Name of Each Exchange

On Which Registered      

Name of Each Exchange

On Which Registered    

American Depository Shares, each
representing four 25p ordinary shares

4.375% Fixed Rate Subordinated Notes due
2024

Title of Each Class

Name of Each Exchange

On Which Registered

American Depository Shares, Series 2, each representing one Non-Cumulative Callable Dollar Preference Share, Series 2

American Depository Shares, Series 3, each representing one Non-Cumulative Callable Dollar Preference Share, Series 3

American Depository Shares, Series 4, each representing one Non-Cumulative Callable Dollar Preference Share, Series 4

American Depository Shares, Series 5, each representing one Non-Cumulative Callable Dollar Preference Share, Series 5

Page and caption references

in this document*

43-44, 285-286 (note 36), 291 (note 38), 299-305 (note 46), 434-435, 476-478

Related party transactions

Page and caption references

in this document*

Barclays PLC and Barclays Bank PLC

2015 Annual Report on Form 20-F

Page 

Who we are

§   Board of Directors

3 

§   Group Executive Committee

§   Board diversity

5 

What we did in 2015

§   Chairman’s introduction

6 

§   Deputy Chairman’s statement

§   Board Audit Committee Report

§   Board Risk Committee Report

§   Board Reputation Committee Report

§   Board Nominations Committee Report

27 

How we comply

35 

Other statutory information

42 

People

46 

Remuneration report

50 

“We have continued to play a role in changing the culture and building a greater sense of personal accountability, not just at a senior level within the Group but throughout the organisation, for maintaining the control environment.”

Dear Fellow Shareholders

My report for 2014 emphasised the role the Committee has in ensuring that Barclays operates with a strong control environment and, in particular, the role it is playing in changing the culture and building a greater sense of personal accountability, not just at a senior level within the Group but throughout the organisation, for maintaining that control environment. During 2015, with the agreement of the Board and the Board Risk Committee, the Committee assumed primary responsibility for assessing and tracking the progress of embedding the Enterprise Risk Management Framework (ERMF), which is the way in which Barclays approaches enterprise risk management and is the bedrock of our management of internal risk and control. In particular, the Committee was keen to find ways in which the ERMF could be linked to the Group’s assessment of Management’s Control Approach (MCA), both to drive the right behaviours and provide a more objective method of assessing MCA. In terms of specific control issues, an area of focus for the Committee during 2015 was operations and technology, where there are a number of material control issues the Group is addressing. In assessing control issues for disclosure, the Committee has applied similar definitions to those used for assessing internal financial controls for the purposes of Sarbanes-Oxley and has concluded that there are no control issues that are considered to be a material weakness, which would therefore merit specific disclosure. Further details may be found in the Risk Management and Internal Control section on page 39. The Committee also continued to address the significant judgements that need to be made in connection with the Group’s financial statements, primarily those relating to conduct and litigation provisions and the valuations of specific financial instruments, derivatives assets and portfolios, particularly those where there is a lack of observable market data. More details of the material matters addressed by the Committee are given in the report below. The Committee also spent time carefully considering the requirements of the new viability statement and confirmed that, as indicated in last year’s report, three years was the appropriate period, as it accorded with the Group’s Medium Term Plan.

A significant activity for the Committee during 2015 was the external audit tender, which was conducted by an Audit Tender Oversight Sub-Committee, chaired by Tim Breedon. As I was until 2013 a partner of KPMG, one of the bidding audit firms, I took no part in the external audit tender process, other than providing input to its initial design. Tim Breedon reports separately on the external audit tender process below.

The role of Board Audit Committee Chairman continues to be a full and busy one. During 2015, I had significant interaction with our regulators, meeting with representatives from our UK and US regulators and also participating in trilateral meetings with our auditors and UK regulators. I also took the opportunity to liaise with my fellow audit committee chairmen in other financial services companies, to discuss common issues and share practice, and I met with a group of investors to discuss disclosure issues, in particular with regard to realised profits. I carried on with my practice of meeting with representatives from senior management to discuss specific issues, such as customer complaints or cyber risk, in addition to my regular meetings with the Group Finance Director and Chief Internal Auditor. I also visited Barclays Africa, attending the African chairmen’s conference. I held regular private meetings with my fellow Committee members ahead of Committee meetings to ensure I had a good sense of the matters that concerned them most and likewise met regularly with the lead audit partner of the external auditor.

Committee performance

The Committee’s performance during 2015 was evaluated as part of the independently facilitated Board effectiveness review and I am pleased to report that the outcomes were positive. The Committee was regarded as effective and considered to be very thorough and detailed. The review commented on the continuing need to balance the demands of a busy agenda and programme of work with the need to cover issues in appropriate detail. We will also be seeking to strengthen the level of technical accounting experience on the Committee. You can read more about the outcomes of the Board effectiveness review on pages 33 and 34.

Looking ahead

Barclays continues to face an unprecedented level of change, driven by both internal and external factors and it will be critical to ensure that a culture of strong control is maintained as the Group implements its strategy and also as it positions itself for structural reform. The Committee will continue to seek to ensure that management maintains its focus on building personal accountability for upholding a strong and effective control environment and is supportive of the pilot programme being implemented in 2016 that will require certain business personnel to spend time working in a control function before being promoted. 2016 will also see the Committee focus on the transition to a new auditor, KPMG, who will become Barclays auditor with effect from the 2017 financial year. We will be seeking to ensure that the quality of the audit performed by the existing auditor, PwC, is maintained until the end of its tenure and that KPMG has completed the steps it needs to undertake to ensure it is fully independent of Barclays’ and has a strong understanding of the business before it takes up office.

Mike Ashley

Chairman, Board Audit Committee

29 February 2016

Conduct provisions

(see Note 27 to the financial statements).

In debating Barclays’ financial results statements, the Committee examined the provisions held for the costs of customer redress.

In respect of PPI, the Committee:

§  analysed the judgements and estimates with regard to the PPI provision, taking into account estimated overturn rates, the estimation policy on missing data, and complaints trend data

§  evaluated Financial Ombudsman Service overturn rates and trends, provisions utilisation, latest flow forecasts and how reasonable high and low end scenarios had been determined in order to assess the range of reasonable possible future costs

§  debated proposed additional provisions and whether the analysis performed by management was consistent with prior periods

§  assessed the Group’s ability to forecast trends in PPI complaints, discussing the levels of uncertainty in the projections

§  debated the potential range of outcomes that might arise from the Plevin case (the 2014 UK Supreme Court ruling in Plevin v Paragon Personal Finance Ltd) and the potential impact on the future range of provisions arising from the proposed timebar on claims.

The Committee endorsed management’s recommendation that an expense of £282m for PBA should be provided for in the first half and agreed it should be disclosed as a separate item in the interim results. Having examined claims trend data, it concluded that no further provisions were required during 2015.

The Committee agreed with the proposal to make a provision of £290m in the third quarter and that this provision should be separately disclosed. The remediation is still at an early stage and the Committee noted that there were no significant developments in the fourth quarter. The Committee therefore agreed that no adjustment was required in the provision at the end of 2015.

§  debated the practice of providing for future costs where persistent levels of complaints are received

§  assessed PBA claims experience throughout 2015, examining the level of provisions against forecast volumes and actual claims experience

§  evaluated management’s analysis of complaint levels and trends and the outputs of product reviews.

In relation to redress to certain customers regarding rates provided on foreign exchange transactions, the Committee:

§  examined the results of the internal review conducted by management on foreign exchange transactions

§  evaluated the Group’s proposal for calculating remediation for the customers affected.

Legal, competition and regulatory provisions

(see Notes 27 and 29 to the financial statements).

§  Evaluated advice on the status of current legal, competition and regulatory matters.

§  Assessed management’s judgements and estimates of the levels of provisions to be taken and the adequacy of those provisions, based on available information and evidence.

The Committee discussed provisions and utilisation for Foreign Exchange and ISDAFix litigation and agreed that any residual provision should be retained and not released in the first half.

Having reviewed the information available to determine what could be reliably estimated, the Committee agreed that the provision at the full year should be set at £1,237m for ongoing investigations and litigation including Foreign Exchange.

Further information may be found on pages 266 and 267.

Valuations

(see Notes 13 to 18 to the financial statements).

§  Debated fair value balance sheet items. This included evaluating a report from the Valuations Committee, analysing social housing bonds credit spread performance and debating the appropriateness of the valuation model.

§  Assessed how the ESHLA portfolio might be accounted for under IFRS 9.

§  Debated uncollateralised derivatives and differences in pricing ranges and the potential impact on the Group’s financial statements.

§  Examined the significant valuation disparity between the Group and a counterparty in relation to a specific long-dated derivative portfolio.

The Committee concluded that there should be no change to the fair value approach. It also agreed with management’s recommendation that an additional prudential valuation adjustment of £300m should be made in respect of the ESHLA portfolio, reflecting an increase in credit uncertainty for social housing sector loans arising from some widening of social housing bond credit spreads.

The Committee noted that despite attempts by the front office trading team, the Group Finance Director and the Chairman of the Committee, it had not proved possible to gain a complete understanding of the causes of the valuation disparity from the relevant counterparty. Nonetheless, a significant element was understandable in light of the different underlying positions held and the Committee took further comfort from a third party valuation provided in relation to ongoing consideration of restructuring the trades. The Committee concluded that the Group’s valuation methodology was appropriate and also noted that the Group was protected against counterparty credit risk through a collateral escrow arrangement.

Impairment

(see Note 7 to the financial statements).

§  Assessed impairment experience against forecast and whether impairment provisions were appropriate.

§  Evaluated the results of the review and stress tests conducted by management of the Group’s exposures to the oil and gas sector in light of the reduction in oil prices.

§  Debated management’s analysis of the emergence and outturn periods for the Barclaycard portfolios.

The Committee agreed with the proposed adjustments to emergence and outcome periods and determined that the allowances for credit impairment on loans and advances were appropriate and adequately supported by model outputs.

In relation to the oil and gas sector, the Committee determined that the proposed provisions were appropriate but noted that further stress was possible in the event of a prolonged period of lower oil prices.

Going concern

(see page 45 for further information).

§  Assessed a working capital report prepared by Barclays Treasury, covering forecast and stress tested forecasts for liquidity and capital compared to current and future regulatory requirements, while taking into account levels of conduct and litigation provisioning and possible further provisions that may be required.

Viability

§  At the request of the Board, evaluated at the year end a report from management that set out the view of Barclays’ longer-term viability. This report was based on Barclays Medium Term Plan (MTP) and covered forecasts for capital, liquidity and leverage, including forecast performance against regulatory targets, outcomes of the stress test of the MTP and forecast capital and liquidity performance against stress hurdle rates, funding and liquidity forecasts and an assessment of global risk themes and the Group’s risk profile.

Fair, balanced and understandable reporting

(including Country by Country reporting and Pillar 3 reporting).

§  At the request of the Board, assessed, via discussion with and challenge of management, whether disclosures in Barclays’ published financial statements were fair, balanced and understandable, taking into account comments received from investors and others.

§  Evaluated reports from the Disclosure Committee on its assessment of the content, accuracy and tone of the disclosures.

§  Sought and obtained confirmation from the Group Chief Executive and Group Finance Director that they considered the disclosures to be fair, balanced and understandable.

§  Evaluated the outputs of Barclays’ Turnbull assessments and Sarbanes- Oxley s404 internal control process.

§  Established via reports from management that there were no indications of fraud relating to financial reporting matters.

§  Assessed disclosure controls and procedures.

§  Requested that management report on and evidence the basis on which representations to the external auditors were made.

Having assessed 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 were appropriate in ensuring that those statements were fair, balanced and understandable.

In assessing Barclays’ financial results statements, the Committee requested that certain amendments were made to disclosures on litigation and also provided input on other key disclosure items, including the US Wealth disposal, guidance on Barclays Non-Core, adjusting items, dividends and outlook statements. It also debated the proposed statements to be made by the Chairman and Group Chief Executive, suggesting amendments.

The Committee concluded that the disclosures and process underlying the production of the 2015 Annual Report and Financial Statements were appropriate and recommended to the Board that the 2015 Annual Report and Financial Statements are fair, balanced and understandable.

Internal control

Read more about the Barclays’ Internal control and risk management processes on page 39.

§  Evaluated on a regular basis, the O&T control environment, including the status of any open material control issues, emerging risks and closed control issues, taking the opportunity to directly challenge and question functional leaders.

§  Scrutinised the status of specific material control issues and their associated remediation plans, including in particular those relating to access management, security of secret and confidential data, cyber risk, IT infrastructure and application issues and third party supplier management.

§  Debated any slippage to remediation programmes and whether this was a cultural indicator of the Group’s approach.

§  Conducted a deep dive on security of secure and confidential data control issues, discussing in particular the cultural changes that the businesses needed to make.

§  Assessed the threat presented by cyber risk, including the impact of any confirmed cyber attacks.

§  Debated the progress of remediation of third party supplier management control issues, including the potential impacts of the Group’s focus on cost management and of decentralisation.

Having assessed the status of material control issues and their remediation, the Committee suggested that resilience should be elevated as a material control issue and requested a deep dive. The deep dive has been scheduled for early 2016. The Committee also requested further updates on cyber risk and third party supplier management, both of which are scheduled to take place in early 2016.

The Committee requested a deep dive on access management control issues, which took place during 2015.

§  Assessed individual reports on the control environment in PCB, Barclaycard, Barclays Africa and US Investment Banking operations, including questioning directly the heads of those businesses.

§  Debated the importance of maintaining an effective control environment as the Group decentralises certain functional activities.

§  Assessed the results of a self-assessment pilot exercise conducted by the principal business units, as the first line of defence.

§  Evaluated a proposal for a revised approach to the internal control attestation process to link it to the ERMF.

§  Deliberated on the challenge of embedding conduct risk management as part of the ERMF.

§  Debated the effectiveness of the systems being used to support risk and control assessments by the first line of defence.

§  Focused on the need for effective challenge by the second line of defence.

§  Debated what metrics could be used to provide line of sight to control issues and whether a more objective approach to MCA ratings could be developed.

§  Debated the enhancements made to the Group’s whistleblowing framework, including changes in the team, communications to employees and re-publication of the Raising Concerns Policy.

§  Evaluated the level of substantiated cases and trends in reporting.

The Committee welcomed the steps that had been taken to strengthen the Group whistleblowing team and to enhance awareness and visibility across the Group of whistleblowing processes and the Raising Concerns Policy. It asked for more granular reporting to be made to the Committee, including ensuring that any cases of retaliation were clearly highlighted and that Barclays Africa incidents were reported to the Committee on the same basis as the rest of the Group. This information is now being received.

To enable an assessment of effectiveness, the Committee asked for Barclays’ processes to be benchmarked against its peers. It was subsequently presented with the results of the benchmarking exercise and concluded that Barclays’ processes were appropriate.

§  Focused on how to accelerate the remediation of any control weaknesses and the importance of having a culture of closing issues effectively, including debating a new approach to audit issues management, which requires issues to be remediated within six months of identification, with any extension to that time period requiring the approval of a member of the Group Executive Committee.

§  Evaluated progress of the internal audit plan for 2015 and debated the plan for 2016, including assessing the proposed internal audit coverage and key control themes identified.

§  Assessed internal audit resources and attrition levels.

§  Debated the outcomes from Barclays Internal Audit’s annual self-assessment.

The Committee supported the approach to enforcing even greater accountability and ensuring greater visibility at Group Executive Committee and senior management level of the remediation of control issues and audit issues management. It confirmed its agreement to the key control themes identified by internal audit, although it asked for execution risk to be covered specifically. The Committee approved changes to internal audit’s methodology and the approach to audit coverage and issues validation, which has been implemented from 1 January 2016. The Committee asked for internal audit reports to comment as a matter of course on the effectiveness of both first and second lines of defence when evaluating their audit findings. Having assessed internal audit’s reports on a regular basis, the Committee confirmed completion of the internal audit plan for the first half of 2015 and approved the plan for the second half of the year, including approving the resources requested. It also approved the plan for the first half of 2016. In view of the Group’s focus on cost management, the Committee asked for an assessment of the impact on the internal audit plan of any proposed headcount reductions and for this to be reported to the Committee along with any revised plan. The Committee was content with the outcomes of the self-assessment of internal audit performance, although requested an update on the quality assurance programme, which will be provided in 2016.

§  Convened a separate session with the key members of the PwC audit team to discuss the 2015 audit plan and agree areas of focus.

§  Assessed regular reports from PwC on the progress of the 2015 audit and any material issues identified.

§  Debated the draft audit opinion ahead of 2015 year end.

The Committee was also briefed by PwC on critical accounting estimates, where significant judgement is needed.

The Committee approved the audit plan and the main areas of focus, including impairment, valuations, conduct redress provisions, litigation and regulation and IT systems and controls. The Committee asked PwC to comment on the Group’s reconciliations processes and how they compared to other financial institutions.

Read more about the Committee’s role in assessing the performance, effectiveness and independence of the external auditor and the quality of the external audit below.

§  Received regular updates from the Audit Tender Oversight Sub-Committee on the progress of the audit tender.

§  Convened a special meeting to evaluate final presentations from the three audit firms who responded to the request for proposal.

§  Assessed and endorsed the proposed process to ensure that KPMG was independent by 1 July 2016.

The Committee decided to look further at potential reputation risk before making a recommendation to the Board. Having done so, it concluded on two firms for recommendation to the Board for consideration, indicating its preferred option of KPMG. In July 2015, Barclays announced the appointment of KPMG as its statutory auditor with effect from the 2017 financial year.

Read more about the external audit tender and the processes in place to ensure KPMG’s independence below.

Governance in Action – external audit tender

As indicated in last year’s Annual Report, Barclays decided to undertake an external audit tender in 2015, with a view to replacing our external audit firm from the 2017 financial year onwards. This was done to conform with the auditor rotation requirements of the final statutory audit services order published in October 2014 by the UK’s Competition and Markets Authority, which took effect in January 2015.

In December 2014, we established an Audit Tender Oversight Sub-Committee, to oversee the external audit. I was asked to chair the Sub-Committee and Crawford Gillies and Colin Beggs, Chairman of the BAGL Audit Committee, were the other members. The tender process completed in summer 2015 and the Board announced in July 2015 that it had appointed KPMG as Barclays Auditor with effect from the 2017 financial year.

One of the Sub-Committee’s key objectives was to ensure that the selection process was efficient, fair, effective, open and transparent. It established and published the following weighted key assessment criteria: Audit Quality (50%), Cultural Fit (20%), Corporate Fit (15%) and Experience (15%). No fee information was available to the Board Audit Committee before the recommendation was finalised. Three levels of governance were implemented to manage and support the process.

Timeline and key activities

Governance body

Purpose

Core Audit Tender

Team

§  Assist the audit firms to put the best solution forward for consideration.

§  Conduct a detailed assessment of the audit firms following the design approved by the Audit Tender Oversight Sub-Committee.

Audit Tender Oversight

Sub-Committee

§  Agree objectives and desired outcomes for the audit tender.

§  Approve the design of the audit tender process.

§  Construct and agree a shortlist of firms to be asked to participate.

§  Oversee the implementation of the audit tender process.

Board Audit Committee

§  Recommend to the Board, from at least two potential candidates, the preferred firm to be appointed.

A number of firms were invited to participate in the audit tender, including firms outside the ‘Big 4’ auditors. We published key information on the tender in a timely manner, including making the request for proposal available on Barclays’ website. We also wrote to our major shareholders, setting out the process and details of the tendering audit firms, which we considered essential to transparency. Enhanced compliance procedures were established. We then undertook a broad and structured evaluation of each firm through site visits and workshops with the tendering firms, covering all the major businesses of the Group, the control functions and specific audit exercises, which were also attended by members of the Board Audit Committee. Ongoing feedback was provided to the tendering audit firms through a single point of contact in order to ensure that each was given the best chance possible of putting forward a credible proposal to the Board Audit Committee.

At the conclusion of the audit tender process, the Board Audit Committee was able to recommend to the Board the preferred firm to be appointed, from two shortlisted firms. All tendering firms met the minimum thresholds set by the Audit Tender Oversight Sub- Committee and, following a full assessment of the proposals and detailed questioning of the audit firms, KPMG was identified as the preferred firm, based on audit quality, evaluation scores and its extensive experience of auditing banks. Mike Ashley and Sir Michael Rake, both former partners of KPMG, took no part in the evaluation process or the Board Audit Committee’s recommendation and both recused themselves when the Board discussed and approved the appointment.

Tim Breedon

Chairman, Audit Tender Oversight Sub-Committee

“In 2016 the Committee will continue to supervise the level and deployment of risk appetite, as well as the Group’s funding and capital position, as we respond to regulatory requirements and our expectations of continued volatility in external conditions.”

Dear Fellow Shareholders

Over the past year, the Board Risk Committee reviewed management’s responses to a range of external challenges. These included a slowdown in China and other emerging markets, falling oil and commodity prices, as well as some industry trends toward more aggressive lending terms in certain core markets, including UK property and international leveraged finance. Risk appetite, as well as country, sector and individual exposures, were carefully monitored to ensure that business activity and limits appropriately reflected external risks. We were pleased to see impairment remain broadly flat on 2014 levels and within planning expectations, despite increasingly challenging conditions in some markets.

A key activity for the Committee is recommending risk appetite to the Board and monitoring performance against the agreed appetite on its behalf. The context in which we set our Medium Term Plan (MTP) and risk appetite for 2015 was based on our assessment of our key markets, including risk factors arising from the near term geopolitical, macroeconomic and market environment and the potential for further conduct and litigation charges. Matters for particular focus were the UK housing market, where new mortgage regulations, a potential rise in interest rates, the growth in the buy-to-let market and ongoing high levels of household debt were expected to have an impact; continuing economic and political uncertainty in Europe; weak economic prospects for South Africa; and the potential effects of ongoing weakness in oil prices. 2015 risk appetite and risk triggers were set to position Barclays conservatively given this environment. During 2015, significant stress in emerging markets and economies became evident, underpinned by a slowing in the Chinese economy and resultant market volatility. Consequently, Barclays took early action to reduce its risk appetite to emerging markets, particularly Africa, and also remained vigilant to the potential impacts arising from a downturn in economic growth, indebtedness generally and further weakness in capital markets.

At the end of 2014, the Committee asked for a review of the Group’s process for setting risk appetite and during 2015 approved a revised methodology that takes a scenario-based approach, with stress testing as the basis of the risk appetite framework. This revised methodology was used to set risk appetite for 2016, with the Committee also approving the stress testing themes, the severity of the proposed stress and the financial constraints.

Note

a   The name of the Committee changed from the Board Financial Risk Committee in June 2015

Another key area of focus during 2015 was the structural reform programme, where the Committee was asked by the Group Chairman to oversee progress of the planning process, particularly with regard to structural options, their capital and liquidity implications and the potential risks for the Group, its customers and for the financial system. Now that the programme has moved into its implementation phase, the Board will directly oversee programme execution, although the Committee will continue to exercise oversight of capital and liquidity aspects, including assessing capital on a legal entity basis. From July 2015, the Committee also assumed oversight responsibility for operational risk, agreeing to focus on the financial and capital aspects of operational risk, while the Board Audit Committee oversees the control aspects.

The role of Board Risk Committee Chairman is not confined to the Committee’s regular meetings. During 2015, I continued to have significant interaction with our regulators, meeting regularly with representatives from our UK and US regulators. I held regular meetings with the Chief Risk Officer and members of his senior management team, with Barclays Treasurer and the Chief Operating Officer. I also liaised closely with the Chairman of Board Audit Committee, particularly on those matters where the remit of the two committees might overlap, including with regard to the implementation of the Enterprise Risk Management Framework and operational risk issues.

Committee performance

The Committee’s performance during 2015 was evaluated as part of the independently facilitated annual Board effectiveness review and I am happy to report that the outcomes were positive. The Committee was regarded as effective and as taking a thorough and detailed approach to its responsibilities. The main area identified for improvement was ensuring that the papers presented to the Committee strike the right balance between providing data for information and providing insight and analysis to encourage greater debate and I will be working with the Chief Risk Officer and Barclays Treasurer to address this during 2016. You can read more about the outcomes of the Board effectiveness review on pages 33 and 34.

Looking ahead

The Committee expects its areas of focus for 2016 to be guided by the ongoing level of change faced by the Group as it implements its strategy and executes the structural reform programme, with a particular focus on capital and liquidity management across legal entities. We will also continue to monitor and react to any emerging risks arising in our key markets in the UK, US and South Africa as a consequence of any macroeconomic deterioration or disruption in financial market conditions.

Tim Breedon

Chairman, Board Risk Committee

29 February 2016

§  Requested a review of the Group’s risk appetite process and methodology and debated proposals from management to move to a scenario-based stress testing approach.

§  Evaluated the proposed MTP stress test, agreeing on a scenario involving a global recession from an economic slowdown in China.

§  Debated the severity of the scenario and how it would apply across the Group’s main markets of the UK, US and South Africa and how it aligned to regulatory stress tests.

The Committee challenged the parameters proposed by management and asked for a parameter to be linked to PBT. It also asked for early consideration to be given to the impact of IFRS 9 on the Group’s risk appetite and stress testing assumptions. This work is under way and will be reported to the Committee in the first half of 2016. Given the change in methodology, the Committee requested early sight of the design and outputs as the new risk appetite process was implemented, resulting in a workshop being held in December 2015. All non-executive Directors were invited to attend the workshop.

Stress testing, i.e. testing whether the Group’s financial position and risk profile provide sufficient resilience to withstand the impact of severe economic stress.

§  Debated proposals from management to move to a scenario-based risk appetite setting approach and approved a change to the Group’s methodology.

§  Assessed the progress of the BoE stress test and evaluated the preliminary results, including discussing any potential areas of sensitivity.

§  Debated structural reform and the impact on the capital and liquidity flight paths for individual legal entities, in particular, the prospective credit rating of Barclays Bank PLC in the structural reform structure.

§  Evaluated the respective impacts on capital, liquidity and on the general safeness and soundness of the Group of different ring fence bank (RFB) structures.

The Committee recognised the design and implementation challenges of the programme and supported management in proposing structures and perimeters that best ensured the safety and soundness of all elements of the Group. It requested a workshop on structural reform to provide the Committee with an in-depth view of the key challenges. The workshop was held in December 2015 and all non-executive Directors were invited to attend.

§  Assessed on a regular basis liquidity performance against requirements.

§  Debated the credit ratings of Barclays PLC and Barclays Bank PLC and potential market reaction to a ratings downgrade following removal of sovereign support notching.

§  Questioned the cost of additional liquidity and asked for options to reduce the cost to be considered.

Capital and leverage,

i.e., having sufficient capital resources to meet the Group’s regulatory requirements, maintain its credit rating and support growth and strategic options.

§  Debated on a regular basis, capital performance against plan, tracking the capital flight path, any challenges/headwinds and regulatory developments.

§  Evaluated options to maximise capital and capital ratios in order to meet regulatory and market expectations.

§  Debated economic conditions in South Africa and the future outlook.

§  Examined the actions already taken to manage risks, improve controls and asset quality and develop triggers for additional action in the event of further macro deterioration.

§  Monitored the impact on South Africa of the slowdown in China and the fall in commodity prices.

The Committee sought additional information around the actions that had been taken to manage the risk profile in South Africa, including the impact of the actions taken to date. It requested a deep dive on the risk profile of the South African business, inviting the South African business heads to present on the actions that had been taken and how the business was positioned for a further economic downturn, including the impact of a further country rating downgrade.

§  Assessed the potential impact of the UK general election and steps that could be taken to manage any market volatility.

§  Evaluated the potential risks arising from a general macroeconomic slowdown and from financial markets disruption, including the global impact of the economic slowdown in China.

§  Assessed global consumer indebtedness indicators and the potential impact of rising consumer debt on the Group’s risk profile.

§  Debated the Group’s Eurozone exposures in the context of the potential break-up of the Eurozone in the event of a Greek exit and assessed the Group’s levels of redenomination risk in the Eurozone.

Retail credit risk,

i.e. UK property market, interest rate risk.

§  Debated UK property market indicators and conditions, particularly in the high loan to value (LTV) and the buy-to-let markets and potential economic and political risks to that market.

§  Evaluated the Group’s lending criteria and its approach to assessing customers on affordability.

§  Assessed the potential impact of an increase in interest rates on customers, including how customers had been stress tested and assessed against affordability criteria.

Specific sector risk,

i.e. the Group’s risk profile in sectors showing signs of stress, such as the oil sector.

§  Regularly assessed the Group’s exposures to the oil sector, including assessing steps taken with regard to the credit strategy for the sector, how the portfolio was performing and whether this was in line with expectations.

§  Evaluated the Group’s exposures to the commodities sector and actions taken to identify any names at risk and reduce exposures.

Operational Risk

From 1 July 2015, the Committee took responsibility for oversight of the capital and financial aspects of operational risk.

§  Evaluated operational risk capital and debated the potential for an increase in regulatory operational capital requirements.

§  Debated whether Barclays advanced status for calculating operational risk capital should be retained.

§  Tracked operational risk key indicators via regular reports from the Head of Operational Risk.

Risk governance,

i.e. the capability, governance and controls that the Group has over the management of risk.

§  Requested development of a risk capability scorecard.

§  Regularly debated conditions in the leveraged finance market, tracking market indicators and the Group’s risk exposures and assessing the limit framework for leveraged finance and underwriting, including proposed changes to the framework to strengthen controls.

§  Assessed the progress of enhancements to risk models controls and governance, including the role of the Group’s Independent Validation Unit.

§  Evaluated revisions proposed to the ERMF.

The Committee approved the approach to the risk capability scorecard and requested a formal annual assessment of capability, with the option of an external assessment every three years. The Committee approved a revised limit framework for leveraged finance transactions and approved underwriting limits in general. The Committee concluded that good progress had been made on enhancing the controls and governance around risk models and asked management to focus on improving the quality of models and data quality further. The Committee also recommended the revised ERMF to the Board for approval.

§   Evaluated the Risk function’s view of performance, which informed remuneration decisions for 2015.

The Committee supported the Risk function’s view of 2015 risk performance and endorsed the report that had been submitted to the Board Remuneration Committee.

The Remuneration Report on pages 50 to 83 includes more detail on how risk is taken into account in remuneration decisions.