SecProbe.io

Securities and Exchange Commission Washington DC 20549 USA 26 July 2013

Dear Ms Ciboroski,

Barclays PLC and Barclays Bank PLC

Form 20-F for the fiscal year ended December 31, 2012

Filed 13 March 2013

Form 6-K

Filed 16 April 2013

Files No. 001-09246 and 001-10257

This letter responds to the comment letter (the “Comment Letter”) from the staff (“the Staff”) of the Securities and Exchange Commission (the “Commission”), dated 21 June 2013, concerning the Annual Report on Form 20-F for the fiscal year ended 31 December 2012 (the “2012 Form 20-F”) of Barclays PLC and Barclays Bank PLC (collectively, “Barclays”) and the Report on Form 6-K relating to the Restatement Document (the “April Form 6-K”).

Our responses to your comments are set out in Appendix 1 to this letter. To facilitate the Staff’s review, Barclays has included in its response the numbered questions as raised in the Staff’s comment letter and provided responses immediately following each numbered comment.

Yours sincerely,

C.G. Lucas

Group Finance Director

Cc

Rebekah Lindsay

(Securities and Exchange Commission)

George H. White

John O’Connor

(Sullivan & Cromwell LLP)

Andrew Ratcliffe

(PricewaterhouseCoopers LLP)

Stephanie J Ciboroski

Securities and Exchange Commission

Appendix 1

1. In your letter to us dated October 18, 2010, you discussed your contacts with Cuba, Sudan, and Syria. It appears from the disclosure on page 322 that you continue to maintain legacy guarantees related to Syria. In addition, publicly-available information indicates that you have a correspondent banking relationship with Byblos Bank, which operates in Sudan and Syria. As you know, Cuba, Sudan, and Syria are designated as state sponsors of terrorism by the U.S. Department of State, and are subject to U.S. economic sanctions and export controls. Your Form 20-F does not include disclosure regarding contacts with Cuba or Sudan, or disclosure beyond the limited information on page 322 regarding contacts with Syria. Please describe to us the nature and extent of your past, current, and anticipated contacts with Cuba, Sudan, and/or Syria, whether through direct or indirect arrangements, since the referenced letter. Your response should describe any funds, services, or support you have provided or intend to provide into Cuba, Sudan, and/or Syria, directly or indirectly, and any agreements, arrangements, or other contacts you have had or intend to have with the governments of those countries or entities they control.

We are in the process of gathering the required data and will provide a response to this comment in a separate letter. We anticipate that we will be able to file this letter by 31 October 2013.

2. Please discuss for us the materiality of the contacts with Cuba, Sudan, and/or Syria you describe in response to the foregoing comment, and whether those contacts constitute a material investment risk for your security holders. You should address materiality in quantitative terms, including the approximate dollar amounts of any associated revenues, assets, and liabilities for the last three fiscal years and the subsequent interim period. Also, address materiality in terms of qualitative factors that a reasonable investor would deem important in making an investment decision, including the potential impact of corporate activities upon a company’s reputation and share value. As you know, various state and municipal governments, universities, and other investors have proposed or adopted divestment or similar initiatives regarding investment in companies that do business with U.S.-designated state sponsors of terrorism. Your materiality analysis should address the potential impact of the investor sentiment evidenced by such actions directed toward companies that have operations associated with Cuba, Sudan, or Syria.

We are in the process of gathering the required data and will provide a response to this comment in a separate letter. We anticipate that we will be able to file this letter by 31 October 2013

3. Please refer to our previous comment 3 in our letter dated February 1, 2013. We note that you utilize a 12 month roll rate model to estimate losses on the interest only loans for which you have provided an extension. Please address the following:

•

Tell us how you considered a borrower’s ability to repay the principal at the end of the loan, particularly in light of the fact that they needed an extension of the interest only period on their current term.

Prior to granting a term extension, we consider the borrower’s ability to repay principal through a plausibility test. This test considers:

•

the current value of the repayment vehicle / plan (i.e., Endowment, Stocks & Shares ISA, Investment Plan, Sale of Property – all assume 0% growth over the period) that the borrower intends to use to repay the principal balance of the mortgage);

Stephanie J Ciboroski

Securities and Exchange Commission

Appendix 1

•

the payments made each month into the repayment vehicle; and

•

the remaining new term of the mortgage.

This test, which has been in place since February 2012, is used to mitigate the risk of a loan remaining unpaid at the end of the mortgage term. The cost, such as payments in to an endowment policy, of the repayment vehicle is included in the affordability calculation. Additionally, all such loans are secured by a first charge on the property.

For the interest only loans for which term extensions were granted between 2008 and 2011, our underwriting approach at the time did not include a formal plausibility test. However, as outlined in our letter dated October 9th 2012, for this cohort of loans we required the following:

•

Loan maturity not yet reached.

•

Affordability criteria met based on current and stressed rate.

•

The source of repayment (interest-only) was in line with current underwriting rules.

•

Extension did not take the maturity date past retirement age of the borrower or 70 (whichever the earlier).

•

Maximum term after extension no more than 35 years from original completion (i.e. initiation) date.

We continue to apply these criteria to term extensions of interest only loans, in addition to the plausibility test described above.

We have also enhanced our contact programme (introduced in Q4 12). Previously, interest only customers with mortgages that are 90% through their term were contacted, Starting July 13 through April 14 we plan to expand our strategy to include all customers whose mortgage term ends before December 2020 to emphasise the requirement on the customer to repay the balance of the mortgage at the end of term. As part of this strategy, customers who have any concerns will be asked to contact us to discuss alternative approaches to repayment. In addition, customers that Barclays determines to be high risk will receive telephone contact to initiate a discussion about their repayment strategy. Where the customer requires a Forbearance led solution, the mortgage will be flagged as such and and given the appropriate impairment and capital treatment.

•

Tell us in more detail why you choose to extend the interest only periods for an average extension of 6.5 years, which appears significant relative to the original loan period. As part of your response, clarify if the length of the extension period was requested by the borrower and discuss your process for evaluating the length of the extension period you would grant.

The term extension periods were those requested by the borrower. The maximum term of each loan (after the extension) was 25 years or less with the maximum term from original mortgage completion (i.e. initiation) date not exceeding 35 years. It was also ensured that the extension did not take the maturity date past the earlier of retirement age of the borrower or the borrower reaching 70 years of age.

Please refer to our comment above for changes made to underwriting criteria since February 2012.

Stephanie J Ciboroski

Securities and Exchange Commission

Appendix 1

•

Similarly, given that these loans are not repaid until maturity and that borrowers may be in a situation where they are able to make interest payments but remain unable to repay the loan at maturity, please tell us how you determined that using a 12 month period to estimate losses was appropriate, particularly given the average 6.5 year extension period.

The 12 month roll rate period is used for the entire portfolio, including the cohort of loans since these have not been classified as Forbearance. The roll rate model (with a 12 month outcome period) is a bespoke model built using historical data from the portfolio; the model is refreshed monthly to update the Probability of Default rates.

Currently the model captures 75% of defaults (delinquent moving into charge-off) within a 12 month outcome period. Specifically on this cohort of term extensions the model captures 84% of defaults within the 12 month outcome period. On this basis, the model is viewed as appropriate. We assess the outcome period on a six-monthly basis for appropriateness

In addition to the modelled approach, we hold a Management Adjustment for High Risk customers (highly indebted customers as evidenced by bureau data). On this cohort of term extensions the overall impairment stock as at 30 June 2013 is £1.3m, giving impairment coverage of 8bps for this segment (vs. 7bps for the total book and 80bps for forbearance accounts)

Please note we continue to evaluate and improve our impairment models and methodology to incorporate loss events that have not yet manifested for inclusion in indentified impairment.

•

We note that you say that any increase in the probability of default related to these loans results in an increase in the probability of default (PD) levels but it is unclear from your response how. Please provide additional information about how any higher risk related to these loans is appropriately reflected in your PD rates.

Bespoke PD models for each portfolio segment are refreshed with the most recent default data on a monthly/quarterly basis. If specific segments experience increased default rates, this will feed back into the model and increase the PD rates produced. These rates may be lagged in terms of their effect on the PD produced by the model, however we consider this lag as part of our financial reporting close process and incorporate adjustments if deemed necessary.

Stephanie J Ciboroski

Securities and Exchange Commission

Appendix 1

4. We note your disclosure in footnote (b) that valuation weighted LTV, used for the UK, South Africa and Italy portfolios, is the ratio between total outstanding balance and the value of total collateral held against these balances. Please clarify whether you are determining LTVs at an individual account level first, and then doing a weighting approach, or whether this methodology is performed entirely at a portfolio level. As part of your response, please consider providing an illustrative calculation of how both the valuation weighted LTV and balance weighted LTV calculation is performed to clearly illustrate the differences between these two methodologies.

In our 2012 Annual Report glossary, we disclosed the following definitions of valuation weighted and balance-weighted methodology:

“Balance weighted approach - In the context of the credit risk disclosures on secured home loans, a means of calculating marked to market LTVs derived by calculating individual LTVs at account level and weighting it by the balances to arrive at the average position.

Valuation weighted approach - In the context of credit risk disclosures on secured home loans, a means of calculating marked to market LTVs derived by comparing total outstanding balance and the value of total collateral we hold against these balances”

For UK, South Africa and Italy, the valuation-weighted methodology was used to derive the Average portfolio LTV and this calculation is performed entirely at a portfolio level.

For Spain and Portugal, the balance-weighted methodology was used (as required for local regulatory purposes) so that the LTV’s are calculated at an individual account level and weighted for the outstanding balance at account level.

In light of Staff’s comment, we propose to add the following additional information to the definitions of valuation weighted and balance weighted methodology in our 2013 Annual Report Glossary.

“Valuation Weighted LTV:

Average LTV = Total Outstandings/Total Property Values of Total Outstandings

Balance-weighted LTV

Average LTV = S (Loan balance x MTM LTV %) / Total Outstandings”

As an example, consider a simple loan portfolio of 10 loans as outlined in the table below. Out of the 10 loans, 9 loans have an LTV > 70%; representing approximately 51% of the outstanding balances; but only approximately 30% of collateral.

Account

Outstanding

MTM Collateral

LTV

Ln01

£ 10,000

£ 13,000

76.9 %

Ln02

£ 40,000

£ 53,000

75.5 %

Ln03

£ 80,000

£ 110,000

72.7 %

Ln04

£ 100,000

£ 125,000

80.0 %

Ln05

£ 120,000

£ 144,000

83.3 %

Ln06

£ 160,000

£ 210,000

76.2 %

Ln07

£ 320,000

£ 434,000

73.7 %

Ln08

£ 640,000

£ 644,000

99.4 %

Ln09

£ 1,280,000

£ 1,750,000

73.1 %

Ln10

£ 2,700,000

£ 8,000,000

33.8 %

Portfolio

£ 5,450,000

£ 11,483,000

Valuation-weighted Average MTM LTV = £5,450,000/£11,483,000 = 47.5%

Balance weighted Average MTM LTV = [(£10,000*76.9%) + (£40,000*75.7%) + …. + (£2,700,000*33.8%)]/[£10,000+£40,000+….+£2,700,000] = 57.2%

Stephanie J Ciboroski

Securities and Exchange Commission

Appendix 1

We propose to disclose Average MTM LTVs using both methodologies for all Principal home loans portfolios in our 30 June 2013 disclosures and then move to a single consistent balance-weighted approach in 2013 year-end disclosures.

The proposed proforma for inclusion within the H1 2013 Interim Results announcement, with additional balance-weighted items, is as follows:

Home loans principal portfolios - distribution of balances by LTV

UK

South Africa

Spain

Italy

Portugal

30.06.13

31.12.12

30.06.13

31.12.12

30.06.13

31.12.12

30.06.13

31.12.12

30.06.13

31.12.12

%

%

%

%

%

%

%

%

%

%

<=75%

x

x

x

x

x

x

x

x

x

x

>75% and <=80%

x

x

x

x

x

x

x

x

x

x

>80% and <=85%

x

x

x

x

x

x

x

x

x

x

>85% and <=90%

x

x

x

x

x

x

x

x

x

x

>90% and <=95%

x

x

x

x

x

x

x

x

x

x

>95% and <=100%

x

x

x

x

x

x

x

x

x

x

>100%

x

x

x

x

x

x

x

x

x

x

Marked to market LTV: valuation weighted %

x

x

x

x

x

x

x

x

x

x

marked to market LTV: balance weighted %

x

x

x

x

x

x

x

x

x

x

For >100% LTVs:

balances (£m)

x

x

x

x

x

x

x

x

x

x

Marked to market collateral (£m)

x

x

x

x

x

x

x

x

x

x

Average LTV: valuation weighted %

x

x

x

x

x

x

x

x

x

x

Average LTV: balance weighted %

x

x

x

x

x

x

x

x

x

x

% of balances in recoveries

x

x

x

x

x

x

x

x

x

x

Home loans principal portfolios - new lending

UK

South Africa

Spain

Italy

Portugal

As at 30 June

New home loans (£m) 1

x

x

x

x

x

x

x

x

x

x

New home loans proportion above 85% LTV

x

x

x

x

x

x

x

x

x

x

Average LTV:

Valuation weighted %

x

x

x

x

x

x

x

x

x

x

Average LTV:

Balance weighted %

x

x

x

x

x

x

x

x

x

x

New home loans for 2013 and 2012 is total for the first half of the year

Stephanie J Ciboroski

Securities and Exchange Commission

Appendix 1

5. Please refer to prior comment 12 in our letter dated February 1, 2013 regarding the successfulness of your forbearance programs. Please tell us and revise future filings to