financial statements
Capital instruments, equity and reserves
Undated subordinated liabilities a | Barclays Bank Group | ||||||||||
| 2021 | 2020 | ||||||||||
| Initial call date | £m | £m | |||||||||
| Barclays Bank PLC externally issued subordinated liabilities | |||||||||||
| Tier One Notes (TONs) | |||||||||||
6% Callable Perpetual Core Tier One Notes | 2032 | 15 | 17 | ||||||||
6.86% Callable Perpetual Core Tier One Notes (USD 179m) | 2032 | 194 | 205 | ||||||||
| Reserve Capital Instruments (RCIs) | |||||||||||
5.3304% Step-up Callable Perpetual Reserve Capital Instruments | 2036 | 51 | 56 | ||||||||
| Undated Notes | |||||||||||
6.125% Undated Subordinated Notes | 2027 | 39 | 43 | ||||||||
Junior Undated Floating Rate Notes (USD 38m) | Any interest payment date | 28 | 28 | ||||||||
Undated Floating Rate Primary Capital Notes Series 1 (USD 167m) | Any interest payment date | 90 | 89 | ||||||||
Undated Floating Rate Primary Capital Notes Series 2 (USD 295m) | Any interest payment date | 189 | 186 | ||||||||
| Undated Floating Rate Primary Capital Notes Series 3 | Any interest payment date | 21 | 21 | ||||||||
| Bonds | |||||||||||
9.25% Perpetual Subordinated Bonds (ex-Woolwich Plc) | 2021 | — | 78 | ||||||||
9% Permanent Interest Bearing Capital Bonds (GBP 40m) | At any time | 42 | 44 | ||||||||
| Loans | |||||||||||
5.03% Reverse Dual Currency Undated Subordinated Loan (JPY 8,000m) | 2028 | 51 | 57 | ||||||||
5% Reverse Dual Currency Undated Subordinated Loan (JPY 12,000m) | 2028 | 75 | 83 | ||||||||
| Total undated subordinated liabilities | 795 | 905 | |||||||||
Note
aInstrument values are disclosed to the nearest million.
Undated subordinated liabilities
Undated subordinated liabilities are issued by Barclays Bank PLC and its subsidiaries for the development and expansion of their businesses 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 market rate.
After the initial call date, in the event that they are not redeemed, the 6.125% Undated Notes 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 market rates.
Payment of interest
Apart from the Junior Undated Floating Rate Notes, Barclays Bank PLC is not obliged to make a payment of interest on its Undated Notes, Bonds and Loans 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. 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 paid interest on each of its Undated Notes, Bonds and Loans.
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, (i) neither Barclays Bank PLC nor Barclays PLC may 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, (i) neither Barclays Bank PLC nor Barclays PLC may 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 6.125% Undated Notes 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
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 170 | ||||
Notes to the financial statements
Capital instruments, equity and reserves
payment date. There are no events of default except non-payment of principal or mandatory interest. Any repayments require the prior consent of the PRA.
Other
All issues of undated subordinated liabilities are non-convertible.
Dated subordinated liabilitiesa | Barclays Bank Group | |||||||||||||
| 2021 | 2020 | |||||||||||||
| Initial call date | Maturity date | £m | £m | |||||||||||
| Barclays Bank PLC externally issued subordinated liabilities | ||||||||||||||
10% Fixed Rate Subordinated Notes | 2021 | — | 2,108 | |||||||||||
6% Fixed Rate Subordinated Notes (EUR 1,500m) | 2021 | — | 1,427 | |||||||||||
10.179% Fixed Rate Subordinated Notes (USD 1,521m) | 2021 | — | 1,101 | |||||||||||
9.5% Subordinated Bonds (ex-Woolwich Plc) | 2021 | — | 221 | |||||||||||
Subordinated Floating Rate Notes (EUR 100m) | 2021 | — | 90 | |||||||||||
7.625% Contingent Capital Notes (USD 3,000m) | 2022 | 1,159 | 1,189 | |||||||||||
6.625% Fixed Rate Subordinated Notes (EUR 1,000m) | 2022 | 889 | 982 | |||||||||||
Subordinated Floating Rate Notes (EUR 50m) | 2022 | 42 | 45 | |||||||||||
Subordinated Floating Rate Notes (EUR 50m) | 2023 | 42 | 45 | |||||||||||
5.75% Fixed Rate Subordinated Notes | 2026 | 322 | 351 | |||||||||||
5.4% Reverse Dual Currency Subordinated Loan (JPY 15,000m) | 2027 | 97 | 108 | |||||||||||
6.33% Subordinated Notes (GBP 50m) | 2032 | 59 | 64 | |||||||||||
Subordinated Floating Rate Notes (EUR 68m) | 2040 | 57 | 61 | |||||||||||
| External issuances by other subsidiaries | 2026 | 311 | 146 | |||||||||||
| Barclays Bank PLC notes issued intra-group to Barclays PLC | ||||||||||||||
2% Fixed Rate Subordinated Callable Notes (EUR 1,500) | 2023 | 2028 | 1,288 | 1,388 | ||||||||||
3.75% Fixed Rate Resetting Subordinated Callable Notes (SGD 200m) | 2025 | 2030 | 113 | 119 | ||||||||||
5.20% Fixed Rate Subordinated Notes (USD 1,367m) | 2026 | 1,037 | 1,069 | |||||||||||
1.125% Fixed Rate Resetting Subordinated Callable Notes (EUR 1,000m) | 2026 | 2031 | 831 | — | ||||||||||
4.836% Fixed Rate Subordinated Callable Notes (USD 1,200m) | 2027 | 2028 | 937 | 973 | ||||||||||
5.088% Fixed-to-Floating Rate Subordinated Callable Notes (USD 1,300m) | 2029 | 2030 | 1,005 | 1,049 | ||||||||||
3.811% Fixed Rate Resetting Subordinated Callable Notes (USD 1,000m) | 2041 | 2042 | 778 | — | ||||||||||
5.25% Fixed Rate Subordinated Notes (USD 827m) | 2045 | 618 | 660 | |||||||||||
4.95% Fixed Rate Subordinated Notes (USD 1,250m) | 2047 | 896 | 960 | |||||||||||
Floating Rate Subordinated Notes (USD 456m) | 2047 | 341 | 337 | |||||||||||
| Barclays Bank PLC intra-group loans from Barclays PLC | ||||||||||||||
| Various Fixed Rate Subordinated Loans | 7,184 | 9,563 | ||||||||||||
| Various Subordinated Floating Rate Loans | 646 | 489 | ||||||||||||
| Various Fixed Rate Subordinated Callable Loans | 11,016 | 5,838 | ||||||||||||
| Various Subordinated Floating Rate Callable Loans | 1,725 | 500 | ||||||||||||
| Zero Coupon Callable Loans | 2051 | 483 | 221 | |||||||||||
| Total dated subordinated liabilities | 31,873 | 31,100 | ||||||||||||
Notes
aInstrument values are disclosed to the nearest million
Dated subordinated liabilities
Dated subordinated liabilities are issued by Barclays Bank PLC and its subsidiaries for the development and expansion of their businesses 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 £21,052m (2020: £16,607m) of intra-group loans is made up of various fixed, fixed to floating rate, floating and zero coupon loans from Barclays PLC with notional amounts denominated in USD 14,809m, EUR 5,937m, GBP 1,250m, JPY 252,600m, AUD 2,315m, SEK 500m, NOK 970m, CAD 450m and CHF 435m, with maturities ranging from 2023 to 2051. 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 Barclays Bank PLC of depositors and other unsecured unsubordinated creditors but before the claims of the undated subordinated liabilities and the holders of Barclays Bank
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 171 | ||||
Notes to the financial statements
Capital instruments, equity and reserves
PLC 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 market 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 or maturity as applicable. After the call date (where relevant), 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.
No interest is paid on zero coupon notes.
Repayment
Those subordinated liabilities with a call date are repayable at the option of Barclays Bank PLC on such call date in accordance with the conditions governing the respective debt obligations, some in whole or in part, and some only in whole, or otherwise on maturity. The remaining dated subordinated liabilities outstanding at 31 December 2021 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 consent of the PRA or BoE or, in the case of the overseas issues, the consent 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 transitional CET1 ratio falls below 7%
27Ordinary shares, preference shares and other equity
| Called up share capital, allotted and fully paid and other equity instruments | ||||||||||||||
| Barclays Bank Group | Barclays Bank Group | |||||||||||||
| Ordinary share capital | Preference share capital | Total share capital | Other equity instruments | |||||||||||
| £m | £m | £m | £m | |||||||||||
| As at 1 January 2021 | 2,342 | 6 | 2,348 | 8,621 | ||||||||||
| AT1 securities issuance | — | — | — | 1,072 | ||||||||||
| As at 31 December 2021 | 2,342 | 6 | 2,348 | 9,693 | ||||||||||
| As at 1 January 2020 | 2,342 | 6 | 2,348 | 8,323 | ||||||||||
| AT1 securities issuance | — | — | — | 1,134 | ||||||||||
| Increase in borrowings from subsidiary | — | — | — | — | ||||||||||
| AT1 securities redemption | — | — | — | (836) | ||||||||||
| As at 31 December 2020 | 2,342 | 6 | 2,348 | 8,621 | ||||||||||
Ordinary shares
The issued ordinary share capital of Barclays Bank PLC, as at 31 December 2021, comprised 2,342m (2020: 2,342m) ordinary shares of £1 each.
Preference shares
The issued preference share capital of Barclays Bank PLC, as at 31 December 2021, comprised 1,000 Sterling Preference Shares of £1 each (2020: 1,000); 31,856 Euro Preference Shares of €100 each (2020: 31,856); and 58,133 US Dollar Preference Shares of $100 each (2020: 58,133).
Ordinary share capital and preference share capital constitutes 100% (2020: 100%) of total share capital issued.
Sterling £1 Preference Shares
1,000 Sterling cumulative callable preference shares of £1 each (the £1 Preference Shares) were issued on 31 December 2004 at nil premium.
The £1 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
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 172 | ||||
Notes to the financial statements
Capital instruments, equity and reserves
£1 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 £1 Preference Shares for the recovery of amounts owing in respect of £1 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 £1 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 £1 Preference Shares on a winding-up or other such return of capital), in payment to the holders of the £1 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 £1 per £1 Preference Share. After payment of the full amount of the liquidating distributions to which they are entitled, the holders of the £1 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 £1 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 Barclays Bank PLC's Articles. Holders of the £1 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 non-cumulative callable preference shares of €100 each (the Euro Preference Shares) were issued on 15 March 2005 for a consideration of €1,383.3m (£966.7m), of which the nominal value was €14m and the balance was share premium. The Euro Preference Shares entitled 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 €10,000 per preference share until 15 March 2020, and since 15 March 2020 quarterly at a rate reset quarterly equal to 0.71% per annum above the Euro interbank offered rate for three-month Euro deposits. The board of directors of Barclays Bank PLC may resolve, in its absolute discretion, not to pay in full, or at all, the dividend on the Euro Preference Shares in respect of a particular dividend period.
The Euro Preference Shares are redeemable at the option of Barclays Bank PLC, in whole but not in part only, on each dividend payment date at €10,000 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 non-cumulative callable preference shares of $100 each (the US Dollar Preference Shares), represented by 100,000 American Depositary Shares, Series 1, were issued on 8 June 2005 for a consideration of $995.4m (£548.1m), of which the nominal value was $10m and the balance was share premium. The US Dollar 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 board of directors of Barclays Bank PLC may resolve, for any reason and in its absolute discretion, not to declare or pay in full or in part any dividends on the US Dollar Preference Shares in respect of a particular dividend period.
The US Dollar 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.
No redemption or purchase of any Euro Preference Shares and US Dollar Preference Shares (together, the Preference Shares) may be made by Barclays Bank PLC without the prior consent of the 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 £13m 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 £35m 5.3304% Step-up Callable Perpetual Reserve Capital Instruments of Barclays Bank PLC (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 €10,000 per Euro Preference Share and $10,000 per US Dollar 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 share dividend; and (2)the date on or by which all the preference shares are redeemed in full or purchased by Barclays Bank PLC.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 173 | ||||
Notes to the financial statements
Capital instruments, equity and reserves
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.
Other equity instruments
Other equity instruments issued by Barclays Bank PLC of £14,400m (2020: £13,328m) include AT1 securities issued to Barclays PLC and borrowings of $6bn from a wholly-owned, indirect subsidiary of Barclays Bank PLC. As a result, the other equity instruments balance recorded by Barclays Bank Group is £9,693m (2020: £8,621m).
Barclays PLC uses funds from its own market issuance of AT1 securities to purchase AT1 securities from the 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 2021, there was one issuance of AT1 instruments, in the form of Fixed Rate Resetting Perpetual Subordinated Contingent Convertible Securities for £1,072m (2020: one issuance for £1,134m). There were no redemptions in 2021 (2020: one redemption of £836m).
| AT1 equity instruments | |||||||||||
| 2021 | 2020 | ||||||||||
| Initial call date | £m | £m | |||||||||
| AT1 equity instruments - Barclays Bank Group | |||||||||||
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 | 1,509 | ||||||||
7.125% Perpetual Subordinated Contingent Convertible Securities | 2025 | 299 | 299 | ||||||||
6.375% Perpetual Subordinated Contingent Convertible Securities | 2025 | 495 | 495 | ||||||||
6.125% Perpetual Subordinated Contingent Convertible Securities (USD 1,500m) | 2025 | 1,134 | 1,134 | ||||||||
4.375% Perpetual Subordinated Contingent Convertible Securities (USD 1,500m) | 2028 | 1,072 | — | ||||||||
| 9,693 | 8,621 | ||||||||||
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 174 | ||||
Notes to the financial statements
Capital instruments, equity and reserves
28Reserves
Currency translation reserve
The currency translation reserve represents the cumulative gains and losses on the retranslation of the Barclays Bank Group's net investments 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
Other reserves includes redeemed ordinary and preference shares issued by the Barclays Bank Group.
| Barclays Bank Group | ||||||||
| 2021 | 2020 | |||||||
| £m | £m | |||||||
| Currency translation reserve | 2,581 | 2,736 | ||||||
| Fair value through other comprehensive income reserve | (118) | 244 | ||||||
| Cash flow hedging reserve | (618) | 1,181 | ||||||
| Own credit reserve | (960) | (954) | ||||||
| Other reserves | (24) | (24) | ||||||
| Total | 861 | 3,183 | ||||||
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 175 | ||||
Notes to the financial statements
Employee benefits
The notes included in this section focus on the costs and commitments associated with employing our staff.
29Staff costs
Accounting for staff costs
The Barclays Bank Group applies IAS 19 Employee benefits in its accounting for most of the components of staff costs.
Short-term employee benefits – salaries, accrued performance costs and social security are recognised over the period in which the employees provide the services to which the payments relate.
Performance costs – recognised to the extent that the Barclays Bank Group has a present obligation to its employees that can be measured reliably and are recognised over the period of service that employees are required to work to qualify for the payments.
Deferred cash and share awards are made to employees to incentivise performance over the period employees provide services. To receive payment under an award, employees must provide service over the vesting period. The period over which the expense for deferred cash and share awards is recognised is based upon the period employees consider their services contribute to the awards. For past awards, the Barclays Bank Group considers that it is appropriate to recognise the awards over the period from the date of grant to the date that the awards vest. In relation to awards granted from 2017, the Barclays Bank Group, taking into account the changing employee understanding surrounding those awards, considered it appropriate for expense to be recognised over four years including the financial year prior to the grant date.
The accounting policies for share-based payments, and pensions and other post-retirement benefits, are included in Note 30 and Note 31 respectively.
| 2021 | 2020 | 2019 | |||||||||
| £m | £m | £m | |||||||||
| Performance costs | 1,308 | 1,145 | 1,104 | ||||||||
Salariesa | 2,245 | 2,285 | 2,373 | ||||||||
| Social security costs | 297 | 295 | 269 | ||||||||
Post-retirement benefitsb | 181 | 176 | 184 | ||||||||
| Other compensation costs | 172 | 208 | 237 | ||||||||
| Total compensation costs | 4,203 | 4,109 | 4,167 | ||||||||
| Other resourcing costs | |||||||||||
| Outsourcing | 136 | 142 | 211 | ||||||||
| Redundancy and restructuring | 49 | 47 | 69 | ||||||||
| Temporary staff costs | 17 | 14 | 48 | ||||||||
| Other | 51 | 53 | 70 | ||||||||
| Total other resourcing costs | 253 | 256 | 398 | ||||||||
| Total staff costs | 4,456 | 4,365 | 4,565 | ||||||||
Notes
a£152m (2020: £156m; 2019: £123m) of compensation was capitalised as internally generated software.
bPost-retirement benefits charge includes £121m (2020: £127m; 2019: £126m) in respect of defined contribution schemes and £60m (2020: £49m; 2019: £58m) in respect of defined benefit schemes.
30Share-based payments
Accounting for share-based payments
The Barclays Bank Group applies IFRS 2 Share-based Payments in accounting for employee remuneration in the form of shares.
Employee incentives include awards in the form of shares and share options, as well as offering employees the opportunity to purchase shares on favourable terms. The cost of the employee services received in respect of the shares or share options granted is recognised in the income statement over the period that employees provide services. The overall cost of the award is calculated using the number of shares and options expected to vest and the fair value of the shares or options at the date of grant.
The number of shares and options expected to vest takes into account the likelihood that performance and service conditions included in the terms of the awards will be met. Failure to meet the non-vesting condition is treated as a cancellation, resulting in an acceleration of recognition of the cost of the employee services.
The fair value of shares is the market price ruling on the grant date, in some cases adjusted to reflect restrictions on transferability. The fair value of options granted is determined using option pricing models to estimate the numbers of shares likely to vest. These take into account the exercise price of the option, the current share price, the risk-free interest rate, the expected volatility of the share price over the life of the option and other relevant factors. Market conditions that must be met in order for the award to vest are also reflected in the fair value of the award, as are any other non-vesting conditions – such as continuing to make payments into a share-based savings scheme.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 176 | ||||
Notes to the financial statements
Employee benefits
The charge for the year arising from share based payment schemes was as follows:
| Charge for the year | |||||||||||
| 2021 | 2020 | 2019 | |||||||||
| £m | £m | £m | |||||||||
| Deferred Share Value Plan / Share Value Plan | 235 | 220 | 244 | ||||||||
| Others | 159 | 129 | 148 | ||||||||
| Total equity settled | 394 | 349 | 392 | ||||||||
| Cash settled | 4 | 2 | 3 | ||||||||
| Total share based payments | 398 | 351 | 395 | ||||||||
The terms of the main current plans are as follows:
Share Value Plan (SVP)
The SVP was introduced in March 2010. SVP awards have been granted to participants in the form of a conditional right to receive Barclays PLC shares or provisional allocations of Barclays PLC shares which vest or are considered for release over a period of three, five or seven years. Participants do not pay to receive an award or to receive a release of shares. For awards granted before December 2017, the grantor may also make a dividend equivalent payment to participants on release of a SVP award. SVP awards are also made to eligible employees for recruitment purposes. All awards are subject to potential forfeiture in certain leaver scenarios.
Deferred Share Value Plan (DSVP)
The DSVP was introduced in February 2017. The terms of the DSVP are materially the same as the terms of the SVP as described above, save that Executive Directors are not eligible to participate in the DSVP and the DSVP operates over market purchase shares only.
Other schemes
In addition to the SVP and DSVP, the Barclays Group operates a number of other schemes settled in Barclays PLC Shares including Sharesave (both UK and Ireland), Sharepurchase (both UK and overseas), and the Barclays Group Long Term Incentive Plan. A delivery of upfront shares to ‘Material Risk Takers’ can be made as a Share Incentive Award (Holding Period).
Share option and award plans
The weighted average fair value per award granted, weighted average share price at the date of exercise/release of shares during the year, weighted average contractual remaining life and number of options and awards outstanding (including those exercisable) at the balance sheet date were as follows:
SVP and DSVP are nil cost awards on which the performance conditions are substantially completed at the date of grant. Consequently, the fair value of these awards is based on the market value at that date.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 177 | ||||
Notes to the financial statements
Employee benefits
Movements in options and awards
The movement in the number of options and awards for the major schemes and the weighted average exercise price of options was:
DSVP / SVP a,b | Others a,c | |||||||||||||||||||
| Number (000s) | Number (000s) | Weighted average ex. price (£) | ||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||
| Outstanding at beginning of year/acquisition date | 370,006 | 297,149 | 53,767 | 37,481 | 0.95 | 1.27 | ||||||||||||||
Transfers in the yeard | (2,214) | 953 | (2,697) | 140 | — | — | ||||||||||||||
| Granted in the year | 174,338 | 203,157 | 79,050 | 136,227 | 1.43 | 0.84 | ||||||||||||||
| Exercised/released in the year | (144,943) | (117,355) | (78,273) | (99,465) | 1.36 | 1.21 | ||||||||||||||
| Less: forfeited in the year | (26,682) | (13,898) | (3,395) | (18,285) | 0.95 | 1.23 | ||||||||||||||
| Less: expired in the year | — | — | (972) | (2,331) | 1.69 | 1.33 | ||||||||||||||
| Outstanding at end of year | 370,505 | 370,006 | 47,480 | 53,767 | 0.95 | 0.95 | ||||||||||||||
| Of which exercisable: | — | — | 4,428 | 4,746 | 1.16 | 1.64 | ||||||||||||||
Notes
aOptions/award granted over Barclays PLC shares.
bWeighted average exercise price is not applicable for SVP and DSVP awards as these are not share option schemes.
cThe number of awards within Others at the end of the year principally relates to Sharesave (number of awards exercisable at end of year was 1,499,920). The weighted average exercise price relates to Sharesave.
dAwards of employees transferred between the Barclays Bank Group and the rest of the Barclays PLC Group.
Awards and options granted to employees and former employees of the Barclays Bank Group under the Barclays PLC Group share plans may be satisfied using new issue shares, treasury shares and market purchase shares of Barclays PLC. Awards granted to employees and former employees of the Barclays Bank Group under DSVP may only be satisfied using market purchase shares of Barclays PLC.
There were no significant modifications to the share based payments arrangements in 2021 and 2020.
As at 31 December 2021, the total liability arising from cash-settled share based payments transactions was £4m (2020: £2m).
31Pensions 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 the Barclays Bank Group’s main scheme, representing 97% of the 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 Bank PLC’s discretion. The costs of ill-health retirements and death in service benefits for Afterwork members are borne by the UKRF. The main risks that the Barclays Bank Group 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 the Barclays Bank Group 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 Bank PLC 2021 Annual Report on Form 20-F, as amended | 178 | ||||
Notes to the financial statements
Employee benefits
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 the Barclays Bank Group 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, the Barclays Bank Group 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 and defined contribution 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 the Barclays Bank Group.
The Trustee Board comprises six Management Directors selected by Barclays Bank PLC, of whom three are independent Directors with no relationship with the Barclays Bank Group (and who are not members of the UKRF), plus three Member Nominated Directors selected from eligible active members of the UKRF, deferred members or 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 the Barclays Bank Group’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 | ||||||||
| 2021 | 2020 | |||||||
| £m | £m | |||||||
| Current service cost | 58 | 53 | ||||||
| Net finance cost | (26) | (40) | ||||||
| Past service cost | — | (4) | ||||||
| Other movements | 2 | — | ||||||
| Total | 34 | 9 | ||||||
The Barclays Bank PLC 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 £240m current service cost in the table on the next page, £90m relates to Barclays Bank UK PLC and £92m 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.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 179 | ||||
Notes to the financial statements
Employee benefits
| Balance sheet reconciliation | ||||||||||||||
| 2021 | 2020 | |||||||||||||
| Barclays Bank Group Total | Of which relates to UKRF | Barclays Bank Group Total | Of which relates to UKRF | |||||||||||
| £m | £m | £m | £m | |||||||||||
| Benefit obligation at beginning of the year | (33,131) | (32,108) | (30,298) | (29,304) | ||||||||||
| Current service cost | (240) | (225) | (232) | (217) | ||||||||||
| Interest costs on scheme liabilities | (422) | (405) | (573) | (549) | ||||||||||
| Past service cost | — | — | 4 | — | ||||||||||
| Remeasurement gain/(loss) - financial | 849 | 820 | (3,439) | (3,358) | ||||||||||
| Remeasurement gain/(loss) - demographic | 53 | 50 | (281) | (286) | ||||||||||
| Remeasurement gain/(loss) - experience | (249) | (259) | 243 | 237 | ||||||||||
| Employee contributions | (4) | — | (5) | (1) | ||||||||||
| Benefits paid | 1,309 | 1,268 | 1,406 | 1,370 | ||||||||||
| Exchange and other movements | 1 | — | 44 | — | ||||||||||
| Benefit obligation at end of the year | (31,834) | (30,859) | (33,131) | (32,108) | ||||||||||
| Fair value of scheme assets at beginning of the year | 34,713 | 33,915 | 32,093 | 31,362 | ||||||||||
| Interest income on scheme assets | 448 | 434 | 613 | 595 | ||||||||||
| Employer contribution | 971 | 955 | 265 | 248 | ||||||||||
| Settlements | — | — | — | — | ||||||||||
| Remeasurement - return on plan assets greater than discount rate | 653 | 642 | 3,411 | 3,328 | ||||||||||
| Employee contributions | 4 | — | 5 | 1 | ||||||||||
| Benefits paid | (1,309) | (1,268) | (1,406) | (1,370) | ||||||||||
| Exchange and other movements | (13) | — | (268) | (249) | ||||||||||
| Fair value of scheme assets at the end of the year | 35,467 | 34,678 | 34,713 | 33,915 | ||||||||||
| Net surplus | 3,633 | 3,819 | 1,582 | 1,807 | ||||||||||
| Retirement benefit assets | 3,879 | 3,819 | 1,814 | 1,807 | ||||||||||
| Retirement benefit liabilities | (246) | — | (232) | — | ||||||||||
| Net retirement benefit assets | 3,633 | 3,819 | 1,582 | 1,807 | ||||||||||
Included within the Barclays Bank Group’s benefit obligation is £821m (2020: £866m) relating to overseas pensions and £154m (2020: £157m) relating to other post-employment benefits.
As at 31 December 2021, the UKRF’s scheme assets were in surplus versus IAS 19 obligations by £3,819m (2020: £1,807m). The movement for the UKRF during the year is driven by £700m of deficit reduction contributions, higher corporate bond yields and favourable asset returns, partially offset by higher expected long term price inflation.
The weighted average duration of the benefit payments reflected in the defined benefit obligation for the UKRF is 16 years (2020: 17 years). The UKRF expected benefits are projected to be paid out for in excess of 50 years, although 25% of the total benefits are expected to be paid in the next 10 years; 30% in years 11 to 20 and 25% in years 20 to 30. The remainder of the benefits are expected to be paid beyond 30 years.
Of the £1,268m (2020: £1,370m) UKRF benefits paid out, £419m (2020: £520m) related to transfers out of the fund.
Where a scheme’s assets exceed its obligations, 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 UKRF Trustee does not have a substantive right to augment benefits, nor does it have the right to wind up the plan except in the dissolution of Barclays Bank PLC or termination of contributions by Barclays Bank PLC. The application of the asset ceiling to other plans and recognition of additional liabilities in respect of future minimum funding requirements is considered on an individual plan basis.
Critical accounting estimates and judgements
Actuarial valuation of the schemes’ obligations 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 | 2021 | 2020 | ||||||
| % p.a. | % p.a. | |||||||
| Discount rate | 1.84 | 1.29 | ||||||
| Inflation rate (RPI) | 3.56 | 2.99 | ||||||
The UKRF discount rate assumption for 2021 was based on a standard Willis Towers Watson RATE Link model. The RPI inflation assumption for 2021 was set by reference to the Bank of England’s implied inflation curve. 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 inflation assumptions is consistent with that used at the prior year end.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 180 | ||||
Notes to the financial statements
Employee benefits
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 2020 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 ends, except that the 2019 core projection model was used at 2020. 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 | 2021 | 2020 | 2019 | ||||||||
| Life expectancy at 60 for current pensioners (years) | |||||||||||
| – Males | 27.3 | 27.2 | 27.1 | ||||||||
| – Females | 29.6 | 29.4 | 29.3 | ||||||||
| Life expectancy at 60 for future pensioners currently aged 40 (years) | |||||||||||
| – Males | 29.1 | 29.0 | 28.9 | ||||||||
| – Females | 31.4 | 31.2 | 31.1 | ||||||||
The UKRF entered into a £5bn longevity swap in 2020 covering around a quarter of the pensioner liabilities. The swap is part of the UKRF’s investment portfolio and provides income in the event that pensions are paid out for longer than expected. The swap is not included directly within the balance sheet of Barclays PLC as it is an asset of the UKRF. At 31 December 2021, the swap is valued at nil (2020: nil) as experience since the swap was effected has been neutral.
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 Bank Group expressing any specific view of the probability of such movements happening.
| Change in key assumptions | ||||||||
| 2021 | 2020 | |||||||
| (Decrease)/Increase in UKRF defined benefit obligation | (Decrease)/Increase in UKRF defined benefit obligation | |||||||
| £bn | £bn | |||||||
| Discount rate | ||||||||
| 0.50% p.a. increase | (2.3) | (2.5) | ||||||
| 0.25% p.a. increase | (1.2) | (1.3) | ||||||
| 0.25% p.a. decrease | 1.3 | 1.4 | ||||||
| 0.50% p.a. decrease | 2.6 | 2.9 | ||||||
| Assumed RPI | ||||||||
| 0.50% p.a. increase | 1.6 | 1.8 | ||||||
| 0.25% p.a. increase | 0.8 | 0.9 | ||||||
| 0.25% p.a. decrease | (0.8) | (0.9) | ||||||
| 0.50% p.a. decrease | (1.6) | (1.8) | ||||||
| Life expectancy at 60 | ||||||||
| One year increase | 1.2 | 1.2 | ||||||
| One year decrease | (1.2) | (1.2) | ||||||
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 schemes, with any derivative holdings reflected on a fair value basis.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 181 | ||||
Notes to the financial statements
Employee benefits
The value of the assets of the schemes and their percentage in relation to total scheme assets were as follows:
Notes
aValuations of unquoted assets are provided by the underlying managers or qualified independent valuers. Valuations of complex instruments are based on UKRF custodian valuations. All valuations are determined in accordance with relevant industry guidance.
Included within the fair value of scheme assets were nil (2020: nil) relating to shares in Barclays PLC and nil (2020: nil) relating to bonds issued by Barclays PLC or Barclays Bank PLC. The UKRF 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 45% of the UKRF assets are invested in liability-driven investment strategies; primarily UK gilts as well as interest rate and inflation swaps. These swaps 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 annual update as at 30 September 2021 showed the funding position had improved to a surplus of £0.6bn from a deficit of £0.9bn shown at 30 September 2020. The improvement was mainly due to £0.7bn of deficit reduction contributions and favourable asset returns, partially offset by higher expected long term price inflation.
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.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 182 | ||||
Notes to the financial statements
Employee benefits
The deficit reduction contributions agreed with the UKRF Trustee as part of the 30 September 2019 triennial valuation recovery plan are shown in the table below.
| Deficit reduction contributions under the | |||||
| 30 September 2019 valuation | |||||
| Year | £m | ||||
| Cash paid: | |||||
| 2019 | 500 | ||||
| 2020 | 500 | ||||
| 2021 | 700 | ||||
| Future commitments: | |||||
| 2022 | 294 | ||||
| 2023 | 286 | ||||
| 2024 and beyond | — | ||||
During 2019 and 2020 the UKRF subscribed for non-transferable listed senior fixed rate notes for £1,250m, backed by UK gilts (the Senior Notes) entitling the UKRF to semi-annual coupon payments for five years, and full repayment in cash in three tranches: £250m in 2023, £750m in 2024, and £250m in 2025. As a result of these transactions, the CET1 impact of the UKRF was deferred until 2023, 2024 and 2025 upon maturity of the notes. Following the PRA’s statement on 13 April 2022, Barclays Bank PLC is planning to unwind these transactions and to agree the terms and timing of this unwind with the UKRF Trustee as part of the next triennial actuarial valuation as at 30 September 2022. Upon unwind, this would result in a c.65bps reduction to the CET1 ratio potentially being accelerated to Q422 from 2023, 2024 and 2025. As at 31 March 2022, the UKRF was in an accounting surplus of £4.4bn on an IAS 19 basis and as at 30 September 2021 was in a funding surplus of £0.6bn. There may also be a pension related reduction in Pillar 2A requirements in 2022 which could partially mitigate the impact of the unwind on the Barclays Bank Group surplus capital position. As the UKRF's investment in these Senior Notes does not qualify as a plan asset under IAS 19, the £1,250m does not appear in the IAS 19 plan assets. The Senior Notes were issued by Heron Issuer Limited (Heron) for £500m and Heron Issuer Number 2 Limited (Heron 2) for £750m, entities consolidated within the Barclays Bank Group under IFRS 10. Heron and Heron 2 acquired a total of £1,250m of gilts from Barclays Bank PLC for cash to support payments on the Senior Notes. There were no further transactions of this type in 2021.
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 at least 100% of the funding deficit with an overall cap of £9bn. 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 36 Assets pledged, collateral received and assets transferred.
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:
There were nil (2020: nil) Section 75 contributions included within the Barclays Bank Group’s contributions paid as no participating employers left the UKRF in 2021.
The Barclays Bank Group’s expected contribution to the UKRF in respect of defined benefits in 2022 is £352m (2021: £783m). In addition, the expected contributions to UK defined contribution schemes in 2022 is £6m (2021: £9m) to the UKRF and £42m (2021: £47m) 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.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 183 | ||||
Notes to the financial statements
Scope of consolidation
32Principal subsidiaries
Barclays Bank Group applies IFRS 10 Consolidated Financial Statements. The consolidated financial statements combine the financial statements of Barclays Bank PLC and all of its subsidiaries. Subsidiaries are entities over which Barclays Bank Group has control. Under IFRS 10, this is when Barclays Bank Group is exposed to or has rights to variable returns from its involvement in an entity and has the ability to affect those returns through its power over an entity.
Barclays Bank Group reassesses whether it controls an entity if facts and circumstances indicate that there have been changes to its power, its rights to variable returns or its ability to use its power to affect the amount of its returns.
Intra-group transactions and balances are eliminated on consolidation and 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 been obtained and they do not result in loss of control.
The significant judgements used in applying this policy are set out below.
Principal subsidiaries of the Barclays Bank Group are set out below. This includes those subsidiaries that are most significant in the context of the Barclays Bank Group’s business, results or financial position.
| Company Name | Principal place of business or incorporation | Nature of business | Percentage of voting rights held | Non-controlling interests - proportion of ownership interests | Non-controlling interests - proportion of voting interests | ||||||||||||
| % | % | % | |||||||||||||||
| Barclays Bank Ireland PLC | Ireland | Banking | 100 | — | — | ||||||||||||
| Barclays Capital Inc. | United States | Securities dealing | 100 | — | — | ||||||||||||
| Barclays Capital Securities Limited | United Kingdom | Securities dealing | 100 | — | — | ||||||||||||
| Barclays Securities Japan Limited | Japan | Securities dealing | 100 | — | — | ||||||||||||
| Barclays US LLC | United States | Holding company | 100 | — | — | ||||||||||||
| Barclays Bank Delaware | United States | Credit card issuer | 100 | — | — | ||||||||||||
The country of registration or incorporation is also the principal area of operation of each of the above subsidiaries.
Ownership interests are in some cases different to voting interests due to the existence of non-voting equity interests, such as preference shares.
Significant judgements and assumptions used to determine the scope of the consolidation
Determining whether the Barclays Bank Group has control of an entity is generally straightforward based on ownership of the majority of the voting capital. However, in certain instances, this determination will involve significant judgement, particularly in the case of structured entities where voting rights are often not the determining factor in decisions over the relevant activities. This judgement will involve assessing the purpose and design of the entity. It will also often be necessary to consider whether the Barclays Bank Group, or another involved party with power over the relevant activities, is acting as a principal in its own right or as an agent on behalf of others.
There is also often considerable judgement involved in the ongoing assessment of control over structured entities. In this regard, where market conditions have deteriorated such that the other investors’ exposures to the structure’s variable returns have been substantively eliminated, the Barclays Bank Group may conclude that the managers of the structured entity are acting as its agent and therefore will consolidate the structured entity.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 184 | ||||
Notes to the financial statements
Scope of consolidation
An interest in equity voting rights exceeding 50% would typically indicate that the Barclays Bank Group has control of an entity. However, the entity set out below is excluded from consolidation because the Barclays Bank Group does not have exposure to its variable returns.
| Company name | Country of registration or incorporation | Percentage of voting rights held (%) | Equity shareholders' funds (£m) | Retained profit for the year (£m) | ||||||||||
| Palomino Limited | Cayman Islands | 100 | — | — | ||||||||||
This entity is managed by an external counterparty and consequently is not controlled by the Barclays Bank Group. Interests relating to this entity are included in Note 33.
Significant restrictions
As is typical for a group of its size and international scope, there are restrictions on the ability of the Barclays Bank Group to obtain distributions of capital, access the assets or repay the liabilities of members of the Barclays Bank Group due to the statutory, regulatory and contractual requirements of its subsidiaries and due to the protective rights of non-controlling interests. These are considered below.
Regulatory requirements
The Barclays Bank Group’s principal subsidiary companies have assets and liabilities before intercompany eliminations of £439bn (2020: £417bn) and £414bn (2020: £393bn) respectively. Certain classes of these assets and liabilities are subject to prudential regulation and regulatory capital requirements in the countries in which the subsidiaries are regulated. These prudential and regulatory capital requirements require entities to maintain minimum capital levels which cannot be returned to the parent company, Barclays Bank PLC, on a going concern basis.
In order to meet capital requirements, subsidiaries may issue certain equity accounted and debt accounted financial instruments such as Tier 1 and Tier 2 capital instruments and other forms of subordinated liabilities. Refer to Note 26 and Note 27 for particulars of these instruments. These instruments may be subject to cancellation clauses or preference share restrictions that would limit the ability of the entity to repatriate the capital on a timely basis.
Liquidity requirements
Regulated subsidiaries of the Barclays Bank Group are required to meet PRA or local regulatory requirements pertaining to liquidity. Some of the regulated subsidiaries include Barclays Capital Securities Limited (which is regulated for liquidity matters on a combined basis with Barclays Bank PLC under a Domestic Liquidity Sub-Group (DoLSub) arrangement), Barclays Bank Ireland PLC, Barclays Capital Inc. and Barclays Bank Delaware Inc. See page 80 for further details of liquidity requirements, including those of the Barclays Bank Group’s significant subsidiaries.
Statutory requirements
The Barclays Bank Group’s subsidiaries are subject to statutory requirements not to make distributions of capital and unrealised profits and generally to maintain solvency. These requirements restrict the ability of subsidiaries to make remittances of dividends to Barclays Bank PLC, the parent, except in the event of a legal capital reduction or liquidation. In most cases the regulatory restrictions referred to above exceed the statutory restrictions.
Asset encumbrance
The Barclays Bank Group uses its financial assets to raise finance in the form of securitisations and through the liquidity schemes of central banks, as well as to provide security to the UK Retirement Fund. Once encumbered, the assets are not available for transfer around the Barclays Bank Group. The assets typically affected are disclosed in Note 36.
Other restrictions
The Barclays Bank Group is required to maintain balances with central banks and other regulatory authorities and these amounted to £4,260m (2020: £3,119m).
33Structured entities
A structured entity is an entity in which voting or similar rights are not the dominant factor in deciding who controls the entity. An example is when voting rights relate to administrate tasks only and the relevant activities are directed by means of contractual arrangements. Structured entities are generally created to achieve a narrow and well-defined objective with restrictions around their ongoing activities.
Depending on the Barclays Bank Group’s power over the activities of the entity and its exposure to and ability to influence its own returns, it may consolidate the entity. In other cases, it may sponsor or have exposure to such an entity but not consolidate it.
Consolidated structured entities
The Barclays Bank Group has contractual arrangements which may require it to provide financial support to the following types of consolidated structured entities:
▪Securitisation: The Barclays Bank Group uses securitisation as a source of financing and a means of risk transfer. Where entities are controlled by the Barclays Bank Group, they are consolidated. Refer to Note 35 for further detail.
▪Commercial paper (CP) conduits: These entities issue CP and use the proceeds to lend to clients as part of the Barclays Bank Group's multi-seller conduit programme. The Barclays Bank Group has provided £17.2bn (2020: £16.9bn) in contractual liquidity facilities to the CP conduits that the Barclays Bank Group consolidates. These amounts represent the maximum the conduits can lend externally. The amounts of CP conduit lending (drawn and undrawn) to unconsolidated structured entities can be seen in Other interests in unconsolidated structured entities under multi-seller conduit programme in the Summary of interests in unconsolidated structured entities table.
▪Tender Option Bond (TOB) trusts: During 2021, the Barclays Bank Group provided undrawn liquidity facilities of £3.3bn (2020: £2.9bn) to consolidated TOB trusts. These trusts invest in fixed income instruments issued by state, local or other municipalities in the United States, funded by long-term senior floating-rate notes and junior residual securities.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 185 | ||||
Notes to the financial statements
Scope of consolidation
Unconsolidated structured entities
The term ‘unconsolidated structured entities’ refers to structured entities not controlled by the Barclays Bank Group, and are established either by Barclays Bank Group or a third party. An interest in a structured entity is any form of contractual or non-contractual involvement which creates variability in returns arising from the performance of the entity for the Barclays Bank Group. Such interests include holdings of debt or equity securities, derivatives that transfer financial risks from the entity to the Barclays Bank Group, lending, loan commitments, financial guarantees and investment management agreements.
Barclays Bank Group enters into transactions with unconsolidated structured entities in the normal course of business to facilitate customer transactions, to provide risk management services and for specific investment opportunities. This is predominantly within the CIB business. Structured entities may take the form of funds, trusts, securitisation vehicles, and private investment companies. The largest transactions include loans and derivatives with hedge fund structures and special purpose entities, multi-seller conduit lending, holding notes issued by securitisation vehicles and facilitating customer requirements through funds.
The nature and extent of the Barclays Bank Group’s interests in structured entities is summarised below:
| Summary of interests in unconsolidated structured entities | |||||||||||||||||
| Secured financing | Short-term traded interests | Traded derivatives | Other interests | Total | |||||||||||||
| £m | £m | £m | £m | £m | |||||||||||||
| As at 31 December 2021 | |||||||||||||||||
| Assets | |||||||||||||||||
| Trading portfolio assets | — | 7,170 | — | — | 7,170 | ||||||||||||
| Financial assets at fair value through the income statement | 61,816 | — | — | 3,417 | 65,233 | ||||||||||||
| Derivative financial instruments | — | — | 5,160 | — | 5,160 | ||||||||||||
| Financial assets at fair value through other comprehensive income | — | — | — | 91 | 91 | ||||||||||||
| Loans and advances at amortised cost | — | — | — | 22,741 | 22,741 | ||||||||||||
| Reverse repurchase agreements and other similar secured lending | 104 | — | — | — | 104 | ||||||||||||
| Other assets | — | — | — | 12 | 12 | ||||||||||||
| Total assets | 61,920 | 7,170 | 5,160 | 26,261 | 100,511 | ||||||||||||
| Liabilities | |||||||||||||||||
| Derivative financial instruments | — | — | 9,543 | — | 9,543 | ||||||||||||
| As at 31 December 2020 | |||||||||||||||||
| Assets | |||||||||||||||||
| Trading portfolio assets | — | 11,361 | — | — | 11,361 | ||||||||||||
| Financial assets at fair value through the income statement | 56,265 | — | — | 2,780 | 59,045 | ||||||||||||
| Derivative financial instruments | — | — | 2,968 | — | 2,968 | ||||||||||||
| Financial assets at fair value through other comprehensive income | — | — | — | 153 | 153 | ||||||||||||
| Loans and advances at amortised cost | — | — | — | 18,418 | 18,418 | ||||||||||||
| Reverse repurchase agreements and other similar secured lending | 10 | — | — | — | 10 | ||||||||||||
| Other assets | — | — | — | 11 | 11 | ||||||||||||
| Total assets | 56,275 | 11,361 | 2,968 | 21,362 | 91,966 | ||||||||||||
| Liabilities | |||||||||||||||||
| Derivative financial instruments | — | — | 7,075 | — | 7,075 | ||||||||||||
Secured financing arrangements, short-term traded interests and traded derivatives are typically managed under market risk management policies described in the Market risk management section which includes an indication of the change of risk measures compared to last year. For this reason, the total assets of these entities are not considered meaningful for the purposes of understanding the related risks and so have not been presented. Other interests include conduits and lending where the interest is driven by normal customer demand. As at 31 December 2021, there were 5,696 (2020: 3,162) structured entities that the Barclays Bank Group entered into transactions with.
Secured financing
The Barclays Bank Group routinely enters into reverse repurchase contracts, margin lending, stock borrowing and similar arrangements on normal commercial terms where the counterparty to the arrangement is a structured entity. Due to the nature of these arrangements, especially the transfer of collateral and ongoing margining, the Barclays Bank Group is able to manage its variable exposure to the performance of the structured entity counterparty. The counterparties included in secured financing mainly include hedge fund limited structures, investment companies and special purpose entities.
Short-term traded interests
As part of its market making activities, the Barclays Bank Group buys and sells interests in structured vehicles, which are predominantly debt securities issued by asset securitisation vehicles. Such interests are typically held individually or as part of a larger portfolio for no more than 90 days. In such cases, the Barclays Bank Group typically has no other involvement with the structured entity other than the securities it holds as part of trading activities and its maximum exposure to loss is restricted to the carrying value of the asset.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 186 | ||||
Notes to the financial statements
Scope of consolidation
Traded derivatives
The Barclays Bank Group enters into a variety of derivative contracts with structured entities which reference market risk variables such as interest rates, foreign exchange rates and credit indices among other things. The main derivative types which are considered interests in structured entities include index-based and entity specific credit default swaps, balance guaranteed swaps, total return swaps, commodities swaps, and equity swaps. Interest rate swaps, foreign exchange derivatives that are not complex and which expose the Barclays Bank Group to insignificant credit risk by being senior in the payment waterfall of a securitisation and derivatives that are determined to introduce risk or variability to a structured entity are not considered to be an interest in an entity and have been excluded from the disclosures.
A description of the types of derivatives and the risk management practices are detailed in Note 13. The risk of loss may be mitigated through ongoing margining requirements as well as a right to cash flows from the structured entity which are senior in the payment waterfall. Such margining requirements are consistent with market practice for many derivative arrangements and in line with the Barclays Bank Group’s normal credit policies.
Derivative transactions require the counterparty to provide cash or other collateral under margining agreements to mitigate counterparty credit risk. The Barclays Bank Group is mainly exposed to settlement risk on these derivatives which is mitigated through daily margining. Total notional contract amounts were £217,055m (2020: £153,894m).
Except for credit default swaps where the maximum exposure to loss is the swap notional amount, it is not possible to estimate the maximum exposure to loss in respect of derivative positions as the fair value of derivatives is subject to changes in market rates of interest, exchange rates and credit indices which by their nature are uncertain. In addition, the Barclays Bank Group’s losses would be subject to mitigating action under its traded market risk and credit risk policies that require the counterparty to provide collateral in cash or other assets in most cases.
Other interests in unconsolidated structured entities
The Barclays Bank Group’s interests in structured entities not held for the purposes of short-term trading activities are set out below, summarised by the nature of the interest and limited to significant categories, based on maximum exposure to loss.
| Nature of interest | |||||||||||||||||
| Multi-seller conduit programme | Lending | Other | Total | Of which: Barclays Bank Group owned, not consolidated entities1 | |||||||||||||
| £m | £m | £m | £m | £m | |||||||||||||
| As at 31 December 2021 | |||||||||||||||||
| Financial assets at fair value through the income statement | — | 2 | 3,415 | 3,417 | 3,335 | ||||||||||||
| Financial assets at fair value through other comprehensive income | — | 53 | 38 | 91 | — | ||||||||||||
| Loans and advances at amortised cost | 5,184 | 14,294 | 3,263 | 22,741 | — | ||||||||||||
| Other assets | 8 | 4 | — | 12 | — | ||||||||||||
| Total on-balance sheet exposures | 5,192 | 14,353 | 6,716 | 26,261 | 3,335 | ||||||||||||
| Total off-balance sheet notional amounts | 11,015 | 9,394 | — | 20,409 | — | ||||||||||||
| Maximum exposure to loss | 16,207 | 23,747 | 6,716 | 46,670 | 3,335 | ||||||||||||
| Total assets of the entity | 65,441 | 160,611 | 28,582 | 254,634 | 11,513 | ||||||||||||
| As at 31 December 2020 | |||||||||||||||||
| Financial assets at fair value through the income statement | — | 15 | 2,765 | 2,780 | 2,698 | ||||||||||||
| Financial assets at fair value through other comprehensive income | — | 106 | 47 | 153 | — | ||||||||||||
| Loans and advances at amortised cost | 5,146 | 12,475 | 797 | 18,418 | — | ||||||||||||
| Other assets | 8 | 3 | — | 11 | — | ||||||||||||
| Total on-balance sheet exposures | 5,154 | 12,599 | 3,609 | 21,362 | 2,698 | ||||||||||||
| Total off-balance sheet notional amounts | 11,750 | 7,531 | — | 19,281 | — | ||||||||||||
| Maximum exposure to loss | 16,904 | 20,130 | 3,609 | 40,643 | 2,698 | ||||||||||||
| Total assets of the entity | 87,004 | 153,990 | 22,389 | 263,383 | 11,008 | ||||||||||||
Maximum exposure to loss
Unless specified otherwise below, the Barclays Bank Group’s maximum exposure to loss is the total of its on-balance sheet positions and its off-balance sheet arrangements, being loan commitments and financial guarantees. Exposure to loss is mitigated through collateral, financial guarantees, the availability of netting and credit protection held.
Multi-seller conduit programme
The Barclays Bank Group's multi-seller conduit programme engages in providing financing to various clients and holds whole or partial interests in pools of receivables or similar obligations. These instruments are protected from loss through over-collateralisation, seller guarantees, or other credit enhancements provided to the conduit entity. The Barclays Bank Group’s off-balance sheet exposure included in the table above represents liquidity facilities that are provided to the conduit for the benefit of the holders of the commercial paper issued by the conduit and will only be drawn where the conduit is unable to access the commercial paper market. If these liquidity facilities are drawn, the Barclays Bank Group is protected from loss through over-collateralisation, seller guarantees, or other credit enhancements provided to the conduit.
1Comprises of Barclays Bank Group owned, not consolidated structured entities per IFRS 10 Consolidated Financial Statements, and Barclays Bank Group sponsored entities. Refer to Note 32 Principal subsidiaries for more details on consolidation.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 187 | ||||
Notes to the financial statements
Scope of consolidation
Lending
The portfolio includes lending provided by the Barclays Bank Group to unconsolidated structured entities in the normal course of its lending business to earn income in the form of interest and lending fees and includes loans to structured entities that are generally collateralised by property, equipment or other assets. All loans are subject to the Barclays Bank Group’s credit sanctioning process. Collateral arrangements are specific to the circumstances of each loan with additional guarantees and collateral sought from the sponsor of the structured entity for certain arrangements. During the year the Barclays Bank Group incurred an impairment charge of £25m (2020: £22m) against such facilities.
Other
This includes fair value loans with structured entities where the market risk is materially hedged with corresponding derivative contracts, interests in debt securities issued by securitisation vehicles and drawn and undrawn loan facilities to these entities. In addition, other includes investment funds with interests restricted to management fees based on the performance of the fund and trusts held on behalf of beneficiaries with interests restricted to unpaid fees.
Assets transferred to sponsored unconsolidated structured entities
The Barclays Bank Group is considered to sponsor another entity if, it had a key role in establishing that entity, it transferred assets to the entity, the Barclays name appears in the name of the entity or it provides guarantees on the entity’s performance. As at 31 December 2021, assets transferred to sponsored unconsolidated structured entities were £1,662m (2020: £730m).
34Investments in associates and joint ventures
Accounting for associates and joint ventures
The Barclays Bank Group applies IAS 28 Investments in Associates and IFRS 11 Joint Arrangements. Associates are entities in which the Barclays Bank Group has significant influence, but not control, over the operating and financial policies. Generally the Barclays Bank Group holds more than 20%, but less than 50%, of their voting shares. Joint ventures are arrangements where the Barclays Bank Group has joint control and rights to the net assets of the entity.
The Barclays Bank Group’s investments in associates and joint ventures are initially recorded at cost and increased (or decreased) each year by the Barclays Bank Group’s share of the post acquisition profit/(loss). The Barclays Bank Group ceases to recognise its share of the losses of equity accounted associates when its share of the net assets and amounts due from the entity have been written off in full, unless it has a contractual or constructive obligation to make good its share of the losses. In some cases, investments in these entities may be held at fair value through profit or loss, for example, those held by private equity businesses.
There are no individually significant investments in joint ventures or associates held by Barclays Bank Group.
| 2021 | 2020 | |||||||||||||||||||
| Associates | Joint ventures | Total | Associates | Joint ventures | Total | |||||||||||||||
| £m | £m | £m | £m | £m | £m | |||||||||||||||
| Equity accounted (Group) | 24 | — | 24 | 24 | — | 24 | ||||||||||||||
Summarised financial information for the Barclays Bank Group’s equity accounted associates and joint ventures is set out below. The amounts shown are the Barclays Bank Group’s share of the comprehensive income of the investees for the year ended 31 December 2021, with the exception of certain undertakings for which the amounts are based on accounts made up to dates not earlier than three months before the balance sheet date.
| Associates | Joint ventures | |||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||
| £m | £m | £m | £m | |||||||||||
| (Loss)/profit from continuing operations | — | (1) | — | 2 | ||||||||||
| Other comprehensive income / (loss) | 1 | (3) | — | — | ||||||||||
| Total comprehensive income/(loss) from continuing operations | 1 | (4) | — | 2 | ||||||||||
35Securitisations
Accounting for securitisations
The Barclays Bank Group uses securitisations as a source of finance and a means of risk transfer. Such transactions generally result in the transfer of contractual cash flows from portfolios of financial assets to holders of issued debt securities.
Securitisations may, depending on the individual arrangement, result in continued recognition of the securitised assets and the recognition of the debt securities issued in the transaction; lead to partial continued recognition of the assets to the extent of the Barclays Bank Group’s continuing involvement in those assets or lead to derecognition of the assets and the separate recognition, as assets or liabilities, of any rights and obligations created or retained in the transfer. Full derecognition only occurs when the Barclays Bank Group transfers both its contractual right to receive cash flows from the financial assets, or retains the contractual rights to receive the cash flows, but assumes a contractual obligation to pay the cash flows to another party without material delay or reinvestment, and also transfers substantially all the risks and rewards of ownership, including credit risk, prepayment risk and interest rate risk.
In the course of its normal banking activities, the Barclays Bank Group makes transfers of financial assets, either where legal rights to the cash flows from the asset are passed to the counterparty or beneficially, where the Barclays Bank Group retains the rights to the cash flows but assumes a responsibility to transfer them to the counterparty. Depending on the nature of the transaction, this may result in derecognition of the assets in their entirety, partial derecognition or no derecognition of the assets subject to the transfer.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 188 | ||||
Notes to the financial statements
Scope of consolidation
A summary of the main transactions, and the assets and liabilities and the financial risks arising from these transactions, is set out below:
Transfers of financial assets that do not result in derecognition
Securitisations
The Barclays Bank Group is party to securitisation transactions involving its credit card balances.
In these transactions, the assets, interests in the assets, or beneficial interests in the cash flows arising from the assets, are transferred to a special purpose entity, which then issues interest bearing debt securities to third party investors.
Securitisations may, depending on the individual arrangement, result in continued recognition of the securitised assets and the recognition of the debt securities issued in the transaction. Partial continued recognition of the assets to the extent of the Barclays Bank Group’s continuing involvement in those assets can also occur or derecognition of the assets and the separate recognition, as assets or liabilities, of any rights and obligations created or retained in the transfer.
The following table shows the carrying amount of securitised assets that have not resulted in full derecognition, together with the associated liabilities, for each category of asset on the balance sheet:
| 2021 | 2020 | |||||||||||||||||||||||||
| Assets | Liabilities | Assets | Liabilities | |||||||||||||||||||||||
| Carrying amount | Fair value | Carrying amount | Fair value | Carrying amount | Fair value | Carrying amount | Fair value | |||||||||||||||||||
| £m | £m | £m | £m | £m | £m | £m | £m | |||||||||||||||||||
| Barclays Bank Group | ||||||||||||||||||||||||||
| Loans and advances at amortised cost | ||||||||||||||||||||||||||
| Credit cards, unsecured loans and other retail lending | 1,303 | 1,423 | (1,225) | (1,219) | 963 | 1,051 | (952) | (966) | ||||||||||||||||||
Balances included within loans and advances at amortised cost represent securitisations where substantially all the risks and rewards of the assets have been retained by Barclays Bank Group.
The relationship between the transferred assets and the associated liabilities is that holders of notes may only look to cash flows from the securitised assets for payments of principal and interest due to them under the terms of their notes, although the contractual terms of their notes may be different to the maturity and interest of the transferred assets.
If the Barclays Bank Group transfers a financial asset but does not transfer or retain substantially all the risk and rewards of the asset and retains control over it, the transferred assets are recognised to the extent of Barclays Bank Group's continuing involvement. In 2021, financial assets of £249m (2020: £nil) were transferred in this manner and the carrying value of the assets representing continued involvement is included in the table above.
For transfers of assets in relation to repurchase agreements, see Note 36.
Continuing involvement in financial assets that have been derecognised
In some cases, the Barclays Bank Group may have transferred a financial asset in its entirety but may have continuing involvement in it. This arises in asset securitisations where loans and asset backed securities were derecognised as a result of the Barclays Bank Group’s involvement with asset backed securities, residential mortgage backed securities and commercial mortgage securities. Continuing involvement largely arises from providing financing into these structures in the form of retained notes, which do not bear first losses.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 189 | ||||
Notes to the financial statements
Scope of consolidation
The table below shows the potential financial implications of such continuing involvement:
Continuing involvementa | Gain/(loss) from continuing involvement | |||||||||||||||||||
| Carrying amount | Fair value | Maximum exposure to loss | For the year ended | Cumulative to 31 December | ||||||||||||||||
| Type of transfer | £m | £m | £m | £m | £m | |||||||||||||||
| 2021 | ||||||||||||||||||||
| Asset backed securities | 25 | 25 | 25 | 1 | 2 | |||||||||||||||
| Residential mortgage backed securities | 78 | 78 | 78 | 3 | 4 | |||||||||||||||
| Commercial mortgage backed securities | 311 | 307 | 311 | 5 | 11 | |||||||||||||||
| Total | 414 | 410 | 414 | 9 | 17 | |||||||||||||||
| 2020 | ||||||||||||||||||||
| Asset backed securities | 56 | 56 | 56 | 1 | 1 | |||||||||||||||
| Residential mortgage backed securities | 49 | 49 | 49 | 1 | 1 | |||||||||||||||
| Commercial mortgage backed securities | 243 | 237 | 243 | 2 | 6 | |||||||||||||||
| Total | 348 | 342 | 348 | 4 | 8 | |||||||||||||||
Note
aAssets which represent the Barclays Bank Group’s continuing involvement in derecognised assets are recorded in Loans and advances at amortised cost and Debt Securities at FVTP&L.
36Assets pledged, collateral received and assets transferred
Assets are pledged or transferred as collateral to secure liabilities under repurchase agreements, securitisations and stock lending agreements or as security deposits relating to derivatives. Assets transferred are non-cash assets transferred to a third party that do not qualify for derecognition from the Barclays Bank Group’s balance sheet, for example because the Barclays Bank Group retains substantially all the exposure to those assets under an agreement to repurchase them in the future for a fixed price.
Where non-cash assets are pledged or transferred as collateral for cash received, the asset continues to be recognised in full, and a related liability is also recognised on the balance sheet. Where non-cash assets are pledged or transferred as collateral in an exchange for non-cash assets, the transferred asset continues to be recognised in full, and there is no associated liability as the non-cash collateral received is not recognised on the balance sheet. The Barclays Bank Group is unable to use, sell or pledge the transferred assets for the duration of the transaction and remains exposed to interest rate risk and credit risk on these pledged assets. Unless stated, the counterparty's recourse is not limited to the transferred assets.
The following table summarises the nature and carrying amount of the assets pledged as security against these liabilities:
| Barclays Bank Group | ||||||||
| 2021 | 2020 | |||||||
| £m | £m | |||||||
| Cash collateral and settlement balances | 63,080 | 69,271 | ||||||
| Loans and advances at amortised cost | 29,962 | 25,437 | ||||||
| Trading portfolio assets | 71,201 | 76,750 | ||||||
| Financial assets at fair value through the income statement | 5,595 | 5,584 | ||||||
| Financial assets at fair value through other comprehensive income | 14,699 | 15,303 | ||||||
| Assets pledged | 184,537 | 192,345 | ||||||
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 190 | ||||
Notes to the financial statements
Scope of consolidation
The following table summarises the transferred financial assets and the associated liabilities:
| Barclays Bank Group | ||||||||
| Transferred assets | Associated liabilities | |||||||
| £m | £m | |||||||
| At 31 December 2021 | ||||||||
| Derivatives | 64,826 | (64,826) | ||||||
| Repurchase agreements | 48,504 | (28,494) | ||||||
| Securities lending arrangements | 66,703 | — | ||||||
| Other | 4,504 | (4,174) | ||||||
| 184,537 | (97,494) | |||||||
| At 31 December 2020 | ||||||||
| Derivatives | 72,732 | (72,732) | ||||||
| Repurchase agreements | 58,398 | (39,044) | ||||||
| Securities lending arrangements | 59,824 | — | ||||||
| Other | 1,391 | (1,134) | ||||||
| 192,345 | (112,910) | |||||||
Included within Other are agreements where a counterparty's recourse is limited to the transferred assets. The relationship between the transferred assets and the associated liabilities is that holders of notes may only look to cash flows from the securitised assets for payments of principal and interest due to them under the terms of their notes.
| Carrying value | Fair value | ||||||||||||||||
| Transferred assets | Associated liabilities | Transferred assets | Associated liabilities | Net position | |||||||||||||
| £m | £m | £m | £m | £m | |||||||||||||
| Barclays Bank Group | |||||||||||||||||
| 2021 | |||||||||||||||||
| Recourse to transferred assets only | 1,303 | (1,225) | 1,423 | (1,219) | 204 | ||||||||||||
| 2020 | |||||||||||||||||
| Recourse to transferred assets only | 963 | (952) | 1,051 | (966) | 85 | ||||||||||||
The Barclays Bank Group has an additional £3.5bn (2020: £3.1bn) of loans and advances within its asset backed funding programmes that can readily be used to raise additional secured funding and are available to support future issuances.
Total assets pledged includes a collateral pool put in place to provide security for the UKRF funding deficit, as referred to in Note 31.
Collateral held as security for assets
Under certain transactions, including reverse repurchase agreements and stock borrowing transactions, the Barclays Bank Group is allowed to resell or re-pledge the collateral held. The fair value at the balance sheet date of collateral accepted and re-pledged to others was as follows:
| Barclays Bank Group | ||||||||
| 2021 | 2020 | |||||||
| £m | £m | |||||||
| Fair value of securities accepted as collateral | 934,363 | 792,317 | ||||||
| Of which fair value of securities re-pledged/transferred to others | 819,169 | 684,389 | ||||||
Additional disclosure has been included in Credit risk on pages 49 to 51.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 191 | ||||
Notes to the financial statements
Other disclosure matters
The notes included in this section focus on related party transactions, Auditors’ remuneration, Directors’ remuneration and Transition disclosures. Related parties include any subsidiaries, associates, joint ventures and Key Management Personnel.
37Related 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.
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 32.
Fellow subsidiaries
Transactions between the Barclays Bank Group and other subsidiaries of the parent company also meet the definition of related party transactions.
Associates and other entities
The Barclays Bank Group provides banking services to its associates 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 34.
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 | Pension funds | |||||||||||
| £m | £m | £m | £m | |||||||||||
| For the year ended and as at 31 December 2021 | ||||||||||||||
| Total income | (611) | 20 | — | 3 | ||||||||||
| Operating expenses | (64) | (3,195) | — | (1) | ||||||||||
| Total assets | 6,491 | 909 | — | 3 | ||||||||||
| Total liabilities | 32,141 | 3,962 | 177 | 81 | ||||||||||
| For the year ended and as at 31 December 2020 | ||||||||||||||
| Total income | (606) | 41 | — | 3 | ||||||||||
| Operating expenses | (62) | (2,937) | — | (1) | ||||||||||
| Total assets | 6,803 | 1,917 | — | 4 | ||||||||||
| Total liabilities | 25,819 | 3,954 | 66 | 69 | ||||||||||
Total liabilities include derivatives transacted on behalf of the pensions funds of £18m (2020: £13m).
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 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 | ||||||||
| 2021 | 2020 | |||||||
| £m | £m | |||||||
| As at 1 January | — | — | ||||||
Loans issued during the yeara | — | — | ||||||
Loan repayments during the yearb | — | — | ||||||
| As at 31 December | — | — | ||||||
Notes
aIncludes loans issued to existing Key Management Personnel and new or existing loans issued to newly appointed Key Management Personnel.
bIncludes loan repayments by existing Key Management Personnel and loans to former Key Management Personnel.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 192 | ||||
Notes to the financial statements
Other disclosure matters
No allowances for impairment were recognised in respect of loans to Key Management Personnel (or any connected person).
| Deposits outstanding | ||||||||
| 2021 | 2020 | |||||||
| £m | £m | |||||||
| As at 1 January | 3.4 | 4.2 | ||||||
Deposits received during the yeara | 9.0 | 13.3 | ||||||
Deposits repaid during the yearb | (10.3) | (14.1) | ||||||
| As at 31 December | 2.1 | 3.4 | ||||||
Notes
aIncludes deposits received from existing Key Management Personnel and new or existing deposits received from newly appointed Key Management Personnel.
bIncludes 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 2021 were £0.1m (2020: £0.2m).
All 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.
| 2021 | 2020 | |||||||
| £m | £m | |||||||
| Salaries and other short-term benefits | 35.2 | 37.5 | ||||||
| Pension costs | 0.2 | 0.1 | ||||||
| Other long-term benefits | 8.5 | 7.2 | ||||||
| Share-based payments | 13.2 | 12.4 | ||||||
| Employer social security charges on emoluments | 6.0 | 6.0 | ||||||
| Costs recognised for accounting purposes | 63.1 | 63.2 | ||||||
| Employer social security charges on emoluments | (6.0) | (6.0) | ||||||
| Other long-term benefits – difference between awards granted and costs recognised | 3.3 | 0.4 | ||||||
| Share-based payments – difference between awards granted and costs recognised | 6.1 | 1.3 | ||||||
| Total remuneration awarded | 66.5 | 58.9 | ||||||
Disclosure required by the Companies Act 2006
The following information regarding the Barclays Bank PLC Board of Directors is presented in accordance with the Companies Act 2006:
| 2021 | 2020 | |||||||
| £m | £m | |||||||
Aggregate emolumentsa | 6.3 | 6.4 | ||||||
Amounts paid under LTIPsb | 1.2 | — | ||||||
| 7.5 | 6.4 | |||||||
Notes
aThe aggregate emoluments include amounts paid for the 2021 year. In addition, deferred share awards for 2021 with a total value at grant of £1.4m (2020: £0.6m) will be made to Directors which will only vest subject to meeting certain conditions.
bThe figure above for "Amounts paid under LTIPs" for 2021 relates to LTIP awards that were released to Directors in 2021. This includes the first tranche of the 2017 LTIP, the release of which was delayed from June 2020 to March 2021. Dividend shares released on the awards are excluded (where applicable).
There were no pension contributions paid to defined contribution schemes on behalf of Directors (2020: £nil). There were no notional pension contributions to defined contribution schemes.
As at 31 December 2021, there were no Directors accruing benefits under a defined benefit scheme (2020: nil).
The aggregate amount of compensation payable to departing officers in respect of loss of office was £426,139 (2020: £1,850,713).
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 193 | ||||
Notes to the financial statements
Other disclosure matters
Of the figures in the table above, the amounts attributable to the highest paid Director in respect of qualifying services are as follows:
| 2021 | 2020 | |||||||
| £m | £m | |||||||
Aggregate emolumentsa | 2.1 | 3.0 | ||||||
| Amounts paid under LTIPs | 0.7 | — | ||||||
| 2.8 | 3.0 | |||||||
Note
aThe aggregate emoluments include amounts paid for the 2021 year.
There were no actual pension contributions paid to defined contribution schemes on behalf of the highest paid Director (2020: £nil). There were no notional pension contributions to defined contribution schemes (2020: £nil).
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 2021 to persons who served as Directors during the year was £nil (2020: £nil). The total value of guarantees entered into on behalf of Directors during 2021 was £nil (2020: £nil).
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 194 | ||||
Notes to the financial statements
Other disclosure matters
38Disposal of business
During the year, Barclays Bank PLC sold its investment in Barclays Insurance Guernsey PCC to Barclays Principal Investments Limited, a fellow Barclays PLC Group company, at its fair value of £65m. The Barclays Bank Group recorded a loss on disposal of £10m.
39Auditor’s remuneration
Auditor’s remuneration is included within consultancy, legal and professional fees in administration and general expenses and comprises:
| 2021 | 2020 | 2019 | ||||||||||||
| £m | £m | £m | ||||||||||||
| Audit of the Barclays Bank Group's annual accounts | 19 | 17 | 16 | |||||||||||
| Other services: | ||||||||||||||
Audit of the Barclays Bank PLC subsidiariesa | 14 | 13 | 12 | |||||||||||
Other audit related feesb | 7 | 7 | 6 | |||||||||||
| Other services | 1 | 1 | 1 | |||||||||||
| Total Auditor's remuneration | 41 | 38 | 35 | |||||||||||
Notes
aComprises the fees for the statutory audit of the subsidiaries both inside and outside UK and fees for the work performed by associates of KPMG in respect of the consolidated financial statements of the Company.
bComprises services in relation to statutory and regulatory filings. These include audit services for the review of the interim financial information under the Listing Rules of the UK listing authority.
Under SEC regulations, the remuneration of our auditors is required to be presented as follows: audit fees £36m (2020: £33m, 2019: £31m), audit-related fees £5 (2020: £5m, 2019: £3m), tax fees £nil (2020: £nil, 2019: £nil), and all other fees £nil (2020: £nil, 2019: £1m).
40Interest rate benchmark reform
Following the financial crisis, the reform and replacement of benchmark interest rates such as LIBOR has been a priority for global regulators. As a result, the UK’s Financial Conduct Authority (FCA) and other global regulators instructed market participants to prepare for the cessation of most LIBOR rates after the end of 2021 and to adopt “near Risk-Free Rates” (RFRs).
Pursuant to FCA announcements during 2021, panel bank submissions for all GBP, JPY and CHF LIBOR and Euro Overnight Index Average (EONIA) tenors ceased, and representative LIBOR rates also ceased after 31 December 2021. For USD, certain actively used tenors will continue to be provided until June 2023; however, in line with the US banking regulators’ joint statement, Barclays ceased issuing or entering into new contracts that use USD LIBOR as a reference rate from 31 December 2021, other than in relation to those allowable use cases set out under the FCA's prohibition notice (ref 21A). These include market making in support of client activity; or transactions that reduce or hedge Barclays’ or any client of Barclays’ US dollar LIBOR exposure on contracts entered into before 1 January 2022.
The Barclays Bank Group’s exposure to rates subject to benchmark interest rate reform has been predominantly to GBP, USD, JPY and CHF LIBOR and EONIA with the vast majority concentrated in derivatives within the Corporate and Investment Bank. Some additional exposure resides on floating rate loans and advances, repurchase agreements and debt securities held and issued within the Corporate and Investment Bank. Following transition activity in late 2021 and early 2022, GBP, USD (one week and two month tenors), JPY and CHF LIBOR and EONIA positions (“2021 scope”) have transitioned onto RFRs, and while there are a number of IBORs yet to cease, Barclays Bank Group’s exposure is now mainly to USD LIBOR.
There are key differences between IBORs and RFRs. IBORs are ‘term rates’, which means that they are published for a borrowing period (for example three months), and they are ‘forward-looking’, because they are published at the beginning of a borrowing period, based upon an estimated inter-bank borrowing cost for the period. RFRs are based upon overnight rates from actual transactions, and are therefore published after the end of the overnight borrowing period. Furthermore, IBORs include a credit spread over the RFRs. Therefore, to transition existing contracts and agreements to RFRs, adjustments for term and credit differences may need to be applied to RFR-linked rates. The methodologies for these adjustments have been determined through in-depth consultations by industry working groups, on behalf of the respective global regulators and related market participants.
How the Barclays Group is managing the transition to alternative benchmark rates
Barclays has established a Group-wide LIBOR Transition Programme, with oversight from the Barclays Group Finance Director. The Transition Programme spans all business lines and has cross-functional governance which includes Legal, Compliance, Conduct Risk, Client Engagement and Communications, Risk, and Finance. The Transition Programme aims to drive strategic execution, and identify, manage and resolve key risks and issues as they arise. Barclays’ transition plans primarily focus on G5 currencies while providing quarterly updates on progress and exposures to the PRA/FCA and other regulators as required.
The Transition Programme follows a risk based approach, using recognised ‘change delivery’ control standards. Accountable Executives are in place within key working groups and workstreams, with overall Board oversight delegated to the Board Risk Committee and the Barclays Group Finance Director. Barclays performs a prominent stewardship role to drive orderly transition via our representation on official sector and industry working groups across all major jurisdictions and product classes. Additionally, the Barclays Group Finance Director is Chair of the UK’s ‘Working Group on Sterling Risk-Free Reference Rates’ (UK £RFRWG), whose mandate is to catalyse a broad-based transition to using SONIA (‘Sterling Overnight Index Average’), as the primary sterling interest rate benchmark in bond, loan and derivatives markets.
Approaches to transition exposure expiring post the expected end dates for LIBOR vary by product and nature of counterparty. The Barclays Group has actively engaged with the counterparties to transition or include appropriate fallback provisions and transition mechanisms in its floating rate assets and liabilities with maturities after 2021, when relevant IBORs excluding USD LIBOR ceased to be published. The fallback will provide the relevant replacement rate. In the case of the ISDA Protocol it is the RFR plus a credit adjusted spread that should be used post cessation or pre-cessation of the relevant IBOR. For the derivative population, adherence to the ISDA IBOR Fallbacks Protocol has provided Barclays with an efficient mechanism to amend outstanding trades to incorporate fallbacks. Beyond the ISDA IBOR Fallbacks Protocol, other options have included terminating or bilaterally agreeing new terms with counterparties. Derivative contracts facing central clearing counterparties have followed a market-wide, standardised approach to reform through a series of CCP-led conversions.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 195 | ||||
Notes to the financial statements
Other disclosure matters
The FCA has authorised broad usage of synthetic LIBOR as a temporary solution for the ‘tough legacy’ population of unremediated contracts for GBP and JPY. Given cleared derivatives for the 2021 scope transitioned via CCP driven conversions, synthetic LIBOR does not apply in this context. In line with regulatory expectations, Barclays’ strategy remains to actively transition LIBOR exposure where viable, and/or to implement and utilise robust contractual fallbacks where possible. Where contracts remain unremediated, they may be able to utilise synthetic LIBOR on a temporary basis. Barclays will continue to monitor, assess and limit the reliance on synthetic LIBOR.
As announced by the FCA on 5 March 2021, USD LIBOR tenors (except 1 week and 2 month tenors) will cease to be representative from 30 June 2023. As detailed above, the key area of focus for transition prior to 2022 was on the other non-USD IBOR currency-tenors that ceased to be published at the end of 2021. Cessation of new USD LIBOR trading and transition of USD LIBOR exposures is the priority for the Barclays LIBOR Transition Programme in 2022/23. Clients and colleagues have been notified that we have prohibited entering into new USD LIBOR transactions (with narrow permitted exceptions) from 1 January 2022 in line with regulatory expectations.
Whilst synthetic LIBOR will be published on a temporary basis for 1, 3 and 6 month tenors of GBP and JPY LIBOR to assist the transition of certain exposures, no synthetic rate has been announced for USD LIBOR. New York State legislation has been enacted (with US Federal legislation to follow) which provides a solution for contracts governed under New York law for USD LIBOR to the Secured Overnight Financing Rate (SOFR) transition with the additional benefit of statutory contract continuity and safe harbour protection. This contrasts with the legislation implemented in the UK which provides for statutory contract continuity with safe harbour protection only for the administrator, and could expose market participants to additional litigation risk. Clients have been engaged on the transition of their legacy USD LIBOR exposures through active transition or the implementation of fallbacks, and have been issued with communications on key regulatory developments in the transition away from USD LIBOR.
Progress made during 2021
During 2021, the Barclays Bank Group delivered RFR product capabilities and alternatives to LIBOR across loans, bonds, securities financing transactions and derivatives required for LIBOR cessation to support transition of legacy contracts. Barclays Bank Group has transitioned over 99% (by gross notional exposure) of legacy positions in those rates within the 2021 scope, onto new RFRs in line with official sector expectations and milestones. This has been achieved through bilateral negotiation of contracts with clients, including the use of appropriate fallback provisions (which became effective post 31 December 2021, however, note that the switch onto the RFR may not take place until next reset post 31 December 2021 and so exposures may still be reported as LIBOR) and taking part in large scale transition events at a number of Central Counterparty Clearing Houses (London Clearing House (LCH), Chicago Mercantile Exchange (CME), EUREX and Japan Securities Clearing Corporation (JSCC) for OTC derivatives and Intercontinental Exchange (ICE) EU and LCH CurveGlobal for exchange traded derivatives). In relation to those contracts yet to be transitioned, we remain in active dialogue with clients. Barclays Bank Group transitioned the EONIA / LIBOR language in all active Credit Support Annexes (CSAs) via a number of mechanisms, primarily through bilateral CSA amendments but also by means of adherence to the ISDA 2021 EONIA Collateral Agreement Fallbacks Protocol. Barclays Bank Group delivered technology and business process changes required to ensure operational readiness in preparation for LIBOR cessation and transitions to RFRs for those benchmark rates ceasing at the end of 2021. Any incremental Technology or Business Process changes required to support USD LIBOR cessation will be delivered ahead of 30 June 2023. Whilst the majority of IBOR exposures have moved to RFRs, where appropriate other rates such as fixed rates or Bank of England base rates have also been used.
Risks to which the Barclays Bank Group is exposed as a result of the transition
Global regulators and central banks in the UK, US and EU have been driving international efforts to reform key benchmark interest rates and indices, such as LIBOR, which are used to determine the amounts payable under a wide range of transactions and make them more reliable and robust. These benchmark reforms have resulted in significant changes to the methodology and operation of certain benchmarks and indices, the adoption of RFRs, the discontinuation of certain reference rates (including LIBOR), and the introduction of implementing legislation and regulations. Specifically, regulators in the UK, US and EU have directed that certain non-US dollar LIBOR tenors cease at the end of 2021. Certain US dollar LIBOR tenors are to cease by the end of June 2023, and restrictions have been imposed on new use of USD LIBOR. Notwithstanding these developments, given the unpredictable consequences of benchmark reform, any of these developments could have an adverse impact on market participants, including the Group, in respect of any financial instruments linked to, or referencing, any of these benchmark interest rates.
Uncertainty associated with such potential changes, including the availability and/or suitability of alternative RFRs, the participation of customers and third-party market participants in the transition process; challenges with respect to required documentation changes; and impact of legislation to deal with ‘certain legacy’ contracts that cannot convert into or add fall-back RFRs before cessation of the benchmark they reference, may adversely affect a broad range of transactions (including any securities, loans and derivatives which use LIBOR or any other affected benchmark 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 present 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 (such as LIBOR) to new alternative RFRs, the Barclays Bank Group faces conduct risks. These may lead to customer complaints, regulatory sanctions or reputational impact if the Barclays Bank Group is considered to be (among other things) (i) 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 a consistent approach to remediation for customers in similar circumstances, (v) unduly delaying the communication and migration activities in relation to client exposure, leaving them insufficient time to prepare, or (vi) colluding or inappropriately sharing information with competitors.
•Litigation risk: members of the Barclays Bank Group may face legal proceedings, regulatory investigations and/or other actions or proceedings regarding (among other things) (i) the conduct risks identified above, (ii) the interpretation and enforceability of provisions in LIBOR-based contracts, and (iii) the Barclays Bank Group’s preparation and readiness for the replacement of LIBOR with alternative RFRs.
•Financial risk: the valuation of certain of the Barclays Bank Group’s financial assets and liabilities may change. Moreover, transitioning to alternative RFRs 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 certain alternative RFRs (such as the SONIA and 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 cash flows.
•Pricing risk: changes to existing reference rates and indices, discontinuation of any reference rate or indices and transition to alternative RFRs may impact the pricing mechanisms used by the Barclays Bank Group on certain transactions.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 196 | ||||
Notes to the financial statements
Other disclosure matters
•Operational risk: changes to existing reference rates and indices, discontinuation of any reference rate or index and transition to alternative RFRs 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.
•Accounting risk: an inability to apply hedge accounting in accordance with IAS 39 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, prospects and reputation. While a number of the above risks in relation to transition of legacy 2021 scope onto RFRs have been substantially mitigated, they remain relevant in relation to USD and related LIBOR rate transitions.
The Barclays Bank Group does not expect material changes to its risk management approach and strategy as a result of interest rate benchmark reform.
The following table summarises the significant exposures impacted by interest rate benchmark reform:
| As at 31 December 2021 | GBP LIBOR | USD LIBOR | JPY LIBOR | CHF LIBOR | Othersb | Total | ||||||||||||||
| £m | £m | £m | £m | £m | £m | |||||||||||||||
| Non-derivative financial assets | ||||||||||||||||||||
| Loans and advances at amortised cost | 11,761 | 15,801 | 24 | 222 | 442 | 28,250 | ||||||||||||||
| Reverse repurchase agreements and other similar secured lending | — | 186 | — | — | — | 186 | ||||||||||||||
| Financial assets at fair value through the income statement | 101 | 8,538 | 5 | 327 | 194 | 9,165 | ||||||||||||||
| Financial assets at fair value through other comprehensive income | — | — | — | — | — | — | ||||||||||||||
| Non-derivative financial assets | 11,862 | 24,525 | 29 | 549 | 636 | 37,601 | ||||||||||||||
| Non-derivative financial liabilities | ||||||||||||||||||||
| Debt securities in issue | — | — | — | — | — | — | ||||||||||||||
| Subordinated liabilities | (36) | (3,774) | (1,213) | — | (113) | (5,136) | ||||||||||||||
| Financial liabilities designated at fair value | (708) | (212) | — | — | — | (920) | ||||||||||||||
| Non-derivative financial liabilities | (744) | (3,986) | (1,213) | — | (113) | (6,056) | ||||||||||||||
| Equity | ||||||||||||||||||||
| Other equity instruments | — | (3,062) | — | — | — | (3,062) | ||||||||||||||
Standby facilities, credit lines and other commitmentsa | 58,094 | 42,767 | 1,284 | 375 | 12,973 | 115,493 | ||||||||||||||
| As at 31 December 2020 | GBP LIBOR | USD LIBOR | JPY LIBOR | CHF LIBOR | Othersb | Total | ||||||||||||||
| £m | £m | £m | £m | £m | £m | |||||||||||||||
| Non-derivative financial assets | ||||||||||||||||||||
| Loans and advances at amortised cost | 19,317 | 17,990 | 173 | 11 | 1,725 | 39,216 | ||||||||||||||
| Reverse repurchase agreements and other similar secured lending | — | 334 | — | — | — | 334 | ||||||||||||||
| Financial assets at fair value through the income statement | 1,190 | 6,373 | — | 283 | 209 | 8,055 | ||||||||||||||
| Financial assets at fair value through other comprehensive income | 186 | 106 | — | — | 8 | 300 | ||||||||||||||
| Non-derivative financial assets | 20,693 | 24,803 | 173 | 294 | 1,942 | 47,905 | ||||||||||||||
| Non-derivative financial liabilities | ||||||||||||||||||||
| Debt securities in issue | — | (1,430) | (22) | — | — | (1,452) | ||||||||||||||
| Subordinated liabilities | (21) | (876) | — | — | — | (897) | ||||||||||||||
| Financial liabilities designated at fair value | (149) | (1,273) | (759) | — | (139) | (2,320) | ||||||||||||||
| Non-derivative financial liabilities | (170) | (3,579) | (781) | — | (139) | (4,669) | ||||||||||||||
| Equity | ||||||||||||||||||||
| Other equity instruments | (2,122) | (3,062) | — | — | — | (5,184) | ||||||||||||||
Standby facilities, credit lines and other commitmentsa | 18,169 | 74,008 | — | 74 | 15,951 | 108,202 | ||||||||||||||
Notes
aThere has been a change on how exposures for multi currency loan facilities are reported in 2021, from base currency to the currency which needs to be remediated first. This has resulted in an increase in GBP LIBOR and a corresponding reduction in USD LIBOR exposure of £34bn. 2020 comparatives have not been restated to reflect this change.
bIncludes EUR LIBOR and SOR
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 197 | ||||
Notes to the financial statements
Other disclosure matters
The table above represents the exposures to interest rate benchmark reform by balance sheet account, which have yet to transition. The exposure disclosed is for positions with contractual maturities after 31 December 2021 (apart from USD, which is for maturities after 30 June 2023). Trades with exposures to other IBORs whose respective cessation dates is in the future and mature before that date have been excluded (2020: exposures are disclosed for maturities after 31 December 2021 for all rates). Balances reported at amortised cost are disclosed at their gross carrying value and do not include any expected credit losses that may be held against them.
The following table represents the derivative exposures to interest rate benchmark reform, which have yet to transition:
| As at 31 December 2021 | GBP LIBOR | USD LIBOR | EONIA | JPY LIBOR | CHF LIBOR | Othersa | Total | ||||||||||||||||
| £m | £m | £m | £m | £m | £m | £m | |||||||||||||||||
| Derivative notional contract amount | |||||||||||||||||||||||
| OTC interest rate derivatives | 245,604 | 2,283,077 | 7,811 | 140,357 | 4,396 | 61,937 | 2,743,182 | ||||||||||||||||
| OTC interest rate derivatives - cleared by central counterparty | — | 2,211,729 | — | — | — | 168,649 | 2,380,378 | ||||||||||||||||
| Exchange traded interest rate derivatives | — | 466,339 | — | — | — | — | 466,339 | ||||||||||||||||
| OTC foreign exchange derivatives | 183,477 | 461,680 | — | 122,823 | 32,900 | 1,419 | 802,299 | ||||||||||||||||
| OTC equity and stock index derivatives | — | 9,949 | — | — | — | — | 9,949 | ||||||||||||||||
| Derivative notional contract amount | 429,081 | 5,432,774 | 7,811 | 263,180 | 37,296 | 232,005 | 6,402,147 | ||||||||||||||||
| As at 31 December 2020 | GBP LIBOR | USD LIBOR | EONIA | JPY LIBOR | CHF LIBOR | Othersa | Total | ||||||||||||||||
| £m | £m | £m | £m | £m | £m | £m | |||||||||||||||||
| Derivative notional contract amount | |||||||||||||||||||||||
| OTC interest rate derivatives | 596,564 | 2,832,339 | 457,844 | 754,206 | 25,681 | 41,782 | 4,708,416 | ||||||||||||||||
| OTC interest rate derivatives - cleared by central counterparty | 1,552,637 | 2,872,962 | 623,802 | 1,091,479 | 119,382 | 198,113 | 6,458,375 | ||||||||||||||||
| Exchange traded interest rate derivatives | 300,182 | 333,705 | — | — | 2,494 | — | 636,381 | ||||||||||||||||
| OTC foreign exchange derivatives | 155,285 | 589,332 | — | 93,108 | 31,257 | 1,921 | 870,903 | ||||||||||||||||
| OTC equity and stock index derivatives | 1,845 | 7,946 | 544 | 1,929 | 491 | 2,141 | 14,896 | ||||||||||||||||
| Derivative notional contract amount | 2,606,513 | 6,636,284 | 1,082,190 | 1,940,722 | 179,305 | 243,957 | 12,688,971 | ||||||||||||||||
Note
aIncludes EUR LIBOR, SOR and STIBOR
The exposure disclosed is for positions with contractual maturities after 31 December 2021 (apart from USD, which is for maturities after 30 June 2023). Trades with exposures to other IBORs whose respective cessation dates is in the future and mature before that date have been excluded (2020: exposures are disclosed for maturities after 31 December 2021 for all rates). Derivatives are reported by using the notional contract amount and where derivatives have both pay and receive legs with exposure to benchmark reform, such as cross currency swaps, the notional contract amount is disclosed for both legs. As at 31 December 2021, there were £256bn (2020: £264bn) of cross currency swaps where both the pay and receive legs are impacted by interest rate benchmark reform.
The Barclays Bank Group also had £9bn (2020: £23bn) of Barclays issued debt retained by the Barclays Bank Group, impacted by the interest rate benchmark reform, in USD LIBOR (2020: predominately in GBP and USD LIBOR.)
Fallback clauses
The 31 December 2021 exposure has been broken up into those with robust fallbacks and those without. Fallbacks here are defined as any mechanism involving a ‘switch’ or ‘hardwire’ or a contractual agreement to transition to an automatically selected rate. One of the most commonly used is the ISDA 2020 IBOR Protocol published in October 2020 which enabled market participants to incorporate fallback provisions into legacy non-cleared derivatives and certain non-derivatives transactions. Market participants who have adhered to the ISDA 2020 IBOR Protocol agree, between adhering parties, that their legacy contracts will be amended to include the relevant fallback provisions. In addition to this, ISDA developed bilateral Swap Rate Fallbacks templates for GBP and JPY Swap Rate bilateral derivative trades with the GBP ICE Swap Rate fallback provisions being published in August 2021 and the JPY ISDA Swap Rate fallback provisions being published in November 2021. Whilst the fallback provisions have been applied to the majority of trades, with some limited exceptions being worked through, the switch to the replacement rate as a result of fallback provision inclusion may not take place until the next rate reset post the cessation or pre-cessation event.
The following tables present a breakdown of the exposures to IBOR reform (excluding USD LIBOR and other IBORs whose respective cessation dates is in the future) with fallbacks in place and those without.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 198 | ||||
Notes to the financial statements
Other disclosure matters
| With appropriate fallback clause | Without appropriate fallback clause | ||||||||||||||||||||||||||||||||||
| GBP LIBOR | JPY LIBOR | CHF LIBOR | EUR LIBOR | Total | GBP LIBOR | JPY LIBOR | CHF LIBOR | EUR LIBOR | Total | ||||||||||||||||||||||||||
| As at 31 December 2021 | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | |||||||||||||||||||||||||
| Non-derivative financial assets | |||||||||||||||||||||||||||||||||||
| Loans and advances at amortised cost | 7,389 | — | 210 | 413 | 8,012 | 4,372 | 24 | 12 | 29 | 4,437 | |||||||||||||||||||||||||
| Financial assets at fair value through the income statement | 84 | 5 | 327 | 8 | 424 | 17 | — | — | 186 | 203 | |||||||||||||||||||||||||
| Non-derivative financial assets | 7,473 | 5 | 537 | 421 | 8,436 | 4,389 | 24 | 12 | 215 | 4,640 | |||||||||||||||||||||||||
| Non-derivative financial liabilities | |||||||||||||||||||||||||||||||||||
| Subordinated liabilities | (36) | (1,213) | — | — | (1,249) | — | — | — | — | — | |||||||||||||||||||||||||
| Financial liabilities designated at fair value | (708) | — | — | — | (708) | — | — | — | — | — | |||||||||||||||||||||||||
| Non-derivative financial liabilities | (744) | (1,213) | — | — | (1,957) | — | — | — | — | — | |||||||||||||||||||||||||
| Standby facilities, credit lines and other commitments | 36,087 | 657 | 375 | 9,436 | 46,555 | 22,007 | 627 | — | 3,538 | 26,172 | |||||||||||||||||||||||||
The majority of the remaining exposures without fallbacks in place are either undrawn facilities or syndicated facilities where the transition is led by a third party agent. Work is ongoing with clients and agents to transition facilities or insert fallbacks prior to the next rate reset. There may be some scenarios where synthetic LIBOR is temporarily used whilst Barclays continues to work with the client to remediate their exposures, with little expectation of longer term usage.
| With appropriate fallback clause | Without appropriate fallback clause | ||||||||||||||||||||||||||||||||||||||||
| GBP LIBOR | EONIA | JPY LIBOR | CHF LIBOR | EUR LIBOR | Total | GBP LIBOR | EONIA | JPY LIBOR | CHF LIBOR | EUR LIBOR | Total | ||||||||||||||||||||||||||||||
| As at 31 December 2021 | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | |||||||||||||||||||||||||||||
| Derivative notional contract amount | |||||||||||||||||||||||||||||||||||||||||
| OTC interest rate derivatives | 234,813 | 7,568 | 135,720 | 4,362 | 3,626 | 386,089 | 10,791 | 244 | 4,638 | 35 | 403 | 16,111 | |||||||||||||||||||||||||||||
| OTC foreign exchange derivatives | 183,203 | — | 122,822 | 32,900 | — | 338,925 | 274 | — | 1 | — | — | 275 | |||||||||||||||||||||||||||||
| Derivative notional contract amount | 418,016 | 7,568 | 258,542 | 37,262 | 3,626 | 725,014 | 11,065 | 244 | 4,639 | 35 | 403 | 16,386 | |||||||||||||||||||||||||||||
Exposures that have not actively transitioned and do not have robust fallbacks in place will not necessarily need to apply the FCA’s approach to ‘tough legacy’ contracts and utilise synthetic LIBOR rates. In many cases, work is ongoing to transition trades or insert fallbacks prior to the next rate reset. There may be some scenarios where synthetic LIBOR is temporarily used whilst Barclays continues to work with the client to remediate their exposures, with little expectation of longer term usage. It is also key to note that not all remaining exposures can leverage synthetic LIBOR. CHF LIBOR, EUR LIBOR and EONIA do not have any synthetic LIBOR available and only the more commonly used, 1M, 3M and 6M GBP LIBOR and JPY LIBOR tenors have a synthetic rate being published. The volume of these residual exposures is very low and work is focused on transitioning these prior to next reset.
The majority of remaining exposures where no synthetic rate is available are bilateral derivatives using GBP/JPY Swap Rates within the Markets businesses. The focus for these is agreeing the bilateral swap rate fallbacks that were published by ISDA in August (for GBP) and November (for JPY) 2021. Continued uptake of these bilateral fallbacks has been seen in early 2022.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 199 | ||||
Notes to the financial statements
Other disclosure matters
41 Barclays Bank PLC (the Parent company)
| Income Statement | ||||||||||||||
| Barclays Bank PLC | Restateda | |||||||||||||
| 2021 | 2020 | 2019 | ||||||||||||
| For the year ended 31 December | £m | £m | £m | |||||||||||
| Continuing operations | ||||||||||||||
| Interest and similar income | 4,190 | 4,016 | 5,866 | |||||||||||
| Interest and similar expense | (3,096) | (3,059) | (4,729) | |||||||||||
| Net interest income | 1,094 | 957 | 1,137 | |||||||||||
| Fee and commission income | 4,272 | 3,770 | 4,226 | |||||||||||
| Fee and commission expense | (2,728) | (3,177) | (3,045) | |||||||||||
| Net fee and commission income | 1,544 | 593 | 1,181 | |||||||||||
| Net trading income | 4,575 | 6,066 | 3,679 | |||||||||||
| Net investment income | 1,123 | 574 | 1,225 | |||||||||||
| Other income | 4 | 130 | 59 | |||||||||||
| Total income | 8,340 | 8,320 | 7,281 | |||||||||||
| Credit impairment releases/( charges) | 414 | (1,577) | (235) | |||||||||||
| Net operating income | 8,754 | 6,743 | 7,046 | |||||||||||
| Staff costs | (1,598) | (1,623) | (1,826) | |||||||||||
| Infrastructure costs | (409) | (154) | (161) | |||||||||||
| Administration and general expenses | (3,158) | (3,154) | (3,019) | |||||||||||
| Litigation and conduct | (360) | (60) | (154) | |||||||||||
| Operating expenses | (5,525) | (4,991) | (5,160) | |||||||||||
| Share of post-tax results of associates and joint ventures | — | 2 | — | |||||||||||
| Profit on disposal of subsidiaries, associates and joint ventures | 94 | 401 | 132 | |||||||||||
| Profit before tax | 3,323 | 2,155 | 2,018 | |||||||||||
| Taxation | 113 | (21) | 391 | |||||||||||
| Profit after tax | 3,436 | 2,134 | 2,409 | |||||||||||
| Attributable to: | ||||||||||||||
| Equity holders of the parent | 2,641 | 1,305 | 1,570 | |||||||||||
| Other equity instrument holders | 795 | 829 | 839 | |||||||||||
| Total equity holders of the parent | 3,436 | 2,134 | 2,409 | |||||||||||
| Profit after tax | 3,436 | 2,134 | 2,409 | |||||||||||
a.2021 financial metrics have been restated to reflect the over-issuance of securities under the Company's 2019 F-3. See Restatement of financial statements (Note 1a) on page 118 for further details.
Dividends paid to the Parent company by its subsidiaries, associates and joint ventures totalled £1,174m (2020: £610m, 2019: £980m)
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 200 | ||||
Notes to the financial statements
Other disclosure matters
| Parent statement of comprehensive income | Restatedb | 2020 | 2019 | ||||||||
| 2021 | 2020 | 2019 | |||||||||
| For the year ended 31 December | £m | £m | £m | ||||||||
| Profit after tax | 3,436 | 2,134 | 2,409 | ||||||||
| Other comprehensive income/(loss) that may be recycled to profit or loss: | |||||||||||
| Currency translation reserve | |||||||||||
Currency translation differencesa | 128 | (519) | (198) | ||||||||
| Fair value through other comprehensive income reserve movement relating to debt securities | |||||||||||
| Net (losses)/gains from changes in fair value | (1,382) | 2,405 | 2,463 | ||||||||
| Net gains transferred to net profit on disposal | (248) | (252) | (454) | ||||||||
| Net (gains)/losses transferred to net profit due to impairment | (6) | 1 | 1 | ||||||||
| Net gains/(losses) due to fair value hedging | 1,103 | (1,634) | (1,780) | ||||||||
| Other movements | — | — | (3) | ||||||||
| Tax | 170 | (131) | (63) | ||||||||
| Cash flow hedging reserve | |||||||||||
| Net (losses)/gains from changes in fair value | (2,230) | 1,375 | 850 | ||||||||
| Net gains transferred to net profit | (333) | (296) | (149) | ||||||||
| Tax | 748 | (291) | (175) | ||||||||
| Other | — | 2 | 9 | ||||||||
| Other comprehensive (loss)/income that may be recycled to profit or loss | (2,050) | 660 | 501 | ||||||||
| Other comprehensive (loss)/income not recycled to profit or loss: | |||||||||||
| Retirement benefit remeasurements | 1,261 | (85) | (269) | ||||||||
| Fair value through other comprehensive income reserve movements relating to equity instruments | — | — | (3) | ||||||||
| Own credit | (55) | (778) | (277) | ||||||||
| Tax | (563) | 190 | 149 | ||||||||
| Other comprehensive income/(loss) not recycled to profit or loss | 643 | (673) | (400) | ||||||||
| Other comprehensive (loss)/income for the year | (1,407) | (13) | 101 | ||||||||
| Total comprehensive income for the year | 2,029 | 2,121 | 2,510 | ||||||||
| Attributable to: | |||||||||||
| Equity holders of the parent | 2,029 | 2,121 | 2,510 | ||||||||
| Total comprehensive income for the year | 2,029 | 2,121 | 2,510 | ||||||||
Note
aIncludes £0m (2020:£0m; 2019: £45m profit) on recycling of currency translation differences.
b2021 financial metrics have been restated to reflect the over-issuance of securities under the Company's 2019 F-3. See Restatement of financial statements (Note 1a) on page 118 for further details.
The Parent company financials on pages 111 to 114 form part of this note.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 201 | ||||
Notes to the financial statements
Other disclosure matters
Commitments and contractual obligations
Barclays Bank PLC Commercial commitments include guarantees, contingent liabilities and standby facilities.
| Commercial commitments | |||||||||||||||||
| Amount of commitment expiration per period | |||||||||||||||||
| Less than one year | Between one to three years | Between three to five years | After five years | Total amounts committed | |||||||||||||
| Barclays Bank PLC | £m | £m | £m | £m | £m | ||||||||||||
| As at 31 December 2021 | |||||||||||||||||
| Guarantees and letters of credit pledged as collateral security | 45,289 | — | — | — | 45,289 | ||||||||||||
| Performance guarantees, acceptances and endorsements | 10,485 | — | — | — | 10,485 | ||||||||||||
| Documentary credits and other short-term trade related transactions | 1,462 | — | — | — | 1,462 | ||||||||||||
| Standby facilities, credit lines and other commitments | 193,641 | — | — | — | 193,641 | ||||||||||||
| As at 31 December 2020 | |||||||||||||||||
| Guarantees and letters of credit pledged as collateral security | 31,425 | 23 | — | — | 31,448 | ||||||||||||
| Performance guarantees, acceptances and endorsements | 10,967 | 2 | — | — | 10,969 | ||||||||||||
| Documentary credits and other short-term trade related transactions | 1,029 | — | — | — | 1,029 | ||||||||||||
| Standby facilities, credit lines and other commitments | 182,357 | 150 | 198 | 28 | 182,733 | ||||||||||||
Contractual obligations include debt securities.
| Contractual obligations | |||||||||||||||||
| Payments due by period | |||||||||||||||||
| Less than one year | Between one to three years | Between three to five years | After five years | Total | |||||||||||||
| Barclays Bank PLC | £m | £m | £m | £m | £m | ||||||||||||
| As at 31 December 2021 | |||||||||||||||||
Long-term debta | 31,019 | 10,446 | 6,509 | 20,050 | 68,024 | ||||||||||||
| Purchase obligations | 17 | — | — | — | 17 | ||||||||||||
| Total | 31,036 | 10,446 | 6,509 | 20,050 | 68,041 | ||||||||||||
| As at 31 December 2020 | |||||||||||||||||
Long-term debta | 20,841 | 10,301 | 7,880 | 14,873 | 53,895 | ||||||||||||
Note
aLong-term debt has been prepared to reflect cash flows on an undiscounted basis, which includes interest payments.
Net cash flows from derivatives used to hedge long-term debt amount to £1.1bn (2020: £2.3bn).
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 202 | ||||
Additional unaudited information
Additional information
Additional shareholder information
Articles of Association
Barclays Bank PLC (the “Company”) is a public limited company registered in England and Wales under company number 01026167 (formerly called Barclays Bank International Limited, a company incorporated under the name The Colonial Bank by the Colonial Bank Act 1925 and which changed its name on 15 September 1925 to Barclays Bank (Dominion, Colonial and Overseas) and further changed its name on 22 September 1954 to Barclays Bank D.C.O. and on 1 October 1971 to Barclays Bank International Limited) was incorporated under the Companies Acts 1948 to 1967 as a limited company on 4 October 1971 and changed its name on 1 January 1985 to Barclays Bank PLC.
Under the Companies Act 2006 a company’s Memorandum of Association now need only contain the names of the subscribers and the number of shares each subscriber has agreed to take. For companies in existence as of 1 October 2009, all other provisions which were contained in the company’s Memorandum of Association, including the company’s objects, are now deemed to be contained in the company’s articles. The Companies Act 2006 also states that a company’s objects are unrestricted unless the company’s articles provide otherwise.
The Articles of Association were adopted by Special Resolution at the Company's Annual General Meeting on 8 June 2021,in substitution for and to the exclusion of Articles adopted 30 April 2010.
The following is a summary and explanation of the current Articles of Association, which are available for inspection.
Directors
(i)The minimum number of Directors (excluding alternate Directors) is five. There is no maximum limit. There is no age limit for Directors. A director shall not be required to hold any shares in the Company by way of qualification.
(ii)Excluding executive remuneration and any other entitlement to remuneration for extra services (including service on board committees) under the Articles, a Director is entitled to a fee at a rate determined by the Board but the aggregate fees paid to all Directors shall not exceed £2,000,000 per annum or such higher amount as may be approved by an ordinary resolution of the Company. Each Director is entitled to reimbursement for all reasonable travelling, hotel and other expenses properly incurred by him/her in or about the performance of his/her duties.
(iii)A Director may hold any other office of the Company on such terms as the Board shall determine.
(iv)No director shall be required to retire from office at any annual general meeting by rotational retirement.
(v)The Board has the power to appoint additional Directors or to fill a casual vacancy amongst the Directors. Any Director so appointed holds office until the next AGM, when he/she may offer himself/herself for reappointment.
(vi)The Board may appoint any Director to any executive position or employment in the Company on such terms as they determine.
(vii)The Company may by ordinary resolution remove a Director before the expiry of his/her period of office (without prejudice to a claim for damages for breach of contract or otherwise) and may by ordinary resolution appoint another person who is willing to act to be a Director in his/her place.
(viii)A Director may appoint either another Director or some other person approved by the Board to act as his/her alternate with power to attend Board meetings and generally to exercise the functions of the appointing Director in his/her absence (other than the power to appoint an alternate).
(ix)The Board may authorise any matter in relation to which a Director has, or can have, a direct interest that conflicts, or possibly may conflict with, the Company’s interests. Only Directors who have no interest in the matter being considered will be able to authorise the relevant matter and they may impose limits or conditions when giving authorisation if they think this is appropriate.
(x)A Director may hold positions with or be interested in other companies and, subject to legislation applicable to the Company and the FCA’s requirements, may contract with the Company or any other company in which the Company is interested. A Director may not vote or count towards the quorum on any resolution concerning any proposal in which he/she (or any person connected with him/her) has a material interest (other than by virtue of his/her interest in securities of the Company) or if he/she has a duty which conflicts or may conflict with the interests of the Company, unless the resolution relates to any proposal:
(a)to indemnify a Director or provide him/her with a guarantee or security in respect of money lent by him/her to, or any obligation incurred by him/her or any other person for the benefit of (or at the request of), the Company (or any other member of the Group);
(b)to indemnify or give security or a guarantee to a third party in respect of a debt or obligation of the Company (or any other member of the Group) for which the Director has personally assumed responsibility;
(c)to obtain insurance for the benefit of Directors;
(d)involving the acquisition by a Director of any securities of the Company (or any other member of the Group) pursuant to an offer to existing holders of securities or to the public;
(e)concerning any other company in which the Director is interested as an officer or creditor or Shareholder but, broadly, only if he/she (together with his/her connected persons) is directly or indirectly interested in less than 1% of either any class of the issued equity share capital or of the voting rights of that company; and
(f)concerning any other arrangement for the benefit of employees of the Company (or any other member of the Group) under which the Director benefits or stands to benefit in a similar manner to the employees concerned and which does not give the Director any advantage which the employees to whom the arrangement relates would not receive.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 203 | ||||
Additional unaudited information
Classes of Shares
The Company authorised capital comprise of Ordinary Shares, Euro, US Dollar and Sterling Preference Shares (collectively, the “Preference Shares”) and Series 1 Sterling Preference Shares. A list and description the outstanding Ordinary Shares and Preference Shares of the Company is included in Note 27 to the Financial Statements (Ordinary shares, share premium, and other equity).
Dividends
Subject to the provisions of the Articles and applicable legislation, the Company in general meeting may declare dividends on the Ordinary Shares by ordinary resolution, but any such dividend may not exceed the amount recommended by the Board. The Board may also pay interim or final dividends if it appears they are justified by the Company’s financial position.
Each Preference Share confers the right to a preferential dividend (“Preference Dividend”) payable in such currency at such rates (whether fixed or calculated by reference to or in accordance with a specified procedure or mechanism), on such dates and on such other terms as may be determined by the Board prior to allotment thereof.
The Preference Shares rank in regard to payment of dividends in priority to the holders of Ordinary Shares and any other class of shares in the Company ranking junior to the Preference Shares.
Dividends may be paid on the Preference Shares if, in the opinion of the Board, the Company has sufficient distributable profits, after payment in full or the setting aside of a sum to provide for all dividends payable on (or in the case of shares carrying a cumulative right to dividends, before) the relevant dividend payment date on any class of shares in the Company ranking pari passu with or in priority to the relevant series of Preference Shares as regards participation in the profits of the Company.
If the Board considers that the distributable profits of the Company available for distribution are insufficient to cover the payment in full of Preference Dividends, Preference Dividends shall be paid to the extent of the distributable profits on a pro rata basis.
Notwithstanding the above, the Board may, at its absolute discretion, determine that any Preference Dividend which would otherwise be payable may either not be payable at all or only payable in part.
If any Preference Dividend on a series of Preference Shares is not paid, or is only paid in part, for the reasons described above, holders of Preference Shares will not have a claim in respect of such non-payment.
If any dividend on a series of Preference Shares is not paid in full on the relevant dividend payment date, a dividend restriction shall apply. The dividend restriction means that, subject to certain exceptions, neither the Company nor Barclays Bank may (a) pay a dividend on, or (b) redeem, purchase, reduce or otherwise acquire, any of their respective ordinary shares, other preference shares or other share capital ranking equal or junior to the relevant series of Preference Shares until the earlier of such time as the Company next pays in full a dividend on the relevant series of Preference Shares or the date on which all of the relevant series of Preference Shares are redeemed.
All unclaimed dividends payable in respect of any share may be invested or otherwise made use of by the Board for the benefit of the Company until claimed. If a dividend is not claimed after 12 years of it becoming payable, it is forfeited and reverts to the Company. However, The Company shall be indebted to the member or other person entitled to the shares for the net proceeds of any shares sold by the Company for a period of six years following the date of such sale.
Subject to applicable legislation and the rights of the other shareholders, any share may be issued on terms that it is, at the option of the Company or the holder of such share, redeemable. The Directors are authorised to determine the terms, conditions and manner of redemption of any such shares under the Articles of Association.
Calls on capital
The Directors may make calls upon the members in respect of any monies unpaid on their shares. A person upon whom a call is made remains liable even if the shares in respect of which the call is made have been transferred. Interest will be chargeable on any unpaid amount called at a rate determined by the Board (of not more than 20% per annum).
If a member fails to pay any call in full (following notice from the Board that such failure will result in forfeiture of the relevant shares), such shares (including any dividends declared but not paid) may be forfeited by a resolution of the Board, and will become the property of the Company. Forfeiture shall not absolve a previous member for amounts payable by him/her (which may continue to accrue interest).
The Company also has a lien over all partly paid shares of the Company for all monies payable or called on that share and over the debts and liabilities of a member to the Company. If any monies which are the subject of the lien remain unpaid after a notice from the Board demanding payment, the Company may sell such shares.
Annual and other general meetings
The Company is required to hold an AGM in addition to such other general meetings as the Directors think fit. The type of the meeting will be specified in the notice calling it. Under the Companies Act 2006, the AGM must be held within six months of the accounting reference date. A general meeting may be convened by the Board on requisition in accordance with the applicable legislation.
In the case of an AGM, a minimum of 21 clear days’ notice is required. The notice must be in writing and must specify the place, the day and the hour of the meeting, and the general nature of the business to be transacted. A notice convening a meeting to pass a special resolution shall specify the intention to propose the resolution as such. The accidental failure to give notice of a general meeting or the non-receipt of such notice will not invalidate the proceedings at such meeting.
Subject as noted above, all Shareholders are entitled to attend and vote at general meetings. The Articles do, however, provide that arrangements may be made for simultaneous attendance at a satellite meeting place or, if the meeting place is inadequate to accommodate all members and proxies entitled to attend, another meeting place may be arranged to accommodate such persons other than that specified in the notice of meeting, in which case Shareholders may be excluded from the principal place.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 204 | ||||
Additional unaudited information
Holders of Preference Shares have no right to receive notice of, attend or vote at, any general meetings of the Company as a result of holding Preference Shares.
Notices
Save where the articles expressly require otherwise, a document or information may be sent by the Company in hard copy form, electronic form, by being made available on a website, or by another means agreed with the recipient, in accordance with the provisions set out in the Companies Act 2006. Accordingly, a document or information may only be sent in electronic form to a person who has agreed to receive it in that form or, in the case of a company, who has been deemed to have so agreed pursuant to applicable legislation. A document or information may only be sent by being made available on a website if the recipient has agreed to receive it in that form or has been deemed to have so agreed pursuant to applicable legislation, and has not revoked that agreement.
In respect of joint holdings, documents or information shall be sent to the joint holder whose name stands first in the register.
A member who (having no registered address within the UK) has not supplied an address in the UK at which documents or information may be sent in hard copy form, or an address to which notices, documents or information may be sent or supplied by electronic means, is not entitled to have documents or information sent to him/her.
In addition, the Company may cease to send notices to any member who has been sent documents on two consecutive occasions over a period of at least 12 months and when each of those documents is returned undelivered or notification is received that they have not been delivered.
Capitalisation of profits
The Company may, by ordinary resolution, upon the recommendation of the Board capitalise all or any part of an amount standing to the credit of a reserve or fund to be set free for distribution provided that amounts from the share premium account, capital redemption reserve or any profits not available for distribution should be applied only in paying up unissued shares to be allotted to members credited as fully paid and no unrealised profits shall be applied in paying up debentures of the Company or any amount unpaid on any share in the capital of the Company.
Indemnity
Subject to applicable legislation, every current and former Director or other officer of the Company (other than any person engaged by the company as auditor) shall be indemnified by the Company against any liability in relation to the Company, other than (broadly) any liability to the Company or a member of the Group, or any criminal or regulatory fine.
Variation of Rights
The rights attached to any class of shares may be varied either with the consent in writing of the holders of at least 75% in nominal value of the issued shares of that class, or with the sanction of a special resolution passed at a separate meeting of the holders of the shares of that class. The rights of shares shall not (unless expressly provided by the rights attached to such shares) be deemed varied by the creation of further shares ranking equally with them or subsequent to them.
Limitations on foreign shareholders
There are no restrictions imposed by the Articles of Association or (subject to the effect of any economic sanctions that may be in force from time to time) by current UK laws which relate only to non-residents of the UK and which limit the rights of such non-residents to hold or (when entitled to do so) vote the ordinary shares.
Special rights
There are no persons holding securities that carry special rights with regard to the control of the company.
Taxation of UK holders
The following is a summary of certain UK tax issues which are likely to be material to the holding and disposal of Preference Shares of Barclays Bank PLC or ADSs representing such Preference Shares (the ‘Shares’).
It is based on the current laws of England and Wales, UK tax law and the practice of Her Majesty’s Revenue and Customs (‘HMRC’), each of which may be subject to change, possibly with retrospective effect. It is a general guide for information purposes and should be treated with appropriate caution. It is not intended as tax advice and it does not purport to describe all of the tax considerations that may be relevant to a prospective purchaser, holder or disposer of Shares. In particular, save where expressly stated to the contrary, this summary deals with shareholders who are resident and, in the case of individuals, domiciled in (and only in) the UK for UK tax purposes, who hold their Shares as investments (other than under an individual savings account) and who are the absolute beneficial owners of their Shares and any dividends paid on them.
The statements are not addressed to: (i) shareholders who own (or are deemed to own) 10% or more of the voting power of Barclays Bank PLC; (ii) shareholders who hold Shares as part of hedging transactions; (iii) investors who have (or are deemed to have) acquired their Shares by virtue of an office or employment; and (iv) shareholders who hold Shares in connection with a trade, profession or vocation carried on in the UK (whether through a branch or agency or, in the case of a corporate shareholder, through a permanent establishment, or otherwise). It does not discuss the tax treatment of classes of shareholder subject to special rules, such as dealers in securities.
Persons who are in any doubt as to their tax position should consult their professional advisers. Persons who may be liable to taxation in jurisdictions other than the UK in respect of their acquisition, holding or disposal of Shares are particularly advised to consult their professional advisers as to whether they are so liable.
(i)Taxation of dividends
In accordance with UK law, Barclays Bank PLC pays dividends on the Shares without any deduction or withholding for or on account of any taxes imposed by the UK government or any UK taxing authority.
The total dividends (including any dividends paid by Barclays Bank PLC) paid to a UK resident individual shareholder in a tax year (the ‘Total Dividend Income’) will generally form part of that shareholder’s total income for UK income tax purposes, and will be subject to UK income tax at the rates discussed below.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 205 | ||||
Additional unaudited information
For dividends paid on or after 6 April 2016, the rate of UK income tax applicable to the Total Dividend Income will depend on the amount of the Total Dividend Income and the UK income tax band(s) that the Total Dividend Income falls within when included as part of the shareholder’s total income for UK income tax purposes for that tax year.
For the tax year from 6 April 2021 to 5 April 2022 (inclusive), a nil rate of UK income tax applies to the first £2,000 of Total Dividend Income received by an individual shareholder in that tax year (the ‘Nil Rate Amount’). For the 2018-2019, 2019-2020 and 2020-2021 tax years, the Nil Rate Amount was £2,000. For the 2016-2017 and 2017-2018 tax years, the Nil Rate Amount was £5,000.
Where the Total Dividend Income received by an individual shareholder in a tax year exceeds the relevant Nil Rate Amount for that tax year, the excess amount (the ‘Remaining Dividend Income’) will be subject to UK income tax at the following current rates:
(a) at the rate of 7.5% on any portion of the Remaining Dividend Income that falls within the basic tax band;
(b) at the rate of 32.5% on any portion of the Remaining Dividend Income that falls within the higher tax band; and
(c) at the rate of 38.1% on any portion of the Remaining Dividend Income that falls within the additional tax band.
In determining the tax band the Remaining Dividend Income falls within for a tax year, the individual shareholder’s Total Dividend Income for the tax year in question (including the portion comprising the Nil Rate Amount) will be treated as the top slice of the shareholder’s total income for UK income tax purposes.
Subject to special rules for small companies, UK resident shareholders within the charge to UK corporation tax will not generally be subject to UK corporation tax on the dividends paid on the Shares, provided the dividend falls within an exempt class and certain conditions are met.
(ii)Taxation of capital gains
The disposal of Shares may, depending on the shareholder’s circumstances, give rise to a liability to UK tax on chargeable capital gains.
Where Shares are sold, a liability to UK tax may result if the proceeds from that sale exceed the sum of the base cost of the Shares sold and any other allowable deductions such as share dealing costs and, in certain circumstances, indexation relief (discussed further below). For this purpose, current legislation permits the market valuation at 31 March 1982 to be substituted for the original cost of shares purchased before that date, subject to certain exceptions for shareholders within the charge to UK corporation tax. Shareholders other than those within the charge to UK corporation tax should note that, following the Finance Act 2008, no indexation allowance will be available. Following the Finance Act 2018, shareholders within the charge to UK corporation tax may be eligible for indexation allowance for the period of ownership of their Shares up to December 2017, but no indexation allowance will be available in respect of the period of ownership starting on or after 1 January 2018.
Chargeable capital gains may also arise from the gifting of Shares to connected parties such as relatives (although not spouses or civil partners) and family trusts.
The calculations required to compute chargeable capital gains may be complex. Shareholders are advised to consult their personal financial adviser if further information regarding a possible tax liability in respect of their holdings of shares is required.
(iii)Stamp duty and stamp duty reserve tax
Dealings in Shares will generally be subject to UK stamp duty or stamp duty reserve tax (although see the comments below as regards ADSs in the section ‘Taxation of US holders – UK stamp duty and stamp duty reserve tax’). Any document effecting the transfer on sale of Shares will generally be liable to stamp duty at 0.5% of the consideration paid for that transfer (rounded up to the next £5). An unconditional agreement to transfer Shares, or any interest therein, will generally be subject to stamp duty reserve tax at 0.5% of the consideration given. Such liability to stamp duty reserve tax will be cancelled, or a right to a repayment (generally with interest) in respect of the stamp duty reserve tax liability will arise, if the agreement is completed by a duly stamped transfer within six years of the agreement having become unconditional. Both stamp duty and stamp duty reserve tax are normally the liability of the transferee.
Paperless transfers of Shares within CREST are liable to stamp duty reserve tax rather than stamp duty.
Stamp duty reserve tax on transactions settled within the CREST system or reported through it for regulatory purposes will be collected by CREST.
Special rules apply to certain categories of person, including intermediaries, market makers, brokers, dealers and persons connected with depositary arrangements and clearance services.
(iv)Inheritance tax
An individual may be liable to inheritance tax on the transfer of Shares. Where an individual is so liable, inheritance tax may be charged on the amount by which the value of his or her estate is reduced as a result of any transfer by way of gift or other gratuitous transaction made by them or treated as made by them.
Taxation of US Holders
The following is a summary of certain US federal income tax considerations and certain UK tax considerations to the purchase, ownership, and disposition of Preference Shares of Barclays Bank PLC or ADSs representing such Preference Shares (the "Shares") that are likely to be relevant for US Holders (as defined below) who own the Shares as capital assets for tax purposes. This discussion is not a comprehensive analysis of all the potential US or UK tax consequences that may be relevant to US Holders and does not discuss particular tax consequences that may be applicable to US Holders who may be subject to special tax rules such as banks, brokers or dealers in securities or currencies, traders in securities that elect to use a mark-to-market method of accounting for securities holdings, financial institutions, tax-exempt organisations, regulated investment companies, life insurance companies, entities or arrangements that are treated as partnerships for US federal income tax purposes (or partners therein), holders that own or are treated as owning 10% or more of the stock of Barclays Bank PLC measured either by voting power or value, holders that hold Shares as part of a straddle or a hedging or conversion transaction, holders that purchase or sell Shares as part of a wash sale, holders whose functional currency is not the US Dollar, or holders who are resident, or who are carrying on a trade, in the UK. The summary also does not address state or local taxes or any aspect of US federal taxation other than US federal income taxation (such as the estate and gift tax, the alternative minimum tax or the Medicare tax on net
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 206 | ||||
Additional unaudited information
investment income). Investors are advised to consult their tax advisers regarding the tax implications of their particular holdings, including the consequences under applicable state and local law, and in particular whether they are eligible for the benefits of the Treaty (as defined below).
This discussion is based on the Internal Revenue Code of 1986, as amended (the ‘Code’), its legislative history, existing and proposed regulations, published rulings and court decisions, and on the Double Taxation Convention between the UK and the US as entered into force in March 2003 (the ‘Treaty’), and, in respect of UK tax, the Estate and Gift Tax Convention between the UK and the US as entered into force on 11 November 1979 (the ‘Estate and Gift Tax Convention’), the current UK tax law and the practice of HMRC, all of which are subject to change, possibly on a retroactive basis. This discussion is based in part upon the representations of the ADR Depositary and the assumption that each obligation of the Deposit Agreement and any related agreement will be performed in accordance with its terms.
A “US Holder” is a beneficial owner of Shares that is a citizen or resident of the United States or a US domestic corporation or that otherwise is subject to US federal income taxation on a net income basis in respect of such Shares and that is fully eligible for benefits under the Treaty.
In general, the holders of ADRs evidencing ADSs will be treated as owners of the underlying Preference Shares for the purposes of the Treaty, the Estate and Gift Tax Convention, and the Code. Generally, exchanges of shares for ADRs and ADRs for shares will not be subject to US federal income tax or to UK capital gains tax.
Taxation of dividends
Subject to the PFIC rules discussed below, the gross amount of any distribution of cash or property with respect to the Shares (including any amount withheld in respect of UK taxes) that is paid out of Barclays Bank PLC’s current or accumulated earnings and profits (as determined for US federal income tax purposes) will be includible in a US Holder’s taxable income as ordinary dividend income on the day such US Holder receives the dividend, in the case of Preference Shares, or the date the Depositary receives the dividends, in the case of ADRs, and will not be eligible for the dividends-received deduction allowed to corporations under the Code.
Subject to certain exceptions for short-term positions, dividends paid by Barclays Bank PLC to an individual with respect to the Shares will generally be subject to taxation at a preferential rate if the dividends are “qualified dividend income.” Dividends paid on the Shares will be treated as qualified dividend income if (i) the Shares are readily tradable on an established securities market in the United States or Barclays Bank PLC is eligible for the benefits of a comprehensive tax treaty with the United States that the US Treasury determines is satisfactory for purposes of this provision and that includes an exchange of information programme, and (ii) Barclays Bank PLC was not a PFIC (as defined below) in the year of the distribution or the immediately preceding taxable year. The US Treasury has determined that the Treaty meets the requirements for reduced rates of taxation, and Barclays Bank PLC believes that it is eligible for the benefits of the Treaty. Based on its audited financial statements and relevant market and shareholder date, Barclays Bank PLC believes that it was not treated as a PFIC for US federal income tax purposes with respect to its 2020 or 2021 taxable years. In addition, based on its audited financial statements and current expectations regarding the value and nature of its assets, the sources and nature of its income, and relevant market and shareholder data, Barclays Bank PLC does not anticipate becoming a PFIC for its current taxable year or in the foreseeable future.
Dividends paid by Barclays Bank PLC to a US Holder with respect to the Shares will not be subject to UK withholding tax. For foreign tax credit purposes, dividends will generally be income from sources outside the US and will generally be “passive” income for purposes of computing the foreign tax credit allowable to a US Holder.
The amount of the dividend distribution includable in income will be the US Dollar value of the distribution, determined at the spot Pound Sterling/US Dollar rate on the date the dividend distribution is includable in income, regardless of whether the payment is in fact converted into US Dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend payment is includable in income to the date the payment is converted into US Dollars will be treated as ordinary income or loss and, for foreign tax credit limitation purposes, from sources within the US, and will not be eligible for the special tax rates applicable to qualified dividend income.
Distributions in excess of current or accumulated earnings and profits, as determined for US federal income tax purposes, will be treated as a return of capital to the extent of the US Holder’s basis in the Shares and thereafter as capital gain. Because Barclays Bank PLC does not currently maintain calculations of earnings and profits for US federal income tax purposes, US Holders should expect that distributions with respect to the Shares will generally be treated as dividends.
Taxable sale or other disposition of Shares
Subject to the PFIC rules discussed below, upon a sale or other taxable disposition of the Shares, US Holders generally will not be subject to UK tax, but will realise gain or loss for US federal income tax purposes in an amount equal to the difference between the US Dollar value of the amount realised on the disposition and the US Holder’s adjusted tax basis in the Shares, as determined in US Dollars. Such gain or loss will be capital gain or loss, and will generally be long‑term capital gain or loss if the Shares have been held for more than one year. Long‑term capital gain of a noncorporate US Holder is generally taxed at preferential rates. The gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes. The deductibility of capital losses is subject to limitations.
Taxation of passive foreign investment companies (PFICs)
Barclays Bank PLC believes that its Shares should not be treated as stock of a passive foreign investment company (“PFIC”) for US federal income tax purposes, but this conclusion is a factual determination that is made annually and thus may be subject to change. In general, Barclays Bank PLC will be a PFIC with respect to a US Holder if, for any taxable year in which a US Holder holds the Shares, either (i) at least 75% of the gross income of Barclays Bank PLC for the taxable year is passive income, or (ii) at least 50% of the value, generally determined on the basis of a quarterly average, of Barclays Bank PLC’s assets is attributable to assets that produce or are held for the production of passive income (including cash). With certain exceptions, a US Holder’s Shares will be treated as stock of a PFIC if Barclays Bank PLC was a PFIC at any time during such holder’s holding period in its Shares.
If Barclays Bank PLC were to be treated as a PFIC with respect to a US Holder, unless such US Holder elected to be taxed annually on a mark-to-market basis with respect to its Shares, such gain and certain ‘excess distributions’ would be treated as having been realised ratably over a US Holder’s holding period for the Shares and generally would be taxed at the highest tax rate in effect for each such year to which the gain was allocated, together with an interest charge in respect of the tax attributable to each such year.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 207 | ||||
Additional unaudited information
UK stamp duty and stamp duty reserve tax
No obligation to pay UK stamp duty will arise on the transfer on sale of an ADS, provided that any instrument of transfer is not executed in, and remains at all times outside, the UK. No UK stamp duty reserve tax is payable in respect of an agreement to transfer an ADS. For the UK stamp duty and stamp duty reserve tax implications of dealings in Preference Shares, see the section “Taxation of UK holders – (iii) Stamp duty and stamp duty reserve tax” above.
UK estate and gift tax
Under the Estate and Gift Tax Convention, Shares held by an individual US holder who is US domiciled for the purposes of the Estate and Gift Tax Convention and who is not for such purposes a UK national generally will not, provided any US federal estate or gift tax chargeable has been paid, be subject to UK inheritance tax on the individual’s death or on a lifetime transfer of Shares, except in certain cases where the Shares are comprised in a settlement (unless the settlor was US domiciled and not a UK national at the time of the settlement), are part of the business property of a UK permanent establishment of an enterprise, or pertain to a UK fixed base of an individual used for the performance of independent personal services. In cases where the Shares are subject to both UK inheritance tax and US federal estate or gift tax, the Estate and Gift Tax Convention generally provides a credit against US federal tax liability for the amount of any inheritance tax paid in the UK.
Foreign Financial Asset Reporting
Certain US Holders that own “specified foreign financial assets” with an aggregate value in excess of US$50,000 on the last day of the taxable year or US$75,000 at any time during the taxable year are generally required to file an information statement along with their tax returns, currently on Form 8938, with respect to such assets. “Specified foreign financial assets” include any financial accounts held at a non-US financial institution, as well as securities issued by a non-US issuer that are not held in accounts maintained by financial institutions. The understatement of income attributable to “specified foreign financial assets” in excess of US$5,000 extends the statute of limitations with respect to the tax return to six years after the return was filed. US Holders who fail to report the required information could be subject to substantial penalties. Prospective investors are encouraged to consult with their own tax advisors regarding the possible application of these rules, including the application of the rules to their particular circumstances.
Backup Withholding and Information Reporting
Dividends paid on, and proceeds from the sale or other disposition of, the Shares to a US Holder generally may be subject to the information reporting requirements of the Code and may be subject to backup withholding unless the US Holder provides an accurate taxpayer identification number and makes any other required certification or otherwise establishes an exemption. Backup withholding is not an additional tax. The amount of any backup withholding from a payment to a US Holder will be allowed as a refund or credit against the US Holder’s US federal income tax liability, provided the required information is furnished to the US Internal Revenue Service (“IRS”) in a timely manner.
A holder that is not a US Holder may be required to comply with certification and identification procedures in order to establish its exemption from information reporting and backup withholding.
FATCA Risk Factor
In certain circumstances, payments on shares or ADSs may be subject to US withholding taxes on “passthru payments,” starting on the date that is two years after the date on which final regulations defining this concept are adopted in the United States. Under the “Foreign Account Tax Compliance Act” (or “FATCA”), as well as intergovernmental agreements between the United States and other countries and implementing laws in respect of the foregoing, certain US-source payments (including dividends and interest) and certain payments made by, and financial accounts held with, entities that are classified as financial institutions under FATCA are subject to a special information reporting and withholding tax regime. Regulations implementing withholding in respect of “passthru payments” under FATCA have not yet been adopted or proposed. The United States has entered into an intergovernmental agreement regarding the implementation of FATCA with the UK (the “UK IGA”). Under the UK IGA, as currently drafted, it is not expected that Barclays Bank PLC will be required to withhold tax under FATCA on payments made with respect to the shares or ADSs. However, significant aspects of when and how FATCA will apply remain unclear, and no assurance can be given that withholding under FATCA will not become relevant with respect to payments made on or with respect to the shares or ADSs in the future. Investors should consult their own tax advisers regarding the potential impact of FATCA.
The Barclays Group has registered with the Internal Revenue Service (‘IRS’) for FATCA. The Global Intermediary Identification Number (GIIN) for Barclays Bank PLC in the United Kingdom is E1QAZN.00001.ME.826 and it is a Reporting Model 1 FFI. The GIINs for other parts of the Barclays Group or Barclays branches outside of the UK may be obtained from your usual Barclays contact on request. The IRS list of registered Foreign Financial Institutions is publicly available on the IRS website.
Exchange controls and other limitations affecting security holders
Other than certain economic sanctions which may be in force from time to time, there are currently no UK laws, decrees or regulations which would affect the transfer of capital or remittance of dividends, interest and other payments to holders of Barclays securities who are not residents of the UK. There are also no restrictions under the Articles of Association of Barclays Bank PLC, or (subject to the effect of any such economic sanctions) under current UK laws, which relate only to non-residents of the UK, and which limit the right of such non-residents to hold Barclays securities or, when entitled to vote, to do so.
Documents on display
It is possible to read and copy documents that have been filed by Barclays Bank PLC with the US Securities and Exchange Commission via commercial document retrieval services, and from the website maintained by the US Securities and Exchange Commission at www.sec.gov.
Disclosure controls and procedures
The Chief Executive, C.S. Venkatakrishnan, and the Chief Financial Officer, Steven Ewart, conducted with Barclays Bank Group's management an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures as at 31 December 2021, which are defined as those controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the US Securities Exchange Act of 1934 is recorded, processed, summarised and reported within the time periods specified in the SEC’s rules and forms. Based on that evaluation as at the Original Filing Date, it was originally concluded that the design and operation of these disclosure controls and procedures were effective. However, subsequent to the evaluation, in assessing the material weakness that contributed to the restatement of the Restated Financial Statements included in this Amendment No. 1 (see Restatement of financial statements (Note 1a) on page 118 and Governance - Corporate Governance Statement - Material Weakness on page 13 for further details), the Chief Executive and Chief Financial Officer concluded that these disclosure controls and procedures were not effective as at 31 December 2021. For further details, refer to 'Governance-Corporate Governance Statement-Audit, Risk and Internal Control-Material Weakness' on page 13 above.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 208 | ||||
Additional unaudited information
Section 13(r) to the US Securities Exchange Act of 1934 (Iran sanctions and related disclosure)
Section 13(r) of the US Securities Exchange Act of 1934 as amended (the “Exchange Act”) requires each SEC reporting issuer to disclose in its annual and, if applicable, quarterly reports whether it or any of its affiliates have knowingly engaged in certain activities, transactions or dealings relating to Iran or with the Government of Iran or certain designated natural persons or entities involved in terrorism or the proliferation of weapons of mass destruction during the period covered by the report. The requirement includes disclosure of activities not prohibited by US or other law even if conducted outside the US by non-US companies or affiliates in compliance with local law. Pursuant to Section 13(r) of the Exchange Act we note the following in relation to activity occurring in 2021, the period covered by this annual report, or in relation to activity we became aware of in 2021 relating to disclosable activity prior to the reporting period. Except as noted below, Barclays intends to continue the activities described. Barclays does not allocate profits at the level of these activities, which in any event would not be significant, and we therefore report only gross revenue where measurable. Barclays attributed revenue of approximately GBP 14,290 in 2021 in relation to the activities disclosed below.
Legacy Guarantees
Between 1992 and 2006, Barclays entered into several guarantees for the benefit of Iranian banks in connection with the supply of goods and services by Barclays customers to Iranian buyers (the "Iranian guarantees"). These were counter guarantees issued to Iranian banks to support guarantees issued by these banks to the Iranian buyers. The Iranian banks and a number of the Iranian buyers were either subsequently designated as Specially Designated Nationals and Blocked Persons (“SDN”) by the US Department of the Treasury, Office of Foreign Assets Control (“OFAC”), or are owned by the Government of Iran. In addition, between 1993 and 2005, Barclays entered into similar guarantees for the benefit of a Syrian bank that was subsequently designated pursuant to the Weapons of Mass Destruction Proliferators Sanctions Regulations (“WMDPSR”) in August 2011 (the "WMDPSR guarantees").
These guarantees were issued either on:
(i)an “extend or pay” basis, which means that, although the guarantee is of limited duration on its face, until there is full performance under the contract to provide goods and services, the terms of the guarantee require Barclays to maintain the guarantee or pay the beneficiary bank the full amount of the guarantee; or
(ii)the basis that Barclays obligations can only be discharged with the consent of the beneficiary counterparty.
Barclays is not able to exit its obligations under the above guarantees unilaterally, and thus it maintains a limited legacy portfolio of these guarantees, which were in compliance with applicable laws and regulations at the time they were entered into. Barclays intends to terminate the guarantees where an agreement can be reached with the counterparty, in accordance with applicable laws and regulations. Barclays attributed no revenue in 2021 in relation to the Iranian guarantees. Barclays attributed revenue of approximately GBP 14,000 in 2021 in relation to the WMDPSR guarantees.
Lease Payments
Barclays is party to a long-term lease, entered into in 1979, with the National Iranian Oil Company (“NIOC”), pursuant to which Barclays rents part of NIOC House in London for a Barclays branch. The lease is for 60 years, contains no early termination clause, and has 18 years remaining. Barclays makes quarterly lease payments in GBP to the bank account of an entity that is owned by the Government of Iran. This bank account is maintained with an Iranian SDN bank that is ultimately owned by the Government of Iran. The payments are made in accordance with applicable laws and regulations. Barclays attributed no revenue in 2021 in relation to this activity.
Local Clearing Systems
Banks based in the United Arab Emirates (“UAE”), including certain Iranian SDN banks, participate in the various banking payment and settlement systems used in the UAE (the “UAE Clearing Systems”). Barclays, by virtue of its banking activities in the UAE, participates in the UAE Clearing Systems, in accordance with applicable laws and regulations. In order to mitigate the risk of engaging in transactions in which participant Iranian SDN banks may be involved, Barclays has implemented restrictions relating to its involvement in the UAE Clearing Systems. Barclays attributed no revenue in 2021 in relation to this activity.
Banks based in the United Arab Emirates (“UAE”), including certain Iranian banks that are SDNs, participate in the various banking payment and settlement systems used in the UAE (the “UAE Clearing Systems”). Barclays, by virtue of its banking activities in the UAE, participates in the UAE Clearing Systems, in accordance with applicable laws and regulations. In order to mitigate the risk of engaging in transactions in which participant Iranian SDN banks may be involved, Barclays has implemented restrictions relating to its involvement in the UAE Clearing Systems. Barclays attributed no revenue in 2020 in relation to this activity.
Payments Notified
A Barclays customer was designated pursuant to the Global Terrorism Sanctions Regulations ("GTSR") in March 2016. Barclays continued to receive credit card repayments from this customer in accordance with applicable laws and regulations. A block continues to be applied to the card to prevent any further spending. Barclays attributed revenue of approximately GBP 115 in 2021 in relation to this activity.
Barclays maintains a customer relationship with a UK-incorporated medical manufacturing company. In 2021, Barclays processed a number of payments, for the benefit of our customer, relating to the export of medical devices to a privately-owned Iranian entity. The end users of these medical devices include hospitals, medical universities, or clinics that may be owned or controlled by, or affiliated with, the Government of Iran. The payments were made in accordance with applicable laws and regulations and all payments were received from the privately-owned Iranian entity; no payments were received directly from any SDN or entity owned or controlled by, or affiliated with, the Government of Iran. Although OFAC has issued general licenses relating to the sale of medical devices to Iran, these licenses do not apply to sales of non-US origin items by non-US persons. Barclays attributed revenue of approximately GBP 120 in 2021 in relation to this activity.
Barclays maintains customer relationships with several individuals who are employed by a UK-based SDN entity that is ultimately owned by the Government of Iran. Payments are received in GBP from a UK-based payment services company, and are credited to the customers’ accounts with Barclays. The payments are processed in accordance with applicable laws and regulations. No payments are received directly from any entity owned by the Government of Iran or any SDN. Barclays attributed no revenue in 2021 in relation to this activity.
Barclays maintains a relationship with Her Majesty's Revenue & Customs a UK Government agency, which receives funds from Iranian SDN banks in relation to the settlement of tax liabilities with the UK Government. The payments were processed in accordance with applicable laws and regulations. Barclays attributed revenue of approximately GBP 25 in 2021 in relation to this activity.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 209 | ||||
Additional unaudited information
Barclays processed number of payments to embassies of the Government of Iran in Europe in relation to customer paying fees for renewing or replacing passports, visa applications, and her administrative matters. The payments were processed in accordance with applicable laws and regulations. Barclays attributed no revenue in 2021 in relation to this activity.
Barclays maintains a customer relationship with a UK-incorporated charity that works in the areas of blood cancer and stem cell transplantation. In 2021, Barclays processed one EUR payment, on behalf of our customer, where the ultimate beneficiary of the payment was a medical organisation affiliated with the Government of Iran. The payment was for the procurement of a blood sample from an individual in Iran, and the associated injections, medical testing, advice, and assessments. The payment was processed in accordance with applicable laws and regulations. Barclays attributed revenue of approximately GBP 10 in 2021 in relation to this activity.
In June 2021, a Barclays customer was designated pursuant to the GTSR. The customer had two accounts with Barclays, with total balances of less than GBP 15, both of which were inactive since 2015. Barclays exited the relationship with the customer, placed the nominal funds in an internal sundry account, and closed the accounts. Barclays attributed no revenue in 2021 in relation to this activity.
In 2021, Barclays processed one GBP payment from a law firm in Germany to a law firm in the UK, which is a customer of Barclays. The German law firm is representing an Iranian SDN airline, ultimately owned by the Government of Iran, in arbitration proceedings in France. The payment was for legal advice provided by the Barclays law firm customer to the German law in relation to the proceedings. The payment was processed in accordance with applicable laws and regulations. Barclays attributed revenue of approximately GBP 10 in 2021 in relation to this activity.
In 2020, Barclays processed one USD payment identified in 2021 as being on behalf of a Barclays MSB customer’s client that was affiliated with an entity designated pursuant to the GTSR. Barclays attributed revenue of approximately GBP 10 in 2020 in relation to this activity.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 210 | ||||
Additional unaudited information
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 211 | ||||
Additional unaudited information
| Wholly owned subsidiaries | Note | Wholly owned subsidiaries | Note | Wholly owned subsidiaries | Note | |||||||||||||||
| Argentina | Guernsey | Jersey | ||||||||||||||||||
| – 855 Leandro N.Alem Avenue, 8th Floor, | - PO BOX 41, Floor 2, Le Marchant House, Le | - 2nd Floor, Gaspé House, 66-72 | ||||||||||||||||||
| Buenos Aires | Truchot, St Peter Port, GY1 3BE | Esplanade, St. Helier, JE1 1GH | ||||||||||||||||||
| Compañía Sudamerica S.A. | A | Barclays Nominees (Guernsey) Limited (In | A | Barclays Services Jersey Limited | A | |||||||||||||||
| – Marval, O’Farrell & Mairal, Av. Leandro N. | Liquidation) | - 5 Esplanade, St. Helier, JE2 3QA | ||||||||||||||||||
| Alem 882, Buenos Aires, C1001AAQ | Barclays Wealth Management Jersey Limited | A | ||||||||||||||||||
| Compañia Regional del Sur S.A. | A | Hong Kong | BIFML PTC Limited | A | ||||||||||||||||
| - 42nd floor Citibank Tower, Citibank Plaza, | – 13 Library Place, St Helier, JE4 8NE | |||||||||||||||||||
| Brazil | 3 Garden Road | Barclays Nominees (Jersey) Limited | A, Z | |||||||||||||||||
| – Av. Brigadeiro Faria Lima, No. 4.440, 12th | Barclays Bank (Hong Kong Nominees) Limited | A | Barclaytrust Channel Islands Limited | A, Z | ||||||||||||||||
| Floor, Bairro Itaim Bibi, Sao Paulo, CEP, | (in Liquidation) | – Estera Trust (Jersey) Limited, 13-14 | ||||||||||||||||||
| 04538-132 | Barclays Capital Asia Nominees Limited (In | Esplanade, St Helier, JE1 1EE | ||||||||||||||||||
| Barclays Brasil Assessoria Financeira Ltda | A | Liquidation) | MK Opportunities GP Ltd | A | ||||||||||||||||
| BNC Brazil Consultoria Empresarial Ltda | A | - Level 41, Cheung Kong Center, 2 Queen's | ||||||||||||||||||
| Road, Central | Luxembourg | |||||||||||||||||||
| Canada | Barclays Capital Asia Limited | A | - 9, allée Scheffer, L-2520 | |||||||||||||||||
| – 333 Bay Street, Suite 4910, Toronto ON M5H | Barclays Alzin Investments S.à r.l. | U,V | ||||||||||||||||||
| 2R2 | India | Barclays Bayard Investments S.à r.l. | J, K | |||||||||||||||||
| Barclays Capital Canada Inc. | - 208 Ceejay House, Shivsagar Estate, Dr A | Barclays Bedivere Investments S.à r.l. | ||||||||||||||||||
| – Stikeman Elliot LLP, 199 Bay Street, 5300 | Beasant Road, Worli, Mumbai, 400 018 | Barclays Bordang Investments S.à r.l. | U,V | |||||||||||||||||
| Commerce Court West, Toronto ON M5L 1B9 | Barclays Securities (India) Private Limited | Barclays BR Investments S.à r.l. | ||||||||||||||||||
| Barclays Corporation Limited | A | Barclays Wealth Trustees (India) Private | Barclays Cantal Investments S.à r.l. | |||||||||||||||||
| Limited | Barclays Capital Luxembourg S.à r.l. | |||||||||||||||||||
| Cayman Islands | - Level 10, Block B6, Nirlon Knowledge | Barclays Capital Trading Luxembourg S.à r.l. | U,V | |||||||||||||||||
| - Maples Corporate Services Limited, PO Box | Park, Off Western Express Highway | Barclays Claudas Investments S.à r.l. | ||||||||||||||||||
| 309, Ugland House, George Town, Grand | Goregaon (East), Mumbai, 40063 | Barclays Equity Index Investments S.à r.l. | ||||||||||||||||||
| Cayman, KY1-1104 | Barclays Investments & Loans (India) | A, F, I | Barclays International Luxembourg Dollar | |||||||||||||||||
| Alymere Investments Limited | Private Limited | Holdings S.à r.l. | ||||||||||||||||||
| Analytical Trade UK Limited | A | Barclays Lamorak Investments S.à r.l. | T | |||||||||||||||||
| Barclays US Holdings Limited | A, J | Ireland | Barclays Leto Investments S.à r.l. | I, K | ||||||||||||||||
| Barclays Capital (Cayman) Limited | A | - One Molesworth Street, Dublin 2, | Barclays Luxembourg EUR Holdings S.à r.l | T | ||||||||||||||||
| Barclays Securities Financing Limited | G,H, I | D02RF29 | Barclays Luxembourg Finance S.à r.l. | |||||||||||||||||
| Braven Investments No.1 Limited | Barclays Bank Ireland Public Limited | Barclays Luxembourg GBP Holdings S.à r.l. | T | |||||||||||||||||
| Calthorpe Investments Limited | Company | Barclays Luxembourg Global Funding S.à r.l. | ||||||||||||||||||
| Capton Investments Limited | A | Barclays Europe Client Nominees | A, Z | Barclays Luxembourg Holdings S.à r.l. | I, Q | |||||||||||||||
| Claudas Investments Limited | A | Designated Activity Company | Barclays Luxembourg Holdings SSC | B | ||||||||||||||||
| Claudas Investments Two Limited | Barclays Europe Firm Nominees Designated | Z | Barclays Pelleas Investments S.à r.l. | |||||||||||||||||
| Gallen Investments Limited | Activity Company | - 68-70 Boulevard de la Petrusse, L-2320 | ||||||||||||||||||
| Hurley Investments No.1 Limited | Barclays Europe Nominees Designated | Z | Adler Toy Holding Sarl | |||||||||||||||||
| JV Assets Limited | L | Activity Company | -10 rue du Château d’Eau, Leudelange, | |||||||||||||||||
| Mintaka Investments No. 4 Limited | -70 Sir John Rogerson’s Quay, Dublin 2 | Grand Duchy of Luxembourg, L-3364 | ||||||||||||||||||
| OGP Leasing Limited | Barclays Finance Ireland | BPM Management GP SARL | A | |||||||||||||||||
| Palomino Limited | A, Z | - 25-28 North Wall Quay, Dublin 1, | ||||||||||||||||||
| Pelleas Investments Limited | A | D01H104 | Mauritius | |||||||||||||||||
| Pippin Island Investments Limited | A | Erimon Home Loans Ireland Limited | A | - C/O Rogers Capital Corporate Services | ||||||||||||||||
| Razzoli Investments Limited | A, F, I | Limited, 3rd Floor, Rogers House, No.5 | ||||||||||||||||||
| RVH Limited | A, F, I | Isle of Man | President John Kennedy Street, Port Louis | |||||||||||||||||
| Wessex Investments Limited | - P O Box 9, Victoria Street, | Barclays Capital Mauritius Limited (In Liquidation) | A | |||||||||||||||||
| - Walkers Corporate Limited, Cayman | Douglas, IM99 1AJ | Barclays Capital Securities Mauritius Limited | A | |||||||||||||||||
| Corporate Centre, 27 Hospital Road, George | Barclays Holdings (Isle of Man) Limited (In | A | - Fifth Floor, Ebene Esplanade, 24 | |||||||||||||||||
| Town, KY1- 9008 | Liquidation) | Cybercity, Ebene | ||||||||||||||||||
| Long Island Holding B Limited | A | Barclays Nominees (Manx) Limited | A | Barclays Mauritius Overseas Holdings Limited | A | |||||||||||||||
| Barclays Private Clients International | A, J, K | |||||||||||||||||||
| Germany | Limited | Mexico | ||||||||||||||||||
| - TaunusTurm, Taunustor 1, 60310, | – Paseo de la Reforma 505, 41 Floor, Torre | |||||||||||||||||||
| Frankfurt | Japan | Mayor, Col. Cuauhtemoc, CP 06500 | ||||||||||||||||||
| Barclays Capital Effekten GmbH | A | - 10-1, Roppongi 6-chome, Minato-ku, | Barclays Bank Mexico, S.A. | K, M | ||||||||||||||||
| - Stuttgarter Straße 55-57, 73033 | Tokyo | Barclays Capital Casa de Bolsa, S.A. de C.V. | K, M | |||||||||||||||||
| Göppingen | Barclays Funds and Advisory Japan Limited | Grupo Financiero Barclays Mexico, S.A. de C.V. | A,K,M | |||||||||||||||||
| Holding Stuttgarter Straße GmbH (In | Barclays Securities Japan Limited | I, G | Servicios Barclays, S.A. de C.V. | |||||||||||||||||
| Liquidation) | Barclays Wealth Services Limited | |||||||||||||||||||
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 212 | ||||
Additional unaudited information
| Wholly owned subsidiaries | Note | Wholly owned subsidiaries | Note | Other Related Undertakings Unless otherwise stated, the undertakings below are consolidated and the share capital disclosed comprises ordinary and/or common shares which are held by Barclays Bank PLC or its subsidiaries. The Barclays Bank PLC Group’s overall ownership percentage is provided for each undertaking. | ||||||||||||||||
| Monaco | Barclays Receivables LLC | C | ||||||||||||||||||
| – 31 Avenue de la Costa, Monte Carlo | Barclays Services Corporation | |||||||||||||||||||
| BP 339 | Barclays Services LLC | C | ||||||||||||||||||
| Barclays Private Asset Management | Barclays US CCP Funding LLC | C | ||||||||||||||||||
| (Monaco) S.A.M | Barclays US Investments Inc. | J, K | ||||||||||||||||||
| Barclays US LLC | ||||||||||||||||||||
| Saudi Arabia | BCAP LLC | C | Other Related Undertakings | % | Note | |||||||||||||||
| - 3rd Floor Al Dahna Center, 114 Al-Ahsa | Crescent Real Estate Member LLC | C | United Kingdom | |||||||||||||||||
| Street, PO Box 1454, Riyadh 11431 | Curve Investments GP | B | – 1 Churchill Place, London, E14 5HP | |||||||||||||||||
| Barclays Saudi Arabia (In Liquidation) | A | Gracechurch Services Corporation | PSA Credit Company Limited (In Liquidation) | 50.00 | A,J,L | |||||||||||||||
| Lagalla Investments LLC | – 3 - 5 London Road, Rainham, Kent, ME8 7RG | |||||||||||||||||||
| Singapore | Long Island Holding A LLC | C | Trade Ideas Limited | 20.00 | A,Z | |||||||||||||||
| - 10 Marina Boulevard, #25-01 Marina Bay | LTDL Holdings LLC | C | – 50 Lothian Road, Festival Square, | |||||||||||||||||
| Financial Centre, Tower 2, 018983 | Marbury Holdings LLC | Edinburgh, EH3 9WJ | ||||||||||||||||||
| Barclays Capital Futures (Singapore) Private | Procella Investments No.2 LLC | C | Equistone Founder Partner II L.P. | 20.00 | A,B,Z | |||||||||||||||
| Limited (In Liquidation) | Procella Investments No.3 LLC | C | Equistone Founder Partner III L.P. | 35.00 | A,B,Z | |||||||||||||||
| Barclays Capital Holdings (Singapore) | A | Preferred Liquidity, LLC | J | – Enigma, Wavendon Business Park | ||||||||||||||||
| Private Limited (In Liquidation) | Relative Value Holdings, LLC | Milton Keynes, MK17 8LX | ||||||||||||||||||
| Barclays Merchant Bank (Singapore) Ltd | Surrey Funding Corporation | Intelligent Processing Solutions Limited | 19.50 | A,Z | ||||||||||||||||
| Sussex Purchasing Corporation | – 65A Basinghall Street, London, EC2V 5DZ | |||||||||||||||||||
| Spain | Sutton Funding LLC | C | Cyber Defence Alliance Limited | 25.00 | A,E,Z | |||||||||||||||
| - Calle Jose, Abascal 51, 28003, Madrid | TPProperty LLC | C | ||||||||||||||||||
| Barclays Tenedora De Inmuebles SL. | A | US Funding (VISA B Acquisition)LLC | C | Korea, Republic of | ||||||||||||||||
| BVP Galvani Global, S.A.U. | A | US Secured Investments LLC | R | - 18th Floor, Daishin Finance Center, | ||||||||||||||||
| Verain Investments LLC | 343, Samil-daero, Jung-go, Seoul | |||||||||||||||||||
| Switzerland | Wilmington Riverfront Receivables LLC | V | Woori BC Pegasus | 70.00 | A,W | |||||||||||||||
| - Chemin de Grange Canal 18-20, PO Box | - Corporation Service Company, 100 Pearl Street | Securitization Specialty Co., | ||||||||||||||||||
| 3941, 1211, Geneva | 17th Floor, MC-CSC1, Hartford, CT 06103 | Limited | ||||||||||||||||||
| Barclays Bank (Suisse) SA | Barclays Capital Inc. | |||||||||||||||||||
| BPB Holdings SA | - Corporation Service Company, 80 State Street | Luxembourg | ||||||||||||||||||
| Albany, NY, 12207-2543 | - 9, allée Scheffer, L-2520 | |||||||||||||||||||
| United States | Barclays Equity Holdings Inc. | Preferred Funding S.à r.l. | 33.33 | X | ||||||||||||||||
| - Corporation Service Company, | -Corporation Service Company, 2626 | Preferred Investments S.à r.l. | 33.33 | I,X | ||||||||||||||||
| 251 Little Falls Drive, Wilmington, DE 19808 | Glenwood Ave, Suite 550, Raleigh, NC, 27608 | |||||||||||||||||||
| Analytical Trade Holdings LLC | Barclays US GPF Inc. | Malta | ||||||||||||||||||
| Analytical Trade Investments LLC | S | Equifirst Corporation (In Liquidation) | - RS2 Buildings, Fort Road, | |||||||||||||||||
| Barclays Bank Delaware | -Aon Insurance Managers, 76 Paul Street | Mosta MST 1859 | ||||||||||||||||||
| Barclays Capital Derivatives Funding LLC | C | Suite, 500, Burlington VT 05401 | RS2 Software PLC | 18.25 | A,Z | |||||||||||||||
| Barclays Capital Energy Inc. | Barclays Insurance U.S. Inc. | |||||||||||||||||||
| Barclays Capital Equities Trading GP | B | |||||||||||||||||||
| Barclays Capital Holdings Inc. | H, I | Zimbabwe | ||||||||||||||||||
| Barclays Capital Real Estate Finance Inc. | - 2 Premium Close, Mount Pleasant Business | |||||||||||||||||||
| Barclays Capital Real Estate Holdings Inc. | Park, Mount Pleasant, Harare | |||||||||||||||||||
| Barclays Capital Real Estate Inc. | Branchcall Computers (Pvt) Limited | A | ||||||||||||||||||
| Barclays Commercial Mortgage Securities LLC | C | |||||||||||||||||||
| Barclays Dryrock Funding LLC | C | |||||||||||||||||||
| Barclays Electronic Commerce Holdings Inc. | ||||||||||||||||||||
| Barclays Financial LLC | C | |||||||||||||||||||
| Barclays Group US Inc. | ||||||||||||||||||||
| Barclays Oversight Management Inc. | ||||||||||||||||||||
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 213 | ||||
Additional unaudited information
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 214 | ||||
Additional unaudited information
Income statement commentary
Consolidated income statement commentary
2021 compared to 2020
The Barclays Bank Group’s profit increased in FY21 primarily reflecting an impairment release, which included an update for an improved macroeconomic environment, partly offset by lower income and higher costs, which included a structural cost action charge as part of a real estate review and a provision relating to the expected losses resulting from a rescission offer to repurchase certain securities issuances identified as being in excess of the registered amount.
•Profit before tax increased to £5,418m (2020: £3,075m) driven by an increase in CIB to £5,528m (2020: £3,929m) and CC&P to £729m (2020: £292m loss), partially offset by an increased loss in Head Office of £839m (2020: £562m)
•Total income decreased 2% to £15,408m
–CIB income decreased 1% to £12,481m driven by a 15% decrease in Global Markets, reflecting tighter spreads and the non-recurrence of prior year client activity levels, partially offset by a 35% increase in Investment Banking fees as the fee pool and Barclays' share improved1. Corporate income increased 7% driven by deposits and higher payments volumes, partially offset by the current year fair value loan write-off on a single name and increased cost of hedging, whilst the prior year included net losses from the mark-to-market of lending and related hedge positions
–CC&P income decreased 4% to £3,337m reflecting lower cards balances, partially offset by the non-recurrence of a c.£100m valuation loss on Barclays’ preference shares in Visa Inc. in Q220, which have subsequently been fully disposed of in FY21
–Head Office income was a net expense of £410m (2020: £319m) which primarily reflected hedge accounting and funding costs on a legacy capital instrument
•Credit impairment net release of £277m (2020: £3,377m charge) was driven by an improved macroeconomic outlook
–CIB credit impairment net release of £461m (2020: £1,565m charge) was also supported by net single name wholesale loan releases and a benign credit risk environment
–CC&P credit impairment charge of £185m (2020: £1,720m charge) was partially driven by lower delinquencies and higher customer repayments
–Head Office credit impairment net release was £1m (2020: £92m charge)
•Total operating expenses increased 8% to £10,259m
–CIB total operating expenses increased 4% to £7,406m primarily driven by a £220m provision relating to the expected losses resulting from a rescission offer to repurchase certain securities issuances identified as being in excess of the registered amount. Operating expenses increased 1% to £7,169m driven by higher performance costs, that reflect an improvement in performance, partly offset by a lower bank levy charge primarily due to the reduced rate
–CC&P total operating expenses increased 11% to £2,424m driven by the impact of higher investment spend, including an increase in marketing and costs for existing and new partnerships, and customer remediation costs related to a legacy portfolio
–Head Office total operating expenses of £429m (2020: £154m) included a charge of £266m relating to a structural cost action taken as part of a real estate review
•Other net income decreased to an £8m expense (2020: £133m income) due to the non-recurrence of prior year gains on disposals from the sale of a number of subsidiaries within the Barclays Group
•The effective tax rate was 15.3% (2020: 20.3%). This reflects a £218m tax benefit recognised for the re-measurement of the Barclays Bank Group’s UK deferred tax assets as a result of the enactment in 2021 of a UK corporation tax rate increase from 19% to 25% effective from 1 April 2023
Please refer to “Income statement commentary” in the “Additional information” section of the 2020 Annual Report on Form 20-F for a comparative discussion of 2020 financial results compared to 2019.
Note
1 Data source: Dealogic for the period covering 1 January to 31 December 2021
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 215 | ||||
Additional unaudited information
Balance sheet commentary
Additional information
Consolidated balance sheet commentary
Total assets
Total assets increased by £2bn to £1,062bn.
Cash and balances at central banks increased £13bn to £169bn driven by strong client deposit growth.
Cash collateral and settlement balances decreased £10bn to £88bn, predominantly due to reduced derivative balances.
Loans and advances increased £11bn to £145bn due to increased lending across CIB and CC&P.
Reverse repurchase agreements and other similar secured lending decreased £6bn to £3bn due to reduced secured lending.
Trading portfolio assets increased £19bn to £147bn, predominantly due to increased activity in Equities.
Financial assets at fair value through the income statement increased £16bn to £188bn driven by increased secured lending.
Derivative financial instruments decreased £40bn to £262bn, driven by an increase in major interest rate curves and reduced client activity.
Financial assets at fair value through other comprehensive income decreased £6bn to £46bn driven by disposals.
Total liabilities
Total liabilities decreased £1bn to £1,005bn.
Deposits at amortised cost increased £18bn to £263bn primarily due to clients increasing liquidity.
Cash collateral and settlement balances decreased £7bn to £79bn, predominantly due to reduced derivative balances.
Repurchase agreements and other similar secured borrowing increased £2bn to £13bn driven by increased secured borrowing.
Debt securities in issue increased £19bn to £48bn due to net new issuances.
Subordinated liabilities remained broadly flat.
Trading portfolio liabilities increased £7bn to £53bn due to increased client activity.
Financial liabilities designated at fair value increased £2bn to £251bn primarily driven by increased secured borrowing.
Derivative financial instruments decreased £44bn to £257bn, driven by an increase in major interest rate curves and reduced client activity. This is consistent with the movement in derivative financial instrument assets.
Total shareholders’ equity
Total shareholders’ equity increased £2.6bn to £56.3bn.
Other equity instruments increased £1.1bn to £9.7bn due to the issuance of a $1.5bn AT1 instrument, AT1 securities are perpetual subordinated contingent convertible securities structured to qualify as AT1 instruments under prevailing capital rules applicable as at the relevant issue date.
Other reserves decreased by £2.3bn, mainly due to a reduction in the cash flow hedging reserve of £1.8bn to £0.6bn debit, as a result of fair value movements on interest rate swaps held for hedging purposes due to an increase in major interest rate curves.
Retained earnings increased £3.9bn to £43.4bn, mainly due to profits of £4.0bn and an increase in the pension remeasurement reserve of £0.6bn, offset by dividends of £0.8bn.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 216 | ||||
Additional unaudited information
Additional financial disclosure
Deposits
Deposits
Deposits include deposits from banks and customer accounts.
| 2021 | 2020 | 2019 | |||||||||
Average for the year ended 31 Decembera | £m | £m | £m | ||||||||
| Deposits at amortised cost | |||||||||||
| UK | 165,647 | 148,711 | 130,726 | ||||||||
| Europe | 41,936 | 46,353 | 39,496 | ||||||||
| Americas | 36,205 | 36,841 | 31,815 | ||||||||
| Asia | 9,937 | 12,269 | 9,268 | ||||||||
| Africa | 8,379 | 8,290 | 7,802 | ||||||||
| Total deposits at amortised cost | 262,104 | 252,464 | 219,107 | ||||||||
Note
aThe country analysis in the table above is based on the location of the counterparty with which the deposits at amortised cost are recorded.
| 2021 | 2020 | 2019 | |||||||||
For the year ended 31 Decembera | £m | £m | £m | ||||||||
| Deposits at amortised cost | 262,828 | 244,696 | 213,881 | ||||||||
| In offices in the United Kingdom: | |||||||||||
| Current and demand accounts | |||||||||||
| – interest free | 49,310 | 44,371 | 31,865 | ||||||||
| – interest bearing | 33,335 | 29,655 | 25,040 | ||||||||
| Savings accounts | 18,933 | 17,251 | 14,059 | ||||||||
| Other time deposits- retail | 5,235 | 4,683 | 4,846 | ||||||||
Other time deposits- wholesale | 69,676 | 67,192 | 62,949 | ||||||||
| Total repayable in offices in the United Kingdom | 176,489 | 163,152 | 138,759 | ||||||||
| In offices outside the United Kingdom: | |||||||||||
| Current and demand accounts | |||||||||||
| – interest free | 17,186 | 15,309 | 10,613 | ||||||||
–interest bearing | 15,762 | 13,772 | 12,932 | ||||||||
| Savings accounts | 15,055 | 14,940 | 14,110 | ||||||||
Other time deposits | 38,336 | 37,523 | 37,467 | ||||||||
| Total repayable in offices outside the United Kingdom | 86,339 | 81,544 | 75,122 | ||||||||
Note
aThe UK/Non-UK deposit analysis is based on the location of the office where the transactions are recorded.
Deposits at amortised cost in offices in the United Kingdom received from non-residents amounted to £36,527m (2020: £31,818m).
Of the deposits at amortised cost disclosed in the above table, there are uninsured deposits of £208,534m (2020: £194,109m; 2019: £170,323m) which are not insured through the UK Financial Services Compensation Scheme (FSCS) or other similar deposits schemes.
Uninsured other time deposits
| 2021 | 2020 | 2019 | |||||||||
| £m | £m | £m | |||||||||
| 3 months or less | 92,422 | 84,321 | 88,204 | ||||||||
3 to 6 months | 12,023 | 13,567 | 6,808 | ||||||||
6 to 12 months | 4,629 | 5,630 | 4,820 | ||||||||
| 12 months and over | 2,104 | 3,345 | 2,430 | ||||||||
| Total | 111,178 | 106,863 | 102,262 | ||||||||
As at 31 December 2021, £263m (2020: £649m; 2019: £869m) of US time deposits were in excess of the Federal Deposit Insurance Corporation insurance limit.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 217 | ||||
Additional unaudited information
Additional financial disclosure
Commitments and contractual obligations
Barclays Bank Group Commercial commitments include guarantees, contingent liabilities and standby facilities.
| Commercial commitments | |||||||||||||||||
| Amount of commitment expiration per period | |||||||||||||||||
| Less than one year | Between one to three years | Between three to five years | After five years | Total amounts committed | |||||||||||||
| Barclays Bank Group | £m | £m | £m | £m | £m | ||||||||||||
| As at 31 December 2021 | |||||||||||||||||
| Guarantees and letters of credit pledged as collateral security | 15,759 | — | — | — | 15,759 | ||||||||||||
| Performance guarantees, acceptances and endorsements | 7,987 | — | — | — | 7,987 | ||||||||||||
| Documentary credits and other short-term trade related transactions | 1,584 | — | — | — | 1,584 | ||||||||||||
| Standby facilities, credit lines and other commitments | 282,867 | — | — | — | 282,867 | ||||||||||||
| As at 31 December 2020 | |||||||||||||||||
| Guarantees and letters of credit pledged as collateral security | 15,115 | 23 | — | — | 15,138 | ||||||||||||
| Performance guarantees, acceptances and endorsements | 5,792 | 2 | — | — | 5,794 | ||||||||||||
| Documentary credits and other short-term trade related transactions | 1,086 | — | — | — | 1,086 | ||||||||||||
| Standby facilities, credit lines and other commitments | 263,461 | 245 | 202 | 28 | 263,936 | ||||||||||||
The above table for Barclays Bank Group includes £1.7bn (2020: £2.6bn) of guarantees that have been provided to subsidiaries of Barclays PLC outside the Barclays Bank Group. These guarantees have not been reported in the prior periods and the comparatives have not been restated. These are all on demand.
Contractual obligations include debt securities.
| Contractual obligations | |||||||||||||||||
| Payments due by period | |||||||||||||||||
| Less than one year | Between one to three years | Between three to five years | After five years | Total | |||||||||||||
| Barclays Bank Group | £m | £m | £m | £m | £m | ||||||||||||
| As at 31 December 2021 | |||||||||||||||||
Long-term debta | 42,002 | 13,207 | 7,749 | 21,352 | 84,310 | ||||||||||||
| Purchase obligations | 32 | 12 | — | — | 44 | ||||||||||||
| Total | 42,034 | 13,219 | 7,749 | 21,352 | 84,354 | ||||||||||||
| As at 31 December 2020 | |||||||||||||||||
Long-term debta | 29,434 | 11,644 | 9,478 | 15,797 | 66,353 | ||||||||||||
Note
aLong-term debt has been prepared to reflect cash flows on an undiscounted basis, which includes interest payments.
Net cash flows from derivatives used to hedge long-term debt amount to £1.1bn (2020: £2.3bn).
Further information on the contractual maturity of the Barclays Bank Group’s assets and liabilities is given in the Liquidity risk section.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 218 | ||||
Additional unaudited information
Additional financial disclosure
Securities
Investment securities include securities reported within loans and advances at amortised cost and financial assets at fair value through other comprehensive income.
Investment debt securities include government securities held as part of the Group’s treasury management portfolio for asset and liability, liquidity and regulatory purposes and are for use on a continuing basis in the activities of the Group. In addition, the Group holds as investments listed and unlisted corporate securities.
The yield for each range of maturities is calculated by dividing the annualised interest income prevailing at reporting date by the book value of securities held at that date.
The above table is only for debt securities held at the reporting date and does not include associated hedges.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 219 | ||||
Additional unaudited information
Additional financial disclosure
Average balance sheet
Average balances are based upon monthly averages.
| Assets | 2021 | |||||||||||||||||||
| Average balance | Interest income | Interest expensea | Total interest | Rate | ||||||||||||||||
| £m | £m | £m | £m | % | ||||||||||||||||
| Cash and balances at central banks | UK | 45,958 | 56 | — | 56 | 0.1 | ||||||||||||||
| Cash and balances at central banks | Non-UK | 130,493 | 72 | (304) | (232) | (0.2) | ||||||||||||||
| Cash and balances at central banks | Total | 176,451 | 128 | (304) | (176) | (0.1) | ||||||||||||||
| Loans and advances at amortised cost | UK | 76,236 | 1,876 | — | 1,876 | 2.5 | ||||||||||||||
| Loans and advances at amortised cost | Non-UK | 64,389 | 2,389 | (1) | 2,388 | 3.7 | ||||||||||||||
Loans and advances at amortised costb | Total | 140,625 | 4,265 | (1) | 4,264 | 3.0 | ||||||||||||||
| Cash collateral | UK | 47,035 | 109 | (29) | 80 | 0.2 | ||||||||||||||
| Cash collateral | Non-UK | 20,358 | 24 | (36) | (12) | (0.1) | ||||||||||||||
| Cash collateral | Total | 67,393 | 133 | (65) | 68 | 0.1 | ||||||||||||||
| Reverse repurchase agreements | UK | 598 | 11 | — | 11 | 1.8 | ||||||||||||||
| Reverse repurchase agreements | Non-UK | 4,078 | 7 | (4) | 3 | 0.1 | ||||||||||||||
| Reverse repurchase agreements | Total | 4,676 | 18 | (4) | 14 | 0.3 | ||||||||||||||
| Interest earning assets at fair value through other comprehensive income | UK | 45,029 | 342 | — | 342 | 0.8 | ||||||||||||||
| Interest earning assets at fair value through other comprehensive income | Non-UK | 3,006 | 38 | — | 38 | 1.3 | ||||||||||||||
| Interest earning assets at fair value through other comprehensive income | Total | 48,035 | 380 | — | 380 | 0.8 | ||||||||||||||
Other interest and similar incomec | — | 748 | (248) | 500 | ||||||||||||||||
| Total interest earning assets not at fair value through income statement | 437,180 | 5,672 | (622) | 5,050 | 1.2 | |||||||||||||||
| Less interest and similar expense | — | (2,599) | 622 | (1,977) | ||||||||||||||||
| Net interest | 437,180 | 3,073 | — | 3,073 | ||||||||||||||||
| Interest earning assets at fair value through income statement | UK | 190,258 | ||||||||||||||||||
| Interest earning assets at fair value through income statement | Non-UK | 103,179 | ||||||||||||||||||
| Interest earning assets at fair value through income statement | Total | 293,437 | ||||||||||||||||||
| Total interest earning assets | 730,617 | |||||||||||||||||||
| Impairments | (4,251) | |||||||||||||||||||
| Non-interest earning assets | 401,358 | |||||||||||||||||||
| Total | 1,127,724 | |||||||||||||||||||
| Percentage of total average interest earning assets in offices outside the UK | 45% | |||||||||||||||||||
Notes
aNegative interest earned on assets (which is presented within interest and similar expense in the statutory accounts) is included in determining the total net interest figure. This presentation is deemed appropriate to represent the return associated with each asset class in the table.
bLoans and advances at amortised cost include all doubtful lendings, including non-accrual lendings. Interest receivable on such lendings has been included to the extent to which either cash payments have been received or interest has been accrued in accordance with the income recognition policy of the Barclays Bank Group
cOther interest and similar income principally relates to hedging activity.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 220 | ||||
Additional unaudited information
Additional financial disclosure
| Assets | 2020 | |||||||||||||||||||
| Average balance | Interest income | Interest expensea | Total net interest | Rate | ||||||||||||||||
| £m | £m | £m | £m | % | ||||||||||||||||
| Cash and balances at central banks | UK | 44,950 | 84 | — | 84 | 0.2 | ||||||||||||||
| Cash and balances at central banks | Non-UK | 123,162 | 142 | (281) | (139) | (0.1) | ||||||||||||||
| Cash and balances at central banks | Total | 168,112 | 226 | (281) | (55) | — | ||||||||||||||
| Loans and advances at amortised cost | UK | 78,833 | 1,500 | — | 1,500 | 1.9 | ||||||||||||||
| Loans and advances at amortised cost | Non-UK | 73,781 | 3,010 | (4) | 3,006 | 4.1 | ||||||||||||||
Loans and advances at amortised costb | Total | 152,614 | 4,510 | (4) | 4,506 | 3.0 | ||||||||||||||
| Cash collateral | UK | 61,503 | 196 | (31) | 165 | 0.3 | ||||||||||||||
| Cash collateral | Non-UK | 18,110 | 36 | — | 36 | 0.2 | ||||||||||||||
| Cash collateral | Total | 79,613 | 232 | (31) | 201 | 0.3 | ||||||||||||||
| Reverse repurchase agreements | UK | 675 | 8 | — | 8 | 1.2 | ||||||||||||||
| Reverse repurchase agreements | Non-UK | 8,917 | 4 | (9) | (5) | (0.1) | ||||||||||||||
| Reverse repurchase agreements | Total | 9,592 | 12 | (9) | 3 | — | ||||||||||||||
| Interest earning assets at fair value through other comprehensive income | UK | 47,665 | 549 | — | 549 | 1.2 | ||||||||||||||
| Interest earning assets at fair value through other comprehensive income | Non-UK | 2,927 | 55 | — | 55 | 1.9 | ||||||||||||||
| Interest earning assets at fair value through other comprehensive income | Total | 50,592 | 604 | — | 604 | 1.2 | ||||||||||||||
Other interest and similar incomec | — | 422 | — | 422 | — | |||||||||||||||
| Total interest earning assets not at fair value through income statement | 460,523 | 6,006 | (325) | 5,681 | 1.2 | |||||||||||||||
| Less interest and similar expense | — | (2,846) | 325 | (2,521) | — | |||||||||||||||
| Net interest | 460,523 | 3,160 | — | 3,160 | — | |||||||||||||||
| Interest earning assets at fair value through income statement | UK | 184,701 | ||||||||||||||||||
| Interest earning assets at fair value through income statement | Non-UK | 76,369 | ||||||||||||||||||
| Interest earning assets at fair value through income statement | Total | 261,070 | ||||||||||||||||||
| Total interest earning assets | 721,593 | |||||||||||||||||||
| Impairments | (4,852) | |||||||||||||||||||
| Non-interest earning assets | 412,510 | |||||||||||||||||||
| Total | 1,129,251 | |||||||||||||||||||
| Percentage of total average interest earning assets in offices outside the UK | 42% | |||||||||||||||||||
Notes
aNegative interest earned on assets (which is presented within interest and similar expense in the statutory accounts) is included in determining the total net interest figure. This presentation is deemed appropriate to represent the return associated with each asset class in the table.
bLoans and advances at amortised cost include all doubtful lendings, including non-accrual lendings. Interest receivable on such lendings has been included to the extent to which either cash payments have been received or interest has been accrued in accordance with the income recognition policy of the Barclays Bank Group.
cOther interest and similar income principally relates to hedging activity.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 221 | ||||
Additional unaudited information
Additional financial disclosure
| Assets | 2019 | |||||||||||||||||||
| Average balance | Interest income | Interest expensea | Total net interest | Rate | ||||||||||||||||
| £m | £m | £m | £m | £m | ||||||||||||||||
| Cash and balances at central banks | UK | 38,450 | 293 | — | 293 | 0.8 | ||||||||||||||
| Cash and balances at central banks | Non-UK | 101,371 | 626 | (233) | 393 | 0.4 | ||||||||||||||
| Cash and balances at central banks | Total | 139,821 | 919 | (233) | 686 | 0.5 | ||||||||||||||
| Loans and advances at amortised cost | UK | 74,894 | 1,746 | — | 1,746 | 2.3 | ||||||||||||||
| Loans and advances at amortised cost | Non-UK | 71,925 | 3,768 | (3) | 3,765 | 5.2 | ||||||||||||||
Loans and advances at amortised costb | Total | 146,819 | 5,514 | (3) | 5,511 | 3.8 | ||||||||||||||
| Cash collateral | UK | 56,091 | 394 | (14) | 380 | 0.7 | ||||||||||||||
| Cash collateral | Non-UK | 7,400 | 49 | — | 49 | 0.7 | ||||||||||||||
| Cash collateral | Total | 63,491 | 443 | (14) | 429 | 0.7 | ||||||||||||||
| Reverse repurchase agreements | UK | 1,284 | 46 | — | 46 | 3.6 | ||||||||||||||
| Reverse repurchase agreements | Non-UK | 2,041 | 11 | — | 11 | 0.5 | ||||||||||||||
| Reverse repurchase agreements | Total | 3,325 | 57 | — | 57 | 1.7 | ||||||||||||||
| Interest earning assets at fair value through other comprehensive income | UK | 49,399 | 756 | — | 756 | 1.5 | ||||||||||||||
| Interest earning assets at fair value through other comprehensive income | Non-UK | 2,961 | 75 | — | 75 | 2.5 | ||||||||||||||
| Interest earning assets at fair value through other comprehensive income | Total | 52,360 | 831 | — | 831 | 1.6 | ||||||||||||||
Other interest and similar incomec | — | 321 | — | 321 | — | |||||||||||||||
| Total interest earning assets not at fair value through P&L | 405,816 | 8,085 | (250) | 7,835 | 1.9 | |||||||||||||||
| Less interest and similar expense | — | (4,178) | 250 | (3,928) | ||||||||||||||||
| Net interest | 405,816 | 3,907 | — | 3,907 | ||||||||||||||||
| Interest earning assets at fair value through P&L | UK | 188,811 | ||||||||||||||||||
| Interest earning assets at fair value through P&L | Non-UK | 68,031 | ||||||||||||||||||
| Interest earning assets at fair value through P&L | Total | 256,842 | ||||||||||||||||||
| Total interest earning assets | 662,658 | |||||||||||||||||||
| Impairments | (3,776) | |||||||||||||||||||
| Non-interest earning assets | 348,215 | |||||||||||||||||||
| Total | 1,007,097 | |||||||||||||||||||
| Percentage of total average interest earning assets in offices outside the UK | 38% | |||||||||||||||||||
Notes
aNegative interest earned on assets (which is presented within interest and similar expense in the statutory accounts) is included in determining the total net interest figure. This presentation is deemed appropriate to represent the return associated with each asset class in the table.
bLoans and advances at amortised cost include all doubtful lending. Interest receivable on such lending has been included to the extent to which either cash payments have been received or interest has been accrued in accordance with the income recognition policy of the Barclays Bank Group.
cOther interest and similar income principally includes interest income relating to hedging activity.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 222 | ||||
Additional unaudited information
Additional financial disclosure
| Liabilities | Restatedd | |||||||||||||||||||
| 2021 | ||||||||||||||||||||
| Average balance | Interest expense | Interest incomea | Total net interest | Rate | ||||||||||||||||
| £m | £m | £m | £m | % | ||||||||||||||||
| Deposits at amortised cost | UK | 130,828 | 112 | (55) | 57 | — | ||||||||||||||
| Deposits at amortised cost | Non-UK | 69,811 | 218 | (77) | 141 | 0.2 | ||||||||||||||
| Deposits at amortised cost | Total | 200,639 | 330 | (132) | 198 | 0.1 | ||||||||||||||
| Federal funds purchased | UK | — | — | — | — | — | ||||||||||||||
| Federal funds purchased | Non-UK | 788 | 1 | — | 1 | 0.1 | ||||||||||||||
Federal funds purchasedb | Total | 788 | 1 | — | 1 | 0.1 | ||||||||||||||
| Cash collateral | UK | 44,591 | 42 | (40) | 2 | — | ||||||||||||||
| Cash collateral | Non-UK | 16,036 | 22 | — | 22 | 0.1 | ||||||||||||||
| Cash collateral | Total | 60,627 | 64 | (40) | 24 | — | ||||||||||||||
| Debt securities in issue | UK | 9,295 | 290 | — | 290 | 3.1 | ||||||||||||||
| Debt securities in issue | Non-UK | 12,745 | 95 | — | 95 | 0.7 | ||||||||||||||
| Debt securities in issue | Total | 22,040 | 385 | — | 385 | 1.7 | ||||||||||||||
| Commercial paper | UK | 9,094 | 4 | (26) | (22) | (0.2) | ||||||||||||||
| Commercial paper | Non-UK | 11,337 | 24 | (6) | 18 | 0.2 | ||||||||||||||
Commercial paperb | Total | 20,431 | 28 | (32) | (4) | — | ||||||||||||||
| Subordinated liabilities | UK | 29,757 | 922 | — | 922 | 3.1 | ||||||||||||||
| Subordinated liabilities | Non-UK | 227 | 12 | — | 12 | 5.3 | ||||||||||||||
| Subordinated liabilities | Total | 29,984 | 934 | — | 934 | 3.1 | ||||||||||||||
| Repurchase agreements | UK | 8,793 | 15 | — | 15 | 0.2 | ||||||||||||||
| Repurchase agreements | Non-UK | 2,542 | 1 | (44) | (43) | (1.7) | ||||||||||||||
| Repurchase agreements | Total | 11,335 | 16 | (44) | (28) | (0.2) | ||||||||||||||
Other interest and similar expensec | — | 841 | (374) | 467 | — | |||||||||||||||
| Total interest bearing liabilities not at fair value through income statement | 345,844 | 2,599 | (622) | 1,977 | 0.6 | |||||||||||||||
| Interest bearing liabilities at fair value through income statement | UK | 268,067 | ||||||||||||||||||
| Interest bearing liabilities at fair value through income statement | Non-UK | 55,754 | ||||||||||||||||||
| Interest bearing liabilities at fair value through income statement | Total | 323,821 | ||||||||||||||||||
| Total interest bearing liabilities | 669,665 | |||||||||||||||||||
| Interest free customer deposits | UK | 45,498 | ||||||||||||||||||
| Interest free customer deposits | Non-UK | 15,179 | ||||||||||||||||||
| Interest free customer deposits | Total | 60,677 | ||||||||||||||||||
Other non-interest bearing liabilitiesd | 343,510 | |||||||||||||||||||
| Shareholders' equity | 53,872 | |||||||||||||||||||
| Total | 1,127,724 | |||||||||||||||||||
| Percentage of total average interest earning liabilities in offices outside the UK | 25% | |||||||||||||||||||
Notes
aNegative interest earned on liabilities (which is presented within interest and similar income in the statutory accounts) is included in determining the total net interest figure. This presentation is deemed appropriate to represent the return associated with each asset class in the table.
bFollowing a change in reporting requirements, federal funds purchased and commercial paper have been presented separately for the average balance sheet. Federal funds purchased were previously shown within deposits at amortised cost and commercial paper was previously shown within debt securities in issue. Prior year comparatives have been re-presented.
cOther interest and similar expense principally relates to hedging activity.
d2021 financial metrics have been restated to reflect the over-issuance of securities under the Company's 2019 F-3. See Restatement of financial statements (Note 1a) on page 118 for further details. In calculating the impact on the average balances for the provision relating to over-issuance of securities under the Company's 2019 F-3 and related current tax liabilities the quarter end positions have been used.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 223 | ||||
Additional unaudited information
Additional financial disclosure
| Liabilities | 2020 | |||||||||||||||||||
| Average balance | Interest expense | Interest incomea | Total net interest | Rate | ||||||||||||||||
| £m | £m | £m | £m | % | ||||||||||||||||
| Deposits at amortised cost | UK | 130,760 | 200 | (15) | 185 | 0.1 | ||||||||||||||
| Deposits at amortised cost | Non-UK | 70,552 | 443 | (15) | 428 | 0.6 | ||||||||||||||
| Deposits at amortised cost | Total | 201,312 | 643 | (30) | 613 | 0.3 | ||||||||||||||
| Federal funds purchased | UK | — | — | — | — | — | ||||||||||||||
| Federal funds purchased | Non-UK | 155 | 1 | — | 1 | 0.6 | ||||||||||||||
Federal funds purchasedb | Total | 155 | 1 | — | 1 | 0.6 | ||||||||||||||
| Cash collateral | UK | 53,245 | 96 | (31) | 65 | 0.1 | ||||||||||||||
| Cash collateral | Non-UK | 13,921 | 38 | — | 38 | 0.3 | ||||||||||||||
| Cash collateral | Total | 67,166 | 134 | (31) | 103 | 0.2 | ||||||||||||||
| Debt securities in issue | UK | 10,208 | 54 | — | 54 | 0.5 | ||||||||||||||
| Debt securities in issue | Non-UK | 13,358 | 274 | (2) | 272 | 2.0 | ||||||||||||||
| Debt securities in issue | Total | 23,566 | 328 | (2) | 326 | 1.4 | ||||||||||||||
| Commercial paper | UK | 7,727 | 16 | — | 16 | 0.2 | ||||||||||||||
| Commercial paper | Non-UK | 10,185 | 80 | — | 80 | 0.8 | ||||||||||||||
Commercial paperb | Total | 17,912 | 96 | — | 96 | 0.5 | ||||||||||||||
| Subordinated liabilities | UK | 34,573 | 1,104 | — | 1,104 | 3.2 | ||||||||||||||
| Subordinated liabilities | Non-UK | 220 | 8 | — | 8 | 3.6 | ||||||||||||||
| Subordinated liabilities | Total | 34,793 | 1,112 | — | 1,112 | 3.2 | ||||||||||||||
| Repurchase agreements | UK | 7,245 | 29 | — | 29 | 0.4 | ||||||||||||||
| Repurchase agreements | Non-UK | 1,321 | 7 | (5) | 2 | 0.2 | ||||||||||||||
| Repurchase agreements | Total | 8,566 | 36 | (5) | 31 | 0.4 | ||||||||||||||
Other interest and similar expensec | — | 496 | — | 496 | — | |||||||||||||||
| Total interest bearing liabilities not at fair value through income statement | 353,470 | 2,846 | (68) | 2,778 | 0.8 | |||||||||||||||
| Interest bearing liabilities at fair value through income statement | UK | 239,987 | ||||||||||||||||||
| Interest bearing liabilities at fair value through income statement | Non-UK | 51,887 | ||||||||||||||||||
| Interest bearing liabilities at fair value through income statement | Total | 291,874 | ||||||||||||||||||
| Total interest bearing liabilities | 645,344 | |||||||||||||||||||
| Interest free customer deposits | UK | 38,136 | ||||||||||||||||||
| Interest free customer deposits | Non-UK | 12,860 | ||||||||||||||||||
| Interest free customer deposits | Total | 50,996 | ||||||||||||||||||
| Other non-interest bearing liabilities | 377,157 | |||||||||||||||||||
| Shareholders' equity | 55,754 | |||||||||||||||||||
| Total | 1,129,251 | |||||||||||||||||||
| Percentage of total average interest earning liabilities in offices outside the UK | 25% | |||||||||||||||||||
Notes
aNegative interest earned on liabilities (which is presented within interest and similar income in the statutory accounts) is included in determining the total net interest figure. This presentation is deemed appropriate to represent the return associated with each asset class in the table.
bFollowing a change in reporting requirements, federal funds purchased and commercial paper have been presented separately for the average balance sheet. Federal funds purchased were previously shown within deposits at amortised cost and commercial paper was previously shown within debt securities in issue. Prior year comparatives have been re-presented.
cOther interest and similar expense principally includes interest expense relating to hedging activity.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 224 | ||||
Additional unaudited information
Additional financial disclosure
| Liabilities | 2019 | |||||||||||||||||||
| Average balance | Interest expense | Interest incomea | Total net interest | Rate | ||||||||||||||||
| £m | £m | £m | £m | % | ||||||||||||||||
| Deposits at amortised cost | UK | 110,455 | 636 | — | 636 | 0.6 | ||||||||||||||
| Deposits at amortised cost | Non-UK | 67,329 | 1,136 | (1) | 1,135 | 1.7 | ||||||||||||||
| Deposits at amortised cost | Total | 177,784 | 1,772 | (1) | 1,771 | 1.0 | ||||||||||||||
| Federal funds purchased | UK | — | — | — | — | — | ||||||||||||||
| Federal funds purchased | Non-UK | 299 | 6 | — | 6 | 2.0 | ||||||||||||||
Federal funds purchasedb | Total | 299 | 6 | — | 6 | 2.0 | ||||||||||||||
| Cash collateral | UK | 50,985 | 214 | (10) | 204 | 0.4 | ||||||||||||||
| Cash collateral | Non-UK | 8,332 | 82 | — | 82 | 1.0 | ||||||||||||||
| Cash collateral | Total | 59,317 | 296 | (10) | 286 | 0.5 | ||||||||||||||
| Debt securities in issue | UK | 8,248 | 84 | — | 84 | 1.0 | ||||||||||||||
| Debt securities in issue | Non-UK | 15,839 | 536 | (2) | 534 | 3.4 | ||||||||||||||
| Debt securities in issue | Total | 24,087 | 620 | (2) | 618 | 2.6 | ||||||||||||||
| Commercial paper | UK | 7,584 | 17 | — | 17 | 0.2 | ||||||||||||||
| Commercial paper | Non-UK | 9,891 | 236 | — | 236 | 2.4 | ||||||||||||||
Commercial paperb | Total | 17,475 | 253 | — | 253 | 1.4 | ||||||||||||||
| Subordinated liabilities | UK | 35,590 | 1,072 | — | 1,072 | 3.0 | ||||||||||||||
| Subordinated liabilities | Non-UK | 374 | 24 | — | 24 | 6.4 | ||||||||||||||
| Subordinated liabilities | Total | 35,964 | 1,096 | — | 1,096 | 3.0 | ||||||||||||||
| Repurchase agreements | UK | 2,160 | 11 | — | 11 | 0.5 | ||||||||||||||
| Repurchase agreements | Non-UK | 2,381 | 20 | — | 20 | 0.8 | ||||||||||||||
| Repurchase agreements | Total | 4,541 | 31 | — | 31 | 0.7 | ||||||||||||||
Other interest and similar expensec | — | 104 | — | 104 | — | |||||||||||||||
| Total interest bearing liabilities not at fair value through income statement | 319,467 | 4,178 | (13) | 4,165 | 1.3 | |||||||||||||||
| Interest bearing liabilities at fair value through income statement | UK | 231,224 | ||||||||||||||||||
| Interest bearing liabilities at fair value through income statement | Non-UK | 62,304 | ||||||||||||||||||
| Interest bearing liabilities at fair value through income statement | Total | 293,528 | ||||||||||||||||||
| Total interest bearing liabilities | 612,995 | |||||||||||||||||||
| Interest free customer deposits | UK | 30,688 | ||||||||||||||||||
| Interest free customer deposits | Non-UK | 10,375 | ||||||||||||||||||
| Interest free customer deposits | Total | 41,063 | ||||||||||||||||||
| Other non-interest bearing liabilities | 303,005 | |||||||||||||||||||
| Shareholders' equity | 50,034 | |||||||||||||||||||
| Total | 1,007,097 | |||||||||||||||||||
| Percentage of total average interest earning liabilities in offices outside the UK | 27% | |||||||||||||||||||
Notes
aNegative interest earned on liabilities (which is presented within interest and similar income in the statutory accounts) is included in determining the total net interest figure. This presentation is deemed appropriate to represent the return associated with each asset class in the table.
bFollowing a change in reporting requirements, federal funds purchased and commercial paper have been presented separately for the average balance sheet. Federal funds purchased were previously shown within deposits at amortised cost and commercial paper was previously shown within debt securities in issue. Prior year comparatives have been re-presented.
cOther interest and similar expense principally includes interest expense relating to hedging activity.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 225 | ||||
Additional unaudited information
Additional financial disclosure
Changes in total interest – volume and rate analysis
The following tables allocate changes in interest between changes in volume and changes in interest rates for the last two years. Volume and rate variances have been calculated on the movement in the average balances and the change in the interest rates on average interest earning assets and average interest bearing liabilities. Where variances have arisen from changes in both volumes and interest rates, these have been allocated proportionately between the two.
| Interest income | |||||||||||||||||||||||
| 2021/2020 Change due to increase/(decrease) in: | 2020/2019 Change due to increase/(decrease) in: | ||||||||||||||||||||||
| Total change | Volume | Rate | Total change | Volume | Rate | ||||||||||||||||||
| £m | £m | £m | £m | £m | £m | ||||||||||||||||||
| Cash and balances at central banks | UK | (28) | 2 | (30) | (209) | 43 | (252) | ||||||||||||||||
| Cash and balances at central banks | Non-UK | (93) | (8) | (85) | (532) | 69 | (601) | ||||||||||||||||
| Cash and balances at central banks | Total | (121) | (6) | (115) | (741) | 112 | (853) | ||||||||||||||||
| Loans and advances at amortised cost | UK | 376 | (50) | 426 | (246) | 88 | (334) | ||||||||||||||||
| Loans and advances at amortised cost | Non-UK | (618) | (363) | (255) | (759) | 95 | (854) | ||||||||||||||||
| Loans and advances at amortised cost | Total | (242) | (413) | 171 | (1,005) | 183 | (1,188) | ||||||||||||||||
| Cash collateral | UK | (85) | (33) | (52) | (215) | 34 | (249) | ||||||||||||||||
| Cash collateral | Non-UK | (48) | 4 | (52) | (13) | 38 | (51) | ||||||||||||||||
| Cash collateral | Total | (133) | (29) | (104) | (228) | 72 | (300) | ||||||||||||||||
| Reverse repurchase agreements | UK | 3 | (1) | 4 | (38) | (16) | (22) | ||||||||||||||||
| Reverse repurchase agreements | Non-UK | 8 | 2 | 6 | (16) | 3 | (19) | ||||||||||||||||
| Reverse repurchase agreements | Total | 11 | 1 | 10 | (54) | (13) | (41) | ||||||||||||||||
| Interest earning assets at fair value through other comprehensive income | UK | (207) | (29) | (178) | (207) | (26) | (181) | ||||||||||||||||
| Interest earning assets at fair value through other comprehensive income | Non-UK | (17) | 1 | (18) | (20) | (1) | (19) | ||||||||||||||||
| Interest earning assets at fair value through other comprehensive income | Total | (224) | (28) | (196) | (227) | (27) | (200) | ||||||||||||||||
| Other interest and similar income | 78 | — | 78 | 101 | — | 101 | |||||||||||||||||
| Total interest receivable | (631) | (475) | (156) | (2,154) | 327 | (2,481) | |||||||||||||||||
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 226 | ||||
Additional unaudited information
Additional financial disclosure
| Interest expense | |||||||||||||||||||||||
| 2021/2020 Change due to increase/(decrease) in: | 2020/2019 Change due to increase/(decrease) in: | ||||||||||||||||||||||
| Total change | Volume | Rate | Total change | Volume | Rate | ||||||||||||||||||
| £m | £m | £m | £m | £m | £m | ||||||||||||||||||
| Deposits at amortised cost | UK | (128) | — | (128) | (451) | 99 | (550) | ||||||||||||||||
| Deposits at amortised cost | non-UK | (287) | (4) | (283) | (707) | 52 | (759) | ||||||||||||||||
| Deposits at amortised cost | Total | (415) | (4) | (411) | (1,158) | 151 | (1,309) | ||||||||||||||||
| Federal funds purchased | UK | — | — | — | — | — | — | ||||||||||||||||
| Federal funds purchased | non-UK | — | 2 | (2) | (5) | (2) | (3) | ||||||||||||||||
Federal funds purchaseda | Total | — | 2 | (2) | (5) | (2) | (3) | ||||||||||||||||
| Cash Collateral | UK | (63) | (10) | (53) | (139) | 9 | (148) | ||||||||||||||||
| Cash Collateral | non-UK | (16) | 5 | (21) | (44) | 36 | (80) | ||||||||||||||||
| Cash Collateral | Total | (79) | (5) | (74) | (183) | 45 | (228) | ||||||||||||||||
| Debt securities in issue | UK | 236 | (5) | 241 | (30) | 17 | (47) | ||||||||||||||||
| Debt securities in issue | non-UK | (177) | (11) | (166) | (262) | (67) | (195) | ||||||||||||||||
| Debt securities in issue | Total | 59 | (16) | 75 | (292) | (50) | (242) | ||||||||||||||||
| Commercial paper | UK | (38) | 3 | (41) | (1) | — | (1) | ||||||||||||||||
| Commercial paper | non-UK | (62) | 8 | (70) | (156) | 7 | (163) | ||||||||||||||||
Commercial papera | Total | (100) | 11 | (111) | (157) | 7 | (164) | ||||||||||||||||
| Subordinated liabilities | UK | (182) | (150) | (32) | 32 | (32) | 64 | ||||||||||||||||
| Subordinated liabilities | non-UK | 4 | — | 4 | (16) | (8) | (8) | ||||||||||||||||
| Subordinated liabilities | Total | (178) | (150) | (28) | 16 | (40) | 56 | ||||||||||||||||
| Repurchase agreements | UK | (14) | 5 | (19) | 18 | 20 | (2) | ||||||||||||||||
| Repurchase agreements | non-UK | (45) | — | (45) | (18) | (6) | (12) | ||||||||||||||||
| Repurchase agreements | Total | (59) | 5 | (64) | — | 14 | (14) | ||||||||||||||||
| Other interest and similar expense | (29) | — | (29) | 392 | — | 392 | |||||||||||||||||
| Total interest payable | (801) | (157) | (644) | (1,387) | 125 | (1,512) | |||||||||||||||||
Note
a.Following a change in reporting requirements, federal funds purchased and commercial paper have been presented separately for the average balance sheet. Federal funds purchased were previously shown within deposits at amortised cost and commercial paper was previously shown within debt securities in issue. Prior year comparatives have been re-presented.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 227 | ||||
Additional unaudited information
Additional financial disclosure
Average deposits at amortised cost and the average interest rate paid
The following tables present average deposits at amortised cost and their associated interest expense by deposit type.
| Average deposits at amortised cost | Interest expense | Average interest rate | |||||||||
| For the year ended 31 December 2021 | £m | £m | % | ||||||||
| Current and demand accounts | |||||||||||
| – interest free | 60,677 | — | — | ||||||||
| – interest bearing | 49,488 | 36 | 0.1 | ||||||||
| Savings accounts | 34,778 | 75 | 0.2 | ||||||||
| Other time deposits- retail | 14,814 | 31 | 0.2 | ||||||||
Other time deposits- wholesale | 102,347 | 189 | 0.2 | ||||||||
| Total | 262,104 | 331 | 0.1 | ||||||||
| Average deposits at amortised cost | Interest expense | Average interest rate | |||||||||
| For the year ended 31 December 2020 | £m | £m | % | ||||||||
| Current and demand accounts | |||||||||||
| – interest free | 50,996 | — | — | ||||||||
| – interest bearing | 42,717 | 63 | 0.1 | ||||||||
| Savings accounts | 32,257 | 113 | 0.4 | ||||||||
| Other time deposits- retail | 17,242 | 81 | 0.5 | ||||||||
Other time deposits- wholesale | 109,252 | 387 | 0.4 | ||||||||
| Total | 252,464 | 644 | 0.3 | ||||||||
| Average deposits at amortised cost | Interest expense | Average interest rate | |||||||||
| For the year ended 31 December 2019 | £m | £m | % | ||||||||
| Current and demand accounts | |||||||||||
| – interest free | 41,063 | — | — | ||||||||
| – interest bearing | 38,745 | 166 | 0.4 | ||||||||
| Savings accounts | 28,383 | 196 | 0.7 | ||||||||
| Other time deposits- retail | 16,852 | 232 | 1.4 | ||||||||
Other time deposits- wholesale | 94,064 | 1,184 | 1.3 | ||||||||
| Total | 219,107 | 1,778 | 0.8 | ||||||||
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 228 | ||||
Additional unaudited information
Additional financial disclosure
Credit risk additional disclosure
This section of the report contains supplementary information that is more detailed or contains longer histories than the data presented in the Risk review section.
Risk elements in loans and advances at amortised cost
Loans assessed as Stage 3 credit impaired
Stage 3 credit impaired loans are loans in default assessed for lifetime expected credit losses. Further details on the approach to expected credit loss provisioning, including the classification into stages of gross exposures and approach to the measurement of lifetime expected credit losses, can be found in Note 1 Significant Accounting Policies.
This risk element in loans and advances at amortised cost may be analysed between the United Kingdom and Rest of the World as follows:
| Risk elements in loans and advances at amortised cost | |||||||||||
| 2021 | 2020 | 2019 | |||||||||
| As at 31 December | £m | £m | £m | ||||||||
| Gross stage 3 credit impaired loans | |||||||||||
| United Kingdom | 609 | 1,016 | 1,037 | ||||||||
| Rest of the world | 2,739 | 4,103 | 3,311 | ||||||||
| Total | 3,348 | 5,119 | 4,348 | ||||||||
| Total risk elements in loans and advances at amortised cost | |||||||||||
| United Kingdom | 609 | 1,016 | 1,037 | ||||||||
| Rest of the world | 2,739 | 4,103 | 3,311 | ||||||||
| Total | 3,348 | 5,119 | 4,348 | ||||||||
| Interest forgone on risk elements in loans and advances | |||||||||||
| 2021 | 2020 | 2019a | |||||||||
| As at 31 December | £m | £m | £m | ||||||||
| Interest income that would have been recognised under the original contractual terms | |||||||||||
| United Kingdom | — | — | — | ||||||||
| Rest of the World | 39 | 69 | 83 | ||||||||
| Total | 39 | 69 | 83 | ||||||||
Note
aPrior year comparatives have been restated to ensure a consistent basis of reporting with 2020.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 229 | ||||
Additional unaudited information
Additional financial disclosure
Potential Problem Loans
Potential problem loans are those loans for which serious doubt exists as to the ability of the borrower to continue to comply with repayment terms in the near future.
Loans and advances at amortised cost by product on page 53 includes gross exposure and associated impairment allowance for assets classified as Stage 2, but not past due i.e. assets satisfying the criteria for a Significant Increase in Credit Risk, but which are still complying with repayment terms.
Forbearance measures consist of concessions towards a debtor that is experiencing or is about to experience difficulties in meeting their financial commitments. Both performing and non-performing forbearance assets are classified as Stage 3 except where it is established that the concession granted has not resulted in diminished financial obligation and that no other regulatory definition of default criteria has been triggered, in which case the asset is classified as Stage 2. The minimum probationary period for non-performing forbearance is 12 months and for performing forbearance, 24 months. Hence, a minimum of 36 months is required for non-performing forbearance to move out of a forborne state.
In order to assess asset credit quality, 12-month PDs are used to map assets into strong, satisfactory, higher risk or credit impaired. A credit risk profile by internal PD grade for gross loans and advances at amortised cost and allowance for ECL is shown in the credit risk section on page 73, analysing each of these categories by stage.
Wholesale accounts that are deemed to contain heightened levels of risk are recorded on graded watchlists comprising four categories, graded in line with the perceived severity of the risk attached to the lending, and its probability of default. Where a counterparty’s financial health gives grounds for concern, it is immediately placed into the appropriate category. Once an account has been placed on a watchlist, the exposure is monitored and, where appropriate, exposure reductions are effected.
Impairment
Loans and Advances at fair value are not subject to ECL under IFRS 9 and are excluded from the disclosure below.
| Allocation of the Allowance for Credit Losses | ||||||||||||||||||||
| Balance at end of period applicable to: | Amount | % of loans in each category to total loans | ||||||||||||||||||
| 2021 | 2020 | 2019 | 2021 | 2020 | 2019 | |||||||||||||||
| As at 31 December | £m | £m | £m | % | % | % | ||||||||||||||
| Loans and Advances at amortised cost to Banks | 2 | 4 | 3 | 6.8 | 7.2 | 7.2 | ||||||||||||||
| Loans and Advances at amortised cost to Customers | 3,484 | 5,052 | 3,685 | 93.2 | 92.6 | 92.3 | ||||||||||||||
| Financial Assets at Fair Value through Other Comprehensive Income | — | — | — | — | 0.2 | 0.5 | ||||||||||||||
| Loans and Advances | 3,486 | 5,056 | 3,688 | 100.0 | 100.0 | 100.0 | ||||||||||||||
| Net charge offs during the period to average loans outstanding | |||||||||||
| Amount | |||||||||||
| 2021 | 2020 | 2019 | |||||||||
| As at 31 December | £m | £m | £m | ||||||||
| Loans and Advances at amortised cost to Banks | |||||||||||
| Net charge off | — | — | — | ||||||||
| Average loans | 9,381 | 9,703 | 10,341 | ||||||||
| Ratio (%) | — | — | — | ||||||||
| Loans and Advances at amortised cost to Customers | |||||||||||
| Net charge off | 1,417 | 969 | 1,220 | ||||||||
| Average loans | 114,757 | 128,770 | 130,925 | ||||||||
| Ratio (%) | 1.2 | 0.8 | 0.9 | ||||||||
| Financial Assets at Fair Value through Other Comprehensive Income | |||||||||||
| Net charge off | — | — | — | ||||||||
| Average loans | 110 | 418 | 409 | ||||||||
| Ratio (%) | — | — | — | ||||||||
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 230 | ||||
Additional unaudited information
Additional financial disclosure
| Consolidated Basis | |||||||||||
| Allowance for Credit losses to total loans outstanding | Amount | ||||||||||
| 2021 | 2020 | 2019 | |||||||||
| As at 31 December | £m | £m | £m | ||||||||
| Allowance for credit losses | 3,486 | 5,055 | 3,688 | ||||||||
| Total loans outstanding | 129,304 | 124,352 | 135,050 | ||||||||
| Ratio (%) | 2.7 | 4.1 | 2.7 | ||||||||
Notes
a.Total Loans outstanding includes Loans and Advances at Amortised Cost and FVOCI
b.Allowance for credit losses: Impairment allowance reduced to £3.4bn (2020: £5.1bn), driven by amounts written-off for £1,158m, ECL release of £298m due to favourable macro-economic outlook and exchange and other adjustments of £113m.
c.Loans Outstanding: Gross loans and Advances increased to £129bn (2020: £124bn), reflecting increases in Investment Bank , Barclaycard International and Private Bank partially offset by decrease in Corporate Bank International.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 231 | ||||
Additional unaudited information
Additional financial disclosure
Maturity analysis of Gross loans and advances
Traded Loans are included in the 'Less than 1 year' column at their fair value. Liquidity risk on these items is not managed on the basis of contractual maturity since these items are not held for settlement according to such maturity and will frequently be settled before contractual maturity at fair value.
| Maturity analysis of Gross loans and advances | |||||||||||||||||
| Less than 1 year | One to Five Years | Five to fifteen years | Over fifteen years | Total | |||||||||||||
| As at 31 December 2021 | £m | £m | £m | £m | £m | ||||||||||||
| Loans and Advances at Amortised cost to banks | 8,751 | — | — | — | 8,751 | ||||||||||||
| Loans and Advances at Amortised cost to Customers | 35,881 | 57,528 | 20,036 | 7,055 | 120,500 | ||||||||||||
| Financial Assets at Fair Value Through Other Comprehensive Income | 53 | — | — | — | 53 | ||||||||||||
| Loans and Advances at Fair Value through Profit and Loss | 30,386 | 2,621 | 1,737 | 1,158 | 35,902 | ||||||||||||
| Traded loans | 12,525 | — | — | — | 12,525 | ||||||||||||
| Total Gross loans and advances | 87,596 | 60,149 | 21,773 | 8,213 | 177,731 | ||||||||||||
| Less than 1 year | One to Five Years | Five to fifteen years | Over fifteen years | Total | |||||||||||||
| As at 31 December 2020 | £m | £m | £m | £m | £m | ||||||||||||
| Loans and Advances at Amortised cost to banks | 9,007 | — | — | — | 9,007 | ||||||||||||
| Loans and Advances at Amortised cost to customers | 29,722 | 54,002 | 22,017 | 9,412 | 115,153 | ||||||||||||
| Financial Assets at Fair Value Through Other Comprehensive Income | 85 | 106 | — | — | 191 | ||||||||||||
| Loans and Advances at Fair Value through Profit and Loss | 23,755 | 1,171 | 1,509 | 1,014 | 27,449 | ||||||||||||
| Traded loans | 8,348 | — | — | — | 8,348 | ||||||||||||
| Total Gross loans and advances | 70,917 | 55,279 | 23,526 | 10,426 | 160,148 | ||||||||||||
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 232 | ||||
Additional unaudited information
Additional financial disclosure
| Notional principal amounts of credit derivatives | |||||||||||
| 2021 | 2020 | 2019 | |||||||||
| As at 31 December | £m | £m | £m | ||||||||
Credit derivatives held or issued for trading purposesa | 1,272,104 | 847,845 | 825,516 | ||||||||
Note
aIncludes credit derivatives held as economic hedges which are not designated as hedges for accounting purposes.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 233 | ||||
Additional unaudited information
Additional financial disclosure
Environmental, Social and Governance (ESG)
Our approach to environmental and social issues is becoming increasingly integrated in the work we do across our business and is subject to the governance and oversight of our management and Board structures.
The ESG section sets out an overview of our approach to ESG, including how we think about, and measure, our environmental and social impact. Our approach is informed by our engagement with our stakeholders, including with customers and clients, colleagues, investors, regulators and wider society.
Say on Climate
In line with our commitment to offer shareholders a ‘Say on Climate’, we will be publishing an update on our climate strategy, targets and methodology in advance of the 2022 Annual General Meeting. This will include 2030 targets for two new sectors, Cement and Metals (Steel).
Our strategy
Our universal bank model provides us with strength and stability, and we have priorities to sustain and grow our business.
Strategic priorities to sustain and grow
1. Deliver next-generation, digitised consumer businesses
As technology transforms consumer financial services, we are building and delivering improved products and services for our customers, leveraging our payments interconnection and improving our efficiency.
•Investing in digital capabilities to improve service for customers and unlock new sources of income:
–accelerating digital access and adoption, while ensuring we do not leave customers behind
–building more cost-effective infrastructure
–using the quality and scale of our data to better understand customer needs, anticipate trends and deliver more competitive products and services.
•Realising value from investment in Payments across the Group.
•Expanding unsecured lending in the UK, US and Europe through Corporate partnerships.
•Create a competitive Wealth franchise to efficiently service our customers’ evolving needs.
2. Deliver sustainable growth for the CIB
As the capital markets grow, we will seek to maintain our market position as a top six1 global investment bank while investing in new capabilities for our clients.
•Building consistent strength in investment banking, expanding in new economy sectors, Equity business and M&A.
•Prioritising digital investment to ensure we are an electronic first markets business, while growing our share in Securitised Products and Macro Rates, FX, and EM.
•Capture greater client flow in Equities and disrupt Prime financing.
•Broaden corporate banking product capability, particularly in Europe and US.
•Selectively expand the CIB internationally, including in the Middle East and China.
3. Capture opportunities as we transition to a low-carbon economy
We want to be alongside customers and clients as they transition to a low-carbon economy, using our advisory and financial expertise to help them navigate this period of extraordinary change.
•Using our financial and capital markets expertise to support the scale-up of low-carbon technologies, infrastructure and capacity.
•Supporting clients to decarbonise by providing advice and finance, including supporting transition away from fossil fuels.
•Continuing to develop green and sustainable banking products, including green mortgages, bonds, loans and investment funds.
•Investing equity capital in sustainability-focused start-ups with growth potential.
•Continuing to make progress to become a net zero bank by 2050, including aligning all of our financing to the goals of the Paris Agreement.
1 Top 6 Global Investment Bank supported by #6 ranking in Investment Banking (Source : Dealogic) and #6 ranking in Global Markets (Source : Coalition Greenwich, FY21 Preliminary Competitor analysis)
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 234 | ||||
Additional unaudited information
Additional financial disclosure
Our climate strategy
Addressing climate change is an urgent and complex challenge. It requires a fundamental transformation of the global economy, so that society stops adding to the total amount of Greenhouse Gases (GHG) in the atmosphere. The financial sector has a critical role to play in supporting the economy to reach this goal. It is estimated that at least $3-5 trillion1 of additional investment will be needed each year, for the next 30 years, in order to finance the transition. At Barclays we are determined to play our part. In March 2020, we announced our ambition to be a net zero bank by 2050, becoming one of the first banks to do so. We have a strategy, in three parts, to turn that ambition into action:
1. Achieving net zero operations
As part of our ambition to be a net zero bank by 2050, Barclays is working to achieve net zero operations. Barclays has been carbon neutral2 for its scope 1,3 scope 24 and scope 3 (business travel) emissions since 2020. We intend to remain carbon neutral, while investing in the continued decarbonisation of our operations.
We are defining net zero operations as the state in which we will achieve a GHG reduction of our scope 1 and scope 2 emissions of at least 90% against a 2018 baseline and use carbon removals to neutralise any limited operational emissions that we cannot yet eliminate.
2. Reducing our financed emissions
Most of our emissions result from the activities of the clients that we finance and those generated in their respective value chains. These are so-called ‘financed emissions’ and fall within the general definition of scope 3 emissions.
In November 2020, we published details of our strategy for measuring and managing alignment of our financing with the goals and timelines of the Paris Agreement. Our approach is underpinned by BlueTrackTM5, a methodology we have developed for measuring our financed emissions and tracking them at a portfolio level against the goals of the Paris Agreement. BlueTrack builds on and extends existing industry approaches to cover not only lending but also capital markets financing. This better reflects the breadth of our support for clients through our investment bank.
We are setting ambitious targets, informed by Paris-aligned benchmark scenarios, to reduce our financed emissions. We also have clear restrictions on financing certain energy sector activities, including relating to thermal coal, oil sands, hydraulic fracturing (‘fracking’) and projects in the Arctic Circle.
We have used BlueTrack™ to assess the financed emissions of our client portfolios in the Energy and Power sectors, prioritising these two sectors because they are responsible for up to three-quarters of all GHG emissions globally and because Barclays has meaningful exposure to them. Therefore, they represented the most appropriate starting place from which to make a significant difference. In November 2020, we set a target for a 30% reduction in the CO2 intensity of our Power portfolio by 2025, as well as a target for a 15% CO2 reduction in absolute emissions of our Energy portfolio by 2025.
3. Financing the transition
Barclays is providing the green and sustainable finance required to transform the economies we serve. We are channelling investment, including our own capital, into new green technologies and infrastructure project that will build up low-carbon energy capability.
Barclays continued to make progress in 2021 against our sustainable finance commitments to facilitate £150bn of social, environmental and sustainability-linked financing from 2018 to 2025; and to facilitating £100bn of green financing by 2030. On a cumulative basis, by year end 2021 we have facilitated a total of £193.3bn in social, environmental and sustainability-linked financing since 2018. We facilitated £29.8bn of green financing in 2021, up 70% from £17.6bn in 2020 and comprised of:
•labelled, 'use of proceeds' and business mix financing in environmental categories (£22.6bn in 2021), and
•sustainability-linked financing that incorporates environmental performance targets (£7.2bn in 2021).
Managing climate-related risks
Our strategy is underpinned by the way we assess and manage our exposure to climate-related risk. From 2022, Climate Risk will be a Principal Risk under Barclays’ Enterprise Risk Management Framework.
Notes
Note 1 “$3-5trn as estimated in the GFMA/BCG (Global Financial Markets Association/Boston Consulting Group) Climate Finance Markets and the Real Economy report, December 2020
Note 2 We are defining carbon neutral as first reducing carbon dioxide emissions then counterbalancing carbon dioxide emissions from scope 1, scope 2 and scope 3 (business travel) with carbon offsets.
Note 3 Scope 1 emissions include our direct GHG emissions from natural gas, fuel oil, company cars and HFC refrigerants.
Note 4 Scope 2 emissions include our indirect GHG emissions from purchased electricity and purchased steam and chilled water.
Note 5 Further information and a detailed methodology white paper are available online, see home.barclays/sustainability/our-position-on-climate-change/bluetrack/.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 235 | ||||
Additional unaudited information
Additional financial disclosure
Important information
In preparing the ESG section within the Form 20-F, we have:
i.made a number of key judgements, estimations and assumptions, and the processes and issues involved are complex. This is for example the case in relation to financed emissions, classification of environmental and social financing and operational emissions and measurement.
ii.used ESG and climate data, models and methodologies that we consider to be appropriate and suitable for these purposes as at the date on which they were deployed. However, these data, models and methodologies are not of the same standard as those available in the context of other financial information, nor subject to the same or equivalent disclosure standards, historical reference points, benchmarks or globally accepted accounting principles. There is an inability to rely on historical data as a strong indicator of future trajectories, in the case of climate change and its evolution. Outputs of models, processed data and methodologies will also be affected by underlying data quality which can be hard to assess.
The data models and methodologies used and the judgements, estimates or assumptions made are rapidly evolving and this may directly or indirectly affect the metrics, data points and targets contained in this section of the Form 20-F. We continue to review and develop our approach to data, models and methodologies in line with market principles and standards as this subject area matures. Further development of accounting and/or reporting standards could impact (potentially materially) the performance metrics, data points and targets referenced in this report. In future reports we may present some or all of the information for this reporting period using updated or more granular data, or improved models, methodologies, market practices or standards. Such re-presented information may result in different outcomes than those included in this section of the Form 20-F. Where information is re-presented from time to time, we will identify this and (where we think it is appropriate) include an explanation. It is important for readers and users of this report to be aware that direct like-for-like comparisons of each piece of information disclosed may not always be possible from one reporting period to another.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 236 | ||||
Glossary of terms
Barclays Bank PLC (BBPLC or the Company) is a wholly-owned subsidiary of Barclays PLC. The consolidation of Barclays Bank PLC and its subsidiaries is referred to as the Barclays Bank Group. The term Barclays refers to either Barclays PLC (or BPLC) or, depending on the context, the Barclays Group as a whole. The term Barclays Group refers to BPLC together with its subsidiaries.‘
Advanced-Internal Ratings Based (A-IRB)’ See ‘Internal Ratings Based (IRB)’.
‘Acceptances and endorsements’ An acceptance is an undertaking by a bank to pay a bill of exchange drawn on a customer, for which reimbursement by the customer is normally immediate. Endorsements are to change the payee of a bill of exchange but with no change to the bank’s liability.
‘Additional Tier 1 (AT1) capital’ AT1 capital largely comprises eligible non-common equity capital securities and any related share premium.
‘Additional Tier 1 (AT1) securities’ Non-common equity securities that are eligible as AT1 capital.
‘Advanced Measurement Approach (AMA)’ Under the AMA, banks are allowed to develop their own empirical model to quantify required capital for operational risk. Banks can only use this approach subject to approval from their local regulators.
‘Agencies’ Bonds issued by state and / or government agencies or government-sponsored entities.
‘Agency Mortgage-Backed Securities’ Mortgage-Backed Securities issued by government-sponsored entities.
‘All price risk (APR)’ An estimate of all the material market risks, including rating migration and default for the correlation trading portfolio.
‘American Depository Receipts (ADR)’ A negotiable certificate that represents the ownership of shares in a non-US company (e.g. Barclays Bank Group) trading in US financial markets.
‘Americas’ Geographic segment comprising the US, Canada and countries where Barclays Bank Group operates within Latin America.
‘Annual Earnings at Risk (AEaR)’ A measure of the potential change in Net Interest Income (NII) due to an interest rate movement over a one-year period.
‘Annualised cumulative weighted average lifetime PD’ The probability of default over the remaining life of the asset, expressed as an annual rate, reflecting a range of possible economic scenarios.
‘Application scorecards’ Algorithm based decision-making tools used to aid business decisions and manage credit risk based on available customer data at the point of application for a product.
‘Arrears’ Customers are said to be in arrears when they are behind in fulfilling their obligations with the result that an outstanding loan is unpaid or overdue. Such customers are also said to be in a state of delinquency. When a customer is in arrears, their entire outstanding balance is said to be delinquent, meaning that delinquent balances are the total outstanding loans on which payments are overdue.
‘Asia’ Geographic segment comprising countries where Barclays Bank Group operates within Asia and the Middle East.
‘Asset Backed Commercial Paper (ABCP)’ Typically short-term notes secured on specified assets issued by consolidated special purpose entities for funding purposes.
‘Asset Backed Securities (ABS)’ Securities that represent an interest in an underlying pool of referenced assets. The referenced pool can comprise any assets which attract a set of associated cash flows but are commonly pools of residential or commercial mortgages and, in the case of a Collateralised Debt Obligation (CDO), the referenced pool may be ABS or other classes of assets.
‘Attributable profit’ Profit after tax that is attributable to ordinary equity holders of Barclays adjusted for the after tax amounts of capital securities classified as equity.
‘Average allocated tangible equity’ Calculated as the average of the previous month’s period end allocated tangible equity and the current month’s period end allocated tangible equity. The average allocated tangible equity for the period is the average of the monthly averages within that period.
‘Average tangible shareholders’ equity’ Calculated as the average of the previous month’s period end tangible equity and the current month’s period end tangible equity. The average tangible shareholders’ equity for the period is the average of the monthly averages within that period.
‘Average UK leverage ratio’ As per the PRA rulebook, calculated as the average capital measure based on the last day of each month in the quarter divided by the average exposure measure for the quarter, where the average exposure is based on each day in the quarter.
‘Back testing’ Includes a number of techniques that assess the continued statistical validity of a model by simulating how the model would have predicted recent experience.
‘Bank of England (BoE)’ The central bank of the United Kingdom with devolved responsibility for managing monetary policy and to oversee regulation of the UK’s financial sector. Through the Prudential Regulation Committee, the BoE exercises control over the PRA.
‘Barclays Africa’ or ‘Absa’ or ‘Absa Group Limited’ Barclays Africa Group Limited (now Absa Group Limited), which was previously a subsidiary of the Barclays Group. Following a sell down of shares resulting in a loss of control, the Barclays Group's shareholding in Absa Group Limited is now classified as a financial asset at fair value through other comprehensive income (FVOCI).
‘Balance weighted Loan to Value (LTV) ratio’ In the context of the credit risk disclosures on secured home loans, a means of calculating marked to market LTVs derived by calculating individual LTVs at account level and weighting it by the balances to arrive at the average position. Balance weighted
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 237 | ||||
Loan to Value ratio is calculated using the following formula: LTV = ((loan 1 balance x Marked to market (MTM) LTV% for loan 1) + (loan 2 balance x Marked to market (MTM) LTV% for loan 2) + ...) / total outstandings in portfolio.
‘Barclays’ or ’Barclays Group’ Barclays PLC, together with its subsidiaries.
‘Barclays Bank Group’ Barclays Bank PLC, together with its subsidiaries.
‘Barclays Bank UK Group’ Barclays Bank UK PLC, together with its subsidiaries.
‘Barclays Operating Businesses’ The core Barclays businesses operated by Barclays UK (which include the UK Personal Banking; UK Business Banking and the Barclaycard Consumer UK businesses) and Barclays International (the large UK Corporate business; the International Corporate and Private Bank businesses; the Investment Bank; the Barclaycard International business; and Payments).
‘Barclays Execution Services’ or ‘BX’ or ‘Group Service Company’ Barclays Execution Services Limited, the Group services company set up to provide services to Barclays UK and Barclays International to deliver operational continuity.
‘Barclays International’ The segment of Barclays held by Barclays Bank PLC. The division includes the large UK Corporate business; the International Corporate and Private Bank businesses; the Investment Bank; the Barclaycard International business; and Payments.
‘Barclays UK’ The segment of Barclays held by Barclays Bank UK PLC. The division includes the UK Personal Banking; UK Business Banking and the Barclaycard Consumer UK businesses. Following a transfer from Barclays International in Q2 2020, this also includes Barclays Partner Finance (BPF).
‘Basel 3’ The third of the Basel Accords, setting minimum requirements and standards that apply to internationally active banks. Basel 3 is a set of measures developed by the Basel Committee on Banking Supervision aiming to strengthen the regulation, supervision and risk management of banks.
‘Basel Committee on Banking Supervision (BCBS)’ or ‘The Basel Committee’ A forum for regular cooperation on banking supervisory matters which develops global supervisory standards for the banking industry. Its 45 members are officials from central banks or prudential supervisors from 28 jurisdictions.
‘Basic Indicator Approach (BIA)’ Under the BIA, banks are required to hold regulatory capital for operational risk equal to 15% of the annual average, calculated over a rolling three-year period, of the relevant income indicator for the bank as whole.
‘Basis point(s)’ or ‘bp(s)’ One hundredth of a per cent (0.01%); 100 basis points is 1%. The measure is used for quoting movements in interest rates, yields on securities and for other purposes.
‘Basis risk’ Index/tenor risk, that arises when floating rate products are linked to different interest rate indices, which are imperfectly correlated, especially under stressed market conditions.
‘Behavioural scorecards’ Algorithm based decision tools used to aid business decisions and manage credit risk based on existing customer data derived from account usage.
‘Book quality’ In the context of the Capital Risk section of the Barclays Bank PLC Annual Report, changes in RWAs caused by factors such as underlying customer behaviour or demographics leading to changes in risk profile.
‘Book size’ In the context of the Capital Risk section of the Barclays Bank PLC Annual Report, changes in RWAs driven by business activity, including net originations or repayments.
‘Bounce Back Loan Scheme (BBLS)’ A UK Government (British Business Bank) backed loan scheme which allowed small and medium-sized businesses to borrow between £2,000 and £50,000. The UK Government guarantees 100% of the loan and pays the first 12 months of interest on behalf of the borrowers, subject to terms and conditions.
‘Business scenario stresses’ Multi asset scenario analysis of extreme, but plausible events that may impact the market risk exposures of the Investment Bank.
‘Buy to let mortgage’ A mortgage whereby the intention of the customer is to let the property at origination.
‘Capital Conservation Buffer (CCB)’ A capital buffer of 2.5% of a bank’s total exposures that needs to be met with an additional amount of Common Equity Tier 1 capital above the 4.5% minimum requirement for Common Equity Tier 1 set out in CRR. Its objective is to conserve a bank’s capital by ensuring that banks build up surplus capital outside periods of stress which can be drawn down if losses are incurred.
‘Capital ratios’ Key financial ratios measuring the bank's capital adequacy or financial strength expressed as a percentage of RWAs.
‘Capital Requirements Directive (CRD)’ Directive 2013/36/EU, a component of the CRD IV package which accompanies the Capital Requirements Regulation and sets out macroprudential standards including the countercyclical capital buffer and capital buffers for systemically important institutions. Directive (EU) 2019/878, published as part of the EU Risk Reduction Measure package amends CRD. These amendments entered into force from 27 June 2019, with EU member states required to adopt the measures within the Directive by 28 December 2020. CRD forms part of UK law pursuant to the European Union (Withdrawal) Act 2018, as amended, and is subject to the temporary transitional powers available to UK regulators to delay or phase-in on-shoring changes to UK regulatory requirements arising at the end of the transition period until 31 March 2022.
‘Capital Requirements Regulation (CRR)’ Regulation (EU) No 575/2013, a component of the CRD IV package which accompanies the Capital Requirements Directive and sets out detailed rules for capital eligibility, the calculation of RWAs, the measurement of leverage, the management of large exposures and minimum standards for liquidity. Between 27 June 2019 and 28 June 2023, this regulation will be amended in line with the requirements of amending Regulation (EU) 2019/876 (CRR II). CRR, as amended by CRR II, forms part of UK law pursuant to the European Union (Withdrawal) Act 2018, as amended, and is subject to the temporary transitional powers available to UK regulators to delay or phase-in on-shoring changes to UK regulatory requirements arising at the end of the transition period until 31 March 2022.
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‘Capital Requirements Regulation II (CRR II)’ Regulation (EU) 2019/876, amending Regulation (EU) No 575/2013 (CRR). This is a component of the EU Risk Reduction Measure package. The requirements set out in CRR II will be introduced between 27 June 2019 and 28 June 2023. CRR, as amended by CRR II, forms part of UK law pursuant to the European Union (Withdrawal) Act 2018, as amended, and is subject to the temporary transitional powers available to UK regulators to delay or phase-in on-shoring changes to UK regulatory requirements arising at the end of the transition period until 31 March 2022. Following a consultation process in 2021 the PRA finalised their implementation of the CRR II package through Policy Statement 22/21. The finalised requirements were implemented in the UK with effect from 1 January 2022.
‘Capital requirements on the underlying exposures (KIRB)’ An approach available to banks when calculating RWAs for securitisation exposures. This is based upon the RWA amounts that would be calculated under the IRB approach for the underlying pool of securitised exposures in the programme, had such exposures not been securitised.
‘Capital resources’ Common Equity Tier 1, Additional Tier 1 capital and Tier 2 capital that are eligible to satisfy capital requirements under CRD. Referred to as ‘own funds’ within EU regulatory texts.
‘Capital risk’ 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 testing purposes). This includes the risk from the Barclays Bank Group’s pension plans.
‘Central Counterparty’ or ‘Central Clearing Counterparties (CCPs)’ A clearing house mediating between the buyer and the seller in a financial transaction, such as a derivative contract or repurchase agreement (repo). Where a central counterparty is used, a single bi-lateral contract between the buyer and seller is replaced with two contracts, one between the buyer and the CCP and one between the CCP and the seller. The use of CCPs allows for greater oversight and improved credit risk mitigation in over-the-counter (OTC) markets.
‘Client Assets’ Assets managed or administered by the Barclays Bank Group on behalf of its clients including assets under management (AUM), custody assets, assets under administration and client deposits.
‘Climate risk’ The impact on Financial and Operational Risks arising from climate change through physical risks, risks associated with transitioning to a lower carbon economy and connected risks arising as a result of second order impacts of these two drivers on portfolios.
'Connected risks' The second-order risks arising from physical or transition risk impacts. Connected risk is diverse, impacting customer and wholesale portfolios.
‘CLOs and Other insured assets’ Highly rated CLO positions wrapped by monolines, non-CLOs wrapped by monolines and other assets wrapped with Credit Support Annex (CSA) protection.
‘Collateralised Debt Obligation (CDO)’ A security issued by a third party which references Asset Backed Securities and/or certain other related assets purchased by the issuer. CDOs may feature exposure to sub-prime mortgage assets through the underlying assets.
‘Collateralised Loan Obligation (CLO)’ A security backed by repayments from a pool of commercial loans. The payments may be made to different classes of owners (in tranches).
‘Collateralised Mortgage Obligation (CMO)’ A security backed by mortgages. A special purpose entity receives income from the mortgages and passes them on to investors in the security.
‘Combined Buffer Requirement (CBR)’ In the context of the CRD capital obligations, the total Common Equity Tier 1 capital required to meet the combined requirements of the Capital Conservation Buffer, the GSII Buffer, the counter-cyclical buffer, and the OSII buffer if applicable to a firm.
‘Commercial paper (CP)’ Short-term notes issued by entities, including banks, for funding purposes.
‘Commercial real estate (CRE)’ Commercial real estate includes office buildings, industrial property, medical centres, hotels, retail stores, shopping centres, farm land, multifamily housing buildings, warehouses, garages, industrial properties and other similar properties. Commercial real estate loans are loans backed by a package of commercial real estate. Note: for the purposes of the Credit Risk section, the UK CRE portfolio includes property investment, development, trading and housebuilders but excludes social housing contractors.
‘Commissions and other incentives’ Includes commission-based arrangements, guaranteed incentives and Long Term Incentive Plan awards.
‘Committee of Sponsoring Organisations of the Treadway Commission Framework (COSO)’ A joint initiative of five private sector organisations dedicated to the development of frameworks and providing guidance on enterprise risk management, internal control and fraud deterrence.
‘Commodity derivatives’ Exchange traded and over-the-counter (OTC) derivatives based on an underlying commodity (e.g. metals, precious metals, oil and oil related products, power and natural gas).
‘Commodity risk’ Measures the impact of changes in commodity prices and volatilities, including the basis between related commodities (e.g. Brent vs. WTI crude prices).
‘Common Equity Tier 1 (CET1) capital’ The highest quality form of regulatory capital under CRR that comprises common shares issued and related share premium, retained earnings and other reserves, less specified regulatory adjustments.
‘Common Equity Tier 1 (CET1) ratio’ A measure of Common Equity Tier 1 capital expressed as a percentage of RWAs.
‘Compensation: income ratio’ The ratio of compensation expense over total income. Compensation represents total staff costs less non-compensation items consisting of outsourcing, staff training, redundancy costs and retirement costs.
‘Comprehensive Capital Analysis and Review (CCAR)’ An annual exercise, required by and evaluated by the Federal Reserve, through which the largest bank holding companies operating in the US assess whether they have sufficient capital to continue operations through periods of economic and financial stress and have robust capital-planning processes that account for their unique risks.
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‘Comprehensive Risk Capital Charge (CRCC)’ An estimate of all the material market risks, including rating migration and default for the correlation trading portfolio.
‘Comprehensive Risk Measure (CRM)’ An estimate of all the material market risks, including rating migration and default for the correlation trading portfolio. Also referred to as All Price Risk (APR) and Comprehensive Risk Capital Charge (CRCC).
‘Conduct risk’ The risk of detriment to customers, clients, market integrity, competition or Barclays from the inappropriate supply of financial services, including instances of wilful or negligent misconduct.
‘Constant Currency Basis’ Excluding the impact of foreign currency conversion to GBP when comparing financial results in two different financial periods.
‘Consumer, Cards and Payments (CC&P)' International Cards and Consumer Bank (including Barclays US Consumer Bank, and Barclaycard Germany), Unified Payments (including merchant acquiring and commercial payments) and Private Bank.
‘Contingent Capital Notes (CCNs)’ Interest bearing debt securities issued by the Barclays Bank Group or its subsidiaries that are either permanently written off or converted into an equity instrument from the issuer's perspective in the event of the Common Equity Tier 1 (CET1) ratio of the relevant Barclays Group entity falling below a specific level, or at the direction of regulators.
‘Conversion Trigger’ Used in the context of Contingent Capital Notes and AT1 securities. A conversion trigger event occurs when the CET1 ratio of the bank falls below a certain level (the trigger) as defined in the Terms & Conditions of the instruments issued. See ‘Contingent Capital Notes (CCNs)’.
‘Coronavirus Business Interruption Loan Scheme (CBILS)’ A loan scheme by the British Business Bank (BBB) to support UK based small and medium-sized businesses (turnover of up to £45 million) adversely impacted by COVID-19. The CBILS scheme provided loans of up to £5 million which are backed by an 80% UK Government (BBB) guarantee. The UK Government will pay interest and fees for the first 12 months on behalf of the borrowers, subject to terms and conditions.
'Coronavirus Large Business Interruption Loan Scheme (CLBILS)’ A loan scheme by the British Business Bank (BBB) to support UK based medium-sized businesses (turnover above £45 million, but with no access to CCFF) adversely impacted by COVID-19. The CLBILS scheme provided loans of up to £200 million which are backed by an 80% UK Government (BBB) guarantee.
‘Corporate and Investment Bank (CIB)’ Barclays Corporate and Investment Bank businesses which form part of Barclays International.
‘Correlation risk’ Refers to the change in marked to market value of a security when the correlation between the underlying assets changes over time.
‘Cost of Equity’ The rate of return targeted by the equity holders of a company.
‘Cost: income jaws’ Relationship of the percentage change movement in operating expenses relative to total income.
‘Cost: income ratio’ Total operating expenses divided by total income.
‘Countercyclical Capital Buffer (CCyB)’ An additional buffer introduced as part of the CRD IV package that requires banks to have an additional cushion of CET 1 capital with which to absorb potential losses, enhancing their resilience and contributing to a stable financial system.
‘Countercyclical leverage ratio buffer (CCLB)’ A macroprudential buffer that has applied to specific PRA regulated institutions since 2018 and is calculated at 35% of any risk weighted countercyclical capital buffer set by the Financial Policy Committee (FPC). The CCLB applies in addition to the minimum of 3.25% and any G-SII additional leverage ratio buffer that applies.
‘Counterparty credit risk (CCR)’ The risk that a counterparty to a transaction could default before the final settlement of a transaction’s cash flows. In the context of RWAs, a component of RWAs that represents the risk of loss from derivatives, repurchase agreements and similar transactions as a result of the default of the counterparty.
‘Coverage ratio’ This represents the percentage of impairment allowance reserve against the gross exposure.
‘Covered bonds’ Debt securities backed by a portfolio of mortgages that are segregated from the issuer’s other assets solely for the benefit of the holders of the covered bonds.
‘Covid Corporate Finance Facility (CCFF)’: Bank of England (BOE) scheme to support liquidity among larger investment grade firms which make a material UK contribution, helping to bridge coronavirus disruption to their cash flows. The Bank of England provided liquidity by purchasing short-term debt in the form of commercial paper from corporates. Barclays acts as dealer.
‘CRD IV’ The Fourth Capital Requirements Directive, comprising an EU Directive and an accompanying Regulation (CRR) that together prescribe EU capital adequacy and liquidity requirements, and which implements Basel 3 in the European Union.
‘CRD V’ The Fifth Capital Requirements Directive, comprising an EU amending Directive and an accompanying amending Regulation (CRR II) that together prescribe EU capital adequacy and liquidity requirements, and which implements enhanced Basel 3 proposals in the European Union.
‘Credit conversion factor (CCF)’ A factor used to estimate the risk from off-balance sheet commitments for the purpose of calculating the total Exposure at Default (EAD) used to calculate RWAs.
‘Credit default swaps (CDS)’ A contract under which the protection seller receives premiums or interest-related payments in return for contracting to make payments to the protection buyer in the event of a defined credit event. Credit events normally include bankruptcy, payment default on a reference asset or assets, or downgrades by a rating agency.
‘Credit derivatives (CDs)’ An arrangement whereby the credit risk of an asset (the reference asset) is transferred from the buyer to the seller of the protection.
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‘Credit impairment charges’ Also known as ‘credit impairment’. Impairment charges on loans and advances to customers and banks and impairment charges on fair value through other comprehensive income assets and reverse repurchase agreements.
‘Credit market exposures’ Assets and other instruments relating to commercial real estate and leveraged finance businesses that have been significantly impacted by the deterioration in the global credit markets. The exposures include positions subject to fair value movements in the Income Statement, positions that are classified as loans and advances, and available for sale and other assets.
‘Credit quality step’ In the context of the Standardised Approach to calculating credit risk RWAs, a “credit quality assessment scale” maps the credit assessments of a recognised credit rating agency or export credit agency to credit quality steps that determine the risk weight to be applied to an exposure.
‘Credit rating’ An evaluation of the creditworthiness of an entity seeking to enter into a credit agreement.
‘Credit risk’ The risk of loss to Barclay Bank Group from the failure of clients, customers or counterparties, including sovereigns, to fully honour their obligations to Barclays, including the whole and timely payment of principal, interest, collateral and other receivables. In the context of RWAs, it is the component of RWAs that represents the risk of loss in loans and advances and similar transactions resulting from the default of the counterparty.
‘Credit risk mitigation’ A range of techniques and strategies to actively mitigate credit risks to which the bank is exposed. These can be broadly divided into three types: collateral, netting and set-off, and risk transfer.
‘Credit spread’ The premium over the benchmark or risk-free rate required by the market to accept a lower credit quality.
‘Credit Valuation Adjustment (CVA)’ The difference between the risk-free value of a portfolio of trades and the market value which takes into account the counterparty’s risk of default. The CVA therefore represents an estimate of the adjustment to fair value that a market participant would make to incorporate the credit risk of the counterparty due to any failure to perform on contractual agreements.
‘CRR leverage exposure’ Calculated in accordance with Article 429 of the CRR.
‘CRR leverage ratio’ Calculated using the CRR definition of “Tier 1 capital” for the numerator and the CRR definition of “leverage exposure” as the denominator.
‘Customer assets’ Represents loans and advances to customers. Average balances are calculated as the sum of all daily balances for the year to date divided by number of days in the year to date.
‘Customer deposits’ In the context of the Liquidity Risk section, money deposited by all individuals and companies that are not credit institutions. Such funds are recorded as liabilities in the Barclays Bank Group’s balance sheet under “deposits at amortised cost”.
‘Customer liabilities’ See ‘Customer deposits’.
‘Daily Value at Risk (DVaR)’ An estimate of the potential loss which might arise from market movements under normal market conditions, if the current positions were to be held unchanged for one business day, measured to a specified confidence level.
‘DBRS’ DBRS Morningstar, a credit rating agency.
‘Debit Valuation Adjustment (DVA)’ The opposite of Credit Valuation Adjustment (CVA). It is the difference between the risk-free value of a portfolio of trades and the market value which takes into account the Barclays Bank Group’s risk of default. The DVA, therefore, represents an estimate of the adjustment to fair value that a market participant would make to incorporate the credit risk of the Barclays Bank Group due to any failure to perform on contractual obligations. The DVA decreases the value of a liability to take into account a reduction in the remaining balance that would be settled should the Barclays Bank Group default or not perform any contractual obligations.
‘Debt buybacks’ Purchases of the Barclays Bank Group’s issued debt securities, including equity accounted instruments, leading to their de-recognition from the balance sheet.
‘Debt securities in issue’ Transferable securities evidencing indebtedness of the Barclays Bank Group. These are liabilities of the Barclays Bank Group and include certificates of deposit and commercial paper.
‘Default grades’ The Barclays Bank Group classifies ranges of default probabilities into a set of 21 intervals called default grades, in order to distinguish differences in the probability of default risk.
‘Default fund contributions’ The contribution made by members of a central counterparty (CCP). All members are required to contribute to this fund in advance of using a CCP. The default fund can be used by the CCP to cover losses incurred by the CCP where losses are greater than the margins provided by a defaulting member.
‘Derivatives netting’ Adjustments applied across asset and liability mark-to-market derivative positions pursuant to legally enforceable bilateral netting agreements and eligible cash collateral received in derivative transactions that meet the requirements of BCBS 270 (Basel III leverage ratio framework and disclosure requirements).
‘Diversification effect’ Reflects the fact that risk of a diversified portfolio is smaller than the sum of the risks of its constituent parts. It is measured as the sum of the individual asset class DVaR estimates less the total DVaR.
‘Dodd-Frank Act (DFA)’ The US Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
‘Domestic Liquidity Sub-Group Arrangement (DoLSub)’ An intra-group capital and liquidity support agreement that secures certain regulatory permissions authorised by the Prudential Regulation Authority (PRA).
‘Economic Value of Equity (EVE)’ A measure of the potential change in value of expected future cash flows due to an adverse interest rate movement, based on existing balance sheet run-off profile.
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'Effective Expected Positive Exposure (EEPE)' The weighted average over time of effective expected exposure. The weights are the proportion that an individual exposure represents of the entire exposure horizon time interval.
‘Effective interest rate (EIR)’ As defined in IFRS 9 Financial Instruments, effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial asset or financial liability to the gross carrying amount of a financial asset or to the amortised cost of a financial liability.
‘Eligible liabilities’ Liabilities and capital instruments that are eligible to meet MREL that do not already qualify as own funds.
‘Encumbrance’ The use of assets to secure liabilities, such as by way of a lien or charge.
‘Enterprise Risk Management Framework (ERMF)’ The Barclays Bank Group’s risk management responsibilities are laid out in the Enterprise Risk Management Framework, which describes how Barclay Bank Group identifies and manages risk. The framework identifies the principal risks faced by the Barclays Bank Group, sets out risk appetite requirements, sets out roles and responsibilities for risk management, and sets out risk committee structure.
‘Equities’ Trading businesses encompassing Cash Equities, Equity Derivatives & Equity Financing
‘Equity and stock index derivatives’ Derivatives whose value is derived from equity securities. This category includes equity and stock index swaps and options (including warrants, which are equity options listed on an exchange). The Barclays Bank Group also enters into fund-linked derivatives, being swaps and options whose underlyings include mutual funds, hedge funds, indices and multi-asset portfolios. An equity swap is an agreement between two parties to exchange periodic payments, based upon a notional principal amount, with one side paying fixed or floating interest and the other side paying based on the actual return of the stock or stock index. An equity option provides the buyer with the right, but not the obligation, either to purchase or sell a specified stock, basket of stocks or stock index at a specified price or level on or before a specified date.
‘Equity risk’ In the context of trading book capital requirements, the risk of change in market value of an equity investment.
‘Equity structural hedge’ An interest rate hedge in place to reduce earnings volatility of the overnight / short term equity investment and to smooth the income over a medium/long term.
‘EU Risk Reduction Measure package’ A collection of amending Regulations and Directives that update core EU regulatory texts and which came into force on 27 June 2019.
‘Euro Interbank Offered Rate (EURIBOR)’ A benchmark interest rate at which banks can borrow funds from other banks in the European interbank market.
‘Europe’ Geographic segment comprising countries in which Barclay Bank Group operates within the EU (excluding the UK), Northern Continental and Eastern Europe.
‘European Banking Authority (EBA)’ The EBA is an independent EU Authority which works to ensure effective and consistent prudential regulation and supervision across the European banking sector. Its overall objectives are to maintain financial stability in the EU and to safeguard the integrity, stability efficiency and orderly functioning of the banking sector.
‘European Securities and Markets Authority (ESMA)’ An independent European Supervisory Authority with the remit of enhancing the protection of investors and reinforcing stable and well-functioning financial markets in the European Union.
‘Eurozone’ Represents the 19 European Union countries that have adopted the Euro as their common currency. The 19 countries are Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia and Spain.
‘Expected Credit Losses (ECL)’ A present value measure of the credit losses expected to result from default events that may occur during a specified period of time. ECLs must reflect the present value of cash shortfalls, and the unbiased and probability weighted assessment of a range of outcomes.
‘Expected Losses’ A regulatory measure of anticipated losses for exposures captured under an internal ratings based credit risk approach for capital adequacy calculations. It is measured as the Barclays Bank Group's modelled view of anticipated losses based on Probability of Default (PD), Loss Given Default (LGD) and Exposure at Default (EAD), with a one-year time horizon.
’Expert lender models’ Models of risk measures that are used for parts of the portfolio where the risk drivers are specific to a particular counterparty, but where there is insufficient data to support the construction of a statistical model. These models utilise the knowledge of credit experts that have in depth experience of the specific customer type being modelled.
‘Exposure’ Generally refers to positions or actions taken by a bank, or consequences thereof, that may put a certain amount of a bank’s resources at risk.
‘Exposure at Default (EAD)’ The estimation of the extent to which the Barclays Bank Group may be exposed to a customer or counterparty in the event of, and at the time of, that customer or counterparty’s default. At default, the customer may not have drawn the loan fully or may already have repaid some of the principal, so that exposure may be less than the approved loan limit.
‘External Credit Assessment Institutions (ECAI)’ Institutions whose credit assessments may be used by credit institutions for the determination of risk weight exposures according to CRR.
‘External ratings based approach / internal assessment approach (Sec ERBA / IAA)’ Under the SEC-ERBA approach, regulatory capital is assigned to securitisation tranches on the basis of their external credit rating. SEC-ERBA approach can also be used for unrated ABCP exposures where the institution has the regulatory permission to use the Internal Assessment approach (IAA) to assign a credit rating to the unrated ABCP exposure.
‘Federal Housing Finance Agency (FHFA)’ An independent federal agency in the United States that oversees the secondary mortgage market and regulates Fannie Mae and Freddie Mac, as well as 11 Federal Home Loan banks. The FHFA also sets the Housing Price Index (HPI) in the United States.
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‘Federal Reserve Board (FRB)’ The Board of Governors of the Federal Reserve System, commonly known as the Federal Reserve Board, is responsible for- amongst other things – setting monetary policy in the US.
'FICC' Represents Macro (including rates and currency), Credit and Securitised products.
'Financial Policy Committee (FPC)' The Bank of England’s Financial Policy Committee identifies, monitors and takes action to remove or reduce systemic risks with a view to protecting and enhancing the resilience of the UK financial system. The FPC also has a secondary objective to support the economic policy of the UK Government.
'Foundation Internal Ratings Based (F-IRB)’ See ‘Internal Ratings Based (IRB)’.
‘Financial Conduct Authority (FCA)’ The statutory body responsible for conduct of business regulation and supervision of UK authorised firms. The FCA also has responsibility for the prudential regulation of firms that do not fall within the PRA’s scope.
‘Financial Services Compensation Scheme (FSCS)’ The UK’s fund for compensation of authorised financial services firms that are unable to pay claims.
‘Financial collateral comprehensive method (FCCM)’ A counterparty credit risk exposure calculation approach which applies volatility adjustments to the market value of exposure and collateral when calculating RWA values.
‘Financial Stability Board (FSB)’ An international body that monitors and makes recommendations about the global financial system. It promotes international financial stability by coordinating national financial authorities and international standard-setting bodies as they work toward developing strong regulatory, supervisory and other financial sector policies. It fosters a level playing field by encouraging coherent implementation of these policies across sectors and jurisdictions.
‘Fitch’ A credit rating agency.
‘Forbearance Programmes’ Forbearance programmes assist customers in financial difficulty through agreements to accept less than contractual amounts due where financial distress would otherwise prevent satisfactory repayment within the original terms and conditions of the contract. These agreements may be initiated by the customer, Barclay Bank Group or a third party and include approved debt counselling plans, minimum due reductions, interest rate concessions and switches from capital and interest repayments to interest-only payments.
‘Foreclosures in Progress’ The process by which the bank initiates legal action against a customer with the intention of terminating a loan agreement whereby the bank may repossess the property used as collateral for the loan subject to local law and recover amounts it is owed.
‘Foreign exchange derivatives’ The Barclays Bank Group’s principal exchange rate-related contracts are forward foreign exchange contracts, currency swaps and currency options. Forward foreign exchange contracts are agreements to buy or sell a specified quantity of foreign currency, usually on a specified future date at an agreed rate. Currency swaps generally involve the exchange, or notional exchange, of equivalent amounts of two currencies and a commitment to exchange interest periodically until the principal amounts are re-exchanged on a future date. Currency options provide the buyer with the right, but not the obligation, either to purchase or sell a fixed amount of a currency at a specified exchange rate on or before a future date. As compensation for assuming the option risk, the option writer generally receives a premium at the start of the option period.
‘Foreign exchange risk’ In the context of DVaR, the impact of changes in foreign exchange rates and volatilities.
‘Full time equivalent’ Full time equivalent units are the on-job hours paid for employee services divided by the number of ordinary-time hours normally paid for a full-time staff member when on the job (or contract employees where applicable).
‘Fully loaded’ When a measure is presented or described as being on a fully loaded basis, it is calculated without applying the transitional provisions set out in Part Ten of CRR.
‘Funded credit protection’ A technique of credit risk mitigation where the reduction of the credit risk on the exposure of an institution derives from the right of that institution, in the event of the default of the counterparty or on the occurrence of other specified credit events relating to the counterparty, to liquidate, or to obtain transfer or appropriation of, or to retain certain assets or amounts, or to reduce the amount of the exposure to, or to replace it with, the amount of the difference between the amount of the exposure and the amount of a claim on the institution.
‘Gains on acquisitions’ The amount by which an acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities, recognised in a business combination, exceeds the cost of the combination.
‘General Data Protection Regulation (GDPR)’ GDPR (Regulation (EU) 2016/679) is a regulation intended to strengthen and unify data protection for all individuals within the European Union. GDPR forms part of UK law pursuant to the European Union (Withdrawal) Act 2018, as amended.
‘General market risk’ The risk of a price change in a financial instrument due to a change in the level of interest rates or owing to a broad equity market movement unrelated to any specific attributes of individual securities.
‘Global-Systemically Important Banks (G-SIBs or G-SIIs)’ Global financial institutions whose size, complexity and systemic interconnectedness, mean that their distress or failure would cause significant disruption to the wider financial system and economic activity. The Financial Stability Board and the Basel Committee on Banking Supervision publish a list of global systemically important banks.
‘G-SII additional leverage ratio buffer (G-SII ALRB)’ A macroprudential buffer that applies to G-SIBs and other major domestic UK banks and building societies, including banks that are subject to ring-fencing requirements. The G-SII ALRB will be calibrated as 35% (on a phased basis) of the combined buffers that apply to the bank.
‘GSII Buffer’ Common Equity Tier 1 capital required to be held under CRD to ensure that G-SIBs build up surplus capital to compensate for the systemic risk that such institutions represent to the financial system.
’Grandfathering’ In the context of capital resources, the phasing in of the application of instrument eligibility rules which allows CRR and CRR II non-compliant capital instruments to be included in regulatory capital subject to certain thresholds which decrease over the transitional period.
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‘Gross charge-off rates’ Represents the balances charged-off to recoveries in the reporting period, expressed as a percentage of average outstanding balances excluding balances in recoveries. Charge-off to recoveries generally occurs when the collections focus switches from the collection of arrears to the recovery of the entire outstanding balance, and represents a fundamental change in the relationship between the bank and the customer. This is a measure of the proportion of customers that have gone into default during the period.
‘Gross Domestic Product (GDP)’ Measures the total value of goods and services produced in a country within a specific time period.
‘Gross write-off rates’ Expressed as a percentage and represent balances written off in the reporting period divided by gross loans and advances held at amortised cost at the balance sheet date.
‘Gross new lending’ New lending advanced to customers during the period.
‘Guarantee’ Unless otherwise described, an undertaking by a third party to pay a creditor should a debtor fail to do so. It is a form of credit substitution.
‘Head Office’ Comprises head office, Barclays Services FTE and legacy businesses.
‘High-Net-Worth’ Businesses within Barclays International that provide banking and other services to high net worth customers.
‘High quality liquidity assets (HQLA)’ It comprises eligible and unencumbered cash or assets that can be converted into cash at little or no loss of value in private markets, to meet liquidity needs arising from a liquidity stress scenario or event. Please refer to ‘Level 1 assets’ and ‘Level 2 assets’.
‘High Risk’ In retail banking, ‘High Risk’ is defined as the subset of up-to-date customers who, either through an event or observed behaviour, exhibit potential financial difficulty. Where appropriate, these customers are proactively contacted to assess whether assistance is required.
‘Home loan’ A loan to purchase a residential property. The property is then used as collateral to guarantee repayment of the loan. The borrower gives the lender a lien against the property and the lender can foreclose on the property if the borrower does not repay the loan per the agreed terms. Also known as a residential mortgage.
‘IHC’ or ‘US IHC’ Barclays US LLC, the intermediate holding company established by Barclay Bank Group in July 2016, which holds most of Barclays’ subsidiaries and assets in the US.
'Internal Model Approach (IMA)’ In the context of RWAs, RWAs for which the exposure amount has been derived via the use of a PRA approved internal market risk model.
'Internal Model Method (IMM)’ In the context of RWAs, RWAs for which the exposure amount has been derived via the use of a PRA approved internal counterparty credit risk model.
‘Identified Impairment (II)’ Specific impairment allowances for financial assets, estimated individually.
‘IFRS 9 transitional arrangements’ Following the application of IFRS 9 as of 1 January 2018, Article 473a of CRR permits institutions to phase-in the impact on capital and leverage ratios of the impairment requirements under the new accounting standard.
‘Impairment Allowances’ A provision held on the balance sheet as a result of the raising of a charge against profit for expected losses in the lending book. An impairment allowance may either be identified or unidentified and individual or collective.
‘Income’ Total income, unless otherwise specified.
‘Incremental Risk Charge (IRC)’ An estimate of the incremental risk arising from rating migrations and defaults for traded debt instruments beyond what is already captured in specific market risk VaR for the non-correlation trading portfolio.
‘Independent Validation Unit (IVU)’ The function within the bank responsible for independent review, challenge and approval of all models.
‘Individual liquidity guidance (ILG)’ Guidance given to a bank about the amount, quality and funding profile of liquidity resources that the PRA has asked the bank to maintain.
‘Inflation risk’ In the context of DVaR, the impact of changes in inflation rates and volatilities on cash instruments and derivatives.
‘Insurance Risk’ The risk of the Barclays Bank Group’s aggregate insurance premiums received from policyholders under a portfolio of insurance contracts being inadequate to cover the claims arising from those policies.
‘Interchange’ Income paid to a credit card issuer for the clearing and settlement of a sale or cash advance transaction.
‘Interest-only home loans’ Under the terms of these loans, the customer makes payments of interest only for the entire term of the mortgage, although customers may make early repayments of the principal within the terms of their agreement. The customer is responsible for repaying the entire outstanding principal on maturity, which may require the sale of the mortgaged property.
‘Interest rate derivatives’ Derivatives linked to interest rates. This category includes interest rate swaps, collars, floors options and swaptions. An interest rate swap is an agreement between two parties to exchange fixed rate and floating rate interest by means of periodic payments based upon a notional principal amount and the interest rates defined in the contract. Certain agreements combine interest rate and foreign currency swap transactions, which may or may not include the exchange of principal amounts. A basis swap is a form of interest rate swap, in which both parties exchange interest payments based on floating rates, where the floating rates are based upon different underlying reference indices. In a forward rate agreement, two parties agree a future settlement of the difference between an agreed rate and a future interest rate, applied to a notional principal amount. The settlement, which generally occurs at the start of the contract period, is the discounted present value of the payment that would otherwise be made at the end of that period.
‘Interest rate risk’ The risk of interest rate volatility adversely impacting the Barclays Bank Group’s Net Interest Margin. In the context of the calculation of market risk DVaR, measures the impact of changes in interest (swap) rates and volatilities on cash instruments and derivatives.
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‘Interest rate risk in the banking book (IRRBB)’ 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.
‘Internal Assessment Approach (IAA)’ One of three types of calculation that a bank with permission to use the Internal Ratings Based (IRB) approach may apply to securitisation exposures. It consists of mapping a bank's internal rating methodology for credit exposures to those of an External Credit Assessment Institution (ECAI) to determine the appropriate risk weight based on the ratings based approach. Its applicability is limited to ABCP programmes related to liquidity facilities and credit enhancement.
‘Internal Capital Adequacy Assessment Process (ICAAP)’ It describes how the firm identifies, manages and qualifies the risks it is exposed to, in pursuit of its business strategy. It assesses whether the quality and quantity of capital is available to absorb capital losses for the risks the firm undertakes. The capital adequacy is assessed on a point of time basis and on a forward looking basis taking into account baseline and stressed economic capital conditions.
‘Internal Ratings Based (IRB)’ An approach under the CRR framework that relies on the bank’s internal models to derive the risk weights. The IRB approach is divided into two alternative applications, Advanced and Foundation:
–Advanced IRB (A-IRB): the bank uses its own estimates of Probability of Default (PD), Loss Given Default (LGD) and credit conversion factor to model a given risk exposure.
–Foundation IRB (F-IRB): the bank applies its own PD as for Advanced, but it uses standard parameters for the LGD and the credit conversion factor. The Foundation IRB approach is specifically designed for wholesale credit exposures. Hence retail, equity, securitisation positions and non-credit obligations asset exposures are treated under standardised or A-IRB.
‘Internal Ratings Based approach (SEC-IRBA)’ This is a method to calculate risk-weighted exposure amounts for securitisation positions. Under this method, an institution must be able to model regulatory capital requirements for underlying exposures in the securitisation as if these had not been securitised (‘KIRB’), subject to certain other inputs and criteria.
‘IRB Roadmap’ introduction of several EBA technical standards and sets of guidelines developed with the intent to reduce unwarranted variability across firms in IRB Risk-Weighted Assets for Credit Risk, PRA confirmed UK firms to implement these changes from 1 January 2022.
‘Investment Bank’ The Barclays Bank Group’s investment bank which consists of origination led and returns focused markets and banking business, and which forms part of the Corporate and Investment Bank segment of Barclays International.
‘Investment Banking Fees’ In the context of Investment Bank analysis of Total Income, fees generated from origination activity businesses – including financial advisory, debt and equity underwriting.
‘Investment grade’ A debt security, treasury bill or similar instrument with a credit rating of AAA to BBB as measured by external credit rating agencies.
‘ISDA Master Agreement’ The most commonly used master contract for OTC derivative transactions internationally. It is part of a framework of documents, designed to enable OTC derivatives to be documented fully and flexibly. The framework consists of a master agreement, a schedule, confirmations, definitions booklets, and a credit support annex. The ISDA Master Agreement is published by the International Swaps and Derivatives Association, commonly known as “ISDA”.
‘Key Risk Scenarios (KRS)’ Key Risk Scenarios are a summary of the extreme potential risk exposure for each Key Risk in each business and function, including an assessment of the potential frequency of risk events, the average size of losses and three extreme scenarios. The Key Risk Scenario assessments are a key input to the Advanced Measurement Approach calculation of regulatory and economic capital requirements.
‘Large exposure’ A large exposure is defined as the total exposure of a bank to a counterparty or group of connected clients, whether in the banking book or trading book or both, which in aggregate equals or exceeds 10% of the bank's eligible capital.
‘Legal risk’ The risk of loss or imposition of penalties, damages or fines from the failure of the Barclays Bank Group to meet its legal obligations including regulatory or contractual requirements.
‘Lending’ In the context of Investment Bank analysis of Total Income, lending income includes Net Interest Income (NII), gains or losses on loan sale activity, and risk management activity relating to the loan portfolio.
‘Letters of credit’ A letter typically used for the purposes of international trade guaranteeing that a debtor’s payment to a creditor will be made on time and in full. In the event that the debtor is unable to make payment, the bank will be required to cover the full or remaining amount of the purchase.
‘Level 1 assets’ High quality liquid assets under the Basel Committee’s Liquidity Coverage Ratio (LCR), including cash, central bank reserves and higher quality government securities.
‘Level 2 assets’ High quality liquid assets under the Basel Committee’s Liquidity Coverage Ratio (LCR), Level 2A assets, including, e.g. lower quality government securities, covered bonds and corporate debt securities, and Level 2B assets, including, e.g. lower rated corporate bonds, residential mortgage backed securities and equities that meet certain conditions.
‘Lifetime expected credit losses’ An assessment of expected losses associated with default events that may occur during the life of an exposure, reflecting the present value of cash shortfalls over the remaining expected life of the asset.
‘Lifetime Probability’ The likelihood of accounts entering default during the expected remaining life of the asset.
‘Liquidity Coverage Ratio (LCR)’ The ratio of the stock of high quality liquid assets to expected net cash outflows over the next 30 days. High-quality liquid assets should be unencumbered, liquid in markets during a time of stress and, ideally, be central bank eligible. These include, e.g. cash and claims on central governments and central banks.
‘Liquidity Pool’ The Barclays Bank Group liquidity pool comprises cash at central banks and highly liquid collateral specifically held by the Barclays Bank Group as a contingency to enable the bank to meet cash outflows in the event of stressed market conditions.
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‘Liquidity Risk’ 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.
‘Liquidity risk appetite (LRA)’ The level of liquidity risk that the Barclays Bank Group chooses to take in pursuit of its business objectives and in meeting its regulatory obligations.
‘Liquidity Risk Management Framework (the Liquidity Framework)’ The Liquidity Risk Management Framework, which is sanctioned by the Board Risk Committee, incorporates liquidity policies, systems and controls that the Barclays Bank Group has implemented to manage liquidity risk within tolerances approved by the Board and regulatory agencies.
‘Litigation and conduct charges’ or ‘Litigation and conduct’ Litigation and conduct charges include regulatory fines, litigation settlements and conduct-related customer redress.
‘Loan loss rate’ Quoted in basis points and represents total impairment charges divided by gross loans and advances held at amortised cost at the balance sheet date.
‘Loan to deposit ratio’ or ‘Loan: deposit ratio’ Loans and advances at amortised costs divided by deposits at amortised cost.
‘Loan to value (LTV) ratio’ Expresses the amount borrowed against an asset (i.e. a mortgage) as a percentage of the appraised value of the asset. The ratios are used in determining the appropriate level of risk for the loan and are generally reported as an average for new mortgages or an entire portfolio. Also see ‘Marked to market (MTM) LTV ratio’.
‘London Interbank Offered Rate (LIBOR)’ A benchmark interest rate at which banks can borrow funds from other banks in the London interbank market.
‘Loss Given Default (LGD)’ The percentage of Exposure at Default (EAD) that will not be recovered following default. LGD comprises the actual loss (the part that is not expected to be recovered), together with the economic costs associated with the recovery process.
‘Management VaR’ A measure of the potential loss of value arising from unfavourable market movements at a specific confidence level, if current positions were to be held unchanged for predefined period. Corporate and Investment Bank uses Management VaR with a two-year equally weighted historical period, at a 95% confidence level, with a one day holding period.
‘Mandatory break clause’ In the context of counterparty credit risk, a contract clause that means a trade will be ended on a particular date.
‘Marked to market approach’ A counterparty credit risk exposure calculation approach which uses the current marked to market value of derivative positions as well as a potential future exposure add-on to calculate an exposure to which a risk weight can be applied. This is also known as the Current Exposure Method.
‘Marked to market (MTM) LTV ratio’ The loan amount as a percentage of the current value of the asset used to secure the loan. Also see ‘Balance weighted Loan to Value (LTV) ratio’ and ‘Valuation weighted Loan to Value (LTV) ratio.’
‘Market risk’ The risk of loss arising from potential adverse changes in the value of the Barclays Bank Group’s assets and liabilities from fluctuations in market variables including, but not limited to, interest rates, foreign exchange, equity prices, commodity prices, credit spreads, implied volatilities and asset correlations.
‘Master netting agreement’ An agreement that provides for a single net settlement of all financial instruments and collateral covered by the agreement in the event of the counterparty’s default or bankruptcy or insolvency, resulting in a reduced exposure.
‘Master trust securitisation programme’ A securitisation structure where a trust is set up for the purpose of acquiring a pool of receivables. The trust issues multiple series of securities backed by these receivables.
‘Material Risk Takers (MRTs)’ Categories of staff whose professional activities have or are deemed to have a material impact on Barclays’ risk profile, as determined in accordance with the European Banking Authority regulatory technical standard on the identification of such staff.
‘Maximum Distributable Amount (MDA)’ The MDA is a factor representing the available distributable profit whilst remaining in excess of its combined buffer requirement. CRD IV places restrictions on a bank’s dividend decisions depending on its proximity to meeting the buffer.
‘Medium-Term Notes’ Corporate notes (or debt securities) continuously offered by a company to investors through a dealer. Investors can choose from differing maturities, ranging from nine months to 30 years. They can be issued on a fixed or floating coupon basis or with an exotic coupon; with a fixed maturity date (non-callable) or with embedded call or put options or early repayment triggers. MTNs are most generally issued as senior, unsecured debt.
‘Methodology and policy’ In the context of the Capital Risk section of the Barclays Bank PLC Annual Report, the effect on RWAs of methodology changes driven by regulatory policy changes.
‘MiFID II’ Refers to either the Markets in Financial Instruments Directive 2014/65/EC and the Markets in Financial Instruments Regulation 600/2014 (as amended from time to time), which together are European Union law that provide harmonised regulation for investment services across the member states of the European Economic Area, or these rules and regulations as they form part of UK law pursuant to the European Union (Withdrawal) Act 2018 (as amended from time to time), as applicable.
‘Minimum requirement for own funds and eligible liabilities (MREL)’ A European Union wide requirement under the Bank Recovery and Resolution Directive for all European banks and investment banks to hold a minimum level of equity and/or loss absorbing eligible liabilities to ensure the operation of the bail-in tool to absorb losses and recapitalise an institution in resolution. An institution’s MREL requirement is set by its resolution authority. Amendments in the EU Risk Reduction Measure package are designed to align MREL and TLAC for EU G-SIBs.
‘Model risk’ The risk of the potential adverse consequences from financial assessments or decisions based on incorrect or misused model outputs and reports.
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‘Model updates’ In the context of the Capital Risk section of the Barclays Bank PLC Annual Report, changes in RWAs caused by model implementation, changes in model scope or any changes required to address model malfunctions.
‘Model validation’ Process through which models are independently challenged, tested and verified to prove that they have been built, implemented and used correctly, and that they continue to be fit-for-purpose.
‘ModelledVaR’ In the context of RWAs, market risk calculated using Value at Risk models laid down by the CRR and supervised by the PRA.
‘Money market funds’ Investment funds typically invested in short-term debt securities.
‘Monoline derivatives’ Derivatives with a monoline insurer such as credit default swaps referencing the underlying exposures held.
‘Moody’s’ A credit rating agency.
‘Mortgage Servicing Rights (MSR)’ A contractual agreement in which the right to service an existing mortgage is sold by the original lender to another party that specialises in the various functions involved with servicing mortgages.
‘Multilateral development banks’ Financial institutions created for the purposes of development, where membership transcends national boundaries.
‘National discretion’ Discretions in CRD given to EU member states to allow the local regulator additional powers in the application of certain CRD rules in its jurisdiction.
‘Net asset value per share’ Calculated by dividing shareholders’ equity, excluding non-controlling interests and other equity instruments, by the number of issued ordinary shares.
‘Net Interest Income (NII)’ The difference between interest income on assets and interest expense on liabilities.
‘Net Interest Margin (NIM)’ Net Interest Income (NII) divided by the sum of average customer assets.
‘Net investment income’ Changes in the fair value of financial instruments designated at fair value, dividend income and the net result on disposal of available for sale assets.
‘Net Stable Funding Ratio (NSFR)’ The ratio of available stable funding to required stable funding over a one-year time horizon, assuming a stressed scenario. The ratio is required to be over 100%. Available stable funding would include such items as equity capital, preferred stock with a maturity of over one year, or liabilities with a maturity of over one year. The required amount of stable funding is calculated as the sum of the value of the assets held and funded by the institution, multiplied by a specific required stable funding factor assigned to each particular asset type, added to the amount of potential liquidity exposure multiplied by its associated required stable funding factor.
‘Net trading income’ Gains and losses arising from trading positions which are held at fair value, in respect of both market-making and customer business, together with interest, dividends and funding costs relating to trading activities.
‘Net write-off rate’ Expressed as a percentage and represents balances written off in the reporting period less any post write-off recoveries divided by gross loans and advances held at amortised cost at the balance sheet date.
‘Net written credit protection’ In the context of leverage exposure, the net notional value of credit derivatives protection sold and credit derivatives protection bought.
‘New bookings’ The total of the original balance on accounts opened in the reporting period, including any applicable fees and charges included in the loan amount.
‘Non-asset backed debt instruments’ Debt instruments not backed by collateral, including government bonds; US agency bonds; corporate bonds; commercial paper; certificates of deposit; convertible bonds; corporate bonds and issued notes.
‘Non-Model Method (NMM)’ In the context of RWAs, counterparty credit risk, RWAs where the exposure amount has been derived through the use of CRR norms, as opposed to an internal model.
‘Non-Traded Market Risk’ The risk that the current or future exposure in the banking book (i.e. non-traded book) will impact the bank's capital and/or earnings due to adverse movements in Interest or foreign exchange rates.
‘Non-Traded VaR’ Reflects the volatility in the value of the fair value through other comprehensive income (FVOCI) investments in the liquidity pool which flow directly through capital via the FVOCI reserve. The underlying methodology to calculate non-traded VaR is similar to Traded Management VaR, but the two measures are not directly comparable. The Non-Traded VaR represents the volatility to capital driven by the FVOCI exposures. These exposures are in the banking book and do not meet the criteria for trading book treatment.
‘Notch’ A single unit of measurement in a credit rating scale.
‘Notional amount’ The nominal or face amount of a financial instrument, such as a loan or a derivative, that is used to calculate payments made on that instrument.
‘Open Banking’ The Payment Services Directive (PSD2) and the Open API standards and data sharing remedy imposed by the UK Competition and Markets Authority following its Retail Banking Market Investigation Order.
‘Operating leverage’ Operating expenses compared to total income less credit impairment charges and other provisions.
‘Operational risk’ The risk of loss to the bank from inadequate or failed processes or systems, human factors or due to external events (e.g. fraud) where the root cause is not due to credit or market risks.
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‘Operational Riskdata eXchange Association (ORX)’ The Operational Riskdata eXchange Association (ORX) is a not-for-profit industry association dedicated to advancing the measurement and management of operational risk in the global financial services industry. Barclays is a member of ORX.
‘Origination led’ Focus on high margin, low capital fee based activities and related hedging opportunities.
‘O-SII Buffer’ As part of the implementation of CRD V requirements in the UK, the Other Systemically Important Institutions (O-SII) Buffer replaces the CRD IV Systemic Risk Buffer. For implementation in January 2021, the O-SII Buffer was set at the same rate as a firms’ previous SRB buffer.
‘Other systemically important institutions (OSII)’ Other systemically important institutions are institutions that are deemed to create risk to financial stability due to their systemic importance.
‘Over-the-counter (OTC) derivatives’ Derivative contracts that are traded (and privately negotiated) directly between two parties. They offer flexibility because, unlike standardised exchange-traded products, they can be tailored to fit specific needs.
‘Overall capital requirement’ The overall capital requirement is the sum of capital required to meet the total of a Pillar 1 requirement, a Pillar 2A requirement, a Global Systemically Important Institution (G-SII) buffer, a Capital Conservation Buffer (CCB) and a Countercyclical Capital Buffer (CCyB).
‘Own credit’ The effect of changes in the Barclays Bank Group’s own credit standing on the fair value of financial liabilities.
‘Owner occupied mortgage’ A mortgage where the intention of the customer was to occupy the property at origination.
‘Own funds’ The sum of Tier 1 and Tier 2 capital.
‘Own funds and eligible liabilities ratio’ A risk-based ratio representing the own funds and eligible liabilities of the institution expressed as a percentage of total RWAs.
‘Past due items’ Refers to loans where the borrower has failed to make a payment when due under the terms of the loan contract.
‘Pension Risk’ The risk of the Barclays Bank Group’s earnings and capital being adversely impacted by the Barclays Bank Group’s defined benefit obligations increasing or the value of the assets backing these defined benefit obligations decreasing due to changes in both the level and volatility of prices.
‘Performance costs’ The accounting charge recognised in the period for performance awards. For deferred incentives and long-term incentives, the accounting charge is spread over the relevant periods in which the employee delivers service.
‘Period end allocated tangible equity’ Allocated tangible equity is calculated as 13.5% (2020: 13.0%) of RWAs for each business, adjusted for capital deductions, excluding goodwill and intangible assets, reflecting assumptions the Barclays Bank Group uses for capital planning purposes. Head Office allocated tangible equity represents the difference between the Barclays Bank Group’s tangible shareholders’ equity and the amounts allocated to businesses.
'Physical risks' Physical risks resulting from a changing climate can be event driven (acute risks), including increased severity of extreme weather events such as cyclones, hurricanes and flood. Longer term shifts in climate patterns (chronic risks) arise from sustained higher temperatures that may cause rises in sea levels, rising mean temperatures and more severe weather events. These changes are likely to lead to risks for sovereigns, business models and supply chains.
‘Pillar 1 requirements’ The minimum regulatory capital requirements to meet the sum of credit (including counterparty credit), market risk and operational risk.
‘Pillar 2A requirements’ The additional regulatory capital requirement to meet risks not captured under Pillar 1 requirements. These requirements are the outcome of the bank’s Internal Capital Adequacy Assessment Process (ICAAP) and the complementary supervisory review and evaluation carried out by the PRA.
‘Post-Model Adjustment (PMA)’ In the context of Basel models, a PMA is a short term increase in regulatory capital applied at portfolio level to account for model input data deficiencies, inadequate model performance or changes to regulatory definitions (e.g. definition of default) to ensure the model output is accurate, complete and appropriate.
‘Potential Future Exposure (PFE) on derivatives’ A regulatory calculation in respect of the Barclays Bank Group’s potential future credit exposure on both exchange traded and OTC derivative contracts, calculated by assigning a standardised percentage (based on the underlying risk category and residual trade maturity) to the gross notional value of each contract.
‘PRA waivers’ PRA approvals that specifically give permission to the bank to either modify or waive existing rules. Waivers are specific to an organisation and require applications being submitted to and approved by the PRA.
‘Primary securitisations’ The issuance of securities (bonds and commercial papers) for fund-raising.
‘Primary Stress Tests’ In the context of Traded Market Risk, Stress Testing provides an estimate of potentially significant future losses that might arise from extreme market moves or scenarios. Primary Stress Tests apply stress moves to key liquid risk factors for each of the major trading asset classes.
‘Prime Services’ Involves financing of fixed income and equity positions using Repo and stock lending facilities. The Prime Services business also provides brokerage facilitation services for hedge fund clients offering execution and clearance facilities for a variety of asset classes.
‘Principal’ In the context of a loan, the amount borrowed, or the part of the amount borrowed which remains unpaid (excluding interest).
‘Private equity investments’ Investments in equity securities in operating companies not quoted on a public exchange. Investment in private equity often involves the investment of capital in private companies or the acquisition of a public company that results in the delisting of public equity. Capital for private equity investment is raised by retail or institutional investors and used to fund investment strategies such as leveraged buyouts, venture capital, growth capital, distressed investments and mezzanine capital.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 248 | ||||
‘Principal Risks’ The principal risks affecting the Barclays Bank Group, as described in the Risk Review section of the Barclays Bank PLC Annual Report.
‘Pro-cyclicality’ Movements in financial variables (including capital requirements) following natural fluctuations in the economic cycle, where the subsequent impact on lending or other market behaviours acts as an amplification of the economic cycle by the financial sector.
‘Probability of Default (PD)’ The likelihood that a loan will not be repaid and will fall into default. PD may be calculated for each client who has a loan (normally applicable to wholesale customers/clients) or for a portfolio of clients with similar attributes (normally applicable to retail customers). To calculate PD, Barclays assesses the credit quality of borrowers and other counterparties and assigns them an internal risk rating. Multiple rating methodologies may be used to inform the rating decision on individual large credits, such as internal and external models, rating agency ratings, and for wholesale assets market information such as credit spreads. For smaller credits, a single source may suffice such as the result from an internal rating model.
‘Product structural hedge’ An interest rate hedge put in place to reduce earnings volatility on product balances with instant access (such as non-interest bearing current accounts and managed rate deposits) and to smoothen the income over a medium/long term.
‘Properties in Possession held as ‘Loans and Advances to Customers’’ Properties in the UK and Italy where the customer continues to retain legal title but where the bank has enforced the possession order as part of the foreclosure process to allow for the disposal of the asset or the court has ordered the auction of the property.
‘Properties in Possession held as ‘Other Real Estate Owned’’ Properties in South Africa where the bank has taken legal ownership of the title as a result of purchase at an auction or similar and treated as ‘Other Real Estate Owned’ within other assets on the bank’s balance sheet.
‘Proprietary trading’ When a bank, brokerage or other financial institution trades on its own account, at its own risk, rather than on behalf of customers, so as to make a profit for itself.
‘Prudential Regulation Authority (PRA)’ The statutory body responsible for the prudential supervision of banks, building societies, insurers and a small number of significant investment banks in the UK. The PRA is a subsidiary of the Bank of England.
‘Prudential Valuation Adjustment (PVA)’ A calculation which adjusts the accounting values of positions held on balance sheet at fair value to comply with regulatory valuation standards, which place greater emphasis on the inherent uncertainty around the value at which a trading book position could be exited.
‘Public benchmark’ Unsecured medium term notes issued in public syndicated transactions.
‘Qualifying central bank claims’ An amount calculated in line with the PRA policy statement allowing banks to exclude claims on the central bank from the calculation of the leverage exposure measure, as long as these are matched by deposits denominated in the same currency and of identical or longer maturity. From 1 January 2022, ‘matching deposits’ will become ‘matching liabilities’ increasing the scope of matching possible against central bank claims.
‘Qualifying Revolving Retail Exposure (QRRE)’ In the context of the IRB approach to credit risk RWA calculations, an exposure meeting the criteria set out in Capital Requirements Regulation (CRR Article 154.4). It includes most types of credit card exposure.
‘Rates’ In the context of Investment Bank income analysis, trading revenue relating to government bonds and interest rate derivatives.
‘Re-aging’ The returning of a delinquent account to up-to-date status without collecting the full arrears (principal, interest and fees).
‘Real Estate Mortgage Investment Conduits (REMICs)’ An entity that holds a fixed pool of mortgages and that is separated into multiple classes of interests for issuance to investors.
‘Recovery book’ Represents the total amount of exposure which has been transferred to recovery units who set and implement strategies to recover the Group’s exposure.
‘Recovery book Impairment Coverage Ratio’ Impairment allowance held against recoveries balances expressed as a percentage of balance in recoveries.
‘Recovery book proportion of outstanding balances’ Represents the amount of recoveries (gross month-end customer balances of all accounts that have charged-off) as at the period end compared to total outstanding balances. The size of the recoveries book would ultimately have an impact on the overall impairment requirement on the portfolio. Balances in recovery will decrease if, assets are written-off, amounts are collected, or assets are sold to a third party (i.e. debt sale).
‘Regulatory capital’ The amount of capital that a bank holds to satisfy regulatory requirements.
‘Renegotiated loans’ Loans are generally renegotiated either as part of an ongoing customer relationship or in response to an adverse change in the circumstances of the borrower. In the latter case, renegotiation can result in an extension of the due date of payment or repayment plans under which the Barclays Bank Group offers a concessionary rate of interest to genuinely distressed borrowers. This will result in the asset continuing to be overdue, and individually impaired if the renegotiated payments of interest and principal will not recover the original carrying amount of the asset. In other cases, renegotiation will lead to a new agreement, which is treated as a new loan.
‘Repurchase agreement (Repo)’ or ‘Reverse repurchase agreement (Reverse repo)’ Arrangements that allow counterparties to use financial securities as collateral for an interest bearing cash loan. The borrower agrees to sell a security to the lender subject to a commitment to repurchase the asset at a specified price on a given date. For the party selling the security (and agreeing to repurchase it in the future), it is a Repurchase agreement or Repo; for the counterparty to the transaction (buying the security and agreeing to sell in the future), it is a Reverse repurchase agreement or Reverse repo.
‘Reputation risk’ The risk that an action, transaction, investment or event will reduce trust in the Barclays Bank Group’s integrity and competence by clients, counterparties, investors, regulators, employees or the public.
‘Re-securitisations’ The repackaging of securitised products into securities. The resulting securities are therefore securitisation positions where the underlying assets are also predominantly securitisation positions.
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 249 | ||||
‘Reserve Capital Instruments (RCIs)’ Hybrid issued capital securities which may be debt or equity accounted, depending on the terms.
‘Residential Mortgage-Backed Securities (RMBS)’ Securities that represent interests in a group of residential mortgages. Investors in these securities have the right to cash received from future mortgage payments (interest and/or principal).
‘Residual maturity’ The remaining contractual term of a credit obligation associated with a credit exposure.
‘Restructured loans’ Comprises loans where, for economic or legal reasons related to the debtor’s financial difficulties, a concession has been granted to the debtor that would not otherwise be considered. Where the concession results in the expected cash flows discounted at the original effective interest rate being less than the loan’s carrying value, an impairment allowance will be raised.
‘Return on average Risk Weighted Assets’ Statutory profit after tax as a proportion of average RWAs.
‘Return on average tangible shareholders’ equity (RoTE)’ Profit after tax attributable to ordinary equity holders of the parent, as a proportion of average shareholders’ equity excluding non-controlling interests and other equity instruments adjusted for the deduction of intangible assets and goodwill.
‘Return on average allocated tangible equity’ Profit after tax attributable to ordinary equity holders of the parent, as a proportion of average allocated tangible equity.
‘Risk appetite’ The level of risk that Barclays is prepared to accept whilst pursuing its business strategy, recognising a range of possible outcomes as business plans are implemented.
‘Risk weighted assets (RWAs)’ A measure of a bank’s assets adjusted for their associated risks. Risk weightings are established in accordance with the Basel rules as implemented by CRR and local regulators.
‘Risks not in VaR (RNIVS)’ Refers to all the key market risks which are not captured or not well captured within the VaR model framework.
‘Sarbanes-Oxley requirements’ The Sarbanes-Oxley Act 2002 (SOX), which was introduced by the US Government to safeguard against corporate governance scandals such as Enron, WorldCom and Tyco. All US-listed companies must comply with SOX.
‘Second Lien’ Debt that is issued against the same collateral as higher lien debt but that is subordinate to such higher lien debt. In the case of default, compensation for this debt will only be received after the first lien has been repaid and thus represents a riskier investment than the first lien.
‘Secondary Stress Tests’ Secondary stress tests are used in measuring potential losses arising from illiquid market risks that cannot be hedged or reduced within the time period covered in Primary Stress Tests.
‘Secured Overnight Financing Rate (SOFR)’ A broad measure of the cost of borrowing cash overnight collateralised by US Treasury securities in the repurchase agreement (repo) market.
‘Securities Financing Transactions (SFT)’ In the context of RWAs, any of the following transactions: a repurchase transaction, a securities or commodities lending or borrowing transaction, or a margin lending transaction whereby cash collateral is received or paid in respect of the transfer of a related asset.
‘Securities Financing Transactions adjustments’ In the context of leverage ratio, a regulatory add-on calculated as exposure less collateral, taking into account master netting agreements.
‘Securities lending arrangements’ Arrangements whereby securities are legally transferred to a third party subject to an agreement to return them at a future date. The counterparty generally provides collateral against non-performance in the form of cash or other assets.
‘Securitisation’ Typically, a process by which debt instruments such as mortgage loans or credit card balances, are aggregated into a pool, which is used to back new securities. A company sells these pools of assets to a special purpose vehicle (SPV) which then issues securities backed by the assets. This allows the credit quality of the assets to be separated from the credit rating of the original borrower and transfers risk to external investors.
‘Set-off clauses’ In the context of counterparty credit risk, contract clauses that allow Barclay Bank Group to set off amounts owed to us by a counterparty against amounts owed by us to the counterparty.
‘Settlement balances’ Receivables or payables recorded between the date (the trade date) a financial instrument (such as a bond) is sold, purchased or otherwise closed out, and the date the asset is delivered by or to the entity (the settlement date) and cash is received or paid.
‘Settlement Netting’ Netting approach used in the calculation of the leverage exposure measure whereby firms may calculate their exposure value of regular way purchases and sales awaiting settlement in accordance with Article 429g of CRR, as amended by Regulation (EU) 2019/876 (CRR 2).
‘Settlement risk’ The risk that settlement in a transfer system will not take place as expected, usually owing to a party defaulting on one or more settlement obligations.
‘Significant Increase in Credit Risk (SICR)’ Barclays assesses when a significant increase in credit risk has occurred based on quantitative and qualitative assessments.
‘Slotting’ Slotting is an internal Barclays terminology for what is known as “Specialised Lending” in the IRB approach as described in Capital Requirements Regulation (CRR Article 147.8). A standard set of rules are required to be used in credit risk RWA calculations, based upon an assessment of factors such as the financial strength of the counterparty. The requirements for the application of the Specialised Lending approach are detailed in CRR Article 153.5.
‘Small and Medium-Sized Enterprises (SME)’ An enterprise which employs fewer than 250 persons and which has an annual turnover which does not exceed EUR 50 million, and / or an annual balance sheet total not exceeding EUR 43 million. Within the SME category, a small enterprise is defined as an enterprise which employs fewer than 50 persons and whose annual turnover and/or annual balance sheet total does not exceed EUR 10 million. This is
| Barclays Bank PLC 2021 Annual Report on Form 20-F, as amended | 250 | ||||
defined in accordance with Commission Recommendation 2003/361/EC of 6 May 2003 concerning the definition of micro, small and medium sized enterprises.
‘Software intangibles benefit’ This benefit was introduced as part of the EU response package to the COVID-19 pandemic. It will be reversed as part of the UK implementation of CRR II from 1 January 2022, at which point software assets will be fully deducted from CET 1 capital.
‘Sovereign exposure(s)’ Exposures to central governments, including holdings in government bonds and local government bonds.
‘Specific market risk’ A risk that is due to the individual nature of an asset and can potentially be diversified or the risk of a price change in an investment due to factors related to the issuer or, in the case of a derivative, the issuer of the underlying investment.
‘Spread risk’ Measures the impact of changes to the swap spread, i.e. the difference between swap rates and government bond yields.
‘Stage 1’ This represents financial instruments where the credit risk of the financial instrument has not increased significantly since initial recognition. Stage 1 financial instruments are required to recognise a 12 month expected credit loss allowance.
‘Stage 2’ This represents financial instruments where the credit risk of the financial instrument has increased significantly since initial recognition. Stage 2 financial instruments are required to recognise a lifetime expected credit loss allowance.
‘Stage 3’ This represents financial instruments where the financial instrument is considered impaired. Stage 3 financial instruments are required to recognise a lifetime expected credit loss allowance.
‘Standard & Poor’s’ A credit rating agency.
'Standardised Approach for Counterparty Credit Risk (SA-CCR)' The approach for the calculation of exposure at default for derivative and long-settlement transactions being introduced in the UK under CRR II, from 1 January 2022. This is a more risk sensitive approach that replaces the Current Exposure Method (CEM) and Standardised Method (SM) applicable under CRR.
‘Standardised approach (SEC-SA)’ This is a method to calculate risk-weighted exposure amounts for securitisation positions. Under this method, an institution must be able calculate regulatory capital requirements per standardised approach for underlying exposures in the securitisation as if these had not been securitised (‘KSA’), subject to certain other inputs and criteria.
‘Standby facilities, credit lines and other commitments’ Agreements to lend to a customer in the future, subject to certain conditions. Such commitments are either made for a fixed period, or have no specific maturity but are cancellable by the lender subject to notice requirements.
‘Statutory’ Line items of income, expense, profit or loss, assets, liabilities or equity stated in accordance with the requirements of the UK Companies Act 2006 and the requirements of International Financial Reporting Standards (IFRS).
‘Statutory return on average shareholders’ equity’ Statutory profit after tax attributable to ordinary shareholders as a proportion of average shareholders’ equity.
‘STD’ / ‘Standardised Approach’ A method of calculating RWAs that relies on a mandatory framework set by the regulator to derive risk weights based on counterparty type and a credit rating provided by an External Credit Assessment Institute.
‘Sterling Over Night Index Average (SONIA)’ Reflects bank and building societies’ wholesale overnight funding rates in the sterling unsecured market administrated and calculated by the Bank of England.
‘Stress Testing’ A process which involves identifying possible future adverse events or changes in economic conditions that could have unfavourable effects on the Barclays Bank Group (either financial or non-financial), assessing the Barclays Bank Group’s ability to withstand such changes, and identifying management actions to mitigate the impact.
‘Stressed Value at Risk (SVaR)’ An estimate of the potential loss arising from a 12-month period of significant financial stress calibrated to 99% confidence level over a 10-day holding period.
‘Structured entity’ An entity in which voting or similar rights are not the dominant factor in deciding control. Structured entities are generally created to achieve a narrow and well defined objective with restrictions around their ongoing activities.
‘Structural FX’ Foreign currency positions taken to hedge against the adverse effect of exchange rates on capital ratios. Under Article 352(2) of the CRR the PRA may permit banks to exclude such Structural FX positions from the calculation of its market risk RWAs. On the 15th December 2021 the PRA issued Barclays this permission; taking effect from 31 December 2021. Any long FX positions that are in excess of what is required to hedge the adverse effects of exchange rates on the bank’s capital ratio are not in scope of this exemption and will therefore be captured under the standardised market risk approach.
‘Structural hedge’ or ‘hedging’ An interest rate hedge in place to reduce earnings volatility and to smoothen the income over a medium/long term on positions that exist within the balance sheet and do not re-price in line with market rates. See also ‘Equity structural hedge’ and ‘Product structural hedge’.
‘Structural model of default’ A model based on the assumption that an obligor will default when its assets are insufficient to cover its liabilities.
‘Structured credit’ Includes the legacy structured credit portfolio primarily comprising derivative exposures and financing exposures to structured credit vehicles.
‘Structured finance or structured notes’ A structured note is an investment tool that pays a return linked to the value or level of a specified asset or index and sometimes offers capital protection if the value declines. Structured notes can be linked to equities, interest rates, funds, commodities and foreign currency.
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‘Sub-prime’ Sub-prime is defined as loans to borrowers typically having weakened credit histories that include payment delinquencies and potentially more severe problems such as court judgments and bankruptcies. They may also display reduced repayment capacity as measured by credit scores, high debt-to-income ratios, or other criteria indicating heightened risk of default.
‘Subordinated liabilities’ Liabilities which, in the event of insolvency or liquidation of the issuer, are subordinated to the claims of depositors and other creditors of the issuer.
‘Supranational bonds’ Bonds issued by an international organisation, where membership transcends national boundaries (e.g. the European Union or World Trade Organisation).
‘Synthetic Securitisation Transactions’ Securitisation transactions effected through the use of derivatives.
‘Tangible Net Asset Value (TNAV)’ Shareholders’ equity excluding non-controlling interests adjusted for the deduction of intangible assets and goodwill.
‘Tangible Net Asset Value per share’ Calculated by dividing shareholders’ equity, excluding non-controlling interests and other equity instruments, less goodwill and intangible assets, by the number of issued ordinary shares.
‘Tangible shareholders’ equity’ Shareholders’ equity excluding non-controlling interests and other equity instruments adjusted for the deduction of intangible assets and goodwill.
‘Term premium’ Additional interest required by investors to hold assets with a longer period to maturity.
‘The Fundamental Review of the Trading Book (FRTB)’ A comprehensive suite of capital rules developed by the Basel Committee on Banking Supervision as part of Basel III and applicable to banks’ wholesale trading activities.
‘The Standardised Approach (TSA)’ Under TSA, banks are required to hold regulatory capital for operational risk equal to the annual average, calculated over a rolling three-year period, of the relevant income indicator (across all business lines), multiplied by a supervisory defined percentage factor by business lines.
‘The three lines of defence’ The three lines of defence operating model enables Barclay Bank Group to separate risk management activities between those client facing areas of the Barclays Bank Group and associated support functions responsible for identifying risk, operating within applicable limits and escalating risk events (first line); colleagues in Risk and Compliance who establish the limits, rules and constraints under which the first line operates and monitor their performance against those limits and constraints (second line); and, colleagues in Internal Audit who provide assurance to the Board and Executive Management over the effectiveness of governance, risk management and control over risks (third line). The Legal function does not sit in any of the three lines, but supports them all. The Legal function is, however, subject to oversight from Risk and Compliance with respect to operational and conduct risks.
‘Tier 1 capital’ The sum of the Common Equity Tier 1 capital and Additional Tier 1 capital.
‘Tier 1 capital ratio’ The ratio which expresses Tier 1 capital as a percentage of RWAs under CRR.
‘Tier 2 (T2) capital’ A type of capital as defined in the CRR principally composed of capital instruments, subordinated loans and share premium accounts where qualifying conditions have been met.
‘Tier 2 (T2) securities’ Securities that are treated as Tier 2 (T2) capital in the context of CRR.
‘Total balances on forbearance programmes coverage ratio’ Impairment allowance held against Forbearance balances expressed as a percentage of balance in forbearance.
‘Total capital ratio’ Total regulatory capital as a percentage of RWAs.
‘Total Loss Absorbing Capacity (TLAC)’ A standard published by the FSB which is applicable to G-SIBs and requires a G-SIB to hold a prescriptive minimum level of instruments and liabilities that should be readily available for bail-in within resolution to absorb losses and recapitalise the institution.
‘Total outstanding balance’ In retail banking, total outstanding balance is defined as the gross month-end customer balances on all accounts including accounts charged off to recoveries.
‘Total return swap’ An instrument whereby the seller of protection receives the full return of the asset, including both the income and change in the capital value of the asset. The buyer of the protection in return receives a predetermined amount.
‘Traded Market Risk’ The risk of a reduction to earnings or capital due to volatility of trading book positions.
‘Trading book’ All positions in financial instruments and commodities held by an institution either with trading intent, or in order to hedge positions held with trading intent.
‘Traditional Securitisation Transactions’ Securitisation transactions in which an underlying pool of assets generates cash flows to service payments to investors.
'Transition risks' The transition to a lower carbon economy will involve significant rapid policy, regulatory and legal changes, as evolving technology and markets adapt to a changing climate and associated impacts. These changes will lead to risks for sovereigns, business models and supply chains.
‘Transitional’ When a measure is presented or described as being on a transitional basis, it is calculated in accordance with the transitional provisions set out in Part Ten of CRR.
‘Treasury and Capital Risk’ This comprises of Liquidity Risk, Capital Risk and Interest Rate Risk in the banking book.
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‘Twelve month expected credit losses’ The portion of the lifetime ECL arising if default occurs within 12 months of the reporting date (or shorter period if the expected life is less than 12 months), weighted by the probability of said default occurring.
‘Twelve month PD’ The likelihood of accounts entering default within 12 months of the reporting date.
‘Unencumbered’ Assets not used to secure liabilities or not otherwise pledged.
‘United Kingdom (UK)’ Geographic segment where Barclay Bank Group operates comprising the UK. Also see ‘Europe’.
‘UK Bank Levy’ A levy that applies to UK banks, building societies and the UK operations of foreign banks. The levy is payable based on a percentage of the chargeable equity and liabilities of the bank on its balance sheet date.
‘UK leverage exposure’ Calculated as per the PRA rulebook, where the exposure calculation also includes the FPC’s recommendation to allow banks to exclude claims on the central bank from the calculation of the leverage exposure measure, as long as these are matched by deposits denominated in the same currency and of identical or longer maturity. From 1 January 2022, ‘matched by deposits’ will change to ‘match by liabilities’.
‘UK leverage ratio’ As per the PRA rulebook, means a bank’s Tier 1 capital divided by its total exposure measure, with this ratio expressed as a percentage. In October 2021, PRA issued Policy Statement 21/21 whereby a single UK Leverage Ratio requirement is adopted and changes to the definition of Leverage Exposure Measure and reporting and disclosure requirements have become applicable from 1 January 2022.
‘Unfunded credit protection’ A technique of credit risk mitigation where the reduction of the credit risk on the exposure of an institution derives from the obligation of a third party to pay an amount in the event of the default of the borrower or the occurrence of other specified credit events.
‘US Partner Portfolio’ Co-branded credit card programmes with companies across various sectors including travel, entertainment, and retail.
‘US Residential’ Mortgage-Backed Securities' that represent interests in a group of US residential mortgages.
‘Valuation weighted Loan to Value (LTV) ratio’ In the context of credit risk disclosures on secured home loans, a means of calculating marked to market LTVs derived by comparing total outstanding balance and the value of total collateral we hold against these balances. Valuation weighted Loan to Value ratio is calculated using the following formula: LTV = total outstandings in portfolio/total property values of total outstandings in portfolio.
‘Value at Risk (VaR)’ A measure of the potential loss of value arising from unfavourable market movements at a specific confidence level and within a specific timeframe.
‘Weighted off balance sheet commitments’ Regulatory add-ons to the leverage exposure measure based on credit conversion factors used in the Standardised Approach to credit risk.
‘Wholesale loans’ or ‘wholesale lending’ Lending to larger businesses, financial institutions and sovereign entities.
‘Working Group on Sterling Risk-Free Reference Rates (RFRWG)’ A group mandated with catalysing a broad-based transition to using SONIA (‘Sterling Overnight Index Average’) as the primary sterling interest rate benchmark in bond, loan and derivatives markets.
‘Write-off (gross)’ The point where it is determined that an asset is irrecoverable, or it is no longer considered economically viable to try to recover the asset or it is deemed immaterial or full and final settlement is reached and the shortfall written off. In the event of write-off, the customer balance is removed from the balance sheet and the impairment allowance held against the asset is released. Net write-offs represent gross write-offs less post write-off recoveries.
‘Wrong-way risk’ Arises in a trading exposure when there is significant correlation between the underlying asset and the counterparty, which in an event of default would lead to a significant mark to market loss. When assessing the credit exposure of a wrong-way trade, analysts take into account the correlation between the counterparty and the underlying asset as part of the sanctioning process.
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EXHIBIT INDEX
| Exhibit | Description | ||||
| 1.1 | |||||
| 2.1 * | Long Term Debt Instruments: Barclays Bank PLC is not party to any single instrument relating to long-term debt pursuant to which a total amount of securities exceeding 10% of its total assets (on a consolidated basis) is authorised to be issued. Barclays Bank PLC hereby agrees to furnish to the Securities and Exchange Commission (the “Commission”), upon its request, a copy of any instrument defining the rights of holders of its long-term debt or the rights of holders of the long-term debt of any of its subsidiaries for which consolidated or unconsolidated financial statements are required to be filed with the Commission. | ||||
| 2.2 * | |||||
| 4.1 * | |||||
| 4.2 * | |||||
| 4.3 * | |||||
| 4.4 * | |||||
| 12.1 | |||||
| 13.1 | |||||
| 15.1 | |||||
| 99.1 | |||||
| 101.INS | XBRL Instance Document | ||||
| 101.SCH | XBRL Taxonomy Extension Schema | ||||
| 101.CAL | XBRL Taxonomy Extension Schema Calculation Linkbase | ||||
| 101.DEF | XBRL Taxonomy Extension Schema Definition Linkbase | ||||
| 101.LAB | XBRL Taxonomy Extension Schema Label Linkbase | ||||
| 101.PRE | XBRL Taxonomy Extension Schema Presentation Linkbase | ||||
* Previously filed with the Original Filing on 23 February 2022
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Signatures
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorised the undersigned to sign this Amendment No. 1 on Form 20-F/A on its behalf.
Date May 23, 2022 | Barclays Bank PLC (Registrant) | |||||||
| By | /s/ Steven Ewart | |||||||
| Steven Ewart, Chief Financial Officer | ||||||||
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