Strategic Shareholder Climate and Risk Financial Financial Barclays PLC 404 report information sustainability report Governance review review statements Annual Report 2022 KPMG LLP’s independent auditor’s report to the members of Barclays PLC (continued) Description of the Key Audit Matter Our response to the risk Our economics expertise: We involved our own economic specialists who assisted us in: ▪ Qualitative adjustments – Adjustments to the model-driven ECL results are raised by • assessing the reasonableness of the Group’s methodology and models for determining the management to address known impairment economic scenarios used and the probability weightings applied to them; model limitations or emerging trends as well • assessing key economic variables which included comparing samples of economic variables to as risks not captured by models. They external sources; represent approximately 8.5% of the ECL. These adjustments are inherently uncertain • assessing the overall reasonableness of the economic forecasts by comparing the Group’s and significant management judgement is forecasts to our own modelled forecasts; and involved in estimating certain post model • assessing the reasonableness of the Group’s qualitative adjustments by challenging key economic adjustments (“PMA’s”) and management assumptions applied in their calculation based on external sources. overlays. Other test of details: Key aspects of our testing in addition to those set out above involved: The effect of these matters is that, as part of our risk assessment, we determined that the • sample testing over key inputs into the ECL calculations; impairment of loans and advances to • selecting a sample of post model adjustments, considering the size and complexity of customers including off balance sheet management overlays, in order to assess the reasonableness of the adjustments by challenging elements has a high degree of estimation key assumptions, inspecting the calculation methodology and tracing a sample of the data used uncertainty, with a potential range of back to source data; and reasonable outcomes greater than our • selecting a sample of credit reviews in order to assess the reasonableness of customer risk ratings materiality for the financial statements as a by challenging key judgements and considering disconfirming or contradictory evidence. whole, and possibly many times that amount. The credit risk sections of the financial Assessing transparency: We assessed whether the disclosures appropriately disclose and address statements (pages 301-340) disclose the the uncertainty which exists when determining the ECL. In addition, we assessed whether the sensitivities estimated by the Group. disclosure of the key judgements and assumptions was sufficiently clear. Disclosure quality The disclosures regarding the Group’s application of IFRS 9 are key to explaining the key judgements and material inputs to the IFRS 9 ECL results. Communications with the Barclays PLC Areas of particular auditor judgement Further information in the Annual Report Board Audit Committee and Accounts: See the Board Audit We identified the following as the areas of Our discussions with and reporting to the Committee Report on page 173 for details particular auditor judgement: Board Audit Committee included: on how the Board Audit Committee • The appropriateness of the model considered impairment as an area of • The effectiveness of the control estimations and adjustments recorded focus, page 425 for the accounting policy environment operating over the to the model driven ECL calculations to on accounting for the impairment of calculation of the ECL provisions; reflect the current economic financial assets under IFRS 9, pages • The determination and utilisation of environment. 300-340 for the credit risk disclosures, and judgemental post model adjustments Our results page 436 for the financial disclosure note recognised; Based on the risk identified and our 8; Credit Impairment charges/(releases). • Model monitoring results and procedures performed we considered the adjustments made; impairment allowances on loans and • Management’s economic forecast and advances at amortised cost, including off- associated scenario probability weights; balance sheet elements and the related and disclosures to be acceptable (2021 result: acceptable). • The disclosures made to explain ECL, including explaining the resulting estimation uncertainty.