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Governance review

Good corporate governance is the foundation on which we build value for our shareholders and other stakeholders. We recognise our responsibility to drive ethical, legal and transparent behaviour and to ensure our business dealings are conducted for the benefit of all our stakeholders.

Board

Responsible for creating and delivering sustainable value for our stakeholders.

Ensures an appropriate balance between promoting long-term sustainable growth and delivering short-term performance.

Oversees the management of the Group’s businesses, as assisted by various Board committees.

Reviews and approves the strategic objectives and policies of the Group.

Provides overall strategic direction within a framework of incentives and controls.

Board committees and their mandates

Corporate governance, board nominations, regulatory relations and related matters

Internal controls, operational risk, compliance, internal and external audit, accounting and external reporting

Financial results, annual budgets, and acquisitions and disposals

Risk, risk appetite, capital and liquidity management

Credit policies and process, credit exposures above 10% of the Group’s qualifying capital and reserves, portfolio exposures, applicable impairment trends and concentration risks

Approval of material models and model governance oversight

Strategic human resources matters including remuneration, incentives and talent management

IT systems, data, architecture and innovation

Conduct risk, sustainability, stakeholder management, corporate citizenship, ethics, labour, diversity and inclusion

Other significant subsidiary boards

  • Absa Bank Limited (South Africa)
  • Absa Financial Services Limited
  • Barclays Bank of Botswana Limited
  • Barclays Bank of Ghana Limited
  • Barclays Bank of Kenya Limited
  • Barclays Bank Mauritius Limited
  • Barclays Bank Mozambique SA
  • Barclays Bank (Seychelles) Limited
  • National Bank of Commerce Limited
  • Barclays Bank Tanzania Limited
  • Barclays Bank of Uganda Limited
  • Barclays Bank Zambia Plc

During the course of the year, we expanded the remit of the MC from being an Absa Bank committee to a Barclays Africa committee, reporting both to the GRCMC and the Board.

We strengthened the governance of the Absa Financial Services Group through (i) the appointment of additional independent non-executive members to its board (to five out of a total of 10 board members); (ii) the appointment of independent chairs to the boards of each insurance subsidiary company; (iii) the creation of a separate Absa Financial Services Audit, Risk and Compliance Committee; and (iv) the consolidation of actuarial and complex product governance into the Absa Financial Services Actuarial Committee.

We work with the country boards to continuously improve skill sets, governance practices and quality of reporting.

Our Group is segmented into individual country banks (including Absa Bank) and their subsidiaries, and Absa Financial Services and its (mainly insurance and asset management) subsidiaries.

The boards of the significant subsidiaries meet at key points in the year in advance of the Barclays Africa Board, to ensure that matters of significance are approved at the appropriate level, or referred to the Group Board for approval if required. Where required, there are also open lines of communication between the non-executive directors of these boards and the Barclays Africa Board and its committees.

The Group Chairman again hosted two Africa chairmen’s conferences during the year, to discuss strategy execution and planning, respectively.

Overall Board member attendance reduced slightly to 94% from 95%. Included in the statistics are meetings with the regulator, board strategy meetings and training sessions. The total number of the meetings increased to 56 from 52.

We expect, and receive, significant commitment from our Board members. Besides the extensive work done through our nine committees, the Board members contribute actively to (i) the development and monitoring of strategy; (ii) the content of the financial statements, results announcements and integrated report; (iii) engagement with regulators; (iv) providing leadership to management; and (v) being available for matters that arise on an ad hoc basis.

Peter Matlare’s overall attendance at Board meetings was, as a result of his executive commitments, below the standards set by the Board. Peter has indicated to the Board Chairman that going forward he will be able to devote significantly more time to the Group, including participation in Board committees. Although Yolanda Cuba’s attendance at committee meetings was satisfactory, her attendance at Board meetings was significantly below Board standards. This was mainly due to her recent executive appointment resulting in meeting conflicts, which were not resolvable at the time. These will be more easily managed in future and the Board is confident that Yolanda will be able to attend the requisite meetings. Both Peter and Yolanda continue to provide strong contributions to the Board.

1 Attended Harvard in September and October and was excused from meetings during this time, resulting in a lower total number of meetings. Jason Quinn, Head of Finance was acting Financial Director during this period.
2 Recused from one of the 10 BFC meetings held due to conflict of interest.

We maintain a one-year rolling forward planner for discussions over the year. Apart from standard and regular agenda items, such as report-back from each Board committee and comprehensive reports from the Chief Executive Officer and Financial Director, the following specific matters were tabled at Board meetings during 2015:

Apart from standard and regular agenda items, the key activities of the Board committees during the year are set out below, with a focus on the high-priority items.

Wendy Lucas-Bull (Chairman)
Colin Beggs
Mohamed Husain
Trevor Munday

Attendees:
David Hodnett
Maria Ramos

Reviewed:

  • our Group governance structure, focusing on non-executive director succession planning and appropriate skill sets;
  • matters of reputational risk;
  • matters pertaining to regulatory engagement and regulatory commitments;
  • progress on the Board/corporate governance objectives;
  • progress on the Barclays Africa/Barclays PLC agreements, specifically for the provision of services;
  • the impact of regulatory change on the governance of Absa Financial Services Limited, including establishing a new Risk and Audit Committee;
  • Board and committee attendance;
  • findings of an external board and Board committee evaluation (including a peer review);
  • membership of the Group and subsidiary boards and committees to establish and maintain optimal size, composition, independence, tenure, skills and diversity;
  • training for the main boards, committees and the subsidiary boards;
  • executive director succession plans; and
  • efforts to ensure receipt of unclaimed dividend payments by shareholders.

Approved:

  • the appointment of two chairmen to subsidiary boards in Uganda and Nigeria;
  • fees for non-executives on subsidiary boards; and
  • the prescribed officers for disclosure purposes.

Recommended to the Board:

  • the appointment of a new independent director, Paul O’Flaherty, and annual re-appointment of the Group Chairman and the lead independent director;
  • an adjustment to non-executive directors’ fees;
  • competence of the Group Company Secretary;
  • Board charters and committee terms of reference and related role profiles;
  • securities dealing code; and
  • 2015/2016 Board fees, for approval by shareholders at the 2016 annual general meeting.

The Committee is satisfied with the performance of the Board committees, progress made in filling the vacancies on subsidiary boards, the appointment of additional independent directors to the Absa Financial Services Board and the creation of an audit and risk committee, as contemplated in FSB Board Notice 158, and the enhanced escalation of reputational risks to the DAC. These initiatives will be further progressed in 2016. Other themes for 2016 include regulatory relationships, structural reform, and continued strengthening of the skill sets and diversity of the major boards within the Group.

Colin Beggs (Chairman)
Alex Darko
Mohamed Husain
Trevor Munday

Mandatory Invitees:
David Hodnett
Wendy Lucas-Bull
Maria Ramos
Ashok Vaswani

Attendees:
Chief Internal Auditor
Chief Risk Officer
Head of Compliance
External auditors

Reviewed:

  • the new and revised auditor reporting standards issued by the International Auditing and Assurance Board applicable from 2016, including the proposed content of a new format external auditor’s report;
  • the status of business continuity management including IT disaster and business recovery;
  • progress on financial focus areas including cost initiatives, improved product processes and client systems;
  • compliance with the National Credit Regulator’s affordability regulations;
  • the external audit strategy and risk assessment for the operations outside South Africa highlighting key risks such as credit, fraud and IT;
  • a proposed new tax governance philosophy for the Group, based on principles which seek to balance our tax appetite with tax planning and the prevention of tax losses;
  • the stability in the payments and settlements area, while monitoring the effects of rationalisation and functionalisation on the business; and
  • a deep dive on the requirements of IFRS 9 (Impairments) and reviewed a detailed project plan, including principles, major risks, timelines and resources, in advance of the implementation in 2018.

Monitored:

  • insurance actuarial processes and transition to Solvency Assessment and Management requirements;
  • the implementation of a new operating model and structure for the Group Compliance function to ensure optimal operation and appropriate alignment with Barclays PLC;
  • management’s approach to impairments given the evolving macroeconomic environment; and
  • fraud risk, particularly in the South African retail environment, including the revised operating model which ensures accountability at business unit level.

Approved:

  • The fit and proper status of the Financial Director and the Finance, Internal Audit and Compliance functions.

Recommended to the Board:

  • the appointment of KPMG as new auditor and EY as joint auditor commencing in 2017;
  • dividends to shareholders;
  • solvency and liquidity of the Group on a quarterly basis; and
  • the Group as a going concern for the next twelve months.

The GACC remains satisfied with the overall control environment, including those supporting the financial statements for 2015, as confirmed by Internal and External Audit.

In 2016, the Committee will continue to monitor further improvements in identified areas, including cybercrime, financial crime, fraud and external suppliers.

View the full GACC statement within our consolidated and separate financial statements.

Trevor Munday (Chairman)
Colin Beggs
Yolanda Cuba
Mohamed Husain
Wendy Lucas-Bull
Mark Merson

Attendees:
David Hodnett
Maria Ramos

Considered and assessed:

  • the performance of the eight African businesses acquired from Barclays Bank PLC and progress made with regard to the unbundling of these assets from Barclays Africa Limited up to Barclays Africa;
  • progress of the property consolidation strategy upgrades in South Africa and the Rest of Africa;
  • the possible acquisitions of Barclays Bank Zimbabwe and Barclays Bank Egypt from Barclays Bank PLC; and
  • the Edcon investment.

Approved:

  • the results announcements and profit commentaries to the market within parameters set by the Board in February and July.

Recommended to the Board:

  • the Group’s annual short and medium-term budgets;
  • the office consolidation strategy in Cape Town and related lease agreements;
  • taking up a collateral liquidity facility from the South African Reserve Bank pursuant to the Basel III liquidity requirements, which included a restructure of the securitisation vehicle of the Absa Home Loans division, for this purpose; and
  • the update of Absa Bank’s structured notes programme introducing a new product supplement and a secondary listing on the Irish Stock Exchange.

The BFC was comfortable with the execution of its mandate and will continue to act on its terms of reference and mandate and provide robust challenge to management on the setting of budgets and on investments and disposals.

Trevor Munday (Chairman)
Colin Beggs
David Hodnett
Wendy Lucas-Bull
Mark Merson
Maria Ramos

Attendees:
Chief Internal Auditor
Chief Risk Officer
Head of Compliance
Group Treasurer
External auditors

Reviewed:

  • cyber risk issues and developments;
  • power infrastructure across all countries;
  • legal risk updates;
  • a review of the Absa Home Loans business;
  • a review of the commercial property finance strategy;
  • data management within Basel Committee Principles for Effective Data Aggregation and Risk Reporting (BCBS 239);
  • the impact of recommended dividends on the Group capital and liquidity position; and
  • management’s embedment of the South African Reserve Bank’s guidance note 5/2014 on outsourcing of functions within banks.

Monitored:

  • the risk profile report dealing with (i) the economic environment; (ii) key risk issues and related lead and lag indicators; (iii) risk appetite and utilisation; (iv) all the principal risk categories; and (v) legal risk;
  • feedback on model risk and related projects;
  • current and projected Group capital and liquidity levels, and supported management’s initiatives to optimise capital, risk-weighted assets and liquidity; and
  • remediation progress with regards to the Know Your Customer findings by the South African Reserve Bank.

Approved:

  • the risk and capital management disclosures for the risk management report, integrated report and the financial results booklet.

Recommended to the Board:

  • the updated Recovery Plan for submission to the South African Reserve Bank;
  • management’s assessment of risk appetite (including insurance risk appetite) and financial volatility for 2016;
  • the taking up of a collateral liquidity facility from the South African Reserve Bank for 2016 in terms of Basel III liquidity requirements and the issuance of senior debt notes, Tier 1 and Tier 2 capital under the Barclays Africa Domestic Medium Term Notes programme;
  • management’s annual Internal Capital Adequacy Assessment Process report submission to the South African Reserve Bank;
  • medium-term capital plans (2016 – 2020), capital target ranges (2016), leverage ratio target (2016) and the economic capital target coverage ratio (2016) after taking into account the capital plan assumptions including dividends, cost of capital, regulatory constraints, stress scenarios, Basel III amendments and peer analysis; and
  • the Group’s and Absa Bank’s cost of equity 2016.

The GRCMC remains satisfied with the Group’s levels of risk, capital and liquidity. The themes identified as being particularly relevant for 2016 include the current and projected levels of capital of all regulated entities within the Group considering Basel III and the European Union Capital Requirement Directive IV (CRD IV); stress testing in the context of changing economic conditions; and further embedment of cybercrime mitigation processes.

Trevor Munday (Chairman)
Colin Beggs
Yolanda Cuba
David Hodnett
Wendy Lucas-Bull
Maria Ramos

Attendees:
Chief Credit
Officer
Chief Executive: CIB
Chief Risk Officer

Monitored:

  • levels of Wholesale credit including material concentrations, watchlist clients as well as sector and geographic trends;
  • the process for lending in individual countries, including the use of onshore and offshore balance sheets;
  • mandates and scale;
  • the health of our advances books to banks, insurance companies and the public sector;
  • a number of key sectors through regular updates including agriculture (primary and downstream), construction and property, mining and metals industries, as well as oil and gas;
  • unsecured lending in the retail sector including Edcon; and
  • stress triggers, their impacts and the related risk appetite.

Recommended to the Board:

  • credit facilities to clients above 10% of the Group’s qualifying capital and reserves.

The CoRC was satisfied that all regulatory requirements were met with regard to large exposures and continued the analysis of key sectors started in 2014, with several deep dives being conducted, particularly in those areas experiencing economic pressure. Having regard to the changing economic conditions and in line with the risk management framework, the Committee will undertake industry and product-specific reviews in 2016, and continue to assess the risk profile of the Group’s large exposures to ensure that such exposures are managed within risk appetite.

David Hodnett (Chairman)
Maria Ramos
Chief Executive: RBB
Chief Executive: WIMI
Chief Executive: CIB
Chief Risk Officer

Attendees:
Head:
Model Risk Management

Reviewed:

  • the list of models within the scope of the Committee’s mandate.

Monitored:

  • the governance of models in the Group, embedment of the model risk policy, results and levels of model validation coverage; and
  • the development of IT infrastructure to support the governance of models and model data in the Group.

Approved:

  • the Group’s regulatory capital, economic capital, impairment and other Group-level material models in accordance with the model risk policy and based on the recommendations of the independent validation unit; and
  • the implementation of appropriate post-model adjustments.

The MC was repositioned at a Group level at the beginning of 2015 to ensure appropriate oversight of model approval and governance. The Committee was satisfied with the progress made during the year and will continue to monitor its compliance with regulatory standards set by the South African Reserve Bank and other regulators, and further embedment of the model risk policy.

Mohamed Husain (Chairman)
Patrick Clackson
Yolanda Cuba
Alex Darko
Wendy Lucas-Bull
Trevor Munday

Attendees:
Maria Ramos
Chief: Human Resources Executive
Head of Reward

Reviewed:

  • 2015/2016 remuneration structure, policy and philosophy for the Group in general and the executive team in particular;
  • proposals from the Group Chairman on the performance of the Chief Executive Officer, and proposals from the Chief Executive Officer on the performance of the Financial Director and other Executive Committee members;
  • proposals relating to senior hires and terminations, and provided approval where required as per the Committee mandate;
  • updates from management’s Remuneration Review Panel (RRP) on conduct-related incidents and the impact on compensation;
  • updates on role-based pay, the definition of ‘material risk taker’, and certain European Banking Association and Prudential Regulatory Authority guidelines and policy statements on compensation;
  • updates on pensions and benefits across the Group;
  • reports on subsidiary entities pertaining to pay and benefits; and
  • reports from an external adviser on trends in compensation practices and industry approaches.

Responded to:

  • investor feedback on our remuneration disclosures and further enhanced our remuneration disclosure in line with best practice.

Approved:

  • the conversion of the phantom share plan to an equity share plan which was approved at the 2015 annual general meeting;
  • vesting outcomes for the 2012 long-term incentive awards (vesting mid-2015) and received reports on the prognosis of the 2013 awards (vesting in mid-2016);
  • compensation for the Chief Executive Officer, Financial Director, and other Executive Committee members;
  • the salary mandate for bargaining unit and non-bargaining unit employees; and
  • the remuneration report for inclusion in the integrated report for 2014.

Recommended to the Board:

  • proposed 2015 incentive pools, projected 2015 total compensation expenditure and compensation ratios; and
  • final 2014 incentive pools.

The GRHRC is satisfied with the status of remuneration and incentives in the Group. The GRHRC spent considerable time in refining the link between pay and performance, and will continue on this journey through 2016.

Patrick Clackson (Chairman)
Alex Darko
David Hodnett
Wendy Lucas-Bull
Maria Ramos
Ashok Vaswani

Attendees:
Chief Information Officer
Chief Operating Officer
Chief Risk Officer

Reviewed:

  • the status of IT disaster recovery and data centres in the Group, with a specific focus on the South African data centre;
  • the target architecture by business area; and
  • progress on digital innovation and disruption initiatives, and noted the opening of an innovation hub in Cape Town.

Monitored:

  • ongoing progress of the IT strategy focusing on delivery capability, system stability, internal process automation and innovation;
  • the implementation of a cybersecurity strategy and a new cyber key risk policy and noted the investment made by the broader Group to limit the impact of cybercrime on our systems and our customers’ accounts;
  • system availability and stability and its impact on customers and colleagues;
  • the performance of the Group’s core banking systems, with a view to consolidate and stabilise; and
  • strategic IT investment spend and the related tracking of business case benefits and the overall cost-to-income ratio of the IT function.

Approved:

  • the adoption of cloud computing technology. The storing of encrypted archived data was tabled and conditionally supported, pending approval by the GRCMC and the South African regulator.

The ITC is cognisant of the challenges posed to the Group in the IT environment, but has confidence in management’s ability to deliver on the strategy. Cybersecurity, system availability and stability, disaster recovery and digital innovation will remain priorities in 2016.

Mohamed Husain (Chairman)
Francis Okomo-Okello
Wendy Lucas-Bull
Maria Ramos

Attendees:
David Hodnett
Chief Human Resources Executive
Chief Executive:
Marketing and Corporate Relations
Group General Counsel

Reviewed:

  • the governance structures introduced to monitor, challenge and report conduct and reputation risks, and ongoing monitoring of those risks;
  • key organisational health indicators such as talent attraction and acquisition, employee turnover, process improvements, learning and development, employee relations, diversity and inclusion;
  • regular updates on leadership, disability, graduate, and learnership programmes;
  • updates on advertising and sponsorship spend and trends;
  • updates on the Group’s impact on the environment, such as energy, water, construction waste and confidential waste;
  • our diversity and inclusion journey;
  • our BEE scorecard and regulatory landscape;
  • a framework for compliance with relevant global standards, such as the OECD and the UN Global Compact;
  • the transformation of our citizenship agenda with the introduction of our Shared Growth agenda and a framework that highlights education and skills, enterprise development and inclusive banking, including the implementation of the ReadytoWork programme, which supports young people to enter the workplace; and
  • the relevant requirements of the Companies Act and related regulations and confirmed that these were considered and dealt with as part of the Committee’s mandate.

Monitored:

  • the status of occupational health and safety;
  • changes in the workforce composition in response to changes in labour legislation; and
  • trends, themes and volumes of customer complaints and noted improvement in resolution with the Ombudsman for Banking Services.

The SEC is satisfied with the embedment of conduct risk within the Group, the status of the organisational health indicators, and the impact on our culture and Values. The SEC will continue with its focus on conduct risk matters, the Shared Growth initiatives within Citizenship, labour and employment matters, and diversity and inclusion in 2016, and will also monitor the implementation of actions to address any areas of concern raised in the 2015 employee opinion surveys.

Further information on our corporate governance.