# Barclays PLC ## Annual Report 2017 Positioned for growth, sharing and success --- ## About this report ### Where we can find out more You can learn about Barclays’ strategy, our businesses and performance, approach to governance and risk online, where latest and archived Annual and Strategic Reports are available to view or download. For further information and a fuller understanding of the results and the state of affairs of the Group, please refer to the full Barclays PLC Annual Report 2017 suite of documents at [home.barclays/annualreport](http://home.barclays/annualreport) * **Barclays PLC Annual Report**: Our Governance, our Risks and our Financials * **Strategic Report**: An overview of the business * **Environmental Social Governance Report**: Our shared growth ambition * **Country Snapshot**: Our tax contributions * **Pillar 3 Report**: Our Risk profile and how we manage it Barclays PLC Annual Report was approved by the Board of Directors on 21 February 2018 and signed on its behalf by the Chairman. Details on how to obtain a copy of the full Barclays PLC Annual Report 2017 can be found in the Shareholder information section. **Notes, Non-IFRS performance measures and forward looking statements** Barclays management believes that the non-IFRS performance measures included in this document provide valuable information to the readers of the financial statements. This document also contains certain forward-looking statements within the meaning of Section 21E of the US Securities Exchange Act of 1934, as amended, and Section 27A of the US Securities Act of 1933, as amended, with respect to the Group. For further details on Notes, non-IFRS performance measures, and forward-looking statements used within this document, please see the back cover. **Report of the Auditor** The Auditor’s report on the full accounts for the year ended 31 December 2017 was unqualified, and their statement under section 496 (whether the Strategic Report and the Directors’ report are consistent with the accounts) of the Companies Act 2006 was unqualified. **Approach to non-financial performance reporting** We note the requirements under the provisions of the Companies Act 2006, relating to the preparation of the Strategic Report which have been amended by the Companies, Partnerships and Groups (Accounts and Non-Financial Reporting) Regulations 2016, which implements EU Directive 2014/95/EU (on non-financial and diversity information). As a result of these changes, we have integrated the information required for a Non-Financial Information Statement into the Strategic Report, thereby promoting cohesive reporting of non-financial matters. --- ## The Strategic Report An overview of our 2017 performance, a focus on our strategic direction, and a review of the businesses underpinning our strategy. ### Strategic framework 02 Chairman’s letter 04 Chief Executive’s review 06 Operating environment 08 Business structure 09 Our business model 10 Our strategy 12 Risk management 15 Key performance indicators ### A review of our performance 23 Barclays UK 26 Personal Banking 27 Barclaycard Consumer UK 28 Wealth, Entrepreneurs and Business Banking 29 Barclays International 32 Corporate and Investment Bank 33 Consumer, Cards and Payments 35 Head Office and Group Service Company ### An overview of governance and financial performance 36 Our people and culture 38 Governance compliance 40 Viability statement ## The Detailed Report Within the Annual Report, these disclosures inform of Barclays 2017 performance. The content meets, and where insightful, goes beyond minimal regulatory reporting standards. ### Governance 43 Governance contents 44 Directors’ report 89 People 93 Remuneration report ### Risk review 117 Risk review contents 119 Risk management 121 Material existing and emerging risks 127 Principal Risk management 138 Risk performance 197 Supervision and regulation ### Financial review 205 Financial review contents 206 Key performance indicators 208 Consolidated summary income statement 209 Income statement commentary 210 Consolidated summary balance sheet 211 Balance sheet commentary 212 Analysis of results by business 223 Non-IFRS performance measures ### Financial statements 227 Financial statements contents 234 Consolidated financial statements 241 Notes to the financial statements 323 Shareholder information --- ## Chairman’s letter ### Dear Fellow Shareholders While a number of challenges remain, the launch of the ring-fenced bank expected at the beginning of April this year largely draws a line on large-scale restructuring, and we look forward to a more traditional business pattern, including the return to a more normal dividend pattern. As I indicated last year, Barclays is one of the largest restructuring situations in bank history. While this was partly a consequence of the Global Financial Crisis, it was also partly a consequence of the doubling of the balance sheet and the seven-fold increase in derivatives across 2007 and 2008, immediately prior to the full onset of the Global Financial Crisis. This, together with the subsequent designation of the Group as globally systemic, and the consequent more than doubling of minimum regulatory capital ratios, meant the need substantially to re-capitalise the Group, and resulted in a considerable proportion of our portfolio becoming economically non-viable in the post-crisis environment. The consequent recapitalisation involved the urgent raising of capital in 2008 (now the subject of charges by the Serious Fraud Office), a substantial reduction in capital and balance sheet usage, and the disposal of a considerable portion of our international network. Since the crisis, we have refocused the business, halving the balance sheet by £1trn and the staff by some 80,000, through the disposal of Non-Core assets. We are also creating a new UK ring-fenced bank from scratch, resolving and continuing to resolve multiple large legacy conduct matters, as well as preparing the Group for Brexit. The enormous impact all of this has had on the business, the Board and management, is a sobering lesson. Over the past six years, reasonable underlying operating profits have been fully eroded in the process. Over this period, we saw £15.1bn in litigation and conduct charges, £2.4bn in bank levies, £10.1bn in losses from Non-Core, a £2.5bn loss from the sell down of Barclays Africa, and £7.1bn in taxes (at an average rate of 65%). All of this, totalling £35.6bn over the six years, resulted in an aggregate attributable loss of £1.0bn over the same period. Imagine if all the underlying profits had gone to shareholders and to investment in growth. Clearly, shareholders would prefer we declared higher dividends, but it should be remembered over the same period, we paid £5bn in dividends out of negative attributable profits. While the bulk of our historical challenges are behind us, we do continue to face some residual challenges. These include the historical residential mortgage backed securities matter in the US, the Serious Fraud Office prosecution in the UK as well as the consequence of Brexit. This said, depending on their scale and pacing, we believe we have the capacity to deal with them over time. So, while a number of challenges remain, the launch of the ring-fenced bank Barclays UK expected at the beginning of April this year largely draws a line on large-scale restructuring. We look forward to a more traditional business pattern, including the return to a more normal dividend pattern, planned to begin with the 2018 financial year. Turning to the 2017 financial year itself, this was another critical year for Barclays. Good progress was made on a significant number of fronts. The closure of the Non-Core business from the start of July marked a significant milestone. This business was formed in 2014 in order to deliver the divestment of our non-strategic assets and businesses, releasing capital to support strategic growth in our Core business and to strengthen the Group’s capital position. At its peak, the business comprised approximately £121bn of risk weighted assets (RWAs), representing 28% of the Group’s total at the time and it has been a significant achievement to reduce this to just c.£23bn by the time of its closure. We also implemented the difficult decision to sell down our shareholding in Barclays Africa in 2017. The changing regulatory requirements for global banks resulted in higher hurdles, making the ownership of the profitable African business uneconomic. Therefore, we successfully sold down 33.7% of our remaining Barclays Africa Group Limited (BAGL) shareholding in the first half of the year. We now own a residual 14.9% of the issued share capital, consistent with regulatory commitments. 2017 also saw us make significant progress in terms of creating the new ring-fenced bank as required by UK legislation. This has been an enormous undertaking as we are in effect creating a new bank comprising some 24 million customers. We remain on track to set up this bank in the second quarter of 2018. As part of our structural reform requirements a Group Service Company has been successfully established which provides a wide range of operations, technology and functional services to the Group as a whole. We continued with our Brexit preparations to ensure that Barclays can preserve our access to the EU markets for our customers and clients. Barclays Bank Ireland, where we have a banking license and have operated for nearly 40 years, will provide us with a natural base from which we can continue to provide products and services which require an EU presence. As shareholders are aware, during 2017 Barclays disclosed a whistleblowing incident involving allegations made in connection with the hiring of a senior management team member. After an internal investigation, the Board determined that CEO Jes Staley believed, mistakenly but in good faith, that it was permissible to identify the author. A detailed announcement on the issue was made in April and the matter is now the subject of an external investigation. Despite the very significant achievements and milestones passed during the year, our financial performance in 2017 highlights that further progress is required to deliver acceptable returns to our shareholders. Profit before tax was £3.5bn, and although this was a 10% increase on prior year, return on tangible equity was a negative 3.6% on a statutory basis. Excluding litigation and conduct, the loss on sale of our BAGL stake and a remeasurement of DTAs, largely from US tax reform, return on tangible equity was 5.6%. Fortunately, the losses we experienced last year from Non-Core, as well as the costs of structural reform, are unlikely to be repeated going forward, and this, together with the profit improvement programme in the core business, should contribute towards improving returns. Accordingly, the focus of management and the Board’s attention is on performance, particularly that of the Corporate and Investment Bank in Barclays International. There, performance in Markets, and in particular Macro and Equities, was weak, driven by difficult market conditions. There have been significant management changes and action is being taken to improve profitability in this area. Barclays Consumer, Cards and Payments saw profits decline by 22% but still produced a respectable 16.7% return on tangible equity. Barclays UK’s profits were marginally up on the previous year generating 9.8% return on tangible equity. Share price performance in 2017 was disappointing, with the share price falling from 223p to 203p over the calendar year. We are working to reverse this in 2018. Delivering quality earnings above the cost of equity as well as returning to higher dividend levels, are necessary to generate a meaningful recovery in the share price. This is the priority for 2018 and beyond. The ultimate resolution of legacy conduct and litigation issues will allow underlying profit to fall to the bottom line to the benefit of shareholders. This, together with the resolution of the whistleblowing issue, will also help remove some uncertainty which is overshadowing the Company. The past few years have been a really tough period for the Board and management, and bottom line results can obscure the real underlying progress that is being made. I would therefore like to thank the Board, the management team and all our staff for the enormous efforts they are making to secure our recovery. Finally, I would thank shareholders for their patience, and believe it will be rewarded. The situation is more complex and difficult than we had envisaged, and is taking longer than we hoped, but shareholders can rest assured that we will continue to strive to deliver the performance and value creation that their patience deserves. **John McFarlane** Chairman --- ## Chief Executive’s review ### We have strong foundations in place for delivering to stakeholders and society… Two years ago, we laid out our plan to build a Barclays that is fit for the future. To recast our business as a transatlantic consumer and wholesale bank, with global reach. I am pleased to report that the significant task of restructuring this great institution was completed in 2017. The spirit, energy and professionalism that my colleagues from across Barclays have brought to this endeavour gives me great confidence in our future, both as Group CEO and as a shareholder. While there is still work to be done, the story of Barclays in 2017 has been one of considerable strategic progress. On the 1st of June, we completed the sell down of our shareholding in Barclays Africa. At a stroke, this single act permitted accounting deconsolidation and regulatory proportional consolidation, reduced both cost and complexity, and improved our capital strength. **Our Group profit before tax is up by 10%, year on year.** In July, we closed Barclays’ Non-Core unit, six months ahead of plan. In doing so, we eliminated some £95bn of risk weighted assets, sold more than 20 businesses, exited operations in a dozen countries, and reduced costs by over £2bn – all in just three years. In September, we stood up the Group Service Company, where around 42,000 of our 80,000 employees now work. Operational and technological strength is a key competitive advantage for any global bank today. The cost efficiencies and improvements in effectiveness realised from this strategic decision are already being felt right across the Group – and that is making a real and positive difference to our customers and clients’ lives, every day. By December, we had largely completed the work to build our UK ring-fenced bank, which we expect will be fully up and running by the time we meet at the Annual General Meeting (AGM). The Barclays of today is almost unrecognisable, compared with just a few years ago. The momentum we have built in successfully delivering on our plans so far, leaves me with a sense of confidence about our next task: delivering acceptable Group returns for you, our shareholders. Our financial performance in 2017 shows that we are on our way to doing this. Our Group profit before tax is up by 10%, year on year, largely driven by a reduction in Non-Core losses. Group return on tangible equity, excluding litigation and conduct charges, the losses related to the sell down of BAGL and a one-off adverse impact from US tax reform, stood at 5.6% in 2017. Our two businesses, Barclays UK and Barclays International, performed fairly well in the year despite challenging market conditions, and the Group is benefiting from the balance that the diversity of product, currency, geography, and business mix, gives us. In Barclays UK profitability held up, with good progress in mortgages, deposit growth, and mobile banking. Profits were down in Barclays International versus 2016, due to a poor performance in the Markets business of our Corporate and Investment Bank in difficult trading conditions for the industry. We have strong plans in place to address that underperformance in 2018. Our Consumer, Cards and Payments business continues to produce excellent levels of income, while managing risk effectively. Perhaps most importantly of all, we enter 2018 in a strong capital position. By the end of 2017, we were at a Common Equity Tier 1 (CET1) ratio of 13.3%, within our end-state target range. --- This shows that Barclays can sustainably generate profits at a healthy rate, and our capacity to do so should increase over time as we grow our businesses. That is why in 2017 we set ourselves ambitious but attainable targets for Group returns of greater than 9% in 2019, and of greater than 10% in 2020, excluding litigation and conduct, and based on a CET1 ratio of around 13%. A small number of significant legacy conduct issues remain, and we will need to resolve them in due course. Nevertheless, it is our intention to prioritise the return of capital to shareholders, beginning this year. We plan to pay a dividend for 2018 of six and a half pence, which is more than double the amount paid in 2016 and 2017, and restores it to the level paid in 2015. This is an important first step, but is still a fairly modest proportion of our anticipated earnings for Barclays. It is our firm intent, over time, to return a greater proportion of our earnings to shareholders, both through the annual dividend and in other ways. For example, it has been some 20 years since Barclays last used share buybacks as a means of returning value to investors, but we expect these to be an important part of the capital return mix going forward. I have worked in banking for some 38 years, and I can say with conviction that the way Barclays does business, constantly seeking to earn the trust of every customer, client and community we serve, is truly extraordinary. In 2017, we celebrated the 20th anniversary of the Barclays Citizenship Awards – a year which saw over half of our colleagues take part in volunteering, fundraising or giving programmes. Among many examples of great contributions to the communities in which we operate, I was particularly proud of the work we have done to increase digital safety and to prevent the growing threat of fraud. Our education and awareness campaign has seen over 4.8 million people take action to protect themselves as a result. Supporting the ambitions of customers, clients, and communities is not just the right way to act, it also makes commercial sense. When the societies where we operate succeed, Barclays succeeds. That is why, for over three centuries, this great institution has risen to the challenges that our communities face, and played our part in meeting them. This is particularly true as our home country, the United Kingdom, faces an uncertain future as negotiations to leave the European Union unfold. Whatever may come, Barclays is here to stay, and here to help the 24 million customers and almost one million UK businesses, who put their trust in us, every day. **In 2017, over half of our colleagues took part in volunteering, fundraising or giving programmes.** It is the talent, ingenuity and dedication of our people, and the progress we have made in the past year, which gives me great confidence for our future. I look forward to discussing this future with you when we meet at our AGM in May. **James E. Staley** Group Chief Executive #### Barclays Citizenship Awards Going the extra mile to benefit society and Barclays is what our Shared Growth Ambition is all about. Our Citizenship Awards celebrate the extraordinary Barclays colleagues who do just that and play a positive role in society. 2017 marked the 20th anniversary of the awards and there were almost 500 nominations, celebrating the outstanding contributions of our employees to driving economic, environmental and social prosperity. The awards were split into five categories that encompass Citizenship and our Shared Growth Ambition: access to financing, access to financial and digital empowerment, access to employment, colleagues in the community and the way we do business. Whether it’s creating commercial products with a positive societal impact, empowering customers with better financial and digital skills, helping people get into the world of work, improving the way we do business, or colleagues giving their time and skills to the causes they’re passionate about, there is a huge variety of ways in which Barclays colleagues contributed to society in 2017. Being a contributor is a very important part of the culture of Barclays. It says the right things about who we are. Barclays is a business built on our people and we are proud of the contributions that our extraordinary people make to further our Citizenship ambitions. --- ## Operating environment ### …in a constantly evolving environment that creates opportunity and risk As a transatlantic consumer and wholesale bank with operations globally, Barclays is impacted by a wide range of macroeconomic, political, regulatory, accounting, technological and social developments. The evolving operating environment presents opportunities and risks which we continue to evaluate to ensure that we appropriately adapt our strategy and its delivery. Global growth saw a modest recovery in 2017, principally driven by an upswing in Europe and Asia. However, the interest rate environment remained low, albeit with indications of Central Banks positioning for a tightening cycle. Notably, the Federal Reserve and the Bank of England commenced tightening actions, with an increase in their key policy rate as well as initiation of actions to wind-down quantitative easing programmes. The low interest rate environment combined with continued low market volatility, relatively weak consumer confidence and a slowing housing market in the UK continued to impact banking sector performance by making income generation more challenging. The political environment remained uncertain globally throughout 2017 with a notable increase in geopolitical tensions. We remain vigilant to these risks and their potential impact on global trade and investment. In the UK, the General Election resulted in a hung Parliament while negotiations with the EU on post-Brexit arrangements continue, without full clarity on the nature of the UK’s relationship with the EU immediately following its exit. In July, in response to the EU referendum outcome, Barclays announced its intention to use an existing subsidiary in Ireland as its European licensed entity from which to passport financial services across the EU, thereby continuing to serve its customers and clients in the EU post Brexit. The regulatory landscape impacting Barclays evolved through 2017 and will continue to do so in 2018. The banking industry in the UK has continued implementation of measures to meet structural reform requirements, which include the requirement to ring-fence certain activities. As part of these reforms, Barclays launched its Group Service Company in September 2017. The implementation of structural reform and other regulatory changes requires significant focus and we are seeking to minimise disruption to our customers and clients, while executing in accordance with regulatory timelines (as set out on page 204). Barclays’ ring-fenced bank will be operational during the first half of 2018, subject to court and regulatory approvals. **The banking industry in the UK has continued implementation of measures to meet structural reform requirements, which include the requirement to ring-fence certain activities.** With effect from 1 January 2018, as part of the US Tax Cuts and Jobs Act, the federal corporate income tax rate has been reduced from 35% to 21%. Given the Group’s substantial US operations, this tax rate cut materially impacted the measurement of Barclays’ US deferred tax assets, however, it will also result in a material reduction to the Group’s future effective tax rate. This Act also introduced the Base Erosion and Anti-Abuse Tax (BEAT) which involves complex provisions with currently uncertain practical and technical application and which may reduce the future benefit of the lower statutory tax rate. *Detailed analysis of our tax can be found in the Annual Report, or in the Country by Country report, both found at home.barclays/annualreport* In addition, from 1 January 2018 the introduction of IFRS 9, Financial Instruments, will see significant changes to the accounting for impairment and measurement of expected credit losses which we discuss further, along with other significant accounting policies on pages 241 to 246. Our operating environment continues to be influenced by rapid technological change, significantly impacting customer expectations and behaviour as well as leading to the ongoing review of established banking operating models. We are investing to position our business at the forefront of this evolving environment. New technology is transforming the way customers interact with their banks and continues to encourage new entrants into the market. We expect to see these trends accelerating in 2018 with the implementation of the Second Payment Services Directive (PSD2) and Open Banking, which will have a profound impact on the banking landscape by allowing customers to choose to enable third parties to access their data. Barclays is very supportive of the opportunities that Open Banking presents for those who design their propositions and experiences with customers at their heart. However, we are also aware of potential customer concerns regarding data security and we continue to work hard to ensure the safety of customer data. --- Our Corporate and Investment Bank clients are anticipating enhanced electronic capabilities as well as enhanced transparency through the new Markets in Financial Instruments Directive and Markets in Financial Instruments Regulation (collectively referred to as MiFID II), as part of their operating environment. For example, recent advances in trading automation continue to change the operating landscape through increased experimentation with, and implementation of, solutions relying on machine learning, natural-language processing and predictive analytics. *For further information on the changes in Supervision and Regulation of the Group, please see page 197.* We continue to invest in our digital and mobile capabilities to respond to these rapid changes, while maintaining a continued focus on the risks posed by fraud and social engineering and the importance of network defence, cyber risk, IT security and the appropriate management of our most valuable environments and high risk users in the face of growing cyber threats. In 2017, we launched #digisafe, a UK-wide consumer engagement campaign to highlight the importance of digital safety, helping people to be more aware of the risks that exist in the digital world and how to be safer online. During 2017 there was further activity to advance the financial sector’s understanding of the potential financial, operational and strategic implications of climate change. Recognition of the commercial, reputational and regulatory implications of climate change are shaping the way businesses engage with the climate change agenda. At Barclays, we want to facilitate our stakeholders’ access to financing that places green principles at its core. Please see the Case Study below for examples of how we are putting our beliefs into practice. Developments in the external environment present both opportunities and risks. Without active risk management to address these external factors, our long-term goals could be adversely impacted. *Our approach to risk management and material existing and emerging risks to the Group’s future performance are outlined in the Risk review section on page 121.* #### Green bonds Barclays’ green bond is one of a number of innovative green products, launched in 2017, which reinforce Barclays’ support for, and participation in, the transition to a sustainable and low carbon global economy, following the publication of Barclays’ Green Bond Framework in September 2017. In November 2017, Barclays successfully priced and issued a €500m green bond. This was a milestone for the UK market, being the first green bond issued by a UK bank using UK assets. Green bonds are fixed income securities, designed to raise finance for assets that have positive environmental and climate benefits. The proceeds from Barclays’ green bond have been allocated to the financing and refinancing of Barclays’ residential mortgages on environmentally friendly homes in England and Wales. Barclays is a signatory to the Green Bond Principles and an active lead manager of green bond issuances across jurisdictions, issuers and currencies within our investment bank. Barclays remains firmly committed to contributing to the growth of the green bond market, and has committed to a green bond investment target of £2bn in its Liquidity Portfolio. --- ## Business structure ### Our enhanced structure empowers our business model… In 2017, Barclays made significant progress reorganising the business to enable a sharper focus on our strengths as a transatlantic consumer and wholesale bank with global reach. In March 2016, we announced our intention to operate through two principal business divisions: Barclays UK and Barclays International. As well as accelerating the delivery of our strategy, this change helped enable Barclays to fulfil the requirements of our UK regulators in regard to ring-fencing. Ring-fencing of essential retail banking services is one of the reforms introduced by the UK government to strengthen the UK financial system following the financial crisis that began in 2007. It requires the larger UK high street banks, including Barclays, to separate certain retail and smaller corporate banking activity and products, like savings accounts, current accounts and payments, from more complex, wholesale and investment banking activity and from certain activities outside of the UK and European Economic Area. This separation must be completed by 1 January 2019. **Barclays Bank UK PLC and Barclays Bank PLC will operate alongside, but independently from one another.** Both Barclays UK and Barclays International currently operate within the legal entity of Barclays Bank PLC. Barclays UK offers everyday products and services to retail and consumer customers and small to medium sized enterprises based in the UK, and Barclays International delivers products and services designed for our larger corporate, wholesale and international banking clients. During the first half of 2018, we will formally separate the Barclays UK division into a new legal entity – Barclays Bank UK PLC – which will become our UK ring-fenced bank, subject to court and regulatory approvals. Products and services designed for our larger corporate, wholesale and international banking clients will continue to be offered by Barclays International from within Barclays Bank PLC. Barclays Bank UK PLC and Barclays Bank PLC will operate alongside, but independently from one another as part of the Barclays Group under the listed entity, Barclays PLC. In September 2017, in preparation for the separation of the Barclays UK business into its separate legal entity, we created our Group Service Company, Barclays Services Limited, as a subsidiary of Barclays PLC. The Group Service Company will deliver critical infrastructure services to businesses within the Barclays Group and will enhance operational continuity for our business units, facilitating the execution of recovery and resolution plans in the event of financial difficulty. It will also become a centre of excellence for services required by the business, such as fraud management and cyber security, reducing duplication and promoting best practice across our businesses. The new organisational structure, illustrated below, brings complementary businesses more closely together; creates an enhanced focus on our client proposition and offering across all target sectors; and, through the creation of the new Group Service Company, establishes a centre of service excellence that will drive efficiency and increase the Group’s resilience. *Further information on structural reform can be found on page 204. Illustrative unaudited pro forma financials for Barclays Bank UK PLC and Barclays Bank PLC are available at [home.barclays/annualreport](http://home.barclays/annualreport)* --- ### Barclays PLC * **Barclays Bank UK PLC** (Barclays UK – ring-fenced bank) * **Barclays Services Limited** (Group Service Company) * **Barclays Bank PLC** (Barclays International) --- ## Our business model ### …and creates value for our stakeholders, with economic benefits to society Barclays PLC Group operates via two clearly defined divisions – Barclays UK and Barclays International – with a diversified business model that we believe helps enhance our resilience to changes in the external environment. Our business model is aligned with our strategy of being a leading, diversified transatlantic bank with global reach. * *Read more on our strategy on pages 10 to 11.* * *For further information on our divisions, see: Barclays UK – pages 23 to 28, Barclays International – pages 29 to 34.* #### We draw on the following to support our activities and deliver value to our stakeholders: * the strength and reputation of our brand – serving customers and clients for over 325 years * a strong, well-funded and diversified balance sheet * customer and client relationships built on trust * a solid track record of successfully innovating for customers and clients * our geographic focus: firmly anchored in the two financial centres of London and New York, with global reach * the skills and expertise of our people and our shared values which inform the way we work and how we act #### We aim to provide superior services to help customers and clients create, grow and protect wealth in a sustainable way: Barclays’ customers and clients include: individuals, small and medium-sized businesses, large corporates and multinational companies, financial institutions and banks, institutional investors, funds, sovereign institutions and governments. We offer: * a safe place to save, invest and manage cash and payments * innovative digital and technological capabilities * funding for purchases and growth * management of business and financial risks * financial and business support #### We support our stakeholders via a commercially successful business that generates long-term sustainable returns: * our services generate revenue via net interest income and non-interest income, including fees and commissions as well as trading and investment income through our wholesale activities * we are a large financial institution and provide diversification by business line, geography and customer * we aim to capture the benefits of diversification through efficient delivery of cross group synergies #### We aim to deliver a broad spectrum of value through the way we do business, including: * superior service to enable customers and clients to achieve their ambitions * challenging and fulfilling careers for our people in a values-driven organisation * long-term sustainable returns for our investors * we work together with regulators to help reduce risk in the industry and provide a more sustainable banking landscape over the long term * employment and growth in the economies in which we operate * engagement with governments and society in general to address societal issues and needs * *The skills and trust in our staff helps us, through a range of initiatives, increase financial literacy.* * *Our business services are tailored to help support SMEs and entrepreneurs, creating wealth.* * *Meeting the demands of our customers around sustainable investment drives sustainable value.* * *Innovation through our products and services is helping increase access to finance and generating dividends and returns.* --- ## Our strategy ### We have positioned Barclays as a leading, diversified, transatlantic bank with global reach… As a leading, diversified, transatlantic bank with global reach, our goal is to support our stakeholders via a commercially successful business that generates long-term sustainable returns. We reflect our strategy in a number of financial and non-financial measures. * *Read more on our financial and non-financial measures on pages 15 to 22.* #### Building on our strong foundations The strategy of Barclays PLC Group is to build on our strength as a transatlantic consumer and wholesale bank, anchored in our two home markets of the UK and US, with global reach. Our two clearly defined divisions, Barclays UK and Barclays International, provide diversification to our business model. We believe that combining consumer and wholesale businesses, as well as accessing geographic diversification, provide real advantages to both the Group and our investors and help contribute to the delivery of more consistent and sustainable returns through the business cycle. Effective execution of our strategy of diversification should reduce volatility of income and earnings, generate higher returns through the cycle and improve resilience of the Group as a whole. Consistent with the objective of delivering long-term sustainable value for our stakeholders, we continue to pursue our Shared Growth Ambition – our approach to citizenship and sustainability. The objective is to make decisions and do business that provide our clients and customers, and the communities which we serve, access to a prosperous future. * *You can read more about our Shared Growth Ambition within our performance metrics on page 21.* #### Completion of the restructuring announced in March 2016 In 2017, we successfully delivered on two key components of the strategic priorities we announced in March 2016: * during the course of 2017, we completed the partial sale of our stake in BAGL resulting in a non-controlling, accounting deconsolidated position with a residual 14.9% shareholding in BAGL * on 1 July we closed Barclays Non-Core, six months ahead of schedule, representing a watershed moment for the implementation of the Group’s strategy. These actions have significantly contributed to the simplification of the Group, helping to reduce drag on Group profitability and laying the foundations for Barclays to drive sustainable returns in its businesses. #### Delivering the Barclays of the future Our focus is now on building the Barclays of the future, operating principally through Barclays UK, Barclays International and supported by the new Group Service Company. We are fully committed to our model as a diversified bank and will remain a well-diversified financial institution providing best-in-class products and services to our customers and clients, underpinned by world class operations. We believe that the Group and its entities are well positioned to deliver future growth and appropriate returns for shareholders. **We will remain a well diversified financial institution providing best-in-class products and services to our customers and clients.** We continue to invest in our technological and digital capabilities to facilitate delivery of our strategy. This is particularly relevant in Barclays UK where we already have a strong digital proposition, Barclays Mobile Banking. We have a clear strategy to use technology to deliver deeper and more meaningful customer relationships by transforming the way we interact with customers, leverage data analytics and take advantage of the opportunities presented by Open Banking. Delivering a truly customer-centric model is at the heart of Barclays UK’s strategy. Barclays International will continue to focus on markets and services where we have a competitive advantage, allocating capital where we see the ability to generate the most attractive risk-adjusted returns and investing where we see an opportunity to expand our market share. We see technology as a significant enabler for our strategy across the investment banking business, particularly in Markets business lines, and will continue to invest appropriately, alongside recruiting the best talent as we build the Barclays of the future. In July 2017, we announced our intention to use Barclays Bank Ireland, an existing licensed EU-based bank subsidiary, to continue passported activity after the UK’s departure from the EU. Despite the uncertainty around the final outcome of the negotiations between the UK and EU, our planning is driven by a strategic intention to preserve EU market access for Barclays and our customers and clients, with a continuous seamless service. --- ### Contact centres – creating a seamless end to end customer experience in an omni-channel environment We believe the Group Service Company will enable the delivery of world class services to our customers and clients while driving efficiency gains. Our global contact centres teams within Barclays UK and Barclays International support over 60 million customer calls each year, across several geographies and business areas. Our colleagues are central to our customer experience and through the creation of the Group Service Company we have a unique platform to unlock opportunities across our shared colleague and technology propositions and through doing so, continue the transformation of our customer experience for Barclays UK and Barclays International. In the past, our technology supporting contact centres has been highly fragmented and we have operated with different processes with each business unit having their own contact centres, leading to more than 30 different contact centre sites, utilising over 100 bespoke technology applications. Through the creation of the Group Service Company we aim to streamline our technology estate, identifying synergies to support a world class customer and colleague experience. We will also continue to evolve the way we interact with customers through a highly integrated omni-channel framework, enabling customers to interact with Barclays through their channel of choice. We will continue to roll out and scale new capabilities throughout 2018, supporting our customers choice in how they interact with us. Leveraging our geographic and business diversification, we see a significant opportunity to develop our payments capabilities across the Group. We aim to leverage our extensive experience and expertise developed through our leadership position in the UK to grow our market share in the US. In the Business to Business (B2B) space, we will continue to invest in our commercial payments capabilities, in order to meet the evolving needs of our customers, by leveraging innovative solutions and our data assets. On the consumer side, we are growing our mobile payment solutions in the UK. In the US, we see opportunity to build on our position of 9th largest credit card issuer by receivables, as our targeted partnership model drives continued growth. Furthermore, we are investing in our US consumer banking proposition, where we have a growing, own-brand and prime-focused digital banking offering. Our strategic execution as a diversified bank has been enhanced by the launch of the Group Service Company. The Group Service Company changes the way Barclays operates, enabling the delivery of world class services through a more standardised global operating model. We believe our Group Service Company will enable us to extract cross-Group cost synergies through simpler processes, enhanced controls, a better co-ordinated service provision and more effective management of investment in our technology and processes. The Group Service Company is a key component of Barclays’ operating model. **We believe our Group Service Company will enable us to extract cross-group cost synergies.** We remain focused on resolving legacy conduct, litigation and regulatory matters and delivering enhanced controls. We aspire to be one of the world’s most respected and well-regarded banks. We are working hard to resolve outstanding legacy issues in an appropriate time frame and manner, while continuing to strengthen our control environment. We put our customers and clients at the heart of everything we do and seek to strengthen the trust of our customers, clients and wider society. --- ## Risk management ### …with a structure and governance that enable us to manage risk… Barclays is exposed to external risks as part of our ongoing activities. These risks are managed as part of our business model. The recent changes to the structure of the bank in anticipation of ring fencing, together with the closure of the Non-Core, and the partial sell down of our shareholding in BAGL mean that we have even more clarity on our strategic direction. The risks we undertake in delivering this strategy are now also well-defined. #### Enterprise Risk Management Framework At Barclays, risks are identified and managed in the business through the Enterprise Risk Management Framework (ERMF), which supports the CEO and Chief Risk Officer in embedding effective risk management and a strong risk culture. **By applying mandate and scale limits, we can enable and control specific activities.** The ERMF specifies the Principal Risks of the Group and the approach to managing them. #### Risk Appetite Risk Appetite defines the level of risk we are willing to take across the different risk types, taking into consideration varying levels of financial stress. Risk Appetite is key for our decision making process, including business planning, mergers and acquisitions, new product approvals and business change initiatives. By applying mandate and scale limits across legal entities and businesses, we can enable and control specific activities that may have material concentration. The management of risk is embedded into each level of the business, with all colleagues being responsible for the understanding and managing of risks. This is done by specifying responsibilities according to the ‘Three Lines of Defence’. Each Line of Defence is overseen by the next, resulting in a strong design, implementation, remediation, monitoring and testing framework, with independence and robust governance. #### Three Lines of Defence * The First Line of Defence comprises the revenue generating and client facing areas, along with all associated support functions. The First Line identifies the risks, and sets the policies, standards and controls, within the criteria set by the Second Line of Defence. * The Second Line of Defence comprises Risk and Compliance employees and oversees the First Line, setting the limits, rules and constraints, consistent with the Risk Appetite of the firm. * The Third Line of Defence comprises Internal Audit employees, providing independent assurance to the Board and Executive Management. The Legal function does not sit in any of the three lines, but supports them all and plays a role in overseeing Legal Risk. The Legal function is also subject to oversight from the Risk and Compliance functions with respect to the management of operational and conduct risks. Together with a governance process using Business and Group level Risk Committees and Board level forums, the main Board of Barclays receives regular information in respect of the risk profile of the Group, and has ultimate responsibility for risk appetite and capital plans. #### Risk management post-ring fencing There are no significant changes to the ERMF proposed following ring-fencing. However, each of the Boards of Barclays Bank UK PLC and Barclays Bank PLC will approve and implement the ERMF at an entity level, with any requirements specific to the relevant legal entity documented within the ERMF. Group-wide risk management principles will govern both Barclays Bank UK PLC and Barclays Bank PLC and their own legal entity governance processes around risk management, capital and liquidity plans. We believe that our structure and governance will enable us to manage risk in changing economic, political and market environments. --- ## Principal Risks are overseen by a dedicated Second Line function | Risks are classified into Principal Risks, as below | How risks are managed | | :--- | :--- | | **Credit Risk** | The risk of loss to the firm from the failure of clients, customers or counterparties, including sovereigns, to fully honour their obligations to the firm, including the whole and timely payment of principal, interest, collateral and other receivables. | Credit risk management teams set the Risk Appetite, monitoring risk against limits and help manage risk through the credit cycle. | | **Market Risk** | The risk of loss arising from potential adverse changes in the value of the firm’s assets and liabilities from fluctuation in market variables including, but not limited to, interest rates, foreign exchange, equity prices, commodity prices, credit spreads, implied volatilities and asset correlations. | A range of complementary approaches to evaluate market risk including specific management and regulatory measures, are used to capture exposure to market risk. These are overseen and managed by dedicated market risk management teams who engage with the businesses to challenge the risk profile on a regular basis. | | **Treasury and Capital Risk** | **Liquidity Risk**: The risk that the firm is unable to meet its contractual or contingent obligations or that it does not have the appropriate amount, tenor and composition of funding and liquidity to support its assets.

**Capital Risk**: The risk that the firm has an insufficient level or composition of capital to support its normal business activities and to meet its regulatory capital requirements under normal operating environments or stressed conditions (both actual and as defined for internal planning or regulatory testing purposes). This includes the risk from the firm’s pension plans.

**Interest Rate Risk in the Banking Book**: The risk that the firm is exposed to capital or income volatility because of a mismatch between the interest rate exposures of its (non-traded) assets and liabilities. | Treasury and capital risk is managed and monitored through a wide range of activities including: managing limits on a variety of on and off-balance sheet exposures; monitoring of market indicators for early signs of liquidity risk; recovery planning; capital planning and allocation; internal Group-wide stress testing; management of foreign exchange and pension risk, and uses a range of metrics and sensitivity analysis to measure non-traded market risk. | | **Operational Risk** | The risk of loss to the firm from inadequate or failed processes or systems, human factors or due to external events (e.g. fraud) where the root cause is not due to credit or market risks. | The Group assesses its operational risk and control environment across its businesses and functions with a view to maintaining an acceptable level of residual risk. | | **Model Risk** | The risk of the potential adverse consequences from financial assessments or decisions based on incorrect or misused model outputs and reports. | Models are validated and approved upon implementation and on an ongoing basis. | | **Reputation Risk** | The risk that an action, transaction, investment or event will reduce trust in the firm’s integrity and competence by clients, counterparties, investors, regulators, employees or the public. | Reputation risk is managed by maintaining a controlled culture within Barclays, with the objective of acting with integrity, enabling strong and trusted relationships to be built with customers and clients, colleagues and broader society. | | **Conduct Risk** | The risk of detriment to customers, clients, market integrity, competition or Barclays from the inappropriate supply of financial services, including instances of wilful or negligent misconduct. | All colleagues are responsible for the management and mitigation of conduct risk. The Compliance function sets the minimum standards required, and provide oversight to monitor that these risks are effectively managed and escalated where appropriate. | | **Legal Risk** | The risk of loss or imposition of penalties, damages or fines from the failure of the firm to meet its legal obligations including regulatory or contractual requirements. | The Group conducts diverse activities in a highly regulated global market and therefore is exposed to legal risks in the conduct of its business. The Group General Counsel and the Legal function support colleagues to manage legal risks. | --- ## Risk management ### …and help us focus on climate change Climate change and resource scarcity are acknowledged as two of the greatest global challenges facing society today. As a global institution, we support our clients and communities as they adopt measures to mitigate and adapt to climate change such as clean technologies and infrastructure resilience. We acknowledge the validity of climate science and support the efforts of public and private stakeholders around the world aiming to limit global temperature rise to two degrees Celsius above pre-industrial levels. Barclays participated in the Financial Stability Board’s Task Force on Climate-Related Financial Disclosures (TCFD), which published its final recommendations in June 2017. Barclays endorsed the final report, and will work to implement the recommendations over the coming years. The principles laid out in the TCFD recommendations are an important step in providing the foundations from which companies, investors, banks and other market participants can move forward together to improve transparency and build better understanding of potential climate-related risks and opportunities. **This is the start of a longer-term process to enhance disclosures and improve understanding of potential material financial impacts.** #### Governance On behalf of the Board, the Board Reputation Committee reviews and approves Barclays’ overall Environmental, Social and Governance (ESG) strategy, which includes the approach taken on climate change and emission targets. The Committee discussed the outcome of an externally facilitated review on Barclays alignment with the TCFD recommendations in 2017. See pages 69 to 74 for the Board Reputation Committee report. #### Strategy Significant financing requirements for energy transition and resilient infrastructure will necessitate access to the capital markets, bank debt and wider funding solutions, providing revenue pools that are projected to grow over time. Our approach is to focus on managing potential climate change related risks at a client and transactional level, and assess current and emerging opportunities across our product suite and geographical footprint. In the shorter term, Barclays sees immediate opportunities in Green Bonds and other financing solutions. We actively manage our own direct carbon footprint and are making good progress towards our target of 30% reduction by end 2018, against a 2015 baseline, reducing our emissions by 26.1% in 2017. #### Managing climate risk and opportunity Through a dedicated Environmental Risk Management team within the Credit Risk function, we are focused on managing both physical risks, for instance flood risk for our UK mortgage book, as well as potential transition risks if carbon intensive industries do not plan strategically for a smooth medium to long term transition to a low carbon economy. During 2017, we have significantly increased our focus on developing new climate opportunities, including the launch of a suite of industry-leading Green Products driven by the Green Banking Council and the issuance of Barclays inaugural Green Bond. Please see the Green Bonds case study on page 7. *Please refer to the 2017 ESG Report for further information, found at home.barclays/annualreport* --- ## Key performance indicators ### A holistic approach to measuring success Our approach reflects the way in which management monitors the performance of the Group, allows for a holistic assessment and sets out our progress towards the strategic goals of the organisation. By incorporating a broad range of financial and non-financial measures, our framework is focused on achieving positive and sustainable outcomes for our diverse group of stakeholders, and influences incentive outcomes for Barclays’ employees. *Read more on our remuneration framework in the Remuneration report pages 93 to 116.* #### Approach and governance: Performance measurement In the 2016 Barclays Annual Report, we introduced our revised performance measurement framework to assess progress against our strategy, across our diverse stakeholder groups. The framework reflects a balance of key financial performance metrics and broader strategic non-financial measures. #### Financial performance metrics The financial metrics are aligned to Barclays PLC Group financial targets, updated in Q317: * Group Return on Tangible Equity (RoTE) of greater than 9% in 2019 and greater than 10% in 2020, excluding litigation and conduct, and based on a CET1 ratio of c.13% * CET1 ratio of 150–200 bps above the end point regulatory minimum level * Group costs, excluding litigation and conduct, of £13.6–13.9bn in 2019, and to have a target cost: income ratio below 60%. #### Strategic non-financial performance measures Non-financial measures are an important element of how we evaluate our progress towards achieving our ambition of delivering a sustainable business for all our stakeholders. We focus on the impact we have on our customers and clients, colleagues, and the benefit we bring to society via our citizenship activity. These measures are underpinned by how we behave towards all our stakeholders, through our conduct and our culture. To assess our performance, progress towards delivering positive outcomes for our stakeholders is informed by a number of sources including internal dashboards, regular management reporting and external measures, to help provide a balanced review of performance. We have a range of policies and guidance that can support our key outcomes for our customers and clients, colleagues and citizenship activity. Performance against our strategic non-financial performance measures is one indicator of the effectiveness and outcome of aspects of certain policies and guidance. Our policies and guidance are refreshed regularly. For further details, please see our Customer and Client, Colleague and Citizenship sections. --- ### Barclays PLC Group Performance Measurement Framework #### Financial performance metrics * **Group RoTE***: >9% in 2019; >10% in 2020 * **CET1 ratio**: 150–200 bps above the end point regulatory minimum level * **Group costs**: £13.6–£13.9bn in 2019; Targeting cost: income ratio below 60% *\* excluding litigation and conduct, and based on a CET1 ratio of c.13%* *† excluding litigation and conduct* #### Strategic non-financial performance measures (Delivering positive outcomes for our stakeholders) **Customer and Client** * Building trust with our customers and clients, such that they are happy to recommend us to others * Successfully innovating and developing products and services that meet their needs * Offering suitable products and services in an accessible way, ensuring excellent customer and client experience **Colleague (Promoting and maintaining)** * A diverse and inclusive workforce in which colleagues of all backgrounds are treated equally and have the opportunity to be successful and achieve their potential * Engaged and enabled colleagues * A positive conduct and values-based environment **Citizenship** * Making decisions and doing business that provides our clients, customers, shareholders, colleagues and the communities which we serve with access to a prosperous future, through our Shared Growth Ambition * Proactively managing the environmental and societal impacts of our business **Underpinned by how we behave towards all our stakeholders through our conduct and culture** --- ## Key performance indicators ### A holistic approach to measuring success #### Approach and governance: Remuneration Performance against our financial metrics and strategic non-financial performance measures is directly linked to executive remuneration, and also influences incentive outcomes for Barclays’ employees more broadly. This approach supports us in our work to deliver positive outcomes for all our stakeholders. Please refer to the Remuneration Report on pages 93 to 116 for further information. #### Financial performance metrics The ratio expresses Barclays’ capital as a percentage of risk weighted assets (RWAs), as defined by the PRA, in the context of Capital Requirements Directive IV (CRD IV – an EU directive prescribing capital adequacy and liquidity requirements), and is part of the regulatory framework governing how banks and depository institutions are supervised. Barclays views operating expenses as a key strategic area for banks; those which actively manage costs and control them effectively will gain a strong competitive advantage. Restructuring the cost base is a key execution priority for management and includes a review of all categories of discretionary spending and an analysis of how we can run the business to ensure that costs increase at a slower rate than income. The cost: income ratio measures operating expenses as a percentage of total income and is used to assess the productivity of the business operations. #### Updating the Return on Tangible Equity metric Significant strategic progress was made in 2017 with the closure of Non-Core and sell down of our stake in Barclays Africa, marking the completion of our restructuring. With the closure of Non-Core, we no longer have a Core and Non-Core distinction within the Group, and hence our prior target of Group RoTE to converge with Core RoTE no longer exists. The RoTE target has been updated to reflect our commitment to continuing to execute at pace against our plan and we are confident in asserting when Barclays will start to deliver the economic performance that the Group is capable of. #### How we are doing * **Group Return on Tangible Equity**: (3.6)% (2016: 3.6%) * **Common Equity Tier 1 (CET1) ratio**: 13.3% (2016: 12.4%) * **Cost: income ratio**: 73% (2016: 76%) * **Operating expenses***: £14.2bn (2016: £15.0bn) *\* excluding litigation and conduct* --- #### Group Return on Tangible Equity 2017 reflected a number of one-off items including losses related to the sell down of BAGL of £2.5bn and a net charge of £0.9bn due to the remeasurement of US DTAs in Q417, as well as litigation and conduct of £1.2bn. These items drove a Group RoTE of negative 3.6% (2016: positive 3.6%). Excluding these material items, Group RoTE was 5.6%. #### CRD IV fully loaded CET1 ratio The Group’s CRD IV fully loaded CET1 ratio increased to 13.3% (2016: 12.4%) driven by a decrease in RWAs of £53bn to £313bn, which was partially offset by a reduction in CET1 capital to £41.6bn (2016: £45.2bn). The 90bps improvement was driven by organic capital generation from continuing operations, the benefit of the proportional consolidation of BAGL and the rundown of Non-Core, partially offset by an adverse movement in reserves and the net impact of the remeasurement of US DTAs. #### Operating expenses and cost: income ratio Group operating expenses were £15.5bn (2016: £16.3bn). Excluding litigation and conduct charges, Group operating expenses were £14.2bn (2016: £15.0bn), in line with 2017 guidance. The reduction in operating expenses was primarily driven by lower Non-Core related operating expenses. The Group cost: income ratio was 73% (2016: 76%). *For further information on the financial performance of the Group, please see page 47.* #### Strategic non-financial performance measures **How we are doing: summary** We assess progress towards the delivery of positive outcomes our customers and clients (page 18), colleagues (page 19), and citizenship activity (page 21), all underpinned by conduct and culture. **Areas of encouragement:** * **Customer and Client**: In 2017, we continued to focus on delivering excellent customer and client experience, by offering products and services to meet their needs in an appropriate and accessible way. We are encouraged by the performance of our Relationship Net Promoter Scores (NPS®), while our client ranking and market share indicators remained broadly stable across many of our international business areas, which we believe reflect the relevance of our customer and client proposition. Digital solutions can enable a convenient and secure everyday banking experience for customers and clients, and we believe this is reflected in a 7% year on year increase in the number of Barclays UK customers using our digital services. * **Colleague**: We remain focused on increasing the diversity of our workforce and continuing to build an inclusive culture. We are proud of the progress we have made on the multicultural, multigenerational, LGBT and disability pillars, and we continue to receive external recognition for our diversity and inclusion work. We also continue to focus on the positive engagement of our workforce, and are encouraged to see a 3 percentage point improvement in our annual employee engagement survey score. * **Citizenship**: We are conscious of our wider stakeholders and the communities in which we operate and have performed well against our citizenship agenda, meeting our internal objectives on all six of our Shared Growth Ambition metrics. **Areas of continued focus:** * **Customer and Client**: Further transformation of our customer and client experience remains a key priority for Barclays, particularly as customer and client expectations continue to evolve rapidly. Although we are encouraged by the reductions in the number of complaints we received in 2017, this remains an ongoing area of focus for management and the Board. * **Colleague**: Our commitment to increasing female representation at all levels of Barclays remains firm. Although we have achieved an increase in the percentage of women at our Managing Director and Director levels$^{a}$, we recognise that there is still progress to be made regarding senior female representation. In addition, although we have made progress, we recognise there is still more to do to further reduce obstacles to efficiency and enable our colleagues to achieve excellent performance. We remain committed to driving the right culture throughout all levels of the organisation and continuing to enhance the effective management of Conduct Risk. * **Citizenship**: We have made good progress in delivering access to sustainable finance and developing new green products. We see further opportunity in this space and are working to develop broader sustainability and sensitive sector guidelines. In addition, we continue to focus on enhancing disclosures, particularly on climate change, and improving our Environmental, Social and Governance (ESG) ratings and benchmark scores on an absolute and relative basis. $^{®}$Net Promoter, Net Promoter System, Net Promoter Score, NPS and the NPS-related emoticons are registered trademarks of Bain & Company, Inc., Fred Reichheld and Satmetrix Systems, Inc. *Note* *a 2016 restated on an ex-Africa basis.* --- ## Customer and Client **How we are doing** **Areas of encouragement:** * **Net Promoter Scores (NPS)$^a$**: Improvements to our customer experience and customer value proposition, as well as our campaign to educate customers about how they can take steps to protect themselves from fraud, have all contributed to customers advocating our brand. Barclays Relationship NPS ended the year with an improved score of +14 (2016: +10), while Barclaycard UK Relationship NPS remained relatively flat year on year with a score of +9 (2016:+7). Our Barclaycard International business also continued to perform well on Relationship NPS, supported by a continued focus on customers and improvements in our products and digital experiences. * **Client rankings and market shares**: With the repositioning of the Corporate and Investment Bank largely completed in 2017, we believe the business is well-positioned to deliver for our clients in our two home markets. Our Corporate and Investment Bank achieved a 6th place ranking by fee share (2016: 5th) in our UK and US home markets across M&A, equity and debt capital markets, and syndicated loan transactions, and we were highly encouraged by the 1st place ranking in the UK (Dealogic). In 2017 Barclays ranked 4th, based on Global Fixed Income market share (Greenwich Associates), unchanged from 2016. 88% of our largest UK corporate clients considered the service they receive from Barclays to be good, very good or excellent, a 2 percentage point decrease on 2016 (Charterhouse$^b$). We also processed more than a third of all card payments made in the UK. * **Lending volumes provided to customers and clients**: Barclays continues to be an important provider of financial services to UK businesses. We provided around £66bn of lending, down 6% on 2016, as we continued to exert high levels of discipline in capital allocation decisions to strengthen the long-term sustainability of the business for all our stakeholders. We continue to support UK SME$^c$ customers in achieving their ambitions, with new lending of £2.8bn (2016: £2.5bn). We also extended or renewed mortgage facilities worth nearly £20bn (2016: nearly £19bn) to nearly 88,000 UK households. Our Mortgage business continued to focus on enhancing the customer experience, with Barclays winning eight awards in 2017$^d$. * **Digital engagement**: Digital solutions can enable a convenient and secure everyday banking experience and over 10 million customers and clients in the UK are using our digital services on a regular basis (2016: nearly 9.5m). Barclays Mobile Banking has now been chosen by 5.5 million customers as a ‘bank in their pocket’, to access key services whenever and wherever they need them. We are also mindful that while we have customers who fully embrace digital channels, we serve a wide customer base. We continue to work alongside communities to help our customers feel comfortable in the digital environment and we also launched our Digital Safety campaign which aims to heighten awareness and educate our customers on the risks posed by cyber crime. In 2017, Barclaycard US customers logged into our website and mobile apps over 230 million times, up 12% on 2016. Of our over eight million digitally active customers in Barclaycard US, 57% are mobile active and they expect instant, relevant and safe access to their most important banking needs including account management, rewards, and payments. In 2017, we continued to leverage consumer insights and feedback to build innovative experiences for our customers as evidenced by our 3rd place in the JD Power 2017 Mobile Banking Credit Card evaluation and the launch of our mobile-first Uber co-branded credit card. See our case study on Uber on page 34. **Areas of continued focus:** * **Complaints performance**: In Barclays UK, we continue to focus on customer journeys and our underlying complaint volumes (Barclays UK, excluding PPI) reduced 13% year on year, however we have seen a small increase in PPI complaints (up 2% year on year) driven largely, we believe, by the FCA deadline announcement. Barclays UK complaint volumes, including PPI, were down 7% year on year$^e$. Barclays International complaints reduced by 19% year on year, largely driven by a strong performance in the Barclaycard US business, as we continued our focus on improving customer experience. Complaints reduction remains a priority across the Group and, despite improvement in 2017, we have more work to do, as can be seen from our position in the H1 2017 FCA complaints tables in the UK$^f$. --- ## Colleague **How we are doing** **Areas of encouragement:** * **A diverse and inclusive workforce**: We remain focused on increasing the diversity of our workforce and continuing to build an inclusive culture. In 2017, we have placed additional focus on upskilling our leadership through a range of initiatives including our Unconscious Bias Training, which has been delivered to over 10,000 leaders to date. * **LGBT**: Our Spectrum Allies programme is growing, with an estimated over 8,000 colleagues (2016: over 7,000), who have pledged to challenge homophobia, biphobia and transphobia and provide support to LGBT colleagues. * **Disability**: This year, alongside PwC, we have further scaled the ‘This is Me in the City’ initiative along with the Lord Mayor of the City of London. * **Multicultural**: The number of apprentices who identify as Black, Asian and Minority Ethnic was 19% in 2017 (2016: 30%), 8 percentage points above the national apprenticeship average. * **Multigenerational**: Since the Barclays Armed Forces Transition, Employment and Resettlement (AFTER) programme began in 2010, the programme has assisted over 5,500 veterans in employment transition and since 2013 we have hired over 500 ex-military personnel (2016: nearly 400). * **Our Dynamic Working campaign** is relevant to colleagues at every life stage and encourages the integration of personal and professional responsibilities through smarter work patterns. The campaign is having a positive effect on colleague engagement, with 59% of colleagues actively working dynamically in 2017 with an average overall sustainable engagement score of 83% among this group. * **Gender**: Our commitment to increasing female representation at all levels remains firm. Please see ‘Areas of continued focus’ below for details on our progress. * **Recognition**: Throughout 2017, our work was recognised externally, including: Stonewall recognising Barclays as one of only 12 Top Global Employers; the Human Rights Campaign awarding Barclays 100% on their corporate equality index; Working Families UK recognising Barclays as one of the top 10 Employers for Working Families in 2017; and the City of London and the Social Mobility Commission acknowledging Barclays as a Top 50 Employer through the Social Mobility Employer Index. --- ## Citizenship **How we are doing** **Areas of encouragement:** * **Delivery against our Shared Growth Ambition**: We met our internal objectives on all six of our Shared Growth Ambition metrics. Performance was on-track against our internal milestones for three initiatives around ‘access to financing’, ‘access to digital and financial empowerment’ and ‘access to employment’. We also met or exceeded our 2017 annual targets for The Barclays Way training, carbon emissions reduction and payment of suppliers on time. * **Access to financing**: We continued to deliver financing solutions in areas including renewable energy, water and low carbon technologies; social infrastructure; development institutions; and small business financing. Barclays delivered £31.7bn in financing for specific social and environmental segments across our business lines (2016: £30.5bn$^a$). There has been significant momentum across the Barclays franchise in 2017, including the launch of a range of new Green Loans, Asset Finance and Deposit products; the issuance of Barclays inaugural Green Bond (see case study on page 7); an industry-first Multi-Impact Growth Fund for retail investors; a range of innovative transactions such as solar project bonds and green asset backed securities; and continued coverage from our Research teams on ESG and Sustainability themes. * **Access to financial and digital empowerment**: Inclusive financial systems are key to achieving economic and societal progress, but there can be several barriers to access. We believe digital offerings can help break down these barriers. We helped empower around 205,000 people in 2017 (2016: 249,000) through initiatives such as Barclaycard Initial for those with a limited credit history; our Digital Eagles network, comprised of specially trained Barclays employees working to provide free technology support to customers and non-customers; and the continued development of learning platforms. * **Access to employment**: Barclays is committed to helping people gain access to skills, and supporting entrepreneurs to drive job creation. We helped upskill over 2.1 million people in 2017 (2016: 1.7 million), driven by a range of regional employability partnerships and our flagship LifeSkills programme in the UK. --- ### Supporting sustainable ventures Barclays and the Unreasonable Group hosted the first Unreasonable Impact World Forum in 2017, bringing together 27 innovative companies from Asia, the US and Europe working to solve some of the world’s most pressing problems. Held in London, the Forum included elevator pitches from entrepreneurs and panel sessions on themes such as scaling businesses and raising capital through impact investors. Over 400 representatives from a range of stakeholder groups, including investors, clients, NGOs and government agencies attended in person, with the event broadcast live on select social media channels globally. Unreasonable Impact is an innovative multi-year partnership between Barclays and Unreasonable Group to launch the world’s first international network of accelerators focused on scaling-up entrepreneurial solutions that will help employ thousands worldwide while solving some of our most pressing societal challenges. See [https://unreasonableimpact.com/](https://unreasonableimpact.com/) for more information. --- ## Barclays UK ### Our performance in the UK With 30,000 colleagues and 24 million customers and clients, Barclays UK strives to help people move forward by providing personalised and perfect experiences, delivered by passionate colleagues. In 2017, we have made significant progress in establishing the ring-fenced bank, protecting our customers and clients and transforming our business through digitisation and automation. **Ashok Vaswani** CEO, Barclays UK #### Overview of products, services and clients Our future ring-fenced bank, Barclays UK, is a personal and business banking franchise, built around our customers’ needs with innovation at its core. Our Personal and Premier Banking financial solutions help customers move forward by putting them at the heart of everything we do, connecting the different aspects of their lives to their financial lives, at a time that suits them. Barclaycard Consumer UK is a leading credit card provider, offering flexible borrowing and payment solutions, while delivering a market-leading customer experience. Wealth, Entrepreneurs and Business Banking serves a spectrum of clients, from those who manage their own investments to small and medium-sized enterprises (SMEs) who need specialist advice, products and services. #### Market and environment in which the division operates Against the background of a prolonged uncertain political and economic climate in the UK, we continue to deliver solid financial performance and provide innovative solutions for our customers and clients. The operating environment continues to be challenging including rapidly changing customer behaviours; increasing expectations of society and regulators; and significant technological disruption amid the threat of dis-aggregation from competitors and new entrants. However, we have a leading brand, a solid customer base and we remain well positioned in the current environment. #### Barclays UK operational model * **Customers and Clients**: Individuals; Businesses (SMEs) * **Products and services**: Personal banking services; Credit cards and transactional lending; Investment products and services; Business banking solutions * **Value creation**: To our customers and clients – Building meaningful relationships to provide relevant financial solutions; To society – Helping communities move forward; To Barclays – Ring-fenced UK-focused bank with sustainable returns and prudent balance growth * **Contribution to Group**: £7.4bn Income; £1.7bn Profit before tax; 9.8% RoTE; 66% Cost: income ratio; £70.9bn Risk Weighted Assets --- ## Personal Banking ### Our performance in Personal Banking Our Personal and Premier Banking team develop transparent and innovative solutions for our customers. We help customers move forward by putting them at the heart of everything we do, connecting the different aspects of their lives to their financial lives, at a time that suits them. This ranges from opening their first bank account to completing a mortgage on their dream home. This year we created a single Product and Propositions team, bringing together our core product capabilities in Current Accounts, FX and Insurance, Consumer Lending, Mortgages and Savings with our newer Information Business and Mobile Payments products, as well as with the Community and Premier segments they serve. Through doing this, we are now able to more fully anticipate and deliver responses to our customers’ needs and understand what they want in the moment they need it. #### Moving Barclays UK forward 2017 has seen a continued focus on rewarding customer loyalty and creating advocates for every interaction. Over 930,000 customers now benefit from Blue Rewards, including Cashback. We landed our first 10% Cashback retail offers and have helped our customers earn over £5 million in savings since Cashback was launched. Technology and data are such fundamental parts of how we serve customers and clients that it is vital that we all become more digitally savvy and help our customers to do the same. We started several years ago with the nationwide force of Digital Eagles, offering our customers and clients the help and resources to improve their digital skills; and continued this year with our Digital Safety campaign which aims to heighten awareness and educate our customers to be digitally safe. Leveraging our data to benefit our customers and clients is a fundamental pillar of our strategy. We launched Local Insights, providing consumers, businesses and MPs key insights about their local area. We celebrated one year of our Barclays Identity Service, which allows consumers to access government services such as tax self-assessment online in a simplified, secure manner. We launched a new online Track Savings Goals tool available through Barclays Finance Manager, which aims to support customers in setting and reaching their targets. Our Mortgages business has continued to focus on enhancing the customer experience this year, and has won eight awards$^a$ in 2017. We’ve also continued to enhance our CloudIt offering, including allowing customers to access their mortgage statements online. #### Helping our customers and colleagues Barclays has made significant progress to enhance accessibility this year. Our high visibility and tactile debit cards aren’t just useful for the visually impaired – many people struggle to read the numbers on their card – so we’ve offered a high contrast design option. We also launched a new larger audio PINsentry device to facilitate easier access to online banking for customers with dexterity and sight difficulties, enabling them to continue to do their banking independently. We have supported customers in vulnerable circumstances by automating complex processes such as registering a power of attorney. As well as delivering for our customers and clients, we need to ensure we deliver for our colleagues too. Our focus on investment in training, development and coaching as well as creating new ways to engage and support our colleagues continues. Our colleagues’ needs are changing just as those of our customers are, and empowerment, dynamic and flexible working as well as improved technology have been a strong focus as we develop a world-class team who put the customer at the centre of everything they do. > “Barclays has always believed in me. The real support has come from my points of contact at the bank. It’s these relationships that not only keep me banking with Barclays, but encourage me, without a shadow of a doubt, to recommend Barclays.” > > **Kieran Miles**, Premier Customer --- ## Barclaycard Consumer UK ### Our performance in Barclaycard Consumer UK Barclaycard Consumer UK is a leading credit card provider, providing flexible borrowing and payment solutions to around 10 million customers in the UK. We help people move forward, by enabling them to borrow and pay in a way that suits them. We are a responsible lender, providing credit based on credit history, ability to afford credit and our risk appetite, while delivering a market-leading customer experience. Barclaycard Consumer UK offers a suite of products to our customers. Our Barclaycard Initial credit card is aimed at customers who are looking for a first credit card, or have a limited credit history, and helps them to build a credit profile. Our Barclaycard Platinum card offers promotional savings on balance transfers and purchases for borrowers with good credit history. Alternatively, shoppers can earn reward points everywhere they shop with our Barclaycard Freedom Rewards credit card. The UK credit market continues to experience considerable change, driven by new competitors, new technologies, economic and regulatory pressures, and changing consumer expectations and behaviour. We are responding by developing new products and services for our consumers. For example, this year we have further diversified our offers to new and existing customers with the launch of our Barclaycard Platinum travel card, which has no non-Sterling transaction fees on foreign spend and ATM withdrawals. **This year also saw the integration of Barclaycard Consumer UK with our retail bank to build and grow more sustainable income while reducing complaints and creating better customer experience.** The integration of Barclaycard Consumer UK into Barclays UK has progressed with focus on enhancing the customer experience, as well as leveraging resources, technology and digital capabilities. We are continuously looking for ways to improve the customer experience we deliver. Throughout 2017 we focused on reducing customer complaints, maintained a stable Relationship NPS and reached new records on several transaction NPS, including Customer Service. We are pleased to have won a number of awards, acknowledging the market-leading service we offer our customers. We were recognised at the Top 50 Companies for Customer Service Awards, with two awards, Best Extra-Large Centre and Best Social Media Team. We support consumers by providing free credit scores, and personalised hints and tips on how to become fraud smart. Fraud-related activity is increasing and our research tells us that customers are increasingly concerned about how to protect themselves, and look to us to help provide support and information. We developed a digital interactive Fraud Fighter Tool to help customers understand where they are vulnerable and what they could do to better protect themselves, by giving them personalised fraud prevention tips. We also launched the Barclaycard Start Today campaign, to encourage people to start something new that they always wanted to do. So whether it is signing up to those pottery lessons or buying a bike, Barclaycard is there for our customers to help them move forward. --- ## Wealth, Entrepreneurs and Business Banking ### Our performance in Wealth, Entrepreneurs and Business Banking Within Wealth, Entrepreneurs and Business Banking, Wealth and Investments serves a spectrum of clients, from those who manage their own investments and require an execution service, to those who require a dedicated and holistic service through our Wealth Management services. Business Banking offers specialist advice, products and services to over one million business clients across the UK, helping them to run and grow their business, from start-ups through to mid-sized businesses. #### Wealth and Investments overview Wealth and Investments is formed of two businesses; Wealth Management and Smart Investor, both of which are supported by our in-house investment and asset management capabilities. Clients of our Wealth Management business benefit from holistic advice in banking, credit, wealth planning, and investments through their dedicated Wealth Manager and access to specialists across Wealth and Investments and the wider Barclays UK division. Despite significant investment in regulations required, Wealth Management has achieved a strong performance, and achieved year on year growth in client acquisitions. **Despite significant investment in regulations required, Wealth Management has achieved a strong performance, and achieved year on year growth in client acquisitions.** Smart Investor provides clients access to a wide range of investment products, educational resources to help build their confidence in investing, and tools to assist in planning for their future. The focus of the business this year has been launching Smart Investor and migrating over 225,000 existing Stockbrokers’ clients onto the new platform. This allows our clients to leave the day-to-day management of their investments to our experts, thereby taking the complexity out of investing. This year, we launched the Multi-Impact Growth Fund, the first impact-investing vehicle of its kind from a major UK bank, offering mainstream investors the opportunity to generate long-term capital growth while making a positive contribution to society. #### Business Banking overview Our Business Banking unit provides coverage for clients across the UK at every stage of their business cycle in every industry, delivering distribution models which match clients’ needs and sophistication. This year, we launched our SmartBusiness Dashboard and App and now have over 12,000 clients benefiting from this unique client experience. With all their key business data in one handy place, our business clients are now spending more time within SmartBusiness and reaping the benefits. The roll-out of Direct, our unique telephony relationship model for small business and start-up customers, has vastly increased the number of conversations and in-depth client reviews we are able to have, which directly benefits over 900,000 customers already on this new, interactive model. In 2017, we supported more clients, reduced account opening times, lent more money and generated more income than in 2016 through targeting sustainable, long-term growth. Our aim in 2018 is to empower our colleagues through continuing to invest in technology and services. --- ## Barclays International ### Our performance in International Barclays International is the diversified transatlantic, wholesale and consumer bank within Barclays Bank PLC. Encompassing the Corporate and Investment Bank, Barclaycard International and Private Bank and Overseas Services businesses, our dual home markets in the UK and US anchor our business in the two most important global financial centres. **Tim Throsby** President, Barclays International and Chief Executive Officer, Corporate and Investment Bank #### Overview of products, services and clients On the consumer side, within Barclaycard International, we provide consumers with credit cards, lending and deposit accounts. In Private Bank and Overseas Services, we provide banking, investment and wealth management services. For SMEs and corporates, we enable payment acceptance, commercial card payments and point-of-sale finance. Through our Corporate and Investment Bank, we serve our clients by providing advice, financing, trade and payment solutions, and raising capital. We support our institutional clients through sales and trading of securities. Our business model in Barclays International is dependent upon our client relationships, the services we provide to our clients and our capital – human, technological and financial. In 2017, Barclays International contributed 68% to Group income with an RoTE of 6.6%, excluding the impact of the US deferred tax assets remeasurement. #### Barclays International operational model * **Customers and Clients**: Corporates; Financial institutions; Institutional investors; Governments; Consumers; High and Ultra-High Net Worth Individuals; Family Offices * **Products and services**: Financial advice; Primary capital raising and capital markets execution; Risk and liquidity management; Lending; Sales and trading; International credit cards; Consumer payments; Banking; Investments; Wealth management * **Value creation**: To our customers and clients – we create value by facilitating the transmission of money from providers to users of capital; To society – we provide financing to a range of social and environmental segments; To shareholders – as a diversified transatlantic, wholesale and consumer bank * **Contribution to Group**: £14.4bn Income; £3.3bn Profit before tax; 3.4% RoTE (6.6% excl. the impact of the US deferred tax assets remeasurement); 69% Cost: income ratio; £210.3bn Risk Weighted Assets --- ## Corporate and Investment Bank ### Our performance in the Corporate and Investment Bank The Corporate and Investment Bank offers wholesale banking products and services to corporate and institutional clients. The business is focused on serving our UK and US home markets, while supporting the global ambitions of our strategic clients. The Corporate and Investment Bank includes our markets, investment banking, corporate banking and research businesses. #### Business update Our markets businesses provide execution, prime brokerage and risk management services across the full range of asset classes including equity, fixed income and rates. With a new markets leadership team in place, we are highly focused on investments in technology to drive client successes and increase market share. For example, we migrated to a new digital platform and funded critical upgrades to our electronic trading platforms in 2017. We are focused on the standardisation and simplification of post-trade technologies with the backdrop of a strong regulatory and controls environment. In 2017, Barclays was named Best Bank for FX in London and Best Bank for GBP/USD in FX Week’s annual awards. Our investment banking business provides long-term strategic advice on mergers and acquisitions, corporate finance and strategic risk management solutions, and equity and credit origination capabilities. In 2017, Barclays achieved its highest global fee share in three years$^a$, and was the number one ranked bank in the UK for the first time since 2012$^a$. Bolstered by strong mergers and acquisitions activity, we advised on numerous landmark deals to deliver for our clients. Our Leveraged Finance business reached its highest ever global fee share, ranking Barclays top four for the second consecutive year$^a$. Barclays was named 2017 Sterling Bond House of the Year by *IFR magazine* – with over 150 Sterling bond issues. Serving clients across a number of industries and segments, Barclays is proud to be a top three financier of capital for supranationals, sovereign and agency institutions$^a$, enabling the funding of critical infrastructure and helping to promote global economic growth and stability. With industry expertise and a history of innovation, our corporate banking business provides comprehensive banking, financing, trade and payment solutions to businesses across the UK. For example, Barclays has supported Pod Point, the UK’s leading provider of electric vehicle charging since inception in 2009. Barclays’ venture debt offering – enabled by our innovation finance product which is partly guaranteed by the European Investment Fund – has supported Pod Point to gain early access to capital so they can focus on developing their business. Finally, our research business delivers independent, thought-leading content across Equities, Credit, Macro and Quantitative Portfolio Strategy. The implementation of MiFID II has brought unprecedented change to the research industry and reinforced Barclays’ commitment to providing clients with differentiated market insights, actionable trade ideas and thematic views delivered through publications, one-to-one analyst interactions, conferences and events. --- ## Consumer, Cards and Payments ### Our performance in Consumer, Cards and Payments Consumer, Cards and Payments includes Barclaycard International and the Private Bank and Overseas Services. Barclaycard International provides branded and co-branded consumer credit cards, lending and deposit accounts to our customers in the US and Germany, and payment solutions to our clients in the UK. Private Bank and Overseas Services provide banking, investment and wealth management services to over 160,000 clients, globally. #### Barclaycard International Our Barclaycard International business operates in three divisions: Barclaycard US, Barclaycard Business Solutions and Barclaycard Germany. Barclaycard US offers co-branded and branded credit cards in the US, along with consumer loans and online retail deposits. We are the ninth-largest credit card issuer in the market and this business has strengthened further in 2017. We launched a new co-branded credit card with Uber, which featured a ground breaking integration into the Uber app, offering a simple, seamless and frictionless customer experience. Our relationship with existing partners strengthened further, with our JetBlue co-branded card being named the ‘best no-fee loyalty airline card’ for 2017 by *MONEY magazine*. Across all credit card products, Barclaycard US added over two million new accounts in 2017. In addition, our Barclays-branded consumer retail deposits now exceed $12.5bn. Barclaycard Business Solutions provides merchant acquiring, payments integration and acceptance, payment gateway, commercial payments and point-of-sale consumer finance solutions in the UK. We are a leading provider in all our businesses and we are one of the largest payment acceptance providers in Europe. In 2017, we processed close to £250bn in payments through acquiring. **In 2017, we processed close to £250bn in payments through acquiring.** In 2017, we completed a four-year investment in a new core payment processing platform that provides omni-channel, multi-currency and multi-geography settlement capabilities to help us strengthen our merchant relationships and support their growth. Coinciding with the launch of Apple’s iPhone 8 and X, Barclays Partner Finance rolled out an in-store financing offer in the UK with 131,000 applications received in-store since launch. We are also now a preferred partner for UK point-of-sale finance for Tesla via a digital in-store offering. Barclaycard Business Solutions’ electronic funds transfer platform, known as PrecisionPay Bank Transfer, went live in Q3 with a successful launch, providing clients with the ability to pay their suppliers via bank transfer, which is funded by a commercial card. Barclaycard has been present in Germany for over a quarter of a century and now serves over 1.2 million cards and loans customers. We are the leading issuer of revolving credit cards in the country by outstanding balances. We also have a strongly growing instalment loans business as well as an online deposit product. In recognition of our focus on innovative products and features, all three Barclaycard open market products (New Visa, Gold and Platinum) received several best-in class recognitions from leading German business and finance magazines. Barclaycard Germany continues to drive exceptional customer satisfaction rankings, with the business placing in the top two for both cards and loans. We also provide cards and lending in Norway, Sweden and Denmark via our EnterCard joint venture with Swedbank and we are a leading player in the region. --- ## Head Office and Group Service Company ### Our service operations The Head Office function contains the central operations of the Group. With the reintegration of remaining legacy assets and businesses in the second half of 2017, the function became a more material contributor to the Group results. Going forward, many of the Head Office functions will be within the Group Service Company. The scale of the Group Service Company is substantial, accounting for around 42,000 colleagues working globally. It delivers services across a wide range of technical and functional capabilities, including Compliance, Corporate Relations, Legal, Risk, Real Estate, Finance, Operations and Technology. The Group Service Company operates as a separate legal entity with its own Board of Directors, thereby promoting transparency and increased accountability. The Group Service Company is also a major step in the delivery of our structural reform programme. It is Barclays’ response to the ring-fencing requirements established by the UK Government following the financial crisis that began in 2007. Grouping our services together in this way will allow us to maintain operational continuity for our business units and facilitate the execution of our recovery and resolution plans in the event of financial difficulty, thereby strengthening the overall resilience of the Barclays Group. It also means we have a centre of excellence for services required by the business, such as fraud management and cyber security, where we can reduce duplication and benefit from implementing best practice across all of our businesses. *For further information on the timeline and progress of our structural reform programme, please see page 204.* The Head Office of Barclays includes the impact of treasury operations, which manage the capital, funding and liquidity position of the Group. In 2017, the Head Office became more significant for Barclays as it contained some of the costs associated with the legacy assets and businesses, which were reintegrated on 1 July 2017. These factors contributed to a £834m loss before tax in 2017. From 1 April 2018, the treasury operations will be embedded into the respective legal entities of Barclays Bank UK PLC, and Barclays Bank PLC, as well as into Barclays PLC. **The Group Service Company has significant commercial and competitive value.** Central operations are already operating through the Group Service Company – a separate legal entity, recharging all of its costs to the two legal entities. The Group Service Company was ‘stood up’ in September 2017 and is the hub through which we will deliver a wide range of operations, technology and functional services to the Barclays Group and the two legal entities of Barclays Bank UK PLC and Barclays Bank PLC. The purpose of the Group Service Company is to provide world-class services that are high quality, efficient and cost effective, to support our goal to be at the forefront of industry change and innovation. With significant commercial and competitive value, we believe the Group Service Company will radically reduce duplication of effort and cost, allowing us to give a more consistent and seamless experience to our colleagues, clients and customers. This will allow us to lead the way in next generation products and services in banking, to fully embrace the advantages that lie in automation, capitalise on our data and to innovate like a Fintech. We intend to unlock efficiencies and release capital for strategic investment, helping to drive the optimisation of Barclays as a whole and delivering value to our shareholders. --- ## Our people and culture ### Our ongoing commitment to our people drives our success **Fostering the right culture at Barclays is critical to our success. By promoting respect, diversity and performance in the workplace we strive for excellence to deliver the best results for our customers and clients, taking pride in our achievements. We continue to be focused on the importance of embedding a conduct and values-based culture throughout the organisation and this is at the core of our strategy and processes. In recognising the significance of this commitment, conduct, culture and values remained one of our strategic priorities in 2017.** In 2016, we developed a culture measurement framework, anchored in our values to track and measure cultural progress across the Group. In 2017, we focused on embedding this framework, ensuring it is a key component of the non-financial metrics reviewed to assess the performance and culture of Barclays. Through this framework, and the results from our employee opinion survey ‘Your View’, quarterly insights, key cultural metrics and performance indicators are produced, stimulating management discussions which result in actions and decisions to further promote and embed a conduct and values-based culture. **We continue our ambition to become the most accessible, inclusive and sought after employer, where colleagues feel engaged and empowered to achieve their best in order to deliver the best for our customers and clients.** We are pleased that in 2017 the sustainable engagement of our employees improved to 78% across the Group. This year colleagues were asked to select the phrases that they would use to describe the current culture at Barclays and we are encouraged that customer satisfaction, continuous improvement and growth are some of the top words selected. Focus continues in areas that we know are key to advancing cultural change, for example our Dynamic Working and employee well-being campaigns, as well as prioritising positive mental health awareness through our ‘This is Me’ campaign. Our ongoing commitment towards increasing female representation at all levels across Barclays remains a core focus of our talent management and leadership succession processes and we recognise that our commitment to greater gender equality is integral to drive societal change in equality, diversity and inclusion. Further details on our gender diversity commitments and additional highlights from across our Diversity and Inclusion strategy can be found in the People section on pages 89 to 92. We continue to run Group CEO sponsored Enterprise Leaders’ Summits, which seek to develop the next generation of enterprise leaders and strengthen a culture of collaboration among our leaders in order to deliver improved solutions and products for our customers and clients. The control functions rotational programme launched in 2016, which was expanded this year, recognises that future leaders in our businesses must have a strong awareness and understanding of the control environment. The programme provides colleagues the opportunity to work within a control function gaining valuable perspective. --- ## Governance compliance ### Compliance with the UK Corporate Governance Code A snapshot of how Barclays complies with the requirements of the UK Corporate Governance Code (the Code) is set out below. For further information, see pages 80 to 84. ### Leadership There is clear division of responsibilities between the Chairman, who runs the Board, and the Group Chief Executive, who runs the Group’s business. Individual roles on the Board and their responsibilities are set out in Barclays’ Charter of Expectations. The Senior Independent Director, Sir Gerry Grimstone, provides a sounding board for the Chairman, acts as an intermediary for the other Directors when necessary and is available to shareholders if they have concerns that have not been addressed through the normal channels. The Board has set out Barclays’ culture, values and behaviours in the Barclays Values and Purpose and The Barclays Way, which are embedded throughout the Group. Directors are expected to provide rigorous and constructive challenge on matters that, owing to their strategic, financial or reputational implications or consequences, are considered significant to the Group. ### Effectiveness The skills, knowledge and experience needed for an effective Board are recorded on a skills matrix, which is used by the Board Nominations Committee to inform Director recruitment, induction and ongoing development. The composition of principal Board Committees meets the independence criteria of the Code and there is appropriate cross-membership to further promote effectiveness. 11 of 14 Directors are independent non-executive Directors (79%), while the Chairman was independent on appointment. As at the date of this report, there are three female Directors (21%), compared to our target of 33% by 2020 which the Board remains committed to achieving. The Board Nominations Committee regularly considers Board and senior management succession plans. Appointments to the Board are made following a formal, rigorous and transparent process, based on merit, taking into account the skills, experience and diversity needed on the Board in the context of Barclays’ strategic direction. All Directors are expected to commit sufficient time to fulfil their duties to Barclays. In 2017, Directors’ attendance at scheduled Board meetings was 99% and across the scheduled Board Committee meetings was an average of 94%. The Board assesses its effectiveness and that of its Committees and the individual Directors annually in a process that is externally facilitated by an independent third party. Directors are subject to election or re-election each year by shareholders at the AGM. Barclays’ Charter of Expectations sets out responsibilities for providing the Board with accurate, timely and high-quality information necessary for it to fulfil its duties. **The Board, assisted by its Risk and Reputation Committees, conducts robust assessments of the principal risks facing Barclays.** ### Accountability The Board is responsible for setting Barclays’ risk appetite, that is, the level of risk it is prepared to take in the context of achieving Barclays’ strategic objectives. Barclays’ Enterprise Risk Management Framework is designed to identify and set minimum requirements in respect of the main risks to achieving the Barclays’ strategic objectives and to provide reasonable assurance that internal controls are effective. The Board, assisted by its Risk and Reputation Committees, conducts robust assessments of the principal risks facing Barclays, including those that would threaten its business model, future performance, solvency or liquidity. It reports on this in the annual viability statement on pages 40 and 41. --- ## Viability statement While the financial statements and accounts have been prepared on a going concern basis, the UK Corporate Governance Code also requires the Directors to make a statement in the Annual Report regarding the viability of the Group, including explaining how they assessed the prospects of the Group, the period of time for which they have made the assessment and why they consider that period to be appropriate. In light of the analysis summarised below, the Board has assessed the Group’s viability and confirms that the Directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the next three years. This timeframe is used in management’s Working Capital and Viability Report (WCR), prepared at February 2018. The availability of the WCR gives management and the Board sufficient visibility and confidence on the future operating environment for this time period. The three-year timeframe has also been chosen because: * it is within the period covered by the Group’s future projections of profitability, cash flows, capital requirements and capital resources; * it is also within the period over which regulatory and internal stress testing is carried out; and * it is representative of the continued level of regulatory change in the financial services industry. The Directors are satisfied that this period is sufficient to enable a reasonable assessment of viability to be made. In making their assessment the Board has: * carried out a regular and robust assessment of the Group’s risk profile and material existing and emerging risks. Notable among these are risks which senior management believe could cause the Group’s future results of operations or financial condition to differ materially from current expectations or could adversely impact the Group’s ability to maintain minimum levels of regulatory capital, liquidity, funding and the minimum requirement for own funds and eligible liabilities (‘MREL’) over the period of the assessment; * reviewed how those risks are managed and controlled (further detail provided on pages 127 to 137); * considered the WCR which provides an assessment of forecast CET1, leverage ratio, Tier 1 and total capital ratios, as well as the build-up of MREL up to 2022; * reviewed the Group’s liquidity and funding profile, particularly Barclays’ internal liquidity risk appetite (LRA) and regulatory liquidity coverage ratios; * considered the Group’s viability under specific internal and regulatory stress scenarios; * considered the stability of the major markets in which it operates, the risks posed by the simplification of the business model and regulatory changes; * considered the impacts of structural reform, including the creation of the UK ring-fenced bank; * reviewed the draft statutory accounts and the in-depth disclosure of the financial performance of the Group; * considered the Group’s medium-term plan (MTP); and * reviewed the legal, competition and regulatory matters set out in Note 29 to the financial statements on pages 285 to 293. Risks faced by the Group’s business, including in respect of conduct, capital and operational risk, are controlled and managed within the Group in line with the Enterprise Risk Management Framework and the relevant Principal Risk Frameworks, through the Three Lines of Defence model. Executive management set a Risk Appetite for the Group, which is then approved by the Board. The second line set limits, within which the first line are required to operate. Management and the Board then oversee the associated Risk Profile. Internal Audit comprise the third line of defence and provide independent assurance to the Board and Executive Management over the effectiveness of governance, risk management and control over current, systemic and evolving risks. A full set of material risks to which the organisation is exposed can be found in the Material Existing and Emerging Risks on pages 121 to 126. Certain particular risks to viability identified by the Board are detailed below. These have been chosen on the basis of their ability to impact viability over the timeframe of the assessment but in some instances the risks exist beyond this timeframe. These particular risks include: * legal proceedings, competition, regulatory and conduct matters giving rise to the potential risk of fines, loss of regulatory licences and permissions and other sanctions, as well as potential adverse impacts on our reputation with clients and customers and on investor confidence and/or potentially resulting in impacts on capital, liquidity and funding; * sudden shocks or geopolitical unrest in any of the major economies in which the Bank operates which could impact credit ratings, alter the behaviour of depositors and other counterparties and affect the ability of the firm to maintain appropriate capital and liquidity ratios; and * evolving operational risks (notably cyber security and technology) and the ability to respond to the new and emergent technologies in a controlled fashion. --- ## Governance This section sets out our corporate governance processes and the role they play in supporting the delivery of our strategy, including reports from the Chairman and each of the Board Committee Chairmen. | Directors’ report | Page | | :--- | :--- | | UK Corporate Governance Code | Index to disclosures: 44 | | Chairman’s introduction | 45 | | Who we are | Board of Directors: 47; Group Executive Committee: 49 | | What we did in 2017 | Board report: 50; Board Audit Committee report: 53; Board Risk Committee report: 64; Board Reputation Committee report: 69; Board Nominations Committee report: 75 | | How we comply | 80 | | Other statutory information | 85 | | People | 89 | | Remuneration report | 93 | --- ## Governance: Directors’ report ### UK Corporate Governance Code – index to disclosures “The purpose of corporate governance is to facilitate effective, entrepreneurial and prudent management that can deliver the long-term success of the company.” The UK Corporate Governance Code The UK Corporate Governance Code (the Code) is not a rigid set of rules. It consists of principles (main and supporting) and provisions. The Listing Rules require companies to apply the main principles and report to shareholders on how they have done so. You can find our disclosures as follows: ### Leadership Every company should be headed by an effective board which is collectively responsible for the long-term success of the company. * Board of Directors: 47 * Composition of the Board: 81 There should be a clear division of responsibilities at the head of the company between the running of the board and the executive responsibility for the running of the company’s business. No one individual should have unfettered powers of decision. * Roles on the Board: 80 The chairman is responsible for leadership of the board and ensuring its effectiveness on all aspects of its role. * Roles on the Board: 80 As part of their role as members of a unitary board, non-executive directors should constructively challenge and help develop proposals on strategy. * Roles on the Board: 80 ### Effectiveness The board and its committees should have the appropriate balance of skills, experience, independence and knowledge of the company to enable them to discharge their respective duties and responsibilities effectively. * Board of Directors: 47 * Board diversity: 46 There should be a formal, rigorous and transparent procedure for the appointment of new directors to the board. * Appointment and re-election of Directors: 77 All directors should be able to allocate sufficient time to the company to discharge their responsibilities effectively. * Attendance: 80 * Time commitment: 81 All directors should receive an induction on joining the board and should regularly update and refresh their skills and knowledge. * Induction: 81 * Training and development: 82 The board should be supplied in a timely manner with information in a form and of a quality appropriate to enable it to discharge its duties. * Information provided to the Board: 82 The board should undertake a formal and rigorous annual evaluation of its own performance and that of its committees and individual directors. * Review of Board and Board Committee effectiveness: 78 All directors should be submitted for re-election at regular intervals, subject to continued satisfactory performance. * Composition of the Board: 81 * Appointment and re-election of Directors: 77 ### Accountability The board should present a fair, balanced and understandable assessment of the company’s position and prospects. * Strategic Report: 2 * Risk management: 119 * Viability statement: 40 The board is responsible for determining the nature and extent of the principal risks it is willing to take in achieving its strategic objectives. The board should maintain sound risk management and internal control systems. * Risk management and internal control: 82 The board should establish formal and transparent arrangements for considering how they should apply the corporate reporting, risk management and internal control principles, and for maintaining an appropriate relationship with the company’s auditors. * Board Audit Committee report: 53 * Accountability: 82 ### Remuneration Executive directors’ remuneration should be designed to promote the long-term success of the company. Performance-related elements should be transparent, stretching and rigorously applied. * Remuneration report: 93 There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his or her own remuneration. * Remuneration report: 93 ### Relations with shareholders There should be a dialogue with shareholders based on the mutual understanding of objectives. The board as a whole has responsibility for ensuring that a satisfactory dialogue with shareholders takes place. * Stakeholder engagement: 84 The board should use general meetings to communicate with investors and to encourage their participation. * Stakeholder engagement: 84 --- ## Chairman’s introduction Throughout this period of activity and change, your Board has been providing critical oversight of executive management to oversee the successful execution of the Group’s long-term strategy. ### Dear Fellow Shareholders Welcome to my 2017 corporate governance report. In my Chairman’s letter on page 2, I highlighted the significant milestones and achievements for Barclays in 2017, including the further sell-down of our interest in Barclays Africa Group Limited, the closure of Barclays Non-Core, progress towards the establishment of our ring-fenced bank in 2018 as well as preparations for the UK’s departure from the EU. Throughout this period of activity and change, your Board has been providing critical oversight of executive management to oversee the successful execution of the Group’s long-term strategy. I firmly believe and have often said that the role of the Board is to create long-term, sustainable value for our shareholders. In order to do this, we must have a robust corporate governance framework, providing systems of checks and controls to ensure accountability and drive better decision-making, and also policies and practices which ensure that the Board and its Committees operate effectively. Part of this is creating an environment which encourages a constructive relationship between the Board and executive management to enable an appropriate level of debate, challenge and support in the decision-making process. I am pleased to report that in 2017 your Board and executive management continued to demonstrate this dynamic as we worked together in executing strategy. The impending changes to our Group corporate structure following structural reform has been a significant area of focus for the Board in 2017 and no doubt will continue to be at the forefront of our minds in 2018. After approving for appointment Sir Gerry Grimstone as the Chairman of Barclays International and Sir Ian Cheshire as the Chairman of Barclays UK, we worked closely with both of them to recruit high quality candidates to build the boards of those two entities. Our aim is to ensure that corporate governance within Barclays is in line with best practice for FTSE100 companies and as a Board we will work hard to ensure that our governance framework is always providing the strong foundation needed for effective management of the Group. ### Board changes in 2017 Through the Board Nominations Committee, we are always considering whether we have the right mix of individuals on the Board, providing an appropriate balance and diversity of skills, experience and perspectives. It is important that it is inherent within the composition of the Board that a broad range of perspectives and views are able to be provided which are representative of our customers, clients and employees as the foundations of our Bank. In addition, we are also regularly thinking about Board succession planning and ensuring we have a strong pipeline of directors to steer the Group over the long term. With this in mind, we brought on three new non-executive Directors in 2017: Sir Ian Cheshire, Matthew Lester and Mike Turner CBE, all of whom have significant board-level experience and bring specific sector and technical expertise to your Board. During 2017, Diane de Saint Victor and Steve Thieke, both non-executive Directors, left the Board and I thank them on behalf of the Board for their contributions and service. With the changes in 2017, our current female representation on the Board sits at 21%. Last year I reported that we set ourselves a Board diversity target of having 33% female representation on the Board by 2020. We are conscious that our gender diversity balance on the Board has fallen from 2016, but remain committed to achieving the target that we have set. Ensuring diversity of gender, as well as diversity in its other forms such as ethnicity, is built into our governance processes around Board composition and succession planning, and you can read more about this in the Board Nominations Committee report on pages 75 to 79. --- ## Chairman’s introduction (continued) ### Conduct, culture and values The Board also actively supports diversity throughout the Group. To attract and retain the best talent, we need to create an environment in which colleagues can thrive, develop and achieve their ambitions. I am very proud of the initiatives that we have at Barclays to encourage diversity and support inclusion among colleagues. Most recently, we launched a campaign aimed at increasing mental health awareness as Barclays aims to become a ‘mental health confident’ organisation, and we are delighted that our Chief Internal Auditor, Sally Clark, is the Executive sponsor for ‘Be Well’, our well-being initiative. Everything we do at Barclays is underpinned by the Barclays Values and Purpose, and we must act with respect, transparency and integrity in our interactions with stakeholders and with each other to create the right culture, and encourage the right behaviours by colleagues, across the Group. With that framework, we can build and maintain the trust and confidence of our stakeholders and the market. An important part of our strategy in relation to cultural progress and embedding our Barclays Values is our citizenship strategy, the Shared Growth Ambition, where our long-term aim is to create and grow a collection of products, services and partnerships that improve the lives of people in the communities that we serve. In 2017 we launched Barclays’ ‘green bonds’ as part of our support for the transition to a sustainable and low carbon economy. This was the first green bond issued by a UK bank using UK assets, and you can read more about this on page 7. Initiatives like this not only enable us to contribute meaningfully to society, but also enable us to better understand the environment in which we operate and our wider societal obligations, supporting the Board’s objective of delivering sustainable returns to shareholders. *You can read more about the Shared Growth Ambition at [home.barclays/citizenship](http://home.barclays/citizenship)* ### Stakeholder views As a Board we are conscious of the impact that our business and decisions have on our customers, clients and employees as well as our wider societal impact. It is through an appreciation of our stakeholders that we can create a strategy aimed at delivering sustainable returns to our shareholders over the long term. The Board is supported in this role by the Board Reputation Committee, which monitors key indicators across the areas of conduct, culture, citizenship and customer satisfaction, as well as Barclays’ reputation and events that occur which may impact the trust in our brand. The Board receives information about, and engages with, our various stakeholders throughout the year and one of the most important dates in our calendar is our Annual General Meeting, which gives the Board an opportunity to meet our shareholders and hear their views. During the year the Board is kept informed of shareholder views through regular updates from the Head of Investor Relations, as well as the views of employees through the results of the Barclays Your View employee opinion surveys. Another key stakeholder of Barclays is our regulators, and during 2017 the Board invited representatives of our regulators to attend meetings to hear directly their views and expectations of Barclays. All of these views form the context in which Board decision-making takes place and feeds into the considerations and debate when determining the Group’s strategy. ### Board effectiveness To deliver our strategy and achieve the delivery of long-term, sustainable value for shareholders requires an effective Board. It is an important part of my role as Chairman to satisfy myself that the Board – both collectively and its individual members – operates effectively. Each year, we conduct a self-assessment of our performance with the aid of an independent facilitator. As part of this process, I receive a report on the performance of our individual Directors, and our non-executive Directors, led by our Senior Independent Director, have the opportunity to review my performance. I am pleased to report that the results of the findings showed that your Board and its Committees are still operating effectively. There are, of course, areas to work on and challenges ahead once the new Group structure is crystallised following the stand-up of our new ring-fenced bank in 2018. Ensuring that there is clear accountability and delineated responsibilities in the new structure, not just between boards but also between committees and between the boards and the executive team, will be a key focus for us in 2018. You can read more about the findings and the review process undertaken for 2017 on page 78. ### Looking ahead 2018 will be another pivotal year for Barclays with the execution of our new Group corporate structure, and I look forward to working closely with the boards of Barclays UK and Barclays International to embed a strong framework to ensure clear, effective and consistent corporate governance. We will continue to work closely with executive management on improving performance within the Group’s businesses, without losing sight of the need to constantly be acting in line with the Barclays Values and Purpose to build on and retain the trust and confidence of our customers, clients, employees. Together with your Board, we remain focused on working hard to execute the Group’s strategy in order to create sustainable long-term value for our shareholders. **John McFarlane** Chairman 21 February 2018 ### Board diversity The Board has a balanced and diverse range of skills and experience. All Board appointments are made on merit, in the context of the diversity of gender, skills, experience and background required to be effective. #### Balance of non-executive Directors: executive Directors * Chairman: 1 * Executive Directors: 2 * Non-executive Directors: 11 #### Gender balance * Female: 3 * Male: 11 #### Length of tenure (Chairman and non-executive Directors) 1. 0-3 years: 6 2. 3-6 years: 4 3. 6-9 years: 2 #### Industry experience (Chairman and non-executive Directors)* 1. Financial Services: 12 (100%) 2. Political/regulatory experience: 12 (100%) 3. Current/recent Chair/CEO: 5 (42%) 4. Accountancy/auditing: 2 (17%) 5. Operations and Technology: 1 (8%) 6. Retail/marketing: 1 (8%) #### International experience$^\dagger$ (Chairman and non-executive Directors)* 1. International (UK): 10 (83%) 2. International (US): 2 (17%) 3. International (Rest of the World): 2 (17%) *Notes* *\* Individual Directors may fall into one or more categories.* *$^\dagger$ In relation to board experience based on the location of the headquarters/registered office of a company.* --- ## Who we are – Board of Directors ### John McFarlane Chairman Appointed: 1 January 2015 **Relevant skills and experience** John is Chairman of Barclays PLC and Barclays Bank PLC. He is a senior figure in global banking and financial services circles having spent over 40 years in the sector. John is currently chairman of TheCityUK and a member of the Financial Services Trade and Investment Board and the European Financial Round Table. Other current non-executive directorships include Westfield Corporation, Old Oak Holdings Limited and The International Monetary Conference. John was previously chairman of Aviva plc where he oversaw a transformation of the company, FirstGroup plc, and the Australian Bankers Association. He was also a non-executive director of The Royal Bank of Scotland, joining at the time of the UK Government rescue. Prior to that he was CEO of Australia and New Zealand Banking Group Limited for 10 years, group executive director of Standard Chartered and head of Citibank in the UK. **Other current appointments** Member of Cranfield School of Management Advisory Board; Member of Institut International d’Etudes Bancaires; Member of the President’s Committee Confederation of British Industry **Committees** Nominations (Chairman) ### Sir Gerry Grimstone Deputy Chairman and Senior Independent Director Appointed: 1 January 2016 **Relevant skills and experience** Sir Gerry brings to the Board a wealth of investment banking, financial services and commercial experience gained through his senior roles at Schroders and his various board positions. Sir Gerry has global business experience across the UK, Asia, the Middle East and the US. Sir Gerry has significant experience as a non-executive director and chairman. He is currently the chairman of Standard Life Aberdeen plc, independent non-executive board member of Deloitte NWE LLP, board adviser to the Abu Dhabi Commercial Bank and the lead non-executive at the Ministry of Defence. **Other current appointments** Financial Services Trade and Investment Board **Committees** Nominations, Reputation (Chairman) ### Jes Staley Group Chief Executive Appointed: 1 December 2015 **Relevant skills and experience** Jes joined Barclays as Group Chief Executive on 1 December 2015. He has nearly four decades of extensive experience in banking and financial services. He worked for more than 30 years at JP Morgan, initially training as a commercial banker, later advancing to the leadership of major businesses involving equities, private banking and asset management and ultimately heading the company’s Global Investment Bank. Jes is currently a member of the Institute of International Finance and formerly served as managing partner at BlueMountain Capital. These roles have provided him with a vast experience in leadership and he brings a wealth of investment banking knowledge to Barclays’ Board. **Other current appointments** None **Committees** None ### Tim Breedon CBE Non-executive Appointed: 1 November 2012 **Relevant skills and experience** Tim joined Barclays after a distinguished career with Legal & General, where, among other roles, he was the group chief executive until June 2012. Tim’s experience as a CEO enables him to provide challenge, advice and support to the executive on performance and decision-making. Tim brings to the Board extensive financial services experience, knowledge of risk management and UK and EU regulation, as well as an understanding of the key issues for investors. **Other current appointments** Marie Curie; Chairman, Apax Global Alpha Limited; Chairman, The Northview Group **Committees** Audit, Nominations, Remuneration, Risk (Chairman) ### Mike Ashley Non-executive Appointed: 18 September 2013 **Relevant skills and experience** Mike has deep knowledge of auditing and associated regulatory issues, having worked at KPMG for over 20 years, where he was a partner. Mike was the lead engagement partner on the audits of large financial services groups including HSBC, Standard Chartered and the Bank of England. While at KPMG, Mike was Head of Quality and Risk Management for KPMG Europe LLP, responsible for the management of professional risks and quality control. He also held the role of KPMG UK’s Ethics Partner. **Other current appointments** ICAEW Ethics Standards Committee; International Ethics Standards Board for Accountants; Chairman, Government Internal Audit Agency; Charity Commission **Committees** Audit (Chairman), Nominations, Risk, Reputation ### Sir Ian Cheshire Non-executive Appointed: 3 April 2017 **Relevant skills and experience** Sir Ian joined Barclays in April 2017 as a non-executive Director and the Chairman of Barclays UK. From his lengthy executive career including his time as Group Chief Executive of Kingfisher plc, Sir Ian brings to the Board substantial business experience particularly in the international retail sector, as well as experience in sustainability and environmental matters. He holds strong credentials in leadership as well as being highly regarded by the Government for his work with various Government departments. **Other current appointments** Business Disability Forum President’s Group; Debenhams plc; Maisons du monde; Menhaden plc; lead non-executive director for the Government **Committees** Nominations ### Mary Francis CBE Non-executive Appointed: 1 October 2016 **Relevant skills and experience** Mary has extensive board-level experience across a range of industries. She is a non-executive director of Swiss Re Group and Ensco plc and was formerly senior independent director of Centrica and a non-executive director of the Bank of England, Aviva and Alliance & Leicester. She held senior executive positions in the UK Treasury and Prime Minister’s Office and in the City as Director General of the Association of British Insurers. She brings to Barclays strong understanding of the interaction between public and private sectors and skills in strategic decision-making and all aspects of board governance. **Other current appointments** Advisory Panel of The Institute of Business Ethics **Committees** Remuneration, Reputation --- ## Who we are – Board of Directors (continued) ### Crawford Gillies Non-executive Appointed: 1 May 2014 **Relevant skills and experience** Crawford has extensive business and management experience, gained with Bain & Company and Standard Life plc. These roles have provided him with experience in strategic decision-making and knowledge of company strategy across various sectors and geographical locations. Crawford is currently senior independent director of SSE plc. He has also held board and committee chairman positions during his career, notably as chairman of the remuneration committees of Standard Life plc and MITIE Group PLC. **Other current appointments** Chairman, The Edrington Group Limited **Committees** Audit, Nominations, Remuneration (Chairman) ### Tushar Morzaria Group Finance Director Appointed: 15 October 2013 **Relevant skills and experience** Tushar joined Barclays in 2013 having spent the previous four years in senior management roles with JP Morgan Chase, most recently as the CFO of its Corporate & Investment Bank. Throughout his time with JP Morgan he gained strategic financial management and regulatory relations experience. Since joining the Barclays Board he has been a driving influence on the Group’s cost reduction programme and managing the Group’s capital plan, particularly in response to structural reform. **Other current appointments** Member of the 100 Group main committee **Committees** None ### Mike Turner CBE Non-executive Appointed: 1 January 2018 **Relevant skills and experience** Mike has considerable business and board-level experience gained from his lengthy career with BAE Systems PLC where he was CEO as well as his non-executive positions. He has a strong commercial background and experience in strategy and operational performance culture. Mike brings significant leadership and strategic oversight experience to the Board, particularly from his roles as chairman of Babcock International Group PLC and GKN Plc. **Other current appointments** Member of the UK Government’s Apprenticeship Ambassadors Network **Committees** Reputation ### Reuben Jeffery III Non-executive Appointed: 16 July 2009 **Relevant skills and experience** Reuben has extensive financial services experience, particularly within investment banking and wealth management, through his role as CEO and president of Rockefeller & Co. Inc. and Rockefeller Financial Services Inc. and his former senior roles with Goldman Sachs, head of the European Financial Institutions Group. His previous government roles in the US, including as chairman of the Commodity Futures Trading Commission and as an under Secretary of State, provide Barclays’ Board with insight into the US political and regulatory environment. **Other current appointments** Financial Services Volunteer Corps; The Asia Foundation **Committees** Nominations, Risk ### Dambisa Moyo Non-executive Appointed: 1 May 2010 **Relevant skills and experience** Dambisa is an international economist and commentator on the global economy, having completed a PhD in economics. Dambisa has a background in financial services and a wide knowledge and understanding of African economic, political and social issues, in addition to her experience as a director of companies with complex, global operations. She served as a non-executive director of SABMiller plc (2009-2016) and Seagate Technology plc (2015-2017). **Other current appointments** Chevron Corporation; Barrick Gold Corporation **Committees** Remuneration, Reputation ### Matthew Lester Non-executive Appointed: 1 September 2017 **Relevant skills and experience** Matthew joined Barclays as a non-executive Director in September 2017 and contributes strong financial management and regulatory experience to the Board, having held a number of senior finance roles across a range of business sectors, including financial services. Most recently was chief financial officer of Royal Mail Group. Matthew’s financial expertise enables him to analyse effectively complex reporting and risk management processes. He is currently a non-executive director of Man Group plc and Capita plc, where he also chairs the audit and risk committees of both companies. **Other current appointments** None **Committees** Audit, Risk ### Diane Schueneman Non-executive Appointed: 25 June 2015 **Relevant skills and experience** Diane joined Barclays after an extensive career at Merrill Lynch, holding a variety of senior roles, including responsibility for banking, brokerage services and technology provided to the company’s retail and middle market clients, and latterly for IT, operations and client services worldwide. She brings a wealth of experience in managing global, cross-discipline business operations, client services and technology in the financial services industry. Diane is a member of the board of Barclays US LLC, Barclays’ US intermediate holding company and chair of Barclays Services Limited. **Other current appointments** None **Committees** Audit, Risk ### Company Secretary **Stephen Shapiro** Appointed: 1 November 2017 **Relevant skills and experience** Stephen was appointed Company Secretary in November 2017 having previously served as the Group Company Secretary and Deputy General Counsel of SABMiller plc. Prior to this, he practised law as a partner in a law firm in South Africa, and subsequently in the UK. Stephen has extensive experience in corporate governance, legal, regulatory and compliance matters. Stephen has also previously served as Chairman of the ICC UK’s Committee on Anti-Corruption as well as on working groups of the GC100, providing business input into key areas of legislative and policy reform. --- ## Who we are – Group Executive Committee ### Group Executive Committee *Biographies for Jes Staley, Group Chief Executive, and Tushar Morzaria, Group Finance Director, who are members of the Group Executive Committee, which is chaired by Jes Staley, can be found on pages 47 and 48.* * **Paul Compton**: Group Chief Operating Officer * **Bob Hoyt**: Group General Counsel * **Laura Padovani**: Interim Group Chief Compliance Officer * **Tristram Roberts**: Group Human Resources Director * **Tim Throsby**: President, Barclays International and Chief Executive Officer, Corporate and Investment Bank * **Ashok Vaswani**: CEO, Barclays UK * **C S Venkatakrishnan**: Chief Risk Officer *Group Executive Committee meetings are also attended on a regular basis by the Chief Internal Auditor, Sally Clark, and by an ex-officio member, drawn from senior management. The current ex-officio member is Barry Rodrigues, Head of Barclaycard International.* --- ## Board report ### The role of the Board The Board of Directors is responsible for promoting the highest standards of corporate governance in Barclays. *Further details about our corporate governance framework, policies and Board responsibilities can be found online at [home.barclays/corporategovernance](http://home.barclays/corporategovernance)* We act in a way that we consider promotes the success of Barclays for the benefit of shareholders as a whole, and are accountable to the shareholders for creating and delivering sustainable value. It is our responsibility as the Board to ensure that management not only delivers on short-term objectives, but promotes the long-term growth of Barclays. Our corporate governance framework embeds what we believe are the right culture, values and behaviours throughout the Group and supports our role in determining strategic objectives and policies. In addition to setting strategy and overseeing its implementation, we are also responsible for ensuring that management maintains an effective system of internal control. An effective system of internal control should provide assurance of effective and efficient operations, internal financial controls and compliance with law and regulation. In meeting this responsibility, we consider what is appropriate for the Group’s business and reputation, the materiality of financial and other risks and the relevant costs and benefits of implementing controls. See page 82 for further details on those systems of controls. The Board is the decision-making body for matters that, owing to their strategic, financial or reputational implications or consequences, are considered significant to the Group. A formal schedule of powers reserved to the Board ensures that our control of these key decisions is maintained. A summary of the matters reserved to the Board can be found at [home.barclays/corporategovernance](http://home.barclays/corporategovernance). It includes the approval of appointments to the Board, Barclays’ strategy, financial statements, capital expenditure and any major acquisitions, mergers or disposals. ### Board Committees The main Board Committees are the Board Audit Committee, the Board Nominations Committee, the Board Remuneration Committee, the Board Reputation Committee and the Board Risk Committee. Pursuant to authority granted under our Articles of Association, each Board Committee has had specific responsibilities delegated to it by the Board. Further information on the role and activities of each of the Board Committees can be found in this report on pages 53 to 79 and pages 114 to 115, and in their individual terms of reference, which have been approved by the Board and are available at [home.barclays/corporategovernance](http://home.barclays/corporategovernance). In addition, the Regulatory Investigations Committee was formed in 2012 and focused on providing Board-level oversight of regulatory investigations. In 2017, this Committee was disbanded with residual matters being brought under the oversight of the Board Audit Committee or falling directly under the Board’s oversight, as appropriate. You can read more about what the Board and each of the Board Committees did during 2017 on the following pages. --- ### Board Governance Framework **Barclays Board** *The Board is responsible for creating and sustaining shareholder value, through setting and overseeing the implementation of Barclays’ strategy* * **Board Audit Committee** * Reviews accounting policies and financial reports * Monitors the internal control environment * Considers the adequacy and scope of the internal and external audit * Reviews and monitors the Group’s whistleblowing policies * *See page 53 for further information.* * **Board Nominations Committee** * Reviews the composition of the Board * Recommends the appointment of new Directors * Considers succession plans for the Chairman and Group Chief Executive * Oversees the annual Board effectiveness review * *See page 75 for further information.* * **Board Remuneration Committee** * Sets principles and parameters of remuneration for Barclays * Considers and approves remuneration for executive Directors and senior executives * Oversees employee share schemes * *See page 93 for further information.* * **Board Reputation Committee** * Considers Barclays’ conduct and reputational risk issues and exposures * Reviews and approves Barclays’ overall citizenship strategy * Oversees Barclays’ approach to customer and regulatory matters * *See page 69 for further information.* * **Board Risk Committee** * Monitors and recommends financial and operational risk appetite * Monitors the financial and operational risk profile * Reviews limits for types of financial and operational risk * *See page 64 for further information.* --- During 2017, the Board focused on a number of specific areas, outlined in the table below, in line with Barclays’ three strategic goals and eight Principal Risks: **Strategic goals** * St: Have strong foundations in place * Ac: Accelerate the completion of restructuring * Bu: Build the Barclays of the future **Principal risks** * Cr: Credit * Ma: Market * Tr: Treasury and capital * Op: Operational * Mo: Model * Re: Reputation * Co: Conduct * Le: Legal #### Board allocation of time* (%) 1. Strategy formulation and implementation monitoring: 47% (2016: 55%) 2. Finance (including capital and liquidity): 15% (2016: 17%) 3. Governance and risk (including regulatory issues): 35% (2016: 26%) 4. Other (including compensation): 3% (2016: 2%) *\* Based on scheduled Board meetings* --- ### Strategy formulation and monitoring * Debated and provided input to management on the formulation of overall Group strategy, and reflected on the Group strategy with longer-term views on what could be done to accelerate returns and build capital. The topics covered include: * potential growth opportunities, and key trends and risks, for Barclays UK and Barclays International * constraints and risks to strategy execution, including economic assumptions, expected regulatory requirements on capital and solvency ratios, anticipated changes to accounting rules including IFRS 9, investor expectations, and potential impacts for clients and customers * a strategic approach to costs optimisation, including analysing the impact on costs of different structural initiatives such as product redesign and automation * impact of continuing legacy conduct issues on capital requirements and profit targets * options for the location of Barclays’ operations in Europe, driven by the EU Referendum result. * *St, Ac, Bu, Cr, Ma, Tr, Op, Mo, Re, Co, Le* * Discussed regular updates from the Group Chief Executive on the progress being made against the Group’s 2017 execution priorities and capital targets, received insights on stakeholder, employee and cultural matters (including results from employee opinion surveys), and updates on items of focus for the Group Executive Committee. * *St, Ac, Bu, Cr, Ma, Tr, Op, Mo, Re, Co, Le* * Considered the strategy, and assessed the progress of execution of strategy, in the businesses within each of Barclays UK and Barclays International. * *St, Ac, Bu, Cr, Ma, Tr, Op, Mo, Re, Co, Le* * Monitored the progress of the sell down of the Group’s remaining interest in Barclays Africa Group Limited. * *Ac, Bu, Tr, Op, Re, Le* * Monitored the progress of the rundown and subsequent closure of Barclays Non-Core. * *Ac, Bu, Tr, Op, Re, Le* * Monitored the progress of the Group’s execution of its structural reform programme – see the case study on page 52 for further details. * *St, Ac, Bu, Tr, Op, Re, Le* * Monitored the potential implications of the UK’s preparations to leave the EU following the EU Referendum result; approved and monitored progress of the expansion of Barclays Bank Ireland’s operations in preparation for Brexit – see the case study on page 52 for further details. * *St, Ac, Bu, Ma, Tr, Op, Re, Le* ### Finance (including capital and liquidity) * Debated and approved the Group’s Medium Term Plan for 2017-2019. * *St, Ac, Bu, Cr, Ma, Tr, Mo, Co, Le* * Regularly assessed financial performance of the Group and its main businesses through reports from the Group Finance Director. * *St, Ac, Bu, Cr, Ma, Tr, Mo, Co, Le* * Reviewed and approved Barclays’ financial results prior to publication, including approving final and interim dividends. * *St, Bu, Cr, Ma, Tr, Re* * Discussed market and investor reaction to Barclays’ strategic and financial results announcements, with insights provided by the Head of Investor Relations. * *St, Bu, Re* * Provided input, guidance and advice to senior management on the high-level shape of Barclays’ 2018-2020 Medium Term Plan and subsequently approved the final plan. * *St, Ac, Bu, Cr, Ma, Tr, Mo, Co, Le* --- ### Governance and risk (including regulatory issues) * Debated and approved the 2017 risk appetite for the Barclays Group. * *St, Bu, Cr, Ma, Tr, Mo, Co* * Regularly assessed Barclays’ overall risk profile and emerging risk themes, hearing directly from the Chief Risk Officer and the Chairman of the Board Risk Committee. * *St, Bu, Cr, Ma, Tr, Op, Mo, Re, Co, Le* * Received reports on Barclays’ operational and technology capability, including specific updates on cyber risk capability and the strategy for technology and infrastructure services. * *St, Bu, Op, Mo, Re, Le* * Approved the Group’s 2017 Recovery Plan and US Resolution Plan. * *St, Bu, Ma, Tr* * Invited representatives of Barclays’ UK and US regulators to meetings to enable the Board to hear first-hand about regulatory expectations and their specific views on Barclays. * *St, Ac, Bu, Tr, Op, Re, Co, Le* * Considered and debated proposals for the establishment of a programme to further enhance Barclays’ management information framework across all businesses and entities within the Group. * *St, Bu, Op, Mo* * Discussed and received regular updates directly from the Chief Controls Officer on the Group’s internal controls and framework, and monitored progress of the Barclays Internal Control Enhancement Plan (the programme for remediation of identified risk and control issues). * *St, Bu, Op, Mo, Re, Co, Le* * Considered regular updates from the Group General Counsel on the legal and regulatory risks and issues facing Barclays – refer to note 29 in the financial statements. * *St, Ac, Bu, Tr, Re, Co, Le* * Considered matters relating to Board succession and approved appointments to the Board and Board Committees. * *St, Ac, Bu, Cr, Ma, Tr, Op, Mo, Re, Co, Le* * Received and considered regular updates from the Chairmen of the Board’s principal Board Committees on the matters discussed at Board Committee meetings. See the reports of each Board Committee set out on the following pages for further details. * *St, Ac, Bu, Cr, Ma, Tr, Op, Mo, Re, Co, Le* * Received regular updates (following the establishment of each respective board) from the Chairs of the Barclays UK and Barclays International divisional boards and the Group Service Company. * *St, Ac, Bu, Re* * Considered updates on views of major shareholders, particularly in the period leading up to the 2017 Annual General Meeting. * *St, Bu, Re* * Discussed the Board and Committee governance framework in the context of structural reform, and considered significant developments in UK corporate governance and other corporate governance matters. * *St, Ac, Bu, Op, Co* * Considered the results of the 2016 Board effectiveness review and proposed action plan, and considered the process for and findings of the 2017 Board effectiveness review. See page 78 for further details of this process and the findings for 2017. * *St, Ac, Bu, Op, Co* ### Other (including compensation) * Considered progress on Barclays’ talent and succession planning (and hosted receptions for key talent within the Group), and received updates on the Bank’s diversity and inclusion initiatives, including from the Chairman of the Board Nominations Committee. * *St, Bu, Op, Re, Co* * Considered and approved the 2017 incentive funding pools for the Group and allocation among each business and function – see the Remuneration report on pages 93 to 116 for further details. * *St, Bu, Op, Re, Co* #### Governance in action – Structural reform and Brexit **Execution of structural reform** The execution of our structural reform programme was a significant focus for the Group in 2017 as we move towards the legal entity stand up of our ring-fenced bank in 2018. Building on from the work carried out in 2016, the Board continued to closely monitor and evaluate progress on the execution of the programme in 2017. Specific matters addressed by the Board included the following: * overseeing the establishment of the Group Service Company, which was launched on 1 September 2017 * monitoring the stakeholder communications plan (including, in particular, the communications plan for customers and employees) * considering regular updates on migrating sort codes with a focus on any potential impact on customers and clients * overseeing and approving various transfers of assets and liabilities among Barclays Group entities including establishing a committee to provide appropriate Board-level oversight of the processes involved * with the support of the Board Nominations Committee, debating the composition of, and appointments to each of, the boards of Barclays UK, Barclays International and the Group Service Company and discussing the appropriate governance arrangements for the new Group structure. **Preparations for Brexit** Another area of focus for the Board was preparations for the impact of the UK’s exit from the EU. Barclays has created an internal programme specifically in relation to the planning and preparation for Brexit. The Board debated potential EU hubs for Barclays’ European operations and decided to pursue expansion in Ireland where we have been operating for over 40 years and have an existing banking licence held by Barclays Bank Ireland. Specific matters considered by the Board included debating the feasibility of a significant expansion of Barclays Bank Ireland’s operations, the transfer of capital and resources to Barclays Bank Ireland and assessing the progress being made with applications for the necessary regulatory licensing requirements with the relevant authorities. The successful completion of the Group’s structural reform programme and further progress on our Brexit plans will continue to be areas of focus for the Board in 2018. --- ## Board Audit Committee report ### Solid progress has been made in turning the controls enhancement programme into a ‘business as usual’ activity, with an emphasis on achieving sustainable progress. ### Dear Fellow Shareholders In writing this report I have reflected on how Barclays has been working to embed the significant strategic changes put in place during 2016 while responding to new challenges driven by the external landscape, in particular the delivery of structural reform and preparation for Brexit. As I reported in 2017, the Committee continues to consider a critical part of its role to be ensuring that the commitment to strengthening Barclays’ control environment is maintained throughout this transformational period. My Committee colleagues and I have been encouraged by the increased rigour applied to oversight of the Group control environment following the creation of the Chief Controls Office at the end of 2016. This has given the Committee greater clarity and transparency regarding thematic control environment issues impacting the Group, and has helped to highlight areas of the business where there may be a concentration of issues and where focus on remediation is required. Regular updates on the overall control environment framework have also continued to be provided to the Board over the course of the year, underlining the importance that the Board of Barclays places on this programme of activity. Solid progress has been made in turning the controls enhancement programme into a ‘business as usual’ activity, with an emphasis on achieving sustainable progress. The Committee has observed heightened focus and attention across the organisation on the importance of having robust processes in place across the business to self-identify controls issues and ensure that there are effective remediation plans in place for which senior management are accountable. The embedding of the Chief Controls Office as part of the first line of management within the organisation has also been helpful in delineating more clearly for the organisation the respective roles of the second and third lines of defence. The Chief Controls Office has taken over the co-ordination of the Risk and Control Self-Assessment process and this will continue to be an area of focus in 2018 as management develops a more detailed, granular self-assessment process which should assist in proactively identifying controls which require remediation. Further details may be found in the Risk management and internal control section on page 82. The Committee has continued to engage with senior management regarding areas of controls weaknesses in their businesses and has received presentations from a number of different areas of the organisation on the actions taken to address unsatisfactory audit reports. In assessing control issues for disclosure in the Annual Report, the Committee has continued to apply similar definitions to those used for assessing internal financial controls for the purposes of Sarbanes-Oxley. The conclusion we have reached is that there are no control issues that are considered to be a material weakness, which merit specific disclosure. The Committee has continued to oversee the performance and effectiveness of internal and external audit, the main independent assurance mechanisms that serve to protect shareholders’ interests. I continue to hold regular meetings with the Chief Internal Auditor and members of her senior management team to ensure I am aware of current work programmes and any emerging issues. I also agreed the Chief Internal Auditor’s objectives and the outcomes of her performance assessment and remuneration. The Committee also held a networking event with Barclays Internal Audit (BIA) during 2017, enabling Committee members to meet on a less formal basis with senior members of the BIA management team. During 2017, the Committee continued to monitor closely the implementation of the action plan to address the recommendations arising from the review undertaken by the PRA of BIA to increase its effectiveness. The Chartered Institute of Internal Auditors requires an independent external review of internal audit functions to be carried out at least every five years and during 2017, the Committee commissioned an independent external quality assessment of BIA, further details of which may be found on page 61. The Committee was satisfied with the conclusions drawn in the report, while noting that there were a number of areas for potential development. The Committee considered that the need for a period of stability and consolidation within BIA would be particularly important to embedding existing initiatives and the Committee will continue to monitor this and other recommendations during 2018. In preparation for structural reform, BIA has aligned its audit planning and reporting to the new legal entity structure. The Committee continued to exercise its responsibility for ensuring the integrity of Barclays’ published financial information by debating and challenging the critical judgements and estimates made by management. The exercise of appropriate judgement in preparing the financial statements is critical in ensuring that Barclays reports to its shareholders in a fair, balanced and transparent way. During the course of 2017, the Committee oversaw Barclays’ transition to KPMG as Barclays’ statutory auditor which was approved by shareholders at the 2017 Annual General Meeting. The lead audit partner is Guy Bainbridge who has held this role since KPMG’s appointment as the Group’s auditor. KPMG has brought fresh challenge and insight not only on accounting judgements and policies but also on financial controls which the Committee has found valuable. The report that follows sets out details of the material matters considered by the Committee since my last report. One of the key developments in accounting policy in 2017 has been Barclays’ preparation for the implementation of the IFRS 9 impairment standard on 1 January 2018. The Committee reviewed the guidance note to non-executive Directors from the PRA in relation to IFRS 9 implementation and was comfortable that the areas highlighted by the PRA were being addressed. Further details of the Committee’s consideration of the judgements and financial impacts relating to the implementation of the new standard may be found in the ‘Governance in action’ section of the Committee report on page 63. --- ### Board Audit Committee report (continued) I have continued to hold the role of Whistleblower’s Champion, a position required by the FCA to be held at Board level. As champion, I continue to have specific responsibility for the integrity, independence and effectiveness of the Barclays’ policies and procedures on whistleblowing, including the procedures for protecting employees who raise concerns from detrimental treatment. As Whistleblower’s Champion and as Chairman of the Committee, I have been involved in overseeing the implementation of the suggested enhancements following the benchmarking review undertaken in 2017 at the request of the Board of Barclays. Responsibility for the oversight of litigation, investigation and competition matters has transitioned to the Committee, in line with the Committee’s existing responsibility for the oversight of matters related to disclosure and provisioning. The Committee has received regular updates on these matters from the Group General Counsel, with matters of particular significance to the Group continuing to be subject to oversight by the Board of Barclays. I attended meetings of the IHC audit committee to gain a first-hand insight into the issues being addressed by that committee and have held regular meetings with the chairmen-elect of the Barclays UK and Barclays International audit committees. The chairmen or chairmen-elect of all those entities have attended at least one Committee meeting during 2017. I also met frequently with other members of senior management, including the Group Finance Director, and continued my engagement with Barclays’ regulators both in the UK and US. I have reported regularly on the activities of the Committee to the Board of Barclays. #### Committee performance The Committee’s performance during 2017 was assessed as part of an internal committee effectiveness review. The conclusion of my Board colleagues and standing attendees at Committee meetings was that the Committee is regarded as operating effectively and the Board takes assurance from the quality of the Committee’s work. It is considered well constituted with the right balance of skills and experience. The main area identified for improvement was the need to manage a demanding agenda efficiently so that time is allocated to the most significant items for discussion. Last year’s review commented on the need to strengthen the depth of financial and accounting expertise on the Committee via new appointments, which I am pleased was addressed through the appointment of Matthew Lester to the Committee when he joined the Board of Barclays in September 2017. The review also highlighted the need to ensure that the way in which the Committee works with the Board Reputation and Board Risk Committees continues to capture all significant issues effectively while minimising any overlap. I continued to work closely with my fellow Board Committee chairmen during 2017, particularly with the Board Risk Committee Chairman in order to clarify the responsibility of the respective committees for operational risk issues, which each Committee has a role in overseeing. You can read more about the outcomes of the Board effectiveness review on page 78. #### Looking ahead In 2018, in addition to overseeing management’s progress in continuing to embed the role of the Chief Controls Office and the Group’s management of controls remediation, the Committee will be focusing on some significant accounting issues, including in particular, monitoring the impact of IFRS 9 and the resultant disclosures. The Committee is looking forward to working with the audit committees of Barclays UK and Barclays International as we discharge our responsibilities and focus on ensuring efficient and effective coverage of the business under the new group structure. We have already agreed an allocation of responsibilities, and embedding the necessary reporting and information flows across the three audit committees to ensure all of them can discharge their responsibilities efficiently will be a key area of focus. **Mike Ashley** Chairman, Board Audit Committee 21 February 2018 #### Committee composition and meetings The Committee is composed solely of independent non-executive Directors, with membership designed to provide the breadth of financial expertise and commercial acumen it needs to fulfil its responsibilities. Its members as a whole have experience of the banking and financial services sector in addition to general management and commercial experience. Mike Ashley, who is the designated financial expert on the Committee for the purposes of the US Sarbanes-Oxley Act, is a former audit partner who during his executive career acted as lead engagement partner on the audits of a number of large financial services groups. Following the Board’s finding that the Committee could be strengthened by the appointment of an additional member with direct accounting and auditing experience, Matthew Lester was appointed to the Board and Committee with effect from 1 September 2017. During his executive career, Matthew held a number of senior finance roles across a range of business sectors, including financial services, and most recently was the Chief Financial Officer of Royal Mail Group. You can find more details of the experience of Committee members in their biographies on pages 47 and 48. The Committee met 10 times in 2017 and the chart above shows how it allocated its time. Meetings are generally arranged well in advance and are scheduled in line with Barclays’ financial reporting timetable. One additional meeting was arranged to select an appropriate service provider for the independent review of Barclays Internal Audit and to undertake an early review of particular issues relevant to the financial statements. Committee meetings were attended by management, including as required the Group Chief Executive, Group Finance Director, Chief Internal Auditor, Chief Controls Officer, Chief Risk Officer, Chief Operating Officer, Group General Counsel and Head of Compliance, as well as representatives from the businesses and other functions. The lead audit partner of KPMG (the Group’s external auditor), Guy Bainbridge, attended all Committee meetings since January 2017. The Committee held a number of private sessions with each of the Chief Internal Auditor or the lead audit partner, which were not attended by management. The lead audit partner of PwC, the Group’s previous external auditor, attended meetings until the end of February 2017 to deliver its final audit report to the Committee on the 2016 financial statements before PwC resigned as the Group’s statutory auditor. | Member | Meetings attended/eligible to attend | | :--- | :--- | | Mike Ashley | 10/10 | | Tim Breedon | 10/10 | | Crawford Gillies | 10/10 | | Diane Schueneman* | 8/10 | | Matthew Lester (from 1 September 2017)$^\dagger$ | 1/3 | *\* Did not attend due to personal circumstances.* *$^\dagger$ Did not attend owing to existing commitments with other boards (the Committee meeting dates were set before Matthew joined the Board).* #### Committee allocation of time (%) 1. Control issues: 11% (2016: 23%) 2. Business control environment: 15% (2016: 19%) 3. Financial results: 33% (2016: 36%) 4. Internal audit matters: 25% (2016: 11%) 5. External audit matters: 8% (2016: 6%) 6. Other (including governance and compliance): 8% (2016: 4%) --- ### Committee role and responsibilities The Committee is responsible for: * assessing the integrity of the Group’s financial reporting and satisfying itself that any significant financial judgements made by management are sound * evaluating the effectiveness of the Group’s internal controls, including internal financial controls * scrutinising the activities and performance of the internal and external auditors, including monitoring their independence and objectivity * overseeing the relationship with the Group’s external auditor * reviewing and monitoring the effectiveness of the Group’s whistleblowing procedures * overseeing significant legal and regulatory investigations, including the proposed litigation statement for inclusion in the statutory accounts. *The Committee’s terms of reference are available at [home.barclays/corporategovernance](http://home.barclays/corporategovernance)* ### The Committee’s work The significant matters addressed by the Committee during 2017 and in evaluating Barclays’ 2017 Annual Report and financial statements, are described on the following pages. ### Financial statement reporting issues The Committee’s main responsibility in relation to Barclays’ financial reporting is to review with both management and the external auditor the appropriateness of Barclays’ financial statements, including quarterly results announcements and half-year and annual financial statements and supporting analyst presentations, with its primary focus being on: * the quality and acceptability of accounting policies and practices * any correspondence from financial reporting regulators in relation to Barclays’ financial reporting * material areas where significant judgements have been made, along with any significant assumptions or estimates, or where significant issues have been discussed with or challenged by the external auditor * an assessment of whether the Annual Report, taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess Barclays’ position and performance, business model and strategy. ### Accounting policies and practices The Committee discussed reports from management in relation to the identification of critical accounting judgements and key sources of estimation uncertainty, significant accounting policies and the proposed disclosure of these in the 2017 Annual Report. Following discussions with both management and the external auditor, the Committee approved the critical accounting judgements, significant accounting policies and disclosures, which are set out in Note 1, ‘Significant accounting policies’, to the consolidated financial statements. There was one significant change in accounting policy during the period which was the early adoption of IFRS 9 (Financial Instruments) in relation to own credit, resulting in the recognition of fair value movements through the Statement of Comprehensive Income. Further information regarding this change can be found in note 1, to the consolidated financial statements. Two new significant accounting standards became effective from 1 January 2018, IFRS 9 (Financial Instruments) and IFRS 15 (Revenue Recognition). Further information regarding these changes can be found in note 1, to the consolidated financial statements. During 2017, the Committee was regularly updated on Barclays’ preparations for the implementation of IFRS 9, in particular in relation to the new expected loss model which represents a fundamental change in approach to impairment. The Committee discussed with management the key technical decisions and interpretations required and Barclays’ approach to these. Further details of the Committee’s role in overseeing the Group’s IFRS 9 preparations can be found on page 63, ‘Governance in action’. ### Financial reporting regulators and Barclays The Committee from time to time considers comment letters and papers from external bodies including the SEC and the Financial Reporting Council (FRC). In that regard, the Committee considered the following: * the FRC’s Year-End Advice Letter to Audit Committee Chairs and Finance Directors which highlighted key developments for 2017/18 annual report * the FRC’s Annual Review of Corporate Reporting which summarised key characteristics of good corporate reporting for the 2017/18 reporting year * the PRA note of advice to non-executive Directors regarding IFRS 9 implementation which set out a series of questions for consideration to ensure audit committees were well prepared for the transition and its implications. The Committee sought to ensure that Barclays took due account of the matters raised in the letters and papers described above in its external reporting and has sought to enhance and clarify relevant disclosures. The Committee from time to time considers comment letters from the SEC in relation to its reviews of Barclays’ Annual Report and other publicly filed financial statements. Such comment letters and Barclays’ responses are made publicly available by the SEC on its website, sec.gov, once it has closed each such review. Barclays received one comment letter from the SEC during 2017 requesting clarification from the SEC in relation to its 2017 half year filing. Barclays responded to clarify the queries raised by the SEC. The letter did not raise any material concerns or disclosure items. ### Significant judgements and estimates The significant judgements and estimates and actions taken by the Committee in relation to the 2017 Annual Report and financial statements are outlined below. The significant judgements and estimates are broadly comparable in nature to prior years. Each of these matters was discussed with the external auditor during the year and, where appropriate, have been addressed in the Auditor’s Report on pages 228 to 233. --- | Area of focus | Reporting issue | Role of the Committee | Conclusion/action taken | | :--- | :--- | :--- | :--- | | **Conduct provisions** (refer to Note 27 to the financial statements) | Barclays makes certain assumptions and estimates, analysis of which underpins provisions made for the costs of customer redress, such as for Payment Protection Insurance (PPI). | Regularly analysed the judgements and estimates made with regard to Barclays’ provisioning for PPI claims, taking into account forecasts and assumptions made for PPI complaints and actual claims experience for Barclays and the industry as a whole, including the volume of invalid PPI claims. | The Committee and management continue to monitor closely any changes in customer or claims management companies’ behaviour in light of the FCA time-bar and marketing campaign and the ongoing impact of the Plevin case. Having regard to the actual claims experience over 2017 the Committee agreed with management’s assessment that the current provision of £1,600m was appropriate. The Committee noted that this estimate remains subject to significant uncertainty in particular regarding the level of valid customer claims that may be received in the period to August 2019. In this context the Committee was satisfied that sensitivities to the key variables were appropriately disclosed. | | **Legal, competition and regulatory provisions** (refer to Notes 27 to 29 to the financial statements) | Barclays is engaged in various legal, competition and regulatory matters. The extent of the impact on Barclays of these matters cannot always be predicted, but matters can give rise to provisioning for contingent and other liabilities depending on the relevant facts and circumstances. | Evaluated advice on the status of current legal, competition and regulatory matters. | The Committee discussed provisions and utilisation. Having reviewed the information available to determine what was both probable and could be reliably estimated, the Committee agreed that the level of provision at the year end was appropriate. The Committee also considered that the disclosures made provided the appropriate information for investors regarding the legal, competition and regulatory matters being addressed by the Group. | | **Valuations** (refer to Notes 14 to 18 to the financial statements) | Barclays exercises judgement in the valuation and disclosure of financial instruments, derivative assets and certain portfolios, particularly where quoted market prices are not available, including the Group’s Education, Social Housing and Local Authority (ESHLA) portfolio. | Evaluated reports from Barclays Valuations Committee, with particular focus on the matters below. | The Committee discussed these matters and agreed that a minor modification be made to the valuation of the specific long dated derivative portfolio where there existed significant valuation disparity. This did not result in a material change to the fair value recorded by the Group. The Committee noted that, following efforts by management to restructure derivative agreements impacted by negative interest rates, any residual uncertainty was now insignificant. | --- | Area of focus | Reporting issue | Role of the Committee | Conclusion/action taken | | :--- | :--- | :--- | :--- | | **Impairment** (refer to Note 7 to the financial statements) | Where appropriate, Barclays models potential impairment performance, allowing for certain assumptions and sensitivities, to agree allowances for credit impairment, including agreeing the timing of the recognition of any impairment and estimating the size, particularly where forbearance has been granted. | Assessed impairment experience against forecast and whether impairment provisions were appropriate. | The Committee reviewed model adjustments made by management to ensure that impairment allowances were set at appropriate and adequate levels. The Committee reviewed the impairment charge in Barclaycard US arising in the third quarter from the asset sale in the first quarter. The Committee also reviewed three material single name charges in the Corporate Bank. The Committee agreed that the provision levels for impairment were appropriate. | | **Tax** (refer to Note 10 to the financial statements) | Barclays is subject to taxation in a number of jurisdictions globally and makes judgements with regard to provisioning for tax at risk and on the recognition and measurement of deferred tax assets. | Evaluated the appropriateness of tax risk provisions to cover existing tax risk. | The Committee reviewed Barclays’ global tax risk and associated provisions for the full year and noted that the level of tax provisions remained at about the same level, although the amount of gross tax risk was assessed as slightly reduced. In relation to the treatment of deferred tax assets the Committee noted that those due to US tax losses (£1,520m) are forecast to be utilised by 2019 which is significantly earlier than the first expiry date of 2028. The Committee agreed with management’s view that it was appropriate not to take account of any potential future BEAT liabilities in the measurement of the deferred tax assets. It noted that this would be in line with recent US GAAP pronouncements and as disclosed, management is also continuing to assess the full impact to the Group of the complex provisions in the new US legislation. | | **Long-term viability** (refer to Note 41 to the financial statements) | The Directors are required to make a statement in the Annual Report as to the long-term viability of Barclays. | Evaluated at year end a report from management setting out the view of Barclays’ long-term viability. | The Committee agreed that the appropriate timeframe for the viability statement continued to be three years. Taking into account the assessment by the Board Risk Committee of stress testing results and risk appetite, the Committee agreed to recommend the viability statement to the Board for approval. | --- ### Fair, balanced and understandable reporting (including country-by-country reporting and Pillar 3 reporting) Barclays is required to ensure that its external reporting is fair, balanced and understandable. The Committee undertakes an assessment on behalf of the Board in order to provide the Board with assurance that it can make the statement required by the UK Code on Corporate Governance. * Assessed through discussion with and challenge of management, including the Group Chief Executive and Group Finance Director, whether disclosures in Barclays’ Annual Report and other financial reports were fair, balanced and understandable. * Evaluated reports from Barclays’ Disclosure Committee on its assessment of the content, accuracy and tone of the disclosures. * Established through reports from management that there were no indications of fraud relating to financial reporting matters. * Evaluated the outputs of Barclays’ internal control assessments and Sarbanes-Oxley s404 internal control process. * Assessed disclosure controls and procedures. * Confirmed that management had reported on and evidenced the basis on which representations to the external auditors were made. **Conclusion/action taken** Having evaluated all of the available information and the assurances provided by management, the Committee concluded that the processes underlying the preparation of Barclays’ published financial statements, including the 2017 Annual Report and financial statements, were appropriate in ensuring that those statements were fair, balanced and understandable. In assessing Barclays’ financial results statements over the course of 2017, the Committee specifically addressed and provided input to management on the disclosure and presentation of: * the classification of Barclays’ holding in Barclays Africa Group Limited as an available for sale asset with effect from 1 June 2017 * the closure of the Barclays Non-Core business and the reintegration of the remaining businesses and portfolio * the Group Finance Director’s presentations to analysts * the level of segmental reporting. The Committee recommended to the Board that the 2017 Annual Report and financial statements are fair, balanced and understandable. --- ### Other significant matters Apart from financial reporting matters the Committee has responsibility for oversight of the effectiveness of Barclays’ internal controls, the performance and effectiveness of BIA and the performance, objectivity and independence of the external auditor. The most significant matters considered during 2017 are described in the table below. | Area of focus | Matter addressed | Role of the Committee | Conclusion/action taken | | :--- | :--- | :--- | :--- | | **Internal control** | The effectiveness of the overall control environment, including the status of any material control issues and the progress of specific remediation plans. | Evaluated and tracked the status of the most material control issues identified by management through regular reports from the Chief Controls Officer, assessed against the new Controls Maturity Model created as part of the Barclays Internal Controls Enhancement Programme (BICEP). | The Committee welcomed the positive change in approach that the BICEP programme had driven across the business, notably that the first line of defence was now more focused on proactively self-identifying control issues rather than waiting for them to be highlighted by the second or third lines of defence. The Committee continued to emphasise the importance of a disciplined self-assessment by management. | | | The effectiveness of the control environment in each individual business, including the status of any material control issues and the progress of specific remediation plans. | Assessed reports on individual businesses and functions on their control environment, questioned the heads of the relevant businesses or functions on control concerns and scrutinised any identified control failures and closely monitored the status of remediation plans or workstreams to enhance the respective control environments. | The Committee received deep dive control environment presentations from Barclays International and Barclays UK. These provided further detail of management’s assessment of the business unit control environment and key areas of focus, including key controls hot spots for the businesses. | --- ### Other significant matters (continued) | Area of focus | Matter addressed | Role of the Committee | Conclusion/action taken | | :--- | :--- | :--- | :--- | | | The effectiveness of the control environment in the Chief Operating Office (COO) and the status and remediation of any material control issues. | Scrutinised on a regular basis the COO control environment, taking the opportunity to directly challenge and question functional leaders, including the Chief Operating Officer on the progress of remediation plans. | The Committee was pleased to note continuing progress over 2017 to address control issues in accordance with the agreed timescales. | | | The adequacy of the Group’s arrangements to allow employees to raise concerns in confidence without fear of retaliation and the outcomes of any substantiated cases. | Considered the results of the ‘Your View’ Survey in relation to employee views on their ability to safely speak up in their business/function and whether they could report instances of dishonest or unethical behaviour without fear. | The Committee discussed the importance of ongoing dialogue and regular training to ensure that the route for escalations was clear and cases were directed to the relevant team for investigation and resolution. The Committee was pleased to note that volumes of cases remain proportionate to Barclays’ size and footprint. | | **Internal audit** | The performance of BIA and delivery of the internal audit plan, including scope of work performed, the level of resources and the methodology and coverage of the internal audit plan. | Scrutinised and agreed internal audit plans and methodology and deliverables for 2017 and the first half of 2018, including reviewing the number of audits for delivery following the alignment of the Audit Universe to Barclays’ new structure following structural reform. | The Committee reiterated its support for BIA’s recruitment plans which reflected significant activity during 2017 to ensure appropriate audit coverage to support the focus on BIA quality across the audit cycle. The Committee observed that the issues arising from unsatisfactory audits indicated that there was still work to do in embedding the required level of control consciousness across the Group and ensuring that control exceptions were highlighted clearly in management reporting. | --- ### External audit The work and performance of KPMG: * Met with key members of the KPMG audit team to discuss the 2017 audit plan and agree areas of focus. * Assessed regular reports from KPMG on the progress of the 2017 audit and any material accounting and control issues identified. * Discussed KPMG’s feedback on Barclays’ critical accounting estimates and judgements. * Discussed KPMG’s draft report on certain control areas and the control environment ahead of the 2017 year end. * Discussed the approach to KPMG’s annual report to the PRA which will be issued following completion of the 2017 audit. * Considered the draft SOX controls report and the draft audit opinion. **Conclusion/action taken** The Committee approved the audit plan and the main areas of focus. The Committee also approved the principal services agreement and terms of engagement in connection with KPMG’s appointment as the Group’s auditors. In addition to these matters, as highlighted above in the section of the table headed ‘Internal audit’ the Committee commissioned an independent review of BIA which was undertaken by Deloitte during the second half of 2017. The report concluded that: * BIA demonstrates general conformance with the relevant standards and guidelines * BIA has an effective core audit methodology which reflects investment in agile ways of working and data analytics which has helped to drive continuous improvement. In this respect it is aligned with or ahead of peers * BIA’s purpose and remit is clearly defined and the function is positioned appropriately within the governance framework of the organisation/its role as an objective third line of defence. * the focus on increased headcount in BIA will help drive audit capacity and capability through enhanced specialist skills/knowledge. * while there are opportunities to improve BIA’s impact, they are able to deliver effective feedback on the operation of controls that address key risks. **External auditor** Following an external audit tender in 2015, PwC was replaced in 2017 as Barclays’ statutory auditor by KPMG. Guy Bainbridge of KPMG is Barclays’ senior statutory auditor with effect from the audit for the 2017 financial year. **Assessing external auditor effectiveness, auditor objectivity and independence and non-audit services** The Committee is responsible for assessing the effectiveness, objectivity and independence of the Group’s auditor, KPMG and in 2017 the Committee was particularly concerned to ensure that the external auditor transition period was managed effectively. This responsibility was discharged throughout the year at formal Committee meetings, during private meetings with KPMG and through discussions with key executive stakeholders. In addition to the matters noted above, during 2017 the Committee: * approved the terms of the audit engagement letter and associated fees, on behalf of the Board * discussed and agreed revisions to the Group policy on the Provision of Services by the Group Statutory Auditor and regularly analysed reports from management on the non-audit services provided to Barclays * evaluated and approved revisions to the Group policy on Employment of Employees or Workers from the Statutory Auditor and ensured compliance with the policy by regularly assessing reports from management detailing any appointments made * was briefed by KPMG on critical accounting judgements and estimates * assessed any potential threats to independence that were self-identified and reported by KPMG * reviewed the report on KPMG issued by the FRC’s Audit Quality Review team. --- ### Non-audit services In order to safeguard the Auditor’s independence and objectivity, Barclays has in place a policy setting out the circumstances in which the Auditor may be engaged to provide services other than those covered by the Group audit. During 2017, all engagements where expected fees met or exceeded the above thresholds were evaluated by either the Committee Chairman or the Committee as a whole who, before confirming any approval, assured themselves that there was justifiable reason for engaging the auditor and that its independence and objectivity would not be threatened. No requests to use KPMG were declined in 2017 (2016: one). The fees payable to KPMG for the year ended 31 December 2017 amounted to £48m, of which £10m (2016: £17m) was payable in respect of non-audit services. Of the £10m of non-audit services provided by KPMG during 2017, the significant categories of engagement, i.e. services where the fees amounted to more than £500,000, included: * audit-related services: services in connection with CASS audits * quality assurance: support in connection with reports on the internal controls applicable to IBOR submission processes * transaction support: ongoing attestation and assurance services for treasury and capital markets transactions to meet regulatory requirements The fees paid to PwC for non-audit work during 2017, in the period before they resigned as the Group’s statutory auditor, and after they had resigned but before they were non-independent of certain Group entities (and therefore still fell within the Policy), were £3m (2016: £8m). --- ### Governance in action – Preparation for IFRS 9 A significant activity for the Committee during 2017 has been overseeing the Group’s preparation for the implementation of IFRS 9. IFRS 9 *Financial Instruments* is effective from 1 January 2018 and replaces the IAS 39 accounting standard. The new standard sets out the recognition and measurement requirements for financial instruments and has three parts: classification and measurement of financial assets, the requirements for impairment of financial assets and a hedge accounting model that is designed to more closely reflect risk management. As permitted, Barclays intends to continue with the existing IAS 39 hedge accounting model. The new impairment accounting model however has a significant impact on Barclays and the changes are complex and wide ranging; classification and measurement also results in a number of much less significant changes. IFRS 9 has therefore been the subject of significant regulatory and market focus. Barclays has worked with the industry and regulators to agree a transitional framework for regulatory capital and disclosures and has taken note of the best practice recommendations they have issued for the management of the transition to the new standard. The Committee received regular updates on the status, judgements and financial impacts relating to the implementation of IFRS 9 during 2017 and the first quarter of 2018. It has overseen the steps required for Barclays’ transition to the new standard, in particular the delivery into production of the models and controls which are required for its implementation. Throughout the process, the Committee emphasised to management the importance of developing the models to support business decision making to manage risk and ensure appropriate customer outcomes. The Committee reviewed the internal governance and validation processes in Risk and Finance and received regular updates from KPMG on their assurance work. The Committee also received reports from BIA following the audits undertaken in respect of the IFRS 9 programme, with a number of further audits planned for 2018. The Committee also reviewed the key estimates made by management in considering future economic scenarios and the criteria for determining when significant credit deterioration is observed. In line with its terms of reference, the Committee has been closely involved in the review of all material external financial reporting relating to IFRS 9 and is focused on ensuring clarity, completeness and appropriateness of the Group’s disclosures, particularly given the complexity and technical challenges of this standard. The Committee reviewed the best estimate impact on the Group which was disclosed in Barclays’ third quarter results and the updated IAS 8 disclosures included in the 2017 financial statements. --- ## Board Risk Committee report ### The Committee continued to monitor UK economic trends, consumer behaviour and portfolio performance, and a prudent approach to lending was maintained. ### Dear Fellow Shareholders The focus of the Committee during 2017 has continued to be on assessing the impact of important macroeconomic and market developments on the risk profile of the Group. Credit risk management during 2017 was primarily concerned with the level of exposure to consumer debt both in the UK and US. In the UK, the Committee in 2016 had accepted the recommendation of management to pursue a conservative approach to managing growth and balances in credit card debt. This had been prompted by the rising level of personal debt in the UK and concerns of weaker growth and higher inflation resulting from the country’s vote to leave the European Union. This theme persisted in 2017, as the Committee continued to monitor UK economic trends, consumer behaviour and portfolio performance, and a prudent approach to lending was maintained. In the US, in late 2016, there had been nascent signs of weakness in the consumer credit portfolio. The Committee had requested management to perform detailed analyses of the balances and, based on this work, approved in early 2017 the sale of a proportion of the weaker segments of the portfolio. This action, along with increased conservatism during the year in lending and portfolio quality, has moderated the impact on Barclays of increasing delinquencies among US credit card borrowers being seen among US credit card lenders. While the impairment performance of the Bank was largely within plan, wholesale credit performance in the UK was slightly weaker than in the US. The Bank experienced higher impairment in its corporate lending book in the UK from the default of certain borrowers in the service sector. In the US, improved economic conditions, and higher energy prices resulted in favourable corporate impairment trends compared to 2016. In recent years, the Committee has been closely supervising the strengthening of the capital position of the Bank. Progress continued in 2017 as the Bank’s capital ratios continued to improve. In assessing the adequacy of the Bank’s capital position, the Committee took into account current financial performance, the impact of expected regulatory developments (including structural reform), and estimates of the costs of resolving past conduct and litigation issues. Likewise, the Committee is pleased that the liquidity risk in the Bank has been closely monitored and strengthened over the past year. An important role of the Committee each year is to recommend the risk appetite of the Bank to the Board: its ability to earn an appropriate return while being able to withstand shocks in the market and economic environment. In addition, the Committee monitors closely the assessment of the Bank’s performance under a variety of regulatory stress tests. We evaluate not just the outcome of these analyses but the means by which they are performed, particularly the assessment of model risk. These efforts increased in 2017, as the Bank prepared for the first stress test of the US Intermediate Holding Company, in addition to completing the newly introduced Biennial Exploratory Scenario for the Bank of England stress test. The Committee assesses external conditions as part of establishing risk appetite. These remain challenging and our objective was to position the Bank conservatively to deal with economic uncertainty. Key themes that developed during 2017 with potential to have a significant first order impact on Barclays’ businesses included heightened political and economic risk in the UK in the backdrop of Brexit negotiations, increased geopolitical risk impacting the delicately poised global economy, and a shortage of new transaction flow in leveraged finance underwriting driving tighter terms. Other emerging risks with potential to impact Barclays include UK property price stress and volatility in financial markets after a long period of quiescent asset appreciation. The Committee maintains regular oversight of exposure to the key risk themes it has identified and actions taken by management in response. During the year, the Committee also evaluated the financial and capital impacts of operational risk. The Committee has noted, and encouraged, the efforts by management to improve the Risk and Control Self-Assessment programme in Operational risk. This work is important in an environment of heightened cyber risk and increased operational complexity as the Bank implements structural reform. As in past years, the Committee reviewed the execution by management of material regulatory programmes and initiatives. These included the BCBS239 effort to improve the quality and reliability of data and information, and IFRS 9, a new standard for the estimation of credit impairment. ### Committee performance The performance of the Committee during 2017 was assessed as part of an internal annual Committee effectiveness review. The conclusion of my Board colleagues was that the Committee is considered to operate effectively and that the Board continues to have a high degree of confidence in the diligence and coverage of the Committee. Feedback from the review indicated that the Committee was both effective and influential in identifying areas of risk where Barclays needs to change its performance or adjust its risk profile. One of the areas identified for improvement was to consider whether the Committee would benefit from deeper expertise by including a member with a risk function management background and we will give further consideration to this in 2018. The review also highlighted the need to ensure that the way in which the Committee works with the Board Reputation and Board Audit Committees continues to capture all significant issues effectively while minimising any overlap. I continued to work closely with my fellow Board Committee Chairmen during 2017, particularly with the Board Audit Committee Chairman in order to clarify the responsibility of each committee in relation to operational risk matters during the year which each Committee has a role in overseeing. We will work to embed this further in 2018. --- ### Looking ahead 2018 is important for Barclays as it completes the restructuring required under the structural reform programme. As a result, the firm will have two important subsidiary legal entities in Barclays UK, the core domestic franchise in the UK, and Barclays International, the Corporate and Investment Banking and international consumer businesses of the firm. These will be in addition to the US Intermediate Holding Company, which is part of Barclays International. The Committee will pay close attention to the executive’s management of risk within and across these entities. We expect that credit and employment conditions in the UK will continue to be uncertain, as future trade and economic arrangements with the EU take shape. In the US, the impact of the corporate tax reform on the health of companies and consumers will need assessment. Lastly, the Committee will continue to monitor the risk to Barclays from volatility in financial markets, which have experienced many years of steady asset appreciation. **Tim Breedon** Chairman, Board Risk Committee 21 February 2018 ### Committee composition and meetings The Committee is composed solely of independent non-executive Directors. Details of the skills and experience of the Committee members can be found in their biographies on pages 47 and 48. The Committee met nine times in 2017, with two of the meetings held at Barclays’ New York offices. The chart above shows how the Committee allocated its time during 2017. Committee meetings were attended by management, including the Group Chief Executive, Group Finance Director, Chief Internal Auditor, Chief Risk Officer, Barclays’ Treasurer and Group General Counsel, as well as representatives from the businesses and other representatives from the Risk function. Representatives from Barclays’ external auditor, KPMG, and until March 2017, representatives from the outgoing external auditor, PwC, also attended meetings. | Member | Meetings attended/eligible to attend | | :--- | :--- | | Tim Breedon | 9/9 | | Mike Ashley | 9/9 | | Reuben Jeffery | 9/9 | | Diane Schueneman | 9/9 | | Matthew Lester (from 1 September 2017) | 3/3 | | Steve Thieke (to 10 May 2017) | 3/3 | ### Committee role and responsibilities The Committee’s main responsibilities include: * reviewing and recommending to the Board the Group’s financial and operational risk appetite * monitoring the Group’s financial and operational risk profile * commissioning, receiving and considering reports on key financial and operational risk issues. *The Committee’s terms of reference are available at [home.barclays/corporategovernance](http://home.barclays/corporategovernance)* #### Committee allocation of time (%) 1. Risk profile/risk appetite (including capital and liquidity management): 53% (2016: 52%) 2. Key risk issues: 26% (2016: 26%) 3. Internal control/risk policies: 12% (2016: 8%) 4. Other (including remuneration and governance issues): 9% (2016: 14%) --- ## Board Risk Committee report (continued) ### The Committee’s work The significant matters addressed by the Committee during 2017 are described below: | Area of focus | Matter addressed | Role of the Committee | Conclusion/action taken | | :--- | :--- | :--- | :--- | | **Risk appetite and stress testing** | The risk context to Medium Term Plan (MTP), the financial parameters and constraints and mandate and scale limits for specific business risk exposures; the Group’s internal stress testing exercises, including scenario selection and financial constraints, stress testing themes and the results and implications of stress tests, including those run by the Bank of England (BoE). | Assessed the risk context for the 2017 MTP, including general economic and financial conditions and how these had been reflected in planning assumptions. Debated the assumptions, parameters and results of the internal stress test of the risk appetite of the 2017 MTP. | The Committee recommended the proposed risk appetite for 2017 to the Board for approval, although noted that this may need to be revisited to take account of the impact of IFRS 9 in due course. It encouraged management to make further progress on enhancing infrastructure used to conduct the internal stress test. The Committee approved the 2017 annual stress test results for submission to the BoE. | | **Capital and funding** | The trajectory to achieving required regulatory and internal targets and capital and leverage ratios. | Debated, on a regular basis, capital performance against plan, tracking the capital trajectory, any challenges and opportunities and regulatory policy developments. | The Committee supported the forecast capital and funding trajectory and the actions identified by management to manage the Group’s capital position. It approved the proposed capital and liquidity processes for Barclays UK for submission to the regulator as part of its banking licence application. | | **Political and economic risk** | The potential impact on the Group’s risk profile of political developments, such as elections in other European countries, as well as continuing to monitor the impact of the aftermath of the UK’s EU Referendum. | Monitored progress on actions to mitigate the risk of the potential impact of negative interest rates in the UK on Barclays. | Following the further sell-down of the equity stake in BAGL and the subsequent proportionate regulatory consolidation, the Committee agreed that South Africa should be removed as an ongoing risk theme, although it continued to maintain oversight of any emerging risk. | --- | Area of focus | Matter addressed | Role of the Committee | Conclusion/action taken | | :--- | :--- | :--- | :--- | | **Credit risk** | Conditions in the UK housing market, particularly in London and the South East; levels of UK consumer indebtedness, particularly in the context of the risk of inflation and negative real wage growth; and the performance of the UK and US Cards businesses, including levels of impairment. | Continued to assess and monitor conditions in the UK property market in case of signs of stress. Evaluated how management was tracking and responding to rising levels of consumer indebtedness, particularly unsecured credit in both the UK and US. | The Committee focused on effective collections capability as an important tool of risk management. The Committee encouraged management to carry on with its conservative approach to UK lending. The Committee approved changes to the risk appetite levels for US Cards. | | **Operational risk** | The Group’s operational risk capital requirements and any material changes to the Group’s operational risk profile and performance of specific operational risks against agreed risk appetite. | Tracked operational risk key indicators via regular reports from the Head of Operational Risk. Debated specific areas of emerging risks, including conduct risk, cyber, execution risk, technology and data. | The Committee focused its attention on the financial and capital impacts of operational risk. In relation to fraud, it encouraged management to further integrate strategy, models and operations. | | **Risk framework and governance** | The frameworks, policies and talent and tools in place to support effective risk management and oversight. | Monitored progress on the implementation of an enhanced modelling framework, including receiving updates from Barclays Internal Audit on findings in relation to specific modelling processes. | The Committee requested a gap analysis together with an action plan to remediate specific weaknesses identified in the internal audit in relation to modelling. | | **Remuneration** | The scope of any risk adjustments to be taken into account by the Board Remuneration Committee when making remuneration decisions for 2017. | Debated, in a joint meeting with the Board Reputation Committee, the Risk function’s view of 2017 performance, making a recommendation to the Board Remuneration Committee on the financial and operational risk factors to be taken into account in remuneration decisions for 2017. | The Committee discussed the report of the Chief Risk Officer and considered the proposal put forward in relation to the impact of relevant risk factors in determining 2017 remuneration decisions, noting that it should also include positive events such as the 2017 Banking Standards Board report which had reported improvements on 2016. | --- ### Governance in action – Risk and Control Self-Assessment programme A key focus of the Committee in 2017 was oversight of the implementation of a revised Risk and Control Self-Assessment (RCSA) programme. The RCSA enhancement programme was established as part of Barclays’ commitment to the effective management the Group’s Operational risk and extend both the scope of coverage across a wider range of risks, and also improve the granularity of management’s risk and control assessments of business processes. The programme is the firm-wide process led approach for management to identify and regularly assess material inherent risks and their associated controls, in order to mitigate these risks and reduce the likelihood and/or severity of losses to the firm from a Risk event. In 2017, a number of pilot RCSAs were rolled out across the Group in addition to the regular RCSA process, which was also enhanced. Improvements were also made in the assessment of inherent risk values and the aggregation process for risk and control assessments across risk types. During the year, the Committee reviewed progress in terms of the RCSAs completed across the Group, and also considered the next steps in the review process and the results of the residual risk assessments. Based on the results of the pilot RCSAs undertaken, the Committee was satisfied that the process will improve management’s understanding of the risk and control environment, so they can prioritise and remediate ineffective controls where required. Following completion of the pilot RCSA programme, the Committee considered the ways in which the RCSA programme could be enhanced for the wider implementation of the programme in 2018. The Committee considered specific revisions of the 2017 RCSA programme with the aim of: * improving the identification of inherent risk, control effectiveness and residual risk by going into detail at a more granular process level * increasing the degree of independent challenge provided by all Three Lines of Defence * increasing the granularity of assessments for a further set of pilot RCSAs to estimate inherent risk at activity level by risk type, together with the identification and assessment of detailed operating controls by activity and residual risk. The Committee will continue to work with management in 2018 on further refining and enhancing the RCSA programme. --- ## Board Reputation Committee report ### The Committee has been well positioned during 2017, a time of significant organisational change for the Group, to ensure that our people, whether within Barclays UK, Barclays International or the Group Service Company, continue to demonstrate behaviours and conduct that are consistent with the *Barclays Values*. ### Dear Fellow Shareholders This is my second report to you as Chairman of the Board Reputation Committee. At the conclusion of my last report I commented that the Committee, by way of its membership, executive engagement and reporting processes, had built a strong foundation on which to base its future operations and drive Barclays to be a governance leader in conduct, culture and reputation matters. This strong foundation has ensured that the Committee has been well positioned during 2017, a time of significant organisational change for the Group, to ensure that our people, whether within Barclays UK, Barclays International or the Group Service Company, continue to demonstrate behaviours and conduct that are consistent with the *Barclays Values*. On two occasions during 2017 the Committee extended an invite to representatives of the Banking Standards Board (BSB) to present and discuss the outcomes of their 2016 and 2017 assessments of Barclays. As an independent third party with insights across the banking industry as a whole, the Committee attaches significant value to the insights offered by the BSB and I would like to extend my personal thanks to Dame Colette Bowe and her team at the BSB for their continuing work to promote the highest standards of behaviour in UK banking and restore public trust in the sector. We were encouraged to hear that the results had generally improved between 2016 and 2017 and were particularly pleased to see how strongly the *Barclays Values* still resonate with our colleagues. The Committee also carefully considered the BSB’s feedback on results relating to colleague resilience and you will find an outline of our discussion on colleague well-being on page 71. One of the key challenges faced by the Committee is how to maintain oversight of Group Conduct and Culture matters as a whole, without overlooking the cultural differences that, naturally and quite rightly, exist between our different operating businesses and support functions. During the year the Committee actively discussed this challenge and, in an attempt to address this, I rebalanced the Committee’s agenda by introducing business and functional ‘Deep Dive’ sessions into each meeting. The Deep Dives allow the Committee to understand the conduct, culture and customer satisfaction issues being faced in specific areas of the business and the actions undertaken to address them. While consideration of our well-refined dashboards and Reputation risk reports ensure that Group-level metrics, challenges and initiatives remain clearly visible and subject to Committee consideration and challenge. You can read about some of the Deep Dives undertaken by the Committee during 2017 on the following pages. A significant output from the Committee during 2017 resulted from discussions around Barclays’ historic commitments to the financing of certain fossil fuels projects, which resulted in a decision to develop a more proactive approach to the management of sustainability issues across the Barclays business. I would encourage you to refer to the ‘Governance in action’ box on page 74 for further details on this initiative. ### Committee performance Through the process of the annual Board effectiveness review, which confirmed the continued effectiveness of the Committee, the ongoing evolution of the Committee’s role and the increased impact that it had during the last year was clearly acknowledged. An area that the review identified for further consideration was the continued oversight of Conduct and Reputation risk matters in the post-structural reform corporate structure, which I will ensure is addressed by the Committee ahead of April 2018. ### Looking ahead Finally, I would like to record my thanks to Mike Roemer, who stepped down as Group Chief Compliance Officer in October 2017, for his outstanding contribution to the work of the Committee during his tenure in that role. I would also like to thank Diane de Saint Victor, who stepped down from the Committee on her retirement from the Board in May 2017. I look forward to working with our new Committee member, Mike Turner and, subject to regulatory approval, our new Group Chief Compliance Officer, Laura Padovani, as we continue to support the delivery of the Board’s collective vision of the *Barclays Values*. **Sir Gerry Grimstone** Chairman, Board Reputation Committee 21 February 2018 --- ### Committee composition and meetings The Committee is composed solely of independent non-executive Directors. During 2017, Diane de Saint Victor stepped down from the Committee and the Barclays Board with effect from 10 May 2017. The Committee met four times during 2017. Committee meetings were attended by representatives from management, including the Group Chief Executive, Chief Compliance Officer, Chief Internal Auditor, Chief Risk Officer, Group General Counsel, Group Chief of Staff, Group HR Director and the Heads of Corporate Communications, Citizenship and Reputation, as well as senior representatives from the businesses and other functions. A representative from KPMG, Barclays’ external auditor, attended each Committee meeting during the year and representatives from the BSB attended two meetings during 2017. | Member | Meetings attended/eligible to attend | | :--- | :--- | | Sir Gerry Grimstone | 4/4 | | Mike Ashley | 4/4 | | Mary Francis | 4/4 | | Dambisa Moyo | 4/4 | | Diane de Saint Victor (to 10 May 2017) | 1/1 | ### Committee role and responsibilities The principal purpose of the Committee is to: * support the Board in promoting its collective vision of Barclays’ purpose, values, culture and behaviours * ensure, on behalf of the Board, the efficiency of the processes for identification and management of Conduct and Reputation risk * oversee Barclays’ conduct in relation to its corporate and societal obligations, including setting the guidance, direction and policies for Barclays’ approach to customer and regulatory matters and Barclays’ Citizenship Strategy, including advising the Board and management on these matters. *The Committee’s terms of reference are available at [home.barclays/corporategovernance](http://home.barclays/corporategovernance)* #### Committee allocation of time (%) 1. Conduct and compliance: 36% (2016: 33%) 2. Culture: 20% (2016: 21%) 3. Customer satisfaction: 14% (2016: 6%) 4. Citizenship: 16% (2016: 13%) 5. Brand and other Reputation risk: 14% (2016: 27%) --- ### The Committee’s work The significant matters addressed by the Committee during 2017 are described below: | Area of focus | Matter addressed | Role of the Committee | Conclusion/action taken | | :--- | :--- | :--- | :--- | | **Conduct risk** | Monitoring the risks that can arise from the inappropriate supply of financial services, including instances of wilful or negligent misconduct. | Discussed updates from management on Conduct risk and considered performance against Conduct risk indicators at each meeting. | In line with its recategorisation under the ERMF, the Committee adopted Board-level oversight of financial crime risk and conducted a Deep Dive into this area. The Conduct dashboard report was updated to include financial crime information and metrics, and the Committee was encouraged by management’s open and transparent approach to engaging with regulators on financial crime matters. | --- | Area of focus | Matter addressed | Role of the Committee | Conclusion/action taken | | :--- | :--- | :--- | :--- | | **Cultural progress** | Reviewing management’s progress on embedding a values-based culture across the organisation. | Debated Culture dashboards presented at each meeting and the progress being made to embed cultural change across Barclays globally. Received regular updates on colleague engagement metrics and the results of employee YourView surveys and considered proposed changes to the YourView methodology. | Through consideration of the Culture dashboards and YourView results, the Committee was encouraged by the consistently strong sustainable engagement scores achieved throughout 2017. Improvements have been made in the area of colleague enablement. The Committee discussed the importance of a culture in which colleagues feel able to speak up and raise concerns. | | **Customer satisfaction** | Ensuring fair outcomes for customers by monitoring complaints volumes, the standard and quality of complaints handling processes and other relevant metrics. | Debated Complaints dashboards and performance against key indicators at each meeting. Requested further insight into the first line management of customer complaints and conducted a Deep Dive into Barclays UK’s complaints handling processes. | The Committee was pleased to see a general downward trend in the number of complaints received by Barclays during 2017. While the Committee still receives a Group-wide report on complaints, underlying reporting has been refined in line with organisational changes to ensure the Committee receives a clear view on the complaints metrics of Barclays UK and Barclays International respectively. | | **Citizenship** | Monitoring progress against the Shared Growth Ambition (Barclays’ Citizenship plan for 2016-2018) and the effectiveness of policy statements on Citizenship matters. | Considered the Citizenship dashboards presented at each meeting and assessed status updates on the Shared Growth Ambition. Reviewed Barclays’ ratings and relative peer ranking in external Environmental Social Governance (ESG) benchmarks and tracked external perceptions on Citizenship through stakeholder and media analysis. | The Committee was very pleased to see that Citizenship metrics demonstrate a high level of colleague pride in the contribution Barclays makes to the community and society. The Committee is very encouraged by management’s decision to dedicate resource to financial crime, skills and employability and digital empowerment initiatives. | | **Reputation and brand** | Ensuring that the Barclays brand is proactively managed and Reputation risks and issues are identified and managed appropriately. | Reviewed Reputation risk updates from management, receiving specific information on those issues deemed to constitute the most significant Reputation risks and issues in each quarter. Regularly evaluated the measures being taken to enhance the Barclays brand and to understand, and propose action to improve, where appropriate, external perceptions of the Bank. | The Committee approved the Reputation Risk Framework, confirming that Reputation risk is now a Principal Risk under the ERMF. Significant discussion also took place in respect of the correlation between cultural indicators, conduct outcomes and Reputation risk. The Committee requested further refinement of the Reputation risk reporting received to include sentiment analysis of media coverage and metrics on Barclays’ social media presence. | --- ### Other significant matters The Committee also covered the following matters: * received a report on management’s annual review of the effectiveness of compliance with the Volcker Rule (restrictions on proprietary trading and certain fund investments by banks operating in the US) * received a report from management on Barclays’ Swap Dealer Annual Compliance Report * discussed the outcome of an externally facilitated review on Barclays’ compliance with the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) and its comparative performance against its peers. * approved, from a Reputation risk perspective, a proposal to restructure certain intra-group shareholdings and enhance capital utilisations * assessed and discussed a report on the Committee’s performance * reviewed and updated its terms of reference. *Read more about Barclays’ risk management on pages 119 and 120 and in our Pillar 3 Report, which is available online at barclays.com/annualreport* #### Governance in action – Responding to stakeholder concerns During the year, the Committee gave consideration to Barclays’ exposure to environmental, social and sustainability matters through its business relationships and challenged management to establish a more formal and proactive approach to documenting policy positions and guidelines in relevant sectors. In response to recommendations from the Committee, management commenced work to review Barclays’ involvement and practices in certain ‘sensitive sectors’ and is in the process of drawing up proposals for sector-specific policies that will articulate the forward-looking intentions of Barclays in these areas. The Committee will be reviewing and approving these policies during 2018 and look forward to reporting on their content and implementation in next year’s Annual Report. The Committee considers that the establishment of sector-specific policies and guidelines will be a significant step in further enhancing the role that Barclays plays in the wider business community and believe they will improve the quality of the Company’s future reporting on climate change and other matters of social and environmental interest. --- ## Board Nominations Committee report ### In 2017 we made significant progress towards our new Group governance structure in preparation for structural reform and the stand up of our ring-fenced bank in 2018, with appointments having been made to both the Barclays UK and Barclays International divisional boards. ### Dear Fellow Shareholders In 2017 we made significant progress towards our new Group governance structure in preparation for structural reform and the stand up of our ring-fenced bank in 2018, with appointments having been made to both the Barclays UK and Barclays International divisional boards. We are delighted to welcome the new directors to those boards, led by Sir Gerry Grimstone as Chairman of Barclays International (subject to regulatory approval) and Sir Ian Cheshire as Chairman of Barclays UK (which will become our ring-fenced bank). We continued to refine the details of how the Group Board will interact with those boards and the boards of our other strategically significant subsidiaries, building on the Governance Guiding Principles we created in 2016. We look forward to working collaboratively with them to ensure that the roles and responsibilities of each board are clear, while providing effective governance of the Group and protection of shareholder interests. In view of the significant changes to our Group corporate structure, and always bearing in mind the long-term strategy of the Group, the Committee continues to regularly consider our Board composition and succession plans, ensuring it comprises the right balance of diversity, skills and experience to provide the strategic oversight needed to steer the business of the Group. We conducted searches for non-executive Directors in 2017 and were pleased to appoint Matthew Lester and Mike Turner CBE to the Board, in addition to the appointment of Sir Ian Cheshire. Matthew, Mike and Sir Ian each bring with them significant board-level experience and you can find out more about their background and relevant skills and experience that they bring to the Board in their profiles on pages 47 and 48. I have previously emphasised that it is a key part of our role to be satisfied that there are proper processes in place for executive succession, and this continues to remain another key consideration of the Committee. We closely monitored the status and progress of the Barclays Talent and Succession strategy, providing input and guidance to management to ensure we attract and retain the best talent for the Group. As a Committee, we also discuss ways in which we can develop and nurture high performing individuals within senior management to strengthen our succession pipeline, including the use of ex-officio posts to relevant executive committees to give those individuals exposure to Group matters and leadership. Our people are the driving force in sustaining our business and we firmly believe in the benefits of having a diverse workforce. I am proud to see the number and variety of diversity and inclusion initiatives we have at Barclays to develop and support colleagues, and ultimately to encourage them to grow their careers with us. While we recognise that diversity is not only about gender, it is nevertheless an important element of diversity and we have set ourselves a target of 33% female representation on the Board by 2020, which as a Board we remain committed to achieving. Please see page 79 for further information about our approach to diversity at both Board and Group Executive Committee levels. ### Committee performance The performance of the Committee was assessed as part of the annual Board effectiveness review and I am pleased to report that the results show that it is performing effectively, with the role and responsibilities of the Committee clear and well understood. One area identified for consideration is that the Committee should be mindful of ensuring that all non-executive Directors receive the same flow of information in relation to decisions and discussions by the Committee, which I will address in my updates to the Board as Chairman of the Board Nominations Committee, and outside of scheduled Board meetings to the extent appropriate. The report on the Board effectiveness review can be found on page 78. ### Looking ahead In 2018 we look forward to the execution of our new Group structure and to the implementation of robust processes providing clear, consistent and effective corporate governance for the Group post-structural reform. Throughout this period of change, the Committee will continue to ensure that we have the right people leading the strategic direction of Barclays, motivating colleagues and sustaining our business over the long term. **John McFarlane** Chairman, Board Nominations Committee 21 February 2018 --- ### Committee composition and meetings The Committee is composed solely of independent non-executive Directors. John McFarlane, as Chairman of the Board, is also Chairman of the Committee. Mike Ashley, Tim Breedon, Crawford Gillies, and Sir Gerry Grimstone, being the Chairmen of each of the other Board Committees, and Sir Ian Cheshire (as Chairman of Barclays UK) and Reuben Jeffery III, are also members of the Committee. Details of the skills and experience of the Committee members can be found in their biographies on pages 47 and 48. During 2017 there were three meetings of the Committee, including one held at Barclays’ New York offices. Attendance by members at Committee meetings is shown below and the chart to the left shows how the Committee allocated its time. Committee meetings were attended by the Group Chief Executive, with the Group HR Director, the Head of Talent, and the Global Head of Diversity and Inclusion attending as appropriate. | Member | Meetings attended/eligible to attend | | :--- | :--- | | John McFarlane | 3/3 | | Mike Ashley | 3/3 | | Tim Breedon | 3/3 | | Crawford Gillies | 3/3 | | Sir Gerry Grimstone | 3/3 | | Reuben Jeffery III | 3/3 | | Sir Ian Cheshire (from 9 May 2017) | 0/1* | *\* Sir Ian Cheshire did not attend owing to prior commitments, but his views and comments were made available to, and considered by, the Committee.* ### Committee role and responsibilities The principal purpose of the Committee is to: * support and advise the Board in ensuring that the composition of the Board and its Committees is appropriate and enables them to function effectively * examine the skills, experience and diversity on the Board and plan succession for key Board appointments, planning ahead to deal with upcoming retirements and to fill any expected skills gaps * provide Board-level oversight of the Group’s talent management programme and diversity and inclusion initiatives * agree the annual Board effectiveness review process and monitor the progress of any actions arising * ensure the Board has appropriate corporate governance standards and practices in place and keep these under review to ensure they are consistent with best practice. *The Committee’s terms of reference are available at [home.barclays/corporategovernance](http://home.barclays/corporategovernance)* ### The Committee’s work The significant matters addressed by the Committee during 2017 are described below: | Area of focus | Matter addressed | Role of the Committee | Conclusion/action taken | | :--- | :--- | :--- | :--- | | **Board and Board Committee composition** | The membership of the Barclays PLC Board and the current and future composition of the Board and its Committees. | Reviewed the Board skills matrix and discussed the key skills and experience needed on the Board in the context of future strategic direction, including any areas requiring strengthening for skills and succession and conducted a search for non-executive Directors. | The Committee identified the need to appoint an additional non-executive Director with chairman or CEO experience to add further depth to the Board. During the year it recommended for appointment to the Board Mike Turner CBE, Sir Ian Cheshire and Matthew Lester. | #### Committee allocation of time (%) 1. Corporate governance matters: 8% (2016: 20%) 2. Board and Committee composition: 42% (2016: 36%) 3. Succession planning and talent: 33% (2016: 31%) 4. Board effectiveness: 11% (2016: 8%) 5. Other: 6% (2016: 5%) --- ### Review of Board and Board Committee effectiveness **Process** Each year, an evaluation is conducted on the effectiveness of the Board, the Board Committees and individual Directors. Full external evaluations of Board effectiveness have been undertaken in the past two years. In view of the impending new Group corporate structure, following which another external evaluation will be carried out once the structure has had time to settle, the Board decided to focus this year’s review on individual Director performance to monitor the Board’s progress and to inform the agenda of the next full external review process. Independent Board Evaluation facilitated the effectiveness review for 2016 and was engaged again to conduct the 2017 Board review, also again led by Ffion Hague. Independent Board Evaluation is an independent external consultancy with no other connection to Barclays. Consistent with previous years, Ffion Hague carried out interviews with the Directors to obtain feedback on the effectiveness of the Board throughout 2017. Independent Board Evaluation issued a report to the Board on the findings of the effectiveness review. In addition, the Chairman was provided with a report and feedback on the performance of each of the Directors, and the Senior Independent Director received a report on the Chairman. Following consideration of the findings of the 2017 Board and Committee effectiveness reviews, the Directors remain satisfied that the Board and each of the Board Committees are operating effectively. **Outcomes of 2017 review** Board performance is considered to be improving, with more effective and insightful questions being asked in Board debates and a better balance being struck between support and challenge. In particular, the Directors were positive about: * the preparations for structural reform * project execution, such as the remediation of control issues and preparations for Brexit * the recruitment of high quality new Board members and members for the boards of Barclays UK and Barclays International. The Directors were also pleased with progress on strengthening the senior executive team and deepening relationships between Directors and key executives. The executive team feels well supported by the Board and is grateful for that support. Business performance is a concern for Board members, and the Board is focused on improving this within the Group. This will be a particular area of focus in 2018. The restructuring of the Group in April 2018 is also a significant focus for the Group and regarded as a major challenge. The Board is cognisant of the challenges of ensuring the new Group corporate structure is effective and efficient, and is conscious of the need to maintain good governance overall and minimise duplication. The interaction between the Group Board and the boards of our strategically significant subsidiaries will be closely monitored and thought will be given to identifying opportunities for engagement with subsidiary board members to develop and maintain a good working relationship. The impact of the new structure on Board work and governance will be a key area of review for the 2018 external evaluation of the Board. #### Progress against 2016 findings Following the 2016 Board effectiveness review facilitated by Independent Board Evaluation, a number of findings were identified and the summary below sets out the Board’s progress against those actions in 2017. | 2016 findings | Actions taken/findings in 2017 | | :--- | :--- | | **Board priorities** | Time was scheduled for free-ranging discussion around risk, strategy and the Bank’s long term plan during the Board’s annual strategy session. The review reported that Board discussion was more focused and struck a balance between support and challenge. | | **Board/executive relationship** | The review found that the relationship between the Board and executive management deepened during 2017, with executive management feeling well supported. | | **Optimise communication and collaboration*** | The Chairman continued to hold meetings with non-executive Directors ahead of Board meetings to brief them on current issues. Further principles and practices were developed for interaction between the Board and the boards of Barclays UK and Barclays International. | | **Board appointment process** | The Board skills matrix and succession plan were kept under review, with separate skills matrices established for the Barclays UK and Barclays International boards. | | **Director induction** | The induction programme was reviewed to factor in tailored governance training for new Directors and was extended also to directors of Barclays UK, Barclays International and the Group Service Company. | | **Reporting to the Board$^\dagger$** | The form and content of reporting to the Board was reviewed and refreshed by management to ensure that the Board is provided with appropriate management information on strategy and execution priorities. | --- ## How we comply ### UK Corporate Governance Code (the Code) As Barclays is listed on the London Stock Exchange we apply the main principles of the Code and comply with the Code’s provisions. A copy of the Code can be found at [frc.org.uk](http://frc.org.uk). Corporate Governance in Barclays contains a full description of our corporate governance practices and is available online at [home.barclays/corporategovernance](http://home.barclays/corporategovernance). For the year ended 31 December 2017, and at the date of this report, we are pleased to confirm that we complied in full with the Code. ### Disclosure Guidance and Transparency Rules By virtue of the information included in this Governance section of the Annual Report we comply with the corporate governance statement requirements of the FCA’s Disclosure Guidance and Transparency Rules. Certain additional information that is required to be disclosed pursuant to DTR7.2.6 can be found on pages 85 to 88. ### New York Stock Exchange (NYSE) Barclays is permitted by NYSE rules to follow UK corporate governance practices instead of those applied in the US. However, any significant variations must be explained in Barclays’ Form 20-F filing, which can be accessed from the Securities and Exchange Commission’s EDGAR database or on our website, [home.barclays](http://home.barclays). ### Leadership As highlighted earlier in this report, the Board of Directors is responsible for promoting the highest standards of corporate governance in Barclays. We act in a way that we consider promotes the success of Barclays for the benefit of shareholders as a whole, and are accountable to the shareholders for creating and delivering sustainable value. We are responsible for setting strategy and overseeing its implementation, and also ensuring that management maintains an effective system of internal control. For further information about the role of the Board and its responsibilities, together with the Board governance framework, please see page 50. ### Roles on the Board Executive and non-executive Directors share the same duties and are subject to the same constraints. However, in line with the principles of the Code, a clear division of responsibilities has been established. The Chairman is responsible for leading and managing the work of the Board, while responsibility for the day-to-day management of Barclays has been delegated to the Group Chief Executive. The Group Chief Executive is supported in this role by the Group Executive Committee. Further information on membership of the Group Executive Committee can be found on page 49. As a Board we have set out our expectations of each Director in Barclays’ Charter of Expectations. This includes role profiles and the behaviours and competencies required for each role on the Board, namely the Chairman, Deputy Chairman, Senior Independent Director, non-executive Directors, executive Directors and Committee Chairmen. The Charter of Expectations is reviewed annually to ensure it remains relevant and up to date. It is published on [home.barclays/corporategovernance](http://home.barclays/corporategovernance) to ensure that there is complete transparency of the standards we set for ourselves. ### Attendance As members of the Board of Directors we are expected to attend every Board meeting. In 2017, we attended both scheduled and additional Board meetings, as recorded in the table below. The Chairman met privately with the non-executive Directors ahead of each scheduled Board meeting, and if, owing to exceptional circumstances, a Director was not able to attend a Board meeting they ensured that their views were made known to the Chairman in advance of the meeting. --- ### Other statutory information The Directors present their report together with the audited accounts for the year ended 31 December 2017. Other information that is relevant to the Directors’ report, and which is incorporated by reference into this report, can be located as follows: | | Page | | :--- | :--- | | Employee involvement | 89 | | Policy concerning the employment of disabled persons | 90 | | Financial instruments | 258 | | Hedge accounting policy | 246 | | Remuneration policy, including details of the remuneration of each Director and Directors’ interests in shares | 93 | | Corporate governance report | 43 | | Risk review | 117 | | Viability statement | 40 | ### Disclosures required pursuant to Listing Rule 9.8.4R | | Page | | :--- | :--- | | Long-term incentive schemes | 123 | | Waiver of Director emoluments | 112 | | Allotment for cash of equity securities | 297 | | Waiver of dividends | 85 | Section 414A of the Companies Act 2006 requires the Directors to present a Strategic report in the Annual Report and Financial Statements. The information can be found on pages 2 to 41. The Company has chosen, in accordance with section 414C(11) of the Companies Act 2006, and as noted in this Directors’ report, to include certain matters in its Strategic report that would otherwise be disclosed in this Directors’ report. An indication of likely future developments may be found in the Strategic Report. The particulars of important events affecting the Company since the financial year end can be found in the Strategic report and Note 29, Legal, competition and regulatory matters. ### Profit and dividends Statutory loss after tax for 2017 was £894m (2016: profit £2,828m). The final dividend for 2017 of 2.0p per share will be paid on 5 April 2018 to shareholders whose names are on the Register of Members at the close of business on 2 March 2018. With the interim dividend totalling 1.0p per ordinary share, paid in September 2017, the total distribution for 2017 is 3.0p (2016: 3.0p) per ordinary share. The interim and final dividends for 2017 amounted to £509m (2016: £757m). For 2018, Barclays anticipates resuming a total cash dividend of 6.5p per share, subject to regulatory approvals. Shareholders may have their dividends reinvested in Barclays by joining the Barclays PLC Scrip Dividend Programme (the Programme). The Programme enables shareholders, if they wish, to receive new fully-paid ordinary shares in Barclays PLC instead of a cash dividend, without incurring dealing costs or stamp duty. The nominee company of certain Barclays’ employee benefit trusts holding shares in Barclays in connection with the operation of the Company’s share plans has lodged evergreen dividend waivers on shares held by it that have not been allocated to employees. The total amount of dividends waived during the year ended 31 December 2017 was £0.68m (2016: £2.6m). Barclays understands the importance of the ordinary dividend for our shareholders. Barclays is therefore committed to maintaining an appropriate balance between total cash returns to shareholders, investment in the business, and maintaining a strong capital position. Going forward, Barclays intends to pay an annual ordinary dividend that takes into account these objectives, and the medium-term earnings outlook of the Group. It is also the Board’s intention to supplement the ordinary dividends with additional returns to shareholders as and when appropriate. The Board notes that in determining any proposed distributions to shareholders, the Board will consider the expectation of servicing more senior securities. --- ### Consolidating financial statements (Content not duplicated here) --- ### Auditors’ remuneration (Content not duplicated here) --- ### Shareholder information (Content not duplicated here) --- ```mermaid graph TD A[Barclays PLC] --> B(Barclays Bank UK PLC) A --> C(Barclays Services Limited) A --> D(Barclays Bank PLC) B --> E(Barclays UK - ring-fenced bank) C --> F(Group Service Company) D --> G(Barclays International) ```