Doing the right thing, in the right way, is central to long-term sustainability. It enhances our reputation, promotes trust in the financial system and helps ensure that we provide appropriate products and services.
|1||Annual YouGov survey includes Botswana, Ghana, Kenya, South Africa and Zambia.|
|2||Rest of Africa Treating Customers Fairly measurement methodology expanded from a single question measurement to encompass Treating Customers Fairly and conduct outcomes, thus year-on-year results are not comparable.|
|3||The percentage is calculated based on existing employees who completed refresher training and new employees who completed training (excluding non-operational employees).|
|LA||This indicator is part of a limited assurance engagement undertaken by PwC and EY. The assurance statement can be found here.|
Progress made in 2015
Continue embedding our conduct risk management framework across our operations including refining controls, assessments and reporting (including performance measurement metrics). Refine our strategy and business models and drive cultural transformation to align with the conduct outcomes.
Conduct risk assessments were completed in all businesses and we have enhanced reporting, including performance measurement metrics, against the conduct outcomes. Our new Conduct Risk College Training programme, completed by 94.5%LA employees, aims to ensure that all our employees understand their role in achieving the conduct outcomes. While we believe good progress has been made, we will continue to improve our conduct risk management framework in line with local and international developments.
Further develop and implement procedures and training to counter money laundering, terrorist financing, bribery and corruption. Introduce face‑to‑face training in identified risk areas where it is deemed be beneficial.
This is a continuously evolving area and we launched revised anti-money laundering, sanctions and anti-bribery and corruption training including face-to-face interventions in targeted areas. 97.5%LA (2014: 98.4%LA) of our employees completed the annual fighting financial crime training.
Focusing on conduct risk helps ensure that we provide appropriate products and services across our businesses and reward the right activities and behaviours. We believe that we are all responsible for understanding and managing the potential impact of our decisions and behaviour on our customers and clients, and on the financial services industry as a whole.
By conducting ourselves appropriately and by avoiding detriment to our customers in the way we do business, we mitigate potential risk. While many businesses see their conduct only as a potential risk area, we see it as an opportunity to differentiate ourselves by developing high levels of trust with all our stakeholders. We implemented a number of services in 2015, to improve outcomes for our customers and clients. For example, we proactively remind customers of claimable benefits, and seek out beneficiaries of death benefits. We also notify retail bundle customers, free of charge, when they are close to reaching their free transaction limit, allowing them to manage their banking costs and avoid additional charges.
Our conduct risk framework brings together many of the existing programmes and activities into a consolidated framework. There are 10 conduct risk outcomes on which we aim to deliver:
- Our culture places customer interests at the heart of our strategy, planning, decision-making and judgments.
- Our strategy is to develop long-term banking relationships with our customers by providing products and services that meet their needs and do not cause detriment.
- We do not disadvantage or exploit customers, customer segments, or markets. We do not distort market competition.
- We proactively identify conduct risks and intervene before they crystallise by managing, escalating and mitigating them promptly.
- Our products, services and distribution channels are designed, monitored and managed to provide value, accessibility, transparency, and to meet the needs of our customers.
- We provide banking products and services that meet our customers’ expectations and perform as represented. Our representations are accurate and comprehensible so our customers understand the products and services they are purchasing.
- We address any customer detriment and dissatisfaction in a timely and fair manner.
- We safeguard the privacy of our customers’, clients’ and employees’ personal data.
- We facilitate market integrity.
- We uphold the reputation of Barclays.
We implemented and embedded this framework across our operations and we are tracking our performance against a set of defined metrics. We will further develop proactive indicators to identify potential risks. The implementation of this framework puts us in a good position for the anticipated requirements of the ‘Twin Peaks’ reform process in South Africa (see regulations supporting a culture of good conduct and ethical behaviour).
Our conduct reputation survey, undertaken by YouGov, measures perceptions across a range of questions relating to transparency, employee welfare, quality and customer value as well as trust. Respondents include business and political stakeholders, the media, non-governmental organisations, charities and other opinion formers. The 2015 score was derived from interviews with respondents in Botswana, Ghana, Kenya, South Africa and Zambia. We continue to improve our performance with the mean score increasing to 6.8/10 (2014: 6.7/10).
Treating Customers Fairly
We merged Treating Customers Fairly into the conduct risk framework. The 10 conduct risk outcomes align with and expand on the Treating Customers Fairly outcomes.
For the first time, a comprehensive measurement of all six Treating Customers Fairly and 10 conduct risk outcomes was implemented in all our businesses, providing a broader and more accurate view of our customers’ experience. This resulted in the Rest of Africa’s Treating Customers Fairly score decreasing to 60.0 (2014: 76.0), as the score is no longer calculated based on a single-question service measurement study. The South African score decreased marginally to 61.0 (2014: 63.0), which is within the accepted margin of error for customer perception surveys.
We received recognition from survey respondents for protecting the confidentiality of customer information by living our Values and behaviours which govern our way of working. Identified areas for improvement include providing advice that takes account of the customers’ unique circumstances, identifying potential difficulties before they impact on customers, and having customers’ best interests at heart when offering products or services.
We monitor the conduct of our employees through surveys and by reviewing the number and root causes of disciplinary cases, grievances, whistleblowing and ethical breaches.
Our primary objective is to build management capability that sets the appropriate leadership tone and ensures high ethical standards are embedded in the business. Employees are made aware of and educated on expected behaviours as informed by the Barclays Way and our Values. To reinforce the importance of living our Values, employee performance and reward places equal emphasis on our objectives (‘what’) and behaviours (‘how’).
We have effective processes in place to ensure consistent application of sanctions for ethical breaches.
- Over 2 650 line managers (2014: 1 400) completed the online employee relations training programme and more than 3 900 leaders completed various Global Leadership Curriculum programmes to enhance their leadership capabilities.
- 97.5LA (2014: 97.4%LA) of our employees attested to our code of conduct (the Barclays Way), ahead of the 97% target.
- 97.5%LA (2014: 98.4%LA) of our employees completed the annual fighting financial crime training, ahead of the 95% target. This training addresses the key requirements of our anti-money laundering, sanctions, anti-bribery and anti-corruption and introducer policies.
- Building on the 2014 awareness training, 94.5%LA of our employees completed the new Conduct Risk College Training programme, slightly below our 95% target. This scenario-based learning programme focuses on how each individual’s decisions and actions contributes to delivering good customer outcomes while managing conduct risk for the Group.
- Our Being Barclays induction programme exposes new employees to our Purpose, Goal and Values and how these guide our decision-making and behaviours.
- Our ongoing Think Campaign raises awareness of the consequences of ethical breaches by highlighting employees and ex-employees found guilty of fraud and other ethical breaches.
- All disciplinary and grievance policies and procedures as well as a case management system are integrated across the continent. Our employee relations contact team for Africa monitors the consistency of disciplinary outcomes.
This continued focus is gaining momentum as reflected in our ethics indicators. We have seen a positive reduction in the number of disciplinary cases, primarily as a result of improved leadership, more effective processes and the early and sound management of poor performance.
The incidence of ethical breaches, measured though disciplinary case statistics, decreased to 395 (2014: 460). In all, 49% of the ethical breaches related to dishonesty cases (2014: 48%) and 4% related to misrepresentation (2014: 22%). Of the 120 employee conduct-related whistleblowing cases reported and concluded in 2015, less than 45% were substantiated (2014: 50%).
Grievances as a percentage of permanent employees increased to 2.2% (2014: 1.2%) as a direct result of a change in the timing in communicating individual performance ratings (moved earlier to December from January in previous years). We expect this to normalise in 2016. The main cause of grievances remains dissatisfaction with annual performance management ratings. Overall, the number of grievances is within tolerance levels.
The focus on responsible lending, and specifically unsecured lending, is well known in South Africa. We continue with our responsible approach to lending, amidst the challenging macroeconomic environment and increasing pressure on consumers.
Our lending strategies have been focused on fair practice, enhanced credit assessments and stricter affordability criteria as per National Credit Act requirements.
Our lending policies are closely supported by consumer education initiatives and product-specific support aimed at encouraging responsible borrowing and curbing consumer over-indebtedness. For example, through our My Home and Family Springboard home loan propositions, we provide educational assistance to first-time home buyers on aspects regarding the process of buying and owning a home.
Our debt management solutions guide our customers in assessing their income and expenditure and we also support customers in need of help through a debt counselling process. The recent increase in economic pressure has seen an industry-wide growth in debt counselling balances.
Personal lending outside South Africa continues to increase. However, scheme loans and personal loans to salaried customers contribute approximately 70% of the portfolio. Our approach to responsible lending is based on a sustainable debt-service ratio, which is tiered according to income and is strictly regulated in some countries. The spread of credit bureaus is improving and this information enhances our ability to assess customers’ affordability.
Regulations driving consumer protection and ethical behaviour in the financial services industry continue to evolve. While these changes place additional requirements on the Group, we support efforts to ensure a stable financial services sector and a safe and fair operating environment. The evolving regulations align with our aim to act with integrity in everything we do and are in line with the principles of how we do business.
In all instances, we proactively engage with our various regulators either directly or in collaboration with industry associations.
Protecting personal information
In various jurisdictions we are governed by laws which control the processing and holding of personal data, as well as its security, with an increasing focus on cross-border processing and storage of data.
Governments in a number of jurisdictions are enacting or considering two branches of legislation to regulate the extension of credit. The first seeks to reduce consumer indebtedness by means of limits, for example the ratio of a loan to the value of the asset being purchased, as well as for banks to provide more information to credit bureaus.
In South Africa, affordability guidelines were implemented to ensure the proper assessment of consumers’ finances to determine whether the consumer can afford the proposed credit instalments. Matters relating to the limitation of fees and interest rates, maximum costs of credit life and mechanisms for resolving over-indebtedness (including debt counsellors) are also being dealt with.
The second initiative, as provided in the National Credit Amendment Act (NCA) and as amplified by the regulations to the NCA, provides for the once-off removal of defined adverse consumer credit history, followed by the automatic removal of legal judgments when these judgment debts are paid up.
A safer financial sector to serve South Africa better – the ‘Twin Peaks’ reform process
This Financial Sector Regulation Bill will overlay 13 existing pieces of financial sector legislation, creating a framework designed to supervise the financial sector comprehensively and ultimately ensure financial stability. It places focus on both prudential supervision and market conduct supervision by creating a Prudential Authority and a Financial Sector Conduct Authority.
The Financial Sector Conduct Authority (also referred to as the market conduct regulator) will form part of a restructured Financial Services Board and will provide conduct oversight of all financial institutions. A comprehensive market conduct policy framework is envisaged to ensure better outcomes for financial customers, including the Treating Customers Fairly market conduct policy framework. Other developments include the Retail Distribution Review, which focuses on delivery of suitable products, access to suitable advice remuneration, incentive structures and guidelines relating to bancassurance.
The Prudential Authority will form part of the South African Reserve Bank and will be responsible for supervising the safety and soundness of financial institutions that provide financial products (including insurance), market infrastructures or payment systems. This serves to:
- ensure that customers’ funds are protected against the risk of institutions failing, and that financial institutions can meet their promises to depositors, insurance policyholders, retirement fund members and investors;
- reduce the risks of using taxpayers’ money to protect the economy from systemic failure; and
- provide new and revised guidelines relating to outsourcing and governance.
Combating money laundering, corruption and terrorist financing
We have a zero-tolerance approach and constantly enhance our control environment to reduce the risk of our employees as well as our customers and clients engaging in activities that may be in breach of legislation. This is supported by an anonymous reporting process designed to protect whistleblowers who report instances of unlawful or unethical behaviour.
Where the above initiatives have already been translated into legislation or regulatory requirements, we follow a process to ensure that business processes, policies or system changes required to support the regulatory change are effected. As part of an international organisation, implementing global standards often places us in the position that requirements have already been implemented or addressed, to a certain extent, within the Group by the time they are included in the local regulatory requirements.
Combating tax evasion by non-residents
There are a number of intergovernmental agreements and initiatives to guide the process for sharing information with other jurisdictions, including the Foreign Account Tax Compliance Act, the Organisation for Economic Co-operation and Development Automatic Exchange of Information and TRACE International.
The scale of regulatory change remains challenging and the financial crisis is resulting in a significant tightening of regulation and changes to regulatory structures globally, which, together with political and regulatory scrutiny of the banking and consumer credit industries, is in some cases, leading to increased regulation. The nature and impact of future changes in the legal framework, policies and regulatory action cannot be fully predicted and is beyond our control, but is likely to have an impact on our businesses and earnings both in the banking and insurance sectors.
We are continuously evaluating our compliance programmes and controls in general and conducting related monitoring and review activities. As a consequence of these programmes, controls and activities, we have adopted appropriate remedial and/or mitigating steps, where necessary, and made disclosures on material findings as and when appropriate.
Proper conduct and ethical business dealings are non-negotiable for any responsible organisation and we support efforts to ensure a stable financial services sector and a safe and fair operating environment. We will:
- maintain an awareness and understanding of drivers of political, regulatory and policy changes across the continent and proactively manage changes to minimise customer impact;
- embed conduct risk assessments and forward-looking conduct risk reporting across the organisation;
- ensure an ongoing understanding of the implications of new market conduct regulations and how they impact on our business model and the way we serve our customers and clients; and
- provide regular training and awareness communication to ensure business units and functions are implementing the conduct risk framework requirements, set appropriate risk appetite thresholds, and ensure relevant emerging risks are considered at appropriate governance forums/committees.