Annual Report 2015

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Annual-Report-2015-online-version

Annual Report 2015


BBA at a glance

Our work in 2015

The BBA is the leading trade association for the UK banking

sector with 200 member banks headquartered in over 50

countries, with operations in 180 jurisdictions worldwide. Eighty

per cent of global systemically important banks are members of

the BBA. As the representative of the world’s largest international

banking cluster, the BBA is the voice of UK banking.

We have the largest and most

comprehensive policy resources for banks

in the UK and our members include more

than 80 of the world’s leading financial and

professional services organisations.

We regularly engage with influential

policy-makers, the media and other

stakeholders across the UK, Europe and

beyond. Banking is the UK’s leading export

industry. It supports businesses, over half a

million jobs and the wider economy.

Our strategic aims are to help customers,

promote growth and raise standards in the

banking industry.

Helping customers

In 2015 we worked with our members, the

third sector and the Government to improve

services for consumers all over the country.

The BBA:

• Saw the revised basic bank account go

live, which is now helping some of the most

vulnerable consumers to manage their

money.

• Collaborated with members, consumer

groups and the Government to establish

an industry-wide agreement to work with

communities to minimise the effects of bank

branch closures.

• Agreed an industry-standard range of

payment services available at Post Office

Branch counters, which more than doubles

the number of outlets where customers can

access their money.

• Launched new guidance for banks to help

staff provide the best possible support to

people with critical or long-term illnesses.

• Established the Vulnerability Taskforce with

the Money Advice Trust, which is examining

good practice in financial services and to

see if institutions can improve the

experience of customers who

may be in vulnerable

circumstances.

• Worked with HM Treasury to launch

midata, a new service that helps

customers identify the best

value current account for

them.


www.bba.org.uk

BBA

Pinners Hall

105 –108 Old Broad Street

London, EC2N 1EX

United Kingdom

Considering the financial crime challenges faced by UK banks.

A LexisNexis ® Risk Solutions report produced

for the British Bankers’ Association

November 2015

BBAJ3404_World of Change report_Cover options_12.06.15.indd 1-3 12/06/2015 11:30

Supported by

The competitiveness of the UK as a centre for

international banking

March 2015

A publication

prepared by PwC for

the British Bankers

Association

September 2015

www.pwc.co.uk

What banks are putting back into communities

Emily Redding

In partnership with:

Supported by:

Promoting growth

We’ve supported initiatives that will help kick-start

European growth. Closer to home we backed a

range of measures that will help businesses and

revive the UK economy, including:

• Publishing our report Winning the Global Race:

the competitiveness of the UK as a centre for

international banking, which outlined the critical

role the banking sector plays in the UK economy.

• Providing a comprehensive response to the

European Commission’s public consultation on

the creation of a Capital Markets Union, and saw

many of our recommendations translated into the

Commission’s ‘Action Plan’ for CMU.

• Examining the entire range of regulatory issues

that could prevent CMU from functioning properly

in the EU, and submitted our findings to the

European Commission’s ‘Call for Evidence’.

• Leading one of the most senior UK banking

delegations to Brussels, taking seven member

Chairmen to meet influential representatives from

the EU institutions and discussed ways that the

banking industry could help the Commission to

promote growth in Europe.

• We engaged the Basel Committee and the PRA

on the design and calibration of the leverage ratio,

which would have otherwise required banks to

raise more capital reducing their ability to support

economic growth.

• Working with Government and credit reference

agencies to suggest better ways to make sure

decision-makers have ample information about

business borrowers, so that even more accurate

and quicker credit assessments can be made.

• Supporting the creation of a designated referrals

portal, so that businesses that are not suitable for

borrowing from traditional banks have their details

passed to an alternative provider that may be able

to help.

• Being a key proponent of extending the

drawdown period for the Funding for Lending

Scheme, meaning small firms continue to benefit

from cheaper funding over the next few years.

• Continuing to see positive results from our

Mentorsme programme, which since 2011 has

enlisted 121 mentoring organisations, with access

to 27,000 mentors.

Raising standards

In 2015 we continued to support efforts to raise

standards in our industry. The BBA:

• Was involved in the creation of the Joint Money

Laundering Intelligence Taskforce, which enables

banks and the public sector to share information

about financial crime threats.

• Worked with regulators to support the

implementation of the new Senior Managers and

Certification Regime, which applies to all market

participants and will change conduct in banks

from top to bottom.

• Saw the adoption of our recommendation to the

Fair and Effective Markets Review that there be a

mandatory qualifications and training regime for

staff working in the fixed income, currency and

commodities markets.

• Introduced improved customer communications

and messaging to ensure customers were aware

of the key savings protections provided by the

Financial Services Compensation Scheme

• Worked with our members and the authorities

on measures that are designed to enhance the

resilience of the financial system and solve the

problem of “too big to fail”.

1

BBA Reports in 2015

Future Financial Crime Risks

World of Change

Diversity and inclusion

in banking

The Benefits

of Banking

Winning the Global Race

Banking on British Jobs

Digital Disruption:

UK Banking Report

Total Tax

Contribution of

the UK banking

sector

Good returns

Close at hand

Free ATM 0.5

Financing the UK’s

infrastructure needs

Bank branch 1.4

Post Office 0.7

BBA

Annual Report 2015


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Chair’s welcome

Noreen Doyle

BBA

Annual Report 2015

The banking landscape today is

unrecognisable from its pre-crisis

days. The BBA has played a key

role in helping the sector implement

reform and raise standards in recent

years. It was therefore a privilege to

be appointed Chair of the BBA in

September 2015.


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A key aspiration in taking up the role of Chair is to

help make banking respectable once again, as it

was when I first started working in the industry.

Banking provides fuel to the engines of growth

– helping businesses to invest, hire and innovate.

But we cannot afford to be complacent. The crisis

showed that standards had slipped, and they

needed to be raised. There can be no going back.

To restore trust with customers, Government

and regulators is a big challenge, but all

challenges come with great opportunities. We

now have an opportunity to embed cultural

change from top to bottom across the sector.

The Senior Managers and Certification

Regime, which came into effect in March 2016, is

a major step towards achieving this.

It seeks to clearly define lines of personal

responsibility and ensure individuals are

accountable for their decisions. The SMR ensures

that ignorance can no longer be an excuse

if failure or misconduct falls inside a senior

manager’s area of responsibility.

The banking industry has worked closely with

regulators to ensure we can deliver our joint goal

of ensuring the UK sets the global gold standard

for accountability. Far from resisting this change,

the industry has embraced it as a tool for raising

standards and restoring trust.

These new rules sit alongside the Fair and

Effective Markets Review last year, which sought

to tackle misconduct in wholesale markets and

prevent it taking place in future. The reforms jointly

proposed by the Treasury, Bank of England and

Financial Conduct Authority will help to ensure

markets operate for the good of society – rather

than the personal gains of traders.

Of course, regulation alone is not the answer.

Culture also plays a crucial role in ensuring that

individuals act in a way that best serves their

customers, firm and shareholders.

A huge amount of work has been done by

banks to ensure that high cultural standards are

in place at all levels of their institution. Incentive

structures have been overhauled to discourage

excessive risk-taking and ensure that staff are no

longer rewarded for failure. Banks are deferring

bonuses, paying more in shares and are able to

claw back pay if it subsequently emerges up to

ten years later that it was not deserved.

The Banking Standards Board published

its first annual review in March 2016. The new

organisation, which banks played a key role in

setting up, is helping to independently challenge

the status quo and promote the very highest

standards in our profession.

Together, the SMCR and the BSB provide a

comprehensive new framework for ensuring clear

accountability and more ethical cultures in banks.

Of course, the industry will face other big

challenges and opportunities in 2016. Banks will

continue to embrace the customer-led digital

revolution by making it easier for people to

manage their money on the move. Europe will

also be a major area of focus, with the outcome

of the EU referendum vote on 23 June shaping

the business environment for decades to come,

whichever way the British public vote.

I look forward to driving this agenda forward

throughout the next year and beyond, as the BBA

prepares to start a new exciting chapter of its

hundred-year history, by integrating with four other

trade associations to form a new trade association

to better serve and represent our industry.

BBA

Annual Report 2015


4

Chief Executive’s report

Anthony Browne

BBA

Annual Report 2015

The BBA’s overarching and longterm

ambition is to promote a better

banking industry for the benefit of

the UK. In 2015 we continued to

deliver this by focusing on helping

customers, promoting growth and

raising standards in our industry.

Last year will be remembered as a time of

change. We saw political change for the UK,

with the General Election dominating the first six

months of the year and generating uncertainty for

businesses, investors and banks.

We now have a Conservative Government

with a slim majority, a Labour Party under new

leadership and a strong SNP voice in the House

of Commons. Growth has returned to the UK,

despite uncertainty about the strength of the

emerging markets and the global economy.

In the banking industry, the pace of innovation

accelerated and we saw a number of high

profile reforms around conduct, capital and

competition.

The BBA played an important role in shaping

policy, serving our members and informing the

debate around the issues that affect our industry.

New technologies, new banks and new

regulations are helping to reshape the way that

the industry serves customers. Europe will also

be a major area of focus in 2016 – not least

given the impending referendum on Britain’s

membership of the EU.

In his Mansion House speech last year, the

Chancellor recognised the need to “ensure we

have the best and most competitive financial

services in the world”. Building on this sentiment

we launched our report Winning the Global Race:

the competitiveness of the UK as a centre for

international banking.

Securing the competitiveness of the UK as an

international banking centre has been a key issue

for the BBA over the last 12 months. Our report

– produced in conjunction with Oliver Wyman

– found that this competitiveness is currently

at a tipping point. The report set out detailed

recommendations and called for urgent action

to help the UK win the global race in 2016 and

beyond.

This matters because banking is the UK’s

biggest export industry by a long way. It

contributed £31.3bn in tax to the Exchequer

in 2014 and employs over half a million people

right across the country – from Aberystwyth to

Aberdeen, Basildon to Belfast. As our seminal

Total Tax Contribution of the UK banking sector

report showed, the six main UK banks have seen

their tax contribution jump 55 percent in the first

four years of the last Parliament. This follows

the introduction of five new bank-specific tax

measures in as many years.

In June we hosted our retail banking

conference, Retail Banking: 2020, and debated

how our industry might look in five years’ time.

Looking at the industry five years ago, the pace

of change and innovation is simply staggering.

In response to the popularity of digital banking,

last year we hosted a digital banking conference

and published our report World of Change,

which examined the adoption of mobile banking

technology around the world. Our members

continue to work hard to meet their customers’

high expectations for digital services, and

are investing more than £3bn a year in new

technology.

One of the biggest political issues of 2015


5

was bank branch closures. We worked closely

with our members and the Government in leading

the setting up of a branch closure protocol for

retail banks, and ensuring better access for

customers through their post offices. Professor

Russel Griggs will be reviewing the effectiveness

of the protocol one year on.

Fraud and financial crime have also continued

to rise up the agenda for consumers and

businesses in the last year. Promoting financial

crime compliance standards in the banking

industry has been a key priority this year. We

have worked hand in hand domestically with the

Serious and Organised Crime Forum and the

Joint Money Laundering Intelligence Taskforce,

as well as the Financial Action Taskforce on the

international stage to deliver on this agenda.

Last year we also focused on ensuring the

reforms that were necessary since the crisis have

been firmly put in place. We discussed what we

want the future of the banking industry to be,

and how to tackle the unintended consequences

of regulatory change. We want Britain to have a

banking industry that is built on delivering value

for its customers and for the wider economy. I’m

confident we are getting there.

The issue of conduct was in the spotlight

last year in the wake of new scandals. We firmly

believe that individual accountability should be

at the heart of any business and banking is no

exception. An industry that sets the gold standard

for accountability is good for those it serves, as

well as those serving in it.

The Fair and Effective Markets Review

published in June adopted a number of

our recommendations to help make

the financial markets safer,

sounder and more

robust. The

Banking

Standards Board also got up and running last

year and we saw the final proposals published

for the implementation of the Senior Managers

Regime. Both seek to achieve important reforms

which will continue to see the industry change

next year.

October also saw us host our first annual

International Banking Conference, attended by

300 senior executives working in banks, law

firms and trade associations across the country.

The lively Brexit panel discussion, including Lord

Mandelson and Gerard Lyons was one of the

highlights of the day, a rehearsal no doubt for the

debate of 2016.

I’m proud that our work as a trade association

has seen us rewarded with the ultimate accolade

– last year we experienced the fastest growth

in living memory. Fifteen new banks joined the

BBA and not one left. This has helped to put our

finances on a healthier footing for the first time

since 2012.

Finally, I’d like to pay tribute to Sir Nigel Wicks

who stepped down as Chairman of the BBA

in October after a three-year term. He was a

trusted steward to our organisation and a valued

counsel to me and to many members during that

time. Our new Chair, Noreen Doyle, brings

a wealth of experience to the role

which will help our industry

navigate the challenges

and opportunities

ahead.

Anthony Browne speaking at the BBA Annual

Summer Reception, June 2015

BBA

Annual Report 2016


6

Retail banking: representing

the banks that support us

every day

BBA

Annual Report 2015

The reach of retail banking is broad

and it touches our lives in many

different ways. Helping customers

and raising standards are two of our

main objectives.

In 2015 we showcased our members’ ambitions

to help their customers manage their finances

more easily with:

• Midata

• Promotion of the Current Account Switching

Service,

• Launch of the revised basic bank account,

• Agreed Standards for Post Office Counter

Access

• Publication of the Way We Bank Now report,

and

• Launch of the Access to Banking Protocol.

• We support increased competition on the

high street, as well as increased choice

for customers. We launched a number

of projects throughout the year to help

customers get the best from their day-to-day

banking needs.

Access to banking improved

Access to banking is critical for an individual’s

financial security, especially when it comes to

wages being paid electronically by an employer.

In 2015 the terms of revised basic bank accounts

were agreed by the industry and new products

launched in January 2016. Today it is helping

some of the most vulnerable consumers to

better manage their money. The revised basic

bank account provides all the functionality of a

standard personal current account including the

use of direct debits, online and mobile banking

and a debit card. The key differences are that

customers are not eligible for a cheque book or

an overdraft – and there are no fees of any kind.

The provision of these accounts is part of banks’

commitment to helping the least advantaged

in society and is estimated to cost the banking

industry £350m a year.

Easier account comparison

Working with HM Treasury at the start of

2015 we launched midata, in conjunction with

the price comparison website GoCompare,

to help customers to identify the best value

current account for them. Midata is the UK’s

first comprehensive personal current account

comparison tool and enables customers to

download 12 months of their account transaction


7

history in a single file, and use this to quickly

compare current accounts on offer.

Customers are able to upload their data to

a price comparison website, which will then

analyse the information in the file and suggest

current account options based on how they use

their account. By seeing how each institution’s

fees, charges and benefits might affect them,

customers can make a more informed choice of

account.

It will boost competition on the high street by

encouraging consumers to shop around for the

best deal and switch if appropriate.

Enhanced current account switching

The Current Account Switching Service (CASS)

continues to help consumers switch banks

quickly and seamlessly, boosting competition on

the high street and helping to raise standards.

The BBA engaged closely with BACS payment

scheme over CASS’ marketing strategy last year,

because we wanted to make sure that an even

greater number of consumers were aware of the

service’s benefits. Our members funded a multimillion

pound promotional marketing budget to

raise awareness of CASS, and the first campaign

this funded went live towards the end of 2015.

The BBA and our members support competition

and increased consumer choice.

Retail Banking 2020

In June we were joined by senior executives

and industry experts from across the banking

industry at our conference, Retail Banking 2020.

This flagship event provided an opportunity to

discuss and debate the issues that will shape

banking over the next five years and beyond. We

look forward to hosting the event again in 2016.

and through more informal collaboration, with

the Competition and Markets Authority holding

challenger roundtables and HM Treasury

convening the first meeting of its Challenger

Bank Panel. The Payment Systems Regulator

has been investigating access to the payments

system and we expect to see its first reports

early in 2016.

We saw this year the extension of the

Funding for Lending Scheme until January 2018.

Not only will this help British businesses get

the funding they need to grow, it will help the

challenger bank sector expand its products and

services.

The BBA has continued to make the

argument for proportionate prudential regulation

that facilitates competition by challengers. UK

regulators and authorities are fully supportive

of this initiative and we are exploring together

ways in which challenger banks could use

quasi-modelling approaches to level the capital

requirement playing field, for instance in relation

to mortgage lending.

Similarly, at the international level the

European Commission has recognised that

competition and small business growth

require a proportionate approach to prudential

regulation of banks. The Basel Committee is also

considering the extent to which banks adopting

a modelling approach must use it for all exposure

types. This would enable banks to transition to

a modelling approach more easily for the asset

classes that are particularly important to them.

With the support of UK authorities we

will be engaging actively in 2016 to

entrench proportionality as

the new norm.

Challanger Banks

Our work in support of the challenger banks’

pursuit of a level playing field continued to

gain real momentum this year. We

have seen a growing challenger

voice both within the

BBA’s dedicated

Advisory Board

BBA

Annual Report 2015

Joell Hills, ITV Business Editor, chairing the BBA

Annual Retail Banking Conference in June 2015


8

BBA

Annual Report 2015

No customer left behind

Access to banking is about much more than

making sure everyone has a bank account. It’s

also about making sure that customers have

the facilities to bank where and when they need

to. That’s why in March 2015 our members,

consumer groups and the Government signed

up to an industry-wide agreement to work with

communities to minimise the effects of bank

branch closures. In response to calls from the

Business Secretary, the BBA spearheaded talks

on the agreement.

Banks have committed to work with local

communities to establish the impact of the

branch closure, prior to it shutting, and to find

appropriate alternative provision to suit individual

communities. Banks have also agreed to make

sure that alternative banking services are in place

before a branch is closed, such as free-to-use

cash machines, Post Office branches and mobile

banking arrangements.

Towards the end of 2015, banks and the Post

Office negotiated to introduce improved support

for customers affected by branch closures. The

potential banking services framework would

result in a wider range of banking services

available to personal and business account

holders, available throughout the 11,500 Post

Office branches across the UK.

Support for consumers in vulnerable

circumstances

Anyone’s circumstances can change at short

notice, making managing their everyday finances

much more challenging. We are a champion

for financial inclusion and remain committed to

helping customers in vulnerable circumstances.

In 2015 the BBA’s retail banking team focused

much of its attention and efforts on how banks

can support their customers in times of need. In

February we launched new guidance for banks

to help staff provide the best possible support

to people with critical or long-term illnesses.

The guidance was drawn up with Macmillan,

the Royal College of Psychiatrists and the

Stroke Association. It includes options to help

ensure people with medical conditions are

treated fairly and recommended approaches to

working constructively with families and carers of

customers with health conditions.

The BBA also produced guidance to banks

on what they should offer customers who have

a disability. Our members are helping customers

by having an audio induction loop at the counter

and at customer service desks; providing

wheelchair access to services, and arranging a

facility for taking and exchanging written notes.

And we are continuing our work with the RNIB

to promote best practice for banks and building

societies to assist customers who are blind or

partially sighted.

Later in the year we took this work further

and established the first Financial Services

Vulnerability Taskforce with the Money

Advice Trust (MAT). This new group – which

is chaired by MAT Chief Executive Joanna

Elson – examined good practice in financial

services to see where institutions can improve

the experience of customers who may be

in vulnerable circumstances. The Taskforce

announced its recommendations early in 2016 in

the report Improving outcomes for customers in

vulnerable circumstances.

We also established a Bereavement Working

Group, which is looking at ways to improve

the service that banks provide to bereaved

customers. The Working Group is exploring the

potential for an industry-wide “Tell Us Once” –

type service in the event of the death of a loved

one. In early 2016 the Working Group published

a new code of practice which aligns the UK’s

biggest high street banks and building societies

towards citizen-centric requirements and practice

immediately following the notification of a death.

Our work on protecting customers in

vulnerable circumstances doesn’t stop there.

We’ve worked with groups including the Office

of the Public Guardian, the Alzheimer’s Society

and Solicitors for the Elderly to produce best

practice guidance for bank and building society

staff concerning powers of attorney. Dealing with

a loved one’s financial affairs at a difficult time is

stressful, and our members want to help make

their customers’ lives easier at this time.


BBAJ3404_World of Change report_Cover options_12.06.15.indd 1-3 12/06/2015 11:30

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World of Change

The future of

banking

www.bba.org.uk

BBA

Pinners Hall

105 –108 Old Broad Street

London, EC2N 1EX

United Kingdom

Supported by

The technology we use to look

after our day-to-day finances has

changed beyond recognition when

compared with just a few years ago.

BI LL

Last year was an exciting time for research and

innovation in our industry. Banks are harnessing

new technologies to change the way they

do business and to improve their customers’

experience of their products and services.

In June 2015 we published World of Change,

the second report in our Way We Bank Now

series focused on consumer behaviour and

digital banking. World of Change lifted the lid on

how customers are adopting banks’ technology,

the variety of digital adoptions around the world

and what the future might hold for this sector.

The report highlighted the popularity of mobile

banking and found that large parts of the retail

lending market are shifting onto devices and

cloud-based services. Examples from Iceland,

Turkey and Australia set out how consumers are

harnessing technology to manage their finances.

Our work attracted considerable coverage in the

national press and the series remains one of our

most popular with members.

The report achieved substantial coverage

from BBC News, the Guardian, the International

Business Times and Banking Technology.

£2.9 billion

– transferred a

week using

banking apps

10.5

million

– banking app log-ins

9.6 million

– daily log-ins to

March 2015

BBA

Annual Report 2015 BBA

Annual Report 2015


10

The Benefits of

The Benefits

of Banking

Banking

In August we published the second

edition of our pamphlet The

Benefits of Banking.

BBA

Annual Report 2015

Launched at our summer reception in

Parliament, this work highlighted the support

that our industry brings to consumers,

businesses and the wider economy. Banking is

Britain’s leading export industry and represents

4.9% of the country’s economic output, or £1

in every £20 spent.

In 2014 banking industry

imports stood at £3.4 billion

IMPORTS

Our publication also unveiled that banks are

investing £3bn every year in new technology,

such as new apps for smartphones and

tablets.

£3 billion

per year

But the industry exported

services worth £28 billion

EXPORTS

Regional banking dinner

In recognition of the increasing size and activity

of the banking sector outside of London,

we hosted our first regional banking dinner

in Birmingham in September 2015. Britain’s

second city is home to around 11,000 banking

jobs, and some smaller banks have set up their

operations there and across the Midlands. It’s

not just the smaller players like Wesleyan, Unity

Trust and Al Rayan – HSBC and Deutsche

Bank also have big offices in the city. London

will always be a crucial part of the UK banking

industry, but it is important to remember that it

is only one part.

Apprenticeships portal

The BBA’s apprenticeships portal is a onestop

shop for school leavers and career

changers wanting to discover some of the

exciting opportunities that a career in banking

has to offer. In response to a request from

Government, last year the BBA pulled together

details of many of the apprenticeship schemes

that our largest members offer into a single

portal on our website. Since its launch, the

apprenticeships portal has helped many job

seekers to discover more about a career in

banking.


11

Banking on British

Banking on British Jobs

Jobs

In October 2015 we published our report

Banking on British Jobs. This important piece

of policy work revealed that banking jobs

are not just concentrated in London, but are

shifting from the capital to regional hubs across

the country. Our report analysed data provided

by the Office for National Statistics and the

BBA Annual Employment Survey 2015.

Figures in our report showed that there are

77 local authority banking job “hotspots” where

there was faster growth in banking jobs than

anywhere in London. Areas including Tunbridge

Wells, South Gloucestershire and Chelmsford

recorded the fastest growth. Our work also

showed that the banking industry accounts

for 510,630 jobs across Britain, or 1.7% of the

country’s workforce. Approximately a quarter

of these roles are in wholesale banking. These

roles are diverse and many are highly skilled,

middle office jobs.

Apprenticeships in our industry also play an

important role, and for every one apprentice

based in London there are three outside of

the capital. Banks are committed to helping

these individuals to meet their potential and

championing their talents.

Our report was launched at the BBA’s

Annual International Banking Conference, and

was well received by the press and delegates.

Figures from the report were featured in the

Financial Times and City AM. Economic

Secretary to the Treasury Harriett Baldwin

also referenced our work in her speech to

conference delegates.

Top 10 local authorities for jobs growth in banks,

2013-2014, Top 10 local Great authorities Britain for jobs growth in banks,

2013–2014, Great Britain

Glasgow

30%

Source: ONS, 2015.

Vale of White Horse

20%

Taunton Deane

17%

Edinburgh

13%

Three Rivers

18%

North Tyneside

Hartlepool

89%

17%

St Albans

28%

Banking on jobs across the UK

There is much more to banking in the UK than

the City of London. Our industry supports jobs,

growth and economic activity the length and

breadth of the country. Today Birmingham,

Belfast and Bournemouth are examples of

bustling hubs of banking activity beyond the

capital.

Brentwood

148%

Crawley

12%

BBA

Annual Report 2015


12

Supporting Britain’s

businesses

Our members are committed to

helping businesses of all shapes and

sizes to grow, create jobs and power

economic growth.

Throughout 2015 the BBA’s Business Finance

team remained at the heart of business and

growth policy development.

A boost for business lending

Businesses with plans to scale up, invest and

create jobs need finance. Banks are focused on

businesses getting the right finance, at the right

time and in the right mix. Although bank approval

rates are running at around 80%, traditional bank

lending is not always the most suitable form of

finance for all businesses. Some firms are better

suited to equity or risk capital rather than debt.

BBA

Annual Report 2015

Funding for Lending Scheme

The Funding for Lending Scheme (FLS) was

launched by HM Treasury and the Bank of

England in July 2012. The FLS has been used by

banks to drive economic growth, create jobs and

to lower the cost of borrowing for businesses.

Last year the BBA supported efforts by the

Bank of England and HM Treasury to ensure that

the scheme could continue to support banks

to provide finance for Britain’s businesses. The

scheme was granted a two-year extension in

November 2015, allowing participants to borrow

from it until January 2018. New participants

can also still join, which means that businesses

can apply for finance from an even greater

range of banks. The extension of the scheme

also encourages new banks – the so-called

“challengers” – to expand their range of products

for business customers now that the FLS is

available to them.

This means that lenders can continue to offer

a range of highly competitive deals at a time

when interest rates are already at a record low.

Application


Application


Application


Application


Application

80%

approval rate for bank lending

That is why our industry has worked

closely with the Government on the measures

enacted in the Small Business, Enterprise and

Employment Act in March 2015. These measures

are designed to increase the availability and

sources of finance for small and mediumsized

businesses by levelling the playing field

between lending providers. They open up

access to business credit data and make it a

legal requirement for banks to offer any SME that

makes an unsuccessful application for finance

the opportunity to have their details passed to

alternative lending providers via Governmentdesignated

online platforms.

The legislation lays the pathway for greater

sharing of information between Government,


13

banks, alternative lenders and credit reference

agencies. This will promote more choice for

businesses from finance providers by allowing a

more accurate assessment of their credit history

and a choice of options if a bank is not able to

service the business’s needs.

The creation of designated referral portals

represents a tremendous opportunity for

businesses to gain access to multiple providers

and products. Our industry hopes it will further

encourage businesses to come forward to apply

for the finance that is necessary to drive growth

and productivity and it should foster even more

competition in an already fiercely contested

market. We look forward to putting these

measures into action.

To make borrowing easier in the first place,

there are other measures in the Act to improve

the data available about small businesses. The

BBA has been working with Government and

credit reference agencies to suggest better

ways to make sure that decision-makers have

comprehensive information about business

borrowers, so that more accurate and quicker

credit assessments can be made. It is

therefore ground-breaking for the Act to enable

Government to disclose non-financial VAT

registration data, as this will improve the reliability

of credit scoring information and help businesses

reduce fraud and comply with their anti-money

laundering obligations.

businesses in export supply chains.

As a result, even more businesses –

particularly small and medium-sized enterprises

– will be able to get support from UKEF.

Nurturing growth

The Business Finance team has continued to

work closely with our members, businesses,

alternative finance providers and other

stakeholders to provide direction on key issues

affecting business in all sectors. In 2015 we

worked with peer-to-peer lenders looking

to establish protocols with banks, and we

continued to fund the SME Finance Monitor, the

leading authority on SME financing. In its Q1

2015 results the Monitor found that eight out of

ten applications for finance made in the previous

18 months had been successful.

Each year thousands of businesses turn to

our Mentorsme programme in search of support

and advice from an experienced business

mentor. In November 2015, we celebrated the

achievements of some of these businesses and

their mentors at our annual Mentorsme awards

in London. Since its launch in 2011, Mentorsme

has grown dramatically and has enlisted 121

mentoring organisations, with access to 27,000

mentors.

UK Export Finance – supporting even more

businesses

UK Export Finance is the UK’s export credit

agency. Last year, the BBA played an important

role in helping to expand its offering.

The industry supported measures in

the Small Business, Enterprise and

Employment Act which makes

changes to the constitution

of UKEF to allow it to be

more flexible when

it comes to

helping

BBA

Annual Report 2015


14

Our work in Brussels and

beyond

BBA

Annual Report 2015

We hit our stride in Brussels in 2015,

and built on our successes of the

previous 12 months.

A year after our Brussels office opened, our

increased visibility in the EU’s capital has had time

to bed in. The highlight was leading one of the

most senior UK financial services delegations to

Brussels, taking seven member Chairmen to meet

key representatives from EU institutions.

In April we were delighted to welcome Lord Hill,

the European Commissioner for Financial Stability,

Financial Services and Capital Markets Union, as

guest speaker at our annual Brussels reception,

hosted by Linklaters. Lord Hill spoke openly

about the need to complete banking reform and

promised to be a champion for banks’ contribution

to growth and jobs. MEPs and their staff from

parties of all political colours joined us for the

event.

Our policy work also saw us develop a

comprehensive response to the European

Commission’s plans to establish a Capital Markets

Union. Additionally, we continued our industryleading

work on MiFID II, as our members

came to terms with the legislation’s far-reaching

requirements.

Pre-presidency trips

The year also saw the BBA lead delegations to

Luxembourg and the Netherlands, ahead of both

countries taking up the European Council’s rotating

presidency. In May, we travelled with our members

to Luxembourg City where we were hosted by

the UK Ambassador to Luxembourg, H.E. Alice

Walpole. The country’s Minister of Finance, Pierre

Gramegna, was our guest of honour. In November,

we took a delegation of our members to The

Hague and Amsterdam to meet the Chair of the

Dutch Markets Conduct Regulator, a governing

board member from the Dutch Central Bank and

representatives from the Ministry of Finance. These

visits enabled the BBA and our members to foster

ties with our European partners ahead of their

presidency.

Chairmen’s delegation

We embarked on an ambitious delegation to

Brussels in October when we hosted the Chairmen

of six of the UK’s largest banks and the Chairman

of the UK’s largest mutual, Nationwide. Over the

course of our two-day visit, delegates met with

some of Brussels’ most influential policy-makers,

including European Commission President

Jean-Claude Juncker, European Commission

Vice President Jyrki Katainen, Lord Hill, and

Jeroen Dijsselbloem, the Eurogroup President

and incoming chair of ECOFIN. These meetings

provided a unique opportunity for the BBA and

some of our largest members to come together as

a united voice for the banking industry in the UK

and set out the views of the sector across a range

of issues. These included the competitiveness

of the Single Market and how the banking

industry can help the Commission

to promote growth and jobs

across Europe.


15

Private banking

The UK is a world-leading private

banking market, renowned for

professionalism, expertise and for

being a safe place to carry out

business.

Our November 2015 report, Winning the

Global Race, called on the UK to capitalise on

the private banking and wealth management

(PBWM) opportunities arising from the rapid

growth of emerging markets. The report

observed that this new wealth sits largely with

first generation entrepreneurs, many of whom

require bespoke advice from world class wealth

management and private banking experts. A

recommendation in the report judged the UK to

be well positioned to capture private wealth flows

from these individuals.

The importance of the private banking and

wealth management sector was also reflected

in our pamphlet The Benefits of Banking,

published in June 2015. Here, we spelled out

the contribution of PBWM. The sector directly

provides more than 23,000 jobs and a further

65,000 depend on it. PBWM contributes £5bn to

Britain’s economy each year – the same as a city

the size of Brighton and Hove.

jobs directly

23,000 provided by the sector

£5 billion

contributed to Britain’s

economy each year

PB

WM

The British Economy

Five Billion Pounds only

00-00-00 0034921304 001

Date:

Each year

5,000,000,000

Last year we started deepening the

connections between our PBWM members

and the Financial Ombudsman Service. We

held an initial workshop for members and FOS

staff to help improve understanding of each

other’s activities and operations, with further

engagement planned for 2016.

Together with other trade associations, the

BBA also secured guidance from the Financial

Conduct Authority clarifying the circumstances

under which a discretionary investment

management service can be provided through a

single in-house fund.

In addition, we deepened our working

relationship with the Wealth Management

Association through a new memo of

understanding. We meet regularly to discuss

domestic and international issues of mutual

interest, and Liz Field, Chief Executive of the

WMA, now attends the BBA’s PBWM Advisory

Board meetings. This ensures that work is

not duplicated and that we have a joined up

approach to policy issues and key stakeholder

engagement.

£

Private Banking

BBA

Annual Report 2015


16

Wholesale banking:

Winning the Global Race

representing the

The competitiveness of the UK as a centre for

international banking

international banking

sector

Winning the Global Race

One of the BBA’s most significant pieces of

policy work in 2015 was the research undertaken

to produce our report Winning the Global Race:

the competitiveness of the UK as a centre for

international banking. This document outlined the

critical role that the banking sector plays in the

UK economy, its breadth of business and scale,

and the abiding advantages of being in the UK.

Crucially, our report pointed out that pressure

arising from UK-specific policy and regulatory

decisions has begun to reduce the attractiveness

of the UK as a place for international banking.

This pressure has also hindered UK wholesale

banks’ ability to compete internationally. A

number of our members have told us that they

are already beginning to move jobs and activity

overseas.

While we believe that good regulation is

a competitive advantage and we welcome

moves by the Government to reduce the Bank

Levy, threats to the UK’s position as a leading

international banking centre remain acute.

Ringfencing will be costly for many of our

members and extraterritorial regulation, such

as EMIR, mean that it is harder for banks doing

business from the UK to compete abroad.

Produced with leading consultancy Oliver

Wyman and overseen by Sir Hector Sants, our

report made 23 recommendations. We called

for a coherent national vision for the role of

international banking as part of the UK economy,

and a review of the UK regulatory regime to

identify unintended consequences. We also

suggested that the timeframe for removing the

Bank Levy from overseas liabilities be brought

forward, and that the visa scheme should

not constrain the banking industry’s growth

by preventing access to highly skilled foreign

individuals.

Our report received considerable media

coverage, including from the FT, the Daily Mail

and BBC Radio 4. We also discussed our

findings with senior Treasury officials at a dinner

in November 2015.

BBA

Annual Report 2015


17

Reforming the markets – making them fairer

and more effective

The Fair and Effective Markets review was set

up by Chancellor George Osborne, with the

objective of ensuring that markets continue

to fairly and effectively meet the needs of all

participants long into the future. Given London’s

prominence as a global financial capital, the

BBA encouraged measures that would build

on the extensive conduct and market reforms

brought forward since the global financial crisis.

It is important to ensure that the UK remains an

attractive and competitive place to do business.

Accordingly, our submission contained proposals

for reforming the wholesale financial markets that

would enhance and deepen the accountability of

all participants.

The Review’s final recommendations

were published in June 2015, and a number

of our ideas were adopted. This included

our suggestion that the Senior Managers

and Certification Regime include all market

participants, not just those working in banks.

The Review also accepted our

recommendation that there be a mandatory

qualifications and training regime for staff

working in the fixed income, currency and

commodities markets (FICC). Banks already

hold their staff to a very high standard and many

firms require employees working in the FICC

markets to hold various industry qualifications,

such as those needed to become a Chartered

Financial Analyst. However, we highlighted that

there is inconsistency across market participants,

with non-bank organisations such as hedge

funds or brokers holding their employees to

different standards. The FICC Markets Standards

Board has been tasked with taking our

recommendation forward, and we look forward

to working with its members in 2016.

With regard to market structures, in light of

the extensive changes still being implemented by

MiFID II, we successfully argued that that there

should be no mandatory standardisation of fixed

income instruments and no mandatory electronic

trading of various instruments. Instead, our

recommendation that industry should continue to

work with policy-makers to ensure that markets

continue to meet the funding needs of their

participants fairly and effectively was accepted.

We worked closely with the Bank of England and

other industry partners whilst carrying out this

work.

Capital Markets Union

The Capital Markets Union (CMU) project

developed rapidly in 2015. The Commission

consulted on the project early in the year, the

inputs of which cumulated in the release of its

much anticipated CMU action plan in September

setting out a wide range of ambitious policy

initiatives to be addressed up to the end of 2018.

We continue to be fully supportive of the CMU

project and of the action plan and believe it has

the potential to be a catalyst for job growth and

the real economy. Our objective on its release

was to allow the BBA and our members to play

our part in ensuring the success of the plan

by continuing engagement with stakeholders,

feeding in to CMU related work streams and

building on the wide range of CMU initiatives we

conducted across 2015.

We continued our range of proactive

engagements with stakeholders and decisionmakers,

including the European Commissioner

for Financial Services Lord Hill, MPs, MEPs and

representatives from the European Supervisory

Authorities (ESAs) throughout the year.

We also worked to ensure our engagement

with stakeholders led to informative and

effective policy products. For example, we

developed a comprehensive list of 15 CMU

policy initiatives; some of which were considered

and encapsulated within the final action plan.

During the latter part of the year we conducted

an evidence gathering exercise to identify

unintended consequences and the resulting key

regulatory road blocks that could inhibit a CMU

from flourishing. This work was an early proactive

project which paved the way for us to work with

members in the latter half of 2015 to develop an

in-depth response to the Commission’s call for

evidence on financial sector regulation.

The BBA hosted a CMU conference in

Brussels attended by a wide range of guests

where the topics ranged from the future of

CMU and innovation to the role of the European

Supervisory Authorities. We are grateful to

BBA

Annual Report 2015


18

Financial Markets Director at DG Financial

Stability, Financial Services and Capital Markets

Union (FISMA) Martin Merlin, European Securities

and Markets Authority Chair Steven Maijoor, Kay

Swinburne MEP and academic Nicolas Véron for

speaking at our event.

The BBA will continue to be an active player

in the CMU debate and an advocate of initiatives

encompassed within the CMU action plan.

Already we have made strides in some of the

early CMU policy initiatives. For example, we

worked diligently with members to develop

a position paper on Simple, Transparent and

Standardised (STS) securitisation and continue

to remain engaged with key securitisation policy

makers. We look forward to continuing the CMU

work stream into 2016.

MiFID II

The BBA’s industry-leading work on MiFID II

and transaction reporting continued throughout

2015 as our members came to terms with the

consequences of its far-reaching requirements.

When implemented, MiFID II will significantly

reform investor protections and market

infrastructures in the EU’s capital markets. We

worked extensively with our members, the FCA

and ESMA to identify the key implementation

priorities for regulatory clarity and guidance.

We will continue to expand our engagement

throughout 2016.

BBA Annual International Banking Conference

The challenging interest rates environment

for wholesale participants and the improving

confidence in the sector were just some of

the issues debated at our inaugural Annual

International Banking Conference in October

2015. This event was the first BBA event that

was entirely dedicated to wholesale banking

and nearly 300 senior executives working in

banks, law firms and trade associations across

the country joined us for a day of informed

discussion.

Highlights included our Brexit panel, which

included Lord Mandelson, Chairman of Global

Counsel, and Gerard Lyons, Chief Economic

Advisor to the Mayor of London. The debate was

lively with vigorous arguments on both sides of

the debate, underlining just how important the

EU referendum is for our industry.

Harriett Baldwin, the City Minister, also

spelled out the Government’s vision for

competitiveness and stressed that international

banking is an issue for the entire UK, not just

London. She also praised and thanked the

industry and the BBA for the work our members

were doing to rebalance the economy.

Brexit panel, which included Helena Morrissey,

Newton Investment Management, Rt Hon Lord

Mandelson and Gerard Lyons, Chief Economic

Advisor to the Mayor of London at the BBA

Annual International Banking Conference 2015.

BBA

Annual Report 2015


19

Financial and risk policy

Making our banks safer and sounder

The BBA’s policy experts were busy throughout

2015 working with UK and EU regulators to

influence the implementation of Basel III. We also

hosted conferences and webinars, and spoke at

external events about the prudential regulation

issues affecting our members, such as reforms

by the Financial Stability Board, Total Loss

Absorbing Capacity and work on the ringfencing

regime.

During 2015, the Basel Committee on

Banking Supervision continued its work on

revising standardised risk weightings and the

use of advanced models in Credit Risk Weighted

Asset calculation. Its aim is to ensure that the

standardised approach constitutes a suitable and

granular alternative which complements credit

risk modelling. Discussions continue, but there

has been a key change to the proposals. Banks

using the standardised approach will now be

permitted to rely on external credit ratings, which

had not been previously contemplated.

Our successes in 2015 include the Prudential

Regulation Authority’s calibration of the leverage

ratio and its buffers, recognition of some forms

of netting in the Basel Committee’s final leverage

proposal and confirmation that Pillar II capital

need not be held exclusively in the form of core

equity tier one capital. Without these important

changes, banks would have had to raise even

more capital.

We worked with the PRA to get greater clarity

for our members about the amount of capital

that banks are expected to hold, and how capital

buffers rank with each other and can be used in

times of stress. We also discussed with the PRA

its plans to introduce a 150% Risk Weighting of

loans for small house builders. This is currently

on hold while the issue is considered in Basel

and Brussels.

Last year, the BBA engaged with the Basel

Committee on its review of operational risk and

we await a second set of proposals that we hope

will simplify the calculation of operational risk

capital requirements.

We also spoke with the Basel Committee,

the International Organization of Securities

Commissions (IOSCO) and the European

Commission about simple transparent,

comparable securitisations and the suggestion

that they should attract a lower risk weighting

than other securitisations.

Through our relationship with the authorities

in the UK, we know they recognise prudential

supervision should be proportionately applied.

We are working with members to propose

recommendations that would make a real

difference for our smaller and challenger bank

members, and will be sharing these with the PRA

early in 2016.

We are also hopeful that in 2016 the Bank of

England will make proposals which allow Islamic

banks to leave money in an operating account

with the Bank in a Sharia compliant manner.

This will help them meet their liquidity coverage

requirements.

BBA

Annual Report 2015


20

BBA

Annual Report 2015

The Financial Stability Board’s reform programme

The Financial Stability Board is responsible for

coordinating the implementation of regulatory

reforms agreed by the G20. A major focus of its

work has been the development of a framework for

ensuring that failing banks can be subject to orderly

resolution. Orderly resolution is important for

maintaining confidence in the financial system, and

for minimising disruption and taxpayers’ exposure

to losses.

In November 2015 the Chairman of the FSB,

Mark Carney, described this work as “substantially

complete” following the publication of the final

proposals for Total Loss Absorbency Capacity

(TLAC) to be held by global systemically important

banks.

Last year we worked with our members and the

regulatory authorities to support the creation and

implementation of new proposals that will enhance

the resilience of the financial system. One of the

most significant requirements adopted in 2015 will

require PRA-regulated banks with contracts and

liabilities under non-European laws (such as in the

US, Hong Kong or Singapore) to ensure they are

resolution friendly. PRA rules will require many such

contracts to include provisions which require the

counterparty to be bound by decisions of the Bank

of England, should a bank fail, and to recognise any

bail-in or stay on early termination rights.

Although in principle these changes should be

welcomed, our members will need to undertake

complex remediation programmes to comply

with the rules. Our engagement with the Bank of

England and PRA was instrumental in ensuring the

rules were defined appropriately and phased in

proportionally.

Total Loss Absorbing Capacity (TLAC) and

minimum requirement of own funds and eligible

liabilities (MREL)

TLAC and its European cousin, MREL, are the

“final pieces in the puzzle” of the financial reform

agenda. TLAC sets a global minimum loss

absorbency standard for the global systemically

important banks (GSIBs), while MREL is concerned

with EU banks and investment firms. Both are

variants of Loss Absorbing Capacity, and concern

a bank’s ability to absorb a loss and, potentially be

recapitalised, if it fails. The intention of both TLAC

and MREL is that a bank can fail in an orderly

fashion, with minimal impact on the financial

markets, customers and counterparties. The BBA

has engaged with the FSB, European and UK

authorities to ensure that the final rules are fit for

purpose. We are working with our members and

the Bank of England to review the BoE’s plans to

implement the new MREL requirements in the UK.

It is important that these are technically sound and

proportionate.

Recovery &

Resolution

Planning

Bail-in

TLAC/MREL

Temporary

Stay

Bank ringfencing regime

Legislation put in place in December 2013 by

the Financial Services (Banking Reform) Act

determined that the largest UK banks should

separate retail and SME deposit-taking from

investment banking. This enacted the ringfencing

recommendations of the Independent Commission

on Banking chaired by Sir John Vickers. The

intention is to add to the safety and soundness

of the financial system and involves substantial

reorganisation on the part of the banks concerned,

as recognised by the 1 January 2019 timeline.

If 2014 can be viewed as the year in which the

“location” of the ringfence was set, through the

definitions established in secondary legislation,

2015 saw attention turn to the setting of the

“height” of the ringfence through the drawing up of

the regulatory regime.

The opening regulatory consultation focused

on issues concerning legal structure, governance

and the continuity of services and facilities.

This was then followed by consultations on

the transfer schemes themselves, customer

disclosure and prudential requirements, intragroup

arrangements and the use of financial market

infrastructures. Whilst many of these issues remain

under consideration, the plan is to complete the

regulatory framework during the second half of

2016 in order to provide banks with a solid platform

for completing their reorganisation plans as a

prelude to turning towards implementation.


21

Taxation

Tax policy was a high profile issue for our industry

last year, and developments in this area moved

at a swift pace. Over the course of 2015, the

BBA made more than 60 policy submissions on

a wide range of tax issues. Our involvement in

two European Commission expert groups also

ensured that industry issues and concerns on the

Automatic Exchange of Information and VAT were

aired and understood.

Total Tax Contribution of the UK Banking Sector

An influential piece of policy work examining the

tax contribution of the UK banking sector was

commissioned by and published on behalf of

the BBA in September 2015. Consultants PwC

carried out this work by analysing the contribution

that our members make in taxes to the UK

economy. The study revealed that the banking

sector contributed £31.3bn in taxes borne and

collected in the year to 31 March 2014, making

up 5.5% of Government receipts. The report

has proved timely in contributing to the ongoing

debate over bank taxation and supplemented

a BBA survey of our membership on the

implications of the Corporation Tax surcharge.

We were able to share the findings of both with

the Office for Budget Responsibility in an effort

to encourage greater long-term accuracy in

forecasting bank profitability and tax receipts.

Legislation on tax evasion

The BBA has played an important role in

responding to proposals by HM Revenue and

Customs to introduce a new “corporate criminal

offence” for facilitating tax evasion. On behalf

of our members, we led the banking industry’s

response to the consultation, and suggested

ways in which HMRC could make its plans more

effective. Following discussions with the BBA,

HMRC agreed to a period of further consultation

on this significant new criminal offence.

Simplifying tax matters

A number of operational issues relating to the way

in which different taxes are collected and changes

to the tax regime have also kept our policy team

busy. We’ve worked closely with our members

and the tax authorities on the introduction of

“flexible” ISAs, the introduction of the Personal

Savings Allowance and associated changes to

the Tax Deduction Scheme for Interest, as well

as the Common Reporting Standard. Banks are

working hard to adapt to these changes and

comply with the new rules, many of which have

been introduced with an accelerated timetable

for implementation. Where necessary, we have

raised concerns over some developments, and

have challenged the authorities to look again

at the implementation of initiatives such as the

introduction of new powers for the direct recovery

of debt from bank accounts.

92%

29 banks submitted

data to the BBA and PwC.

Together they employ 92

per cent of bank workers.

£15.3bn

Total 2014 tax

contribution

of banks with

UK HQs

£16bn

Total 2014 tax

contribution of

banks with HQ

outside the UK

85%

The bank levy has

jumped by 85 per

cent since 2011

79%

Unlike other firms,

banks can’t recover

VAT spent on

business costs.

Irrecoverable VAT

has increased by 79

per cent since 2008

BBA

Annual Report 2015

SOURCE: BBA/PwC


22

Standards in corporate

governance

BBA

Annual Report 2015

Strengthening accountability at

the top

Last year the BBA, our members and the

regulators continued to work hard to improve the

lines of accountability in the banking industry. We

worked closely with the Prudential Regulation

Authority and the Financial Conduct Authority

to help shape the new Senior Managers

and Certification Regime. Also known as the

“Individual Accountability Regime”, the SMCR

offers clarity on the responsibilities of senior

managers at the top of businesses when

something in their firm goes wrong. It is an

important step forward in setting standards for

individual behaviour and collective corporate

governance, and will change conduct in banks

for the better from top to bottom.

Under the SMCR, firms must allocate a range

of specific responsibilities to the most senior

individuals who will continue to be subject to

prior approval by the supervisory authorities. The

bank will be required to “map” key responsibilities

to an individual. As a result, supervisors can see

clearly which senior executive has responsibility

for a particular key function.

The middle tier of the SMCR will require

banks to certify the “fit and properness” of

their material risk takers on an ongoing basis.

Banks will also have to notify the regulator

when an individual has behaved in a way that

contravenes the FCA or PRA rulebook. Alongside

this there will be a requirement for banks to

give a more detailed regulatory reference to

another bank seeking to hire one of their current

or former employees. This is to prevent the

“rolling bad apples” problem, and to ensure that

a prospective employer has clarity about an

individual’s regulatory record.

The third tier of the SMCR will apply a new set

of conduct rules to nearly every employee in the

bank, and will likely result in a significant training

requirement for many of these individuals. The

BBA is working to assist this.

We have had a strong and positive

engagement with the regulators over several

years as they put “flesh on the bones” of the

Individual Accountability Regime proposals

by the Parliamentary Commission on Banking

Standards. This has resulted in a number of

helpful clarifications and amendments as our

member banks have worked through their

implementation programmes. The BBA also

worked with smaller members to help them

prepare statements of responsibility with broad

industry applicability.

As part of this engagement, last year we

responded to a number of consultations on the

SMCR. Many of our recommendations have

been accepted including:

1. reducing the responsibilities of the nonexecutive

directors (NEDs) that are caught

by the regime’s scope;

2. extending the implementation period by

an extra six months; and

3. narrowing the range of people in foreign

banks caught by the regime. This final

point is important because this provides

our members with greater clarity about

who the regime applies to. It also reduces

the regime’s extraterritorial scope. Without

this change, it could have been difficult for

UK authorities to pursue a case outside of

the UK.


23

A key achievement for the BBA was the

removal of the scope of the regime concerning

NEDs. Initially, regulators had wanted to see

all NEDs included within the scope of the

SMCR. We suggested NEDs, including those

who chair board committees, should be seen

very differently from those board members

with executive responsibility such as the Chief

Executive.

We therefore welcomed the change by

the regulators that excluded “ordinary” NEDs

from the scope of the regime and clarified the

expectations of NEDs who are chairs of board

committees, who remain within the scope of the

SMCR.

We hope that the “presumption of

responsibility” that was proposed by the

regulators – effectively a statement of “guilty

until proven innocent” – will be replaced with a

duty on senior managers to ensure that there is

a system in place to operate if a breach occurs.

We expect to know more about this change by

spring 2016.

The SMCR came into effect for banks

and insurers on 7 March 2016. Following our

recommendation to the regulators as part of the

Fair and Effective Markets Review, it will

be expanded to all participants in financial

services by 2019.

steps and involve putting in place robust

whistleblowing arrangements, identifying a nonexecutive

whistleblowing “champion” and the

presentation of a whistleblowing report to the

board at least annually.

Firms have until 7 September 2016 to

comply overall and until 7 March 2016 to assign

responsibility to a whistleblowing champion

for overseeing the steps needed to prepare for

the new regime. We were pleased to see the

FCA and PRA think again on some of the more

prescriptive elements of their proposals unrelated

to putting in place arrangements in keeping with

best practice.

Diversity

At the end of 2015 we published our report

Diversity and Inclusion in Banking, which

examined the strategies undertaken by some

of our members to improve diversity amongst

their staff. The report shows that through a

combination of Government push and industry

pull we can speed up the pace of change so that

gender equality is reached more quickly in the

world of banking than otherwise might be the

case.

Whistleblowing

Early in the year, the FCA and PRA

published consultations on whistleblowing

in deposit-takers, PRA-designated firms

and insurers. This followed on from several

recommendations by the Parliamentary

Commission on Banking Standards aimed at

ensuring that whistleblowing arrangements are

effective and whistleblowers protected from

victimisation.

In responding to the FCA and the PRA, the

BBA acknowledged that a well-run financial

institution will seek to foster a culture in which

discussion and challenge is welcomed. We

extended support in principle to what we

described as the regulators’ “five step approach”

to whistleblowing. The final arrangements,

confirmed in the Feedback Statements published

in October, are broadly based on these five

Women make up 31% of

boards in FTSE 100 banks

Our report also shows that gender is only

one aspect of inequality and much more can

be done to generate a more equal and inclusive

workplace for all. We highlight many best

practice examples that are instigated by our

members, and say that by building on some of

these initiatives, industry can lead a meaningful

change. We look forward in 2016 to contributing

to the industry’s preparations for acting upon

the recommendations of the Empowering

Productivity: Harnessing the Talents of Women in

Financial Services report by Virgin Money’s Chief

Executive, Jayne-Anne Gadhia.

BBA

Annual Report 2015


24

Financial crime

BBA

Annual Report 2015

Keeping customers’ money safe

The BBA continues to play a role in promoting

financial crime compliance standards in the

banking industry. In 2015 our work programme

promoted the highest quality financial crime

policies and procedures within the industry.

At the heart of our work is the Serious and

Organised Crime Forum, created in 2014 at

the request of the Home Secretary. The Forum

includes senior public sector figures and senior

bank representatives. In 2014, the Forum

instigated policy initiatives for improving the

UK’s legislation for financial crime, strengthening

arrangements for asset recovery and working

together to engage with key partner jurisdictions.

The Forum has also overseen the creation of

a pilot taskforce on money laundering, the Joint

Money Laundering Intelligence Taskforce (JMLIT).

As a result, banks and the public sector have

shared information on strategic and practical

financial crime threats. There have been positive

results – arrests have been made and criminal

monies identified. The experience gained from

this successful pilot has helped banks and law

enforcement agencies to enhance their long-term

policies and controls.

Throughout 2015, the international agenda

for tackling financial crime remained busy. Our

financial crime experts were involved in a number

of consultations and initiatives, including the

G20/Financial Action Taskforce (FATF) expert

group on anti-corruption and engagement

with EU authorities on the fourth EU Money

Laundering Directive. They were also included

in discussions on new financial sanctions and

the Cyber-Enabled Financial Crime Coalition, a

partnership between EU banks and Europol. The

BBA remains at the forefront of these important

initiatives, representing our members and sharing

our expert knowledge.

Over the past year, the BBA responded to

a range of policy consultations from the Basel

Committee and other international bodies.

We have also produced a number of reports

and best practice documents on behalf of our

members. These range from information on antibribery

and corruption, through to fraud affecting

corporate banks and future financial crime risks.

Our improved training and events programme

has provided value to our members.

The cyber security agenda was a further area

of focus for the BBA last year. We orchestrated

discussions between banks and Government

bodies on recent cyber security incidents in other

sectors. We also worked with the Government

and the Bank of England on efforts to test banks’

cyber security controls, and engaged with the EU

and other international bodies on the EU’s new

Network and Information Security Directive and

cyber security standards.

Many of these initiatives will come to fruition

or completion in 2016, so a critical year awaits.

We anticipate reforms to the UK framework for

financial crime, and public/private partnership

projects such as JMLIT to become permanent

features of the financial crime landscape.

At the same time international consideration

of how best to combat terrorists and their

financing will clearly be a high priority, and

ensuring our member banks are able to engage

in this agenda will be critical.


25

BBA Enterprises

BBA Enterprises (BBAE), the

commercial arm of the BBA,

manages all events, training,

associate member activities, venue

hire and some subject specific

publications on behalf of the BBA.

In response to demand from our banking

members, BBA associates have provided

invaluable support in our work around

governance, risk and compliance, financial crime,

and operational and regulatory risk. BBAE has

delivered this through a comprehensive events

programme.

Last year BBAE delivered two flagship events

– the Retail Banking Conference in June, and

the International Banking Conference in October.

Feedback from both events was extremely

positive. We also took the opportunity to better

channel information to more targeted audiences.

We continued to offer thematic events in

2015, which proved very popular the previous

year. Our events featured a diverse range of

subjects, including cyber security and resilience,

digital innovation and the future of payments. A

two-day conference dedicated to financial crime

and sanctions and a greater focus on roundtable

discussions with senior bankers meant that our

associate members had the opportunity to deal

with specific issues with expert input from across

the banking industry.

It is also through this work that we have

been able to use the BBA’s Learning Academy

to examine the issues concerning our banking

and association members. We are proud to

have close professional ties with key bodies

such as the Institute of Financial Services,

the International Compliance Association,

the Chartered Insurance Institute and the IFS

University College.

By working with these partners, BBAE has

delivered a new programme of free webinars for

staff working in banking and the professional

services industry. The Senior Managers and

Certification Regime, Stress Testing and

Common Reporting Standards were just some of

the subjects we covered in 2015.

The BBA’s Learning Academy is just one part

of our new offering in 2015. We’ve also taken

the learning out of the classroom and into the

boardroom, with our new in-company briefings.

Expert trainers briefed banking boards and their

personnel, and a strong foundation has been

set to take forward this work in 2016. BBAE

interacted with more than 12,000 bankers in

2015, just on learning. The BBA’s eLearning

solution continues to develop and has now

touched 15,000 people.

BBA Enterprises

6353

delegates attended

57

events

Interacted with more than

12,000

bankers

in via the Learning

Academy

BBA

Annual Report 2015


26

Pinners Hall remains a sought

after destination for meetings,

training and conferences. Its premises

welcome an average of 500 visitors a week,

demonstrating that the investment made

in audio visual equipment and catering

facilities has made a real difference to those

using them. These facilities now provide a

valuable centre for key summits, forums and

conferences.

500

visitors

a week

Mon Tue Wed Thur Fri

Pinners Hall

spot emerging

problems and criminal

trends. There are as many as 40

banks going through the on-boarding

process for the service.

BBA Confirmations – which makes

auditing safer, faster and less stressful – has

grown from five banks at beginning of 2015 to

almost 50 at the end of the year. The service

is growing at a rate of one to two banks each

week.

We also formed BBA GOLD Limited, the

Global Operating Loss Database (GOLD)

which enhances risk management disciplines

and operations whilst improving standards for

internal controls across the banking and related

sectors.

BBA

Annual Report 2015

BBAE has also turned its attention to

a number of new initiatives. Work has

completed on the BBA’s Financial Crime

Alert Service (BBA FCAS Limited),

and the service is now being rolled out

across the banking sector as the new

financial crime data sharing platform. BBA

FCAS has placed the BBA at the centre

of Government, law enforcement and

security agency financial crime intelligence

sharing. The service will allow the sector

to react faster than ever to major incidents,

as well as giving the opportunity to

industry financial crime professionals to


27

BBA membership

The BBA is the leading voice for the

world’s largest banking cluster, which

is why in 2015 we regularly spoke

with industry peers, regulators and

Government about the issues that

matter to our members.

As a world-class trade association, in 2015 the

BBA continued to be a constructive partner for

Government and regulators, proving value for

money for members and providing detailed policy

expertise and strategic thought leadership for the

industry.

Last year was a standout year for BBAE.

The team recruited new BBA members across

every banking subsector, including new market

entrants, private banks, retail banking challengers

and global systemically important banks. Thanks

to the relevance, depth and breadth of the BBA’s

policy work, specialist digital banks have been

eager to join the BBA and harness our expertise

as soon as they’ve been granted their banking

licence.

We were also proud to welcome so many

new BBA associate members in 2015, and saw a

new associate join us every seven working days.

Our associate members are a vital part of the

banking ecosystem and operate in the related

financial and professional services industry. They

have played an important role in helping BBAE

develop new services that help support our core

banking members.

The BBA represents more than £8 trillion

of UK-based banking assets, as well as the

diverse interests of our membership; from our

retail banks or new challengers innovating

consumer services, to world-leading private

banking operations and global wholesale and

investment banks. As we continue to grow, the

nature and frequency of our member interactions

and industry-wide enterprise activities will further

demonstrate our world class credentials.

BBA

Annual Report 2015


28

Member list

The following list details BBA member banks and associates

BBA

Annual Report 2015

• ABC International Bank plc

• ABN AMRO Bank N.V

• Ahli United

• Al Rayan Bank

• Aldermore Bank plc

• Alliance Trust Savings

• Allied Irish Bank (GB)/First Trust

Bank

• Allied Irish Bank plc

• Alpha Bank

• Amicus

• Arbuthnot Latham & Co Ltd

• Atom Bank

• Australia & New Zealand Banking

Group Ltd

• Banca Monte Dei Paschi di Siena

SpA

• Banco de Sabadell

• Banco do Brasil SA

• Banco Santander S.A.

• Bank & Clients

• Bank J Safra Sarasin Gibraltar Ltd

• Bank Leumi (UK) plc

• Bank of America NA

• Bank of Baroda

• Bank of Ceylon

• Bank of Cyprus

• Bank of India

• Bank Of Ireland (UK) plc

• Bank of London and Middle East

• Bank of Philippine Islands

(Europe) Limited

• Barclays Bank plc

• BayernLB (Bayerische

Landesbank)**

• Bira Bank

• BLOM BANK France

• BMO Capital Markets**

• BNI (PT Bank Negara Indonesia)**

• BNP Paribas

• British Arab Commercial

• Brown Shipley & Co Ltd

• Butterfield

• C Hoare & Co

• CAF Bank

• Cambridge & Counties

• Canara Bank

• Charter Court

• China Construction Bank

(London) Limited

• CIMB Banking**

• Citibank NA

• Clearstream

• Close Brothers Ltd

• Clydesdale Bank plc

• Credit Industriel et Commercial

(CIC)**

• Credit Suisse Securities (Europe)

Limited

• Crown Agents

• Danske Bank A/S Group

• Deka Bank*

• Deutsche Bank AG

• Diamond Bank UK**

• Duncan Lawrie Ltd

• DWP Bank*

• EBRD*

• EFG Private Bank Ltd

• EIB*

• Europe Arab Bank plc

• FBN Bank (UK) Ltd

• FCE Bank plc

• FCMB**

• Fidor

• Ghana Int›l

• Goldman Sachs International

• Gulf International Bank BSC

Group

• Habib Bank AG Zurich

• Habibsons Bank Limited

• Hampshire Trust plc

• Harrods Bank Ltd

• Havin Bank

• HSBC Bank plc

• HSBC Private Bank Limited

• ICICI Bank UK plc

• ING Bank NV

• Investec Bank

• Jordan International Bank plc

• JPMorgan Chase Bank

• Julian Hodge

• Kleinwort Benson Bank Ltd

• LBBW (Landesbank Baden-

Württemberg)**

• Leeds Building Society*

• Lloyds Banking Group

• Lombard Odier (Europe) S.A.

• Mashreqbank PSC

• Masthaven

• Maybank (Malaysian Banking

Berhad)**

• Mitsubishi UFJ Trust and Banking

• Mizrahi Tefahot Bank**

• Mizuho Bank Ltd

• Mizuho International plc

• Mondo

• Monese

• Morgan Stanley Bank International

Limited

• N M Rothschild & Sons Ltd

• Nacional Financiera SNC

• National Bank of Canada

• National Bank of Egypt

• National Bank of Kuwait

• Nationwide Building Society

• Natixis

• Nedbank

• Nomura

• Nordea Bank**

• Norinchukin

• Northern Bank

• OakNorth Bank

• Oldenburgische Landesbank*

• One Savings Bank

• Piraeus Bank**

• Principality Building Society*

* BBA Gold members ** BBA Confirmations members


29

• Private & Commercial Finance

Group

• Punjab National Bank

• Qatar

• QIB (UK) plc

• R Raphael & Sons

• Rathbones

• Reliance

• RCI Bank

• Royal Bank Of Canada

• Sainsbury›s Bank plc

• Santander UK plc

• Schroder & Co Ltd

• Secure Trust Bank plc

• Shawbrook Bank Ltd

• Skandinaviska Enskilda Banken

AB

• Skipton Building Society*

• Silicon Valley Bank**

• Smith & Williamson

• Societe Generale

• Sonali

• Standard Chartered Bank

• State Bank of India

• State Street Bank & Trust

Company

• Sumitomo Mitsui Banking

Corporation

• Sumitomo Mitsui Trust Bank Ltd

• Svenska Handelsbanken AB

(publ)

• Syndicate Bank

• Tandem Bank

• TD Bank NV

• Tesco Personal Finance plc

• The Bank Of New York Mellon

• The Bank Of Nova Scotia

• The Bank Of Tokyo Mitsubishi

UFJ Ltd

• The Charity Bank Ltd

• The Co-operative Bank

• The Coventry Building Society*

• The Northern Trust Company

• The Royal Bank of Scotland

Group

• Triodos Bank NV

• TSB Bank

• Tungsten Bank

• Turkish Bank**

• Türkiye Is Bankasi AS (Isbank)**

• UBA Capital Europe Limited**

• UBS AG

• Union Bancaire Privee, UBP

• Union Bank UK plc

• United Bank

• United Trust Bank Ltd

• Unity Trust

• Virgin Money plc

• VTB Capital plc

• Weatherbys Bank Ltd

• Wells Fargo Bank NA

• Wesleyan Bank Ltd

• Western Union

• Westpac

• Zenith Bank**

• Ziraat Bank**

Associate Members

• 4most Europe Ltd

• Abide Financial

• Accenture

• Addleshaw Goddard LLP

• Advantage Finance Ltd

• Advicent Solutions

• Allen & Overy LLP

• Almis International

• Ashurst LLP

• Aspect Software

• Avaloq UK Ltd

• Avantage Reply Ltd

• Axelos

• AxiomSL

• BAE Systems

• BDO Services Ltd

• Begbies Traynor Group Plc

• Berkley Research Group

• BFC Exchange Limited

• BGC/GFI*

• BitSight Technologies

• Bivonas Law

• Blackrock

• Board

• Bonafidee

• BRP

• BT

• Buckley Sandler LLP

• Bureau Van Dijk

• Calastone Ltd

• Callcredit Plc

• Capita Asset Services UK Ltd

• Capital One (Europe) plc

• Clifford Chance LLP

• Cognizant Technology Solutions

• Comcarde Ltd

• Confirmation.com

• Conister Bank (Isle of Man)

• Crowe Horwath Global Risk

Consulting UK Ltd

• Deloitte LLP

• Digital Look

• DLA Piper UK LLP

• DTCC

• Easy Solutions

• Equifax Ltd

• Equiniti Hazel Carr

• Ernst & Young LLP

• Eurasia

• EuroCCP

• Eversheds

• Experian Ltd

• Farrer & Co

• Financial Services Training

Partners LLP

• Five Degrees Solutions

• Freshfields Bruckhaus Deringer

• FTI Consulting LLP

BBA

Annual Report 2015

* BBA Gold members ** BBA Confirmations members


30

BBA

Annual Report 2015

• G4S Cash Solutions (UK) Ltd

• Genpact

• Gibraltar Bankers’ Association

• Government Banking Service

• Grant Thornton LLP

• Herbert Smith Freehills LLP

• Hitec Laboratories Ltd

• Hogan Lovells LLP

• Huntswood CTC

• IBM UK Ltd

• IDT911

• Innovative Systems Ltd

• Isle of Man Bankers Association

• Jaywing

• Jersey Bankers Association

• John Wiley & Sons Ltd

• Kaizen Reporting

• Kemp Little LLP

• King & Wood Mallesons

• KPMG LLP

• Kreab Gavin Anderson

• Kroll

• Kyte Broking*

• LexisNexis Risk Solutions

• Lexmark International Ltd

• Linedata Ltd

• Linklaters Business Services

• LogRhythm Inc

• Macfarlanes LLP

• Management Solutions Europe UK Ltd

• Mayer Brown International LLP

• Message Automation Ltd

• Misys Int’l Banking Systems

• Moody’s Analytics

• Morton Fraser Solicitors

• National Savings & Investments

• Norton Rose Fulbright

• Opportunity Network

• Parker Fitzgerald Ltd

• Peters & Peters Ltd

• Pindrop Inc

• Pinsent Masons LLP

• Polaris Consulting & Services Ltd

• Post Office Ltd

• PricewaterhouseCoopers Services Ltd

• Redland Business Solution

• Reed Business Information

• Shearman & Sterling

• Sidley Austin

• Simmons & Simmons

• Slaughter & May

• SNL Financial

• Spitch AG

• SQA Consulting

• Synectics Solutions Ltd

• Templar Executives Ltd

• The Bank of England

• Think Money Limited

• TLT LLP

• Tori Global

• Tradition*

• Trax

• Trillium Software UK Ltd

• UAE Banking Federation

• Una Vista Ltd

• Unipart Group Ltd

• Vocalink

• Wiley

• Williams Lea

• Willis Towers Watson

• Wolters Kluwer Financial

Services

• Worksmart Limited

* BBA Gold members ** BBA Confirmations members


31

Financial Statements

British Bankers’ Association and (subsidiaries):

Extracts from the Annual Report and Financial Statements for the year ended

31 December 2015 which are available in full on our website

Corporate Governance Statement

The BBA is governed by its Members and has a

governance structure that:

• is designed to ensure robust and proper

representation of the different member

segments of its membership;

• aims to be efficient and effective; and

• strives to meet the BBA’s membership and

organisational needs.

The high level principles relating to the

governance structure are set out in the Rules

of the BBA (and can only be amended with the

agreement of Members at an AGM or EGM).

The Board:

• considers current policy issues and has

the ultimate authority to decide BBA policy

positions, particularly when associated with

reputational risk;

• sets and oversees the delivery of the BBA’s

strategic direction and business plan;

• approves the financial statements and budget

of the Association and BBA Enterprises Ltd

(as well as any other subsidiaries from time to

time); and

• gives advice to members and makes

recommendations and statements on matters

of banking policy.

The Board

The BBA’s principal management body is the

Board. The role of the Board is to manage

the Association and to maintain (either

directly or indirectly via its nominee entity) a

stewardship role over the Association’s beneficial

shareholding in BBA Enterprises Ltd and any

other subsidiaries from time to time.

The BBA Board is committed to the highest

standards of corporate governance and believes

that such standards are essential to business

integrity and performance.

The Rules contain detailed provisions around

Board composition and how meetings of the

Board can be legally convened. In general, the

Board composition is designed to ensure an

appropriate balance of member segments and

other committee representation.

The Board elects the Chair and one or more

Deputy Chairs.

The following matters are reserved to the

Board for consideration and decision, after

consultation with relevant Committees as

appropriate:

• any issue (whether economic, political or

regulatory and relating to change in the UK,

BBA

Annual Report 2015


32

BBA

Annual Report 2015

EU or beyond) which may have a strategic

impact on the banking industry as a whole;

• any “cross-cutting” issue that impacts more

than one sector of the banking industry and/

or other member segments; and

• any issue which may present a material

reputational risk for the banking industry.

Any issues that may have an impact on a

specific committee will be referred by the Chair

to the relevant policy committee (see below) for

consideration and decision.

The Board has also delegated certain powers

to the Audit and Oversight Committee and the

Nominations and Remuneration Committee.

Board members will normally serve for a

term of two years, renewable up to two times by

agreement with the Chair.

Each committee is a function of, is

accountable to and has authority vested in it by

the Board. Each committee has formal terms

of reference agreed by the Board which set out

the purpose, membership criteria, delegated

authority, key responsibilities, reserved matters,

quorum, voting rights and attendance etc.

The Board appoints a Chair and Chief

Executive, the latter having all the necessary

powers to manage the running of the

Association.

Audit and Oversight Committee

The purpose of the Audit and Oversight

Committee is to:

• give financial oversight;

• give risk oversight;

• give membership oversight and direction for

the operational issues of the Association;

• give any other oversight function that the

Board reasonably determines is appropriate

to devolve to the Audit and Oversight

Committee; and

• help deliver the BBA’s business plan and

meet strategic objectives

The Audit and Oversight Committee is chaired

by a Board member, or an alternate appointed

in accordance with the Rules, with appropriate

credentials. To further ensure the appropriate

level of expertise and experience, the Audit and

Oversight Committee is made up of the Chief

Executive and at least two other appropriately

qualified Member representatives from member

segments. In addition, any Member whose

subscription fee is in excess of a figure equal to

10% of the total subscription fees due from all

Members for the calendar year shall have the

right, on request, to have a representative on the

Audit and Oversight Committee. Together the

members of the Audit and Oversight Committee

must represent at least three member segments.

Other persons may attend at the invitation of the

Chair.

Audit and Oversight Committee members will

normally serve for a maximum duration of two

years, renewable up to two times by agreement

with the Chair.

Nominations and Remuneration Committee

The purpose of the Nominations and

Remuneration Committee is to review and

recommend to the Board for approval:

• the appointment of the Chair of the Board, its

Deputy Chair (or Deputy Chairs as the case

may be), and Chair of the Audit and Oversight

Committee; and

• the terms and conditions of the BBA Chair

and Chief Executive, and thereafter to

any material changes to their terms and

conditions.

The Nominations and Remuneration

Committee is chaired by a member of the Board

and comprises such other members of the Board

as the Board itself shall decide. The Chair of the

Nominations and Remuneration Committee is

appointed by the Chair of the Board.

Nominations and Remuneration Committee

members, including the Chair, will normally serve

for a maximum duration of two years, renewable

up to two times by agreement with the Board

Chair.

Other Committees

Member segment advisory boards, policy

committees and other senior committees provide

advice and direction on banking policy issues.

The executive committee, comprising the


33

senior management team of the BBA, supports

the Chief Executive in fulfilling his responsibilities

as delegated by the Board.

Strategic report

Principal activity

The BBA represents the banking industry in the

UK. It liaises with UK and EU government and

regulators on all issues concerning the industry.

It also runs conferences, seminars, workshops

and training for members and those interested

in industry issues and undertakes thought

leadership on a range of relevant topics.

Finally it provides services on behalf of the

industry to retail customers and SMEs such as

MyLostAccount.com and Mentorsme etc.

FRS 102

These financial statements are the first prepared

in accordance with FRS 102, The Financial

Reporting Standard applicable in the UK and

Republic of Ireland. The date of transition to FRS

102 was 1 January 2014 and the 2014 figures

have been restated accordingly. The most

significant impact of adopting FRS 102 is that

the assets and liabilities of the defined benefit

pension scheme are now recognised in the

accounts as opposed to being accounted for on

a defined contribution basis.

Business review

The BBA generated a profit for the financial year

of £2.5m compared to a loss in 2014 of £94k.

This exceptional result was generated by a

combination of good trading performance and

financial control, a repayment of VAT overpaid

in prior years and a settlement relating to the

provision of healthcare benefits in retirement.

These factors are explained in further detail

below.

Total income increased 2% in 2015 (or 4%

if one discounts income from discontinued

LIBOR activities in 2014). This increase is a

combination of 5% from subscription income and

a smaller increase across our commercial and

other revenue streams. The BBA exceeded the

record membership growth achieved in 2014 by

securing an additional 14 new banking members

drawn from the new entrant, smaller retail,

challenger, wholesale and Islamic sectors as

well 35 associate firms covering legal, advisory,

consulting, business technology and business

services.

Total expenditure comprises cost of sales

relating to the commercial revenue streams and

administrative expenses. Ignoring exceptional

items in 2014, total expenditure decreased

in 2015 from £10,815k to £9,426k. This

reflects proactive control of costs and some

non recurring credits relating to a favourable

movement on the provision for post-retirement

medical benefits and the release of two

provisions which are no longer required.

The commercial arm of the BBA is operated

by a wholly owned subsidiary, BBA Enterprises

Ltd. In a highly competitive market it increased

market profile including enhanced events

capabilities to realise a 13% uplift in year-on-year

gross profit and extended its training services

under the new BBA Learning Academy brand to

include eLearning and in-house training.

During 2015 BBA Enterprises Ltd made a

number of changes to its operating model to

enhance its capabilities and increase market

differentiation and competitiveness:

• BBA FCAS Limited was created. This is a

unique financial crime information sharing

platform developed in collaboration with BAE

Systems that has placed BBA at the centre

of government, law enforcement and security

agency financial crime intelligence sharing

and insight applying across the banking

sector.

• BBA Confirmations was launched by

combining capabilities in market engagement

with the world’s leading provider of cloud

based services to the audit confirmations

market – transforming paper based

processes and driving radical reductions

in bank-to-auditor response times whilst

delivering operational efficiencies. The service

is now being used by over 40 banking groups

including the largest global banks.

• BBA GOLD Limited was formed to provide

the Global Operating Loss Database (GOLD).

This enhances risk management disciplines

and operations whilst improving standards

BBA

Annual Report 2015


34

BBA

Annual Report 2015

for internal controls across the banking and

related sectors including wholesale brokers

and building societies.

Following a VAT compliance and efficiency

review, the Association’s results have been

further buoyed by exceptional income of £776k

resulting from a repayment from HMRC of

overpaid VAT. This compares to exceptional

costs in 2014 which arose from a reorganisation

of the operations team and the recognition of

certain costs that should have been expensed in

prior years. The new VAT treatment agreed with

HMRC will lead to further VAT efficiencies on an

ongoing basis.

The consolidated statement of comprehensive

income prepared under the principles of FRS102

has also benefitted from actuarial gains and

associated tax of £521k on the legacy defined

benefit pension scheme (2014: actuarial losses

of £1,037k). The scheme is a multi-employer

scheme shared with UK Payments Administration

Limited. As at 31 December 2014 the BBA’s

share of the deficit was £1.3m but as at 31

December 2015 this was a surplus of £670k. The

surplus has not been recognised on the basis

that no economic benefit is expected in the near

future.

The net transfer to reserves this year is

£2,973k compared to a deficit of £1,131k in 2014

and accordingly net assets have increased from

£2.2m to £5.2m over the year. Cash balances

have increased from £4.8m to £5.4m as a result

of the good trading result. Provisions in respect

of post-employment benefits have decreased

from £2.9m to £1.1m due to the favourable

movement in the provision relating to the defined

benefit pension scheme.

Risk

The Board monitors risk through the Audit and

Oversight Committee. The main areas of risk are

considered to be as follows:

• financial risk – the financial position of

the Association is regularly reviewed to

maintain financial stability against the risk

of a reduction of income (whether that is

subscription income or commercial revenue)

and/or increased costs.

• risk associated with civil actions against

the BBA in respect of alleged manipulation

of US$ LIBOR – seven of the claims have

been dismissed or are subject to dismissal

pursuant to court orders and the other is

currently stayed. The remaining case will be

vigorously defended if it proceeds. Progress is

reviewed on a regular basis with the BBA’s UK

and US lawyers. Further detail is contained in

note 21 within the full Financial Statements.

• defined benefit pension scheme liabilities

– the liabilities of the British Bankers’

Association Pension Scheme and the results

of actuarial valuations are carefully monitored

to ensure funding levels are appropriate

for the level of the scheme’s liabilities and

for the financial security of the Association.

Details are contained in note 20 within the full

Financial Statements.

The Audit and Oversight Committee maintains

and regularly reviews a Risks and Opportunities

Matrix.

Internal controls and financial reporting

The BBA maintains a comprehensive set of

financial controls, procedures and delegation of

authority. The financial controls and procedures

are reviewed regularly by the Audit and Oversight

Committee supported by the work of the external

auditors.

Employees

The BBA aims to create a working environment

that enables employees to enjoy their work,

develop their skills and expertise and provide the

best possible service to the BBA, its members

and the organisations the BBA works with. To

this end the BBA has policies addressing health

and safety, diversity, disability, performance

management, grievance, harassment and

employee relations. These policies are continually

reviewed against best practice standards and

updated as necessary. All staff have access

to them and there is an elected Staff Liaison

Committee.

The recruitment of staff includes an

assessment of skills for the role and these are

maintained by on-going training, the need for


35

which is assessed in the annual appraisal process.

The BBA is committed to the development

and training of its staff – both for corporate and

personal benefits.

The current gender profile of BBA employees at

31 December 2015 is:

Gender

No of

employees

Male 39 57

Female 30 43

% of

employees

The current gender profile of BBA Executive

Committee at 31 December 2015 is:

• Capital and Risk: to work for a proportionate

and sustainable prudential regime that achieves

financial stability and promotes growth

• Digital Banking: to ensure regulation helps

protect customers and financial stability, while

not stifling innovation or competition

• Regulation and tax: to address unintended

consequences of regulatory and tax reforms,

including helping the UK to remain competitive

as an international banking centre, with a level

playing field for challenger and smaller banks

• Financial crime: to help ensure we have an

effective and efficient financial crime regime

which enables banks to provide the services

that businesses and customers want

Gender

No of

employees

Male 8 67

Female 4 33

% of

employees

Future developments

The Association’s future developments are driven

in the first instance by the rolling 3 year business

plan which is updated on an annual basis.

The BBA aims to be a world class trade

association, representing the entire spectrum of

our membership in the UK, EU and internationally;

to be a constructive partner for government

and regulators; to prove value for money within

a balanced budget; to provide detailed policy

expertise and strategic thought leadership for

the industry with a pro-active media and events

programme; and to work with the Financial

Services Trade Associations Review to improve the

industry’s representation.

We will ensure that current regulatory, structural

reform, tax and political initiatives are finalised in

forms that are practical, economic and good for

both the industry and its customers. Our policy

priorities will be:

• Retail and Commercial Banking: to tackle

legacy issues and to help implement the

Competition and Markets Authority remedies,

as well as working to improve access to

banking and financial inclusion

• Wholesale Markets: to take forward the Capital

Market Union agenda focusing particularly

on securitisation, to implement the FEMR

recommendations and the MIFID II reforms

During 2015, discussions regarding the merits

of a consolidation between the BBA and other

trade associations progressed. A document

recommending consolidation between four

banking trade associations: the BBA, UK Cards,

Payments UK and the Council of Mortgage

Lenders was published at the end of November.

Since then the proposal has been reviewed by

the BBA Board. A sub-committee of the Board

was set up in February 2016 to negotiate the

detail of the consolidated trade association

and discussions continue. The BBA Board is

supportive of the proposal in principle and once

the sub-committee feels it has a structure it is

happy to recommend to the Board, the latter will

call an Extraordinary General Meeting to ask the

members to vote.

The Strategic Report was approved by the

Board on 22 April 2016 and signed on its behalf

by:

Anthony Browne

Chief Executive

BBA

Annual Report 2015


36

Board’s Responsibilities Statement

The Board is responsible for preparing the

Annual Report and the financial statements for

each financial year in accordance with United

Kingdom Generally Accepted Accounting

Practice, including Financial Reporting

Standard 102, “The Financial Reporting

Standard Applicable in the UK and Republic of

Ireland” (FRS 102).

The Board must not approve the financial

statements unless they are satisfied that they

give a true and fair view of the state of affairs of

the Association and of the profit or loss of the

Association for that period. In preparing these

financial statements, the Board is required to:

• select suitable accounting policies and then

apply them consistently;

• make judgements and accounting estimates

that are reasonable and prudent; and

• prepare the financial statements on

the going concern basis unless it is

inappropriate to presume that the

Association will continue in business.

The Board is responsible for keeping

adequate accounting records that are

sufficient to show and explain the Association’s

transactions and disclose with reasonable

accuracy at any time the financial position of

the Association. The Board is also responsible

for safeguarding the assets of the Association

and hence for taking reasonable steps for the

prevention and detection of fraud and other

irregularities.

The Board is responsible for the

maintenance of the financial information

included on the Association’s website.

Legislation in the United Kingdom governing

the preparation and dissemination of financial

statements may differ from legislation in other

jurisdictions.

Approved on behalf of the Board on 22 April

2016

Noreen Doyle

Chair

Anthony Browne

Chief Executive

Consolidated Income Statement

For the year ended 31 December 2015

2015 2014

as

restated

£’000 £’000

Turnover 11,521 11,240

Total expenditure (9,426) (10,815)

Exceptional item 776 (771)

Operating profit/(loss) 2,871 (346)

Interest receivable and

similar income 13 24

Interest payable and

similar charges (85) (97)

Profit/(loss) before

taxation 2,799 (419)

Taxation (347) 325

Profit/(loss) for the

financial year 2,452 (94)

BBA

Annual Report 2015

Statement of disclosure to auditors

So far as each person who was a member of

the Board at the date of approving this report is

aware, there is no relevant audit information of

which the Association’s auditors are unaware.

Additionally, the Board members individually

have taken all the necessary steps that they

ought to have taken as Board members

in order to make themselves aware of all

relevant audit information and to establish that

the Association’s auditors are aware of that

information.

The income statement has been prepared

on the basis that all operations are continuing

operations, with the exception of income of

£167,800 and expenditure of £120,000 in the

year ended 31 December 2014.

The income statement shows the turnover

and associated expenses as reported under

Financial Reporting Standard 102, which has

been adopted for the first time for the year

ended 31 December 2015.


37

Consolidated Statement of

Comprehensive Income

Consolidated Statement of Cash

Flows

For the year ended 31 December 2015

2015

£’000

2014

£’000

Profit/(loss) for the year 2,452 (94)

Other comprehensive income

Actuarial gain/(loss) on defined

benefit pension scheme and post

retirement medical benefits 608 (1,013)

Tax relating to other

comprehensive income (87) (24)

Other comprehensive income/

(expenditure) for the year 521 (1037)

Total comprehensive income/

(expenditure) for the year 2,973 (1,131)

Group Statement Of Financial

Position

As at 31 December 2015

2015 2014

as

restated

£’000 £’000

Fixed assets

Intangible assets 9 43

Tangible assets 367 451

376 494

Current assets

Stocks 15 15

Debtors 9,556 9,112

Cash at bank and in hand 5,429 4,791

15,000 13,918

Creditors: amounts falling

due within one year (8,542) (8,808)

Net current assets 6,458 5,110

Total assets less current

liabilities 6,834 5,604

Provisions for liabilities (503) (483)

Net assets excluding postemployment

benefits 6,331 5,121

Post-employment benefits (1,140) (2,903)

Net assets 5,191 2,218

Capital and reserves

Accumulated fund 5,191 2,218

For the year ended 31 December 2015

2015 2014

as

restated

£’000 £’000

Cash flows from operating

activities

Cash generated from

operations 608 375

Income taxes refunded/

(paid) 65 (272)

Net cash inflow from

operating activities 673 103

Investing activities

Purchase of tangible assets (48) (292)

Interest received 13 23

Interest paid - -

Net cash used in investing

activities (35) (269)

Net increase/(decrease) in

cash and cash equivalents 638 (166)

Cash and cash equivalents

at beginning of year 4,791 4,957

Cash and cash

equivalents at end of year 5,429 4,791

Cash and cash

equivalents consist of:

Cash at bank and in hand 5,429 4,791

Notes to the Financial Statements

Judgements and key sources of estimation

uncertainty

In the application of the Group’s accounting

policies, the Board is required to make

judgements, estimates and assumptions about

the carrying amount of assets and liabilities that

are not readily apparent from other sources.

The estimates and associated assumptions are

based on historical experience and other factors

that are considered to be relevant. Actual results

may differ from these estimates.

The estimates and underlying assumptions

are reviewed on an ongoing basis. Revisions

to accounting estimates are recognised in the

period in which the estimate is revised where the

revision affects only that period, or in the period

BBA

Annual Report 2015


38

of the revision and future periods where the

revision affects both current and future periods.

Critical judgements

The following judgements (apart from those

involving estimates) have had the most significant

effect on amounts recognised in the financial

statements.

Contingent liability

The Association and subsidiary companies are

involved in on-going litigation in respect of the

alleged manipulation and suppression of US$

LIBOR. The Board has obtained legal advice

relating to all claims. It is the Board’s judgement

that, as a result of developments described

in note 21 within the full Financial Statements,

the likelihood of a successful damages claim

against the BBA has decreased and in any event

insufficient information is available to assess the

likelihood of damages being payable or to

quantify any possible amount. Therefore no

provision has been included in the financial

statements relating to the claims.

Key sources of estimation uncertainty

The estimates and assumptions which have a

significant risk of causing a material adjustment

to the carrying amount of assets and liabilities are

as follows.

website impairment reviews are performed

annually. These reviews require an estimation of

the value in use of the cash generating units to

which the asset has been allocated. The value in

use calculation requires the entity to estimate the

future cash flows expected to arise for the cash

generating unit and a suitable discount rate to

calculate present value.

Useful economic lives of property, plant and

equipment

The annual depreciation charge for property,

plant and equipment is sensitive to changes in

the estimated useful economic lives and residual

values of the assets. The useful economic lives

and residual values are re-assessed annually.

They are amended when necessary to reflect

current estimates, based on technological

advancement, future investments, economic

utilisation and the physical condition of the

assets.

Provisions

Provisions have been made for property

contracts and dilapidations. These provisions

require management’s best estimate of the costs

that will be incurred based on legislative and

contractual requirements. In addition, the timing

of the cash flows and the discount rates used

to establish net present value of the obligations

require management’s judgement.

BBA

Annual Report 2015

Defined benefit pension scheme

The Group has an obligation to pay pension

benefits to certain employees. The cost of

these benefits and the present value of the

obligation depend on a number of factors

including; life expectancy, salary increases, asset

valuations and the discount rate on corporate

bonds. Management estimates these factors

in determining the net pension obligation in the

balance sheet. The assumptions reflect historical

experience and current trends.

Useful economic lives of intangible assets

The annual amortisation charge for intangible

assets is sensitive to changes in the estimated

lives and residual values of the assets. The

useful economic lives and residual values are

re-assessed annually. Computer software and

Turnover and other revenue

An analysis of the Group’s turnover is as follows:

2015 2014

as

restated

£’000 £’000

Turnover

Subscriptions invoiced to

members 8,154 7,748

Events, training and

publications 1,941 2,130

Associate income 746 654

Venue hire 214 234

Other income 466 306

Discontinued operations - 168

11,521 11,240


39

The year ended 31 December 2014 included

an amount of £167,800 of revenue from

discontinued operations. This amount was

turnover related to the LIBOR activities

conducted by BBA Trent Limited. These

activities ceased on 31 January 2014 following

the handing over of the responsibility for the

administration of LIBOR to Intercontinental

Exchange Benchmark Administration Ltd.

Turnover analysed by geographical

market

2015 2014

as

restated

£’000 £’000

United Kingdom 11,521 11,240

Exceptional item

2015

£’000

2014

£’000

Exceptional income

Recovery of additional

value added tax 776 -

776 -

Exceptional expenditure

Reorganisation costs - 310

Costs that relate to prior

years:

- Impairment of fixed assets - 179

- Additional provision for

healthcare costs - 167

- Pension scheme

administration - 52

- Other costs - 63

- 771

Exceptional income of £776,667 (2014: £nil)

represents additional input VAT recoverable on

costs incurred in providing the Better Business

Finance initiative and certain other recharged

activities conducted by the British Bankers’

Association. The inclusion in the financial

statements follows approval for repayment from

HMRC.

Group debtors

2015 2014

as

restated

£’000 £’000

Amounts falling due within

one year:

Trade debtors 6,800 5,969

Corporation tax

recoverable - 65

Amounts due from group

undertakings - -

Other debtors 486 560

Prepayments and accrued

income 2,070 2,005

9,356 8,599

Deferred tax asset - 197

9,356 8,796

Amounts falling due after

one year:

Deferred tax asset 200 316

Total debtors 9,556 9,112

Group creditors: amounts falling due

within one year

2015 2014

as

restated

£’000 £’000

Corporation tax payable 121 -

Other taxation and social

security 1,004 719

Trade creditors 222 898

Amounts due to group

undertakings - -

Other creditors 134 501

Accruals and deferred

income 7,061 6,690

8,542 8,808

BBA

Annual Report 2015


40

BBA

Annual Report 2015

Financial commitments, guarantees and

contingent liabilities

On 14 March 2013, 1 August 2013, 31 October

2013, 14 March 2014, 31 March 2014, 13

November 2014, and 16 April 2015 eight civil

actions were commenced in the United States

against the BBA and various other parties,

including certain contributor banks, BBA

Enterprises Ltd and BBA Trent Limited, by The

Federal Home Loans Mortgage Corporation,

the Principal Financial Group, the Federal

National Mortgage Association, the Federal

Deposit Insurance Corporation, the Bay Area Toll

Authority and the Berkshire Bank and others,

and Axiom Investment Advisors LLC and others

respectively. In the proceedings, damages are

claimed in respect of the alleged manipulation

and suppression of US$ LIBOR. The amount of

damages claimed in each of these eight actions is

not quantified and is not quantifiable at this stage

and as a result it is not practicable to provide

an estimate of any financial impact. Seven of

the eight cases filed against the BBA have been

dismissed or are subject to dismissal pursuant

to court opinions issued on 4 August 2015 and 3

November 2015; the remaining case, brought by

Axiom Investment Advisors LLC, has been stayed

since its commencement and has not been the

subject of any briefing or rulings by the court.

The US court’s earlier dismissal of certain

antitrust claims, including antitrust claims brought

against the BBA by the Bay Area Toll Authority, is

currently subject to a consolidated interlocutory

appeal to which the BBA is a party. Briefing

and oral argument in the appeal have been

completed, but no ruling has been issued yet.

The BBA has indemnified the Hogg

Committee, HMT and the FCA in respect of

remuneration, costs and expenses of each

incurred from January 2013 until completion

of the transfer of the LIBOR operation on 31

January 2014 in connection with the sale of the

business and assets of BBA LIBOR Limited.

The total aggregate liability of the BBA and BBA

Enterprises Ltd to the Hogg Committee, HMT,

and the FCA is limited to £1.5 million. No claim

has been received nor is the BBA aware that any

is contemplated.

The BBA believes that its level of accumulated

reserves is adequate to support its known

contingent obligations in relation to the above.

Subsidiaries

Details of the Association’s subsidiaries at 31

December 2015 are as follows:

Name of

undertaking

and country of

incorporation

BBA Enterprises Ltd

England & Wales

BBA Trent Limited

England & Wales

BBA FCAS Limited

England & Wales

BBA Gold Limited

England & Wales

Nature of

business

Commercial

activities

Class of

shareholding

% Held

direct

Ordinary 100.00

Non-trading Ordinary 100.00

Provision

of financial

crime

information

Provision

of online

service

access to

a global

operational

risk event

database

Ordinary 100.00

Ordinary 100.00

All of the above subsidiaries are included in the

consolidation.


41

BBA in numbers

28,500

pageviews of BBA blogs

460,000

BBA brief

emails delivered

200

In 2015

member banks in 50 countries

915 tweets

968,000

impressions

@bbavoice has

11,200 followers

Over

140

responses to

government

and regulator

consultations

Over

10 million

leaflets

distributed

to bank

customers

50 pieces of

EU

legislation

tracked

BBA

Annual Report 2015


42

BBA

Annual Report 2015

www.bba.org.uk

BBA

Pinners Hall

105–108 Old Broad Street

London, EC2N 1EX

United Kingdom

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