BARCLAYS PLC

23 Provisions

Accounting for provisionsProvisions are recognised for present obligations arising as consequences of past events where it is more likely than not that a transfer of economic benefit will be necessary to settle the obligation, which can be reliably estimated.

Critical accounting estimates and judgementsKey areas involving a higher degree of judgement or estimation include: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 25 for more detail of legal, competition and regulatory matters.

Accruals, provisions, contingent liabilities and legal proceedings

Provisions expected to be recovered or settled within no more than 12 months after 31 December 2025 are£1,400 m (2024:£1,192 m).

Redundancy and restructuring

These provisions comprise the estimated cost of restructuring, including redundancy costs where an obligation exists. For example, when the

Group has a detailed formal plan for restructuring a business and has raised valid expectations in those affected by the restructuring by

announcing its main features or starting to implement the plan.

Customer redress

Customer redress provisions comprise the estimated cost of making redress payments to customers, clients and counterparties for losses or

damages associated with inappropriate judgement in the execution of the Group’s business activities.

Motor finance provision

From 2003 to late 2019, Clydesdale Financial Services Limited (CFSL), a wholly-owned subsidiary of the Group, provided motor finance to

customers in the UK.

In January 2024, the FCA appointed a skilled person to undertake a review of the historical use of discretionary commission arrangements

and sales in the motor finance market across several firms. This review followed two final decisions by the UK Financial Ombudsman

Service (FOS) and a number of complaints and court claims, including some against CFSL.

On 7 October 2025, the FCA began consulting on an industrywide compensation scheme for eligible motor finance customers. Barclays has

engaged with the FCA as part of its consultation process and the FCA has stated that, if it introduces a redress scheme, it expects to publish a

policy statement and final rules in February or March 2026, with compensation to consumers beginning later in 2026. The FCA has indicated

that it expects to lift the existing pause on the handling of certain motor finance complaints on 31 May 2026, subject to the terms of the FCA

redress scheme, if adopted.

Barclays considers it more likely than not that a redress scheme will be implemented by the FCA. As a result, Barclays has recognised a

provision of £325 m in respect of this matter as at 31 December 2025 (as at 31 December 2024: £90 m). Recognising that the proposed terms

of the FCA redress scheme are subject to consultation, in calculating potential redress costs and the amount of provision required, Barclays

has applied a weighted average of multiple scenarios, each incorporating differing evaluations of the FCA’s current proposals. The current

provision reflects the estimated number of motor finance cases falling within the scope of the FCA redress scheme as proposed by the FCA

consultation paper (which covers regulated motor finance agreements between 6 April 2007 and 1 November 2024 where a commission was

payable by the lender to the broker), the anticipated level of customer redress reflecting the FCA’s proposed methodology, the estimated

customer response rate with reference to Barclays previous remediation exercises, and the costs associated with implementing the FCA’s

proposed approach to customer engagement.

The final terms of the FCA redress scheme remain uncertain pending publication of the FCA’s policy statement and final scheme rules.

Accordingly, the legal and regulatory outcomes and the nature, extent and timing of any remediation action, if required, remain uncertain.

The ultimate financial impact on Barclays could differ from the recognised provision, which represents Barclays’ best estimate of the cost of

redress based on the information currently available to Barclays.

Legal, competition and regulatory matters

The Group is engaged in various legal proceedings, both in the UK and a number of other overseas jurisdictions, including the US. For

further information in relation to legal proceedings and discussion of the associated uncertainties, refer to Note 25.

Accruals, provisions, contingent liabilities and legal proceedings

Onerous contracts

Onerous contract provisions comprise an estimate of the unavoidable costs involved with fulfilling the terms and conditions of contracts net

of any expected benefits to be received.

Sundry provisions

This category includes provisions that do not fit into any of the other categories, such as fraud losses and dilapidation provisions.

Undrawn contractually committed facilities and guarantees

Undrawn contractually committed facilities and guarantees provisions are accounted under IFRS9. Impairment allowance under IFRS 9

considers both the drawn and the undrawn counterparty exposure. For retail portfolios, the total impairment allowance is allocated to the

drawn exposure to the extent that the allowance does not exceed the exposure as ECL is not reported separately. Any excess is reported on

the liability side of the balance sheet as a provision. For wholesale portfolios, the impairment allowance on the undrawn exposure is reported

on the liability side of the balance sheet as a provision. Further analysis of the movement is disclosed within the 'Movement in gross

exposures and impairment allowance including provisions for loan commitments and financial guarantees' in the expected credit loss

provision table on page 231.