Material existing and emerging risks to the Barclays Bank UK Group’s future performance
The Barclays Bank UK Group has identified a broad range of risks to which its businesses are exposed. Material risks are those to which
senior management pay particular attention and which could cause the delivery of the Barclays Bank UK Group’s strategy, results of
operations, financial condition and/or prospects to differ materially from expectations. Emerging risks are those which have unknown
components, the impact of which could crystallise over a longer time period. In addition, certain other factors beyond the Barclays Bank UK
Group’s control, including escalation of terrorism or global conflicts, natural disasters, pandemics and similar events, although not detailed
below, could have a similar impact on the Barclays Bank UK Group.
Material existing and emerging risks potentially impacting more than one principal risk
i)Risks relating to the impact of COVID-19
The COVID-19 pandemic has had, and continues to have, a material impact on businesses around the world and the economic
environments in which they operate. Additionally, the impacts of the economic downturn resulting from the COVID-19 pandemic and post-
recovery environment, from a commercial, regulatory and risk perspective could be significantly different to past crises and persist for a
prolonged period. As a result, there are a number of factors associated with the COVID-19 pandemic and its impact on global economies
that have had and could continue to have a material adverse effect on the profitability, capital and liquidity of the Barclays Bank UK Group.
The COVID-19 pandemic has caused disruption to the Barclays Bank UK Group’s customers, suppliers and staff. In the UK severe
restrictions on the movement of people were implemented by the UK, Scottish, Welsh and Northern Irish governments, with a resultant
significant impact on economic activity. While a number of restrictions have been eased with the roll-out of COVID-19 vaccination
programmes, others still remain in place and future developments are highly uncertain. It remains unclear how the COVID-19 pandemic
will evolve through 2022 (including whether there will be further waves of the COVID-19 pandemic, whether COVID-19 vaccines continue
to prove effective, whether further new strains of COVID-19 will emerge and whether, and in what manner, additional restrictions will be
imposed and/or existing restrictions extended) and the Barclays Bank UK Group continues to monitor the situation closely. However,
despite the COVID-19 contingency plans established by the Barclays Bank UK Group, the ability to conduct business may be adversely
affected by disruptions to infrastructure and supply chains, business processes and technology services, resulting from the unavailability of
staff due to illness or the failure of third parties to supply services. This may cause significant customer detriment, costs to reimburse losses
incurred by the Barclays Bank UK Group’s customers, potential litigation costs (including regulatory fines, penalties and other sanctions),
and reputational damage.
In the UK, schemes were implemented by the Bank of England, the UK Government and the Financial Conduct Authority to provide financial
support to parts of the economy most impacted by the COVID-19 pandemic. The rapid introduction and varying nature of these support
schemes, as well as customer expectations, required the Barclays Bank UK Group to implement large-scale changes in a short period of
time, leading to an increase in certain risks faced by the Barclays Bank UK Group, including operational risk, conduct risk, reputation risk
and fraud risk. These risks are likely to be heightened further as and when those government and other support schemes expire, are
withdrawn or are no longer supported. Furthermore, the impact from participating in UK Government and Bank of England-supported loan
and other financing schemes may be exacerbated if the Barclays Bank UK Group is required by the UK Government or the Financial
Conduct Authority to offer forbearance or additional financial relief to borrowers or if the Barclays Bank UK Group is unable to rely on
guarantees provided by governments in connection with financial support schemes.
As these schemes and other financial support schemes provided by the UK Government (such as job retention and furlough schemes,
payment deferrals and mass lending schemes) expire, are withdrawn or are no longer supported, there is a risk that economic growth and
employment may be negatively impacted which may, in turn, impact the Barclays Bank UK Group’s results of operations and profitability. In
addition, the Barclays Bank UK Group may experience a higher volume of defaults and delinquencies in certain portfolios, which may
negatively impact the Barclays Bank Group’s RWAs, level of impairment and, in turn, capital position, and may initiate collection and
enforcement actions to recover defaulted debts. The inception of large scale collections and recovery programmes (including the use of
third party debt collection agents) may also create significant risk if (because of the complexity, speed and scale of these programmes)
defaulting borrowers are harmed by the Barclays Bank UK Group’s conduct which may also give rise to civil legal proceedings, including
class actions, regulatory censure, potentially significant fines and other sanctions, and reputational damage. Other legal disputes may also
arise between the Barclays Bank UK Group and defaulting borrowers relating to matters such as breaches or enforcement of legal rights or
obligations arising under loan and other credit agreements. Adverse findings in any such matters may result in the Barclays Bank UK
Group’s rights not being enforced as intended.
Changes in macroeconomic variables such as gross domestic product (GDP) and unemployment have a significant impact on the
modelling of expected credit losses (ECLs) by the Barclays Bank UK Group. As a result, the Barclays Bank UK Group experienced higher ECLs
in 2020 compared to prior periods though this trend was reversed in 2021 as economic conditions partially recovered. The economic
environment remains uncertain and future impairment charges may be subject to further volatility (including from changes to
macroeconomic variable forecasts) depending on the longevity of the COVID-19 pandemic and related containment measures and the
continued efficacy of any COVID-19 vaccines, as well as the longer term effectiveness of the Bank of England’s, UK Government’s and other
support measures. For further details on macroeconomic variables used in the calculation of ECLs, refer to the credit risk performance
section. In addition, ECLs may be adversely impacted by increased levels of default for single name exposures in certain sectors directly
impacted by the COVID-19 pandemic (such as the retail and hospitality and leisure sectors).
Furthermore, the Barclays Bank UK Group relies on models to support a broad range of business and risk management activities, including
informing business decisions and strategies, measuring and limiting risk, valuing exposures (including the calculation of impairment),
conducting stress testing and assessing capital adequacy. Models are, by their nature, imperfect and incomplete representations of reality
because they rely on assumptions and inputs, and so they may be subject to errors affecting the accuracy of their outputs and/or misused.