...... BOARD OF GOVERNORS 

OF THE: 

FECERAL RESERVE SYSTEM 

AndrewS. Baer, Esq. 

Sullivan & Cromwell LLP 

1701 Pennsylvania Avenue, NW 

Washington, D.C. 20006-5805 

Dear Mr. Baer: 

WASHINGTON, 0. C:. 20551 

Rl£COPV 

ADDRESS OFFICIAL CORRESPONDENCE 

TO THE BOARD 

This letter concerns the notice filed December 2, 2008, under 

section 4 of the Bank Holding Company Act ("BHC Act") 1 by Barclays PLC 

("Barclays"), London, England, to commence the following actions: (1) expand the 

scope of previously approved physical commodities trading activities ("Physical 

Commodity Trading"); (2) measure compliance with the quantitative limits on its 

Physical Commodity Trading at the parent company level ("Barclays level") rather 

than at the level ofBarclays' subsidiary, Barclays Bank PLC ("Barclays Bank"), 

London; (3) enter into physically settled tolling agreements with power plant 

owners ("Energy Tolling"); and ( 4) provide energy management services to power 

plant owners ("Energy Management Services"), all in the United States. 

Barclays is a foreign bank organized under the laws of the United 

Kingdom that is treated as a financial holding company ("FHC") for purposes of 

the BHC Act. Barclays conducts all its commodities derivatives activities, 

including the financial activities of engaging as principal in commodity derivatives 

transactions ("Commodity Derivative Activities") and providing financial and 

investment advisory services for derivatives transactions ("Derivative Advisory 

Services"), through Barclays Bank. Barclays Bank previously obtained the 

Board's approval to engage in Physical Commodity Trading as an activity that is 

complementary to Commodity Derivative Activities? Barclays, on behalf of itself 

and Barclays Bank, has requested as follows: 

1 12 U.S.C. § 1843. 

2 Barclays Bank PLC, 90 Federal Reserve Bulletin 279 (2004) ("Barclays Bank 

Approval"). 
2 

1. Relief from a commitment made in connection with the Barclays 

Bank Approval in order to expand the commodities in which 

Barclays may conduct physical trades to include propylene; 

2. Relief from a commitment made in connection with the Barclays 

Bank Approval in order to allow Barclays, on a limited basis, to 

engage a third party to alter or refine a commodity; 

3. Confirmation that Barclays' proposed long-term electricity supply 

contracts are consistent with its Physical Commodity Trading 

authority; 

4. Relief from a commitment made in connection with the Barclays 

Bank Approval that would allow Barclays to measure compliance 

with the quantitative limits on its Physical Commodity Trading at 

the Barclays level rather than at the Barclays Bank level; 

5. Authority to engage in Energy Tolling, on a limited basis, as an 

activity that is complementary to Commodity Derivative 

Activities; and 

6. Authority to engage in Energy Management Services, on a limited 

basis, as an activity that is complementary to both Commodity 

Derivative Activities and Derivative Advisory Services. 

Physical Commodity Trading 

New Commodities. The Board conditioned the Barclays Bank 

Approval on a commitment by Barclays Bank ("Approved Commodities 

Commitment") to engage in physical trading only in commodities for which 

derivative contracts have been approved for trading on a futures exchange by the 

Commodity Futures Trading Commission (unless specifically excluded by the 

Board) or have been specifically approved by the Board ("Approved 

Commodities"). Since the Barclays Bank Approval, the Board has authorized 

certain commodities if an FHC can demonstrate that (1) there is a market in 

financially settled contracts on the commodity in addition to physically settled 

contracts; (2) the commodity is fungible; and (3) the market for the commodity is 

sufficiently liquid.3 In addition, an FHC must demonstrate that it has trading limits 

3 See The Royal Bank of Scotland Group pic, 94 Federal Reserve Bulletin C60 

(2008)("RBS Order"). 
3 

in place that address both concentration risk and overall exposure to the 

commodity to ensure that it can physically trade the commodity without incurring 

significant additional risk. 

Barclays has requested relief from the Approved Commodities 

Commitment in order to trade in propylene ("Proposed Commodity"). In the RBS 

Order, the Board determined that propylene meets the market, fungibility, and 

liquidity tests noted above. Barclays has represented that, as part of its riskmanagement program relating to the Proposed Commodity, it will impose 

appropriate concentration limits and overall exposure limits. 

Altering Commodities. As noted, the Barclays Bank Approval permits 

Barclays Bank to trade only in Approved Commodities. As part of the approval, 

Barclays Bank committed that it will not process, refine, or otherwise alter a 

commodity (individually or collectively, "alter" or "altering a commodity"). 

Barclays has requested relief from this commitment so that it may engage a third 

party to alter commodities. The Board previously has granted authority to FHCs to 

alter commodities, subject to certain commitments.4 Barclays has made the same 

commitments relating to altering a commodity that the Board has relied on from 

other FHCs. In particular, Barclays has committed that it: 

1. Will not process, refine, or otherwise alter a physical commodity 

itself; 

2. Will not contract for the exclusive right to use a facility to alter 

commodities for any period of time; and 

3. Will contract with third parties (i) to alter only Approved 

Commodities and (ii) to alter commodities only into other 

Approved Commodities. 

Long-Term Electricity Supply Contracts. As part of its energy trading 

business, Barclays proposes to enter into long-term electricity supply contracts 

with large commercial and industrial end-users. Barclays' current Physical 

Commodity Trading authority permits Barclays to take a position in a commodity 

and does not limit the duration of, or counterparties to, its contracts. Most 

commodities that Barclays is permitted to trade under the Physical Commodity 

Trading authority, however, tend by their nature to be limited to the wholesale 

4 See RBS Order and Board letter to John Shrewsberry, Wells Fargo & Company, 

April 10, 2008. 
4 

market. Electricity, on the other hand, has a greater potential to be sold not only to 

end-users generally but also to small retail customers who are unlikely to be 

participants in the market for energy-related derivatives products. Barclays 

requests confirmation that entering into long-term electricity supply contracts with 

large commercial and industrial end-users is consistent with its Physical 

Commodity Trading authority. 

To ensure that Barclays' activities remain complementary to the 

activities permitted under the Physical Commodity Trading authority, and 

consistent with previous approvals, 5 Barclays has committed that it will enter into 

long-term electricity supply contracts only with commercial and industrial 

customers that consume electricity at a rate of at least (1) 800 megawatt-hours per 

year or (2) the minimum consumption level for commercial and industrial 

customers under applicable state law, whichever is greater. Requiring that 

Barclays contract only with customers that consume electricity at these high levels 

should help ensure that Barclays transacts with financially sophisticated purchasers 

(and not with retail purchasers) and, thus, remains essentially a wholesale 

intermediary. 

Compliance at the Barclays Level. As part of the Barclays Bank 

Approval, Barclays Bank committed that the market value of the physical 

commodities it holds as a result of Physical Commodity Trading will not exceed 5 

percent of the Bank's consolidated tier 1 capital, as calculated under its home 

country standard. Barclays Bank also agreed to notify the Federal Reserve Bank of 

New York if the market value of those physical commodities exceeds 4 percent of 

Barclays Bank's tier 1 capital. Other FHCs that have been granted Physical 

Commodity Trading authority have made this commitment based on the tier 1 

capital of the parent holding company rather than that of the subsidiary bank. In 

light of the basis used by other FHCs, Barclays and Barclays Bank have requested 

approval to modify the Bank's commitments to allow the market-value cap to be 

calculated based on the tier 1 capital ofBarclays rather than that ofBarclays Bank. 

Energy Tolling 

As noted, Barclays has requested approval to expand its current 

activities to include Energy Tolling. Under the energy tolling agreements for the 

expanded activities, Barclays would make periodic fixed payments to the owner of 

a power generation facility ("capacity payments") in exchange for the right to all or 

5 See RBS Order. 
5 

part of the plant's power output. Barclays also generally would supply fuel and 

make payments to cover the owner's variable costs plus a profit margin. The plant 

owner, however, would retain control over the day-to-day operations of the plant 

and physical plant assets at all times. 6 

Barclays has committed to conduct Energy Tolling activities in 

accordance with the restrictions, definitions, and conditions previously relied on by 

the Board in authorizing those activities. As noted, Barclays has also committed to 

the Board that it will limit the aggregate market value of physical commodities that 

it and any of its subsidiaries hold at any one time to 5 percent ofBarclays' 

tier 1 capital. In addition, Barclays has committed to include the present value of 

capacity payments associated with Energy Tolling contracts in applying the 

5 percent limit. As a result, Barclays' potential exposure to commodity-price risk 

would not increase by engaging in Energy Tolling activities. 

Energy Management Services 

As noted, Barclays has requested approval to provide Energy 

Management Services pursuant to an energy management agreement with a plant 

owner as an activity that is complementary to its Commodity Derivative Activities 

and Derivative Advisory Services. As an energy manager, Barclays proposes to 

provide transactional and advisory services to power plant owners. The 

transactional services would consist primarily of acting as a financial intermediary, 

thereby substituting its credit and liquidity for the owner's to facilitate the owner's 

purchase of fuel and sale of power. Barclays' advisory services also would include 

providing market information to assist the owner in developing and refining a riskmanagement plan for the plant and providing a variety of administrative services to 

support these transactions. 

Barclays has committed to provide Energy Management Services in 

accordance with the restrictions, definitions, and conditions previously relied on by 

the Board in authorizing those activities. Barclays has also made all the 

commitments made by other FHCs in connection with the Board's previous 

approvals of Energy Management Services. Those commitments generally limit 

the scope of the activities that Barclays may perform as an energy manager to 

ensure that it incurs only those risks that are consistent with the agency nature of 

the Energy Management Services and to limit the revenues attributable to its 

6 

[The footnote has been redacted.]
6 

Energy Management Services to 5 percent of Barclays' total consolidated 

operating revenues.

7 The authority to act as an energy manager does not expand 

Barclays' ability to engage in physical commodity trading beyond what is currently 

permitted under its Physical Commodity Trading authority. 

As noted, the Board previously has determined pursuant to Regulation Y 

that Physical Commodity Trading (including the activities in Barclays' request),· 

Energy Tolling, and Energy Management Services are activities that are 

complementary to the financial activities of Commodity Derivative Activities or 

Derivative Advisory Services.8 The Board has delegated by regulation9 its 

authority to grant or deny requests for modifying a commitment or condition relied 

on by the Board in taking any action under the BHC Act to the Director of the 

Division of Banking Supervision and Regulation ("Director"). The Board also has 

delegated to the Director, with the concurrence of the General Counsel, authority 

to approve proposals by an FHC to engage in Energy Tolling and Energy 

Management Services if the proposal meets the conditions relied on by the Board 

in approving previous proposals and raises no significant legal, policy, or . . supervisory Issues. 

Barclays has made the same commitments with respect to the 

expansion of the scope of its Physical Commodity Trading that have been relied on 

by the Board in approving proposals by other FHCs to conduct the same activities. 

Barclays also has committed to conduct Energy Tolling and provide Energy 

Management Services in accordance with the restrictions, definitions, and 

conditions previously relied on by the Board in authorizing those activities. In 

addition, Barclays has established and continued to maintain policies and systems 

for monitoring and controlling the risks associated with Physical Commodity 

Trading, Energy Tolling, and Energy Management Services and is expected to 

continue to maintain effective risk-management policies and systems for each of 

those activities. Approval of the request to engage in Energy Tolling and Energy 

Management Services likely would benefit Barclays' customers by enhancing 

Barclays' ability to efficiently provide a full range of commodity-related services 

consistent with existing market practice. Approval also would enable Barclays to 

7 "Total operating revenues" is defined as net interest income and all 

non-interest revenue, including net securities gains but excluding extraordinary 

items. 

8 See RBS Order and Fortis S.A./N.V., 94 Federal Reserve Bulletin C20 (2008). 

9 12 CFR 265.7. 
7 

improve its understanding of physical-commodity and commodity-derivatives 

markets and its ability to serve as an effective competitor in those markets. 

Based on the record, the Director, acting pursuant to authority 

delegated by the Board, and after consulting with the General Counsel, grants 

relief from existing commitments to permit Barclays (1) to engage in physical 

trades in propylene; (2) ,on a limited basis, to engage a third party to alter or refine 

a commodity; and (3) to measure compliance with the quantitative limit on its 

Physical Commodity Trading at the Barclays level. The Director also confirms 

that Barclays' proposal to enter into long-term electricity supply contracts is 

consistent with its Physical Commodity Trading authority. 

In addition, the Director, with the concurrence of the General 

Counsel, has determined that (1) the proposed Energy Tolling is complementary to 

Barclays' Commodity Derivative Activities and (2) the proposed Energy 

Management Services are complementary to Barclays' Commodity Derivative 

Activities and Derivative Advisory Services. In approving the proposed Energy 

Tolling and Energy Management Services, the Director, with the concurrence of 

the General Counsel, also has determined that the proposed activities do not pose a 

substantial risk to the safety or soundness ofBarclays, its depository institutions, or 

the financial system generally and can reasonably be expected to produce benefits 

to the public that outweigh any potential adverse effects. 

In making these determinations, the Director relied on all the 

information, representations, and commitments provided by Barclays to the Board 

in connection with the notice. 10 These commitments and conditions are integral to 

the determination that Physical Commodity Trading, Energy Tolling, and Energy 

Management Services would not pose a substantial risk to the safety and soundness 

ofBarclays, other financial institutions, or the financial system generally. These 

determinations also are subject to all the conditions set forth in Regulation Y, 

including those in section 225.7, 11 and to the conditions contained in the Board's 

previous decisions noted above. These commitments and conditions shall be 

deemed to be conditions imposed in writing by the Board in connection with the 

notice and this approval and, as such, may be enforced in proceedings under 

applicable law. These determinations should not be construed as granting relief 

from any other conditions or commitments to which Barclays may be subject. In 

10 See appendix for a complete list of the commitments Barclays has made in 

connection with these proposals. 

11 12 CFR 225.7. 
8 

addition, these determinations are subject to the Board's authority to require 

modification or termination of the activities of a bank holding company or any of 

its subsidiaries as the Board finds necessary to ensure compliance with, or to 

prevent evasion of, the provisions and purposes of the BHC Act and the Board's 

regulations and orders issued thereunder. 

Attachment 

Very truly yours, 

(signed) Robert 

Robert deV. Fri on 

Deputy Secretary of the Board 

cc: Ivan J. Hurwitz, Vice President 

Federal Reserve Bank ofNew York 
9 

Appendix 

Commitments 

1. Barclays PLC ("Barclays") commits to the Board of Governors of the Federal 

Reserve System ("Board") that Barclays will include the present value of all 

capacity payments to be made by Barclays in connection with the energy tolling 

agreements in calculating its compliance with the limit of 5 percent of tier 1 capital 

on the aggregate market value of the physical commodities that it and any of its 

subsidiaries hold at any one time as a result of Physical Commodity Trading; 

2. Barclays commits to the Board that it will enter into long-term electricity supply 

contracts only with large commercial and industrial end-users that consume 

electricity at a rate of at least (i) 800 megawatt-hours per year or (ii) the minimum 

consumption level for large commercial and industrial customers under applicable 

state law, whichever is greater; 

3. Barclays commits to the Board that it will contract with a third party for any 

services it needs in connection with the handling of any commodity; ensure that 

any alteration of commodities will be carried out by third parties on Barclays' 

behalf; and ensure that both the commodities input and the resulting altered 

commodities will be Approved Commodities; 

4. Barclays commits to the Board that it will ensure that revenues attributable to 

Barclays' Energy Management Services in the United States will not exceed 

5 percent of Barclays' total consolidated operating revenues; and 

5. Barclays commits to the Board that it will only act as an energy manager in the 

United States if the energy management agreement under which Barclays performs 

Energy Management Services provides that: 

a. The owner of the facility retains the right to market and sell power directly 

to third parties, which may be subject to the energy manager's right of first 

refusal; 

b. The owner of the facility retains the right to determine the level at which the 

facility will operate (i.e., to dictate the power output of the facility at any 

given time); 

c. Neither the energy manager nor its affiliates guarantee the financial 

performance of the facility; and 

d. Neither the energy manager nor its affiliates bear any risk of loss if the 

facility is not profitable.