Barclays Bank PLC Annual Report 31 December 2021 Contents Page Strategic Report Performance review 1 Managing risk 5 Performance measures 7 Our People and Culture 9 Section 172(1) Statement 12 Governance Chairman’s introduction 15 Corporate governance statement 16 Directors’ report 28 Risk review Risk review contents 32 Risk management strategy 34 Material existing and emerging risks 36 Climate change risk management 49 Principal risk management 51 Risk performance 57 Supervision and regulation 121 Financial statements Financial statements contents 127 Consolidated financial statements 148 Notes to the financial statements 158 The Strategic Report was approved by the Board of Directors on 22 February 2022 and signed on their behalf by the Chairman. On 22 February 2022, Tushar Morzaria informed the Board of his intention to retire from the Board and as Group Finance Director and it has been agreed that this will take effect on 22 April 2022, with Anna Cross succeeding him as a member of the Board and as Group Finance Director on 23 April 2022. Details of these Board changes will be set out in a separate announcement to the market on 23 February 2022. Overview Barclays Bank PLC (BBPLC or the Company) is a wholly-owned subsidiary of Barclays PLC. The consolidation of Barclays Bank PLC and its subsidiaries is referred to as the Barclays Bank Group. The term Barclays refers to either Barclays PLC (or BPLC) or, depending on the context, the Barclays Group as a whole. The term Barclays Group refers to BPLC together with its subsidiaries. Barclays Bank PLC is the non ring-fenced bank within the Barclays Group. The Barclays Bank Group contains the majority of the Barclays Group’s Barclays International division, which is comprised of the Corporate and Investment Bank (CIB) and Consumer, Cards and Payments (CC&P) businesses. Barclays Bank PLC offers customers and clients a range of products and services spanning consumer and wholesale banking and is supported by the Barclays group-wide service company, Barclays Execution Services Limited (BX), which provides technology, operations and functional services to businesses across the Barclays Group. Barclays Bank PLC is focused on delivering for customers and clients around the world, Barclays Bank PLC’s diversified business portfolio provides balance, resilience and exciting opportunities. Barclays Bank PLC has strong global market positions and continues to invest in people and technology with the aim of delivering sustainable returns. Our structure CIB The CIB is comprised of the Investment Banking, Corporate Banking and Global Markets businesses, aiding money managers, financial institutions, governments, supranational organisations and corporate clients to manage their funding, financing, strategic and risk management needs. • Our Global Markets business provides a broad range of clients with market insight, execution services, tailored risk management and financing solutions across equities, credit, rates and foreign exchange products. • Investment Banking provides clients with strategic advice on mergers and acquisitions (M&A), corporate finance and financial risk management solutions, as well as equity and debt issuance services. • Corporate Banking provides GBP and EUR working capital, transaction banking (including trade and payments), and lending for multinational, large and medium corporates, and for financial institutions. CC&P CC&P is comprised of our International Cards and Consumer Bank, Private Bank and Unified Payments businesses. • As part of our International Cards and Consumer Bank, in the US we have a partnership-focused business model, offering credit cards to consumers through our relationships, including with American Airlines and AARP. We also offer online retail savings products, instalment payments and personal loans. • In Germany, we also offer multiple consumer products, including own-branded and co-branded credit cards, online loans, electronic Point of Sale (ePOS) financing and deposits. • Unified Payments enables businesses of all sizes to make and receive payments. • Our Private Bank offers banking, credit and investment capabilities to meet the needs of our clients across the UK, Europe, the Middle East and Africa, and Asia. Market and operating environment CIB The year in the global financial markets was characterised by heightened volatility early on due to COVID-19, with activity decreasing as volatility stabilised. Equities markets remained buoyant through the year, as a number of indices rallied to record highs. There were significant levels of investment banking activity, with M&A up 65% on the prior year1. Similarly, volumes in the initial public offering (IPO) market increased by over 85% compared with 20201. Across our CIB businesses, the opportunities presented by climate change and the broader environmental, social and governance (ESG) agenda continued to grow, as demonstrated by the record levels of green bond issuance at £340bn for the year1. Corporate lending activity declined versus 2020 given the significant amounts of borrowing undertaken at the outset of the pandemic, while Transaction Banking activity grew steadily in conjunction with improved economic conditions. Note 1 Dealogic for period covering 1 January 2021 to 31 December 2021 Strategic report Performance review home.barclays/annualreport Barclays Bank PLC Annual Report 1 CC&P The COVID-19 pandemic and low interest rate environment continued to have a significant impact on CC&P. It accelerated a number of existing trends in customer behaviour, including consumers saving more and paying down existing debt. As cash use declines and online transactions grow, the shift towards digital services and payments continued. In Payments, we also saw a continuing trend towards e-commerce versus in-store transactions, with an accelerating number of Small and Medium Sized Enterprises (SMEs) in particular pivoting their businesses online and accepting digital payments. Strategic priorities CIB Our aim is to provide comprehensive and integrated services to clients, delivering solutions across Investment Banking, Corporate Banking and Global Markets. • Becoming an electronic-first Global Markets business, growing in targeted areas: In Global Markets, we will prioritise simplification of our systems architecture, while seeking to close gaps in our intermediation businesses. We are focused on growing our financing capabilities to build a more diversified portfolio that performs better across the economic cycle. • Investing in high growth sectors and maintaining high returns in Investment Banking: We are continuing to invest in high growth sectors such as Technology and Healthcare, and we aim to sustain the investment we have made in our high returning, fee-driven M&A and Equities businesses. • Capturing opportunities as we transition to a low-carbon economy: We are focused on opportunities to deepen relationships. We aim to support clients who want to make their business models more sustainable, and, in Global Markets and Investment Banking, using our scale and capital markets expertise to mobilise capital for green and social infrastructure. • Diversifying Corporate Banking income: We remain focused on diversifying our Corporate Bank by growing the business in Europe and the US, growing Transaction Banking and optimising the use of loan capital. We aim to continue the build out of our full service Corporate Banking digital proposition and other significant multi-year strategic investment programmes for trade, payments and wholesale lending. • Improving integration: Across our businesses we are focused on serving clients in an integrated way. Our efforts to broaden and deepen our CIB offering across Europe will form an important part of this effort. CC&P We strive to deliver next-generation consumer businesses, offering best-in-class consumer finance, private banking and payment solutions. • Responding to changing consumer behaviour: We continue to invest in the digitisation of our businesses, delivering new products and capabilities to reflect growing trends. This includes focusing on scaling our existing e-commerce solutions to add further value to our digitally engaged customers, small businesses and corporates. • Building a more efficient and seamless business: We are accelerating our automation agenda to drive operational efficiency and create a more seamless digital customer experience. • Winning new partnerships: We are focused on broadening relationships with our existing partners and pursuing new partnerships, particularly in the US. We are also building capabilities to offer new financing solutions across all our markets. Year in review CIB • Our Global Markets business acted as a market-maker and liquidity provider to clients across the globe, playing an important role in helping them find opportunities and manage risk during a period of continued heightened market volatility. In the context of a year in which trading market conditions changed materially, we had an overall share of 4.6% (2020: 4.8%), maintaining our global revenue ranking at 6th2. Gains in Equities were offset by a reduction in FICC revenues, which were down in comparison with a very strong 2020. • We continued to invest in enhancing our Global Markets digital proposition, including our electronic trading capabilities and our digital self-service platform; and our financing platforms across Fixed Income and Equities. • 2021 was a record year for our Investment Banking business on a revenue basis, with significant revenue improvement in target growth areas. This included Advisory, up 64% on prior year and Equity Capital Markets, up 72%. We regained our position of 6th in overall global fee share3, having slipped to 7th in 2020. • We continued to invest in the strength of our Investment Banking coverage in high growth sectors, including expanding our Sustainable Impact Banking (SIB) Group. SIB advised on or raised capital for companies in over 50 transactions representing over £18bn, a five-fold increase in financing volumes from 2020 and a more than doubling in the number of strategic advisory transactions for clients whose businesses are addressing environmental or social challenge. • Our Research team continued to deliver differentiated insights through a mix of thematic and single-name content, high touch interactions, and events. We have continued to further the ESG agenda for Barclays by strengthening our a cross-asset ESG team, which oversees the integration of ESG into our fundamental research. We leveraged the investments made in our data science platform by producing more than 300 reports tied to our data-science insights in 2021. We also played a critical role in driving our thought leadership, for example with the launch of the Eagle Eye newsletter and the ongoing Flip Side podcast to our clients. Strategic report Performance review home.barclays/annualreport Barclays Bank PLC Annual Report 2 • Our Corporate Banking business also originated over £2bn in green lending and continued developing our sustainable product set, growing the number of products from 6 in 2020 to 15 in 2021, including trade, lending and deposits. We collaborated across CIB to deliver financial support to help our clients meet their crucial ESG targets. • Our Corporate Banking business continued to play a role in supporting clients impacted by COVID-19 through the UK Government lending schemes as well as supporting businesses to accelerate growth with the introduction of the new General Export Facility (GEF) in collaboration with UK Export Finance. Since GEF was made available, Barclays has approved more than £95m of UK Export Finance (UKEF) backed finance accounting for over 40% of the total value of facilities to date. In the UK, Corporate Banking deposit balances grew by 7% during the year. • We continued monetising our investments in our international footprint of our Corporate Banking business. Despite the challenging environment, we on-boarded a little under 600 new clients across nine EU countries where our Transaction Banking offering is now live. Notes 2 Coalition Greenwich, Preliminary FY21 Competitor Analysis. Analysis is based on Barclays internal business structure and internal revenues. Rank result is against the Coalition Index Banks. 3 Dealogic for the period covering 1 January 2021 to 31 December 2021 CC&P We established new partnerships across our businesses, notably in the US, where we signed a long-term partnership agreement with Gap Inc., the largest speciality apparel company4 in the US, to issue both co-branded and private label credit cards. We also renewed our existing partnership agreement with JetBlue Airlines, among other partners. We maintained our position as a top 10 credit card issuer5 in the US. We continued to invest in our digital servicing model, reaching a digital active user rate of 71.8%. We have seen an improvement on the Net Promoter Score in the US Consumer Bank, reaching +37 vs +35 in 2020. Our Payments business maintained its position as one of the largest payment processors in Europe6. We secured new client relationships, and retained others, including with Center Parcs, Musgrave and the Ministry of Defence. We also launched iPortal, our Payments servicing platform to Corporate clients, enabling the management of merchant services accounts alongside bank accounts and other Corporate services in a single location. In Germany, we continue to be a leading provider of consumer finance7 through our credit cards and personal loans business. We have scaled the business through collaborations with e-commerce providers, including Amazon, providing customers with financial flexibility at the Point of Sale. Our Private Bank continued to work towards becoming a leading investments house for Ultra High Net-Worth (UHNW) and High Net-Worth (HNW) clients and Family Offices, by offering more tailored and sustainable solutions as well as providing access to our CIB. Notes 4 Gap Inc.2020 5 Nilson Report #1204 6 Nilson Report # 1197 7 Deutsche Bundesbank, Advanzia S.A, plus own calculations Looking ahead CIB Across our CIB, we will remain focused on maintaining our client-centric approach and developing opportunities to grow our business and increase returns. We will continue to focus on growth in high-returning, capital efficient parts of our business and to sustain our focus on cost discipline and operational rigour. In Global Markets we are focused on further developing our electronic trading-driven business, driving efficiency and scale and serving the needs of our investor base. We will continue to invest in market share growth in Securitised Products, Emerging Markets, and parts of our Rates and Foreign Exchange businesses. Investment Banking will continue its investment in high-priority sectors, particularly in Healthcare, where we have more to do to improve fee share, and in Technology in the US and Europe. More broadly, we aim to build on our established momentum and improve revenue contribution from our equity and advisory offerings. We will continue to build our SIB offering, with a particular focus on developing our capabilities in Europe and Asia. We are also looking to broaden the range of ESG capital market product types we offer and to deliver across more client segments. In Corporate Banking, we will continue to monetise investments in our European and US offering with an emphasis on growing our Transaction Banking business. Our focus will remain on steadily improving our credit portfolio returns by reallocating risk weighted assets to higher-returning opportunities. We will keep investing in our trade, payments and wholesale lending offering and we will look to further enhance our digital proposition. CC&P Within CC&P, we will continue to invest in building our technology and digital capabilities, meeting consumer demand and responding to changing behaviour. We aim to drive further scale in our Payments business. Our goal is to deliver a world-class unified payments experience for customers, combining payments and banking technology, to contribute to the Barclays’ growth ambition of delivering an additional £900m of income from payments activity between 2020 and 2023. In support, we will continue to drive the uptake of our e-commerce solutions. We will continue to deepen our relationships with corporates, by: collaborating with the CIB; strengthening our offerings to small businesses and targeting continued growth in our European footprint. In Germany, we will continue to grow and seek to utilise the capabilities built with Amazon to further penetrate the market, as well as pursue new commercial partnerships that further expand our co-branded cards portfolio. Strategic report Performance review home.barclays/annualreport Barclays Bank PLC Annual Report 3