TIDM12ZB
RNS Number : 4960P
Barclays Bank UK PLC
18 February 2021
18 February 2021
Barclays Bank UK PLC
Annual Report and Accounts 2020
UK Listing Authority submission
In compliance with Disclosure Guidance & Transparency Rule
(DTR) 4.1, Barclays Bank UK PLC announces that its Annual Report
2020 will today be submitted to the National Storage Mechanism and
will shortly be available for inspection at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
The document, together with the Pillar 3 Report for 2020, may
also be accessed via Barclays PLC's website at
home.barclays/annualreport
Additional information
The following information is extracted from the Barclays Bank UK
PLC Annual Report 2020 (page references are to pages in the Annual
Report) which can be found at home.barclays/annualreport and
constitutes the material required by DTR 6.3.5 to be communicated
to the media in unedited full text through a Regulatory Information
Service. This material is not a substitute for reading the Barclays
Bank UK PLC Annual Report 2020 in full.
Strategic Report
Performance review
The Strategic Report was approved by the Board of Directors on
17 February 2021 and signed on their behalf by the Chair.
Overview
Barclays Bank UK PLC is a wholly-owned subsidiary of Barclays
PLC. The consolidation of Barclays Bank UK PLC and its subsidiaries
is referred to as Barclays Bank UK Group. The term Barclays refers
to Barclays PLC and Barclays Group refers to Barclays PLC, together
with its subsidiaries.
Barclays Bank UK PLC is the ring-fenced bank within the Barclays
Group. The Barclays Bank UK Group contains the majority of the
Barclays Group's Barclays UK division, including the Personal
Banking, Business Banking and Barclaycard Consumer UK businesses
other than the Barclays Partner Finance business.
Barclays Bank UK PLC serves retail customers in the UK across
the entire spectrum of their banking needs.
Barclays Bank UK PLC also supports small and medium-sized
businesses, providing the financing, saving and transactional
products and services they need to grow.
Our structure
Barclays is one of the most recognisable brands in the UK. We
serve customers across a wide range of retail banking needs, from
credit card users, to start-up businesses, to homebuyers getting on
the property ladder for the first time.
Personal Banking
Offers retail solutions to help customers with their day-to-day
banking needs.
Business Banking
Serves business clients, from high growth start-ups to small and
medium-sized enterprises, with specialist advice for their business
banking needs.
Barclaycard Consumer UK
A leading credit card provider, offering flexible borrowing and
payment solutions, while delivering a leading customer
experience.
Barclays Bank UK PLC is supported by the Barclays Group-wide
service company, Barclays Execution Services Limited (BX) which
provides technology, operations and functional services to
businesses across the Barclays Group.
Strategic priorities
The UK's retail banking environment is rapidly transforming and
we remain focused on being at the forefront of that transformation.
We want to provide customers with banking services in new and
innovative ways, embracing technology as a means of making things
simpler, more transparent and more secure. Barclays Bank UK Group
will continue to support customers and businesses, acting with
empathy and integrity to build a sustainable bank.
At the same time, we know banking cannot be something only a
narrow section of society is able to use. There must be a
sustainable means for everyone - including vulnerable customers who
may need additional protection or want to access banking products
in a different kind of way.
We are focused on the following areas:
1. Providing exceptional service and insights to customers: we want
to provide simple, relevant and prompt services and propositions
for our customers so they have greater choice and access to money
management capabilities. Using insights, we want to help customers
better manage their finances and make informed financial decisions.
2. Driving technology and digital innovation: we continue to invest
in our digital capabilities, upgrading our systems, moving to cloud
technology and implementing rapid automation of manual processes.
This allows us to deliver a more personalised digital experience,
reduce cost and create additional capacity to support more of our
customers.
3. Continuing to grow our business by pursuing partnership opportunities
to build and deliver better propositions and services for our customers.
We will fully utilise the Barclays platform to open up new income
stream opportunities and provide greater services to more customers.
Operating environment
We pay close attention to the environment in which we operate,
scanning the horizon for risks and opportunities, and adapting our
strategy accordingly. We also monitor trends in the behaviour of
our customers and clients so we can effectively meet their evolving
needs.
A rapidly changing world
The health and economic impacts of COVID-19 continue to have
significant implications for Barclays and our stakeholders. The UK
economy has experienced significant fluctuations in activity levels
over the last 12 months, and GDP is still below pre-pandemic
levels. The implications for wider society, and the way we live and
interact, have also been dramatic and will continue to be for some
time.
Throughout a challenging year, we are proud of the support we
have been able to provide to our customers and clients. Now, we are
committed to helping them rebuild and, where required, adapt to new
trends that may arise in the coming years such as long-term
implications for population centres or global supply chains. As the
vaccine rollout continues to progress, we are optimistic about the
opportunities that will exist for Barclays Bank UK Group and for
our customers and clients in a recovery environment.
The UK government continues to implement measures to socially
distance the population and restrict movement of people. This
requires our operating model to adapt, innovate and be nimble,
particularly in our capacity to manage disruption risks to our
people, processes, infrastructure, and technology services. In
March last year, we executed a major workforce transformation,
migrating colleagues to remote working in a matter of days. At the
same time, we adapted working environments for colleagues and
branch staff in the UK.
Where possible, and in line with local government guidance, we
have instigated gradual returns to office working in certain parts
of the business. In time, with the safety and wellbeing of
colleagues as our first priority, we envisage more people will
return to on-site working over the course of the coming months,
more detail on which is set out in the people section of this
report.
Interest rates and other economic consequences
As a direct result of the economic consequences of the pandemic,
there have been changes in the financial environment that we have
adapted to meet. In particular, we have seen a reduction in
interest rates, intensifying an already long-term low-interest rate
environment that we expect to endure for some time. This underlines
the importance, and opportunity, of transformation of our business
to adapt to the structural challenges of the retail banking
market.
We have also seen significant increases in our impairment
provisioning, and have further constrained our risk appetite.
Customer and client behaviour
The impact of COVID-19 on society has accelerated a number of
existing trends in consumer behaviour and preferences. In the last
12 months, for example, we have seen a further shift away from cash
usage towards contactless payments as customers adapt to and
embrace the low-touch environment necessitated by the pandemic.
Contactless payments now account for 78% of total transactions
within Barclays Bank UK Group, increasing 8% since March 2020.
At the same time, we continue to observe a growing trend towards
online transactions and servicing, further reducing customers' use
of our branch infrastructure. Downloads of our mobile banking apps
continue to increase as more and more customers look for ways to
self-serve. As a consequence of lower spending and increasing cash
reserves, we also continue to see a reduction in credit card
balances and an increase in repayment volumes. Growth of the use of
credit alternatives, and growth in precautionary savings has also
meant an increase in customer appetite for financial advice.
These trends present significant opportunities for Barclays Bank
UK Group to transform and continue to improve our services, finding
further efficiencies through technology and automation, and
creating new business models and partnerships based on digital
engagement and customer trust.
This emphasis is important because we continue to operate in a
highly competitive environment. The rapid growth of ecommerce
continues, amplified even further by the pandemic, and a number of
payments focused FinTechs have benefited from this trend. This
creates an imperative for Barclays Bank UK Group to continue
investing in new digital architecture, not only to keep pace with
competitors, but at a rate that allows us to develop ahead of
them.
Political and regulatory change
Geopolitical events have implications for our operating
environment, and political volatility continues to influence
customer and client needs and behaviours. The long-term economic
consequences of the pandemic may also have important monetary and
fiscal impacts, including changes to tax and government spending in
a number of jurisdictions, which is also likely to impact client
needs.
The UK is also actively pursuing new trading relationships with
other parts of the world, which have the potential to lead to an
increase in cross-border activity for our customers and clients.
Within the UK, there is the possibility of continued political
tension over the prospect of a Scottish independence referendum
following Scottish parliamentary elections this year.
Post the UK's withdrawal from the EU, the UK continues to
develop a new framework for financial services regulation. We
anticipate a new architecture for rule-making and enforcement and
an increase in public policy and legislative activity in the near
term, including the potential for regulatory divergence between the
UK and EU. We also await the conclusion of the UK Financial Conduct
Authority (FCA) reviews into the retail banking market and cost of
credit.
Barclays Bank UK Group remains subject to ongoing and
significant levels of regulatory change. In particular, we continue
to pay close attention to the changing landscape of prudential
requirements and supervisory expectations and changing approaches
to stress testing.
Measuring success
-- Barclays Bank UK Group complaints excl. PPI: -32% (2019: -6%)
-- Barclays Bank UK Group Net promoter score (NPS): +15 (2019: +18)
Year in review
2020 was a highly varied and challenging year for Barclays Bank
UK Group, which required immediate and balanced actions to support
millions of our customers and clients impacted by the pandemic.
Barclays Bank UK Group endured severe economic shock, while
incurring additional costs, driven by our response to the pandemic.
We waived fees and charges and interest payments and we worked with
UK regulators and Government to provide ongoing support for our
customers and clients.
Despite a turbulent year, Barclays Bank UK Group continued to
deliver against our strategic priorities.
Throughout the COVID-19 pandemic, we played a key role in the
facilitation and delivery of the UK Government's business support
schemes, designing and executing a digital application system
within days, overcoming significant operational challenges. Over
the course of the period to 8 January 2021, we lent GBP10.1bn to
British businesses under the Bounce Back Loan Scheme (BBLS) and
GBP1.2bn under the Coronavirus Business Interruption Loan Scheme
(CBILS). This is the equivalent of four years of traditional
lending volumes, condensed into less than 12 months. This
represents a significant number of new customers to Barclays
through the Government schemes, providing us with an opportunity to
establish long-lasting relationships for the future.
Barclays Bank UK Group took significant steps to relieve
financial pressure for our customers, acting quickly and
effectively at a time of maximum need. Over the course of the year,
we waived GBP100m of fees and interest charges and granted hundreds
of thousands of payment holidays. Over 650 of our branches (80% of
the total estate) remained open throughout the pandemic and over
250 staff received additional training to answer calls from
customers experiencing financial difficulty.
Despite facing significant challenges this year and enduring a
severe economic shock, we continued to meet more of our customers'
needs by simplifying our credit and debit card offerings. We
eliminated certain fees and charges to better reflect how our
customers interact with us and we made changes to our overdrafts
fees and charges to protect our most vulnerable customers. We also
continued to deliver digital innovation with 67% of our products
provided to customers through digital channels. Currently, 70% of
our products are available via a fully digital solution or are
self-service enabled.
Complaints across Barclays Bank UK Group in 2020 were
significantly lower than in 2019, decreasing 32%. This was, in
part, a consequence of the pandemic and lower business volumes but
also thanks to great strides we have made in reducing complaint
volume year on year. In Q1 2020, prior to the outbreak of the
pandemic, we saw lower year on year complaint volumes, driven by
robust management actions. NPS for Barclays Bank UK Group and
Barclaycard has remained relatively stable at +15 and +8
respectively. NPS scores across the market have softened as
customers continue to feel the financial pressure of the pandemic
and ongoing movement restrictions. While the market remains
challenging, Barclays Bank UK Group has continued to deliver
support and assistance to customers.
Barclays Bank UK Group made significant improvements to our
Barclays apps, which have over 9.2m active users. We introduced
Dream Accelerator to help customers looking to buy their first
home, enabling them to access tools to help them in the home buying
preparation process. Our customers can now also view itemised
digital receipts directly from the Barclays app when they shop at
participating retailers, removing the need to carry paper receipts
and helping customers better manage their spending.
Barclays Bank UK Group launched Plan & Invest, a new digital
investment service that provides customers with the confidence and
support to invest for the future. Plan & Invest creates a
personalised investment plan, tailored to our customers goals, with
dedicated support at every step. Customers can stay updated over
the phone and in an online hub, and see how well their investments
are tracking against their financial goals.
While managing a long-term low interest rate environment, we
have driven strong Mortgage application volumes this year, and
maintained competitive service levels for our customers. Despite
the pandemic, we have continued to support customers with their
home buying needs and have seen a strong performance in Mortgage
completions, particularly through the second half of the year. We
continued to build strategic partnerships, including launching a
new collaboration with Nextdoor, a fast growing social network
service, to help thousands of local businesses secure new customers
by arranging free advertising on the platform.
Barclays Bank UK Group accelerated our green agenda by
leveraging environmentally friendly material for our debit cards,
reducing paper statements sent to our customers, and expanding our
plastic reduction programme. We also supported 'green' agricultural
lending across SMEs and will continue to explore opportunities to
go further.
Looking ahead
Customer expectations continue to evolve, with more interactions
moving to digital or via a virtual channel (call, video or web
chat) and more customers seeking expert guidance for their specific
financial circumstances. We also continue to see a reduction in the
use of our branch infrastructure and a significant shift away from
cash usage towards contactless payments. Where appropriate, we will
continue reshaping our footprint to better support the customers we
serve in ways they want to be serviced.
Barclays Bank UK Group is working to build a better bank for
customers, a more efficient bank that is safe, intuitive and that
will support customers and businesses responsibly and sustainably.
Our focus is on customers and clients and putting them at the heart
of the decisions we make about running our business and shaping it
for the future.
We are reinventing our service model for customers to create a
more efficient, more resilient and seamless service, which will
include the expansion of our Wealth Management proposition. We are
building partnerships in the open market and working across the
whole of Barclays to deliver additional value for our customers and
businesses through our size and scale.
We will continue to invest in digital platforms, remove
unnecessary processes and costs and make it seamless for customers
to self-serve. We will continue to invest in digitalisation and
automation to be more efficient, reduce costs and to create
additional capacity for colleagues to support customers.
In recent years we have invested in cloud technology and begun
to build our digital bank capabilities, removing reliance on a
heritage core. This investment will continue and will provide a
strong digital customer platform that stands out from our
competitors.
Money Mentors - a free and impartial mentoring service customers
can now book a free session with one of our 300 Money Mentors,
asking questions playing on their minds without fear of judgment.
The service responds to millennial customers who told us they
wanted a more open forum to talk through their financial concerns
and goals. We had over 2,000 conversations in 2020, with over 80%
of customer saying they will do something different with their
finances as a result.
Our role in society
The Barclays Bank UK Group success is judged not only by
commercial performance, but also by how we act sustainably and
responsibly for each other and the long term. We believe that we
can, and should, make a positive difference for society - globally
and locally. We do that through the choices we make about how we
run our business, and through the commitments we make proactively
to support others in our communities to achieve their goals. For
detail on our integration of social and environmental issues into
our business, please refer to pages 39 to 43 in the Barclays PLC
Annual Report 2020.
As the global effort to tackle climate change grows, Barclays
Group is moving rapidly to take a leading role in contributing to
the transition to a low-carbon economy. In March last year,
Barclays Group set out our ambition to be a net zero bank by 2050.
In November 2020, on the way to achieving that ambition, Barclays
Group set out the methodology and targets that begin to align the
emissions we finance with the Paris Climate Agreement. More
information is set out in the Barclays Group ESG Report, with the
Barclays Bank UK Group contributing to the overall Barclays Group
climate change agenda. For further information, please see pages 39
to 43 in the Barclays PLC Annual Report.
Against the ambition to be a net zero bank by 2050, Barclays
Group are already net zero in the context of our own emissions; our
focus now is on reducing the client emissions that we finance. That
starts with aligning our financing with the Paris Climate Agreement
- the international treaty on climate change adopted in 2015.
Looking ahead, Barclays Group is optimistic about some of the
additional opportunities the transition to a low carbon economy
will present for Barclays, including through increased green and
infrastructure finance capabilities. Gradual changes to the
structure of our economy are likely to be accelerated by advances
in sustainable technologies, which will require us to be able to
support new industries, and help customers in impacted industries
adapt.
Barclays Group have also committed to providing GBP100bn of
green financing by 2030, to help accelerate the transition to a
low-carbon economy. Green financing supports the transition by
providing investment that is specifically focused on green
activity, including for renewables, energy efficiency and
sustainable transport. This includes specific products such as
Green Loans and there is increasing demand for more innovative
products, such as Sustainability Linked Loans.
In 2020, Barclays Group updated our Sustainable Finance
Framework, which sets out our approach to classifying financing as
sustainable, and references industry guidelines and principles.
Barclays Group welcome and encourage greater global harmonisation
in the way this financing is defined, and will be working with
other financial institutions and stakeholders towards this
goal.
Barclays Group also issued the second Barclays Green Bond in
October 2020. Funds from the GBP400m bond are allocated to
mortgages on energy efficient residential properties in England and
Wales. More than half the funds raised will be allocated to
refinance Barclays' Green Home Mortgage products, which are offered
to customers at a discount provided their property meets certain
energy efficiency thresholds.
For an overview of the Barclays Bank UK Group's approach to
managing climate change risk, please refer to pages 44 to 45 in the
climate change risk management section.
Managing risk
The Barclays Bank UK Group is exposed to internal and external
risks as part of our ongoing activities. These risks are managed as
part of our business model.
Enterprise Risk Management Framework
Within the Barclays Bank UK Group, risks are identified and
overseen through the Enterprise Risk Management Framework (ERMF),
which supports the business in its aim to embed effective risk
management and a strong risk management culture.
The ERMF governs the way in which the Barclays Bank UK Group
identifies and manages its risks. The ERMF is approved by the
Barclays PLC Board on recommendation of the Barclays Group Chief
Risk Officer; it is then adopted by the Barclays Bank UK Group with
minor modifications where needed.
The management of risk is embedded into each level of the
business, with all colleagues being responsible for identifying and
controlling risks.
Risk appetite
Risk appetite defines the level of risk we are prepared to
accept across the different risk types, taking into consideration
varying levels of financial and operational stress. Risk appetite
is key for our decision making processes, including ongoing
business planning and setting of strategy, new product approvals
and business change initiatives.
The Barclays Bank UK Group may choose to adopt a lower risk
appetite than allocated to it by the Barclays Group.
Three Lines of Defence
The first line of defence is comprised of the revenue generating
and customer facing areas, along with all associated support
functions, including Finance, Treasury, Human Resources and
Operations and Technology. The first line identifies the risks,
sets the controls and escalates risk events to the second line of
defence.
The second line of defence is made up of Risk and Compliance and
oversees the first line by setting the limits, rules and
constraints on their operations, consistent with the risk
appetite.
The third line of defence is comprised of Internal Audit,
providing independent assurance over the effectiveness of
governance, risk management and control over current, systemic and
evolving risks.
Although the Legal function does not sit in any of the three
lines, it works to support them all and plays a key role in
overseeing Legal risk throughout the bank. The Legal function is
also subject to oversight from the Risk and Compliance functions
(second line) with respect to the management of operational and
conduct risks.
Monitoring the risk profile
Together with a strong governance process, using Business and
Barclays Group-level Risk Committees as well as Board level forums,
the Barclays Bank UK PLC Board receives regular information in
respect of the risk profile of the Barclays Bank UK Group.
Information received includes measures of risk profile against risk
appetite as well as identification of new and emerging risks.
During 2020, Barclays Group ran a range of scenario analyses to
determine potential outcomes of the COVID-19 pandemic which
informed management actions. One of the scenarios was a
macroeconomic stress test which considered, amongst other factors,
a no deal Brexit and a second wave of the COVID-19 pandemic in
which scientific progress was limited to the extent that no vaccine
was available throughout 2021. In addition, a Group-wide,
exploratory stress test was performed against a severe but
plausible climate scenario, testing vulnerability to disorderly
transition risks and elevated physical risks. The aim of the tests
was to identify key vulnerabilities that were most relevant and
material to the Barclays Group business model and geographical
footprint. We believe that our structure and governance supports us
in managing risk in the changing economic, political and market
environments.
The ERMF defines eight principal risks(a) How risks are managed
------------------------------------------------------------------------------- -------------------------------------
Financial Credit risk The risk of loss to the Barclays Bank Credit risk teams identify,
principal UK Group from the failure of clients, evaluate, sanction, limit and
risks customers or counterparties, monitor various forms of credit
including sovereigns, to fully honour exposure, individually and in
their obligations to the Barclays aggregate.
Bank UK Group, including
the whole and timely payment of
principal, interest, collateral and
other receivables.
------------- ------------------------- ------------------------------------- -------------------------------------
Treasury and Capital risk Liquidity risk: Treasury and capital risk is
identified and managed by specialists
in Capital Planning, Liquidity,
Asset and Liability Management
and Market risk. A range of
approaches are used appropriate
to the risk, such as; limits;
plan monitoring; internal and
external stress testing.
------------- ------------------------- -------------------------------------
The risk that the Barclays Bank UK
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 UK
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 UK Group's pension plans.
Interest rate risk in the Banking
Book:
The risk that the Barclays Bank UK
Group is exposed to capital or income
volatility because
of a mismatch between the interest
rate exposures of its (non-traded)
assets and liabilities.
------------------------- ------------------------------------- -------------------------------------
Market risk The risk of loss arising from A range of complementary approaches
potential adverse changes in the to identify and evaluate market
value of the Barclays Bank risk are used to capture exposure
UK Group's assets and liabilities to Market risk. These are measured,
from fluctuation in market variables controlled and monitored by
including, but not Market risk specialists.
limited to, interest rates, foreign
exchange, equity prices, commodity
prices, credit spreads,
implied volatilities and asset
correlations.
------------- ------------------------- ------------------------------------- -------------------------------------
Non-Financial Operational risk The risk of loss to the Barclays Bank Operational risk comprises the
principal UK Group from inadequate or failed following risks; data management
risks processes or systems, and information, execution risk,
human factors or due to external financial reporting, fraud,
events (for example fraud) where the payments processing, people,
root cause is not due physical security, premises,
to credit or market risks. prudential regulation, supplier,
tax, technology and transaction
operations.
It is not always cost effective
or possible to attempt to eliminate
all Operational risks.
Operational risk is managed
across the businesses and functions
through an internal control
environment with a view to limiting
the risk to acceptable residual
levels.
------------------------- ------------------------------------- -------------------------------------
Model risk The risk of the potential adverse Models are independently validated
consequences from financial and approved prior to implementation
assessments or decisions based and their performance is monitored
on incorrect or misused model outputs on a continual basis.
and reports.
------------------------- ------------------------------------- -------------------------------------
Conduct risk The risk of detriment to customers, The Compliance function sets
clients, market integrity, effective the minimum standards required,
competition or the and provides oversight to monitor
Barclays Bank UK Group from the that these risks are effectively
inappropriate supply of financial managed and escalated where
services, including instances appropriate.
of willful or negligent misconduct.
------------------------- ------------------------------------- -------------------------------------
Reputation risk The risk that an action, transaction, Reputation risk is managed by
investment or event, decision or embedding our purpose and values
business relationship and maintaining a controlled
will reduce trust in the Barclays culture within the Barclays
Bank UK Group's integrity and/or Bank UK Group, with the objective
competence. of acting with integrity, enabling
strong and trusted relationships
with customers and clients,
colleagues and broader society.
------------------------- ------------------------------------- -------------------------------------
Legal risk The risk of loss or imposition of The Legal function supports
penalties, damages or fines from the colleagues in identifying and
failure of the Barclays managing Legal risks.
Bank UK Group to meet its legal
obligations including regulatory or
contractual requirements.
------------------------- ------------------------------------- -------------------------------------
Note
a The ERMF defines eight principal risks. For further information on
the how these principal risks apply specifically to Barclays Bank
UK Group, please see pages 46 to 51.
Performance measures
Financial performance measures
The performance of Barclays Bank UK PLC contributes to the
Barclays Group, upon which the delivery of strategy is
measured.
Income Statement
Barclays Bank UK Group results 2020 2019
For the year ended 31 December GBPm GBPm
--------------------------------------------------------- ------- -------
Total income 6,424 7,322
Credit impairment charges (1,427) (709)
--------------------------------------------------------- ------- -------
Net operating income 4,997 6,613
Operating costs (4,603) (4,358)
Litigation and conduct (43) (1,586)
--------------------------------------------------------- ------- -------
Total operating expenses (4,646) (5,944)
Profit on disposal of subsidiaries, associates and joint
ventures 16 -
--------------------------------------------------------- ------- -------
Profit before tax 367 669
Taxation 12 (513)
--------------------------------------------------------- ------- -------
Profit after tax 379 156
Attributable to:
--------------------------------------------------------- ------- -------
Equity holders of the parent 199 3
Other equity instrument holders 180 153
--------------------------------------------------------- ------- -------
Profit after tax 379 156
--------------------------------------------------------- ------- -------
Income statement commentary
Profit before tax was GBP367m (2019: GBP669m). Barclays Bank UK
PLC continued to support customers throughout the challenging
operating environment, increasing lending by GBP14.1bn
predominantly through BBLS and CBILS loans to small and
medium-sized enterprises (SMEs), as well as delivering strong
mortgage growth. Deposit growth of GBP34.8bn added to a strong
liquidity position.
Total income decreased 12% to GBP6,424m, consisting of:
-- Personal Banking income decreased 12% to GBP3,649m, reflecting
deposit margin compression from lower interest rates, lower unsecured
lending balances, and COVID-19 customer support actions, partially
offset by balance growth in deposits and mortgages
-- Barclaycard Consumer UK income decreased 23% to GBP1,528m as reduced
borrowing and spend levels by customers resulted in a lower level
of interest earning lending (IEL) balances, as well as lower debt
sales
-- Business Banking income decreased 4% to GBP1,308m due to deposit
margin compression from lower interest rates, lower transactional
fee volumes as a result of COVID-19, and related customer support
actions, partially offset by lending and deposit balance growth
from continued support for SMEs through GBP11.0bn of BBLS and CBILS
loans
-- This was partially offset by an expense of GBP61m in Head Office
due to the impact of hedge accounting
Credit impairment charges increased to GBP1,427m (2019: GBP709m)
due to the deterioration in economic outlook driven by the COVID-19
pandemic. The incremental current year charge includes GBP847m of
non-default provision for expected future customer and client
stress. As at 31 December 2020, 30 and 90 day arrears rates in UK
cards were 1.7% (Q419: 1.7%) and 0.8% (Q419: 0.8%)
respectively.
Operating costs increased 6% to GBP4,603m reflecting investment
spend including structural cost actions, higher servicing and
financial assistance costs, partially offset by efficiency
savings.
Balance Sheet Information
The following assets and liabilities represent key balance sheet
items for Barclays Bank UK Group:
As at 31 December 2020 2019
------------------------------------------------------------------ ------- -------
GBPm GBPm
------------------------------------------------------------------ ------- -------
Assets
Loans and advances at amortised cost 211,649 197,569
Financial assets at fair value through other comprehensive income 26,026 19,322
Cash and balances at central banks 35,218 24,305
Liabilities
Deposits at amortised cost 240,535 205,696
------------------------------------------------------------------ ------- -------
Balance Sheet commentary
Loans and advances at amortised cost increased 7% to GBP211.6bn,
predominantly from continued support for SMEs through GBP11.0bn of
BBLS and CBILS lending, GBP5.1bn of mortgage growth following a
strong flow of new applications as well as strong customer
retention, partially offset by GBP6.6bn lower unsecured lending
balances.
Deposits at amortised cost increased 17% to GBP240.5bn
reflecting an increase of GBP20.6bn and GBP14.3bn in Personal
Banking and Business Banking respectively, further strengthening
the liquidity position.
Cash at central banks increased 45% to GBP35.2bn and Financial
assets at fair value through other comprehensive income increased
35% to GBP26.0bn, as a result of a larger liquidity pool,
predominantly due to increased customer deposits.
Other metrics and capital(a)
As at 31 December 2020 2019
---------------------------------- ------ ------
Common equity tier 1 (CET1) ratio 15.6% 13.5%
Total risk weighted assets (RWAs) 72.0bn 75.0bn
Average UK leverage ratio 5.6% 5.2%
---------------------------------- ------ ------
Note
a Capital, RWAs and leverage are calculated applying the IFRS 9 transitional
arrangements of the Capital Requirement Regulation (CRR) as amended
by Capital Requirement Regulation II (CRR II).
Capital commentary
The Barclays Bank UK Group CET1 ratio as at 31 December 2020 was
15.6%, which is above regulatory capital minimum requirements.
RWAs decreased to GBP72.0bn (December 2019: GBP75.0bn) driven by
lower unsecured lending balances, partially offset by growth in
mortgages.
Non-financial performance measures
Barclays Bank UK PLC is part of the Barclays Group which uses a
variety of quantitative and qualitative measures to track and
assess holistic strategic delivery.
Barclays Bank UK PLC has addressed the Non-Financial Reporting
requirements contained in sections 414CA and 414CB of the Companies
Act 2006 through the disclosure contained in Barclays PLC Annual
Report 2020 on pages 52 to 53.
Our people and culture
The strength and success of Barclays is in our people. We want
to support their health and wellbeing, enable them to build their
career and empower and motivate them to be able to provide
excellent service. The following sub-sections are consistent with
those detailed in the People Section of the Barclays PLC Annual
Report and figures mentioned are for the Barclays Group other than
where specifically mentioned.
Adapting to challenge
Events over the last 12 months have affected all our lives, and
the disruption has been significant. Nevertheless, we have
continued to invest in our colleagues in order to strengthen our
business and protect our culture. Our people have shown
extraordinary adaptability and resilience, and thanks to them, so
has Barclays.
Throughout the COVID-19 pandemic, colleagues around the world
have been working incredibly hard to continue to support our
customers and clients. Many were designated as frontline or
critical workers in the countries in which they work. At all times,
we have worked tirelessly to prioritise each other's safety and
wellbeing, as well as taking all necessary steps to slow the spread
of the virus.
We put in place a set of global principles to ensure we were
doing as much as possible to support our people. This included
instigation of new working patterns, digital tools and technology.
We also helped colleagues cope with some of the personal challenges
the COVID-19 pandemic created, including offering paid leave to
support self-quarantine, sickness or care for dependents, financial
help with childcare and advice made available to help protect
physical and mental health. Through our colleague surveys, we have
also regularly checked in with our people to better understand the
impact that working through the COVID-19 pandemic has had.
Barclays continues to believe that people working together in
the same physical location reinforces our culture and helps with
collaboration and inspiration. Where possible, and in line with
local government guidance, we have continued to have critical
workers in offices and in our customer branches, and we have
instigated gradual returns to the office in certain parts of the
business and in certain parts of the world. In time, with the
safety and wellbeing of colleagues as our first priority, we
envisage more people will return to on-site working. In advance of
this, we have already put in place additional measures to ensure we
are COVID-secure, including risk assessments at our sites and
Return to Office Crews to support social distancing and minimise
risks.
Over the last 12 months, we have learnt an enormous amount about
the benefits and challenges of working more flexibly. Ultimately,
we believe this will inform our ambitions for future ways of
working.
A continuous conversation with colleagues
We think colleague engagement should be a two-way exercise, with
equal weight placed on listening to our people as it is 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 regular Here to Listen and Your View surveys are a key part
of how we track engagement. In 2020, in part in response to the
challenge of the COVID pandemic, we improved the effectiveness and
regularity of how we do this.
We saw a 10 percentage point increase in the response rate to
our annual Your View employee engagement survey with 72% of
Barclays Bank UK PLC colleagues responding. The results showed an
increase in Barclays Bank UK PLC engagement levels, up 5 percentage
points to 81%, and an increase of 7 percentage points to 85% of
colleagues saying they would recommend Barclays as a good place to
work. We were also very pleased to see that our colleagues have
continued their focus on customer and client feedback, with 84% of
Barclays Bank UK PLC respondents responding favourably to this
question. In addition, 96% of Barclays Bank UK PLC respondents said
they believe they and their teams do a good job of role modelling
the values every day, an increase of 3 percentage points.
Overall, we are encouraged by our ability to work remotely in
many more roles than we had previously thought possible. Our
colleagues told us that they enjoyed having more flexibility in
their lives, with 82% of Barclays Bank UK PLC respondents saying
they have been able to balance personal and work demands, and 71%
saying there is effective collaboration between teams.
With that said, we recognise there are also areas where we need
to do more. Colleague feedback indicates we have room to make our
internal processes more user friendly, with only 62% of Barclays
Bank UK PLC colleagues saying work processes make it easy for
employees to be productive.
We maintain an engagement approach that is in line with the UK's
Financial Reporting Council (FRC) governance requirements. This
extends to those who work for us indirectly as well, such as
contractors, although in a more limited way. As of 2020, our
supplier code of conduct requires organisations with more than 250
employees to demonstrate that they have an effective workforce
engagement approach of their own.
The results from our surveys are an important part of the
conversations our Executive Committee and Board have about our
culture and how we run Barclays. We also update the Board and its
relevant sub-committees throughout the year.
We monitor our culture across the organisation, and in
individual business areas, through culture dashboards. These
combine colleague survey data with other metrics about our
business, so wider leadership teams can identify areas of continued
strength of our culture and areas of focus for leaders.
In addition to these data sources, our leaders engage regularly
with colleagues locally to hear what they think. Where possible
this year, leaders visited branches to support colleagues during
the COVID-19 pandemic. However, the majority of engagement
activities moved to virtual forums, with opportunities for face to
face engagement being more limited due to social distancing
requirements, these included large-scale virtual town halls,
training and development activity, mentoring, informal breakfast
sessions, committee membership, ex-officio roles, diversity and
wellbeing programmes, focus and consultative groups.
Direct engagement, a comprehensive reporting approach and
dedicated time at board meetings, helps our Board take the issues
of interest to our colleagues into account in their decision
making. This has enabled them to confirm that our workforce
engagement approach is effective.
We make sure we are keeping everyone up to date on the strategy,
performance and progress of the organisation through a strategic,
multichannel approach. This combines leader-led engagement, digital
and print communication, blogs, vlogs and podcasts. In response to
the COVID-19 pandemic, this year we also provided additional
regular updates to colleagues to provide practical advice and
support, including via a dedicated COVID-19 pandemic
intranet-page.
We also engage with our people collectively through a strong and
effective partnership with Unite. In 2020 we worked together
closely with the specific goal of ensuring the safety and wellbeing
of our colleagues throughout the COVID-19 pandemic. Unite strongly
supported the transition of many colleagues to homeworking, as well
as the introduction of measures to protect colleagues working in
our branches and offices. As we progress to return more colleagues
to work, our union partners remain centrally involved.
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 around
84% of the Barclays Group UK workforce and 50% of the global
Barclays 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 wherever
possible, including through voluntary redundancy and
redeployment.
Creating an inclusive and supportive culture
Creating an inclusive and supportive culture is not only the
right thing to do, but also best for our business. It creates a
sense of belonging and value and enables colleagues to perform at
their best.
In 2020, we increased our focus on embedding a culture of
inclusion and encouraged colleagues to become allies in the
workplace. Through a new toolkit we supported them to take
conscious, positive steps to make everyone feel that they belong,
and develop empathy towards another group's challenges or issues.
In our Your View survey, 80% of Barclays Bank UK PLC colleagues
told us they believe we are all in this together.
Events last year rightly prompted organisations like ours to
appraise what we have been doing to aid the fight against racism,
and to ask ourselves whether we can do more. Over recent months,
Barclays has worked extensively with its Black colleague forums to
produce a Race at Work Action Plan. The plan comprises a thorough
set of actions that will open up new opportunities to attract,
develop, and add to our great Black talent, using data to measure
success. From 2021, we will expand our plan to include all
ethnically diverse groups as well as actions to enhance our
long-standing support for citizenship programmes dedicated to
tackling racial inequalities in communities, as well as support of
this agenda for customers and clients.
We want to become one of the most accessible and inclusive FTSE
companies for all our customers, clients and colleagues. 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. As
part of the UK Government Disability Confident scheme, we encourage
applications from people with a disability, or a physical or mental
health condition.
Through our BeWell 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 2020, our Mental
Health Awareness e-learning became mandatory, and we regularly
check-in with managers to ensure they are supporting colleagues'
wellbeing. We were also one of the first businesses to sign up to
the Mental Health at Work Commitment. In our Your View survey, 83%
of Barclays Bank UK PLC colleagues told us that Barclays supports
their efforts to enhance their wellbeing.
We encourage our people to benefit from Barclays' performance by
enrolling in our share ownership plans, further strengthening their
commitment to the organisation.
Engaging with our stakeholders
Section 172(1) statement
Having regard to our stakeholders in Board decision-making
The Directors have acted in the way that they considered, in
good faith, would be most likely to promote the success of the
company for the benefit of its member as a whole and this section
forms our Section 172 disclosure, describing how, in doing so, the
Directors considered the matters set out in section 172(1)(a) to
(f) of the Companies Act 2006. The Directors also took into account
the views and interests of a wider set of stakeholders, including
regulators, the UK Government and non-governmental
organisations.
Detail about Barclays Bank UK Group's key stakeholders, how
management and/or the Directors engaged with them, the key issues
raised and actions taken can be found on pages 16 to 17 of the
Barclays PLC Annual Report 2020 which is incorporated by reference
into this statement.
The Directors recognise that having a good understanding of the
views and interests of the Barclays Bank UK Group's key
stakeholders will help them to deliver the Barclays Bank UK Group's
strategy in line with its purpose and to operate the business in a
sustainable way. Consistent with its regulatory responsibilities,
the Board also considers carefully the impact its decisions will
have on the Barclays Bank UK Group's risk and control environment,
and on customer outcomes. Considering a broad range of stakeholders
and their relative interests is an important part of the way in
which the Board makes decisions, although in having regard to those
different perspectives it is not always possible to deliver
everyone's desired result or necessarily achieve a positive outcome
for all stakeholders.
How does the Board engage with stakeholders?
Depending on the decision in question, the relevance of each
particular stakeholder group may differ, and equally the Board
adopts a variety of methods of engagement with different
stakeholder groups. The Board will sometimes engage directly with
certain stakeholders on certain issues, but the number and
distribution of the Barclays Bank UK Group's stakeholders and the
size of the Barclays Bank UK Group overall means that stakeholder
engagement often takes place at an operational level. In addition,
to ensure a more efficient and effective approach, certain
stakeholder engagement is led at Barclays Group level, in
particular where matters are of Group-wide significance or have the
potential to impact the reputation of the Barclays Group.
In addition to direct engagement with stakeholders by Board
members, the Board regularly receives reports and considers and
discusses information from across the organisation to help it
understand the impact of the Barclays Bank UK Group's operations
on, and the interests and views of, the Barclays Bank UK Group's
key stakeholders. As a result of these activities and the
information it receives, the Board has an overview of engagement
with stakeholders, and other relevant factors, which enables the
Directors to comply with their legal duty under section 172 of the
Companies Act 2006.
For more details on how the Board operates, and the way in which
it reaches decisions, including the matters it discussed and
debated during the year, please refer to page 17 to 26 of the
Governance Report.
Engagement in action
The following, in the context of responding to the challenges
arising from the COVID-19 pandemic, is an example of how the
Directors have had regard to the matters set out in section 172
when discharging their duties, and the effect of those
considerations in reaching certain decisions taken by them.
COVID-19
Throughout almost the entirety of 2020, as the pandemic
unfurled, the primary focus of the company and the Board has been
on (i) the operational and financial resilience of the bank to
ensure the Barclays Bank UK Group has been able to maximise its
support for the economy and society during a time of such
challenge; (ii) supporting customers and clients to relieve
financial pressure whilst at the same time working with the UK
Government to deliver programmes to help businesses; and (iii)
protecting the health and well-being of colleagues (the 'COVID-19
Priorities'). The Board and its Committees have demonstrated
leadership and oversight during the pandemic, and this continues at
the date of this report. This has seen the Board meet, whether in
person (when permitted) or by video conference calls, significantly
more frequently than in previous years, in order to devote the time
needed to address the challenges which have arisen and to provide
the necessary support to customers, clients, colleagues and society
more broadly.
Between formal meetings, the Board has received regular updates
on the implementation of the Barclays Bank UK Group's strategy, in
particular in relation to the Barclays Bank UK Group's
participation in UK Government schemes and its broader support for
customers and clients, as well as its ongoing engagement with key
stakeholders and the steps being taken to safeguard the health and
well-being of customers and colleagues. Given the importance of
Barclays Bank UK Group's response to the COVID-19 pandemic and its
impact on stakeholders and the economy as a whole, in addition to
the increased Board interaction and reporting referenced earlier,
the Risk Committee, on behalf of the Board, met initially
fortnightly from March until June 2020 and, since July, on
approximately a monthly basis. The Committee reviewed and monitored
material risk considerations and issues arising during the pandemic
as well as acting as a point of escalation for management.
Specifically, the Committee focused on the COVID-19 Priorities
(referenced above). The Committee escalated to the Board any
material risk matters and any business decisions made by management
which might impact the reputation of the Barclays Bank UK Group.
Close co-ordination between the Chair of the Board and the Barclays
PLC Board has also ensured an ongoing dialogue has been maintained
across the Barclays Group throughout the COVID-19 pandemic,
resulting in a more coordinated response.
Set out below is a summary of some of the key decisions and
actions the Barclays Bank UK Group has taken in response to the
impact of the ongoing pandemic where the Board has had regard to
the interests of, and impact on, affected stakeholders, including
consideration of stakeholder engagement and feedback received.
Customers and clients Continuing to support customers and clients has been a critical focus of the Board throughout
the year.
This has been reflected in a range of actions and decisions taken by the Board and
management,
including in its efforts to ensure a COVID-19 safe environment has been maintained for our
customers and clients as well as our colleagues. This has been achieved through the provision
of safe access to bank branches, putting in place a programme to achieve effective social
distancing and a stringent cleaning routine. Balancing the needs of our customers and clients
against their health and safety and that of our colleagues has been crucial and so, whilst
such measures included notifying customers and clients of reduced opening times, we also
sought
to enhance our call centre facilities within the UK, in order to deal with increased call
volumes resulting from the impact of the pandemic and the closure of operations in India,
leading to a redeployment of technology to enable UK call centre staff to handle enquiries
at home, as well as redeployment of some branch staff to bolster capacity. We also took steps
to support vulnerable customers who were unable to visit a branch, and ensured that access
to cash was maintained throughout the pandemic.
In order to help relieve the financial pressure for customers and clients throughout these
unprecedented times, the Board supported management in making appropriate adjustments to the
Barclays Bank UK Group's strategy and policies. This has included decisions to assist the
Barclays Bank UK Group's borrowers such as the implementation of payment holidays, the waiver
of interest and fees on overdrafts and forbearance on late payments, as well as facilitating
borrowing under the various UK Government loan schemes.
The rationale for these changes has been to provide breathing space for customers; to
appropriately
reflect the impact of the pandemic on customers' income and circumstances in affordability
calculations and credit decisions given the unprecedented uncertainty as a result of the
pandemic.
All of this has been achieved whist maintaining an appropriate risk and control environment.
Through regular updates from the Risk Committee, Audit Committee and management, the Board
has closely scrutinised the risk and control environment across the Barclays Bank UK Group,
and ensured that the ongoing support for customers and clients during the pandemic has been
achieved whilst continuing to adopt a robust approach to risk and control so as to maintain
a strong capital position for the longer term. The Board has paid particularly keen attention
to updates from management on various metrics and tools used to measure customer and client
satisfaction and had been pleased to note that feedback on the Barclays Bank UK Group's
support
during 2020 has been positive.
The Board and senior management will continue to monitor customer and client behaviours and
preferences - whether arising from ongoing concerns over social distancing or from a change
in customer and client banking patterns, or greater use of on-line services rather than
branch
or call centre facilities - and this information will help inform the Board's decisions on
future strategy as it evolves to meet the long-term needs of our customers and clients.
Colleagues The Board regards colleagues' wellbeing as being of paramount importance throughout the
pandemic.
Together with management, the Board has sought to support colleagues both financially (in
terms of preservation of employment by minimising job losses), and by adapting working
practices
across the Barclays Bank UK Group to minimise the risk of spreading COVID-19, including
through
reduced branch opening times; deep cleaning of branches, call centres and offices; and the
instigation of a widespread regime of remote working where possible.
In early April 2020 the Barclays PLC Group Chairman, on behalf of the Barclays PLC Board,
announced the launch of the Barclays Group's COVID-19 Community Aid Package totalling GBP100m
and, in addition, colleagues across the Barclays Bank UK Group have also made a considerable
contribution towards charitable giving during the year - much of this has been provided by
way of personal donations and salary sacrifices. In this way colleagues have been able to
support charities of their choice, local to their homes or places of work and which are
working
to support communities impacted by the COVID-19 pandemic. The Barclays PLC Board approved
the Barclays Group making a GBP50m commitment to match-fund these colleague contributions.
Colleague surveys have been conducted on a number of occasions throughout the year in order
to maintain ongoing engagement and gather feedback, and reported to the Board. The Board has
been pleased to note that the results of these surveys confirmed a high degree of
satisfaction
among colleagues with the measures being taken to ensure their wellbeing; and a strong sense
of engagement through the matched funding for charities local to them and chosen by them as
recipients of such funding.
In addition to the colleague surveys and regular updates from management, members of the
Board
have continued to engage with colleagues in a variety of ways throughout the pandemic. These
included holding virtual town halls, interactive video call sessions, virtual meetings with
representatives of employee resource groups and visits to branches, where possible. Further
details on colleague engagement is set out on pages 9 and 10 in the Strategic Report.
The Board has also ensured that colleagues have been provided with the necessary tools to
enable the shift to remote working, including by the provision of increased technological
support, laptops and other home office equipment and human resources support. Recognising
the additional pressures and challenges faced by colleagues as a result of the pandemic, the
Board has overseen support initiatives including paid leave to support self-quarantine,
sickness
or care for dependents, financial help with childcare and support services and helplines for
colleagues, to help protect physical and mental health and wellbeing. Further information
is set out on pages 9 and 10 of the Strategic Report.
In assessing the Barclays Bank UK Group's future strategy, the Board will take into account
the lessons learnt during the pandemic and, in particular, will monitor changes in customer
and client banking patterns and the ability of colleagues to provide services through remote
working, in order to assess whether these changes could be adopted in the longer term so as
to provide greater flexibility in terms of working practices for colleagues once the pandemic
is over.
----------------------------------------------------------------------------------------------
Society From the outset of the pandemic, the Board has encouraged management to ensure that the
Barclays
Bank UK Group, as a key bank in the UK, strives to operate responsibly in supporting the
wider
community in dealing with the current unprecedented medical and economic crisis caused by
COVID-19, and in preparing for recovery in its aftermath.
In particular, the Board has focused on the need for the economy to be supported; and has
taken a particularly keen interest in the regular updates provided by management as to the
Barclays Bank UK Group's efforts in this regard.
In addition, set out in the 'colleagues' section above and on page 43 of the Barclays PLC
Annual Report 2020, are details of the COVID-19 Community Aid package launched by Barclays
Group in April 2020. We have and continue to work with some of the UK's leading charities
to bring immediate relief to vulnerable people and communities hardest hit by the social and
economic hardship caused by the pandemic.
We have also continued to engage with local communities throughout the pandemic, to
understand
their needs and develop alternative solutions to enhance the provision of our services where
possible, including by working closely in communities across the UK to help them access and
feel confident in using our digital services through our team of Barclays Digital Eagles.
The Board is pleased to note that external feedback has been very positive in relation to
the Barclays Bank UK Group's support of society both through the maintenance of its financial
services and the delivery, as part of the Barclays Group, of the Community Aid Package.
The Board is committed to develop its future strategy so as to continue this support and
engagement
with local communities and society more broadly through the remainder of the pandemic and
its aftermath during 2021.
----------------------------------------------------------------------------------------------
Investors The Board is committed to achieving sustainable returns for our shareholder, Barclays PLC,
and in turn its investors over the long-term.
Taking into consideration the importance to our shareholder, and its investors more broadly,
of the long-term security and soundness of the Barclays Bank UK Group and the preservation
of its balance sheet, the Board encouraged management to ensure that lending decisions would
continue to be taken prudently throughout the pandemic, notwithstanding the drive to provide
increased support to our customers and clients. This has also been reflected in the Risk
Committee
monitoring closely any changes to relevant risk limits and financial products. In addition,
in order to preserve capital for use in servicing Barclays Bank UK Group's customers and
clients
though the challenges imposed by COVID-19, the Board decided that, despite the short term
impact on Barclays PLC, it was right and prudent not to pay an interim dividend to Barclays
PLC in 2020. The Board is pleased to end the year with a strong capital position.
The Board considers engagement with its shareholder as being critical to its understanding
of the Barclays Group's strategy, and the Barclays Bank UK Group's role in it, and ultimately
of Barclays PLC's investors' views. Such engagement is achieved in a variety of ways,
including
the Barclays PLC Group Chairman, Chief Executive and other Barclays Group Executive members
attending, by invitation, certain Board meetings, to update on Barclays Group matters, as
well as providing Board members with the opportunity to engage and ask questions to better
understand the shareholder view and Barclays Group context. In addition, the Barclays Bank
UK PLC Chair's position on the Barclays PLC Board ensures the views of the Barclays Bank UK
Group are represented. This engagement model will continue in 2021 and beyond.
----------------------------------------------------------------------------------------------
Crawford Gillies
Chair - Barclays Bank UK PLC
17 February 2021
Directors' responsibility statement
The Directors have responsibility for ensuring that the Company
and the Barclays Bank UK Group keep accounting records which
disclose with reasonable accuracy the financial position of the
Company and the Barclays Bank UK Group and which enable them to
ensure that the financial statements comply with the Act.
The Directors are also responsible for preparing a Strategic
Report, Directors' Report and Corporate Governance Statement in
accordance with applicable law and regulations.
The Directors are responsible for the maintenance and integrity
of the Annual Report and financial statements as they appear on the
Company's website. Legislation in the UK governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
The Directors have a general responsibility for taking such
steps as are reasonably open to them to safeguard the assets of the
Company and to prevent and detect fraud and other
irregularities.
The Directors, whose names and functions are set out on page 17,
confirm to the best of their knowledge that:
(a) The financial statements, prepared in accordance with the applicable
set of accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company
and the undertakings included in the consolidation taken as a whole;
and
(b) The Strategic Report on pages 1 to 13 which is incorporated in
the Directors' Report, includes a fair review of the development
and performance of the business and the position of the Company
and the undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and uncertainties
that they face.
By order of the Board
Katie Marshall
Company Secretary
17 February 2021
Registered in England.
Company No. 9740322
Risk review
Material existing and emerging risks
Material existing and emerging risks to the Barclays Bank UK
Group's future performance
The Barclays Bank UK 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 UK 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 UK 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 UK 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. There are a number of factors associated
with the pandemic and its impact on global economies that could
have a material adverse effect on (among other things) the
profitability, capital and liquidity of financial institutions such
as Barclays Bank UK.
The COVID-19 pandemic has caused disruption to the Barclays Bank
UK Group's customers, suppliers and staff. In the UK severe
restrictions on the movement of people have been implemented by the
UK, Scottish, Welsh and Northern Irish governments, with a
resultant significant impact on economic activity. It remains
unclear how the COVID-19 pandemic will evolve through 2021
(including whether there will be further waves of the COVID-19
pandemic, whether COVID-19 vaccines approved for use by regulatory
authorities will be deployed successfully with desired results,
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 UK Group
continues to monitor the situation closely. However, despite the
COVID-19 contingency plans established by the Barclays Bank UK
Group, the ability to conduct business may be adversely affected by
disruptions to infrastructure, 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 UK Group's customers, potential litigation
costs (including regulatory fines, penalties and other sanctions),
and reputational damage.
In the UK, schemes have been implemented by the Bank of England,
the UK Government and the Financial Conduct Authority to provide
financial support to parts of the economy most impacted by the
COVID-19 pandemic. These schemes have been designed and implemented
at pace, meaning lenders (including Barclays) continue to address
operational issues which have arisen in connection with the
implementation of the schemes, including resolving the interaction
between the schemes and existing law and regulation. In addition,
the full extent of how these schemes will impact the Barclays Bank
UK Group's customers and therefore the impact on the Barclays Bank
UK Group remains uncertain at this stage. However, certain actions
(such as the introduction of payment holidays for various consumer
lending products or the cancellation or waiver of fees associated
with certain products) may negatively impact the effective interest
rate earned on the Barclays Bank UK Group portfolios and may reduce
fee income being earned on certain products and negatively impact
the Barclays Bank UK Group's profitability. Furthermore, the
introduction of, and participation in, central-bank supported loan
and other financing schemes introduced as a result of the COVID-19
pandemic may negatively impact the Barclays Bank UK Group's risk
weighted assets (RWAs), level of impairment and, in turn, capital
position (particularly when any transitional relief applied to the
calculation of RWAs and impairment expires). This may be
exacerbated if the Barclays Bank UK Group is required by the UK
Government or the Financial Conduct Authority to offer forbearance
or additional financial relief to borrowers or if the Barclays Bank
UK Group is unable to rely on guarantees provided by governments in
connection with financial support schemes as a result of the
Barclays Bank UK Group's failure to comply with scheme requirements
or otherwise.
As these schemes and other financial support schemes provided by
the UK Government (such as job retention and furlough schemes)
expire, are withdrawn or are no longer supported, economic growth
may be negatively impacted which may impact the Barclays Bank UK
Group's results of operations and profitability. In addition, the
Barclays Bank UK Group may experience a higher volume of defaults
and delinquencies in certain portfolios and may initiate collection
and enforcement actions to recover defaulted debts. Where
defaulting borrowers are harmed by the Barclays Bank UK Group's
conduct, this may 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 UK 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 UK Group's rights not being enforced as intended. For
further details, refer to "vii) Legal risk and legal, competition
and regulatory matters" below.
The actions taken by the UK Government and the Bank of England,
may indicate a view on the potential severity of any economic
downturn and post recovery environment, which from a commercial,
regulatory and risk perspective could be significantly different to
past crises and persist for a prolonged period. The COVID-19
pandemic has led to a weakening in gross domestic product (GDP) and
an expectation of higher unemployment in the UK. These factors all
have a significant impact on the modelling of expected credit
losses (ECLs) by the Barclays Bank UK Group. As a result, the
Barclays Bank UK Group experienced higher ECLs in 2020 compared to
prior periods and this trend may continue in 2021. 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 efficacy
of any COVID-19 vaccines, as well as the longer term effectiveness
of the Bank of England's, UK Government's 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 and
hospitality and leisure sectors).
Furthermore, the Barclays Bank UK 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 "iv) Model
risk" below.
The disruption to economic activity caused by the COVID-19
pandemic could adversely impact the Barclays Bank UK Group's other
assets such as goodwill and intangibles, and the value of Barclays
Bank UK PLC's investments in subsidiaries. It could also impact the
Barclays Bank UK Group's income due to lower lending and
transaction volumes due to volatility or weakness in the capital
markets. Other potential risks include credit rating migration
which could negatively impact the Barclays Bank UK Group's RWAs and
capital position, and potential liquidity stress due to (among
other things) increased customer drawdowns, notwithstanding the
significant initiatives that the UK Government and the Bank of
England have put in place to support funding and liquidity.
Furthermore, a significant increase in the utilisation of credit
cards by customers could have a negative impact on the Barclays
Bank UK Group's RWAs and capital position.
The Bank of England and UK Government actions and other support
measures taken in response to the COVID-19 pandemic may also create
restrictions in relation to capital. Restrictions imposed by the UK
Government and/or the Prudential Regulation Authority may further
limit management's flexibility in managing the business and taking
action in relation to capital distributions and capital
allocation.
Any and all such events mentioned above could have a material
adverse effect on the Barclays Bank UK Group's business, financial
condition, results of operations, prospects, liquidity, capital
position and credit ratings (including potential credit rating
agency changes of outlooks or ratings), as well as on the Barclays
Bank UK Group's customers, employees and suppliers.
ii) Business conditions, general economy and geopolitical
issues
The Barclays Bank UK 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 UK 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 UK Group; and (iv) revisions to calculated ECLs
leading to increases in impairment allowances. In addition, the
Barclays Bank UK 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 weakened sharply in the first half of 2020 as
a result of the COVID-19 pandemic. Whilst a number of central banks
and governments implemented financial stimulus packages to counter
the economic impact of the pandemic, recovery has been slower than
anticipated and concerns remain as to whether (a) there will be
subsequent waves of the COVID-19 pandemic, (b) further financial
stimulus will be required and/or (c) governments will be required
to significantly increase taxation to fund these commitments. All
of these factors could adversely affect economic growth, affect
specific industries or affect the Barclays Bank UK Group's employees
and business operations. See "i) Risks relating to the impact of
COVID-19" above for further details.
-- In the UK, the decision to leave the European Union (EU) may give
rise to further economic and political consequences including for
investment and market confidence in the UK and the remainder of
EU. See "(iii)The UK's withdrawal from the European Union" below
for further details.
iii) The UK's withdrawal from the European Union
The EU-UK Trade and Cooperation Agreement (TCA), which provides
a new economic and social partnership between the EU and UK
(including zero tariffs and zero quotas on all goods that comply
with the appropriate rules of origin) came into force provisionally
on 1 January 2021, following expiry of the transition period.
The TCA is a new, unprecedented arrangement between the EU and
the UK, and there is some uncertainty as to its operation and the
manner in which trading arrangements will be enforced by both the
EU and the UK. Furthermore, the EU and/or the UK can invoke trade
remedies (such as tariffs and non-tariff barriers) against each
other in certain circumstances under the TCA. Resultant trading
disruption 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 UK Group's business, results of
operations, financial condition and prospects. Unstable economic
conditions could result in (among other things):
-- a recession in the UK, 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 UK mortgage portfolio, UK unsecured
lending portfolio (including credit cards) and commercial real
estate exposures);
-- increased market and interest rate volatility, which could affect
the underlying value of assets in the banking book and securities
held by the Barclays Bank UK Group's for liquidity purposes;
-- a credit rating downgrade for Barclays Bank UK PLC (either directly
or indirectly as a result of a downgrade in the UK sovereign credit
ratings), which could significantly increase Barclays Bank UK PLC's
cost of and/or reduce its access to funding, widen credit spreads
and materially adversely affect Barclays Bank UK PLC's interest
margins and liquidity position; and/or
-- a widening of credit spreads more generally or reduced investor
appetite for Barclays Bank UK PLC's debt securities, which could
negatively impact Barclays Bank UK PLC's cost of and/or access
to funding.
iv) The impact of interest rate changes on the Barclays Bank UK
Group's profitability
Changes to the Bank of England base interest rate are
significant for the Barclays Bank UK Group, especially given the
uncertainty as to the direction of interest rates and the pace at
which they may change.
A continued period of low interest rates and flat yield curves,
including any further rate cuts and/or negative interest rates, may
affect and continue to put pressure on the Barclays Bank UK 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 UK Group.
Interest rate rises could positively impact the Barclays Bank UK
Group's profitability as income increases due to margin
de-compression. 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, in turn, could cause stress in the lending
portfolio with resultant higher credit losses driving an increased
impairment charge which would most notably impact retail unsecured
portfolios and could have a material effect on the Barclays Bank UK
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 UK
Group's liquid asset portfolio. Consequently, this could create
more volatility than expected through the Barclays Bank UK Group's
Fair Value through Other Comprehensive Income (FVOCI) reserves.
v) Competition in the banking and financial services
industry
The Barclays Bank UK Group operates in a highly competitive
environment in which it must evolve and adapt to the significant
changes as a result of financial regulatory reform, technological
advances, increased public scrutiny and current economic
conditions. The Barclays Bank UK 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 UK Group's
future business, results of operations and prospects.
New competitors in the financial services industry continue to
emerge. For example, 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. This has
allowed financial institutions and other companies to provide
electronic and internet-based financial solutions, including
electronic securities trading, payments processing and online
automated algorithmic-based investment advice. Furthermore, both
financial institutions and their non-banking competitors face the
risk that payments processing and other services could be
significantly disrupted by technologies, such as cryptocurrencies,
that require no intermediation. New technologies have required and
could require the Barclays Bank UK 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 may put pressure on the pricing
for the Barclays Bank UK Group's products and services, which could
reduce the Barclays Bank UK Group's revenues and profitability, or
may cause the Barclays Bank UK 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 UK 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 UK Group's ability to attract or retain clients and customers.
Any such impact could, in turn, reduce the Barclays Bank UK Group's
revenues.
vi) Regulatory change agenda and impact on business model
The Barclays Bank UK Group remains subject to ongoing
significant levels of regulatory change and scrutiny. As a result,
regulatory risk will remain a focus for senior management.
Furthermore, a more intensive regulatory approach and enhanced
requirements may adversely affect the Barclays Bank UK Group's
business, capital and risk management strategies and/or may result
in the Barclays Bank UK Group deciding to modify its legal entity,
capital and funding structures and business mix, or to exit certain
business activities altogether or not to expand in areas despite
otherwise attractive potential.
There are several significant pieces of legislation and areas of
focus which will require significant management attention, cost and
resource, including:
-- Changes in prudential requirements may impact minimum requirements
for own funds and eligible liabilities (MREL) (including requirements
for internal MREL), leverage, liquidity or funding requirements,
applicable buffers and/or add-ons to such minimum requirements
and risk weighted assets calculation methodologies all as may be
set by international, EU or national authorities. Such or similar
changes to prudential requirements or additional supervisory and
prudential expectations, either individually or in aggregate, may
result in, among other things, a need for further management actions
to meet the changed requirements, such as:
- increasing capital, MREL or liquidity resources, reducing leverage
and risk weighted assets;
- restricting distributions on capital instruments;
- modifying the terms of outstanding capital instruments;
- modifying legal entity structure (including with regard to issuance
and deployment of capital, MREL and funding);
- changing the Barclays Bank UK Group's business mix or exiting
other businesses; and/or
- undertaking other actions to strengthen the Barclays Bank UK
Group's position.
-- The Barclays Group is subject to supervisory stress testing of
which Barclays Bank UK PLC forms a component part. These exercises
currently include the programmes of the Bank of England (BoE) and
the European Banking Authority (EBA). 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 UK PLC being required to enhance their capital position,
limit capital distributions or position additional capital in specific
subsidiaries.
For further details on the regulatory supervision of, and
regulations applicable to, the Barclays Bank UK Group, see the
Supervision and regulation section.
vii) The impact of climate change on the Barclays Bank UK
Group's business
The risks associated with climate change are subject to rapidly
increasing societal, regulatory and political focus, both in the UK
and internationally. Embedding climate risk into the Barclays Bank
UK Group's risk framework in line with regulatory expectations, and
adapting the Barclays Bank UK Group's operations and business
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 UK Group's business.
Physical risks from climate change arise from a number of
factors and relate to specific weather events and longer-term
shifts in the climate. The nature and timing of extreme weather
events are uncertain but they are increasing in frequency and their
impact on the economy is predicted to be more acute in the future.
The potential impact on the economy includes, but is not limited
to, lower GDP growth, higher unemployment and significant changes
in asset prices and profitability of industries. Damage to the
properties and operations of borrowers could impair asset values
and the creditworthiness of customers leading to increased default
rates, delinquencies, write-offs and impairment charges in the
Barclays Bank UK Group's portfolios. In addition, the Barclays Bank
UK Group's premises and resilience may also suffer physical damage
due to weather events leading to increased costs for the Barclays
Bank UK Group.
As the economy transitions to a low-carbon economy, financial
institutions such as the Barclays Bank UK Group may face
significant and rapid developments in stakeholder expectations,
policy, law and regulation which could impact the lending
activities the Barclays Bank UK Group undertakes, as well as the
risks associated with its lending portfolios and the value of the
Barclays Bank UK Group's assets. As sentiment towards climate
change shifts and societal preferences change, the Barclays Bank UK
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 UK Group's
products, returns on certain business activities and the value of
certain assets 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 UK 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 UK
Group's clients, higher ECLs, and increased charge-offs and
defaults among retail customers.
If the Barclays Bank UK Group does not adequately embed risks
associated with climate change into its risk framework to
appropriately measure, manage and disclose the various financial
and operational risks it faces as a result of climate change, or
fails to adapt its strategy and business model to the changing
regulatory requirements and market expectations on a timely basis,
it may have a material and adverse impact on the Barclays Bank UK
Group's level of business growth, competitiveness, profitability,
capital requirements, cost of funding, and financial condition.
For further details on the Barclays Bank UK Group's approach to
climate change, see the climate change risk management section.
viii) Impact of benchmark interest rate reforms on the Barclays
Bank UK Group
For several years, global regulators and central banks have been
driving international efforts to reform key benchmark interest
rates and indices, such as the London Interbank Offered Rate
(LIBOR), which are used to determine the amounts payable under a
wide range of transactions and make them more reliable and robust.
This has resulted in significant changes to the methodology and
operation of certain benchmarks and indices, the adoption of
alternative "risk-free" reference rates and the proposed
discontinuation of certain reference rates (including LIBOR), with
further changes anticipated, including legislative proposals to
deal with 'tough legacy' contracts that cannot convert into or
cannot add fall-back risk-free reference rates. The consequences of
reform are unpredictable and may have an adverse impact on any
financial instruments linked to, or referencing, any of these
benchmark interest rates.
The Barclays Bank UK Group predominantly offers products which
reference central bank rates rather than LIBOR and other indices
which are likely to be subject to reform. Consequently, the product
offering and business model are unlikely to be significantly
affected. Nevertheless, there are other ways the Barclays Bank UK
Group could be affected.
Uncertainty as to the nature of such potential changes, the
availability and/or suitability of alternative "risk-free"
reference rates and other reforms may adversely affect a broad
range of transactions (including any securities, loans and
derivatives which use LIBOR to determine the amount of interest
payable that are included in the Barclays Bank UK Group's financial
assets and liabilities) that use these reference rates and indices
and introduce a number of risks for the Barclays Bank UK 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, risk-free
rates, the Barclays Bank UK Group faces conduct risks. These may
lead to customer complaints, regulatory sanctions or reputational
impact if the Barclays Bank UK 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;
-- Financial risks: the valuation of certain of the Barclays Bank
UK Group's financial assets and liabilities may change. Moreover,
transitioning to alternative "risk-free" reference rates may impact
the ability of members of the Barclays Bank UK Group to calculate
and model amounts receivable by them on certain financial assets
and determine the amounts payable on certain financial liabilities
(such as debt securities issued by them) because currently alternative
"risk-free" reference rates (such as the Sterling Overnight Index
Average (SONIA) and the Secured Overnight Financing Rate (SOFR))
are look-back rates whereas term rates (such as LIBOR) allow borrowers
to calculate at the start of any interest period exactly how much
is payable at the end of such interest period. This may have an
adverse effect on the Barclays Bank UK Group's cash flows;
-- Operational risk: changes to existing reference rates and indices,
discontinuation of any reference rate or index and transition to
alternative "risk-free" reference rates may require changes to
the Barclays Bank UK 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 UK Group may incur additional
expenses in amending documentation for new and existing transactions
and/or effecting the transition from the original reference rate
or index to a new reference rate or index; and
-- Accounting risk: an inability to apply hedge accounting in accordance
with IFRS could lead to increased volatility in the Barclays Bank
UK Group's financial results and performance.
Any of these factors may have an adverse effect on the Barclays
Bank UK Group's business, results of operations, financial
condition and prospects.
For further details on the impacts of benchmark interest rate
reforms on the Barclays Bank UK Group, see Note 35.
Material existing and emerging risks impacting individual
principal risks
i) Credit risk
Credit risk is the risk of loss to the Barclays Bank UK Group
from the failure of clients, customers or counterparties, including
sovereigns, to fully honour their obligations to members of the
Barclays Bank UK Group, including the whole and timely payment of
principal, interest, collateral and other receivables.
a) Impairment
The introduction of the impairment requirements of IFRS 9
Financial Instruments, resulted in impairment loss allowances that
are recognised earlier, on a more forward-looking basis and on a
broader scope of financial instruments, and may continue to have a
material impact on the Barclays Bank UK Group's business, results
of operations, financial condition and prospects.
Measurement involves complex judgement and impairment charges
could be volatile, particularly under stressed conditions.
Unsecured products with longer expected lives, such as credit
cards, are the most impacted. Taking into account the transitional
regime, the capital treatment on the increased reserves has the
potential to adversely impact the Barclays Bank UK Group's
regulatory capital ratios.
In addition, the move from incurred losses to ECLs has the
potential to impact the Barclays Bank UK Group's performance under
stressed economic conditions or regulatory stress tests. For more
information, refer to Note 1.
b) Specific sectors and concentrations
The Barclays Bank UK 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 UK
Group's portfolio which could have a material impact on
performance:
-- Consumer affordability has remained a key area of focus, particularly
in unsecured lending. Macroeconomic factors, such as rising unemployment,
that impact a customer's ability to service debt payments could
lead to increased arrears in both unsecured and secured products.
-- UK real estate market. UK property represents a significant portion
of the overall Barclays Bank UK Group retail credit exposure. In
2020, property prices fluctuated significantly. In the first half
of 2020, the Barclays Bank Group's retail exposure experienced
a suppressed UK real estate market due to the impact of the COVID-19
pandemic, whilst the second half of 2020 saw increased activity
as financial support schemes and a temporary stamp duty cut took
effect. However, there can be no assurance that the recovery in
the UK real estate market will continue in 2021 especially as the
longer term macro-economic effects of the COVID-19 pandemic are
felt, financial support schemes are withdrawn, stamp duty cuts
are reversed and growth across the UK has slowed, particularly
in London and the South East where the Barclays Bank UK Group has
a high exposure.
For further details on the Barclays Bank UK Group's approach to
credit risk, see the credit risk management and credit risk
performance sections.
ii) Treasury and capital risk
There are three primary types of treasury and capital risk faced
by the Barclays Bank UK Group:
a) Liquidity risk
Liquidity risk is the risk that the Barclays Bank UK 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 UK Group to fail to meet regulatory liquidity
standards or be unable to support day-to-day banking activities.
Key liquidity risks that the Barclays Bank UK Group faces
include:
-- The stability of the Barclays Bank UK Group's current funding
profile: In particular, that part which is based on accounts and
deposits payable on demand or at short notice, could be affected
by general UK economic conditions and the Barclays Bank UK Group
failing to preserve the current level of customer and investor
confidence in the financial services sector. The Barclays Bank
UK Group benefits from the additional deposit stability generated
as a result of the guarantees provided under the Financial Services
Compensation Scheme but recognises that there is the potential
for outflow of deposits or the reduction of the ability to access
retail deposit funding on reasonable terms if the arrangement is
altered or removed in future.
-- In the interest of generating greater resilience to liquidity stress
events and to benefit from diversified sources of funding, the
Barclays Bank UK Group holds distinct relations with various counterparties
with the intention of creating issuance capability for debt instruments
which is independent of Barclays Group and to support its own funding
requirements in addition to funding provided by the Barclays Group.
Counterparties are likely however to incorporate an assessment
of the health of the Barclays Group in addition to the Barclays
Bank UK Group specifically when making investment decisions. As
with all financial institutions arranging funding, several factors,
including adverse macroeconomic conditions, adverse outcomes in
conduct and legal, competition and regulatory matters and loss
of confidence by investors, counterparties and/or customers in
the Barclays Bank UK Group, can affect the ability of the Barclays
Bank UK Group to access money or capital markets and/or the cost
and other terms upon which the Barclays Bank UK Group is able to
obtain market funding.
-- Credit rating changes and the impact on funding costs : Rating
agencies regularly review credit ratings given to Barclays Bank
UK PLC. Credit ratings are based on a number of factors, including
some which are not within the Barclays Bank UK Group's control
(such as political and regulatory developments, changes in rating
methodologies, macroeconomic conditions and the UK's sovereign
credit rating).
Whilst the impact of a credit rating change will depend on a
number of factors (including the type of issuance and prevailing
market conditions), any reductions in a credit rating (in
particular, any downgrade below investment grade) may affect the
Barclays Bank UK Group's access to the money or capital markets
and/or terms on which the Barclays Bank UK Group is able to obtain
market funding, increase costs of funding and credit spreads,
reduce the size of the Barclays Bank UK Group's deposit base,
trigger additional collateral or other requirements in derivative
contracts and other secured funding arrangements or limit the range
of counterparties who are willing to enter into transactions with
the Barclays Bank UK Group. Any of these factors could have a
material adverse effect on the Barclays Bank UK Group's business,
results of operations, financial condition and prospects.
b) Capital risk
Capital risk is the risk that the Barclays Bank UK Group has an
insufficient level or composition of capital to support its normal
business activities and to meet its regulatory capital requirements
under normal operating environments or stressed conditions (both
actual and as defined for internal planning or regulatory stress
testing purposes). This includes the risk from the Barclays Bank UK
Group's pension plans. Key capital risks that the Barclays Bank UK
Group faces include:
-- Failure to meet prudential capital requirements: This could lead
to the Barclays Bank UK 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 UK Group's capital or
leverage position.
-- Adverse changes in FX rates impacting capital ratios: The Barclays
Bank UK Group share capital is denominated in Sterling. However,
some capital resources and MREL are 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 UK Group's regulatory capital ratios are sensitive
to foreign currency movements. Failure to appropriately manage
the Barclays Bank UK Group's balance sheet to take account of foreign
currency movements could result in an adverse impact on its regulatory
capital.
c) Interest rate risk in the banking book
Interest rate risk in the banking book is the risk that the
Barclays Bank UK 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 UK Group's
hedge programmes for interest rate risk in the banking book rely on
behavioural assumptions and, as a result, the success of the
hedging strategy cannot be guaranteed. A potential mismatch in the
balance or duration of the hedge assumptions could lead to earnings
deterioration. A decline in Sterling interest rates may also
compress net interest margin on retail portfolios. In addition, the
Barclays Bank UK Group's liquid asset portfolio is exposed to
potential capital and/or income volatility due to movements in
market rates and prices.
For further details on the Barclays Bank UK Group's approach to
treasury and capital risk, see the treasury and capital risk
management and treasury and capital risk performance sections.
iii) Operational risk
Operational risk is the risk of loss to the Barclays Bank UK
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 UK 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 UK
Group and across the financial services industry, whether arising
through impacts on the Barclays Bank UK Group's technology systems,
real estate services including its retail branch network, 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 UK Group's business processes
depend, may result in significant customer detriment, costs to
reimburse losses incurred by the Barclays Bank UK Group's
customers, and reputational damage.
b) Cyber-attacks
Cyber-attacks continue to be a global threat that is inherent
across all industries, with a spike in both number and severity of
attacks observed recently. The financial sector remains a primary
target for cyber criminals, hostile nation states, opportunists and
hacktivists. The Barclays Bank UK Group, like other financial
institutions, experiences numerous attempts to compromise its cyber
security.
The Barclays Bank UK Group dedicates significant resources to
reducing cyber security risks, but it cannot provide absolute
security against cyber-attacks. 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. Cyber-attacks can originate from a
wide variety of sources and target the Barclays Bank UK Group in
numerous ways, including attacks on networks, systems, or devices
used by the Barclays Bank UK Group or parties such as service
providers and other suppliers, counterparties, employees,
contractors, customers or clients, presenting the Barclays Bank UK
Group with a vast and complex defence perimeter. Moreover, the
Barclays Bank UK Group does not have direct control over the cyber
security of the systems of its clients, customers, counterparties
and third-party service providers and suppliers, limiting the
Barclays Bank UK Group's ability to effectively defend against
certain threats.
A failure in the Barclays Bank UK Group's adherence to its cyber
security policies, procedures or controls, employee malfeasance,
and human, governance or technological error could also compromise
the Barclays Bank UK Group's ability to successfully defend against
cyber-attacks. Furthermore, certain legacy technologies that are at
or approaching end-of-life may not be able to be able to maintained
to acceptable levels of security. The Barclays Bank UK Group has
experienced cyber security incidents and near-misses in the past,
and it is inevitable that additional incidents will occur in the
future. Cyber security 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 UK Group's employees, contractors, and third
party service providers and suppliers and their sub-contractors in
response to the COVID-19 pandemic. Bad actors have taken advantage
of remote working practices and modified customer behaviours during
the COVID-19 pandemic, exploiting the situation in novel ways that
may elude defences.
Common types of cyber-attacks include deployment of malware,
including destructive ransomware; denial of service and distributed
denial of service (DDoS) attacks; infiltration via business email
compromise, including phishing, or via social engineering,
including vishing and smishing; automated attacks using botnets;
and credential validation or stuffing attacks using login and
password pairs from unrelated breaches. A successful cyber-attack
of any type has the potential to cause serious harm to the Barclays
Bank UK 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 UK Group's brand and reputation, and other
financial loss. The impact of a successful cyber-attack also is
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 cyber security as an
increasing systemic risk to the financial sector and have
highlighted the need for financial institutions to improve their
monitoring and control of, and resilience to cyber-attacks. A
successful cyber-attack may, therefore, result in significant
regulatory fines on the Barclays Bank UK Group.
For further details on the Barclays Bank UK Group's approach to
cyber-attacks, see the operational risk performance section.
c) New and emergent technology
Technology is fundamental to the Barclays Bank UK 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 UK Group, with new
solutions being developed both in-house and in association with
third-party companies. For example, payment services are
increasingly occurring electronically, both on the Barclays Bank UK
Group's own systems and through other alternative systems, and
becoming automated. Whilst increased use of electronic payment
systems could significantly reduce the Barclays Bank UK Group's
cost base, it may, conversely, reduce the commissions, fees and
margins made by the Barclays Bank UK Group on these transactions
which could have a material adverse effect on the Barclays Bank UK
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 UK Group's business, results of operations, financial
condition and prospects.
d) External fraud
The nature of fraud is wide-ranging and continues to evolve, as
criminals continually seek opportunities to target the Barclays
Bank UK Group's business activities and exploit changes to customer
behaviour and product and channel use (such as the increased use of
digital products and enhanced online services) or exploit new
products (such as loans provided under the UK Government's Bounce
Back Loan Scheme and the Coronavirus Business Interruption Loan
Scheme, which have been designed to support customers and clients
during the COVID-19 pandemic).
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 UK market has also seen significant growth in
"scams" where the Barclays Bank UK Group takes increased levels of
liability as part of a voluntary code to provide additional
safeguards to customers and clients who are tricked into making
payments to fraudsters. 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 UK Group's business,
results of operations, financial condition and prospects.
e) Data management and information protection
The Barclays Bank UK Group holds and processes large volumes of
data, including personally identifiable information, intellectual
property, and financial data and the Barclays Bank UK Group's
businesses are subject to complex and evolving laws and regulations
governing the privacy and protection of personal information of
individuals, including Regulation (EU) 2016/679 (General Data
Protection Regulation (GDPR)). The protected parties can include:
(i) the Barclays Bank UK Group's clients and customers, and
prospective clients and customers; (ii) clients and customers of
the Barclays Bank UK Group's clients and customers; (iii) employees
and prospective employees; and (iv) employees of the Barclays Bank
UK Group's suppliers, counterparties and other external
parties.
Concerns regarding the effectiveness of the Barclays Bank UK
Group's measures to safeguard personal information, or even the
perception that those measures are inadequate, could expose the
Barclays Bank UK Group to the risk of loss or unavailability of
data or data integrity issues and/or cause the Barclays Bank UK
Group to lose existing or potential clients and customers, and
thereby reduce the Barclays Bank UK Group's revenues.
Furthermore, any failure or perceived failure by the Barclays
Bank UK Group to comply with applicable privacy or data protection
laws and regulations may subject it to potential contractual
liability, litigation, regulatory or other government action
(including significant regulatory fines) and require changes to
certain operations or practices which could also inhibit the
Barclays Bank UK 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 UK
Group's reputation and otherwise materially adversely affect its
business, results of operations, financial condition and
prospects.
f) Processing error
The Barclays Bank UK 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 complex and occur at high
volumes and frequencies. As the Barclays Bank UK Group's customer
base expands and the volume, speed, frequency and complexity of
transactions 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 UK
Group's control, such as a spike in transaction volume, could
adversely affect the Barclays Bank UK Group's ability to process
transactions or provide banking and payment services.
Processing errors could result in the Barclays Bank UK 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 and/or other transactions to be executed
erroneously, illegally or with unintended consequences; and (iv)
adversely affecting financial markets. Any of these events could
materially disadvantage the Barclays Bank UK Group's customers,
clients and counterparties (including them suffering financial
loss) and/or result in a loss of confidence in the Barclays Bank UK
Group which, in turn, could have a material adverse effect on the
Barclays Bank UK Group's business, results of operations, financial
condition and prospects.
g) Supplier exposure
The Barclays Bank UK Group depends on suppliers for the
provision of many of its services and the development of
technology. Whilst the Barclays Bank UK 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 introduce concentration risk where the failure
of specific suppliers could have an impact on the Barclays Bank UK
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 UK Group's business,
results of operations, financial condition and prospects.
h) Estimates and judgements relating to critical accounting
policies and capital 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 charges,
fair value of financial instruments, goodwill and intangible assets
and provisions including conduct and legal, competition and
regulatory matters (see 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 UK Group, beyond what was
anticipated or provided for. Further development of accounting
standards and capital interpretations could also materially impact
the Barclays Bank UK Group's results of operations, financial
condition and prospects.
i) Tax risk
The Barclays Bank UK Group is required to comply with the tax
laws and practice of all countries in which it has business
operations. There is a risk that the Barclays Bank UK 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. In addition, increasing customer tax reporting
requirements for UK and international customers and the
digitisation of the administration of tax has potential to increase
the Barclays Bank UK Group's tax compliance obligations
further.
j) Ability to hire and retain appropriately qualified
employees
As a regulated financial institution, the Barclays Bank UK Group
requires diversified and specialist skilled colleagues. The
Barclays Bank UK Group's ability to attract, develop and retain a
diverse mix of talent is key to the delivery of its core business
activity and strategy. This is impacted by a range of external and
internal factors, such as the UK's decision to leave the EU and the
enhanced individual accountability applicable to the banking
industry. Failure to attract or prevent the departure of
appropriately qualified and skilled employees could have a material
adverse effect on the Barclays Bank UK 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 UK Group's approach to
operational risk, see the operational risk management and
operational risk performance sections.
iv) Model risk
Model risk is the risk of potential adverse consequences from
financial assessments or decisions based on incorrect or misused
model outputs and reports. The Barclays Bank UK Group relies on
models to support a broad range of business and risk management
activities, including informing business decisions and strategies,
measuring and limiting risk, valuing exposures (including the
calculation of impairment), conducting stress testing, assessing
capital adequacy, supporting new business acceptance and risk and
reward evaluation, managing client assets, and meeting reporting
requirements. Models are, by their nature, imperfect and incomplete
representations of reality because they rely on assumptions and
inputs, and so they may be subject to errors affecting the accuracy
of their outputs 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 instance, the quality of the data used in models
across the Barclays Bank UK Group has a material impact on the
accuracy and completeness of its risk and financial metrics. Model
errors or misuse may result in (among other things) the Barclays
Bank UK Group making inappropriate business decisions and/or
inaccuracies or errors being identified in the Barclays Bank UK
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 UK Group's business, results of
operations, financial condition and prospects.
For further details on the Barclays Bank UK Group's approach to
model risk, see the model risk management and model risk
performance sections.
v) Conduct risk
Conduct risk is the risk of detriment to customers, clients,
market integrity, effective competition or the Barclays Bank UK
Group from the inappropriate supply of financial services,
including instances of wilful or negligent misconduct. This risk
could manifest itself in a variety of ways:
a) Employee misconduct
The Barclays Bank UK 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 UK 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 UK Group's business include (i) employees improperly
selling or marketing the Barclays Bank UK 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 UK Group, its customers or third parties.
These risks may be exacerbated in circumstances where the Barclays
Bank UK 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 engagement
The Barclays Bank UK 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 UK
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; and (iii) undertake appropriate activity to address
customer detriment, including the adherence to regulatory and legal
requirements on complaint handling. The Barclays Bank UK Group is
at risk of financial loss and reputational damage as a result.
c) Product design and review risk
Products and services must meet the needs of clients, customers,
markets and the Barclays Bank UK Group throughout their lifecycle,
However, there is a risk that the design and review of the Barclays
Bank UK Group's 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 UK Group,
and this focus is set to continue in 2021.
d) Financial crime
The Barclays Bank UK 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 UK Group's regulators,
including severe penalties, which may have a material adverse
effect on the Barclays Bank UK 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 UK Group with an increased
focus on governance and rigour. Failure to meet these requirements
and expectations may lead to regulatory sanctions, both for the
individuals and the Barclays Bank UK Group.
For further details on the Barclays Bank UK Group's approach to
conduct risk, see the conduct risk management and conduct risk
performance sections.
vi) Reputation risk
Reputation risk is the risk that an action, transaction,
investment, event, decision or business relationship will reduce
trust in the Barclays Bank UK 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 UK Group's overall
reputation and any one transaction, investment or event (in the
perception of key stakeholders) can reduce trust in the Barclays
Bank UK Group's integrity and competence. The Barclays Bank UK
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 UK 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
UK Group conducts its business activities, or the Barclays Bank UK
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 UK 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 UK 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 UK Group (see "iii) Operational
risk" above).
For further details on the Barclays Bank UK Group's approach to
reputation risk, see reputation risk management and reputation risk
performance sections.
vii) Legal risk and legal, competition and regulatory
matters
The Barclays Bank UK Group conducts activities in a highly
regulated market which exposes it and its employees to legal risk
arising from (i) the multitude of laws and regulations that apply
to the businesses it operates, which are highly dynamic, may vary
between jurisdictions, and are often unclear in their application
to particular circumstances especially in new and emerging areas;
and (ii) the diversified and evolving nature of the Barclays Bank
UK Group's businesses and business practices. In each case, this
exposes the Barclays Bank UK 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 UK 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 UK Group or its employees could result in criminal
prosecution, regulatory censure, potentially significant fines and
other sanctions. Where clients, customers or other third parties
are harmed by the Barclays Bank UK 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 UK
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 UK Group being liable to third parties
or may result in the Barclays Bank UK Group's rights not being
enforced as intended.
Details of legal, competition and regulatory matters to which
the Barclays Bank UK Group is currently exposed are set out in Note
24. In addition to matters specifically described in Note 24, the
Barclays Bank UK Group is engaged in various other legal
proceedings which arise in the ordinary course of business. The
Barclays Bank UK 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 UK Group is, or has been, engaged.
The outcome of legal, competition and regulatory matters, both
those to which the Barclays Bank UK 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 UK Group may
incur significant expense, regardless of the ultimate outcome, and
any such matters could expose the Barclays Bank UK 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 UK
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 UK 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 UK Group's business,
results of operations, financial condition and prospects.
Consolidated financial statements
Consolidated income statement
2020 2019
For the year ended 31 December Notes GBPm GBPm
------------------------------------------------------------------ ----- ------- -------
Interest and similar income 3 6,201 7,218
Interest and similar expense 3 (1,021) (1,413)
------------------------------------------------------------------ ----- ------- -------
Net interest income 5,180 5,805
------------------------------------------------------------------ ----- ------- -------
Fee and commission income 4 1,375 1,674
Fee and commission expense 4 (310) (368)
------------------------------------------------------------------ ----- ------- -------
Net fee and commission income 1,065 1,306
------------------------------------------------------------------ ----- ------- -------
Net trading income 5 53 33
Net investment income 6 106 172
Other income 20 6
------------------------------------------------------------------ ----- ------- -------
Total income 6,424 7,322
Credit impairment charges 7 (1,427) (709)
------------------------------------------------------------------ ----- ------- -------
Net operating income 4,997 6,613
------------------------------------------------------------------ ----- ------- -------
Staff costs 28 (1,311) (1,252)
Infrastructure costs 8 (444) (382)
Administration and general expenses 8 (2,848) (2,724)
Provisions for litigation and conduct 22 (43) (1,586)
------------------------------------------------------------------ ----- ------- -------
Operating expenses (4,646) (5,944)
------------------------------------------------------------------ ----- ------- -------
Profit on disposal of subsidiaries, associates and joint ventures 16 -
------------------------------------------------------------------ ----- ------- -------
Profit before tax 367 669
Taxation 9 12 (513)
------------------------------------------------------------------ ----- ------- -------
Profit after tax 379 156
------------------------------------------------------------------ ----- ------- -------
Attributable to:
------------------------------------------------------------------ ----- ------- -------
Equity holders of the parent 199 3
Other equity instrument holders 180 153
------------------------------------------------------------------ ----- ------- -------
Profit after tax 379 156
------------------------------------------------------------------ ----- ------- -------
Note
a As permitted by section 408(3) of the Companies Act 2006 an income
statement for the parent company has not been presented.
Consolidated statement of comprehensive income
2020 2019
For the year ended 31 December GBPm GBPm
------------------------------------------------------------------------------------------- ------ ------
Profit after tax 379 156
------------------------------------------------------------------------------------------- ------ ------
Other comprehensive income/(loss) that may be recycled to profit or loss:
Fair value through other comprehensive income reserve movement relating to debt securities
Net gains from changes in fair value 499 438
Net (losses) due to fair value hedging (361) (391)
Net (gains) transferred to net profit on disposal (43) (48)
Net losses transferred to net profit due to impairment 2 -
Tax (25) 5
Cash flow hedging reserve
Net gains from changes in fair value 414 143
Net (gains) transferred to net profit (111) (6)
Tax (85) (34)
Other 1 -
------------------------------------------------------------------------------------------- ------ ------
Other comprehensive income that may be recycled to profit or loss 291 107
Other comprehensive income not/(loss) recycled to profit or loss: - -
------------------------------------------------------------------------------------------- ------ ------
Other comprehensive income for the year 291 107
------------------------------------------------------------------------------------------- ------ ------
Total comprehensive (loss)/income for the year, net of tax from discontinued operation
------------------------------------------------------------------------------------------- ------ ------
Total comprehensive income for the year 670 263
------------------------------------------------------------------------------------------- ------ ------
Consolidated balance sheet
2020 2019
As at 31 December Notes GBPm GBPm
------------------------------------------------------------------ ----- ------- -------
Assets
Cash and balances at central banks 35,218 24,305
Cash collateral and settlement balances 4,345 4,331
Loans and advances at amortised cost 17 211,649 197,569
Reverse repurchase agreements and other similar secured lending 133 1,761
Trading portfolio assets 11 298 860
Financial assets at fair value through the income statement 12 3,432 3,571
Derivative financial instruments 13 550 192
Financial assets at fair value through other comprehensive income 14 26,026 19,322
Goodwill and intangible assets 20 3,527 3,530
Property, plant and equipment 18 737 893
Current tax assets 75 -
Deferred tax assets 9 780 810
Other assets 728 1,254
------------------------------------------------------------------ ----- ------- -------
Total assets 287,498 258,398
------------------------------------------------------------------ ----- ------- -------
Liabilities
Deposits at amortised cost 17 240,535 205,696
Cash collateral and settlement balances 455 214
Repurchase agreements and other similar secured borrowing 7,178 13,420
Debt securities in issue 7,503 8,271
Subordinated liabilities 25 9,869 7,688
Trading portfolio liabilities 11 1,265 1,704
Derivative financial instruments 13 880 740
Current tax liabilities - 458
Other liabilities 21 1,906 2,034
Provisions 22 880 1,660
------------------------------------------------------------------ ----- ------- -------
Total liabilities 270,471 241,885
------------------------------------------------------------------ ----- ------- -------
Equity
Called up share capital and share premium 26 5 5
Other equity instruments 26 2,560 2,560
Other reserves 27 473 183
Retained earnings 13,989 13,765
------------------------------------------------------------------ ----- ------- -------
Total equity 17,027 16,513
------------------------------------------------------------------ ----- ------- -------
Total liabilities and equity 287,498 258,398
------------------------------------------------------------------ ----- ------- -------
The Board of Directors approved the financial statements on
pages 124 to 182 on 17 February 2021.
Crawford Gillies
Chair
Matt Hammerstein
Chief Executive
James Mack
Chief Financial Officer
Consolidated statement of changes in equity
Called up
share
capital Other
and share equity Other Retained
premium(a) instruments(a) reserves(b) earnings Total equity
GBPm GBPm GBPm GBPm GBPm
------------------------------------------------ ----------- ---------------- ------------ --------- ------------
Balance as at 1 January 2020 5 2,560 183 13,765 16,513
Profit after tax - 180 - 199 379
Financial assets at fair value through other
comprehensive income - - 72 - 72
Cash flow hedges - - 218 - 218
Other - - - 1 1
------------------------------------------------ ----------- ---------------- ------------ --------- ------------
Total comprehensive income for the year - 180 290 200 670
------------------------------------------------ ----------- ---------------- ------------ --------- ------------
Equity settled share schemes - - - 31 31
Other equity instruments coupons paid - (180) - - (180)
Vesting of employee share schemes - - - (12) (12)
Dividends paid - - - (220) (220)
Capital contribution from Barclays PLC - - - 220 220
Other reserve movements - - - 5 5
------------------------------------------------ ----------- ---------------- ------------ --------- ------------
Balance as at 31 December 2020 5 2,560 473 13,989 17,027
------------------------------------------------ ----------- ---------------- ------------ --------- ------------
Balance as at 1 January 2019 5 2,070 76 14,792 16,943
Profit after tax - 153 - 3 156
Financial assets at fair value through other
comprehensive income - - 4 - 4
Cash flow hedges - - 103 - 103
------------------------------------------------ ----------- ---------------- ------------ --------- ------------
Total comprehensive income for the year - 153 107 3 263
------------------------------------------------ ----------- ---------------- ------------ --------- ------------
Issue and exchange of other equity instruments - 490 - - 490
Equity settled share schemes - - - 32 32
Other equity instruments coupons paid - (153) - - (153)
Vesting of employee share schemes - - - (12) (12)
Dividends paid - - - (1,050) (1,050)
Balance as at 31 December 2019 5 2,560 183 13,765 16,513
------------------------------------------------ ----------- ---------------- ------------ --------- ------------
Notes
a For further details, refer to Note 26.
b For further details, refer to Note 27.
Consolidated cash flow statement
2020 2019(a)
For the year ended 31 December GBPm GBPm
---------------------------------------------------------------------------------------- -------- --------
Reconciliation of profit before tax to net cash flows from operating activities:
Profit before tax 367 669
Adjustment for non-cash items:
Credit impairment charges 1,427 709
Depreciation, amortisation and impairment of property, plant, equipment and intangibles 175 150
Other provisions 427 1,665
Other non-cash movements (1,217) 110
Changes in operating assets and liabilities
Cash collateral and settlement balances 227 (654)
Loans and advances at amortised cost (15,513) (10,117)
Repurchase and reverse repurchase agreements (4,614) 1,440
Deposits at amortised cost 34,839 8,211
Debt securities in issue (768) (2,901)
Derivative financial instruments (218) 370
Trading assets and liabilities 123 (274)
Financial assets and liabilities at fair value 139 309
Other assets and liabilities (821) (1,835)
Corporate income tax paid (597) (1,086)
Net cash from operating activities 13,976 (3,234)
----------------------------------------------------------------------------------------- -------- --------
Purchase of financial assets at fair value through other comprehensive income (5,557) (11,846)
Purchase of property, plant and equipment and intangibles (17) (30)
----------------------------------------------------------------------------------------- -------- --------
Net cash from investing activities (5,574) (11,876)
----------------------------------------------------------------------------------------- -------- --------
Dividends paid and coupon payments on other equity instruments (400) (1,203)
Capital contribution from Barclays PLC 220 -
Net issue of shares and other equity instruments - 490
Issuance of subordinated debt 3,694 157
Redemption of subordinated debt (1,425) -
Vesting of employee share schemes (12) (12)
----------------------------------------------------------------------------------------- -------- --------
Net cash from financing activities 2,077 (568)
----------------------------------------------------------------------------------------- -------- --------
Effect of exchange rates on cash and cash equivalents 428 (737)
----------------------------------------------------------------------------------------- -------- --------
Net increase in cash and cash equivalents 10,907 (16,415)
----------------------------------------------------------------------------------------- -------- --------
Cash and cash equivalents at beginning of year 27,510 43,925
----------------------------------------------------------------------------------------- -------- --------
Cash and cash equivalents at end of year 38,417 27,510
----------------------------------------------------------------------------------------- -------- --------
Cash and cash equivalents comprise:
Cash and balances at central banks 35,218 24,305
Loans and advances to banks with original maturity less than three months 81 87
Cash collateral at central banks (b) 3,118 3,118
38,417 27,510
---------------------------------------------------------------------------------------- -------- --------
Notes
a 2019 comparative figures have been restated to make the cash flow statement more relevant
following a review of the disclosure and the accounting policies applied. Amendments have
been made to the classification of cash collateral reported within cash and cash equivalents.
Footnote b below quantifies the impact of the change in the prior period and provides further
detail.
b Cash collateral at central banks' was previously labelled 'Cash collateral and settlement
balances with banks with original maturity less than three months'. This line item has been
restated to include only balances that the Barclays Bank UK Group holds at central banks related
to payment schemes. Previously, cash collateral and settlement balances with non-central bank
counterparties were also classified as cash equivalents and included within this balance.
Comparatives have been restated. The effect of this change decreased cash and cash equivalents
by GBP532m as at 31 December 2019 and GBP409m as at 31 December 2018. As a result, net cash
from operating activities decreased by GBP123m in 2019 representing the movement in cash collateral
and settlement balances line item in that period.
Interest received by Barclays Bank UK Group was GBP6,201m (2019:
GBP7,218m) and interest paid by Barclays Bank UK Group was
GBP1,021m (2019: GBP1,413m).
As at 31 December 2020, the Barclays Bank UK Group was required
to maintain balances with central banks in respect of interbank
payment schemes of GBP458m (2019: GBP388m).
For the purposes of the cash flow statement, cash comprises cash
on hand and demand deposits and cash equivalents comprise highly
liquid investments that are convertible into cash with an
insignificant risk of changes in value with original maturities of
three months or less. Repurchase and reverse repurchase agreements
are not considered to be part of cash equivalents.
Financial statements of Barclays Bank UK PLC
Parent company accounts
Balance sheet
------------------------------------------------------------------ ----- ----------------
2020 2019
As at 31 December Notes GBPm GBPm
------------------------------------------------------------------ ----- ------- -------
Assets
Cash and balances at central banks 35,218 24,305
Cash collateral and settlement balances 4,345 4,331
Loans and advances at amortised cost 17 212,033 197,960
Reverse repurchase agreements and other similar secured lending 133 1,761
Trading portfolio assets 11 298 860
Financial assets at fair value through the income statement 12 3,432 3,571
Derivative financial instruments 13 550 193
Financial assets at fair value through other comprehensive income 14 26,026 19,322
Investment in subsidiaries 36 441 454
Goodwill and intangible assets 20 3,379 3,382
Property, plant and equipment 18 737 893
Current tax assets 77 -
Deferred tax assets 9 780 810
Other assets 522 1,079
------------------------------------------------------------------ ----- ------- -------
Total assets 287,971 258,921
------------------------------------------------------------------ ----- ------- -------
Liabilities
Deposits at amortised cost 17 241,091 206,764
Cash collateral and settlement balances 455 214
Repurchase agreements and other similar secured borrowing 7,178 13,420
Debt securities in issue 7,503 7,778
Subordinated liabilities 25 9,869 7,688
Trading portfolio liabilities 11 1,265 1,704
Derivative financial instruments 13 880 740
Current tax liabilities - 451
Other liabilities 21 1,700 1,903
Provisions 22 857 1,613
------------------------------------------------------------------ ----- ------- -------
Total liabilities 270,798 242,275
------------------------------------------------------------------ ----- ------- -------
Equity
Called up share capital and share premium 26 5 5
Other equity instruments 26 2,560 2,560
Other reserves 27 575 285
Retained earnings(a) 14,033 13,796
------------------------------------------------------------------ ----- ------- -------
Total equity 17,173 16,646
------------------------------------------------------------------ ----- ------- -------
Total liabilities and equity 287,971 258,921
------------------------------------------------------------------ ----- ------- -------
Note
a As permitted by section 408(3) of the Companies Act 2006 an income
statement for the parent company has not been presented. Included
in shareholders' equity for the Bank is a profit after tax for
the year ended 31 December 2020 of GBP393m (2019: GBP208m).
The Board of Directors approved the financial statements on
pages 129 to 131 on 17 February 2021.
Crawford Gillies
Chair
Matthew Hammerstein
Chief Executive
James Mack
Chief Financial Officer
Statement of changes in
equity
----------------------- ---------------------- ---------------------- ----------------- ------------ ------------
Called up share
capital and share Other equity Retained
premium(a) instruments(a) Other reserves(b) earnings(c) Total equity
GBPm GBPm GBPm GBPm GBPm
----------------------- ---------------------- ---------------------- ----------------- ------------ ------------
Balance as at 1 January
2020 5 2,560 285 13,796 16,646
Profit after tax - 180 - 213 393
Financial assets at
fair value through
other comprehensive
income - - 72 - 72
Cash flow hedges - - 218 - 218
Other - - - 1 1
----------------------- ---------------------- ---------------------- ----------------- ------------ ------------
Total comprehensive
income for the year - 180 290 214 684
----------------------- ---------------------- ---------------------- ----------------- ------------ ------------
Equity settled share
schemes - - - 31 31
Other equity
instruments coupons
paid - (180) - - (180)
Vesting of employee
share schemes - - - (12) (12)
Capital contribution
from Barclays PLC - - - 220 220
Dividends paid - - - (220) (220)
Other movements - - - 4 4
----------------------- ---------------------- ---------------------- ----------------- ------------ ------------
Balance as at 31
December 2020 5 2,560 575 14,033 17,173
----------------------- ---------------------- ---------------------- ----------------- ------------ ------------
Balance as at 1 January
2019 5 2,070 178 14,771 17,024
Profit after tax - 153 - 55 208
Financial assets at
fair value through
other comprehensive
income - - 4 - 4
Cash flow hedges - - 103 - 103
----------------------- ---------------------- ---------------------- ----------------- ------------ ------------
Total comprehensive
income for the year - 153 107 55 315
----------------------- ---------------------- ---------------------- ----------------- ------------ ------------
Issue and exchange of
other equity
instruments - 490 - - 490
Equity settled share
schemes - - - 32 32
Other equity
instruments coupons
paid - (153) - - (153)
Vesting of employee
share schemes - - - (12) (12)
Dividends paid - - - (1,050) (1,050)
Balance as at 31
December 2019 5 2,560 285 13,796 16,646
----------------------- ---------------------- ---------------------- ----------------- ------------ ------------
Notes
a For further details, refer to Note 26.
b For further details, refer to Note 27.
Cash flow statement
---------------------------------------------------------------------------------------- ------------------
2020 2019(a)
For the year ended 31 December GBPm GBPm
---------------------------------------------------------------------------------------- -------- --------
Reconciliation of profit before tax to net cash flows from operating activities:
Profit before tax 381 703
Adjustment for non-cash items:
Credit impairment charges 1,421 710
Depreciation, amortisation and impairment of property, plant, equipment and intangibles 175 150
Other provisions 406 1,611
Other non-cash movements (1,202) 113
Changes in operating assets and liabilities
Cash collateral and settlement balances 227 (639)
Loans and advances at amortised cost (15,510) (9,797)
Reverse repurchase agreements and other similar lending (4,614) 1,440
Deposits at amortised cost 34,327 7,733
Debt securities in issue (275) (2,134)
Derivative financial instruments (217) 352
Trading assets and liabilities 123 (274)
Financial assets and liabilities at fair value 139 309
Other assets and liabilities (819) (1,753)
Corporate income tax paid (592) (1,083)
Net cash from operating activities 13,970 (2,559)
---------------------------------------------------------------------------------------- -------- --------
Purchase of financial assets at fair value through other comprehensive income (5,557) (11,846)
Purchase of property, plant and equipment and intangibles (21) (28)
Net cash from investing activities (5,578) (11,874)
---------------------------------------------------------------------------------------- -------- --------
Dividends paid and other coupon payments on equity instruments (400) (1,203)
Capital contribution from Barclays PLC 220 -
Net issue of shares and other equity instruments - 490
Issuance of subordinated debt 3,694 157
Redemption of subordinated debt (1,425) -
Vesting of employee share schemes (12) (12)
---------------------------------------------------------------------------------------- -------- --------
Net cash from financing activities 2,077 (568)
---------------------------------------------------------------------------------------- -------- --------
Effect of exchange rates on cash and cash equivalents 428 (737)
---------------------------------------------------------------------------------------- -------- --------
Net increase in cash and cash equivalents 10,897 (15,738)
---------------------------------------------------------------------------------------- -------- --------
Cash and cash equivalents at beginning of year 27,837 43,575
---------------------------------------------------------------------------------------- -------- --------
Cash and cash equivalents at end of year 38,734 27,837
---------------------------------------------------------------------------------------- -------- --------
Cash and cash equivalents comprise:
Cash and balances at central banks 35,218 24,305
Loans and advances to banks with original maturity less than three months 398 414
Cash collateral at central banks(b) 3,118 3,118
---------------------------------------------------------------------------------------- -------- --------
38,734 27,837
---------------------------------------------------------------------------------------- -------- --------
Note
a 2019 comparative figures have been restated to make the cash flow
statement more relevant following a review of the disclosure and
the accounting policies applied. Amendments have been made to the
classification of cash collateral reported within cash and cash
equivalents. Footnote b below quantifies the impact of the change
in the prior period and provides further detail.
b Cash collateral at central banks' was previously labelled 'Cash
collateral and settlement balances with banks with original maturity
less than three months'. This line item has been restated to include
only balances that Barclays Bank UK holds at central banks related
to payment schemes. Previously, cash collateral and settlement balances
with non-central bank counterparties were also classified as cash
equivalents and included within this balance. Comparatives have
been restated. The effect of this change decreased cash and cash
equivalents by GBP532m as at 31 December 2019 and GBP409m as at
31 December 2018. As a result, net cash from operating activities
decreased by GBP123m in 2019 representing the movement in cash collateral
and settlement balances line item in that period.
Interest received by Barclays Bank UK PLC was GBP6,006m (2019:
GBP7,026m) and interest paid by Barclays Bank UK PLC was GBP830m
(2019: GBP1,233m).
As at 31 December 2020, Barclays Bank UK PLC was required to
maintain balances with central banks in respect of interbank
payment schemes of GBP458m (2019: GBP388m).
For the purposes of the cash flow statement, cash comprises cash
on hand and demand deposits and cash equivalents comprise highly
liquid investments that are convertible into cash with an
insignificant risk of changes in value with original maturities of
three months or less. Repurchase and reverse repurchase agreements
are not considered to be part of cash equivalents.
Notes to the financial statements
For the year ended 31 December 2020
This section describes Barclays Bank UK 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.
1 Significant accounting policies
1. Reporting entity
Barclays Bank UK PLC is a public limited company, registered in
England under company number 9740322.
These financial statements are prepared for Barclays Bank UK PLC
and its subsidiaries (the Barclays Bank UK Group) under Section 399
of the Companies Act 2006. The Barclays Bank UK Group is a major UK
financial services provider engaged in retail banking, credit
cards, wholesale banking, wealth management and investment
management services. In addition, separate financial statements
have been presented for the parent company.
2. Compliance with International Financial Reporting
Standards
The consolidated financial statements of the Barclays Bank UK
Group, and the separate financial statements of Barclays Bank UK
PLC, have been prepared in accordance with international accounting
standards in conformity with the requirements of the Company Act
2006 and in accordance with International Financial Reporting
Standards (IFRS) and interpretations (IFRICs) as issued by the IASB
and adopted pursuant to Regulation (EC) No 1606/2002 as it applies
in the European Union. These standards have also been endorsed by
the UK. 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 early adoption of Interest Rate Benchmark Reform -
Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
which was 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 particular financial instruments, to the
extent required or permitted under IFRS as set out in the relevant
accounting policies. They are stated in millions of pounds Sterling
(GBPm), the functional currency of Barclays Bank UK 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 UK 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.
This involved a review of a working capital report (WCR) for the
Group. The WCR is used by the Barclays Bank UK Group and the Board
to assess the future performance of the business and that 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 UK Group's three year medium term plan as well as
projections of future regulatory capital requirements and business
funding needs. The WCR also includes details of the impact of
internally generated stress testing scenarios on the liquidity and
capital requirement forecasts. The stress tests used were based an
assessment of reasonably possible downside economic scenarios that
the Barclays Bank UK Group could experience.
The WCR showed that the Barclays Bank UK Group had sufficient
capital in place to support its future business requirements and
remained above its regulatory minimum requirements in the stress
scenarios. It also showed that the Barclays Bank UK Group has an
expectation that it can continue to meet its funding requirements
during the scenarios. Accordingly, the Board concluded that there
was a reasonable expectation that the Barclays Bank UK 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 UK Group prepares financial statements in
accordance with IFRS. The Barclays Bank UK Group 's significant
accounting policies relating to specific financial statement items,
together with a description of the accounting estimates and
judgements that were critical to preparing them, are set out under
the relevant notes. Accounting policies that affect the financial
statements as a whole are set out below.
(i) Consolidation
The Barclays Bank UK Group applies IFRS 10 Consolidated
financial statements.
The consolidated financial statements combine the financial
statements of Barclays Bank UK PLC and all its subsidiaries.
Subsidiaries are entities over which Barclays Bank UK PLC has
control. The Barclays Bank UK Group has control over another entity
when the Barclays Bank UK 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 UK 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 UK 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.
None of the Barclays Bank UK Group's subsidiaries are
significant in the context of the Barclays Bank UK Group's
business, results or financial position. A complete list of all
subsidiaries is presented in Note 36.
In the individual financial statements of Barclays Bank UK PLC,
investments in subsidiaries are stated at cost less impairment.
(ii) Foreign currency translation
The Barclays Bank UK 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.
(iii) Financial assets and liabilities
The Barclays Bank UK 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 UK Group applies
the requirements of IAS 39 Financial Instruments: Recognition and
Measurement for hedge accounting purposes.
Recognition
The Barclays Bank UK 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 UK 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 UK Group's policies for determining the fair values
of the assets and liabilities are set out in Note 15.
Derecognition
The Barclays Bank UK Group derecognises a financial asset, or a
portion of a financial asset, from its balance sheet where the
contractual rights to cash flows from the asset have expired, or
have been transferred, usually by sale, and with them either
substantially all the risks and rewards of the asset or significant
risks and rewards, along with the unconditional ability to sell or
pledge the asset.
Financial liabilities are de-recognised when the liability has
been settled, has expired or has been extinguished. An exchange of
an existing financial liability for a new liability with the same
lender on substantially different terms - generally a difference of
10% or more in the present value of the cash flows or a substantive
qualitative amendment - is accounted for as an extinguishment of
the original financial liability and the recognition of a new
financial liability.
Transactions in which the Barclays Bank UK 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 UK Group's
exposure to variability in asset cash flows before the transfer
with its retained exposure after the transfer.
A cash flow analysis of this nature may require judgement. In
particular, it is necessary to estimate the asset's expected future
cash flows as well as potential variability around this
expectation. The method of estimating expected future cash flows
depends on the nature of the asset, with market and market-implied
data used to the greatest extent possible. The potential
variability around this expectation is typically determined by
stressing underlying parameters to create reasonable alternative
upside and downside scenarios. Probabilities are then assigned to
each scenario. Stressed parameters may include default rates, loss
severity, or prepayment rates.
Accounting for reverse repurchase and repurchase agreements
including other similar lending and borrowing
Reverse repurchase agreements (and stock borrowing or similar
transaction) are a form of secured lending whereby the Barclays
Bank UK 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 UK Group obtains such loans or cash collateral, in
exchange for the transfer of collateral.
The Barclays Bank UK 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 UK 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 UK 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 UK 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 UK 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 UK Group having an obligation to either deliver cash
or another financial asset, or a variable number of equity shares,
to the holder of the instrument. If this is not the case, the
instrument is generally an equity instrument and the proceeds
included in equity, net of transaction costs. Dividends and other
returns to equity holders are recognised when paid or declared by
the members at the AGM and treated as a deduction from equity.
Where issued financial instruments contain both liability and
equity components, these are accounted for separately. The fair
value of the debt is
estimated first and the balance of the proceeds is included
within equity.
5. New and amended standards and interpretations
The accounting policies adopted are consistent with those of the
previous financial year, with the exception of the early adoption
of Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9,
IAS 39, IFRS 7, IFRS 4 and IFRS 16) which was applied from 1
January 2020.
IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 - Amendments relating
to Interest Rate Benchmark Reform (Phase 2 amendments)
IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 were amended in
August 2020, which are effective for periods beginning on or after
1 January 2021 with earlier adoption permitted. The Barclays Bank
UK Group elected to early adopt the amendments with effect from 1
January 2020. The amendments have been endorsed by the EU and by
the UK.
IFRS 9 allows companies when they first apply IFRS 9, to make an
accounting policy choice to continue to apply the hedge accounting
requirements of IAS 39. The Barclays Bank UK Group made the
election to continue to apply the IAS 39 hedge accounting
requirements, and consequently, the amendments to IAS 39 in respect
of hedge accounting have been adopted by the Barclays Bank UK Group
.
The objective of the amendments is to provide certain reliefs to
companies when changes are made to the contractual cash flows or
hedging relationships resulting from interest rate benchmark
reform. The reliefs adopted by the Barclays Bank UK Group have been
described below.
Changes in the basis for determining contractual cash flows
A change in the basis of determining the contractual cash flows
of a financial instrument that are required by the 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 reform, the practical expedient is applied
first, after which the normal IFRS 9 requirements for modifications
of financial instruments is applied.
Hedge accounting
The IAS 39 requirements in respect of hedge accounting have been
amended in two phases. The Phase 1 amendments, which were adopted
by the Barclays Bank UK Group in 2019, provide relief to the hedge
accounting requirements prior to changing a hedge relationship due
to the interest rate benchmark reform (refer Note 15). The Phase 2
amendments provide relief when changes are made to hedge
relationships as a result of the interest rate benchmark reform.
The Phase 2 amendments adopted by the Barclays Bank UK Group are
described below.
-- Under a temporary exception, 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 UK 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.
-- Amounts accumulated in the cash flow hedge reserve would be deemed
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 entities upon designation of the hedge to assume that the
separately identifiable requirement is met if the entity reasonably
expects the RFR risk will become separately identifiable within
the next 24 months. This relief applies to each RFR on a rate-by-rate
basis and starts when the entity first designates the RFR as a
non-contractually specified risk component.
The amendments to IFRS 7 require certain disclosures to be made
to enable users of financial statements to understand the effect of
interest rate benchmark reform on an entity's financial instruments
and risk management strategy. Refer Note 35 where these disclosures
have been included.
Future accounting developments
The following accounting standards have been issued by the IASB
but are not yet effective.
IFRS 17 - Insurance contracts
In May 2017, the IASB issued IFRS 17 Insurance Contracts, a
comprehensive new accounting standard for insurance contracts
covering recognition and measurement, presentation and disclosure.
Once effective, IFRS 17 will replace IFRS 4 Insurance Contracts
that was issued in 2005.
IFRS 17 applies to all types of insurance contracts (i.e. life,
non-life, direct insurance and re-insurance), regardless of the
type of entities that issue them, as well as to certain guarantees
and financial instruments with discretionary participation
features. A few scope exceptions will apply.
In June 2020, the IASB published amendments to IFRS 17. The
amendments that are relevant to the Barclays Bank UK 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 the
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 amendments to IFRS 17, has not yet been
endorsed by the EU as of the date that the financial statements are
authorised for issue.
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 UK Group is
currently assessing the expected impact of adopting this
standard.
6. Critical accounting estimates and judgements
The preparation of financial statements in accordance with IFRS
requires the use of estimates. It also requires management to
exercise judgement in applying the accounting policies. The key
areas involving a higher degree of judgement or complexity or areas
where assumptions are significant to the consolidated and
individual financial statements are highlighted under the relevant
note. Critical accounting estimates and judgements are disclosed
in:
-- Credit impairment charges on page 139
-- Fair value of financial instruments on page 153
-- Goodwill and intangible assets on page 163
-- Provisions including conduct and legal, competition and regulatory
matters on page 166.
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 page 46 and the tables on pages 53 to 91
-- Market risk on page 48 and the tables on page 104
-- Treasury and capital risk - capital on page 100 and the tables
on pages 100 to 103
-- Treasury and capital risk - liquidity on page 93 and the tables
on pages 93 to 99 .
These disclosures are covered by the Audit opinion (included on
pages 115 to 123 ) where referenced as audited.
Financial performance/return
The notes included in this section focus on the results and
performance of the Barclays Bank UK Group. Information on the
income generated, expenditure incurred, segmental performance, tax
and dividends are included here.
2 Segmental reporting
Presentation of segmental reporting
The Barclays Bank UK 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.
For segmental reporting purposes, the Barclays Bank UK Group
divisions are defined as:
-- Personal Banking which comprises Personal and Premier banking,
Mortgages, Savings, Investments and Wealth management.
-- Barclaycard Consumer UK which comprises the Barclaycard UK consumer
credit cards business.
-- Business Banking which offers products, services and specialist
advice to clients ranging from start-ups to medium-sized businesses
and is where the ESHLA loan portfolio is held.
The below table also includes Head Office which includes central
support functions.
Analysis of results by business
-------------------------------------------------------------- --------- -------- ----------
Barclaycard Barclays
Personal Consumer Business Head Bank
Banking UK Banking Office UK Group
GBPm GBPm GBPm GBPm GBPm
------------------------------------- ---------- ----------- --------- -------- ----------
For the year ended 31 December
2020
Total income 3,649 1,528 1,308 (61) 6,424
Credit impairment (charges) (340) (881) (206) - (1,427)
------------------------------------- ---------- ----------- --------- -------- ----------
Net operating income/(expenses) 3,309 647 1,102 (61) 4,997
Operating costs (3,262) (530) (766) (45) (4,603)
Litigation and conduct (62) 38 (7) (12) (43)
------------------------------------- ---------- ----------- --------- -------- ----------
Total operating expenses (3,324) (492) (773) (57) (4,646)
Other net income 16 - - - 16
------------------------------------- ---------- ----------- --------- -------- ----------
Profit/(loss) before tax 1 155 329 (118) 367
------------------------------------- ---------- ----------- --------- -------- ----------
Total assets GBP201.0bn GBP10.6bn GBP75.8bn GBP0.1bn GBP287.5bn
------------------------------------- ---------- ----------- --------- -------- ----------
Number of employees (full time
equivalent)(a) 18,500 100 2,700 200 21,500
------------------------------------- ---------- ----------- --------- -------- ----------
Average number of employees (full
time equivalent) 21,800
------------------------------------- ---------- ----------- --------- -------- ----------
For the year ended 31 December
2019
Total income 4,112 1,997 1,361 (148) 7,322
Credit impairment (charges)/releases (196) (472) (45) 4 (709)
------------------------------------- ---------- ----------- --------- -------- ----------
Net operating income/(expenses) 3,916 1,525 1,316 (144) 6,613
Operating costs (3,036) (585) (717) (20) (4,358)
Litigation and conduct (705) (876) (2) (3) (1,586)
------------------------------------- ---------- ----------- --------- -------- ----------
Total operating expenses (3,741) (1,461) (719) (23) (5,944)
------------------------------------- ---------- ----------- --------- -------- ----------
Profit/(loss) before tax 175 64 597 (167) 669
------------------------------------- ---------- ----------- --------- -------- ----------
Total assets (GBPbn) GBP187.3bn GBP16.1bn GBP55.0bn - GBP258.4bn
------------------------------------- ---------- ----------- --------- -------- ----------
Number of employees (full time
equivalent)(a) 17,800 500 3,100 200 21,600
------------------------------------- ---------- ----------- --------- -------- ----------
Average number of employees (full
time equivalent) 22,000
------------------------------------- ---------- ----------- --------- -------- ----------
Note
a Barclays Bank UK Group has transformed its business this year and
consolidated several teams into centres of excellence in our Personal
Banking segment, to better service our customers and create efficiencies.
Costs are recharged to the other segments, while full time equivalent
(FTE) are reported within Personal Banking. As a result, fewer
FTE are reported in Barclaycard Consumer UK and Business Banking.
Income by geographic region
The Barclays Bank UK Group generates income from business
activities in the United Kingdom.
4 Net fee and commission income
Accounting for net fee and commission income
The Barclays Bank UK 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 UK 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 UK Group recognises fee and commission income
charged for services provided by the Barclays Bank UK Group as the
services are provided, for example, on completion of the underlying
transaction. Where the contractual arrangements also result in the
Barclays Bank UK 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.
2020
-------------------------------------------------------------------------------
Barclaycard
Personal Consumer Business
Banking UK Banking Head Office Total
GBPm GBPm GBPm GBPm GBPm
------------------------------------- ---------------- ----------------------- ---------------- ----------- -----
Fee type
Transactional 586 97 127 - 810
Advisory 159 - - - 159
Other 258 8 140 - 406
------------------------------------- ---------------- ----------------------- ---------------- ----------- -----
Total revenue from contracts with
customers 1,003 105 267 - 1,375
Other non-contract fee income - - - - -
------------------------------------- ---------------- ----------------------- ---------------- ----------- -----
Fee and commission income 1,003 105 267 - 1,375
------------------------------------- ---------------- ----------------------- ---------------- ----------- -----
Fee and commission expense (276) (23) (11) - (310)
------------------------------------- ---------------- ----------------------- ---------------- ----------- -----
Net fee and commission income 727 82 256 - 1,065
------------------------------------- ---------------- ----------------------- ---------------- ----------- -----
2019
-------------------------------------------------------------------------------
Personal Banking Barclaycard Consumer UK Business Banking Head Office Total
GBPm GBPm GBPm GBPm GBPm
------------------------------------- ---------------- ----------------------- ---------------- ----------- -----
Fee type
Transactional 706 208 160 - 1,074
Advisory 177 - - - 177
Other 260 5 158 - 423
------------------------------------- ---------------- ----------------------- ---------------- ----------- -----
Total revenue from contracts with
customers 1,143 213 318 - 1,674
Other non-contract fee income - - - - -
------------------------------------- ---------------- ----------------------- ---------------- ----------- -----
Fee and commission income 1,143 213 318 - 1,674
------------------------------------- ---------------- ----------------------- ---------------- ----------- -----
Fee and commission expense (322) (31) (15) - (368)
------------------------------------- ---------------- ----------------------- ---------------- ----------- -----
Net fee and commission income 821 182 303 - 1,306
------------------------------------- ---------------- ----------------------- ---------------- ----------- -----
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 UK Group incurs certain card related costs
including those related to cardholder reward programmes. 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 customer that continuously carry an outstanding balance
(revolvers) are included in the effective interest rate of the
receivable (refer to Note 3).
Advisory
Advisory fees are generated from wealth management services.
Wealth management advisory are earned over the period the services
are provided and are generally recognised quarterly when the market
value of client assets is determined.
Contract assets and contract liabilities
The Barclays Bank UK Group had no material contract assets or
contract liabilities as at 31 December 2020 (2019: nil).
Impairment of fee receivables and contract assets
During 2020, there have been no material impairments recognised
in relation to fees receivable and contract assets (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 UK 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 UK 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 UK Group expects that incremental costs of
obtaining a contract such as success fee and commission fees paid
are recoverable and therefore capitalised such contract costs in
the amount of GBP6m at 31 December 2020 (2019: GBP6m).
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 2020, the amount of
amortisation was GBP1m (2019: GBP1m) and there was no impairment
loss recognised in connection with the capitalised contract costs
(2019: nil).
10 Dividends on ordinary shares
The 2020 financial statements include GBP220m (2019: GBP1,050m)
of dividend paid. This is the final dividend declared in relation
to the prior year of GBP220m (2019: GBP700m) and half year
dividends of GBPnil (2019: GBP350m). This results in a total
dividend for the year of 44p (2019: 208p) per ordinary share. A
dividend of GBP220m was paid on 25 March 2020 by Barclays Bank UK
PLC to its parent Barclays PLC. This was prior to the announcement
made by the PRA on 31 March 2020 that capital be preserved for use
in serving Barclays customers and clients through the extraordinary
challenges presented by the Covid-19 pandemic. As part of a
response to this announcement, Barclays PLC took steps to provide
additional capital of GBP220m to Barclays Bank UK PLC in the form
of a capital contribution. No full year 2020 dividend is to be paid
to Barclays PLC.
Dividends paid on other equity instruments amounted to GBP180m
(2019: GBP153m). For further detail on other equity instruments,
please refer to Note 26.
Assets and liabilities held at fair value
15 Fair value of financial instruments
Accounting for financial assets and liabilities - fair
values
Financial instruments that are held for trading are recognised
at fair value through profit or loss. In addition, financial assets
are held at fair value through profit or loss if they do not
contain contractual terms that give rise on specified dates to cash
flows that are SPPI, or if the financial asset is not held in a
business model that is either (i) a business model to collect the
contractual cash flows or (ii) a business model that is achieved by
both collecting contractual cash flows and selling. Subsequent
changes in fair value for these instruments are recognised in the
income statement in net investment income, except if reporting it
in trading income reduces an accounting mismatch.
All financial instruments are initially recognised at fair value
on the date of initial recognition (including transaction costs,
other than financial instruments held at fair value through profit
or loss) and depending on the subsequent classification of the
financial asset or liability, may continue to be held at fair value
either through profit or loss or other comprehensive income. The
fair value of a financial instrument is the price that would be
received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement
date.
Wherever possible, fair value is determined by reference to a
quoted market price for that instrument. For many of the Barclays
Bank UK Group's financial assets and liabilities for which quoted
prices are not available, 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 and currency rates.
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 156.
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.
The following table shows Barclays Bank UK Group's assets and
liabilities that are held at fair value disaggregated by valuation
technique (fair value hierarchy) and balance sheet
classification:
Assets and liabilities held at fair value
---------------------------------------------- ---------------------------------- ----------------------------------
2020 2019
---------------------------------- ----------------------------------
Valuation technique using Valuation technique using
---------------------------------- ----------------------------------
Barclays Bank UK Group Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
As at 31 December GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------------------- ------- ------- ------- ------- ------- ------- ------- -------
Trading portfolio assets 52 246 - 298 384 476 - 860
Financial assets at fair value through the
income statement - 130 3,302 3,432 - 38 3,533 3,571
Derivative financial assets - 550 - 550 - 192 - 192
Financial assets at fair value through other
comprehensive income 6,887 19,139 - 26,026 6,162 13,160 - 19,322
---------------------------------------------- ------- ------- ------- ------- ------- ------- ------- -------
Total assets 6,939 20,065 3,302 30,306 6,546 13,866 3,533 23,945
---------------------------------------------- ------- ------- ------- ------- ------- ------- ------- -------
Trading portfolio liabilities (1,060) (205) - (1,265) (1,331) (373) - (1,704)
Derivative financial liabilities - (880) - (880) - (740) - (740)
---------------------------------------------- ------- ------- ------- ------- ------- ------- ------- -------
Total liabilities (1,060) (1,085) - (2,145) (1,331) (1,113) - (2,444)
---------------------------------------------- ------- ------- ------- ------- ------- ------- ------- -------
The following table shows Barclays Bank UK PLC's assets and
liabilities that are held at fair value disaggregated by valuation
technique (fair value hierarchy) and balance sheet
classification:
Assets and liabilities held at fair value
---------------------------------------------- ---------------------------------- ----------------------------------
2020 2019
---------------------------------- ----------------------------------
Valuation technique using Valuation technique using
---------------------------------- ----------------------------------
Barclays Bank UK PLC Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
As at 31 December GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------------------- ------- ------- ------- ------- ------- ------- ------- -------
Trading portfolio assets 52 246 - 298 384 476 - 860
Financial assets at fair value through the
income statement - 130 3,302 3,432 - 38 3,533 3,571
Derivative financial assets - 550 - 550 - 193 - 193
Financial assets at fair value through other
comprehensive income 6,887 19,139 - 26,026 6,162 13,160 - 19,322
---------------------------------------------- ------- ------- ------- ------- ------- ------- ------- -------
Total assets 6,939 20,065 3,302 30,306 6,546 13,867 3,533 23,946
---------------------------------------------- ------- ------- ------- ------- ------- ------- ------- -------
Trading portfolio liabilities (1,060) (205) - (1,265) (1,331) (373) - (1,704)
Derivative financial liabilities - (880) - (880) - (740) - (740)
---------------------------------------------- ------- ------- ------- ------- ------- ------- ------- -------
Total liabilities (1,060) (1,085) - (2,145) (1,331) (1,113) - (2,444)
---------------------------------------------- ------- ------- ------- ------- ------- ------- ------- -------
Level 3 movement analysis
The following table summarises the movements in the Level 3
balances during the period. Transfers have been reflected as if
they had taken place at the beginning of the year.
Asset transfer between Level 3 and Level 2 is due to an increase
in observable market activity related to an input.
Analysis of movements in Level 3 assets and
liabilities
----------------------------------------------- ----------- --------- ---------- ---------- ---- ----- --------
Total gains and
losses in the period
recognised in the
income statement Transfers
--------------------- -----------
Total
gains or
As at 1 losses As at 31
January Trading Other recognised December
2020 Purchases Sales Issues Settlements income(a) income in OCI In Out 2020
Barclays
Bank UK
Group and
PLC GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------- --------- --------- ----- ------ ----------- --------- ---------- ---------- ---- ----- --------
Non-asset
backed
loans 3,530 - - - (413) 284 - - - (100) 3,301
Other 3 4 - - (6) - - - - - 1
---------- --------- --------- ----- ------ ----------- --------- ---------- ---------- ---- ----- --------
Financial
assets at
fair
value
through
the
income
statement 3,533 4 - - (419) 284 - - - (100) 3,302
---------- --------- --------- ----- ------ ----------- --------- ---------- ---------- ---- ----- --------
As at 1 As at 31
January December
2019 2019
GBPm GBPm
---------- --------- --------- ----- ------ ----------- --------- ---------- ---------- ---- ----- --------
Non-asset
backed
loans 3,852 - - - (551) 244 - - - (15) 3,530
Other - 3 - - - - - - - - 3
---------- --------- --------- ----- ------ ----------- --------- ---------- ---------- ---- ----- --------
Financial
assets at
fair
value
through
the
income
statement 3,852 3 - - (551) 244 - - - (15) 3,533
---------- --------- --------- ----- ------ ----------- --------- ---------- ---------- ---- ----- --------
Note
a Trading income represents gains on Level 3 financial assets
which is offset by losses on derivative hedge disclosed within
Level 2.
Non-asset backed loans
Description: Largely made up of fixed rate loans, extended to
counterparties in the Education, Social Housing and Local Authority
sectors.
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.
Level 3 sensitivity: The sensitivity of fixed rate loans is
calculated by applying a shift to loan spreads, aligned to the
prudent valuation framework for calculating market data uncertainty
around an unobservable valuation input. The prudent valuation
framework additionally requires Barclays Bank UK plc to be
capitalised to 33% (temporarily reduced from 50% until year-end
2020) of the impact of such valuation uncertainty being realised in
the income statement. On a portfolio level, the sensitivity is
equivalent to an averages stress to the input loan spread of
52bp.
Unrealised gains and losses on Level 3 financial assets and
liabilities
The following tables disclose the unrealised gains and losses
recognised in the year arising on Level 3 financial assets and
liabilities held at year end.
Unrealised gains and losses recognised during the period on Level 3 assets and liabilities
held at year end
======================================================================================================================
Barclays Bank
UK Group and
PLC 2020 2019
================================================== ==================================================
Income statement Income statement
============================ ============================
Other
Other compre- compre-
hensive hensive
Trading income Other income income Total Trading income Other income income Total
As at 31
December GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- -------------- ------------ ------------- ----- -------------- ------------ ------------- -----
Financial
assets at
fair value
through the
income
statement 284 - - 284 244 - - 244
-------------- -------------- ------------ ------------- ----- -------------- ------------ ------------- -----
Total 284 - - 284 244 - - 244
-------------- -------------- ------------ ------------- ----- -------------- ------------ ------------- -----
2020 2019
Range Range
----------------------- -------------------------------- ---------- ---------- --------
Valuation technique(s) Significant unobservable inputs Min Max Min Max Units(a)
----------------------- ----------------------- -------------------------------- --- ----- --- ----- --------
Non-asset backed loans Discounted cash flows Loan spread 31 1,518 31 1,884 bps
----------------------- ----------------------- -------------------------------- --- ----- --- ----- --------
Note
a The units used to disclose ranges for significant unobservable inputs are percentages, points
and basis points. Points are a percentage of par; for example, 100 points equals 100% of par.
A basis point equals 1/100th of 1%; for example, 150 basis points equals 1.5%.
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.
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 low
credit risk, and have a history of near zero defaults since
inception and where Barclays is often afforded a position as a
secured creditor. While the overall loan spread range is from 31bps
to 1,518bps (2019: 31bps to 1,844bps), the vast majority of spreads
are concentrated towards the bottom end of this range, with 96% of
the loan notional being valued with spreads less than 200bps
consistently for both years.
In general, a significant increase in loan spreads in isolation
will result in a fair value decrease for a loan.
Sensitivity analysis of valuations using unobservable inputs
================================================================= ================== ====================
2020 2019
---------------------------------------- ----------------------------------------
Favourable changes Unfavourable changes Favourable changes Unfavourable changes
------------------ -------------------- ------------------ --------------------
GBPm GBPm GBPm GBPm
----------------------- ------------------ -------------------- ------------------ --------------------
Non asset backed loans 86 (220) 89 (264)
----------------------- ------------------ -------------------- ------------------ --------------------
Total 86 (220) 89 (264)
----------------------- ------------------ -------------------- ------------------ --------------------
The effect of stressing unobservable inputs to a 90th percentile
confidence interval of a potential range of values, alongside
considering the impact of using alternative models, would be to
increase fair values by up to GBP86m (2019: GBP89m) or to decrease
fair values by up to GBP220m (2019: GBP264m). All the potential
effect would impact profit and loss. The asymmetry in the
favourable and unfavourable changes in the sensitivity analysis is
attributable to Investing and Funding costs with the prudential
valuation framework contributing to the unfavourable side only.
Portfolio exemptions
The Barclays Bank UK 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, the
Barclays Bank UK 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 GBP13m (2019:
GBP13m) for financial instruments measured at fair value and
GBP217m (2019: GBP224m) for financial instruments carried at
amortised cost. The decrease in financial investments measured at
fair value of GBPnil (2019: GBP1m) was driven by amortisation and
releases of GBP2m (2019: GBP1m) offset by additions of GBP2m (2019:
GBPnil). The decrease of GBP7m (2019: GBP7m) in financial
instruments carried at amortised cost is driven by amortisation and
releases of GBP12m (2019: GBP12m) offset by additions of GBP5m
(2019: GBP5m).
Comparison of carrying amounts and fair values:
The following tables summarise the fair value of financial
assets and liabilities measured at amortised cost on Barclays Bank
UK Group's and Barclays Bank UK PLC's balance sheet:
Barclays Bank
UK Group 2020 2019
-------------------------------------------------- ---------------------------------------------------
Carrying Fair Carrying
amount value Level 1 Level 2 Level 3 amount Fair value Level 1 Level 2 Level 3
As at 31
December GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------- --------- --------- --------- -------- ------- --------- ---------- --------- -------- -------
Financial
assets
Loans and
advances at
amortised
cost 211,649 209,612 - 22,816 186,796 197,569 196,342 1,925 6,661 187,756
Reverse
repurchase
agreements
and other
similar
secured
lending 133 133 - 133 - 1,761 1,761 - 1,761 -
Financial
liabilities
Deposits at
amortised
cost (240,535) (240,555) (230,238) (8,268) (2,049) (205,696) (205,701) (191,931) (3,956) (9,814)
Repurchase
agreements
and other
similar
secured
borrowing (7,178) (7,178) - (7,178) - (13,420) (13,420) - (13,420) -
Debt
securities
in issue (7,503) (7,897) - (7,897) - (8,271) (8,644) - (8,151) (493)
Subordinated
liabilities (9,869) (10,344) - (10,344) - (7,688) (8,022) - (8,022) -
------------- --------- --------- --------- -------- ------- --------- ---------- --------- -------- -------
Barclays Bank
UK PLC 2020 2019
-------------------------------------------------- ---------------------------------------------------
Carrying Fair Carrying
amount value Level 1 Level 2 Level 3 amount Fair value Level 1 Level 2 Level 3
As at 31
December GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------- --------- --------- --------- -------- ------- --------- ---------- --------- -------- -------
Financial
assets
Loans and
advances at
amortised
cost 212,033 210,000 - 23,202 186,798 197,960 196,739 1,959 7,548 187,232
Reverse
repurchase
agreements
and other
similar
secured
lending 133 133 - 133 - 1,761 1,761 - 1,761 -
Financial
liabilities
Deposits at
amortised
cost (241,091) (241,119) (230,245) (8,825) (2,049) (206,764) (206,768) (191,931) (5,023) (9,814)
Repurchase
agreements
and other
similar
secured
borrowing (7,178) (7,178) - (7,178) - (13,420) (13,420) - (13,420) -
Debt
securities
in issue (7,503) (7,897) - (7,897) - (7,778) (8,151) - (8,151) -
Subordinated
liabilities (9,869) (10,344) - (10,344) - (7,688) (8,022) - (8,022) -
------------- --------- --------- --------- -------- ------- --------- ---------- --------- -------- -------
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 17.
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.
Accruals, provisions, contingent liabilities and legal
proceedings
25 Subordinated liabilities
Accounting for subordinated liabilities
Subordinated liabilities are measured at amortised cost using
the effective interest method under IFRS 9.
Barclays Bank UK Group and PLC
--------------------------------
2020 2019
GBPm GBPm
------------------ ------------------ ------------
As at 1 January 7,688 7,548
Issuances 3,694 157
Redemption (1,425) -
Other (88) (17)
------------------ ------------------ ------------
As at 31 December 9,869 7,688
------------------ ------------------ ------------
Issuances of GBP3,694m comprise GBP2,412m intra-group loans from
Barclays PLC and GBP1,282m intra-group notes to Barclays PLC.
Redemptions of GBP1,425m comprise GBP1,124m EUR 2.625% Fixed
Rate Subordinated Callable Notes issued to Barclays PLC and a
GBP301m partial redemption of 1.875% Fixed Rate Subordinated Loan
from Barclays PLC
Other movements predominantly include foreign exchange
movements, partially offset by fair value hedge adjustments.
Barclays Bank UK Group and PLC(a)
-----------------------------------
2020 2019
Initial call date Maturity date GBPm GBPm
--------------------------------------------- ------------------ -------------- ----------------- ----------------
Barclays Bank UK PLC notes issued intra-group
to Barclays PLC
2.625% Fixed Rate Subordinated Callable Notes
(EUR 1,250m) 2020 2025 - 1,071
4.375% Fixed Rate Subordinated Notes (USD 1,250m) 2024 999 994
3.75% Fixed Rate Resetting Subordinated
Callable Notes (GBP 500m) 2025 2030 503 -
5.20% Fixed Rate Subordinated Notes (USD 683m) 2026 532 516
4.836% Fixed Rate Subordinated Callable Notes
(USD 800m) 2027 2028 650 629
5.088% Fixed-to-Floating Rate Subordinated
Callable Notes (USD 200m) 2029 2030 161 154
3.564% Fixed Rate Resetting Subordinated
Callable Notes (USD 1,000m) 2030 2035 718 -
Barclays Bank UK PLC intra-group loans from
Barclays PLC
3.20% Fixed Rate Subordinated Loan (USD 1,350m) 2021 1,006 1,025
3.65% Fixed Rate Subordinated Loan (USD 1,100m) 2025 874 861
Various Fixed and Floating Rate Subordinated Loans 4,429 2,438
--------------------------------------------------------------------------------- ----------------- ----------------
Total subordinated liabilities 9,869 7,688
--------------------------------------------------------------------------------- ----------------- ----------------
Note
a Instrument values are disclosed to the nearest million.
Subordinated liabilities
Subordinated liabilities are issued by Barclays Bank UK PLC for
the development and expansion of the business and to strengthen the
capital base. The principal terms of these liabilities are
described below:
Currency and Maturity
In addition to the individual subordinated liabilities listed in
the table, the GBP4,429m (2019: GBP2,438m) balance of intra-group
loans is made up of various fixed, fixed-to-floating and floating
rate loans from Barclays PLC with notional amounts denominated in
USD 4,577m, EUR 1,000m and GBP 400m, with maturities ranging from
2021 to 2041. Certain intra-group loans have a call date one year
prior to their maturity.
Subordination
All subordinated liabilities are issued intra-group to Barclays
PLC. Both the subordinated notes and the subordinated loans rank
behind the claims of depositors and other unsecured unsubordinated
creditors but before the claims of the holders of Barclays Bank UK
PLC equity. However, the subordinated notes rank behind the
subordinated loans.
Interest
Interest on the floating rate loans is set by reference to
market rates at the time of issuance and is fixed periodically in
advance, based on the related market rate.
Interest on fixed rate notes and loans is set by reference to
market rates at the time of issuance and fixed until maturity.
Interest on fixed rate callable notes and loans is set by
reference to market rates at the time of issuance and fixed until
the call date. After the call date, in the event that the notes or
loans are not redeemed, the interest rate will be re-set to either
a fixed or floating rate until maturity based on market rates.
Repayment
Those notes and loans with a call date are repayable at the
option of the Issuer, on conditions governing the respective
liabilities, some in whole or in part, and some only in whole. The
remaining instruments outstanding at 31 December 2020 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.
In certain cases, any repayments prior to maturity may require
the prior consent of the PRA or BoE.
There are no committed facilities in existence at the balance
sheet date which permit the refinancing of debt beyond the date of
maturity.
26 Ordinary shares, share premium, and other equity
Called up share
capital, allotted
and fully paid
------------------- ---------------- ------------------ ------------------- ------------------ ------------------
Total share
Ordinary share Ordinary share capital and share Other equity
Number of shares capital premium premium instruments
m GBPm GBPm GBPm GBPm
------------------- ---------------- ------------------ ------------------- ------------------ ------------------
As at 1 January
2020 505 5 - 5 2,560
AT1 securities
issuance - - - - -
AT1 securities
redemption - - - - -
As at 31 December
2020 505 5 - 5 2,560
------------------- ---------------- ------------------ ------------------- ------------------ ------------------
As at 1 January
2019 505 5 - 5 2,070
AT1 securities
issuance - - - - 1,188
AT1 securities
redemption - - - - (698)
------------------- ---------------- ------------------ ------------------- ------------------ ------------------
As at 31 December
2019 505 5 - 5 2,560
------------------- ---------------- ------------------ ------------------- ------------------ ------------------
Ordinary shares
The issued ordinary share capital of Barclays Bank UK PLC, as at
31 December 2020, comprised 505m (2019: 505m) ordinary shares of
GBP0.01 each.
Other equity instruments
Other equity instruments of GBP2,560m (2019: GBP2,560m) include
AT1 securities issued to Barclays PLC. Barclays PLC uses funds from
its own market issuance of AT1 securities to purchase AT1
securities from Barclays Bank UK 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 2020, there were no issuances of AT1 instruments (2019: two
issuances, totalling GBP1,188m) and no redemptions (2019: one
redemption, totalling GBP698m).
AT1 equity instruments
---------------------------------------------------------------- --------------------------------
2020 2019
Initial call date GBPm GBPm
---------------------------------------------------------------- ------------------ ----- -----
AT1 equity instruments - Barclays Bank UK Group
7.25% Perpetual Subordinated Contingent Convertible Securities 2023 750 750
5.875% Perpetual Subordinated Contingent Convertible Securities 2024 622 622
7.125% Perpetual Subordinated Contingent Convertible Securities 2025 693 693
6.375% Perpetual Subordinated Contingent Convertible Securities 2025 495 495
---------------------------------------------------------------- ------------------ ----- -----
Total AT1 equity instruments 2,560 2,560
------------------------------------------------------------------------------------ ----- -----
27 Reserves
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.
Other reserves and other shareholders' equity
Other reserves and other shareholders' equity relate to the
merger reserve for Barclays Bank UK Group and the Group
Reconstruction Relief for Barclays Bank UK PLC, in respect of the
transfer of the UK banking business in 2018.
Barclays Bank UK Group Barclays Bank UK PLC
------------------------ ----------------------
2020 2019 2020 2019
GBPm GBPm GBPm GBPm
------------------------------------------------------ ----------- ----------- ---------- ----------
Fair value through other comprehensive income reserve 43 (29) 43 (29)
Cash flow hedging reserve 341 123 341 123
Other reserves and other shareholders' equity 89 89 191 191
------------------------------------------------------ ----------- ----------- ---------- ----------
Total 473 183 575 285
------------------------------------------------------ ----------- ----------- ---------- ----------
Notes
The term Barclays Bank UK Group refers to Barclays Bank UK PLC
together with its subsidiaries. Unless otherwise stated, the income
statement analysis compares the year ended 31 December 2020 to the
corresponding twelve months of 2019 and balance sheet analysis as
at 31 December 2020 with comparatives relating to 31 December 2019.
The abbreviations 'GBPm' and 'GBPbn' represent millions and
thousands of millions of Pounds Sterling respectively.
There are a number of key judgement areas, for example
impairment calculations, which are based on models and which are
subject to ongoing adjustment and modifications. Reported numbers
reflect best estimates and judgements at the given point in
time.
Relevant terms that are used in this document but are not
defined under applicable regulatory guidance or International
Financial Reporting Standards (IFRS) are explained in the results
glossary that can be accessed at
home.barclays/investor-relations/reports-and-events/latest-financial-results.
The information in this announcement, which was approved by the
Board of Directors on 00 February 2021, does not comprise statutory
accounts within the meaning of Section 434 of the Companies Act
2006. Statutory accounts for the year ended 31 December 2020, which
contain an unmodified audit report under Section 495 of the
Companies Act 2006 (which does not make any statements under
Section 498 of the Companies Act 2006), will be delivered to the
Registrar of Companies in accordance with Section 441 of the
Companies Act 2006.
Barclays Bank UK Group is an issuer in the debt capital markets
and meets with investors via formal road-shows and other ad hoc
meetings. Consistent with its usual practice, Barclays Bank UK
Group expects that from time to time over the coming half year it
will meet with investors to discuss these results and other matters
relating to the Barclays Bank UK Group.
Forward-looking statements
This document contains certain forward-looking statements with
respect to the Barclays Bank UK Group. Barclays Bank UK 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 UK 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 UK Group's future financial
position, income growth, assets, impairment charges, provisions,
business strategy, capital, leverage and other regulatory ratios,
capital distributions (including dividend payout ratios and
expected payment strategies), projected levels of growth in the
banking and financial markets, projected costs or savings, any
commitments and targets, estimates of capital expenditures, plans
and objectives for future operations, projected employee numbers,
IFRS impacts and other statements that are not historical fact. By
their nature, forward-looking statements involve risk and
uncertainty because they relate to future events and circumstances.
The forward-looking statements speak only as at the date on which
they are made. Forward-looking statements may be affected by:
changes in legislation; the development of standards and
interpretations under IFRS, including evolving practices with
regard to the interpretation and application of accounting and
regulatory standards; the outcome of current and future legal
proceedings and regulatory investigations; future levels of conduct
provisions; the policies and actions of governmental and regulatory
authorities; the Barclays Bank UK Group's ability along with
government and other stakeholders to manage and mitigate the
impacts of climate change effectively; 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; macroeconomic and business conditions in the UK and any
systemically important economy which impacts the UK; 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 UK
Group or any securities issued by such entities; 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; the risk of
cyber-attacks, information or security breaches or technology
failures on the Barclays Bank UK Group's 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 UK Group's control. As a result, the
Barclays Bank UK 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 may differ materially from the statements or guidance set
forth in the Barclays Bank UK Group's forward-looking
statements.
Subject to our obligations under the applicable laws and
regulations of any relevant jurisdiction, (including, without
limitation, the UK), in relation to disclosure and ongoing
information, we undertake no obligation to update publicly or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
For further information, please contact:
Investor Relations Media Relations
Chris Manners Tom Hoskin
+44 (0) 20 7773 2136 +44 (0) 20 7116 4755
About Barclays
Barclays is a British universal bank. We are diversified by
business, by different types of customer and client, and geography.
Our businesses include consumer banking and payments operations
around the world, as well as a top-tier, full service, global
corporate and investment bank, all of which are supported by our
service company which provides technology, operations and
functional services across the Group.
For further information about Barclays, please visit our website
www.barclays.com
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