Strategic Shareholder Climate and Risk Financial Financial Barclays PLC 372 report information sustainability report Governance review review statements Annual Report 2022 Supervision and regulation (continued) the capital that firms use to meet their risk standard (SA-CCR) and rules on large Stress testing minimum requirements (Pillar 1 and Pillar exposures. As part of this policy The Group and certain of its members are 2A) cannot be counted towards meeting statement, the PRA also confirmed that it subject to supervisory stress testing the combined buffer requirement. would maintain its approach of requiring exercises in a number of jurisdictions, the deduction of software assets from designed to assess the resilience of banks The PRA may also impose a confidential capital. On 30 November 2022, the PRA to adverse economic or financial 'PRA buffer' to cover risks over a forward published consultation paper CP16/22 developments and ensure that they have looking planning horizon, including with concerning the implementation of the robust, forward-looking capital planning regard to firm-specific stresses or remaining Basel III standards, which include processes that account for the risks management and governance a revised standardised approach for credit associated with their business profile. weaknesses. If the PRA buffer is imposed risk, the elimination of modelled Assessment by regulators is on both a on a specific firm, it must be met approaches for certain credit risk exposure quantitative and qualitative basis, the latter separately to the combined buffer categories, a new standardised approach focusing on such elements as data requirement, and must be met fully with for operational risk, a new market risk provision, stress testing capability CET1 capital. approach and the implementation of an including model risk management and As part of its approach to ring fencing, the output floor requiring reported RWAs internal management processes and FPC established a framework to apply a calculated under standardised and controls. firm-specific systemic risk buffer (SRB) modelled approaches to be a minimum of Recovery and Resolution which could be set between 0% and 3% of 72.5% of fully standardised calculations. RWAs and which had to be met solely with Stabilisation and resolution framework The EU has also launched its legislative CET1 capital. The purpose of the SRB was The UK framework for recovery and process for implementing these remaining to increase the capacity of ring-fenced resolution was established by the Banking Basel III reforms. In October 2021, the FPC bodies, such as Barclays Bank UK PLC, to Act 2009, as amended. The EU framework and PRA published a policy statement absorb stress. The buffer rate applicable to was established by the 2014 Bank setting out changes to the leverage ratio the Group’s ring-fenced sub-group was Recovery and Resolution Directive (BRRD), framework, including applying the leverage set at 1% with effect from August 2019. as amended by BRRD II. ratio requirement on an individual basis and With the implementation of CRD V, the making sub-consolidation available as an The BoE, as the UK resolution authority, Other Systemically Important Institutions alternative to individual application where a has the power to resolve a UK financial Buffer (O-SII buffer) replaced the SRB. As firm has subsidiaries that can be institution that is failing or likely to fail by part of the implementation of CRD V, the consolidated, which apply from 1 January exercising certain stabilisation tools, PRA and FPC confirmed that the Barclays 2023. including (i) bail-in: the cancellation, Bank UK PLC O-SII buffer would be held at transfer or dilution of a relevant entities’ In the US, in October 2019, the FRB and the historic SRB rate of 1% until equity and write-down or conversion of other US regulatory agencies released final reassessment in December 2021. On 8 the claims of a relevant entities' unsecured rules to tailor the applicability of prudential October 2021, the PRA extended the O- creditors (including holders of capital requirements for large domestic US SII buffer rate of 1% for a further year, with instruments) and conversion of those banking organisations, foreign banking any future adjustment to the O-SII buffer claims into equity as necessary to restore organisations and their intermediate applicable from January 2024. In addition, solvency; (ii) the transfer of all or part of a holding companies (IHCs), including BUSL. in May 2022, the FPC decided to change relevant entities' business to a private BUSL is a “Category III” IHC. BUSL (and the metric used to determine O-SII buffer sector purchaser; and (iii) the transfer of all Barclays Bank Delaware) is therefore rates from total assets to the UK leverage or part of a relevant entities' business to a subject to reduced (calibrated at 85%) exposure measure and to recalibrate the “bridge bank” controlled by the BoE. When standardised liquidity requirements, thresholds used to determine O-SII buffer exercising any of its stabilisation powers, including the liquidity coverage ratio and rates to prevent an overall tightening or the BoE must generally provide that NSFR. loosening of the framework relative to its shareholders bear first losses, followed by pre-Covid level. The FPC determined that In June 2018 and October 2019, the FRB creditors in accordance with the priority of the average of firms’ quarter-end leverage finalised rules regarding single their claims in insolvency. exposure measure over the year will be counterparty credit limits (SCCL). The In order to enable the exercise of its SCCL apply to the largest US BHCs and used to determine O-SII buffer rates, stabilisation powers, the BoE may impose rather than the year-end value and that foreign banks’ (including the Group’s) US a temporary stay on the rights of creditors this change will only take effect after the operations. The SCCL creates two to terminate, accelerate or close out PRA’s December 2023 review. Thus, the separate limits for foreign banks, the first contracts, or override events of default or December 2023 review will be based on on combined US operations (CUSO) and termination rights that might otherwise be the second on the US IHC (BUSL). The end-2022 leverage exposure measure. invoked as a result of a resolution action Rates set in 2023 will apply from January SCCL for US BHCs, including BUSL, and modify contractual arrangements in 2025. In addition, Barclays Bank Ireland requires that exposure to an unaffiliated certain circumstances (including a PLC is identified as a O-SII by the CBI, who counterparty of BUSL not exceed 25% of variation of the terms of any securities). have imposed an O-SII buffer on Barclays BUSL’s tier 1 capital. With respect to the HM Treasury may also amend the law for CUSO, the SCCL rule allows certification to Bank Ireland PLC. the purpose of enabling it to use its powers the FRB that a foreign bank complies with In July 2021 and October 2021, the PRA, under this regime effectively, potentially comparable home country regulation. respectively, published a policy statement with retrospective effect. and confirmation, setting out its planned Barclays Bank PLC was not required to In addition, the BoE has the power, under implementation of certain Basel III comply with the CUSO requirement until 1 the Banking Act, to permanently write- January 2022, with the first certification standards, including the net stable funding down or convert into equity tier 1 capital ratio (NSFR), the new counterparty credit applicable for Q1 2022 results.