Banks are central to every culture; they provide the funding that facilitates organization and entrepreneurship, support a sound financial system, and help to create jobs and wealth. Banks in the UK run in a highly competitive, globalised but lightly-regulated environment. They will face significantly well-informed and ‘energetic’ clients, determined lawmakers, and electorates who have become environmentally mindful. They have to adjust to changing monetary and marketplace conditions, fast changing client needs and expectations. Their particular business is definitely influenced simply by global economic, political, regulating, technological and other unpredictable elements.
Consequently, they must device their very own strategies, plans and functions to adjust to these within order to meet stakeholder objectives and satisfy consumer requires. In this task, I make an effort to describe and evaluate changing business environment of Barclays Bank Plc over the last five years.
About Barclays Bank Plc
Barclays is known as a major monetary crisis services company engaged in full banking, charge cards, corporate banking, investment financial, wealth administration and investment management providers with an extensive international existence in The european union, the Americas, Africa and Asia.
BarclaysGroup hq is at one particular Churchill Place in London, UK, but it features operations worldwide, with products and services to meet the needs of customers and customers in regional markets. With over 300 years of history and expertise in banking, Barclays operates in more than 50 countries and employs more than 144, 000 persons. Barclays movements, lends, invests and shields money for more than 48 million customers and clients throughout the world.
Barclays is made up of two ‘Clusters’: Global Price tag Banking, and company and Investment Banking and Wealth Supervision, each which has a range of Business Units. The next major area of the business is usually Group Middle, which consists all our important support functions.
UK Bank Industry
Britian’s banking sector, following the US and Asia, is the world’s third major and regarded foremost when it comes to: efficiency, dynamism and return on capital. In addition to using one of the major commercial banking industries, great britain is also an important international hub for investment and private financial. The UK banking sector’s strong international orientation is shown in the substantial foreign occurrence and sizeable assets of foreign banking institutions in London. It services 95% of the inhabitants with about 3. 5% of UK’s workforce ” over a million workers.
Banks and finance contribute 70bn to the UK’s national end result (6. 8% of GDP) and provide 25% of total corporation taxes (8bn) to the UK Federal government. The main retail banks present over 125m accounts, crystal clear 7bn deals a year and facilitate 2 . 3bn cash withdrawals annually from its network of above 30, 500 free ATMs. Banks in the UK contribute well over 100m per year to non profit organizations and local community initiatives.
UK banks will be authorised and regulated by Financial Services Authority under the Finance and Markets Act 2150 (FSMA). Finance Authority is usually an independent nongovernmental body which will exercises lawful powers underneath the FSMA. The FSMA needs the FSA to follow four objectives: to maintain assurance in the UK economic climate; to promote community understanding of the financial system; to generate an appropriate level ofprotection for consumers while recognizing their particular responsibilities; and to reduce the scope for financial crime. Financial institutions of Britain is responsible for preserving overall balance of the financial system a whole. Your bank sets interest rates of UK and is as well responsible for discovering and constraining systemic financial risk.
Barclays lender operates nearly all over the world thus its activities are affected by the global economic circumstances. I have used PESTEL framework to spell out and examine business environment of Barclays Bank plc. It categorises environmental elements into half a dozen main types: political, monetary, social, scientific, environmental and legal.
* Government stability
* Taxation policy
* Overseas trade polices
5. Social well being policies
* Business cycles
5. GNP tendencies
* Interest rates
* Funds supply
* Income distribution
* Social mobility
* Lifestyle changes
2. Attitudes to work and leisure
* Levels of education
5. Government investing in research
* Authorities and market focus on technological effort
* Fresh discoveries/development
* Acceleration of technology transfer
* Rates of obsolescence
5. Environmental safeguard laws
* Garbage disposal
5. Energy usage
* Monopolies legislation
* Employment legislation
2. Health and protection
2. Product security
The enhancements made on the business environment of Barclays bank
The collapse of the global enclosure bubble, which usually peaked in the U. H. in 2006, induced the principles of investments tied to property pricing to plummet afterwards, damaging finance institutions globally. Questions regarding bank solvency, declines in credit availability, and damaged trader confidence recently had an impact on global stock markets, where investments suffered huge losses during late 2008 and early on 2009. Financial systems worldwide slowed during this period while credit tightened and foreign trade decreased. Governments and central banks responded with unparalleled fiscal stimulus, monetary insurance plan expansion, and institutional bailouts.
The subsequent emergence of a larger set of credit rating problems ” in mortgage loans and in business lending, and in particular in commercial real estate ” generated credit rating capacity constraints and monetary slowdown. A preliminary focus on financing problems, while using failure of Northern Mountain caused not by right away evident solvency/credit quality complications, but by drying up with the market pertaining to both securitised credit resources and wholesale funding availability. Such money issues were also critical for the problems of Bradford & Bingley and HBOS in September/October 08.
The UK economy was officially declared being in economic downturn on sixth May 2009. The Office of National Figures said that Low domestic merchandise (GDP) dropped by 1 ) 5% within the last three months of 2008, after having a 0. 6% contraction inthe previous one fourth. Recession is generally defined as two quarters of successive spasms in GDP, which means the united kingdom had been in recession seeing that July 08. Industrial development fell by a massive 3. 9 percent over the 1 / 4, while the major services sector fell by simply one %. Unemployment had also risen to 2 . forty seven million inside the three months to July 2009. It was at its highest level in 14 years since May 1995.
The united kingdom economy came out of recession this year, after figures showed completely grown by 0. 1% in the last 90 days of 2009. In the second week of January 2010, UK unemployment dropped for the first time in 18 month. The UK’s production and service groups each grew by zero. 1% throughout the quarter. The UK recession commenced in the April-to-June quarter of 2008, the longest UK recession on record. During 18 months of recession, public borrowing elevated to an predicted 178bn, although output slipped by 6%.
Impact on Barclays Bank’s functionality
Barclays announced record income of more than 11 billion pertaining to 2009 ” a 92% rise on the previous year. Its overall performance driven largely by a good revival in its investment financial arm Barclays Capital. Income were also boosted by sale for fund managing business Barclays Global Buyers, and the addition of the New york city operations of failed expenditure bank Lehman Brothers at the end of 08. The BGI sale added 6. a few billion to pre-tax revenue. Barclays Capital contributed 2. 5 billion of the bank’s underlying earnings of 5. 3 billion dollars which was 13% down on 2008’s 6 billion. However , the bank’s earnings was extremely affected by a global economic slowdown and showing signs of damage economic conditions in the UK.
Their UK Full Banking income before tax in 2009 decreased 55% (757m) to 612m (2008: 1, 369m), influenced by low interest rates causing margin compression on the pay in book and increased disability charges which will together a lot more than offset very well controlled costs and an improved assets margin. Impairment expenses rose to 974m (2008: 414m), highlighting the impact of the economic recession throughout the business with continued pressure on business liquidity, increasing default prices and reduced asset principles.
Barclays forced strict criteria on new credit card applications, using ascoring system that takes over 4 hundred variables into mind when evaluating an applicant’s likely capability to manage all their credit. About 50% of applications for credit cards will be declined as a result. Strong profits growth (2009) across the collection driven by increased loaning, improved margins and forex gains, was offset by simply higher disability charges, driven by the deterioration in the global economy. Disability charges in the international businesses increased 444m, driven by higher delinquencies due to going down hill economic conditions. UK stock portfolio charges had been higher resulting from rising delinquencies due to the economical deterioration, especially in the loan portfolios, and the introduction of Goldfish in UK Cards.
The impairment impose in Global Retail and Commercial Bank increased simply by 85% (2, 473m) to 5, 395m (2008: 2, 922m) because charges went up in all portfolios, reflecting deteriorating credit conditions across all regions.
Impairment charges upon loans and advances increased 50% (2, 445m) to 7, 358m (2008: 4, 913m). The rise was mostly due to economic deterioration and portfolio growth, currency actions and methodology enhancements, partly offset with a contraction in loan balances.
In Expense Banking and Investment Supervision, impairment was broadly unrevised at 1, 949m (2008: 1, 980m). The impairment charge against available for sale property and turned repurchase negotiating increased by 41% (207m) to 713m (2008: 506m), driven simply by impairment against credit market exposures.
During 2008, the UK government acted in the banking sector to recapitalise banks and assurance toxic resources and debris and new lending for essential facilities programmes. It was essential to banks up loaning for buyers and businesses and reestablish confidence in banks. But it was vital to avoid the unprecedented financial crisis having even more extensive reaching and catastrophic effects in the larger economy. This kind of decision was not taken gently and had not been considered a fairly easy ride pertaining to the banking institutions. Banks wishing toparticipate inside the Asset Safeguard Scheme by way of example had to help to make additional loaning to people and businesses. But the overarching priority in the banking sector was first to make sure the ongoing supply of credit to the larger economy. Therefore returning the banks to solvency and profitability, and maintaining economical stability.
Upon 13th August 2008, the us government nationalised the Royal Lender of Ireland (RBS), using a 63 % risk in exchange to get 20 billion dollars of taxpayers’ money (now 84% owned by the government) on state that not any executive bonuses paid during 2008; zero dividend before the government’s 5bn of inclination shares happen to be repaid plus the government designated three administrators; RBS was required to maintain mortgage lending at 2007 amounts.
On thirty first October 2008, Business secretary Lord Mandelson waived competition law pertaining to takeover of Lloyds TSB’s takeover of Halifax Traditional bank of Scotland creating the next biggest traditional bank of Britain to calm concern about the effectiveness of HBOS after a run on their shares. The combined checking accounts for a third of the mortgage market. Even though the merged traditional bank is smaller than Barclays, HSBC and Hoheitsvoll Bank of Scotland, because it has significantly less of an foreign profile than the other financial institutions, it is the market leader ” in terms of savings ” by a huge perimeter.
In order to banks up self confidence in the financial system during 2008, the government injected money into Lloyds TSB Financial institution (5. 5bn) and HBOS (11bn) to become owner of 43. 5% of the combined group, administrators were asked to receive 2008’s bonus in shares; not any dividend till preference shares are refunded; government designated two administrators; Lloyds asked to maintain mortgage lending in 2007 amounts for subsequent three years. Since the Finance Authority increased the capital ratio requirements for all those UK banks, Barclays have been forced to increase 7. a couple of billion from Middle East Investors upon generous terms. A further 1. 5bn was being raised from institutional traders to strengthen the balance sheet.
Chancellor Alistair Favorite introduced a brief one-off super-tax of 50 percent on bankers’ bonuses paid above 25000 between December 2009 and April 2010. Bankers even now had to pay out income tax upon any added bonus they acquire as usual. Thenew tax was designed to discourage banks from imparting large bonuses to personnel in the wake up of the significant taxpayer support they have received in the financial disaster. Consequently, Barclays paid 225 million in windfall reward tax intended for 2009.
According to British Price tag Consortium (BRC), more people are using money to pay for all their purchases among growing client concerns about how much funds they are spending. The global recession is triggering consumers being more mindful with their funds. Figures from the organisation confirmed that funds was used intended for 60 percent of all transactions during 2008, an increase of 54 % from 2007. Cash symbolized 34 per cent of all money spent in the full sector during 2008, in comparison with 32 per cent in 2007. According to BRC, someones enthusiasm intended for using credit cards is moving as they are not merely reluctant to borrow nevertheless also reluctant to use greeting cards.
A survey released upon 22nd January 2009 by simply communications consultants Cohn & Wolfe uncovered the full size of UK consumers’ anger with banking institutions. UK consumers perceive their very own banks to get ‘greedy’ and ‘impersonal’, according to the survey, which in turn polled 852 consumers in January 2009. The study as well revealed that 60 per cent of consumers avoid believe that their particular bank is looking after their utmost interests. Once asked which in turn words greatest describe the perception of their financial institution, buyers identified ‘greedy’ (49%), ‘impersonal’ (36%) and distant (34%). Positive and desired descriptions including ‘ethical’ (2%), ‘trustworthy’ (4%) and ‘transparent’ (5%) were among the least common terms employed by consumers to spell out their banks.
Almost two thirds (64%) of respondents’ rely upon financial institutions experienced weakened over the last 18 months. Too little of confidence in banks was further highlighted with 74% of consumers saying they do not think that their traditional bank would help them recover anything they had lost in 2008. Respondents as well identified the financial services they trusted the majority of. Retail banks were comfortably (59%) one of the most trusted type of financial services. At the opposite end of the size, investment broker (2%), insurance firms (5%), on-line financial service providers and supermarketretailers (both 6%) come off worst.
Due to such bad attitude toward banking industry and intense public curiosity and matter for banking companies and bankers’ pay, Barclays chief executive David Varley and president Joe Diamond equally agreed to sacrifice bonuses for 2 years, 2008 and 2009.
At the end of 2004, Processor chip & FLAG technology was introduced like a strategic response to tackle fake and lost & thieved card scams in the face-to-face environment. Until this point, UK consumers fixed for their services and goods and only applied their PIN for ATM withdrawals. During 2007, Barclays sent out ‘PIN sentry’ machines to over 0.5 mil customers so that they can prevent online banking fraudulence. The FLAG sentry reader is meant to get used once an online accounts holder features logged in the banking web page.
After visiting in, consumers slot their very own bank debit card into the card reader, which usually generates a distinctive code that they can must suggestions before making a transaction. As well, retailers and banks are applying more fraudulence screening recognition tools and online scam prevention equipment, such as Master card SecureCode and Verified by Visa, which make cards more secure when people will be shopping online. This led to telephone, internet and mail buy fraud loss falling nineteen percent by 328. four million in 2008 to 266. 4 million last year.
Weather change is just about the single biggest challenge the world faces at the outset of the modern world, and in response Barclays is usually focusing more and more on the work on environmental surroundings, which includes both its indirect and direct impacts.
Barclays remains focused on increasing it is energy performance, and reducing its carbon footprint by using an ongoing basis, as well as helping its supply chain reduces its exhausts. In 2007, it used emissions trading capability, and moved into the customer market with new lower-carbon products and services.
An illustration is Barclaycard Breathe, a new card that provides consumers incentives when they purchase green products, and donates half their profits to environmental projects. In the inexpensive market Barclays Capital offers committed to the EU exhausts trading industry to delivers its full range of commodity trading and risk management experience to bear to help clients take care of their carbon dioxide risk. Since 2005 it includes traded more than 600 , 000, 000 tonnes of carbon credit, with a notional value of over $14 billion.
A global financial crisis resulted in a significant tightening up of rules and becomes regulatory set ups globally. All of the changes in the legal framework, policies and financial regulatory actions, have an impact about Barclays’ businesses and profits.
The market to get payment protection insurance (PPI) have been under scrutiny by the UK competition authorities and financial services regulators. In 2006, the FSA released the outcome of its extensive industry thematic review of PAYMENT PROTECTION INSURANCE sales practices in which it concluded that a lot of firms neglect to treat customers fairly and that the FSA could strengthen it is actions against such businesses. Barclays voluntarily complied together with the FSA’s ask for to end selling one premium PPI by the end of January 2009. On twenty first February, great britain government introduced Banking Action 2009 which supplies the Specialists with tools to deal with faltering banks and building communities. The Bank Act supplies a permanent and appropriate program for the resolution of failing banking institutions.
It is a key step forward in the Government’s program to strengthen balance and self-confidence in the UK banking system, inside the wake from the global instability experienced simply by financial marketplaces. In order to decrease excessive risk taking by large banking institutions, FSA printed its new Remuneration Code of Practice in August 2009. The code states that firms probably should not encourage risk taking to generate short-term income ” the focus should be upon long term achievement. It needed firms to give pay information to FSA so that it can monitor compliance. Barclays’ discretionary pay prizes for 2009 were totally compliant with all the FSA Remuneration Code which resulted in an increase in the deferred awards by simply approximately 70% and greater use ofequity in deferment structures, specifically to elderly staff. 100% of the discretionary pay prizes for 2009 to the Executive Committee were deferred.
By previous chapters it becomes obvious that Barclays bank are operating in unpredictable and volatile organization environment. In such circumstances, it is recommended that it ought to be clear regarding its tactical framework pertaining to the coming years and should keep a audio financial and organisational ground that anticipates and gets used to to the regulatory changes. It might achieve outstanding growth by diversifying their profit basic by location and by organization line. It may focus intensely on price reduction and risk management. It truly is required to make the internal framework, processes and culture to respond rapidly to new opportunities, threats and regulations. Also, it is required to re-establish trust and relationship with customers simply by fulfilling the requirements with product innovation and customer centric approach.
The global monetary slowdown and subsequent economic downturn in UK and in many other countries on the planet have changed the business environment in considerable way. Barclays Bank operates in a business environment which is very influenced by simply political, cost-effective, sociocultural, technical, environmental and legal elements. In order to be competitive successfully, it has to adapt to changing business environment. Its efficiency in previous five years shows that it includes the ability to manage the business of course profitably even in such deteriorating economic conditions where other players in the market struggled to outlive. However , it needs to undertake a well balanced set of tactical initiatives in such unforeseen and extreme volatile business environment which is beyond the organisational control.
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