Barclays 2010 Annual Report Download - page 127

The fair values of physical and derivative positions are primarily determined
through a combination of recognised market observable prices, exchange
prices, and established inter-commodity relationships. Further information
on fair value measurement of financial instruments can be found in Note 41.
Credit risk exposures relating to commodity contracts are actively managed
by the Group. Refer to the Credit Risk section for more information on the
Group’s approach to credit risk management and the credit quality of
derivative assets.
The tables below analyse the overall fair value of the OTC commodity
derivative contracts by movement over time and contractual maturity.
As at 31st December 2010 the fair value of the commodity derivative
contracts reflects a gross positive fair value of £22,521m (2009: £27,134m)
and a gross negative value of £22,884m (2009: £26,227m).
Other market risks
Barclays maintains a number of defined benefit pension schemes for
past and current employees. The ability of the Pension Fund to meet the
projected pension payments is maintained through investments and
regular bank contributions. Pension risk arises because the estimated
market value of the pension fund assets might decline; or their investment
returns might reduce; or the estimated value of the pension liabilities
might increase. In these circumstances, Barclays could be required or
might choose to make extra contributions to the pension fund. Financial
details of the pension fund are in Note 28.
Asset management structural risk arises where the fee and commission
income earned by asset management products and businesses is affected
by a change in market levels, primarily through the link between income
and the value of assets under management. Asset management structural
risk mainly resides in Barclays Wealth. It is Barclays policy that businesses
monitor and report this risk against a defined risk appetite and regularly
assess potential hedging strategies.
Disclosures about certain trading activities including non-exchange
traded commodity contracts
The Group provides a fully integrated service to clients for base metals,
precious metals, oil, power, natural gas, coal, freight, emission credits,
structured products and other related commodities. This service offering
continues to expand, as market conditions allow, through the addition
of new products and markets.
The Group offers both over the counter (OTC) and exchange-traded
derivatives, including swaps, options, forwards and futures and enters into
physically settled contracts in base metals, power and gas, oil and related
products. Physical commodity positions are held at fair value and reported
in Note 12.
Maturity analysis of commodity derivative
fair value 2010
£m
2009
£m
Not more than one year (1,859) (75)
Over one year but not more than five years 977 620
Over five years 519 362
Total (363) 907
Movement in fair value of commodity
derivative positions 2010
£m
2009
£m
Fair value of contracts outstanding
as at 1st January 907 (936)
Contracts realised or otherwise settled
during the period (3,124) 1,521
Fair value of new contracts entered into
during the period (1,068) (181)
Other changes in fair values 2,922 503
Fair value of contracts outstanding
as at 31st December (363) 907
Barclays PLC Annual Report 2010 www.barclays.com/annualreport10 125
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