Conduct

We act with integrity in everything that we do

Material focus areas

Why this is important:

Doing the right thing, in the right way enhances our reputation, promotes trust in the financial system, and helps ensure that we provide appropriate products and services.

Desired outcomes

For our regulators customers and clients

  • Fair and ethical treatment when dealing with the Group
  • A stable financial services sector
  • Access to responsible financial services

For the Group

  • Sound corporate values, high ethical standards, market integrity and good conduct practices
  • Sustainable operations
  • Ultimately, stakeholder trust and support

Key matters raised by stakeholders

  • Need for an ethical work environment underpinned by sound corporate values
  • Financial system stability spanning from financial soundness to fair treatment of consumers
  • Adequate and timeous response to consumer and client-focused legislative changes
  • Adapting to and influencing changes to legislation and regulations that have a substantial impact on the business and the financial services sector

Measuring our progress

1 Annual YouGov survey includes Botswana, Ghana, Kenya, South Africa and Zambia.
2 The methodology for the Rest of Africa survey was expanded from a single question in 2014, to include all TCF and conduct outcomes resulting in a reduction in scores in 2015.
3 The percentage is calculated based on existing employees who completed refresher training, and new employees who completed training (excluding non-operational employees).
4 The percentage is calculated based on existing employees (excluding non-operational employees) who have completed the training since it was implemented in 2015.
5 The calculation methodology has been refined to reflect total number of cases concluded in the year. This methodology has been applied to 2015 as well.
LA This indicator is covered by the scope of a limited assurance engagement undertaken by EY and PwC. The basis of measurement thereof and the assurance statement can be found here.

1

Driving an ethical culture

At Barclays Africa, we see conduct as an opportunity to differentiate ourselves by developing high levels of trust with all our stakeholders. The financial services industry relies on trust, and good conduct is based on our daily behaviours, exhibited in our individual and collective actions and decisions.

Our code of conduct – the Barclays Way – outlines the behaviours which govern our way of working across the business.

It is a point of reference covering all aspects of employees’ working relationships with:

  • each other;
  • our customers and clients;
  • governments and regulators;
  • business partners;
  • suppliers;
  • competitors; and
  • the broader community.

Our conduct culture fosters values-based decision-making, and shows how our policies and practices align with our Values. We also have a supplier code of conduct, which outlines the standards we expect from them. The Barclays Lens is a complementary framework that moves decision-making beyond legal, regulatory and compliance concerns towards considering broader societal impact and opportunities.

We also participate in local and global platforms, such as the Group of Thirty Forum which recognises the systemic importance of the financial services sector, and the need to aspire to the highest standards of culture and conduct.

One of our primary objectives is building management capability that sets the appropriate leadership tone, and ensures high ethical standards are embedded in the business.

To support this, our leaders completed 6 100 leadership and management development interventions (2015: 3 900) and 625 (2015: 1 400) line managers undertook employee relations-specific training.

We have a comprehensive programme that educates and empowers all employees in terms of their rights and responsibilities. This contributes to a culture of trust.

Our training and awareness programmes, underpinned by clear policies, ensure that our employees:

  • are aware of the values and behaviours expected of them – as outlined in our code of conduct – including those relating to gifts and entertainment;
  • complete fighting financial crime training, which includes anti-bribery and corruption, anti-money laundering and sanctions;
  • develop a sensitivity to situations of real or perceived conflict of interest learn and how to deal with them when they arise;
  • put Treating Customers Fairly at the forefront of what we do; and
  • are aware of the tools available to them to raise their concerns of unethical behaviour or suspected fraud through our whistleblowing programme.

Our performance management processes and reward decisions emphasise commercial objectives as much as behaviour, thus encouraging the right conduct, while making the consequences of misconduct clear.

2

Responding to conduct-related regulations

In addition to our own defined ethics culture, are laws, regulations and codes that further define expectations of how we conduct our business. These cover a wide array of aspects within our business, from Know Your Customer requirements (identity document, proof of residence and proof of income), to the protection and processing of information through to how we design and sell our products and services.

In South Africa, we are supervised and regulated mainly by the South African Reserve Bank, Financial Services Board and ancillary regulators such as the Competition Commission of South Africa and the Financial Intelligence Centre. The Reserve Bank oversees the banking industry, and follows a risk-based approach to supervision, while the Financial Services Board oversees non-banking financial services such as insurance and investment businesses. The National Credit Regulator regulates consumer credit, and the National Consumer Commission is responsible for other aspects of consumer protection not regulated by the Financial Services Board. The intention is to divide regulatory responsibilities in South Africa between the Reserve Bank and the Financial Services Board under Twin Peaks. Our operations in Rest of Africa are primarily supervised and regulated by the central banks and, in some instances, are also regulated by financial market authorities.

Regulations driving consumer protection and ethical behaviour in the financial services industry continue evolving. While this creates additional requirements from the Group, we support efforts to ensure a stable financial services sector and a safe and fair operating environment. In all instances, we proactively engage with our various regulators, either directly or in collaboration with industry associations. We work to balance the requirements and the cost of compliance to minimise the impact on customers and clients, and on shareholder returns.

As part of an international organisation we have implemented certain global standards, and this often means, to a certain extent, we have already implemented or addressed requirements by the time they are introduced in local regulations. We plan to maintain pace with global best practice after the separation

We continuously monitor key macroeconomic, business, political, market and country-specific developments which might impact our portfolios, and take pre-emptive risk management actions where appropriate. The diagram below displays this regulatory environment, the stage of implementation and the impact on our operations.

External factors (shown on right) are predominantly regulatory changes and initiatives such as Twin Peaks and King IV. Additionally, a number of matters have been profiled to which the Group responds through the relevant channels; however, these are being managed for remediation and reputational damage as appropriate.

Internal factors predominantly stem from effectively managing the required operational and structural changes, and embedding the product skills and knowledge necessary for response to regulations. Focus areas include system resilience to decrease service interruptions, increasing employees’ product knowledge and skills needed to uphold Treating Customers Fairly practices, fairness of financial collections practices and remediation relating to regulatory findings. The separation from Barclays PLC potentially impacts conduct, due to the interconnectedness of the two groups. We are carefully planning and managing the separation process.

The regulatory landscape has wide-reaching impact on our business, and we provide a summary of the key regulatory themes currently in focus:

Combating money laundering, corruption and terrorist financing

We have a zero tolerance approach to non-compliance, and constantly enhance our control environment to reduce the risk of our employees, customers and clients breaching legislation when dealing with the Group. We follow a structured approach to ensure that business processes, policies or system changes required to support the regulatory change are implemented.

We have reviewed our anti-bribery and anti-corruption risk assessments against the United National Global Compact Principle – that business should work against corruption in all its forms, including extortion and bribery – as well as the Organisation for Economic Co-operation and Development Good Practice Guidance. The Board is satisfied with the outcomes of these self-reviews.

Protecting personal information

In various jurisdictions, we are governed by laws that control the processing and holding of personal data, as well as its security, with an increasing focus on cross-border processing and storage of data. This requires a careful balance between achieving efficiencies in processing, and meeting local requirements. We are also doing extensive work to prepare for the implementation of the Protection of Personal Information Act in South Africa.

Responsible credit and insurance

Governments in a number of jurisdictions are enacting or considering two legislative focus areas to regulate credit extension. The first seeks to reduce consumer indebtedness through limits and to ensure banks provide more information to credit bureaus. Matters relating to the limitation of fees and interest rates, maximum costs of credit life and mechanisms for resolving over-indebtedness are also being dealt with. The second initiative, as provided in the National Credit Amendment Act, provides for the once-off removal of defined adverse consumer credit history, followed by the automatic removal of legal judgments when debts are paid up.

Measuring our progress

We continuously evaluate our conduct-monitoring process, our review activities and our compliance controls. Based on these activities, we are able to either affirm the effectiveness of these programmes and controls or, where deficiencies are identified, adopt appropriate remedial and/or mitigating steps. When and where appropriate, we make public disclosures on material findings.

The National Credit Act is a key piece of legislation in the financial services sector and we acknowledge the National Credit Regulator’s role in protecting consumers. We will therefore, continue to take every opportunity to entrench the requirements of the National Credit Act in our lending practices and continue to engage with the National Credit Regulator on any ongoing matters.

In February 2017, the South African Competition Commission referred Absa Bank, among other banks, to the Competition Tribunal to be prosecuted for breaches of South African competition law related to foreign exchange trading of the South African rand. This was based on the finding that the respondents had engaged in various forms of collusive behaviour. Along with Barclays PLC, we were the first to bring the conduct to the attention of the Commission under its leniency programme and have cooperated with, and will continue to cooperate with them, in relation to this matter. The Commission is therefore not seeking an order from the Tribunal to impose any administrative fine on Absa Bank.

In the normal course of business, our various regulators conduct reviews of our business operations’ controls and our progress in meeting regulatory requirements. We continuously focus on compliance and risk controls. Sometimes however, remedial action is required, and administrative penalties and fines are levied on the Group. In 2016, we incurred R12.3m in penalties – the most notable being the R10m penalty imposed on Absa Bank by the South African Reserve Bank in December 2016, relating to weaknesses in transaction monitoring protocols regarding anti-money laundering.

Twin Peaks reform readiness underway

In South Africa, the Financial Sector Regulation Bill will overlay existing pieces of financial sector legislation, creating a framework designed to supervise the financial sector comprehensively and, ultimately, ensure financial stability. It focuses on prudential supervision and market conduct supervision by creating a Prudential Authority housed within the South African Reserve Bank, while the Financial Services Board will be transformed into a dedicated market conduct regulator – the Financial Sector Conduct Authority.

This comprehensive market conduct policy framework aims to ensure better outcomes for customers and clients.

It will incorporate:

  • Treating Customers Fairly principles;
  • conduct rules for transactional banking and the Retail Distribution Review (which focuses on delivery of suitable products);
  • access to suitable advice, remuneration and incentive structures; and
  • guidelines relating to many of our products.

The Prudential Authority will be responsible for supervising the safety and soundness of financial institutions that provide financial products (including insurance), market infrastructures or payment systems.

This serves to, among others things:

  • ensure that customers’ and clients’ funds are protected against the risk of institutions failing and that financial institutions can meet their promises to depositors, insurance policyholders, retirement fund members and investors;
  • reduce the risks of using taxpayers’ money to protect the economy from systemic failure; and
  • provide new and revised guidelines relating to outsourcing and governance.

We are in a good position to implement Twin Peaks once it is enacted. Our governance framework is in place, supported by our experience in implementing international regulation relating to market conduct.

3

Managing conduct-related risk

It is essential that we monitor our performance against our own and regulatory conduct standards, and this performance is embedded in our three lines of defence risk management approach. Our conduct risk framework brings together our activities into a consolidated framework.

Focusing on conduct risk helps us to:

  • provide appropriate products and services at the right prices to our customers and clients;
  • uphold market integrity;
  • reward the right activities and behaviours; and
  • mitigate potential risk.

An important part of monitoring our progress is feedback from our stakeholders. We gather it in a number of ways:

Conduct Index: an independent reputation survey with stakeholders

Our conduct reputation survey measures perceptions across a range of questions relating to transparency, employee welfare, quality and customer value as well as trust. Respondents include business and political stakeholders, the media, non-governmental organisations, charities and other opinion formers. While still above our target of 5.9/10, the 2016 score decreased to 6.3 (2015: 6.8). While we are perceived to provide high-quality services, our score has been impacted by certain media coverage in 2016, such as the uncertainties relating to the Barclays PLC sell-down.

Treating Customers Fairly: an outsourced survey with our customers

Our comprehensive measurement of Treating Customers Fairly and the 10 conduct risk outcomes provide a broad view of our customers’ and clients’ actual experience. The survey assesses their perceptions about our corporate culture; product design and marketing; quality of information; quality of advice; services and expectations; barriers to switch to another service provider; cancel; and our complaints management.

The Rest of Africa score improved to 63.9 (2015: 60.0) while the South Africa score remained flat at 61.0. These scores remain below our internal ambition and lag behind our peers.

We remain focused on:

  • improving our ability to provide advice that takes account of the customers’ and clients’ unique circumstances;
  • identifying potential difficulties before they impact customers and clients; and
  • ensuring we keep our customers’ and clients’ best interests at heart when promoting our products or services.

Monitoring the conduct of employees

We monitor the conduct of our employees through surveys and reviews of the number and root causes of disciplinary cases, grievances and whistleblowing statistics.

We have seen a decrease in the number of disciplinary cases as a percentage of permanent employees, primarily as a result of improved leadership, more effective processes and the early and sound management of poor performance. Of the 1 976 disciplinary cases concluded in the year, 462 were as a result of ethical breaches (2015: 395).

Our whistleblowing programme provides a safe platform to raise concerns of unethical behaviour or fraud confidentially and, where permissible, anonymously. 251 employee conduct-related whistleblowing cases were reported and concluded. However, only 35% (2015: 45%) were substantiated. Of the substantiated cases that were closed in the year 24% related to policy and procedure breaches, 33% to dishonesty, 38% to human resource grievances, 4% came from employee complaints and 1% from ‘other’. Tip-offs are the most common detection of fraud, proving the importance of a whistleblowing function.

Grievances as a percentage of permanent employees rose to 3.2% (2015: 2.2%). This is mostly due to increasing effective grievance processes management across all our operations, and a more granular view of grievances related to annual performance management ratings and bonus payments – which are now dealt with individually. Overall, the number of grievances remains within tolerance levels.