Strategic Shareholder Climate and Risk Financial Financial Barclays PLC 436 report information sustainability report Governance review review statements Annual Report 2022 Notes to the financial statements (continued) For the year ended 31 December 2022 7 Operating expenses a Restated 2022 2021 2020 £m £m £m Infrastructure costs Property and equipment 1,649 1,538 1,590 Depreciation and amortisation 1,723 1,673 1,539 b Impairment of property, equipment and intangible assets 63 403 194 Total infrastructure costs 3,435 3,614 3,323 Administration and general expenses Consultancy, legal and professional fees 669 610 567 Marketing and advertising 500 399 330 UK bank levy 176 170 299 Other administration and general expenses 1,101 958 1,117 Total administration and general expenses 2,446 2,137 2,313 Staff costs 9,252 8,511 8,097 Litigation and conduct 1,597 397 153 Operating expenses 16,730 14,659 13,886 Notes a 2021 financial metrics have been restated to reflect the impact of the Over-issuance of Securities. See Restatement of financial statements (Note 1a) on page 428 for further details. b In 2021, Impairment of property, equipment and intangible assets included £266m relating to structural cost actions taken as part of the real estate review. For further details on staff costs including accounting policies, refer to Note 31. 8 Credit impairment charges/(releases) Accounting for the impairment of financial assets Impairment In accordance with IFRS 9, the Group is required to recognise expected credit losses (ECLs) based on unbiased forward-looking information for all financial assets at amortised cost, lease receivables, debt financial assets at fair value through other comprehensive income, loan commitments and financial guarantee contracts. At the reporting date, an allowance (or provision for loan commitments and financial guarantees) is required for the 12 month (Stage 1) ECLs. If the credit risk has significantly increased since initial recognition (Stage 2), or if the financial instrument is credit impaired (Stage 3), an allowance (or provision) should be recognised for the lifetime ECLs. The measurement of ECL is calculated using three main components: (i) probability of default (PD) (ii) loss given default (LGD) and (iii) the exposure at default (EAD). The 12 month and lifetime ECLs are calculated by multiplying the respective PD, LGD and the EAD. The 12 month and lifetime PDs represent the PD occurring over the next 12 months and the remaining maturity of the instrument respectively. The EAD represents the expected balance at default, taking into account the repayment of principal and interest from the balance sheet date to the default event together with any expected drawdowns of committed facilities. The LGD represents expected losses on the EAD given the event of default, taking into account, among other attributes, the mitigating effect of collateral value at the time it is expected to be realised and the time value of money. Expected credit loss measurement is based on the ability of borrowers to make payments as they fall due. The Group also considers sector-specific risks and whether additional adjustments are required in the measurement of ECL. Credit risk may be impacted by climate considerations for certain sectors, such as oil and gas. Determining a significant increase in credit risk since initial recognition: The Group assesses when a significant increase in credit risk has occurred based on quantitative and qualitative assessments. The credit risk of an exposure is considered to have significantly increased when: i) Quantitative test The annualised lifetime PD has increased by more than an agreed threshold relative to the equivalent at origination. PD deterioration thresholds are defined as percentage increases, and are set at an origination score band and segment level to ensure the test appropriately captures significant increases in credit risk at all risk levels. Generally, thresholds are inversely correlated to the origination PD, i.e. as the origination PD increases, the threshold value reduces. The assessment of the point at which a PD increase is deemed ‘significant’, is based upon analysis of the portfolio’s risk profile against a common set of principles and performance metrics (consistent across both retail and wholesale businesses), incorporating expert credit judgement where appropriate. Application of quantitative PD floors does not represent the use of the low credit risk exemption as exposures can separately move into Stage 2 via the qualitative route described below. Wholesale assets apply a 100% increase in PD and 0.2% PD floor to determine a significant increase in credit risk. Retail assets apply bespoke relative increase and absolute PD thresholds based on product type and origination PD. Thresholds are subject to maximums defined by Group policy and typically apply minimum relative thresholds of 50-100% and a maximum relative threshold of 400%.