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 customersIn 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.

• Worked with HM Treasury to launch midata, a new service that helps customers identify the best value current account for them.

• 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.

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eport 2015Promoting growthWe’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 standardsIn 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”.

Banking on British Jobs

Good returns What banks are putting back into communitiesEmily Redding

www.pwc.co.uk

Total TaxContribution ofthe UK bankingsector

A publicationprepared by PwC forthe British BankersAssociation

September 2015

Financing the UK’s infrastructure needs

Close at hand

Bank branch 1.4

Post Office 0.7

Free ATM 0.5

Supported by:

Future Financial Crime Risks Considering the financial crime challenges faced by UK banks.

A LexisNexis® Risk Solutions report produced for the British Bankers’ Association

November 2015

The Benefits of Banking

Diversity and inclusion

in banking

www.bba.org.ukBBA

Pinners Hall105 –108 Old Broad Street

London, EC2N 1EXUnited Kingdom

World of Change

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

Winning the Global RaceThe competitiveness of the UK as a centre for international banking

Digital Disruption:UK Banking ReportMarch 2015

In partnership with:

BBA Reports in 2015

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Chair’s welcomeNoreen Doyle

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.

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The BBA’s overarching and long-

term 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

Chief Executive’s reportAnthony Browne

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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

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Retail banking: representing the banks that support us every day

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

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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 multi-million 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.

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

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.

Joell Hills, ITV Business Editor, chairing the BBA Annual Retail Banking Conference in June 2015

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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.

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The future of banking

The technology we use to look

after our day-to-day finances has

changed beyond recognition when

compared with just a few years ago.

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.

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£2.9 billion – transferred a

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9.6 million– daily log-ins to

March 2015

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www.bba.org.ukBBA

Pinners Hall105 –108 Old Broad Street

London, EC2N 1EXUnited Kingdom

World of Change

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In August we published the second

edition of our pamphlet The

Benefits of Banking.

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.

Our publication also unveiled that banks are investing £3bn every year in new technology, such as new apps for smartphones and tablets.

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 one-stop 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. £3 billion

per year

In 2014 banking industry imports stood at £3.4 billion

But the industry exported services worth £28 billion

IMPORTS

EXPORTS

The Benefits of Banking

The Benefits of Banking

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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.

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.

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

North Tyneside89%

Three Rivers18%

Taunton Deane17%

Hartlepool17%

Brentwood148%

Edinburgh13%

Crawley12%

St Albans28%

Vale of White Horse20%

Glasgow30%

Source: ONS, 2015.

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

Banking on British Jobs

Banking on British Jobs

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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.

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.

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.

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 medium-sized 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 Government-designated online platforms.

The legislation lays the pathway for greater sharing of information between Government,

80%approval rate for bank lending

Application

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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.

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

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.

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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 industry-leading 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.

Our work in Brussels and beyond

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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.

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

23,000 jobs directly provided by the sector

£5 billioncontributed to Britain’s economy each year

5,000,000,000

PBWM

The British EconomyEach year

Five Billion Pounds only

00-00-00 0034921304 001

Date:

£

Private Banking

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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.

Wholesale banking: representing the international banking sector

Winning the Global RaceThe competitiveness of the UK as a centre for international banking

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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 decision-makers, 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

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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.

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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.

Financial and risk policy

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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.

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.

Bail-inTemporary Stay

Recovery & ResolutionPlanning

TLAC/MREL

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92%29 banks submitted

data to the BBA and PwC. Together they employ 92 per cent of bank workers.

Unlike other firms,banks can’t recover

VAT spent onbusiness costs.

Irrecoverable VAThas increased by 79per cent since 2008

79%

Total 2014 taxcontribution ofbanks with HQoutside the UK

Total 2014 taxcontribution

of banks withUK HQs

85%The bank levy hasjumped by 85 per

cent since 2011

£15.3bn

£16bn

SOURCE: BBA/PwC

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.

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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 non-executive 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.

Standards in corporate governance

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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.

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

steps and involve putting in place robust whistleblowing arrangements, identifying a non-executive 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.

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.

Women make up 31% of boards in FTSE 100 banks

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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 anti-bribery 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.

Financial crime

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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 Enterprises

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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.

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

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.

500

Mon Tue Wed Thur Fri

visitorsa week

Pinners Hall

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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 membership

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Member listThe following list details BBA member banks and associates

• 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

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• 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 Gold members ** BBA Confirmations members

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• 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

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Financial StatementsBritish 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

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 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 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,

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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

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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

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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

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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

% of employees

Male 39 57

Female 30 43

The current gender profile of BBA Executive Committee at 31 December 2015 is:

Gender No of employees

% of employees

Male 8 67

Female 4 33

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

• 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

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

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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.

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 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 Anthony BrowneChair Chief Executive

Consolidated Income Statement

For the year ended 31 December 2015

2015

£’000

2014 as

restated£’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)

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.

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Consolidated Statement of

Comprehensive Income

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 2014as

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 post-

employment 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

Consolidated Statement of Cash

Flows

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

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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.

Defined benefit pension schemeThe 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 historicalexperience 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

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.

Turnover and other revenue

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

2015

£’000

2014as

restated £’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

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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

£’000

2014as

restated £’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

£’000

2014as

restated £’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

£’000

2014as

restated £’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

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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

Nature of business

Class of shareholding

% Held direct

BBA Enterprises Ltd England & Wales

Commercial activities

Ordinary 100.00

BBA Trent Limited England & Wales

Non-trading Ordinary 100.00

BBA FCAS Limited England & Wales

Provision of financial

crimeinformation

Ordinary 100.00

BBA Gold Limited England & Wales

Provision of online service

access toa global

operational risk eventdatabase

Ordinary 100.00

All of the above subsidiaries are included in the consolidation.

41B

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eport 2015

BBA in numbers

28,500 pageviews of BBA blogs

Over 10 million

leaflets distributed

to bank customers

460,000

BBA brief emails delivered

member banks in 50 countries

200

11,200 follower

s

@bbavoice has

915 tweets968,000

impressions

In 2015

50 pieces ofEU

legislation tracked

Over

140responses to government

and regulator consultations

42 B

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www.bba.org.ukBBA

Pinners Hall 105–108 Old Broad Street

London, EC2N 1EXUnited Kingdom