# Barclays Bank PLC ## Annual Report ### 31 December 2019 --- ## Contents | | Page | | :--- | :--- | | **Strategic report** | | | Performance review | 1 | | Managing risk | 4 | | Performance measures | 6 | | Our people and culture | 8 | | **Governance** | | | Chairman’s introduction | 11 | | Corporate Governance Statement | 12 | | Directors’ report | 24 | | **Risk review** | | | Risk review contents | 28 | | Risk management strategy | 31 | | Material existing and emerging risks | 34 | | Climate change risk management | 43 | | Principal risk management | 44 | | Risk performance | 50 | | Supervision and regulation | 111 | | **Financial statements** | | | Financial statements contents | 118 | | Consolidated financial statements | 127 | | Notes to the financial statements | 139 | --- ## Strategic report ### Performance review The Strategic Report was approved by the Board of Directors on 12 February 2020 and signed on their behalf by the Chairman. #### Overview Barclays Bank PLC is a wholly-owned subsidiary of Barclays PLC and consists of the Corporate and Investment Bank (CIB), Consumer, Cards and Payments (CC&P) and the Head Office. The consolidation of Barclays Bank PLC and its subsidiaries, is referred to as the Barclays Bank Group. The consolidation of Barclays Bank PLC’s parent entity, Barclays PLC and its subsidiaries, is referred to as the Barclays Group. With relentless focus on delivering for customers and clients around the world, Barclays Bank PLC’s diversified business portfolio provides balance, resilience and exciting growth opportunities. Barclays Bank PLC has strong global market positions and continues to invest in people and technology in order to deliver sustainable improved returns. Barclays Bank PLC offers customers and clients a range of products and services spanning consumer and wholesale banking. #### Our structure **CIB** Our CIB is one of the world’s leading providers of funding, financing, cash management, advisory and risk management products and services. We work with money managers, financial institutions, governments and corporate clients globally to help them innovate and grow. **CC&P** CC&P includes the following key businesses: * In the UK, our payments business enables clients ranging from small businesses to large corporates to make and receive payments. We are a leading corporate card issuer for large and small businesses, and have expanded into providing business-to-business supplier payment solutions. We also help businesses accept payments from their customers in-store, in-app and online. We are also one of the UK’s largest finance partners for retailers, providing point of sale finance solutions to consumers. * In the US, our co-branded cards business provides credit cards to consumers. Our partners include American Airlines, JetBlue and Wyndham Hotels & Resorts. * In Germany, we offer market leading consumer credit cards$^{a}$, while continuing to develop our lending offering. * Globally, our Private Bank provides a diverse range of personal and institutional wealth management products and services, including investments, credit and cash management solutions. Barclays Bank PLC is supported by the Barclay PLC Group-wide service company, Barclays Execution Services (BX) providing technology, operations and functional services to businesses across the Barclays Group. #### Strategic priorities Barclays Bank Group’s business model provides a diversified earnings portfolio to its shareholder, Barclays PLC. Our diversification is a real strength, and we will maintain and increase our diversity as we evolve. Our revenue today comes from different businesses, different types of customer and client, different types of income, and different geographies. We believe this diversification creates the balance and resilience required to deliver through the economic cycle. --- **Notes** a Basis: Ranking by revolving balances. Sources: Bankenfachverband, Statistisches Bundesamt, own calculations --- ## Strategic report ### Performance review #### CIB Over the last few years, our US competitors have consolidated their strong position, and our European peers have focused efforts on a narrower product set. Barclays Bank PLC is therefore able to differentiate itself as a European headquartered provider of universal banking services. As our clients look to diversify their service providers, and decrease their exposure to the US credit cycle, we believe our ability to provide this diversification is a real strength. Our strategy is also shaped by the increasingly sophisticated needs of our clients, and technological evolution across our industry. We are focused on three areas: **Adapting to the evolving needs of our clients** We are investing in technology that makes it easier for our clients to do business with us. That includes the development of our electronic offering in Markets and the digitalisation of our Corporate Banking client service platform. **Running an efficient and effective business** Achieving better operational performance and driving improvements in market share, while maintaining cost discipline and driving more productive use of capital by recycling risk-weighted assets to the highest returning opportunities. **Improving returns by growing high returning and capital efficient businesses** Focused growth in areas such as transaction banking in Corporate Banking and fee-led, advisory and equity origination work in Banking. We are also developing other higher-returning businesses where we see opportunities, such as securitised products. #### CC&P We plan to grow our payments business by deepening our relationships where we have through tighter integration across Barclays and through significant investment in our digital and reporting capabilities, historically had gaps. We will also build upon our deep payments experience by integrating with the software providers our clients use in order to scale our payments solutions more quickly across the UK and into Europe. Further investment in our digital infrastructure and innovative solutions will be key to continuing to simplify processes and make it easy for our clients to access an end-to-end payment service from Barclays Bank PLC in the UK and across Europe. In the US, we are strengthening our foundations through platform upgrades, infrastructure improvements and process automation to meet evolving customer needs. Our co-branded business model is well proven and is creating opportunities for growth. We continue to target strong renewal activity and deeper engagement with current partners, whilst expanding our reach with new strategic opportunities. Our Private Bank remains focused on delivering bespoke solutions for global high-net-worth, ultra-high-net-worth and family office clients. We have made a number of digital enhancements to streamline onboarding for our Private Bank clients and this will remain an area of focus. #### Operating environment **CIB** The economic conditions of 2019 continued to provide a challenging context for corporate and institutional banking and financing activity. Features such as the low interest rate environment, the UK’s withdrawal from the EU and global trade tensions combined to dampen and delay deal activity, particularly primary issuance. That meant the global Markets revenue pool shrank by 2%$^a$. Our Banking business has also seen its available fee pool shrink, with declines of 14-18%$^b$ compared with 2018 in the UK and Europe, and 2-3%$^b$ in the Americas and Asia. We expect many of these macroeconomic trends to continue, and are shaping our business accordingly. **CC&P** Market changes are primarily driven by changes in consumer behaviour. For example, the UK card payment market is growing significantly, with a shift from in-store to online payments. Digital and e-commerce focused players are growing fast and gaining market share. The continued low interest rate environment means consumers are borrowing more, creating opportunities for new entrants focused solely on point of sale financing competing with traditional card issuers like Barclays. Private Banking continues to be highly fragmented, and while digital penetration is lower than other segments, technology and automation are playing an increasing role. --- **Notes** a Source: Coalition FY19 vs FY18 Preliminary Competitor Analysis of total industry revenue pool b Source: Dealogic --- ## Strategic report ### Performance measures #### Financial performance measures The performance of Barclays Bank PLC contributes to the Barclays PLC Group, upon which the delivery of strategy is measured. #### Income Statement | Barclays Bank Group results | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | For the year ended 31 December | £m | £m | £m | | Total income | 14,151 | 13,600 | 13,730 | | Credit impairment charges | (1,202) | (643) | (1,553) | | **Net operating income** | **12,949** | **12,957** | **12,177** | | Operating expenses | (9,718) | (9,893) | (10,230) | | GMP charge$^a$ | - | (140) | - | | Litigation and conduct | (264) | (1,706) | (448) | | **Total operating expenses** | **(9,982)** | **(11,739)** | **(10,678)** | | Other net income | 145 | 68 | 259 | | **Profit before tax** | **3,112** | **1,286** | **1,758** | | Tax charge$^b$ | (332) | (229) | (1,352) | | **Profit after tax in respect of continuing operations** | **2,780** | **1,057** | **406** | | (Loss)/profit after tax in respect of discontinued operations$^c$ | - | (47) | (1,386) | | Non-controlling interests in respect of continuing operations | - | - | (4) | | Non-controlling interests in respect of discontinued operations$^c$ | - | - | (140) | | Other equity instrument holders | (660) | (647) | (639) | | **Attributable profit/(loss)** | **2,120** | **363** | **(1,763)** | --- **Notes** a A £140m charge for Guaranteed Minimum Pensions in relation to the equalisation of obligations for members of the Barclays Bank UKRF. There was no capital impact of this charge as at 31 December 2018, as the Barclays Bank UKRF remained in accounting surplus. b From 2019, due to an IAS 12 update, the tax relief on payments in relation to equity instruments has been recognised in the tax charge of the income statement, whereas it was previously recorded within retained earnings. Comparatives have been restated, reducing the tax charge for FY18 and FY17 by £175m and £174m respectively. Further detail can be found in Note 1. c Barclays Bank PLC transferred its UK banking business on 1 April 2018 to Barclays Bank UK PLC. Results relating to the UK banking business for the three months ended 31 March 2018 and for the year ended 31 December 2017 have been reported as a discontinued operation. 2017 also included results relating to Barclays Africa Group Limited (BAGL) for the five months ended 31 May 2017. --- ## Strategic report ### Managing Risk The Barclays Bank Group is exposed to internal and external risks as part of our ongoing activities. These risks are managed as part of our business model. #### Enterprise Risk Management Framework Within the Barclays Bank Group, risks are identified and overseen through the Enterprise Risk Management Framework (ERMF), which supports the business in its aim to embed effective risk management and a strong risk management culture. This ERMF governs the way in which the Barclays Bank Group identifies and manages its risks. The ERMF is approved by the Barclays PLC board on recommendation of the Barclays Group Chief Risk Officer; it is then adopted by the Barclays Bank Group with minor modifications where needed. The management of risk is embedded into each level of the business, with all colleagues being responsible for identifying and controlling risk. #### Risk appetite Risk appetite defines the level of risk we are prepared to accept across the different risk types, taking into consideration varying levels of financial and operational stress. Risk appetite is key for our decision making processes, including ongoing business planning and setting of strategy, new product approvals and business change initiatives. The Barclays Bank Group may choose to adopt a lower risk appetite than allocated to it by Barclays Group. #### Three Lines of Defence The first line of defence is comprised of the revenue generating and client facing areas, along with all associated support functions, including Finance, Treasury, Human Resources and Operations and Technology. The First Line identifies the risks, sets the controls and escalates risk events to the second line of defence. The second line of defence is made up of Risk and Compliance and oversees the First Line by setting limits, rules and constraints on their operations, consistent with the risk appetite. The third line of defence is comprised of Internal Audit, providing independent assurance over the effectiveness of governance, risk management and control over current, systemic and evolving risks. Although the Legal function does not sit in any of the three lines, it works to support them all and plays a key role in overseeing Legal risk throughout the bank. The Legal function is also subject to oversight from the Risk and Compliance functions (second line) with respect to the management of operational and conduct risks. #### Monitoring the risk profile Together with a strong governance process, using business and Group level Risk Committees as well as Board level forums, the Barclays Bank PLC Board receives regular information in respect of the risk profile of the Barclays Bank Group. Information received includes measures of risk profile against risk appetite as well as the identification of new and emerging risks. We believe that our structure and governance supports us in managing risk in the changing economic, political and market environments. --- ## Risk review ### Principal Risks | The ERMF defines eight Principal Risks | How risks are managed | | :--- | :--- | | **Credit Risk** The risk of loss to the Barclays Bank Group from the failure of clients, customers or counterparties, including sovereigns, to fully honour their obligations to Barclays Bank Group, including the whole and timely payment of principal, interest, collateral and other receivables. | Credit risk teams identify, evaluate, sanction, limit and monitor various forms of credit exposure, individually and in aggregate. | | **Market Risk** The risk of loss arising from potential adverse changes in the value of the Barclays Bank Group’s assets and liabilities from fluctuation in market variables including, but not limited to, interest rates, foreign exchange, equity prices, commodity prices, credit spreads, implied volatilities and asset correlations. | A range of complementary approaches to identify and evaluate market risk are used to capture exposure to market risk. These are measured, limited and monitored by market risk specialists. | | **Treasury and Capital Risk** | | | *Liquidity risk:* The risk that the Barclays Bank Group is unable to meet its contractual or contingent obligations or that it does not have the appropriate amount, tenor and composition of funding and liquidity to support its assets. | Treasury and capital risk is identified and managed by specialists in Capital Planning, Liquidity, Asset and Liability Management and Market risk. A range of approaches are used appropriate to the risk, such as; limits; plan monitoring; internal and external stress testing. | | *Capital risk:* The risk that the Barclays Bank Group has an insufficient level or composition of capital to support its normal business activities and to meet its regulatory capital requirements under normal operating environments or stressed conditions (both actual and as defined for internal planning or regulatory testing purposes). This includes the risk from the Barclays Bank Group’s pension plans. | | | *Interest rate risk in the Banking Book:* The risk that the Barclays Bank Group is exposed to capital or income volatility because of a mismatch between the interest rate exposures of its (non-traded) assets and liabilities. | | | **Operational Risk** The risk of loss to the Barclays Bank Group from inadequate or failed processes or systems, human factors or due to external events (for example fraud) where the root cause is not due to credit or market risks. | Operational risk comprises the following risks; data management and information, execution risk, financial reporting, fraud, payments processing, people, physical security, premises, prudential regulation, supplier, tax, technology and transaction operations. It is not always cost effective or possible to attempt to eliminate all operational risks. Operational risk is managed across the businesses and functions through an internal control environment with a view to limiting the risk to acceptable residual levels. | | **Model Risk** The risk of the potential adverse consequences from financial assessments or decisions based on incorrect or misused model outputs and reports. | Models are independently validated and approved prior to implementation and their performance is monitored on a continual basis. | | **Conduct Risk** The risk of detriment to customers, clients, market integrity, effective competition or the Barclays Bank Group from the inappropriate supply of financial services, including instances of wilful or negligent misconduct. | The Compliance function sets the minimum standards required, and provides oversight to monitor that these risks are effectively managed and escalated where appropriate. | | **Reputation Risk** The risk that an action, transaction, investment or event, decision or business relationship will reduce trust in the Barclays Bank Group’s integrity and/or competence. | Reputation risk is managed by embedding our purpose and values and maintaining a controlled culture within the Barclays Bank Group, with the objective of acting with integrity, enabling strong and trusted relationships with customers and clients, colleagues and broader society. | | **Legal Risk** The risk of loss or imposition of penalties, damages or fines from the failure of the Barclays Bank Group to meet its legal obligations including regulatory or contractual requirements. | The Legal function supports colleagues in identifying and limiting legal risks. | --- ## Balance Sheet Information The following assets and liabilities represent key balance sheet items for Barclays Bank Group. | As at 31 December | 2019 £m | 2018 £m | | :--- | :--- | :--- | | **Assets** | | | | Cash and balances at central banks | 125,940 | 136,359 | | Loans and advances at amortised cost | 141,636 | 136,959 | | Trading portfolio assets | 113,337 | 104,038 | | Financial assets at fair value through the income statement | 129,470 | 145,250 | | Derivative financial instruments | 229,641 | 222,683 | | **Liabilities** | | | | Deposits at amortised cost | 213,881 | 199,337 | | Financial liabilities designated at fair value | 204,446 | 217,741 | | Derivative financial instruments | 228,940 | 219,592 | #### Balance Sheet commentary * Cash and balances at central banks decreased £10.4bn to £125.9bn predominantly due to a reduction in cash at central banks held as part of the liquidity pool * Loans and advances increased £4.7bn to £141.6bn mainly due to an increase in debt securities * Trading portfolio assets increased £9.3bn to £113.3bn due to increased trading activity, principally relating to the Equities business * Financial assets at fair value through the income statement decreased £15.8bn to £129.5bn driven by a focus on capital-efficient secured financing * Derivative financial instrument assets and liabilities increased £7.0bn to £229.6bn and £9.3bn to £228.9bn respectively driven by a decrease in major interest rate curves, partially offset by a decrease in foreign exchange volumes * Deposits at amortised cost increased £14.5bn to £213.9bn due to increased deposits within CIB including the broadening of the business across Europe * Financial liabilities designated at fair value decreased £13.3bn to £204.4bn as a result of more capital-efficient secured lending partially offset by increased issuances of equity linked notes. #### Other Metrics and Capital$^a$ Barclays Bank PLC is regulated by the Prudential Regulation Authority (PRA) on a solo-consolidated basis. Barclays Bank PLC solo-consolidated comprises Barclays Bank PLC plus certain additional subsidiaries, subject to PRA approval. The disclosures below provide key metrics for Barclays Bank PLC solo-consolidated. | | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Common equity tier 1 (CET1) ratio | 13.9% | 13.5% | 13.6% | | Total risk weighted assets (RWAs) | £158.4bn | £173.2bn | £261.4bn | | Capital Requirements Regulation (CRR) leverage ratio | 3.9% | 4.0% | 4.5% | --- **Note** a Capital, RWAs and leverage are calculated applying the IFRS 9 transitional arrangement of the Capital Requirement Regulation (CRR) as amended by the Capital Requirements Regulation II (CRR II) applicable as at the reporting date. For further information on the implementation of CRR II see page 100. --- ## Strategic report ### Our people and culture We believe that the culture of Barclays is built and shaped by the thousands of professionals around the world who serve our customers and clients with a shared purpose and values. Our people make a critical difference to our success, and our investment in them protects and strengthens our culture. The following sub-sections are therefore consistent with those detailed in the People Section of the Barclays PLC Annual Report and figures mentioned are for Barclays Group other than specifically mentioned. #### Colleague engagement We have an established approach to engaging colleagues which includes the majority of mechanisms recommended by the UK’s Financial Reporting Council and with new governance requirements in 2019. This ensures that we understand their perspective, take it into account in our decision making at the most senior level, and share with them our strategy and progress. That extends to those who work for us indirectly as well, such as contractors, although in a more limited way. In 2020, our supplier code of conduct will require organisations with more than 250 employees to demonstrate that they have an effective workforce engagement approach of their own. It’s important to us that our Board members are engaged with our people – directly, and indirectly through our management team. The Board regularly receives reports on colleague engagement. Together with direct engagement, this reporting approach and dedicated time at board meetings helps our Board take the issues of interest to our colleagues into account in their decision making. This has enabled them to confirm that our workforce engagement approach is effective. #### Listening to our people Our regular colleague survey formally captures the views of our people and is a key part of how we track colleague engagement, alongside more granular colleague sentiment tracking across our businesses. Barclays Bank Group overall engagement score reduced slightly to 73% in 2019, but 77% of our colleagues would still recommend Barclays Group as a good place to work. The results from the survey are an important part of the conversations our leaders have about how we run the business, and it’s a specific focus for our Executive Committee and our Board. We monitor our culture across the organisation, and in individual business areas, through Culture Dashboards. These combine colleague survey data with other metrics about our business, so that we can see the effect our people’s engagement has on our performance, and on the continued strength of our culture. 82% of our people have heard or read the speeches of senior leaders across the Barclays Group talking about the character and culture of Barclays. #### Keeping our people informed In addition to these data sources, our leaders, including our Board, engage face to face with colleagues to hear what they think. That might be through site visits, large-scale town halls, training and development activity, mentoring, informal breakfast sessions, committee membership, diversity and wellbeing programmes, or focus and consultative groups. We make sure we’re regularly keeping everyone up to date on the strategy, performance and progress of the organisation through a strategically-coordinated, multichannel approach across a combination of leader-led engagement, and digital and print communication, including blogs, vlogs and podcasts. We also engage with our people collectively through a strong and effective partnership with Unite, in the parts of BBPLC where they are recognised as well as the Barclays Group European Forum, which represents all Barclays Group colleagues within the European Union. These conversations help us to deliver things like a collective pay deal for our Unite covered colleagues, who represent 84% of our UK-based colleagues, as well as more complex business change and our long-term focus on colleague wellbeing. We regularly brief our union partners on the strategy and progress of the business and seek their input on ways in which we can improve the colleague experience of working in Barclays. #### Building a supportive culture Diversity of thought and experience works best when everyone feels included. People who feel they can be themselves at work are happier and more productive, so we believe that creating an inclusive and diverse culture isn’t just the right thing to do, but is also best for our business. Our policies require managers to give full and fair consideration to those with a disability on the basis of their aptitudes and abilities; both when hiring and through ongoing people management, as well as ensuring opportunities for training, career development and promotion are available to all. As part of our commitment to the UK government Disability Confident scheme, we encourage applications from people with a disability, or a physical or mental health condition. We encourage our people to benefit from Barclays’ performance by enrolling in our share plans, further strengthening their commitment to the organisation. --- ## Governance ### Chairman’s introduction The 2019 corporate governance report ("Governance Report") for Barclays Bank PLC ("BBPLC" or the "Company”) provides an overview of how the BBPLC governance framework operates and of the Board’s key areas of focus during the year. Following the structural reform to realign the Barclays Group and ring-fence the Group's UK consumer banking business, BBPLC became the non-ring-fenced bank in April 2018. Initially, BBPLC and its parent company, BPLC, had different (and non-overlapping) board and board committee members. However, as we moved into 2019, following a further review of the corporate governance structure of BBPLC and BPLC and reflecting the outcomes of discussions with the Group's regulators, a decision was taken to consolidate and streamline the membership of the BBPLC and BPLC boards, such that membership of our Board now comprises a subset of that of the BPLC Board, with all members of the BPLC board, except the Senior Independent Director, the Chairman of BBUKPLC and one Non-Executive Director, now also serving on the board of BBPLC. This has significantly increased coordination and efficiency, and reduced complexity and duplication. This revised structure vests oversight over the activities of BBPLC in a board the members of which also have direct accountability to BPLC’s shareholders through their separate responsibilities as members of the BPLC board. As a result of this consolidation, during 2019 the former Board members of BBPLC all stepped down and a new Board, including myself, took office. We thank those Board members who left us this year for their valued contribution. #### Strategy During 2019, the Board spent considerable time overseeing the development of the Company's strategy that is being shaped by the increasingly sophisticated needs of our clients and technological evolution across our industry, in order to fulfil Barclays' common purpose of "Creating Opportunities to Rise". Read more about our strategy in our Strategic Report on pages 1 to 9 and about the Board's role in the creation of the strategy on page 16 of the Corporate Governance Statement. #### Governance This year, as required under the Companies (Miscellaneous Reporting) Regulations 2018 (the "2018 Regulations"), we have included on page 17, a statement of the Company's corporate governance arrangements and, separately, on page 9 of our Strategic Report, we have set out a statement of how the Board has had regard to the matters set out in section 172(1)(a)-(f) of the Companies Act 2006 when discharging their duty to promote the success of the Company and the effect of that regard on certain of the decisions taken by the Board during the year. In addition, the Governance Report reflects the enhanced requirements to report on the Company’s engagement with employees, suppliers, customers and others in a business relationship with the Company, which are now in force pursuant to the 2018 Regulations. These new requirements have prompted us to look afresh at the governance principles that underpin our corporate governance arrangements. You can read more about these principles and how we apply them in our Corporate Governance Statement, where you can also find out more about the work of the Board and our Board Committees during 2019. I would like to thank fellow Board members and our colleagues for their support and hard work throughout 2019. Nigel Higgins Chairman – Barclays Bank Group 12 February 2020 --- ## Governance ### Corporate Governance Statement The Board aspires to have high standards of corporate governance and, in accordance with the 2018 Regulations, has during the year considered which corporate governance arrangements would be most appropriate to apply. The Board has chosen not to adopt and report against the 2018 UK Corporate Governance Code, which is designed for premium listed companies and, whilst we fully support the introduction of the Wates Corporate Governance Principles for Large Private Companies (in particular the focus on purpose, culture and employee and stakeholder engagement), the Board considers they are less appropriate for a wholly-owned subsidiary of a premium listed company which is also a complex financial institution subject to a comprehensive regulatory regime. This approach is consistent with the approach of other significant subsidiaries within the Barclays Group which are subject to the 2018 Regulations, we have therefore adopted our own corporate governance arrangements which we believe are most appropriate for the Company and are designed to ensure effective decision-making to promote the Company’s success for the long term. Our primary aim is that our governance is: * effective in providing challenge, advice and support to management; * providing checks and balances, and encouraging constructive challenge; * driving informed, collaborative and accountable decision-making; and * creating long-term sustainable value for our shareholder, the ultimate shareholders of Barclays PLC (‘Barclays’), and our wider stakeholders. Set out below are the principles which underpin our corporate governance arrangements and how these principles have been applied during 2019. Certain additional information, signposted throughout this section, will be available in the Strategic Report and the ‘Board and Committee Governance’ section on pages 15 to 23. Our group-wide governance framework is set by Barclays and has been designed to facilitate the effective management of the Barclays Group. This includes the setting of Group policies and approach in relation to matters such as Barclays values, Barclays’ Remuneration Policy and the Barclays’ Charter of Expectations. Where appropriate, this corporate governance statement makes reference to those Group policies which are relevant to the way in which the Company is governed. #### Our corporate governance principles and how the Company has applied them during 2019 and to the date of this report **Principle One: Board leadership and company purpose** A successful company is led by an effective and entrepreneurial board whose role is to establish the company’s purpose, values and strategy, aligned to its culture, and make decisions to promote its success for the long term benefit of its shareholder, having regard to the interests of other relevant stakeholders and factors. * Through the leadership of the Board, a clear vision for the Company’s purpose and overall values is articulated, underpinning and defining the strategy and culture of the organisation. This is embedded at every level of management. * Time was spent in 2019 overseeing the development of the Company's strategy that is shaped by the increasingly sophisticated needs of our clients, and technological evolution across our industry, to fulfil the Barclays common purpose of 'Creating Opportunities to Rise'. Further detail on our strategy can be found from page 1 of the Strategic Report and separately pages 8 to 11 of the BPLC 2019 Annual Report and the Board's role in creation of the strategy on page 16 'What we did in 2019'. * Culture remains a core area of focus with the Board actively promoting ethical leadership and accountability and supporting and reinforcing the Barclays’ Code of Conduct, the Barclays Way, and the Barclays values, to achieve a dynamic and positive culture. **Principle Two: Division of responsibilities** An effective board requires a clear division of responsibilities with the Chair leading the board and being responsible for its overall effectiveness, and the executive leadership of the company’s business being delegated to the Chief Executive. The board should consist of an appropriate combination of executive and independent non-executive directors each with a clear understanding of their accountability and responsibilities. The board’s policies and procedures should support effective decision-making and independent challenge. * Clear division of responsibilities between the Chairman and Chief Executive Officer. Detail on the role of each can be found on page 15. Page 16 lists ‘who is on the Board’ with a majority of the Board comprised of independent Non-Executive Directors. * Policies and protocols are in place to support effective decision-making and independent challenge, including the Company’s Charter of Expectations, setting out clearly the role and responsibilities of each Director. The Chairman meets privately with the Non-Executive Directors when appropriate, to promote required independence. * Board duties are executed in part through Board Committees, which provide oversight and make recommendations on the matters delegated to them by the Board. Detail on the principal Committees, their core responsibilities and activities in 2019 is set out on pages 17 to 23. * Appropriate information and support is provided to the Board, to enable them to undertake their work with due care and discharge their responsibilities. See page 16 for further details. * The Barclays Group’s Corporate Governance Manual clearly sets out guidelines of how the Barclays Group entities and their respective Boards and Board committees should interact, while also providing guidance and clarity for management and directors as to how these relationships and processes should work in practice. It is a dynamic document that continues to evolve with the changing nature of the Barclays Group. --- ## Risk management (audited) ### The Barclays Bank Group’s risk management strategy #### Overview The credit risk that the Barclays Bank Group faces arises from wholesale and retail loans and advances together with the counterparty credit risk arising from derivative contracts with clients; trading activities, including: debt securities, settlement balances with market counterparties, FVOCI assets and reverse repurchase loans. Credit risk management objectives are to: * maintain a framework of controls to oversee credit risk; * identify, assess and measure credit risk clearly and accurately across the Barclays Bank Group and within each separate business, from the level of individual facilities up to the total portfolio; * control and plan credit risk taking in line with external stakeholder expectations and avoiding undesirable concentrations; and * monitor credit risk and adherence to agreed controls. #### Organisation, roles and responsibilities The first line of defence has primary responsibility for managing credit risk within the risk appetite and limits set by the Risk function, supported by a defined set of policies, standards and controls. In the Barclays Bank Group, business risk committees (attended by the first line) monitor and review the credit risk profile of each business unit where the most material issues are escalated to the Retail Credit Risk Management Committee, Wholesale Credit Risk Management Committee and the Barclays Group Risk Committee. Wholesale and retail portfolios are managed separately to reflect the differing nature of the assets; wholesale balances tend to be larger and are managed on an individual basis, while retail balances are greater in number but lesser in value and are, therefore, managed in aggregated segments. The responsibilities of the credit risk management teams in the businesses, the sanctioning team and other shared services include: sanctioning new credit agreements (principally wholesale); setting strategies for approval of transactions (principally retail); setting risk appetite; monitoring risk against limits and other parameters; maintaining robust processes, data gathering, quality, storage and reporting methods for effective credit risk management; performing effective turnaround and workout scenarios for wholesale portfolios via dedicated restructuring and recoveries teams; maintaining robust collections and recovery processes/units for retail portfolios; and review and validation of credit risk measurement models. The credit risk management teams in the Barclays Bank Group are accountable to the Barclays Bank PLC CRO, who reports to the Barclays Group CRO. For wholesale portfolios, credit risk managers are organised in sanctioning teams by geography, industry and/or product. In wholesale portfolios, credit risk approval is undertaken by experienced credit risk professionals operating within a clearly defined delegated authority framework, with only the most senior credit officers assigned the higher levels of delegated authority. The largest credit exposures, which are outside the Risk Sanctioning Unit or Risk Distribution Committee authority, require the support of the Barclays Bank PLC Senior Credit Officer. For exposures in excess of the Barclays Bank PLC Senior Credit Officer’s authority, approval by the Barclays Group Senior Credit Officer/Barclays PLC Board Risk Committee is also required. The Barclays Group Credit Risk Committee, attended by the Barclays Bank PLC Senior Credit Officer, provides a formal mechanism for the Barclays Group Senior Credit Officer to exercise the highest level of credit authority over the most material Barclays Group single name exposures. #### Credit risk mitigation The Barclays Bank Group employs a range of techniques and strategies to actively mitigate credit risks. These can broadly be divided into three types: * netting and set-off * collateral * risk transfer. **Netting and set-off** Credit risk exposures can be reduced by applying netting and set-off. For derivative transactions, the Barclays Bank Group’s normal practice is to enter into standard master agreements with counterparties (e.g. ISDAs). These master agreements typically allow for netting of credit risk exposure to a counterparty resulting from derivative transactions against the obligations to the counterparty in the event of default, and so produce a lower net credit exposure. These agreements may also reduce settlement exposure (e.g. for foreign exchange transactions) by allowing payments on the same day in the same currency to be set-off against one another. **Collateral** The Barclays Bank Group has the ability to call on collateral in the event of default of the counterparty, comprising: * home loans: a fixed charge over residential property in the form of houses, flats and other dwellings. * wholesale lending: a fixed charge over commercial property and other physical assets, in various forms. * other retail lending: includes charges over motor vehicles and other physical assets; second lien charges over residential property and finance lease receivables. * derivatives: the Barclays Bank Group also often seeks to enter into a margin agreement (e.g. Credit Support Annex) with counterparties with which the Barclays Bank Group has master netting agreements in place. These annexes to master agreements provide a mechanism for further reducing credit risk, whereby collateral (margin) is posted on a regular basis (typically daily) to collateralise the mark to market exposure of a derivative portfolio measured on a net basis. * reverse repurchase agreements: collateral typically comprises highly liquid securities which have been legally transferred to the Barclays Bank Group subject to an agreement to return them for a fixed price. --- [... section truncated for brevity ...] --- ```mermaid graph TD A[Barclays Bank PLC Board] --> B[Barclays Bank PLC Board Risk Committee] A --> C[Barclays Bank PLC Board Audit Committee] A --> D[Barclays Bank PLC Board Remuneration Committee] E[Barclays Bank PLC ExCo] --- A B -.-> F[Group Risk Committee] C -.-> F F --> G[IHC Board Risk Committee] F --> H[Barclays Bank Ireland Board Risk Committee] G --> I[Barclays Bank PLC Product/Risk Type IHC/BBI Committees] H --> I A --> J[Barclays Bank PLC Remuneration Review Panel] ``` --- ## 40 Auditor’s remuneration Auditor’s remuneration is included within consultancy, legal and professional fees in administration and general expenses and comprises: | | 2019 £m | 2018 £m | 2017 £m | | :--- | :--- | :--- | :--- | | Audit of the Barclays Bank Group's annual accounts | 16 | 14 | 11 | | **Other services:** | | | | | Audit of the Company's subsidiaries$^a$ | 12 | 10 | 27 | | Other audit related fees$^b$ | 6 | 6 | 8 | | Other services | 1 | 1 | 2 | | **Total Auditor's remuneration** | **35** | **31** | **48** | **Notes** a Comprises the fees for the statutory audit of the subsidiaries both inside and outside UK and fees for the work performed by associates of KPMG in respect of the consolidated financial statements of the Company. b Comprises services in relation to statutory and regulatory filings. These include audit services for the review of the interim financial information under the Listing Rules of the UK listing authority. The figures shown in the above table relate to fees paid to KPMG as principal auditor, of which the fees paid in relation to discontinued operations were £nil (2018: £nil, 2017: £4m).