Barclays 2009 Annual Report Download - page 124

122 Barclays PLC Annual Report 2009 www.barclays.com/annualreport09
Risk management
Market risk management
Market Risk is the risk that Barclays earnings or capital, or its ability to
meet business objectives, will be adversely affected by changes in the
level or volatility of market rates or prices such as interest rates, credit
spreads, commodity prices, equity prices and foreign exchange rates.
The majority of market risk exposure resides in Barclays Capital.
Barclays is also exposed to market risk through non-traded interest rate
risk and the pension fund.
Barclays market risk objectives are to:
– Understand and control market risk by robust measurement and the
setting of limits.
– Facilitate business growth within a controlled and transparent risk
management framework.
– Ensure traded market risk resides primarily in Barclays Capital.
– Minimise non-traded market risk.
Organisation and structure
The Board approves market risk appetite for trading and non-trading
activities. The Market Risk Director is responsible for the Market Risk Control
Framework and, under delegated authority from the Chief Risk Officer, sets
a limit framework within the context of the approved market risk appetite.
A daily market risk report summarises Barclays market risk exposures
against agreed limits. This daily report is sent to the Chief Risk Officer, the
Market Risk Director, the Group Finance Director and the appropriate
Business Risk Directors.
The head of each business, assisted by the business risk management
team, is accountable for all market risks associated with its activities. Each
business is responsible for the identification, measurement, management,
control and reporting of market risk as outlined in the Barclays Market Risk
Control Framework. Oversight and support is provided to the business by the
Market Risk Director, assisted by the Group Market Risk team. The Market
Risk Committee reviews, approves, and makes recommendations concerning
the market risk profile across Barclays including risk appetite, limits and
utilisation. The Committee meets monthly and is chaired by the Market Risk
Director. Attendees include the Chief Risk Officer, respective business risk
managers and senior managers from Group Market Risk.
In Barclays Capital, the Head of Market Risk is responsible for
implementing the Market Risk Control Framework. Day to day responsibility
for market risk lies with the senior management of Barclays Capital,
supported by the Market Risk Management team that operates
independently of the trading areas. Oversight is provided by Group
Market Risk.
Daily market risk reports are produced for Barclays Capital as a whole
as well as for the main business areas. These are sent to Group Market Risk
for review and inclusion in the daily market risk report. The risks covered
include interest rate, credit spread, commodity, equity and foreign exchange.
A more detailed trading market risk presentation is produced fortnightly
and discussed at the Barclays Capital Traded Positions Risk Review meeting.
The attendees at this meeting include senior trading and risk managers from
Barclays Capital and Group Market Risk.
In each of the six main Global Retail and Commercial Banking businesses
(UK Retail Banking, Barclays Commercial Bank, Barclaycard, Western Europe,
Emerging Markets and Absa), Group Treasury and Wealth, there is a dedicated
market risk department. The head of each department is responsible for
implementing the Market Risk Control Framework, with oversight provided
by Group Market Risk. A combination of daily and monthly risk reports are
sent to Group Market Risk for review and inclusion in the daily market risk
report. A risk summary is also presented at Market Risk Committee and the
respective Asset and Liability Committees.
The chart below gives an overview of the business control structure.
Overview of the business control structure
Market Risk Director
Non-traded
– Banking book interest rate risk
– Foreign exchange risk
Traded
Risk type
and reviewed
by the Group
Market Risk
Team and…
…managed by
– Pension risk – Investment
risk
– Asset
management
risk
Barclays
Capital
Pension Fund
Trustees and
Barclays Central
Functions
Barclays
Wealth
Global Retail
and
Commercial
Banking
Barclays Wealth
Global Retail
and
Commercial
Banking – Absa
Group
Treasury
– Traded Positions
Risk Review
Meeting
– Asset and Liability
Committees
– New Product
Process team
– Supervisory visits
from business
centre team
– Investment
Committee
– Pension
Management
Group
– Pension Executive
Board
– Barclays Wealth
Asset and
Liability
Committee
– Absa Market Risk
Committee
– Treasury
Committee
– Treasury Hedge
Committee