Material accounting policies (Policies)

12 Months Ended

Dec. 31, 2025

Disclosure of objectives, policies and processes for managing capital [abstract]

Compliance with International Financial Reporting Standards

The consolidated financial statements of the Barclays Bank Group, and the separate financial statements of Barclays Bank

PLC, have been prepared in accordance with UK-adopted international accounting standards.

The consolidated financial statements of the Barclays Bank Group, and the separate financial statements of Barclays Bank

PLC, have also been prepared in accordance with (1) International Financial Reporting Standards (IFRS) as issued by the

International Accounting Standards Board (IASB), including interpretations issued by the IFRS Interpretations Committee, as

there are no applicable differences from IFRS as issued by the IASB for the periods presented; and (2) IFRS adopted pursuant

to Regulation (EC) No. 1606/2002 as it applies in the European Union (“IFRS as adopted by the EU”).

There are currently no differences between UK-adopted international accounting standards and IFRS as adopted by the EU

and therefore no reconciliation of variances is provided.

The principal accounting policies applied in the preparation of the consolidated and separate financial statements are set out

below, and in the relevant notes to the financial statements. These policies have been consistently applied.

Basis of preparation

The consolidated and separate financial statements have been prepared under the historical cost convention modified to the

extent required or permitted under IFRS as set out in the relevant accounting policies. The financial statements are stated in

millions of Pounds Sterling (£m), the functional currency of Barclays Bank PLC.

The financial statements have been prepared on a going concern basis, in accordance with the Companies Act 2006 as

applicable to companies using IFRS. The financial statements are prepared on a going concern basis as the Board is satisfied

that the Barclays Bank Group and parent company have the resources to continue in business for a period of at least 12

months from approval of the financial statements.

In making this assessment, the Board has considered a wide range of information relating to present and future conditions

and has reviewed a working capital report (WCR). The WCR is used by the Board to assess the future performance of the

Barclays Bank Group and whether it has the resources in place that are required to meet its ongoing regulatory

requirements. The WCR assessment is based upon business plans which contain future forecasts of profitability taken from

the Barclays Bank Group’s medium term plan as well as projections of regulatory capital requirements and business funding

needs. The WCR also includes an assessment of the impact of internally generated stress testing scenarios on the liquidity

and capital requirement forecasts. The stress tests used were based upon an assessment of reasonably possible downside

economic scenarios that the Barclays Bank Group could experience.

The WCR showed that the Barclays Bank Group had sufficient capital and liquidity in place to support its future business

requirements and remained above its regulatory minimum requirements in the stress scenarios. Accordingly, the Board

concluded that there was a reasonable expectation that the Barclays Bank Group has adequate resources to continue as a

going concern for a period of at least 12 months from the date of approval of the financial statements.

Consolidation

The consolidated financial statements combine the financial statements of Barclays Bank PLC and all its subsidiaries.

Subsidiaries are entities over which Barclays Bank PLC has control. The Barclays Bank Group has control over another entity

when the Barclays Bank Group has all of the following:

1)power over the relevant activities of the investee, for example through voting or other rights;

2)exposure to, or rights to, variable returns from its involvement with the investee; and

3)the ability to affect those returns through its power over the investee.

As the consolidated financial statements include partnerships where the Barclays Bank Group member is a partner,

advantage has been taken of the exemption under Regulation 7 of the Partnership (Accounts) Regulations 2008 with regard

to preparing and filing of individual partnership financial statements.

Details of the principal subsidiaries are given in Note 31.

Foreign currency translation

Transactions in foreign currencies are translated into Sterling at the rate ruling on the date of the transaction. Foreign

currency monetary balances are translated into Sterling at the period end exchange rates. Exchange gains and losses on

such balances are taken to the income statement.

The Barclays Bank Group’s foreign operations (including subsidiaries, joint ventures, associates and branches) based mainly

outside the UK may have different functional currencies. The functional currency of an operation is the currency of the main

economy to which it is exposed.

Prior to consolidation (or equity accounting) the assets and liabilities of non-Sterling operations are translated at the period

end exchange rate and items of income, expense and other comprehensive income are translated into Sterling at the rate on

the date of the transactions. Exchange differences arising on the translation of foreign operations are included in currency

translation reserves within equity. These are transferred to the income statement when the Barclays Bank Group disposes of

the entire interest in a foreign operation, when partial disposal results in the loss of control of an interest in a subsidiary,

when an investment previously accounted for using the equity method is accounted for as a financial asset, or on the

disposal of a foreign operation within a branch.

Financial assets and liabilities

Recognition

The Barclays Bank Group recognises financial assets and liabilities when it becomes a party to the terms of the contract.

Trade date or settlement date accounting is applied depending on the classification of the financial asset.

Classification and measurement

Financial assets are classified on the basis of two criteria:

i)the business model within which financial assets are managed; and

ii)their contractual cash flow characteristics (whether the cash flows represent ‘solely payments of principal and

interest’ (SPPI)).

The Barclays Bank Group assesses the business model criteria at a portfolio level. Information that is considered in

determining the applicable business model includes (i) policies and objectives for the relevant portfolio, (ii) how the

performance and risks of the portfolio are managed, evaluated and reported to management, and (iii) the frequency, volume

and timing of sales in prior periods, sales expectation for future periods, and the reasons for such sales.

The contractual cash flow characteristics of financial assets are assessed with reference to whether the cash flows represent

SPPI. Terms that could change the contractual cash flows so that it would not meet the condition for SPPI are considered,

including: (i) contingent and leverage features, (ii) non-recourse arrangements, (iii) features that could modify the time

value of money, and (iv) Social, Environmental and Sustainability-linked features. Terms with de-minimis impact do not

preclude cash flows from representing SPPI.

The accounting policy for each type of financial asset or liability is included within the relevant note for the item. The

Barclays Bank Group’s policies for determining the fair values of the assets and liabilities are set out in Note 16.

Derecognition

The Barclays Bank Group derecognises a financial asset, or a portion of a financial asset, from its balance sheet where (i) the

contractual rights to cash flows from the asset have expired, or (ii) the contractual rights to the cash flows from the asset

have been transferred (usually by sale) and with them either (a) substantially all the risks and rewards of the asset have been

transferred, or (b) where neither substantially all the risks and rewards have been transferred or retained, where control over

the asset has been lost.

It may not be obvious whether substantially all of the risks and rewards of a transferred asset, or portion of an asset, have

been transferred. It is often necessary to perform a quantitative analysis that compares the Barclays Bank Group's exposure

to variability in asset cash flows before the transfer with its retained exposure after the transfer. A cash flow analysis of this

nature may require judgement. In particular, it is necessary to estimate the asset’s expected future cash flows as well as

potential variability around this expectation. The method of estimating expected future cash flows depends on the nature of

the asset, with market and market-implied data used to the greatest extent possible. The potential variability around this

expectation is typically determined by stressing underlying parameters to create reasonable alternative upside and downside

scenarios. Probabilities are then assigned to each scenario. Stressed parameters may include default rates, loss severity, or

prepayment rates.

Financial liabilities are de-recognised when the liability has been settled, has expired or has been extinguished. An exchange

of an existing financial liability for a new liability with the same lender on substantially different terms – generally a difference

of 10% or more in the present value of the cash flows or a substantive qualitative amendment – is accounted for as an

extinguishment of the original financial liability and the recognition of a new financial liability.

Accounting for reverse repurchase and repurchase agreements including other similar lending and borrowing

Reverse repurchase agreements (and stock borrowing or similar transactions) are a form of secured lending whereby the

Barclays Bank Group provides a loan or cash collateral in exchange for the transfer of collateral, generally in the form of

marketable securities subject to an agreement to transfer the securities back at a fixed price in the future. Repurchase

agreements are where the Barclays Bank Group obtains such loans or cash collateral, in exchange for the transfer of

collateral.

The Barclays Bank Group purchases (a reverse repurchase agreement) or borrows securities subject to a commitment to

resell or return them. The securities are not included in the balance sheet as the Barclays Bank Group does not acquire the

risks and rewards of ownership. Consideration paid (or cash collateral provided) is accounted for as a loan asset at

amortised cost, unless it is designated or mandatorily at fair value through profit and loss.

The Barclays Bank Group may also sell (a repurchase agreement) or lend securities subject to a commitment to repurchase

or redeem them. The securities are retained on the balance sheet as the Barclays Bank Group retains substantially all the

risks and rewards of ownership. Consideration received (or cash collateral provided) is accounted for as a financial liability at

amortised cost, unless it is designated at fair value through profit and loss.

Issued debt and equity instruments

Issued financial instruments or their components are classified as liabilities if the contractual arrangement results in the

Barclays Bank Group having an obligation to either deliver cash or another financial asset, or a variable number of equity

shares, to the holder of the instrument. If this is not the case, the instrument is generally an equity instrument and the

proceeds included in equity, net of transaction costs. Dividends and other returns to equity holders are recognised when

paid or declared by the members at the Annual General Meeting and treated as a deduction from equity.

Where issued financial instruments contain both liability and equity components, these are accounted for separately. The

fair value of the debt is estimated first and the balance of the proceeds is included within equity.

Cash flow statement

Cash comprises cash on hand and balances at central banks. Cash equivalents comprise loans and advances to banks, cash collateral

balances with central banks related to payment schemes and treasury and other eligible bills, all with original maturities of three months or

less.

Investments in debt securities at amortised cost are deemed to be investing activities for the purposes of the cash flow

statement, except those instruments considered to be cash equivalents.

New and amended standards and interpretations

Future accounting developments

The following accounting standards have been issued by the IASB but are not yet effective:

Amendment to IFRS 9 and IFRS 7 - Classification and Measurement of Financial Instruments

In May 2024, the IASB issued targeted amendments to IFRS 9 to address feedback received from stakeholders following a

post-implementation review. The amendments include:

•Additional guidance to clarify when certain financial assets may be compliant with SPPI requirements, including

instruments with contingent features (e.g. ESG-linked financing), as well as contractually-linked instruments and

non-recourse financing.

•Clarifying the derecognition requirements for financial assets and financial liabilities, including establishing a new

accounting policy choice for derecognition of a financial liability when a payment is initiated by the reporting entity

using an electronic payment system provided specified criteria is met.

The amendments are effective from 1 January 2026. The adoption of the derecognition amendments is expected to result in

a change of policy for derecognising certain types of financial liabilities. As a result of these amendments, it is expected that

the impacted liabilities will be reclassified from Cash collateral and settlement balances to Trading portfolio liabilities. No

other material impacts are anticipated from the adoption of these derecognition amendments or from the other changes

introduced to IFRS 9. The quantitative impact of IFRS 9 and IFRS 7 amendments will continue to be assessed in 2026.

IFRS 18 Presentation and Disclosure in Financial Statements

In April 2024, the IASB issued IFRS 18 Presentation and Disclosure in Financial Statements, which replaces IAS 1. IFRS 18

introduces new requirements for presentation within the statement of profit or loss, including specified totals and subtotals,

it requires entities to classify all income and expenses into five categories: operating, investing, financing, income tax and

discontinued operations, and introduces defined subtotals, including operating profit.

IFRS 18 requires entities to assess whether they have a IFRS 18 defined specified main business activity. For those entities

with a specified main business activity, certain income and expenses will be recorded in the operating category, which may

have been recorded in another category if the entity did not have a specified main business activity.

The standard introduces new aggregation and disaggregation principles for financial information and narrow scope

amendments to IAS 7 Statement of Cash Flows by using operating profit as the starting point for the indirect method and

removing optionality in the classification of interest and dividends. The standard requires disclosure of management-defined

performance measures (MPMs).

The Barclays Bank Group has commenced its IFRS 18 impact assessment. The Barclays Bank Group expects to have an IFRS

18 specified main business activity, allowing significant items from the Barclays Bank Group’s operations to be reported

within the operating category.

The Barclays Bank Group is also assessing the impact on management‑defined performance measures (MPMs) and the

enhanced disaggregation requirements introduced by IFRS 18. In 2026, the Barclays Bank Group will continue to assess the

impact of IFRS 18.

The new standard is effective from 1 January 2027.

Critical accounting estimates and judgements

The preparation of financial statements in accordance with IFRS requires the use of estimates. It also requires management

to exercise judgement in applying the accounting policies. The key areas involving a higher degree of judgement or

complexity or areas where assumptions are significant to the consolidated and individual financial statements are

highlighted under the relevant note. Information about estimates, and other sources of estimation uncertainty at the end of

the reporting period, that are considered to have a significant risk of resulting in material adjustment to the carrying

amounts of assets and liabilities within the next financial year are disclosed within the relevant note.

▪Credit impairment charges on page 199

▪Tax on page 202

▪Fair value of financial instruments on page 217

▪Pensions and post-retirement benefit obligations on page 259

▪Provisions including conduct and legal, competition, and regulatory matters on page 238

7.Critical accounting estimates and judgements

Key areas involving a higher degree of judgement or estimation include:


Judgements	Estimates
Identification and application of management adjustments in response to circumstances outside the scope of the model.	Estimates include modelling assumptions such as estimating forward-looking modelled parameters (PD, EAD & LGD), and a range of unbiased future economic scenarios and scenario weightings.

These estimates are considered to have a significant risk of resulting in material adjustment to the carrying amounts of

financial instruments in scope of IFRS 9 impairment within the next financial year.

IFRS 9 impairment involves several important areas of judgement, including estimating forward looking modelled

parameters (PD, LGD and EAD), developing a range of unbiased future economic scenarios, estimating expected lives and

assessing significant increases in credit risk, based on the Barclays Bank Group’s experience of managing credit risk. The

determination of expected life is most material for Barclays Bank Group's credit card portfolios which is obtained via

behavioural life analysis to materially capture the risk of these facilities.

Within the retail and small businesses portfolios, which comprise large numbers of small homogenous assets with similar

risk characteristics where credit scoring techniques are generally used, the impairment allowance is calculated using forward

looking modelled parameters which are typically run at account level. There are many models in use, each tailored to a

product, line of business or customer category. Judgement and knowledge is needed in selecting the statistical methods to

use when the models are developed or revised. Management adjustments to impairment models, which contain an element

of subjectivity, are applied in order to factor in certain conditions or changes in policy that are not fully incorporated into the

impairment models, or to reflect additional facts and circumstances at the period end. Management adjustments are

reviewed and incorporated into future model development where appropriate.

For individually significant assets in Stage 3, impairment allowances are calculated on an individual basis and all relevant

considerations that have a bearing on the expected future cash flows across a range of economic scenarios are taken into

account. These considerations can be particularly subjective and can include the business prospects for the customer, the

realisable value of collateral, the Barclays Bank Group’s position relative to other claimants, the reliability of customer

information and the likely cost and duration of the work-out process. The level of the impairment allowance is the difference

between the value of the discounted expected future cash flows (discounted at the loan’s original effective interest rate),

and its carrying amount. Furthermore, judgements change with time as new information becomes available or as work-out

strategies evolve, resulting in frequent revisions to the impairment allowance as individual decisions are taken. Changes in

these estimates would result in a change in the allowances and have a direct impact on the impairment charge.

Temporary adjustments to calculated IFRS 9 impairment allowances may be applied in limited circumstances to account for

situations where known or expected risk factors or information have not been considered in the ECL assessment or

modelling process. For further information please see pages 103 to 104 in credit risk performance.

Information about the potential impact of the physical and transition risks of climate change on borrowers is considered,

taking into account reasonable and supportable information to make accounting judgements and estimates. Climate change

is inherently of a long-term nature, with significant levels of uncertainty, and consequently requires judgement in

determining the possible impact in the next financial year, if any.

Critical accounting estimates and judgements

Key areas involving a higher degree of judgement or estimation include:


Judgements	Estimates
Recognition of deferred tax assets and determination of provisions for uncertain tax positions.	Measurement of deferred tax balances and the level of provisioning for uncertain tax positions.

The Barclays Bank Group does not consider there to be a significant risk of a material adjustment to the carrying amount of

current and deferred tax balances, including provisions for uncertain tax positions in the next financial year. The provisions

for uncertain tax positions cover a diverse range of issues and reflect advice from external counsel where relevant. It should

be noted that only a proportion of the total uncertain tax positions will be under audit at any point in time, and could

therefore be subject to challenge by a tax authority over the next year.

Deferred tax assets have been recognised based on business profit forecasts which included consideration for the current

view of climate impacts. Details on the recognition of deferred tax assets are provided in this note.

Critical accounting estimates and judgements

Key areas involving a higher degree of judgement or estimation include:


Judgements	Estimates
Classification of financial instruments with significant unobservable inputs as Level 3.	Valuation of Level 3 assets and liabilities are typically determined by referencing observable inputs, historical data, or employing other analytical techniques.

Critical accounting estimates and judgements

Key areas involving a higher degree of judgement or estimation include:


Judgements	Estimates
Determination as to whether a present obligation exists.	Estimation uncertainty in the probability, timing, nature and quantum of outflows.

These estimates are considered to have a significant risk of resulting in a material adjustment to the carrying amounts of

provisions within the next financial year.

The financial reporting of provisions involves a significant degree of judgement and is complex. Identifying whether a

present obligation exists and estimating the probability, timing, nature and quantum of the outflows that may arise from

past events requires judgements to be made based on the specific facts and circumstances relating to individual events and

often requires specialist professional advice. When matters are at an early stage, accounting judgements and estimates can

be difficult because of the high degree of uncertainty involved. Management continues to monitor matters as they develop

to re-evaluate on an ongoing basis whether provisions should be recognised, however there can remain a wide range of

possible outcomes and uncertainties, particularly in relation to legal, competition and regulatory matters, and as a result it is

often not practicable to make meaningful estimates even when matters are at a more advanced stage.

The amount that is recognised as a provision can also be very sensitive to the assumptions made in calculating it. This gives

rise to a large range of potential outcomes which require judgement in determining an appropriate provision level. See Note

24 for more detail of legal, competition and regulatory matters.

Critical accounting estimates and judgements

Key areas involving a higher degree of judgement or estimation include:

Estimates

Valuation of defined benefit scheme obligations are dependent on a number of assumptions, the most critical being discount rates, price inflation,

and life expectancy.

Accounting for segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the Executive Committee,

which is responsible for allocating resources and assessing performance of the operating segments, and has been identified

as the chief operating decision maker. All transactions between business segments are conducted on an arm’s-length basis.

Income and expenses directly associated with each segment are included in determining business segment performance.

Accounting for interest income and expenses

Interest income on loans and advances at amortised cost, financial assets at fair value through other comprehensive

income and interest expense on financial liabilities held at amortised cost are calculated using the effective interest method

which allocates interest, and direct and incremental fees and costs, over the expected lives of the assets and liabilities.

The effective interest method requires the Barclays Bank Group to estimate future cash flows, in some cases based on its

experience of customers’ behaviour, considering all contractual terms of the financial instrument, as well as the expected

lives of the assets and liabilities.

The Barclays Bank Group incurs certain costs to originate credit card balances with the most significant being co-brand

partner fees. To the extent these costs are attributed to customers that continuously carry an outstanding balance

(revolvers) and incremental to the origination of credit card balances, they are capitalised and subsequently included

within the calculation of the effective interest rate. They are amortised to interest income over the period of expected

repayment of the originated balance. Costs attributed to customers that settle their outstanding balances each period

(transactors) are deferred on the balance sheet as a cost of obtaining a contract and amortised to fee and commission

expense over the life of the customer relationship (refer to Note 4). There are no other individual estimates involved in the

calculation of effective interest rates that are material to the results or financial position.

Accounting for net fee and commission income

The Barclays Bank Group recognises fee and commission income charged for services provided by the Barclays Bank

Group as and when performance obligations are satisfied, for example, on completion of the underlying transaction.

Incremental costs are reported within fee and commission expense if they are directly attributable to generating

identifiable fee and commission income. Where the contractual arrangements also result in the Barclays Bank Group

recognising financial instruments in scope of IFRS 9, such financial instruments are initially recognised at fair value in

accordance with IFRS 9 before applying the provisions of IFRS 15.

Accounting for net trading income

Trading positions are held at fair value, and the resulting gains and losses are included in net trading income, together with

interest and dividends arising from long and short positions and funding costs relating to trading activities. Incremental

costs are reported within net trading income if they are directly attributable to generating identifiable trading income.

Income arises from both the sale and purchase of trading positions, margins which are achieved through market making

and customer business and from changes in fair value caused by movements in interest and exchange rates, equity prices

and other market variables.

Gains or losses on non-trading financial instruments designated or mandatorily at fair value, with changes in fair value

recognised in the income statement, are included in net trading income where the business model is to manage assets and

liabilities on a fair value basis, which includes the use of derivatives. Gains and losses are also reported in net trading

income where an instrument is designated at fair value to eliminate an accounting mismatch.

Accounting for net investment (expense)/income

Dividends are recognised when the right to receive the dividend has been established. Incremental costs are reported

within net investment income if they are directly attributable to generating identifiable investment income. Other

accounting policies relating to net investment income are set out in Note 12 and Note 14.

Accounting for the impairment of financial assets

Impairment

In accordance with IFRS 9, the Barclays Bank Group is required to recognise expected credit losses (ECLs) based on unbiased

forward-looking information for all financial assets at amortised cost, lease receivables, debt financial assets at fair value

through other comprehensive income, loan commitments and financial guarantee contracts. Intercompany exposures in the

individual financial statements, including loan commitments and financial guarantee contracts, are also in scope of IFRS 9

for ECL purposes.

At the reporting date, an allowance (or provision for loan commitments and financial guarantees) is required for the 12

month (Stage 1) ECLs. If the credit risk has significantly increased since initial recognition (Stage 2), or if the financial

instrument is credit impaired (Stage 3), an allowance (or provision) should be recognised for the lifetime ECLs.

The measurement of ECL is calculated using three main components: (i) probability of default (PD) (ii) loss given default

(LGD) and (iii) the exposure at default (EAD).

The 12 month and lifetime ECLs are calculated by multiplying the respective PD, LGD and the EAD. The 12 month and

lifetime PDs represent the PD occurring over the next 12 months and the remaining maturity of the instrument respectively.

The EAD represents the expected balance at default, taking into account the repayment of principal and interest from the

balance sheet date to the default event together with any expected drawdowns of committed facilities. The LGD represents

expected losses on the EAD given the event of default, taking into account, among other attributes, the mitigating effect of

collateral value at the time it is expected to be realised and the time value of money.

Expected credit loss measurement is based on the ability of borrowers to make payments as they fall due. The Barclays Bank

Group also considers sector specific risks and whether additional adjustments are required in the measurement of ECL.

Credit risk may be impacted by climate considerations for certain sectors, such as oil and gas.

Determining a significant increase in credit risk since initial recognition:

The Barclays Bank Group assesses when a significant increase in credit risk has occurred based on quantitative and

qualitative assessments. The credit risk of an exposure is considered to have significantly increased when:

i)Quantitative test

The annualised lifetime PD has increased by more than an agreed threshold relative to the equivalent at origination.

PD deterioration thresholds are defined as percentage increases, and are set at an origination score band and segment level

to ensure the test appropriately captures significant increases in credit risk at all risk levels. Generally, thresholds are

inversely correlated to the origination PD, i.e. as the origination PD increases, the threshold value reduces.

The assessment of the point at which a PD increase is deemed ‘significant’ is based upon analysis of the portfolio’s risk

profile against a common set of principles and performance metrics (consistent across both retail and wholesale

businesses), incorporating expert credit judgement where appropriate. Application of quantitative PD floors does not

represent the use of the low credit risk exemption as exposures can separately move into stage 2 via the qualitative route

described below.

Wholesale assets apply a 100.0% increase in PD and 0.2% PD floor to determine a significant increase in credit risk.

Retail assets apply bespoke relative increase and absolute PD thresholds based on product type and origination PD.

Thresholds are subject to maximums defined by Barclays Bank Group policy and typically apply minimum relative thresholds

of 50%-100% and a maximum relative threshold of 400%

For existing/historical exposures where origination point scores or data are no longer available or do not represent a

comparable estimate of lifetime PD, a proxy origination score is defined, based upon:

▪back-population of the approved lifetime PD score either to origination date or, where this is not feasible, as far back as

possible (subject to a data start point no later than 1 January 2015); or

▪use of available historical account performance data and other customer information, to derive a comparable ‘proxy’

estimation of origination PD.

ii)Qualitative test

This is relevant for accounts that meet the portfolio’s ‘high risk’ criteria and are subject to closer credit monitoring.

High risk customers may not be in arrears but either through an event or an observed behaviour exhibit credit distress. The

definition and assessment of high risk includes as wide a range of information as reasonably available, such as industry and

Barclays Bank Group-wide customer level data, including but not limited to bureau scores and high consumer indebtedness

index, wherever possible or relevant.

Whilst the high risk populations applied for IFRS 9 impairment purposes are aligned with risk management processes, they

are also regularly reviewed and validated to ensure that they capture any incremental segments where there is evidence of

credit deterioration.

iii)Backstop criteria

This is relevant for accounts that are more than 30 calendar days past due. The 30 days past due criteria is a backstop rather

than a primary driver of moving exposures into Stage 2.

The criteria for determining a significant increase in credit risk for assets with bullet repayments follows the same principle

as all other assets, i.e. quantitative, qualitative and backstop tests are all applied.

Exposures will move back to Stage 1 once they no longer meet the criteria for a significant increase in credit risk. This means

that, at a minimum all payments must be up-to-date, the PD deterioration test is no longer met, the account is no longer

classified as high risk, and the customer has evidenced an ability to maintain future payments.

Exposures are only removed from Stage 3 and re-assigned to Stage 2 once the original default trigger event no longer

applies. Exposures being removed from Stage 3 must no longer qualify as credit impaired, and:

a) the obligor will also have demonstrated consistently good payment behaviour over a 12-month period, by making all

consecutive contractual payments due and, for forborne exposures, the relevant EBA defined probationary period has also

been successfully completed; or

b) for non-forborne exposures the performance conditions are defined and approved within an appropriately sanctioned

restructure plan, including 12 months’ payment history have been met.

Management overlays and other exceptions to model outputs are applied only if consistent with the objective of identifying

significant increases in credit risk.

Forward-looking information

The measurement of ECL involves complexity and judgement, including estimation of PD, LGD, a range of unbiased future

economic scenarios, estimation of expected lives (where contractual life is not appropriate), and estimation of EAD and

assessing significant increases in credit risk.

Credit losses are the expected cash shortfalls from what is contractually due over the expected life of the financial

instrument, discounted at the original effective interest rate (EIR). ECLs are the unbiased probability-weighted credit losses

determined by evaluating a range of possible outcomes and considering future economic conditions.

Refer to the Measurement uncertainty and sensitivity analysis section on page 105 for further details.

Definition of default, credit impaired assets, write-offs, and interest income recognition

The definition of default for the purpose of determining ECLs, and for internal credit risk management purposes, has been

aligned to the Regulatory Capital CRR Article 178 definition of default, to maintain a consistent approach with IFRS 9 and

associated regulatory guidance. The Regulatory Capital CRR Article 178 definition of default considers indicators that the

debtor is unlikely to pay, includes exposures in forbearance and is no later than when the exposure is more than 90 days

past due. When exposures are identified as credit impaired at the time when they are purchased or originated, interest

income is calculated on the carrying value net of the impairment allowance.

An asset is considered credit impaired when one or more events occur that have a detrimental impact on the estimated

future cash flows of the financial asset. This comprises assets defined as defaulted and other individually assessed exposures

where imminent default or actual loss is identified.

Uncollectible loans are written off against the related allowance for loan impairment on completion of the Barclays Bank

Group’s internal processes and when all reasonably expected recoverable amounts have been collected. Subsequent

recoveries of amounts previously written off are credited to the income statement. The timing and extent of write-offs may

involve some element of subjective judgement. Nevertheless, a write-off will often be prompted by a specific event, such as

the inception of insolvency proceedings or other formal recovery action, which makes it possible to establish that some or

the entire advance is beyond realistic prospect of recovery.

Accounting for purchased financial guarantee contracts

The Barclays Bank Group may enter into a financial guarantee contract which requires the issuer of such contract to

reimburse the Barclays Bank Group for a loss it incurs because a specified debtor fails to make payment when due in

accordance with the terms of a debt instrument. For these separate financial guarantee contracts, the Barclays Bank Group

recognises a reimbursement asset aligned with the recognition of the underlying ECLs, if it is considered virtually certain that

a reimbursement would be received if the specified debtor fails to make payment when due in accordance with the terms of

the debt instrument.

Loan modifications and renegotiations that are not credit-impaired

When modification of a loan agreement occurs as a result of commercial restructuring activity rather than due to the credit

risk of the borrower, an assessment must be performed to determine whether the terms of the new agreement are

substantially different from the terms of the existing agreement. This assessment considers both the change in cash flows

arising from the modified terms as well as the change in overall instrument risk profile. In respect of payment holidays

granted to borrowers which are not due to forbearance, if the revised cash flows on a present value basis (based on the

original EIR) are not substantially different from the original cash flows, the loan is not considered to be substantially

modified.

Where terms are substantially different, the existing loan will be derecognised and a new loan will be recognised at fair value,

with any difference in valuation recognised immediately within the income statement, subject to observability criteria.

Where terms are not substantially different, the loan carrying value will be adjusted to reflect the present value of modified

cash flows discounted at the original EIR, with any resulting gain or loss recognised immediately within the income

statement as a modification gain or loss.

Expected life

Lifetime ECLs must be measured over the expected life. This is restricted to the maximum contractual life and takes into

account expected prepayment, extension, call and similar options. The exceptions are certain revolver financial instruments,

such as credit cards and bank overdrafts, that include both a drawn and an undrawn component where the entity’s

contractual ability to demand repayment and cancel the undrawn commitment does not limit the entity’s exposure to credit

losses to the contractual notice period. For revolving facilities, expected life is analytically derived to reflect the behavioural

life of the asset, i.e. the full period over which the business expects to be exposed to credit risk. Behavioural life is typically

based upon historical analysis of the average time to default, closure or withdrawal of facility. Where data is insufficient or

analysis inconclusive, an additional ‘maturity factor’ may be incorporated to reflect the full estimated life of the exposures,

based upon experienced judgement and/or peer analysis. Potential future modifications of contracts are not taken into

account when determining the expected life or EAD until they occur.

Discounting

ECLs are discounted at the EIR at initial recognition or an approximation thereof and consistent with income recognition. For

loan commitments the EIR is the rate that is expected to apply when the loan is drawn down and a financial asset is

recognised. Issued financial guarantee contracts are discounted at the risk-free rate. Lease receivables are discounted at the

rate implicit in the lease. For variable/floating rate financial assets, the spot rate at the reporting date is used and projections

of changes in the variable rate over the expected life are not made to estimate future interest cash flows or for discounting.

Modelling techniques

Currently, Internal Ratings-Based models are leveraged to calculate the point-in-time PD and LGD, which serve as key inputs

to the IFRS 9 models. Thereafter, these inputs are extrapolated by the IFRS 9 models to create macroeconomic sensitive

forecast of PDs, LGDs and in turn ECL.

Forbearance

A financial asset is subject to forbearance when it is modified due to the credit distress of the borrower. A modification made

to the terms of an asset due to forbearance will typically be assessed as a non-substantial modification that does not result

in derecognition of the original loan, except in circumstances where debt is exchanged for equity.

Both performing and non-performing forbearance assets are classified as Stage 3 except where it is established that the

concession granted has not resulted in diminished financial obligation and that no other regulatory definitions of default

criteria have been triggered, in which case the asset is classified as Stage 2. The minimum probationary period for non-

performing forbearance is 12 months and for performing forbearance, 24 months. Hence, a minimum of 36 months is

required for non-performing forbearance to move out of a forborne state.

No financial instrument in forbearance can transfer back to Stage 1 until all of the Stage 2 thresholds are no longer met and

can only move out of Stage 3 when no longer credit impaired.

Critical accounting estimates and judgements

Key areas involving a higher degree of judgement or estimation include:


Judgements	Estimates
Identification and application of management adjustments in response to circumstances outside the scope of the model.	Estimates include modelling assumptions such as estimating forward-looking modelled parameters (PD, EAD & LGD), and a range of unbiased future economic scenarios and scenario weightings.