barclays ring-fencing transfer scheme: a summary of … · barclays ring-fencing transfer scheme: a...

Barclays Ring-Fencing Transfer Scheme:

A Summary of the Scheme Report and the Scheme

A Summary of the Scheme Report and the Scheme | 2

ContentsIntroduction 3

Summary of the Scheme Report 5

Summary of the Scheme 24


IntroductionFollowing the global financial crisis in 2008, the UK Government embarked on a number of changes to the UK’s financial system to enhance financial stability. One of these changes was the introduction of ‘ring-fencing’ legislation, which requires large UK licensed banks to legally separate their core UK/EEA retail banking activities from their international and investment banking activities from 1 January 2019.

Barclays Bank PLC (BBPLC) is currently the principal operating entity within the Barclays Group, offering a range of retail, corporate and investment banking products to customers in the UK and various international jurisdictions. To meet ring-fencing requirements BBPLC is required to legally separate its UK/EEA retail banking activities from other parts of its business before the 1 January 2019 deadline.

In anticipation of this, BBPLC has undertaken its banking activity from two distinct business units since March 2016: Barclays UK (BUK, comprising UK retail, wealth, credit card and smaller corporate customers) and Barclays International (BI, comprising UK medium and large corporate, international corporate, investment banking, merchant acquiring, private banking and international credit card customers). To effect ring-fencing, BBPLC will transfer its BUK business to a newly established ring-fenced banking entity, Barclays Bank UK PLC (BBUKPLC).

Moving the BUK business to BBUKPLC requires Barclays to transfer assets and liabilities relating to 24 million customers

to the new entity. Transferring customers will therefore face a different banking entity (BBUKPLC) than the one they contracted with (BBPLC), which may require amendments to the terms and conditions of their original contracts. The government recognised that transfers and amendments on this scale could not plausibly be effected by securing individual consent, so have legislated to provide a Court sanctioned mechanism to effect the transfer. This is called the ring-fencing transfer scheme (RFTS). To ensure that the transfer is done in a transparent and fair way, the ring-fencing process provides protection to help minimise adverse outcomes for any party that may be affected by the RFTS.

The main protections are twofold. Firstly, Barclays must demonstrate to the court that: (a) it has utilised the scheme in a way that does not result in an adverse effect on any party; or (b) if an adverse effect does arise with respect to such a party, it can be demonstrated that this impact was reasonably necessary for the purposes of ring-fencing (both (a) and (b) taken together are referred to as the Statutory Question).

Secondly, any customer, client or other stakeholder of Barclays is entitled to participate in the RFTS process by attending the hearing at which the Court will be asked to sanction the RFTS that is scheduled to take place on 26 and 27 February 2018 and/or by registering an objection any time until the Sanction Hearing with the court and providing copies to Barclays and the PRA. For further information on the objections process please visit home.barclays/about-barclays/ring-fencing-explained.html.

www.home.barclays/about-barclays/ring-fencing-explained.html



In applying to the Court to sanction the RFTS, a person nominated by the applicant and approved by the PRA in consultation with the FCA (the Skilled Person) must provide a report (the Scheme Report) to assess whether, in their view, Barclays has satisfied the Statutory Question. Mark Byers, of the professional services firm Grant Thornton, has been appointed for this purpose and his full Scheme Report can be found at home.barclays/about-barclays/ring-fencing-explained.html, a printed copy of which is available on request from Barclays.

Under the FCA’s finalised guidance on ring-fencing, Barclays is required to provide a summary of the Scheme Report and a summary of the RFTS. The executive summary of the Scheme Report, which has been prepared by the Skilled Person, has been used for the purpose of summarising the Scheme Report (Part I of this document); and a summary of the RFTS is also attached (Part II of this document). However, customers, clients and other stakeholders of the bank are encouraged to read the Skilled Person’s Scheme Report in full to get a detailed understanding of the scope of the RFTS and its impact on them (if any). This should help them to determine whether they wish to participate in any of the court hearings and/or raise any formal objections.

Within the Scheme Report, the Skilled Person has concluded, post the mitigation actions that Barclays has (or is intending to) put in place, that there are not likely to be any adverse effects suffered by any party as a result of the RFTS other than those relating to the withdrawal of branch account services to BBUKPLC customers in Jersey, Guernsey and the Isle of Man. However, the Skilled Person has concluded that this impact is considered reasonably necessary for the purposes of ring-fencing as it’s not legally permissible to offer ring-fenced customers such services outside of the UK/EEA. Post the Directions Hearing, the Skilled Person will file a Supplementary Report for the purpose of the Sanction Hearing which will take into account objections raised and/or any significant developments or changes that impact stakeholders.

For more information on ring-fencing, the impacts that it might have on you and how to participate in the Court process should you wish, please visit home.barclays/about-barclays/ring-fencing-explained.html, or contact us through your preferred channel.






This section is authored by Mark Byers, Skilled Person and

Partner, Grant Thornton

Summary of the Scheme Report


Summary Scheme Report Barclays is restructuring its business to comply with UK ring-fencing legislation. The basic rules of UK ring-fencing require retail and small business deposit-taking operations to be placed inside an entity that is ring-fenced, or legally separate from certain other wholesale and investment banking activities. Some activities, notably the provision of banking services to larger companies, may be undertaken on either side of the ring-fence.

Barclays has established a new entity, Barclays Bank UK PLC (BBUKPLC), as its ring-fenced bank and is proposing the use of a single ring-fencing transfer scheme (the Scheme) to transfer certain customer and non-customer assets, liabilities and contracts from Barclays Bank PLC (BBPLC) and its subsidiary Woolwich Plan Managers Limited (WPML) into BBUKPLC and its subsidiary Barclays Investment Solutions Limited (BISL). In addition, Barclays proposes to use the Scheme to transfer certain non-customer items from BBPLC into its group service company, Barclays Services Limited (BSerL, or ServCo).

A ring-fencing transfer scheme, as defined by Part VII of the Financial Services and Markets Act 2000 (FSMA), enables all or part of a transferor's business to be transferred to another body to comply with the ring-fencing regime established by amendments made to FSMA by the Financial Services Banking Reform Act 2013 (FSBRA) without having to obtain individual consent of all those affected by the transfer.

Section 109A of FSMA requires that an application to Her Majesty’s High Court of Justice in England (the Court) for an order sanctioning a ring-fencing transfer scheme must be accompanied by a report on the terms of the scheme (a ‘scheme report’). A scheme report may be prepared only by a person (the skilled person) nominated or approved by the Prudential Regulation Authority (PRA) having consulted with the Financial Conduct Authority (FCA).

BBPLC has appointed me, Mark Byers, as the Skilled Person to provide the required report on the Scheme for the proposed transfer. The PRA has approved my appointment, having consulted with the FCA.

I am a fellow of the Institute of Chartered Accountants of England and Wales. I am recognised in the banking sector in the UK and across Europe for my work as monitoring trustee of a number of banks under EU state-aid conditions. I have worked with systemically important banks in the UK, Ireland, Netherlands, Greece, Spain, Portugal and Cyprus in supporting and monitoring the implementation of restructuring strategies designed to promote financial stability.

I am independent of the companies involved in the Scheme and neither I nor any partner or member of staff of Grant Thornton has acted for Barclays in developing any aspects of the Scheme.

I have addressed the statutory question set out in FSMA section 109A(4) (the Statutory Question or SQ):

The contents of this page has been written by the Skilled Person


a) whether persons other than the transferor concerned are likely to be adversely affected by the scheme; and

b) if so, whether the adverse effect is likely to be greater than is reasonably necessary in order to achieve whichever of the ring-fencing purposes mentioned in section 106B(3) is relevant.

The ring-fencing purposes indicated in FSMA section 106B(3) are:

a) enabling a UK authorised person to carry on core activities as a ring-fenced body in compliance with the ring-fencing provisions

b) enabling the transferee to carry on core activities as a ring-fenced body in compliance with the ring-fencing provisions

c) making provision in connection with the implementation of proposals that would involve a body corporate whose group includes the body corporate to whose business the scheme relates becoming a ring-fenced body while one or more other members of its group are not ring-fenced bodies

d) making provision in connection with the implementation of proposals that would involve the body corporate whose group includes the transferee becoming a ring-fenced body while one or more other members of the transferee’s group are not ring-fenced bodies.

This report sets out my findings in relation to the Statutory Question as it pertains to effects of the Scheme.

In reaching my conclusions, I have sought to:

• exercisemyjudgementinareasonedandjustifiable manner

• describetheimpactoftheSchemeonallclasses of stakeholder

• assesstheimpactoftheSchemeonallclasses of stakeholder

• assessthemitigationBarclayshasputin place for those affected classes of stakeholder

• describe(insummary)materialinformation on which my opinion is based

• describetherationaleformyopinion.

I interviewed a wide range of senior managers and accountable executives from across Barclays. I held a number of follow-up meetings and observed a number of committees and working group meetings. Additionally, I requested and reviewed c.1,800 documentary artefacts. Appendix D of the full Scheme Report contains a list of documents reviewed. I have relied, without independent verification, upon the accuracy and completeness of the data and information provided to me, in both written and oral form, by Barclays. Where possible, I have reviewed information for reasonableness and consistency using my own and my team's knowledge of the financial services industry.

This report is based on data available to me at, or prior to, 23 October 2017 and takes no account of developments after that date.



The proposed Scheme will be submitted to the Court for approval at a hearing which is expected to be held in February 2018 (the Sanction Hearing). If approved, it’s expected to become effective on 1 April 2018. I will continue to review the implications of the Scheme for stakeholders, and I expect to provide a Supplementary Report to the Court shortly in advance of the Sanction Hearing.

Barclays will bear all direct costs incurred in preparing and implementing the Scheme.

I have considered the effect that the proposed Scheme is expected to have on the different groups of persons connected to Barclays (which I refer to as ‘stakeholders’).

This Executive Summary provides stakeholders with a summarised version of the Report on the Scheme. In particular, it summarises my conclusions on the potential impact of the Scheme on stakeholders and explains my rationale for reaching those conclusions. I have set out my Executive Summary as follows:

• UKring-fencinglegislation

• Barclays’approachtothering-fencinglegislation

• DescriptionoftheScheme

• Primaryconsiderations

• ImpactonstakeholderstransferringtoBBUKPLC

• Impactonstakeholderstransferringtothe Non-Bank Investment Firm (NBIF)

• ImpactonstakeholderstransferringtoBSerL

• ImpactonstakeholdersremaininginBBPLC

• Barclays’preparationfortheSchemeandthe SRP

• Stakeholdercommunications

• Objections

• Futurereporting.

This is a summary of the Report, but stakeholders may wish to read my full report, which provides more details of the Scheme and its effect on stakeholders, in addition to a more comprehensive explanation of my conclusions.

UK ring-fencing legislationThe FSBRA contains provisions amending FSMA to require the ‘ring-fencing’ of ‘core activities’ to ensure ‘as far as reasonably practicable that the carrying on of core activities by a ring-fenced body is not adversely affected by the acts or omissions of other members of its group’. FSMA, as amended by the FSBRA, defines ‘core activities’ as the regulated activity of accepting deposits.

A deposit will be a core deposit for these purposes if it’s held with the UK deposit-taker in a European Economic Area (EEA) account, except where one or more of the account holders is:

a) a relevant financial institution (RFI) (e.g. other banks and investment firms)

b) a qualifying organisation

c) a qualifying group member

d) an eligible individual.



Broadly, a body corporate or partnership will be a qualifying organisation if the UK deposit-taker determines it meets one of the following conditions in the last completed financial year before the determination is made:

• Annualturnoverofnotlessthan£6.5million

• Balancesheetassetsofnotlessthan£3.26million

• Employingnotlessthan50people.

A qualifying group member is one that the UK deposit-taker determines is a member of the same group (as defined in FSMA) as a qualifying organisation.

Where a UK deposit-taker makes a determination of the type mentioned above, it must give notice of its determination to the organisations in writing.

Broadly, an eligible individual is one who heldnotlessthan£250,000inqualifyingassets during the previous financial year. The individual must provide the UK deposit-taker with a signed statement (a declaration of eligibility) to this effect.

Certain activities (excluded and prohibited) cannot be performed by a ring-fenced bank. These are, broadly, activities which are considered to pose a risk to the provision of core services and would make resolution of the bank more complicated. The Excluded Activities and Prohibition Order specifies that dealing in investments as principal and dealing in commodities are excluded activities. Incurring exposures to certain other financial institutions is an example of a prohibited activity.

Part of the ring-fencing rules (and other legislative requirements concerning recovery and resolutions plans) also require banks to demonstrate operational continuity in resolution (OCIR). Broadly, this requirement seeks to ensure that the core services that are required for the delivery of critical functions, such as administering deposit accounts, can continue in the unlikely event of a bank failure.

Barclays approach to the ring-fencing legislationBarclays’ customers range from individuals with personal bank accounts through to large and complex global companies that utilise sophisticated products and services that cannot (under the legislation) be provided by a UK ring-fenced bank. Therefore, the consequence of the UK ring-fencing legislation is that Barclays is required to separate its customers into those that utilise the services that will be provided by a ring-fenced bank and those with more complex needs.

Individual customers with a current account, or one of Barclays’ other everyday banking products (such as savings products, debit cards, mortgages or consumer loans) with Barclays in the UK, will be transferred to the ring-fenced bank. This group of stakeholders comprises approximately 16 million customers. Barclays refers to this part of its business as the Personal Banking business.

Small enterprises (SEs) that are provided with Barclays banking products, such as current and savings accounts, cash and transaction banking, and payment foreign exchange, will be transferred to the ring-



fenced bank. These SEs have an annual turnoveroflessthan£6.5million,exceptfor certain industries where a higher threshold may apply. Barclays refers to this part of its business as the Business Banking business and it has approximately 1.1 million customers. Additionally, some such customers may have debt finance and trade finance products, certain derivatives products or access to foreign exchange spot and forward trades – such products will not transfer with those customers to BBUKPLC, but will continue to be provided to those customers from BBPLC.

Individuals with a UK credit card or credit card products with Barclays will be transferred to the ring-fenced bank. This group of stakeholders comprises approximately 10.5 million customers and the business is referred to by Barclays as the UK Cards business. The UK ring-fencing legislation does not require credit cards to be issued by ring-fenced bodies; however, Barclays considers issuance of credit cards to retail customers to be complementary to the core services which BBUKPLC will provide to individuals. International customers and UK and international businesses with credit card or credit card products will remain in BBPLC. Card merchant acquiring services will remain in BBPLC.

UK clients who use Barclays’ wealth management and investment services will transfer to BBUKPLC Group unless they satisfy certain criteria. This group of transferring stakeholders comprises approximately 500,000 customers. Barclays refers to this part of its business as the UK Wealth and Investments business.

Barclays’ wealth management services are currently offered to Barclays’ customers through a number of its entities, including BBPLC, BISL and WPML. BBUKPLC will not be permitted to offer these services directly, in accordance with the ring-fencing requirements. Barclays, therefore, intends to operate a non-bank investment firm (NBIF), authorised by the FCA, as a subsidiary of BBUKPLC which will be permitted to provide these services. BISL, which is already authorised by the FCA, will become this NBIF prepositioned as a subsidiary of BBUKPLC in late 2017 in advance of the Scheme.

The businesses being transferred to the ring-fenced bank, BBUKPLC, have operated under the Barclays UK (BUK) division since 1 March 2016. BUK offers customers and clients of its business units, namely Personal Banking, UK Cards, UK Wealth and Investments and Business Banking, product sets that are typically less complex and compete with those of other UK Retail banks.

The businesses that will remain in BBPLC have operated under the Barclays International (BI) division since 1 March 2016. BI offers customers and clients of its business units (namely Corporate Banking, Investment Banking, Barclaycard, and Private Bank and Overseas Services) a broader, more complex and international set of products and services.

To comply with the ring-fencing legislation, Barclays will ensure, where necessary, that customers with deposits in the UK remaining in BBPLC after the implementation of the Scheme will either



have received a Notice of Determination (NoD) or, for individuals, signed a Declaration of Eligibility (DoE) prior to January 2019. A NoD will explain that Barclays has determined that the customer is eligible to be placed within BBPLC, in addition to explaining the rationale behind the decision. A NoD will state that the customer has 14 days from the date of receipt to object if it considers the determination is erroneous. Barclays anticipates that this process will largely have been completed by 31 October 2017.

Description of the Scheme The business transfer of BUK from BBPLC and its subsidiaries to BBUKPLC and its subsidiaries (the BBUKPLC Group) will occur via the Scheme when the Scheme becomes effective at 00:00:01 on 1 April 2018 (the Effective Time). The Scheme is described in detail in the Ring-Fencing Transfer Scheme document (the Scheme Document). On the day immediately after the Effective Time, BBPLC will transfer all shares in BBUKPLC to Barclays PLC (BPLC), such transfer to be effected as a distribution in kind, thereby making BBUKPLC a direct subsidiary of BPLC.

Under the Scheme, Barclays is proposing to transfer into the BBUKPLC Group, liabilities and contracts connected with:

• c.16millionPersonalBankingcustomers

• c.500,000UKWealthclients

• c.10.5millionUKBarclaycardcustomers

• c.1.1millionBusinessBankingcustomers

• c.1,600suppliers

• c.1,200leaseholdproperties.

Barclays has established a service company (BSerL), which is not a regulated entity, to deliver the necessary services to its banks to ensure OCIR requirements are met. As well as having the key operating platforms (technology and infrastructure), BSerL will receive approximately 60 leasehold properties and approximately 580 supplier contracts.

Barclays will transfer legal title to certain security interests granted by Corporate and Business Banking customers to a security trustee company (Barclays Security Trustee Limited). The Security Trustee will hold legal title to such security interests for the benefit of either both BBPLC and BBUKPLC or for BBUKPLC only. This approach reduces the administrative burden for customers or clients who might otherwise have to reallocate security between the two banks or grant new security.

As part of the Scheme, Barclays is proposing to transfer collateral arrangements totalling approximately£37billionintoBarclaysSecurity Trustee Limited, where the security is held in trust for BBUKPLC and BBPLC.

BBUKPLCFollowing the implementation of the Scheme, BBUKPLC Group will have approximately 24 million customers and over£200billionoftotalassets.BBUKPLCand its subsidiaries will offer retail personal and business banking services in the UK. BBUKPLC is authorised by the PRA and regulated by the FCA and the PRA.



BBPLCFollowing the implementation of the Scheme, BBPLC and its subsidiaries (BBPLC Group) will have c.17 million customers andc.£900billionoftotalassets.BBPLCisauthorised by the PRA and regulated by the FCA and the PRA.

Primary considerationsI have considered the governance arrangements of the Barclays entities and am satisfied that the new legal entity structure will not lead to a deterioration in the governance environment in Barclays. I have also considered the risk management arrangements within BPLC, BBPLC, BBUKPLC, BSerL and BISL and I am satisfied the Scheme will not result in a deterioration in the quality of risk management arrangements.

As the Skilled Person, I am required to consider the effect of the Scheme on each group of stakeholders. Whilst I have considered each stakeholder group in turn, the primary risks of adverse effect I consider arise from the following:

• changestotheriskprofileoftheBarclays’entities

• changesinproducts,servicesorcontractual rights for customers

• changesincontracttermsforsuppliers

• changesinleaseholdagreementsforlandlords.

To inform my opinion, I have undertaken work to assess whether stakeholders who transfer to a new entity or stay in an existing entity would become connected to a riskier entity than they were connected to before the transfer. As banks are predominately in the business of credit intermediation their financial resilience is of paramount importance. However, I have also undertaken work to assess other potential adverse effects that the Scheme may pose to stakeholders. In all cases, in arriving at my opinion, I have discussed the Scheme’s documentation and intended operation with the management of Barclays as part of my review.

When considering the potential adverse effects of the Scheme on different groups of stakeholders, I have considered separately those transferring to BBUKPLC, its NBIF subsidiary, to BSerL and those remaining with BBPLC.

My primary focus has been on how the Scheme itself impacts different groups of stakeholders but I am also aware that a number of changes are being made ahead of the Scheme as part of Barclays’ SRP. If these changes are not implemented successfully, stakeholders may suffer an adverse effect as a consequence of the Scheme. I have therefore also undertaken work to understand and review those elements of Barclays’ SRP that fall outside of the Scheme but on which the effectiveness of the Scheme is dependent.



Impact on stakeholders transferring to BBUKPLCIntroductionI have considered the impact on the following groups of stakeholders who are transferring to BBUKPLC as a result of the Scheme:

• Customers

• Landlords

• Suppliers.

I first consider the risk profile of BBUKPLC and then set out other potential areas of adverse effect that I have identified and whether Barclays has successfully mitigated any adverse effect or not for the different stakeholder groups.

Risk profile of BBUKPLCBBUKPLC is planned to be a fully operational UK organisation, authorised by the PRA and regulated by both the FCA and PRA, from the Effective Time of the Scheme. BBPLC will provide initial capital out of its existing capital reserves.

In assessing the impact of the Scheme on all stakeholders transferring to BBUKPLC, I have sought to establish whether, in my opinion, they are being connected to a riskier entity as a result of the Scheme. I would be concerned if the Scheme meant that stakeholders transferring to BBUKPLC move from a financially strong company to one which has a greater chance of not honouring its obligations.

The PRA and FCA are responsible for, amongst other things, the supervision of

UK authorised organisation and investment firms. Each such firm must meet or exceed minimum capital and liquidity requirements set out in legislation and regulatory rules. For banks, there are two main capital and liquidity measures, known as Core Equity Tier 1 (CET1) and Liquidity Coverage Ratio (LCR ). Minimum requirements for these measures set a strong standard for banks. Based on my review, I expect that BBUKPLC capital and liquidity ratios will exceed regulatory requirements following the implementation of the Scheme.

While the immediate impact of the Scheme is an important consideration in my assessment, it’s as important to consider the future expected levels of capital and liquidity. Banks hold a level of capital and liquidity in excess of the minimum requirements so that they can continue to meet the requirements were they to suffer losses during adverse conditions. I have considered the ability of BBUKPLC to meet its capital and liquidity targets following the implementation of the Scheme and the relative strengths of the capital and liquidity targets applicable before and after the implementation of the Scheme. In my opinion, these provide a strong level of protection to stakeholders against the risk of BBUKPLC’s obligations to them not being honoured.

I consider capital and liquidity ratios, such as the ratio of capital resources to capital requirements, to be a useful indicator of the immediate impact of the Scheme on the risk profile of the entity to which stakeholders will become connected. While this is helpful, I would be concerned if subsequent events were likely to weaken



the position of an entity in the future, for example through having a business model that is not viable. In considering the impact of the Scheme on stakeholders, I have therefore placed additional emphasis on considering Barclays’ medium-term financial plan in order to satisfy myself that BBUKPLC’s business model is and will remain viable. It’s projected that BBUKPLC’s proposed business model will be profitable and remain viable throughout the planning period (which runs until 2022).

The conclusion of the detailed analysis I undertook is that stakeholders transferring to BBUKPLC from BBPLC, as a result of the Scheme, will not suffer adverse effect from being connected to an entity with a different risk profile.

Potential areas of adverse effectIn addition to the transfer of assets and liabilities to BBUKPLC, the Scheme will transfer BBPLC contracts with customers, suppliers and landlords. I have identified a number of instances where, in the absence of mitigation, there is likely adverse effect for some stakeholders. I am satisfied that Barclays has planned to implement adequate mitigation and therefore the transfer of these contracts is being done in a way that will not have an adverse effect.

In considering the impact on all stakeholders transferring into BBUKPLC, I would be concerned if the Scheme were to result in adverse financial effects on stakeholders, or in a deterioration in the range and quality of services provided. I am satisfied that adequate measures have been taken to ensure that this does not occur. These are discussed below.

CustomersAccess to products and services

I would be concerned if the range of products and services available to the customers of BBUKPLC is less extensive than those currently available and used by them in BBPLC. The vast majority of the customers of BBUKPLC will have no need to use the products and services that are prohibited for a ring-fenced bank to provide (but were previously available to them as customers of BBPLC). However, there are a small number of customers who will need to access products not provided by the ring-fenced bank. For example, small business customers wishing to use more complex investment products. Barclays will implement a cross-referral process that will allow customers within BBUKPLC to access a number of products available within BBPLC. In my opinion, this approach is adequate to ensure that the small number of BBUKPLC customers who may need to access products and services offered by BBPLC because they are prohibited or not offered within BBUKPLC are not adversely affected.

I would be concerned if customers experienced difficulties in accessing counter services as a result of the Scheme. I am satisfied that this will generally not be the case. Those customers whose accounts transfer to BBUKPLC as a result of the Scheme will, however, be unable to use the counter services of BBPLC branches in Jersey, Guernsey and the Isle of Man. In my opinion, this is an adverse effect of the Scheme for customers in Jersey, Guernsey and the Isle of Man, and I am therefore required to consider Part (b) of the Statutory



Question. It’s a requirement of the UK ring-fencing legislation that a ring-fenced bank has no branches outside of the EEA. I, therefore, consider that this adverse effect is necessary in order for Barclays to satisfy the UK ring-fencing requirements.

I would be concerned if customers received less interest on their deposits as a result of the Scheme. I am satisfied that this is not the case, with the exception of a small number of corporate customers that currently benefit from notionally pooling deposits in bank accounts held by different companies within the same corporate group. After the implementation of the Scheme, it will not be possible for these pooling arrangements to apply across both BBUKPLC and BBPLC. To mitigate this, Barclays will offer intra-day cash concentration services at no additional cost to these customers. In my opinion, this approach will prevent any adverse effect from materialising.

Tax implications

I would be concerned if non-UK tax resident customers are adversely affected by tax regulation in their home jurisdictions as a result of the Scheme. This may arise due to the tax implications under local law of a non-UK tax resident transferring deposits or loans to another legal entity.

Barclays has carried out an impact assessment covering the tax implications arising from transfers of products such as deposits, loans and mortgages covering 50 countries. It has concluded that in the majority of jurisdictions no impact will arise due to the specific impact of the local tax regulation. However, there are non-UK tax

resident customers whose tax position may be adversely affected due to the treatment of transfers according to local tax law. Barclays also took advice from external tax advisors in January 2016 in relation to this matter.

To mitigate the potential impact, Barclays has advised affected customers to obtain independent local tax advice to create awareness such that the customers may be in a position to self-mitigate. If this is not feasible, Barclays intends to address any residual detriment on a case-by-case basis. I have reviewed a customer communications letter for this set of customers and consider it to be fit for purpose.

The transfer of core deposit accounts to BBUKPLC is a ring-fencing requirement. I consider that Barclays has taken reasonable steps by undertaking a specific impact analysis to assess the potential adverse effect to customers’ tax positions as a result of the Scheme. I am satisfied with the quality of this analysis and note that the analysis has not identified specific scenarios where a tax liability is likely to arise, but rather identifies a set of general tax risks in a minority of jurisdictions. I am satisfied that the customer communications provide affected customers with adequate time and opportunity to identify and manage potential tax liabilities while Barclays has stated its intention to assess affected customers on a case-by-case basis. As part of my ongoing work, in accordance with the methodology described in the Scheme Report, I will continue to monitor these commitments. On this basis, I conclude that it’s unlikely that customers will be adversely affected.



Preservation of rights in relation to complaints

I would be concerned if customers transferring to BBUKPLC lose their rights to have their complaints considered and access redress where appropriate. I am satisfied that this is not the case because customers transferring to BBUKPLC will retain their current rights to have their complaints considered and have access to redress where appropriate. Likewise, complaints will be handled by BBUKPLC via the same process that is currently in place at BBPLC. This includes referral to the Financial Ombudsman Service (FOS).

Rights to financial redress for legacy liabilities

I would be concerned if, as a result of the Scheme, customers lose their rights to financial redress for legacy liabilities. Liabilities in respect of claims made by customers against BBPLC before the Scheme (e.g. in respect of PPI mis-selling) will either be transferred to BBUKPLC under the Scheme or be retained in BBPLC. In either case, the customer will continue to have a claim against a Barclays entity which will not be extinguished by the Scheme. This also applies in respect of claims made by customers in the future in respect of a business which has transferred to BBUKPLC but where the claim relates to an issue which originated with BBPLC before the Scheme. I am therefore satisfied that customers will not lose their rights to financial redress for legacy liabilities.

Legal rights and proceedings

I would be concerned if customers’ or other stakeholders’ rights to pursue legal claims against Barclays entities were lost or otherwise prejudiced, or if legal proceedings brought against Barclays entities were discontinued or disrupted as a consequence of the Scheme. I am satisfied that the ring-fencing transfer scheme document (the Scheme Document) fully addresses these matters in a way that ensures all such legal rights and proceedings are preserved and continue without any adverse effects on the stakeholders concerned.

Terms and conditions

Barclays is not making any changes to terms and conditions other than those changes necessary to reflect the new legal entities, the Group’s target structure (including preserving existing arrangements with customers, such as with respect to set-off rights) and the ring-fencing requirements. I am satisfied that customers will not be adversely affected by changes to terms and conditions as a result of the Scheme.

Product administration

I would be concerned if changes to product administration resulting from the Scheme have an adverse effect on customers. I am satisfied this is not the case because there will be no changes to product administration, including fees and other costs, as a result of the Scheme.



Level of consumer protection

I would be concerned if there were a change in the level of consumer protection as a result of the Scheme. For example, if, as a result of the Scheme, sufficient resources are not available to ensure clear and accurate information is provided to customers about their rights, products and services, then they could be affected. I am satisfied that this will not be the case because the Scheme will not result in a change to the availability of adequate resources and the level of consumer protection afforded to customers.

LandlordsBarclays is transferring a number of property leases from BBPLC to BBUKPLC. I would be concerned if the Scheme results in increased funding costs for the landlord or reduced access to capital from lenders because of a perceived reduction in the value of the property due to the change in tenant.

Barclays intends to take steps to reassure the landlords whose leases are transferring that BBUKPLC will be financially robust and will continue to meet its commitments. These steps will include formal communications to all affected landlords and direct engagement, as needed, with some of the most significant landlords by rental value. Based on my analysis of the risk profile of BBUKPLC and the view of external credit rating agencies that the covenant strength of BBUKPLC will be no lower than that of BBPLC, I consider it unlikely that landlords will suffer any adverse effect as a result of the Scheme.

Suppliers It’s my opinion that suppliers transferring via the Scheme to new legal entities will not be adversely affected by Barclays’ proposals because there are no material changes to contracts and adequate mitigants are being put in place to raise awareness, avoid potential disruption and minimise costs to suppliers.

ConclusionCustomers who use the counter services of BBPLC branches in Jersey, Guernsey and the Isle of Man and whose accounts transfer to BBUKPLC will no longer be able to use these services as a result of the Scheme. In my opinion, this is an adverse effect of the Scheme for this group of customers, but it’s necessary in order for Barclays to satisfy the UK ring-fencing requirements. I am satisfied that the Scheme is not likely to adversely affect any other group of stakeholders transferring to BBUKPLC.

Impact on stakeholders transferring to the NBIFThe majority of Barclays’ wealth clients in BBPLC will not have the minimum investable assets under the ring-fencing legislation to elect to remain in BBPLC by signing a DoE. As a result, there are approximately 445,000 BBPLC wealth clients whose deposits will transfer into BBUKPLC’s NBIF subsidiary as part of the Scheme.

The NBIF will not have a banking licence and, as a result, customers’ uninvested cash balances will be treated as client money



held on trust as required and defined under the FCA’s Client Assets rules (henceforth Client Money), rather than as a deposit and a liability owed to its customers. I would be concerned if these changes were likely to lead to an adverse effect on those BBPLC customers transferring to the NBIF.

I have identified that clients, as a result of this transition, may lose some interest on uninvested cash balances since third-party banks where Client Money is placed typically offer lower interest rates under such arrangements. To mitigate this issue, Barclays will open cash accounts for affected parties in BBUKPLC, so clients can transfer cash balances from their NBIF dealing accounts to their deposit accounts if they wish.

Current indications are that the above solution will not be available to all cohorts of clients who currently receive interest on uninvested cash balances, namely certain clients with Self-Invested Personal Pension (SIPP) and any transferring customers with stocks and shares Individual Saving Account (ISA) tax-wrapped products. Barclays intends to communicate with affected clients to enable any who may consider that they have been adversely affected to control and mitigate their impact where they consider appropriate, for example by seeking and transferring to alternative product providers. I consider that this form of self-mitigation is adequate, provided that such transfers are economically frictionless to the client. At the time of

writing, Barclays is developing its approach and operational processes to enable clients to control and mitigate this effect. Subject to the effectiveness and final design of this approach, which I will consider in the Supplementary Report, I am satisfied that clients are not likely to be adversely affected.

Impact on stakeholders transferring into BSerLNo customers are transferring to BSerL. I have, however, considered the impact on the following stakeholders who are transferring to BSerL as a result of the Scheme:

• Landlords

• Suppliers.

I am satisfied that the position of these stakeholders is unlikely to be adversely affected by the Scheme.

I have also concluded that the stakeholders transferring to BSerL, which is not a regulated entity, will not be connected to a financially weak company as a result of the Scheme. This is because:

• BSerLwillgeneraterevenuebyprovidingservices to BBUKPLC and BBPLC and will contractually receive a fixed markup on the cost of the services it provides. Hence the entity will be profitable in a business-as-usual environment



• BSerLwillholdliquidassetsofatleast50% of annual fixed overhead expenses, in line with regulatory requirements, aimed to enable BSerL to withstand financial stress experienced by the banking entities

• thereisanongoingregulatoryprocesswith the PRA to ensure that BSerL has sufficient financial resources to be an adequate supplier of outsourced services.

ConclusionFor the reasons outlined above I am satisfied that the stakeholders transferring to BSerL are not likely to be adversely affected by the Scheme.

Impact on stakeholders remaining in BBPLCI have considered the impact on the following stakeholders who are remaining in BBPLC after the implementation of the Scheme:

• Customers

• Landlords

• Suppliers

• BarclaysUKretirementfund

• Bondholders.

I first consider the risk profile of BBPLC and then the impact of the implementation of the Scheme on the stakeholders listed above.

Risk profile of BBPLCI have assessed the risk profile of BBPLC using the same methodology as described above for BBUKPLC. This review focused on capital adequacy, liquidity levels and financial resilience.

BBPLC is a substantial banking entity before and after the Scheme. After the Scheme is implemented, BBPLC will continue to have a diversified business model including corporate banking, wealth management, investment banking and international credit card businesses.

In making an assessment of the likelihood of adverse effects to stakeholders caused by the evolution of the risk profile of BBPLC, I have carefully considered the impact of the changes to its business model. In particular, I have considered the impact of the transfer of the UK retail banking activities’ associated deposit base to BBUKPLC together with the changes Barclays has made, and plans to make, concerning the funding of the wholesale and investment banking activities remaining in BBPLC.

I have also considered relevant legal and regulatory requirements. In my opinion, before and after the implementation of the Scheme, the risk profile of BBPLC is such that the chance of BBPLC failing to meet its obligations as they fall due was and is remote.

I have concluded that the evolution of the overall risk profile of BBPLC arising from the Scheme is not likely to adversely affect stakeholders who remain connected to BBPLC.



CustomersCustomers of BBPLC are unaffected by the Scheme except that in future they may be unable to access some products and services that are only being provided within BBUKPLC. To mitigate the changes to the product and service offerings, Barclays will implement a cross-referral process. This process will allow BBPLC customers to access products and services from BBUKPLC. I am satisfied that customers are not likely to suffer an adverse effect as a result of the scheme.

LandlordsThe Scheme does not affect the leases for those landlords that will remain with BBPLC.

SuppliersThe Scheme does not affect the contracts for those suppliers that will remain with BBPLC.

Barclays UK Retirement FundPost 31 December 2025 it will not be possible for both BBUKPLC and BBPLC to participate as employers in Barclays’ UK defined benefit retirement fund (UKRF) as a result of ring-fencing legislation. As part of the 2016 triennial valuation, the Trustee of the UKRF and Barclays agreed to consider the potential adverse effect that structural reform would have on the UKRF, alongside the deterioration in its funding position since the last triennial valuation.

The triennial valuation was concluded in July 2017 and the agreement Barclays reached with the UKRF Trustee takes into account the impact of ring-fencing. The agreement provides that BBUKPLC will participate in the

UKRF alongside BBPLC until 31 December 2025, that collateral will be pledged to the UKRF, and that BPLC will use dividends paid from BBUKPLC to support the UKRF if BBPLC fails to make pension contributions under the agreed schedule. I am satisfied that the agreement reached between the UKRF Trustee and BBPLC mitigates any adverse effects under the Scheme for the UKRF.

Bondholders/debt holders – specifically BBPLC legacy debt holdersI have considered the position of those stakeholders who hold external legacy debt securities that will remain in BBPLC after the implementation of the Scheme. I have not identified any adverse effect on legacy debt holders in BBPLC. Legacy debt holders in BBPLC, whether institutional or retail, have access to information to enable them to understand the volatility and risk associated with holding relevant legacy debt securities. Disclosure with respect to the impact of ring-fencing has been covered in various presentations and periodically held fixed income calls as well as in “Question and Answer” sessions (the transcripts of which are available on Barclays’ website). My work on the value and liquidity of Barclays’ traded debt securities shows that values are volatile on a business as usual basis, and liquidity in the secondary market, in tandem with disclosures made by Barclays, has been stable. The impact of the Scheme on such instruments is not identifiable over and above the usual volatility of the debt securities and therefore I consider the Scheme unlikely to have an adverse effect on the BBPLC legacy debt holders.



ConclusionFor the reasons outlined above I am satisfied that the stakeholders remaining in BBPLC are not likely to be adversely affected by the Scheme.

Barclays’ preparation for the Scheme and the SRPWhile the Scheme is being used as the primary transfer mechanism, other items will transfer via alternative mechanisms not requiring sanction by the court. These alternative mechanisms are used where:

• theSchemecannotbeusedforthetransfer (for example, where local law in the relevant jurisdiction would not recognise the sanction of the Scheme Court by Order); or

• thepreferredalternativemechanismreduces the overall execution risk associated with structural reform.

I have outlined below some of the significant changes Barclays is making outside of the Scheme.

Operational launch of BSerLAhead of the Scheme, Barclays will have completed the following preparatory steps in respect of BSerL:

a) employee transfers to align employees to their intended employers

b) transfers of freehold properties and associated fixtures and fittings to BSerL

c) the novation of certain high-value third-party supplier contracts to BSerL

d) the assignment of technical intellectual property rights to BSerL

e) the transfer of fixed assets to BSerL

d) the entry into intragroup supply arrangements between BSerL and BBPLC (including for the BUK division) and other group entities as appropriate.

Sort codesTo achieve compliance with ring-fencing legislation, Barclays must ensure that sort codes are only aligned to one legal entity. Barclays currently has a total of 1,463 sort codes. Of these 434 are ‘mixed’. Mixed sort codes are those that currently apply to accounts of customers that will transfer to BBUKPLC and to those that will remain in BBPLC. After the implementation of the Scheme, sort codes will only belong to one entity; therefore, these mixed sort codes will need to be ‘unmixed’. The remaining 1,029 sort codes are ‘clean’; ie they are only linked to one entity, and no further work is required for them.

Barclays plans to either ‘cleanse’ or ‘un-mix’ the 434 mixed sort codes to ensure that the codes are aligned to the relevant legal entity. As a result, some customers will receive new sort codes.

Changes to sort codes will take place in advance of the Scheme, with migrations occurring in five tranches, beginning in July 2017 and completing in January 2018. The phased approach to migration is designed to allow Barclays to manage any issues arising from early migrations.

Barclays has performed an analysis to determine the potential impact that



changes to sort codes can have on customers and has identified a series of changes and controls to mitigate these prospective impacts.

Barclays is putting in place measures to reduce the risk of an adverse effect on customers as a result of the sort code changes including arranging for automatic redirection of receipts and payments for 36 months and the migration of sort codes being completed in tranches in advance of the Scheme.

Relationship directorsSome customers’ relationship directors will be changing as a result of the separation of BBPLC’s current business between it and BBUKPLC. Where possible, Barclays has sought to minimise the number of relationship changes in the first instance and where this was not possible, implement the change in advance of the Scheme, to allow time for new relationships to be developed.

Products and servicesFor those products and services where changes are being made to their terms and conditions, or they are being withdrawn outside of the Scheme, Barclays intends to do this in accordance with its contractual rights and obligations and regulatory requirements. If customers believe that they have been treated unfairly, or inappropriate detriment has arisen, as a result of any changes to products and services outside of the Scheme, they can raise a complaint with Barclays. If the complaint is not resolved to their satisfaction, individuals have the

right to make a complaint to the Financial Ombudsman Service. Ultimately, for the changes to products and services Barclays is making outside of the Scheme, customers can seek appropriate redress through the legal system.

SuppliersCertain categories of suppliers transferring to BSerL or BBUKPLC will not be subject to transfer via the Scheme but will be transferred via individual negotiation and novation instead.

EmployeesIn order to ensure the ring-fenced bank is not reliant on employees of the non-ring-fenced bank, Barclays is required to make changes to the current employing entity for the majority of its UK staff. In the UK, the vast majority of transfers for affected employees took place in September 2017 under the Transfer of Undertakings (Protection of Employment) Regulation 2006 (TUPE). Approximately 54,000 staff transferred at this time. Barclays refers to this process as ‘the Mass Transfer’.

The main consequence of the Mass Transfer is that almost all employee transfers needing to meet ring-fencing requirements will have taken place at least six months before the Scheme. In fact, Barclays is not proposing to transfer any employees under the Scheme itself.

Just over 3,000 employees from Barclaycard International, Corporate Banking and Barclays Overseas Services UK moving into BI will no longer be covered by recognition



or the Partnership Agreement with Unite. Barclays has committed to working positively with Unite to ensure regular dialogue with senior business leaders, continuing influence and involvement in key issues, and to maintain support and representation for members.

Stakeholder communicationsBarclays has a multi-channel communications plan designed to raise awareness of ring-fencing and to provide customers and non-customer stakeholders with timely information to enable them to exercise their right to participate in the ring-fencing transfer scheme process. Elements of the communications plan include:

• CustomerInformationPortal(CIP)

• Schemecommunications

• mitigationcommunications

• internalcommunications.

The CIP is an explanatory website in a dedicated section of the Barclays Group website designed to act as a central repository of information relating to the Scheme. All elements of the communications plan will direct customers and stakeholders to the CIP. Information available includes, or will include, contextual background on ring-fencing, what the Scheme means to customers and other stakeholders and how to participate in the Court process, including information about how to lodge an objection.

Barclays launched a general communications campaign on 4 September 2017. Individual notification letters will be sent to approximately 24 million customers transferring to BBUKPLC Group. Customers remaining in BBPLC (except those in separately regulated entities) will also be sent individual communications using a range of on and offline formats that will be familiar and readily accessible to those stakeholders. These communications are part of a wider communications plan, under which all stakeholders will be sent adequate communications.

I have reviewed a sample of these communications and consider them to be fit for purpose.

ObjectionsAny stakeholder who feels they would be adversely affected by the Scheme may put their objections to Barclays and the Court. The outputs of Barclays’ process to capture objections will be an important mechanism to identify any adverse effect not otherwise considered in the Report. In the Supplementary Report, I will assess any additional sources of adverse effect.

Future reportingI will keep the matters discussed in this report under review until the date of the Sanction Hearing and will bring any significant developments or changes that may affect stakeholders to the attention of the Court in the Supplementary Report.



This section is authored by Barclays

A Summary of the Scheme


Summary of the scheme

Introduction Barclays Bank PLC (BBPLC) and Woolwich Plan Managers Limited (WPML), two companies within the Barclays group (the Group) are applying to the Court to sanction a ring-fencing transfer scheme (the Scheme), which is currently intended to take effect at 00:00:01 on 1 April 2018. The time and date the Scheme becomes effective is referred to as the Effective Time.

Transfer of Transferring BUK Businesses from BBPLC to BBUKPLC At the Effective Time, BBPLC will transfer its UK retail and business banking operations, consumer cards, investment advisory and wealth management businesses and supporting operations (the Transferring BUK Businesses) to Barclays Bank UK PLC (BBUKPLC).

The customer-facing businesses to be transferred to BBUKPLC as part of the Transferring BUK Businesses comprise:

a) the whole of BBPLC’s UK ‘Personal Banking’ business – this business includes current and savings accounts, wearable devices for payments, consumer lending and personal mortgage products provided to UK individuals and consumers. As a result of this transfer all UK ‘Personal Banking’ customers will see their products and any associated contracts (such as terms and conditions) transfer to BBUKPLC;

b) certain parts of BBPLC’s UK ‘Barclaycard’ business – the parts of this business which are transferring to BBUKPLC are cards issued in the UK to consumers and other individual customers. As a result of this transfer all consumers and other individual customers with UK-issued cards will see their Barclaycard products and associated contracts transfer to BBUKPLC;

c) the whole of BBPLC’s UK ‘Business Banking’ business – this business includes business banking products and services provided from the UK to business banking customers, who are broadly customers with an annual turnoveroflessthan£6.5million.Asa result of this transfer all ‘Business Banking’ customers (including corporates, partnerships and sole traders) will see their UK ‘Business Banking’ products and associated contracts (though not more complex products, such as interest rate or currency derivatives, trade finance, asset finance or sales finance products, which will remain in BBPLC) transfer to BBUKPLC; and

d) certain parts of BBPLC’s UK ‘Wealth and Investments’ business – the parts of this business which are transferring to BBUKPLC are the banking and credit products provided by Wealth and Investments. The investments part of this business are transferring to BISL (see section on Transfer of Transferring BISL Businesses from BBPLC and WPML to BISL). As a result of the


transfer to BBUKPLC, all UK ‘Wealth and Investments’ customers (including any corporates, partnership and other vehicles) will see their UK banking and credit products and associated contracts provided by ‘Wealth and Investments’ (though not more complex products, such as interest rate or currency derivatives or trade finance products, which will remain in BBPLC) transfer to BBUKPLC.

As well as customer products and contracts, the Scheme will also transfer to BBUKPLC the benefit of any security arrangements granted in favour of BBPLC in respect of:

a) ‘Personal Banking’ mortgages;

b) ‘Wealth and Investments’ banking and credit products;

c) products provided to customers of ‘Personal Banking’ or ‘Wealth and Investments’ who are notified by BBPLC that their security will transfer to BBUKPLC under the Scheme; and

d) security granted to BBPLC solely in respect of the Transferring BUK Businesses, other than security granted by ‘Business Banking’ customers, the legal title to which will, instead, be transferred to Barclays Security Trustee Limited (the Security Trustee) and the benefit of such security will be held on trust for both BBPLC and BBUKPLC as appropriate.

In addition to the transfers of the above customer-related items, certain other assets and liabilities of the Transferring BUK Businesses will transfer to BBUKPLC under the Scheme, including:

a) certain ancillary contracts related to the Transferring BUK Businesses, including distribution agreements and certain supplier contracts for the provision of services which support those businesses;

b) certain leasehold property interests for which BBPLC is the tenant in respect of Barclays’ branch network; and

c) various capital instruments and funding, including participations in secured funding structures, assets comprised in the liquidity buffer, and participations in certain financial market infrastructures and certain payment schemes, as well as associated assets and liabilities, which support the Transferring BUK Businesses.

Transfer of Transferring BISL Businesses from BBPLC and WPML to BISL At the Effective Time, BBPLC and WPML will transfer certain parts of their UK investments business (operated as part of the ‘Wealth and Investments’ business) to BISL (the Transferring BISL Businesses).

The following customers will therefore see their investments products (such as a stocks and shares ISA) and associated contracts transfer from BBPLC or WPML to BISL under the Scheme:

a) all UK ‘Wealth and Investments’ customers (including any corporates, partnership and other vehicles), though not ‘Private Bank and Overseas Services’ customers; and

b) any customer of WPML, who will see the parts of their products which are held with WPML transfer to BISL.


Where an investment product currently involves BBPLC or WPML holding assets on behalf of a customer (such as the securities held in a customer’s investment account), the relevant securities will also transfer to BISL, which will hold them on behalf of the customer with effect from the Effective Time.

In addition to the transfers of the above customer-related items, certain ancillary contracts related to the Transferring BISL Businesses shall transfer to BISL under the Scheme, including distribution agreements and investment management agreements.

Transfer of Security Trust Security Interests from BBPLC to the Security TrusteeAt the Effective Time, BBPLC will transfer legal title to the majority of security interests granted by ‘Business Banking’ customers in respect of products provided by ‘Corporate and Business Banking’ to the Security Trustee. The Security Trustee will hold legal title to such security interests for the benefit of BBPLC and/or BBUKPLC.

Retained Businesses The Scheme excludes from the transfers a number of assets and liabilities in connection with certain businesses which are to be retained by BBPLC (the Retained Businesses). The Retained Businesses are:

a) BBPLC’s ‘Corporate Banking’ business – this business provides corporate banking products and services in the UK and internationally to larger corporate customers, who are broadly those customers with an annual turnover of at least£6.5million;

b) BBPLC’s ‘Investment Banking’ business, both in the UK and internationally;

c) BBPLC’s ‘Private Bank and Overseas Services’ business both in the UK and internationally (including operations in Guernsey, Jersey and the Isle of Man); and

e) the parts of the ‘Barclaycard’ business which are not transferring to BBUKPLC under the Scheme, including all of its non-UK business and all of its business offered to business and corporate banking customers (including self-employed individuals and sole traders in their capacities as self-employed individuals and sole traders) and government customers.

Customers of the ‘Corporate Banking’ and ‘Private Bank and Overseas’ UK businesses will already be aware that they will continue to be served by BBPLC as:

a) BBPLC has provided the relevant customer with a ‘Notice of Determination’ stating that it qualifies to continue banking in BBPLC; or

b) if the relevant customer is an individual, that person has signed a ‘Declaration of Eligibility’ certifying that they qualify to continue banking in BBPLC.

In addition, customers which are a certain type of financial institution, known as a ‘Relevant Financial Institution’ or ‘RFI’, will all continue to be served by BBPLC.

All customers and counterparties of Barclays’ ‘Investment Banking’ business will remain with BBPLC.


Amendments to contracts Most terms and conditions for customer contracts will be unchanged by the Scheme, other than customers will be contracting with a different entity (such as BBUKPLC or BISL) than the one they previously contracted with (such as BBPLC or WPML).

However, there are some amendments to contracts which will be made to contracts to give effect to the transfers contemplated by the Scheme, which are as follows:

a) the amendment of certain customer contracts transferring to BISL to provide that, in respect of uninvested balances held in BBPLC as deposits in respect of certain BISL products, from the date of transfer such balances shall be treated as client money instead of deposits;

b) the amendment of certain customer contracts transferring to BBUKPLC in respect of ‘Wealth and Investments’ customers to remove references to certain facilities (known as the BGI Facility and the Trading Facility) being available to transferring customers, as such facilities can no longer be provided to such customers from BBUKPLC;

c) the amendment of transferring customer contracts (and some capital instruments transferring to BBUKPLC) such that any interest rate under such contracts calculated by reference to the Barclays Bank Base Rate will after the Effective Time be calculated by reference to the Bank of England Bank Rate (also known as the Bank of England base rate);

d) the amendment of existing set-off and deductions provisions in customer contracts to allow such provisions to apply across BBUKPLC and BBPLC and

their respective subsidiaries after the Effective Time in a similar manner for the Group as before the Effective Time;

e) the splitting of guarantee arrangements in respect of liabilities that will be transferred and, where applicable, split between BBUKPLC and BBPLC after the Effective Time; and

f) the amendment of data protection and data and information sharing clauses within customer and other contracts to permit the sharing of data and information within and between certain members of the Group.

Additionally, the Scheme gives effect to the amendment of contractual terms of certain internal treasury capital instruments entered into between BBPLC (as issuer or borrower) and Barclays PLC (as instrument holder or lender), where such instruments are (i) being transferred to BBUKPLC or (ii) being retained by BBPLC.

Liabilities and Proceedings The Scheme provides that certain liabilities of BBPLC relating to the Transferring BUK Businesses will transfer to BBUKPLC at the Effective Time, including any liabilities in relation to products moving to BBUKPLC under the Scheme, the sale of payment protection insurance to any UK customers of BBPLC and the sale of interest rate hedging products which are linked to products (such as loans) transferring to BBUKPLC.

Any liabilities of BBPLC or WPML relating to the Transferring BISL Businesses will transfer to BISL at the Effective Time, including liabilities in respect of products transferring to BISL.


Any ongoing or future Proceedings being brought by or against BBPLC in respect of the Transferring BUK Businesses or Transferring BISL Businesses will be transferred to BBUKPLC (in respect of liabilities transferring to BBUKPLC or the Transferring BUK Businesses) or BISL (in respect of liabilities transferring to BISL or the Transferring BISL Businesses).

Residual Assets and Residual Liabilities The Scheme includes additional provisions dealing with certain assets and liabilities which, for whatever reason, cannot be transferred as intended at the Effective Time (Residual Assets and Residual Liabilities).

Once the relevant Residual Assets and Residual Liabilities are able to transfer to BBUKPLC or BISL, they will be transferred. It’s not expected that many assets and liabilities will fall into these categories.

Additionally, where any transferring items are held by customers who are subject to sanctions, or where they otherwise cannot be lawfully transferred, the relevant items will be retained by BBPLC until the relevant transfer can be lawfully made.

Where any transferring items are the subject of a Court order imposing restrictions upon them (such as a freezing order), the items will be transferred to BBUKPLC or BISL as intended, but they will continue to be subject to the same restrictions under the relevant order after the transfer as applied immediately before the transfer.

Wrong pocketsThe Scheme provides that:

a) if, at any point after the Effective Time and before 1 January 2019, any product provided by BBPLC constitutes a deposit that must be ring-fenced (but has not otherwise transferred under the Scheme), and BBPLC and BBUKPLC so agree, the relevant deposit will be transferred to BBUKPLC, but only if BBPLC has given the affected customer(s) written notice of that transfer;

b) if, after the Effective Time and before 1 January 2019, any products or contracts transferred to BBUKPLC under the Scheme involve BBUKPLC engaging in an activity which a ring-fenced bank cannot undertake under ring-fencing legislation, BBUKPLC may transfer the products or contracts back to BBPLC, but only if BBUKPLC has given the affected customer(s) written notice of that transfer; and

c) if, at any point after the Effective Time and before 1 January 2019, any customer whose deposits have transferred to BBUKPLC:

1. provides a valid Declaration of Eligibility to BBPLC; or

2. is provided with a valid Notice of Determination by BBPLC,

then BBPLC and BBUKPLC may transfer that customer’s products and contracts back to BBPLC, but only if they give written notice to the affected customer(s) of that transfer.


Transfer of BBUKPLC shares to Barclays PLCOn the day after the Effective Time, BBPLC shall transfer its shares in BBUKPLC to Barclays PLC.

Transfer of Transferring ServCo Operations from BBPLC to ServCo At the Effective Time, BBPLC will transfer certain assets and liabilities to Barclays Services Limited (ServCo), which is the company in the Group set up to ensure operational continuity in resolution of a trading entity. These assets and liabilities include:

a) certain third party supplier contracts where the services provided under such contracts will support the operations of both BBPLC and BBUKPLC, as well as other members of the Group; and

b) certain leasehold property interests for which BBPLC is the tenant in respect of BBPLC’s shared premises.

Certain supplier contracts transferring to ServCo will be amended from the Effective Time so as to insert provisions allowing the services and materials provided under such contracts to be provided on a pass-through basis to, and for the benefit of, Group companies other than ServCo.

barclays ring-fencing transfer scheme: a summary of … · barclays ring-fencing transfer scheme: a...

Documents