Barclays Bank UK PLC Annual Report 31 December 2021 Page Strategic Report Performance review 2 Managing risk 5 Performance measures 7 Our people and culture 9 Having regard to our stakeholders in Board decision-making 11 Environment, Social and Governance Report 13 Governance Chair’s introduction 17 Governance Report (including our Corporate Governance Statement) 19 Directors’ Report 28 Risk review Risk review contents 32 Risk management strategy 35 Material existing and emerging risks 37 Climate change risk management 49 Principal risk management 52 Risk performance 59 Supervision and regulation 120 Financial statements Financial statements contents 124 Consolidated financial statements 134 Notes to the financial statements 142 Contents home.barclays/annualreport 1 Barclays Bank UK PLC Annual Report The Strategic Report was approved by the Board of Directors on 22 February 2022 and signed on their behalf by the Chair. Overview Barclays Bank UK PLC (the Company) is a wholly-owned subsidiary of Barclays PLC. The consolidation of Barclays Bank UK PLC and its subsidiaries is referred to as the Barclays Bank UK Group. The term Barclays refers to Barclays PLC, or depending on context, the Barclays Group as a whole, and Barclays Group refers to Barclays PLC, together with its subsidiaries. Barclays Bank UK PLC is the ring-fenced bank within the Barclays Group. The Barclays Bank UK Group contains the majority of the Barclays Group’s Barclays UK division, including the Personal Banking, Business Banking and Barclaycard Consumer UK businesses other than the Barclays Partner Finance business. Our structure Barclays is one of the most recognisable brands in the UK. We serve customers across a wide range of retail banking needs, from credit card users, to start-up businesses, to homebuyers getting on the property ladder for the first time. Personal Banking Offers retail solutions to help customers with their day-to-day banking needs. Business Banking Serves business clients, from high growth start-ups to small and medium-sized businesses, with specialist advice for their business banking needs. Barclaycard Consumer UK A leading credit card provider, offering flexible borrowing and payment solutions, while delivering a leading customer experience. Barclays Bank UK PLC is supported by the Barclays Group service company, Barclays Execution Services Limited (BX), which provides technology, operations and functional services to businesses across the Barclays Group. Market and operating environment The COVID-19 pandemic and low interest rate environment continued to have a significant impact on our consumer businesses in the Barclays Bank UK Group. It accelerated a number of existing trends in customer behaviour, including a declining use of cash for transactions, lower footfall across our branch network and consumers saving more and paying down existing debt. There continues to be a significant shift towards digital adoption and demand for digital financial services to meet day-to-day needs, including for online shopping and contactless payments. This significant shift towards digital, combined with the effect of the Covid-19 pandemic restrictions, has unfortunately attracted more criminal behaviour and there has been a consequent increase in fraud and scams in 2021. We are committed to combatting this. Whilst we have seen an increase in the number of customers moving to digital, there remains a cohort of customers where we continue to observe more traditional forms of engagement. Strategic priorities We aim to provide customers with banking services in new and innovative ways, embracing technology as a means of making things simpler, more transparent and more secure. We are focused on the following areas: 1. Providing exceptional service and insights to customers: We aim to provide simple, relevant and prompt services and propositions for our customers so they have greater choice and access to money management capabilities. Using the quality and scale of our data insights, our ambition is to help customers better manage their finances and make informed financial decisions. 2. Driving technology and digital innovation: We continue to invest in our digital capabilities, upgrading our systems, moving to cloud technology and implementing automation of manual processes. This is intended to allow delivery of a more personalised digital experience, reduce cost and create additional capacity to support more of our customers. It aims to provide capability to unlock new sources of income, drive service and improve financial inclusion. Strategic Report Performance review home.barclays/annualreport 2 Barclays Bank UK PLC Annual Report 3. Continuing to grow our business: We are pursuing partnership opportunities to build and deliver better propositions and services for our customers. We aim to use the Barclays platform to provide better service to Barclays customers and open up new income streams. 4. Evolving our societal purpose: We are working to support the communities we serve. We are focused on financial inclusion and recognise our role in supporting people and businesses make the transition to a low-carbon economy. We also seek to preserve access to cash for consumers and businesses over the long term. Year in review Customers • We helped 48,000 first time buyers onto the property ladder, up 92% on 2020, and the highest number we have seen in recent history. We have continued to support customers with their home buying needs and have had a record performance in mortgage completions, particularly through the second half of the year. We have delivered 7% growth in net mortgage balances this year. • We remain focused on bringing customer complaints down, recognising we still have a long way to go. With that said, we were encouraged to see complaints were lower than in the previous year, decreasing 17% even as volumes of customer transactions and interactions grew. Unfortunately, we also saw a disappointing decline in Net Promoter Scores (NPSa) for the Barclays Bank UK Group’s UK banking and Barclaycard UK businesses throughout 2021 at +11 and +4 respectively. We recognise there is much more to do. • We continued to build strategic partnerships, including launching a new collaboration with British Airways and Avios, allowing eligible Barclays customers to link their Barclays accounts to their British Airways Executive Club membership to earn more Avios points through everyday banking. Digital • We continued to make strides to enhance the Barclays app. This year, we reached 10m registrations on the Barclays app and exceeded over 3 billion logins. We introduced an in-app self-serve feature for customers in financial difficulty who require assistance with making repayments on their credit card. We launched our first in-app subscription product, allowing new and existing customers to subscribe to the Telegraph via the Barclays app. • As part of our aim to deliver a leading money management experience, we delivered more tools and features to educate customers on managing their money. Through the use of our digital platforms, Barclays Digital Eagles and Money Mentors, we helped customers build financial confidence and plans, and save more money through our budgeting tools. • We made progress on our digital on-boarding proposal, automating the procedure to enable our customers to open new accounts with minimal fuss. This created additional capacity for branch colleagues and made it simple and easy for the over 1m new-to-bank customers who visit our branches each year to complete the required on-boarding steps. Sustainability and Social Purpose • We were one of the first major UK lenders to launch a Green Home Mortgage in 2018, and to date we have completed over £1bn in Green Home Mortgages. In 2021 we expanded the eligibility criteria of our Green Home Mortgage to include any new build properties meeting energy efficiency requirements. This has now also been expanded to include customers purchasing a new build, energy efficient buy-to-let property. • We extended the expiry date on our cards from every three years to every five years, saving virgin plastic. We have expanded our offering of environmentally friendly materials to all Barclays debit cards and Barclaycard credit cards in the UK. • Led by our Business Bank, we joined the Banking for Impact on Climate and Agriculture (B4ICA), an inter-bank group focused on developing a means for the measurement and disclosure of the greenhouse gas emissions of banking portfolios in the agricultural sector. • In the Business Bank, we launched a proposition to support the development and growth of the Social Business sector, comprising a combination of access to finance, skills and networks to help social entrepreneurs build their impact. Note a ®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. Strategic Report Performance review home.barclays/annualreport 3 Barclays Bank UK PLC Annual Report Looking ahead Our aim remains putting customers and clients at the heart of the decisions we make, helping to ensure good customer outcomes for every customer and client. We are endeavouring to reinvent our service model for customers, creating a more efficient, more resilient and seamless service at a pace that suits our customers’ expectations. More interactions are moving to digital and virtual channels and fewer customers are using our branch network. Where traditional branches may have been the most appropriate point of engagement in the past, we will increase the range of more flexible options for our customers, whilst ensuring we continue to support customers who are less digitally capable. This will continue to include physical branches, complemented with flexible banking pop-ups in community spaces, the introduction of mobile banking vans and shared services, including shared Banking Hubs and ATMs. We will continue to play a leading role collaborating with the Access to Cash Group, and plans are underway to help retailers supply cashback without purchases, ensuring greater accessibility of cash in local and remote areas. We continue to build partnerships in the open market and work across the Barclays Bank UK Group to deliver additional value for our customers and businesses through our size and scale. We will continue to invest in digital platforms, remove unnecessary processes and costs and make it seamless for customers to self-serve. We are acutely aware of increasing consumer expectations on climate and sustainability. We are committed to inspiring and supporting our customers to live and act more sustainably through our propositions. Measuring success • Income (2020: £6.4bn, 2021: £6.5bn) • Operating expenses (2020: £4.6bn, 2021: £4.7bn) • Profit before tax (2020: £0.4bn, 2021: £2.2bn) • Return on tangible equity (2020: 3.2%, 2021: 17.6%) Growing with society Our success is judged not only by commercial performance, but also by our contribution to society and how we act responsibly for the common good and the long term. These outcomes are mutually dependent. We believe that we can, and should, make a positive difference for society – globally and locally. We do that through the choices we make about how we run our business, and through the commitments we make to support our communities. We prize sustainability, and recognise our role to play in leaving things better than we found them. We cannot be successful in the long term without recognising that we are at our best when our clients, customers, communities, and colleagues all progress. For detail on our integration of social and environmental issues into our business, please refer to our Environment, Social and Governance (ESG) Report on pages 13 to 15 and pages 51 to 104 in the Barclays PLC 2021 Annual Report. Addressing climate change is an urgent and complex challenge. It requires a fundamental transformation of the global economy, so that society stops adding to the total amount of greenhouse gases in the atmosphere. The financial sector has a critical role to play in supporting the economy to reach this. It is estimated that at least $3-5 trilliona of additional investment will be needed each year, for the next 30 years, in order to finance the transition. At Barclays, we are determined to play our part. In March 2020, we announced our ambition to be a net zero bank by 2050, becoming one of the first banks to do so. We have a strategy, in three parts, to put that ambition into action: • Net zero operations – Barclays is working to achieve net zero operations • Reducing our financed emissions – Barclays is aligning its financing portfolios in every sector, with the goals and timelines of the Paris Climate Agreement and restricting financing of non-Paris Agreement aligned activity • Financing the transition – Barclays is providing the green and sustainable finance required to transform the economies we serve Our strategy is underpinned by the way we assess and manage our exposure to climate-related risk. You can read more about Barclays’ approach to climate risk in the Barclays PLC Task Force on Climate-Related Financial Disclosures (TCFD) Report. Our approach to environmental and social issues is grounded in the work we do every day, right across our business, supported in turn by the governance and oversight of our management and Board structures. Barclays was one of the 30 founding banks of the Principles for Responsible Banking, which help to align banks with society’s goals as expressed in the Paris Climate Agreement and the United Nations’ Sustainable Development Goals. We engage directly with stakeholders internally and externally to assess our areas of focus against their priorities. That happens through ongoing conversations, as well as surveys and information requests from investors and ratings agencies. We also monitor closely the relevant ESG frameworks and reporting guidelines. For an overview of the Barclays Bank UK Group’s approach to managing climate change risk, please refer to pages 49 to 51 in the climate change risk management section. You can read more about our approach to ESG issues in our ESG Report on pages 13 to 15 and in the ESG section of the Barclays PLC 2021 Annual Report. Note a $3-5trn as estimated in the GFMA/BCG (Global Financial Markets Association/Boston Consulting Group) Climate Finance Markets and the Real Economy report, December 2020 Strategic Report Performance review home.barclays/annualreport 4 Barclays Bank UK PLC Annual Report