Barclays 2009 Annual Report Download - page 342

340 Barclays PLC Annual Report 2009 www.barclays.com/annualreport09
Glossary of terms
continued
‘Equity products’ As used in Note 50, these products are linked to equity
markets. This category includes listed equities, exchange traded
derivatives, equity derivatives, preference shares and contract for
difference (CFD) products.
‘Equity structural hedge’ An interest rate hedge which functions to reduce
the impact of the volatility of short-term interest rate movements on equity
positions on the balance sheet that do not reprice with market rates.
‘Expected loss’ The Group measure of anticipated loss for exposures
captured under an internal ratings based credit risk approach for capital
adequacy calculations. It is measured as the Barclays modelled view of
anticipated loss based on Probability of Default (PD), Loss Given Default
(LGD) and Exposure at Default (EAD), with a one-year time horizon.
‘Exposure in the event of default (EAD)’ The estimation of the extent to
which Barclays may be exposed to a customer or counterparty in the event
of, and at the time of, that counterparty’s default. At default, the customer
may not have drawn the loan fully or may already have repaid some of the
principal, so that exposure is typically less than the approved loan limit.
‘FICO score’ A credit score, based on the Fair Isaac Corporation (being the
US rating company that wrote the software that calculates the scores).
‘First/Second Lien’ First lien: debt that places its holder first in line to collect
compensation from the sale of the underlying collateral in the event of a
default on the loan. Second lien: debt that is issued against the same
collateral as higher lien debt but that is subordinate to it. In the case of
default, compensation for this debt will only be received after the first lien
has been repaid and thus represents a riskier investment than the first lien.
See Risk Management section – Credit Market Exposures.
‘Full time equivalent’ Full time equivalent employee units are the on-job
hours paid for employee services divided by the number of ordinary-time
hours normally paid for a full-time staff member when on the job (or
contract employee where applicable).
‘Funds and fund-linked products’ As used in Note 50, this category
includes holdings in mutual funds, hedge funds, fund of funds and fund
linked derivatives.
‘Funded/unfunded’ Exposures where the notional amount of the
transaction is either funded or unfunded. Represents exposures where a
commitment to provide future funding has been made and the funds have
been released/not released.
‘FX products’ As used in Note 50, these products are derivatives linked to
the foreign exchange market. This category includes FX spot and forward
contracts; FX swaps; FX options.
‘Gain on acquisition’ The amount by which the acquirer’s interest in the
net fair value of the identifiable assets, liabilities and contingent liabilities,
recognised in a business combination, exceeds the cost of the combination.
‘Global Retail and Commercial Banking – Absa’ The portion of Absa’s results
that is reported within the Global Retail and Commercial Banking business.
‘Home Loans’ A loan to purchase a residential property which is then used
as collateral to guarantee repayment of the loan. The borrower gives the
lender a lien against the property, and the lender can foreclose on the
property if the borrower does not repay the loan per the agreed terms.
Also known as a residential mortgage.
‘Impaired loans’ Loans are reported as Credit Risk Loans (defined above)
and comprise loans where individual identified impairment allowance has
been raised and also include loans which are fully collateralised or where
indebtedness has already been written down to the expected realisable
value. The impaired loan category may include loans, which, while impaired,
are still performing.
‘Impairment allowances’ A provision held on the balance sheet as a result
of the raising of a charge against profit for the incurred loss inherent in the
lending book. An impairment allowance may either be identified or
unidentified and individual or collective.
‘Income’ Total income net of insurance claims, unless otherwise specified.
‘Individually/Collectively Assessed’ Impairment is measured individually
for assets that are individually significant, and collectively where a portfolio
comprises homogenous assets and where appropriate statistical
techniques are available.
‘Interest rate products’ As used in Note 50, these are products with a payoff
linked to interest rates. This category includes interest rate swaps,
swaptions, caps and exotic interest rate derivatives.
‘Investment grade’ A debt security, treasury bill or similar instrument with
acredit rating measured by external agencies of AAA to BBB.
‘Jaws’ The difference between the growth in cost and the growth in income.
‘LCDX Index’ The Loan Credit Default Swap Index, a generally accepted
loan-only credit default swap index created by CDSIndexCo. The LCDX index
is a tradeable index with 100 equally-weighted underlying single-name
loan-only credit default swaps (LCDS).
‘Leveraged Finance’ Loans or other financing agreements provided to
companies whose overall level of debt is high in relation to their cash flow
(net debt: EBITDA) typically arising from private equity sponsor led
acquisitions of the businesses concerned.
‘Liabilities margin’ Interest paid on customer liabilities relative to the average
internal funding rate, divided by average customer liabilities. Expressed as
an annualised percentage.
‘Liquidity and Credit enhancements’ Credit enhancement facilities are used
to enhance the creditworthiness of financial obligations and cover losses due
to asset default. Two general types of credit enhancement are third-party loan
guarantees and self-enhancement through over collateralization. Liquidity
enhancement makes funds available if required, for other reasons than asset
default, e.g. to ensure timely repayment of maturing commercial paper.
‘Liquidity pool/buffer’ The Group liquidity pool comprises cash at central
banks and highly liquid collateral specifically held by the Group as
contingency to enable the bank to meet cash outflows in the event
of stressed market conditions.
‘Loan loss rate’ Defined as total credit impairment charge (excluding
available for sale assets and reverse repurchase agreements) divided by
gross loans and advances to customers and banks (at amortised cost).
‘Loan to deposit ratio’ The ratio of wholesale and retail loans and advances
to customers net of impairment allowance divided by customer deposits.
‘Loan funding ratio’ The ratio of wholesale and retail loans and advances
to customers net of impairment allowance, divided by the total of customer
accounts, long-term debt (>1 yr) and equity.
‘Loan to value ratio (LTV)’ The amount of a first mortgage lien as a
percentage of the total appraised value of real property. The LTV ratio is
used in determining the appropriate level of risk for the loan and therefore
the price of the loan to the borrower. LTV ratios may be expressed in a
number of ways, including origination LTV and mark to market (MTM) LTV.
Origination LTVs use the current outstanding loan balance and the value
of the property at origination of the loan. MTM LTVs use the current
outstanding loan value and the current value of the property (which is
estimated using one or more external house price indices).
‘Loans past due’ Loans are past due when a counterparty has failed to make
a payment when contractually due.
‘Loss Given Default (LGD)’ The fraction of Exposure at Default (EAD)
(defined above) that will not be recovered following default. LGD comprises
the actual loss (the part that is not expected to be recovered), together with
the economic costs associated with the recovery process.
‘Markit LCDX Index’ An index compiled by Markit Inc, a specialist securities
market researcher, compiled by reference to first lien loans issued by
100 entities listed on the Markit Syndicated Secured List, widely used
in the industry.
‘Medium Term Notes (MTNs)’ Corporate notes continuously offered by a
company to investors through a dealer. Investors can choose from differing
maturities, ranging from nine months to 30 years.