Barclays 2010 Annual Report Download - page 130

Risk management
Capital risk management continued
Total net capital resources increased by £3.9bn during 2010 reflecting
the growth in Tier 1 capital and an increase in total qualifying Tier 2 capital,
primarily due to the net issuance of additional subordinated debt of
£0.9bn. This was offset by an increase in other regulatory deductions for
investments in non-consolidated subsidiaries and associates of £1.4bn.
As at 31st December 2010, on a Basel II basis, the Group’s Core Tier 1
ratio was 10.8% (2009: 10.0%) and the Tier 1 capital ratio was 13.5%
(2009: 13.0%).
Risk weighted assets
Risk weighted assets increased 4% to £398bn in 2010. Year on year, there
was a £22bn reduction in underlying risk weighted assets (predominantly
in Barclays Capital) as a result of capital management efficiencies and
reduced levels of risk and inventory. This was offset in part by both
methodology and model changes, which increased risk weighted assets
by approximately £28bn. Foreign exchange and other movements
accounted for a further increase of £9bn.
Adjusted gross leverage
The adjusted gross leverage was 20x as at 31st December 2010 (2009: 20x)
principally as a result of a £3.9bn increase in Tier 1 Capital to £53.5bn offset
by the impact of a £84.6bn increase in adjusted total tangible assets. At
month ends during 2010 the ratio moved in a range from 20x to 24x, with
fluctuations arising as a result of normal trading activities, primarily due to
increases in reverse repurchase trading and changes in holdings of trading
portfolio assets. Significant fluctuations on a monthly basis comprised:
– an increase from 20x at December 2009 to 22x at January 2010 driven
by an increase in reverse repurchase trading, holdings of trading
portfolio assets, the acquisition of Standard Life Bank, and increased
cash balances;
– a step up from 21x to 23x in April resulting from an increase in reverse
repurchase trading, holdings of trading portfolio assets, and a decrease
in Tier 1 capital;
– a decrease in June from 24x to 20x driven by a reduction in reverse
repurchase trading and holdings of trading portfolio assets;
– a step up in July from 20x to 23x arising from an increase in reverse
repurchase trading;
– a fall in September from 24x to 21x driven by an increase in Tier 1
capital and a reduction in reverse repurchase trading;
– an increase from 21x to 23x in October as a result of increases in reverse
repurchase trading and holdings of trading portfolio assets; and
– a steady decrease during November and December from 23x to 20x
resulting from decreases in reverse repurchase trading and holdings
of trading portfolio assets and an increase in Tier 1 capital, principally
reflecting the impact of increases in available for sale reserves.
The ratio of total assets to total shareholders equity was 24x as at 31st
December 2010 (2009: 24x). The ratio moved within a month end range
of 24x to 29x, driven by the fluctuations noted above, as well as changes
in gross interest rate derivatives and settlement balances. Significant
drivers of fluctuations other than those noted above comprised:
Regulatory capital summary (audited) Basel II
2010
£m
2009
£m
2008
£m
Total qualifying Tier 1 Capital 53,546 49,637 37,250
Total qualifying Tier 2 Capital 16,019 14,703 22,333
Total Deductions (2,250) (880) (856)
Total net Capital resources 67,315 63,460 58,727
Risk weighted assets by business 2010
£m
2009
£m
UK Retail Banking 35,274 35,876
Barclaycard 31,913 30,566
Western Europe Retail Banking 17,269 16,811
Barclays Africa 8,003 7,649
Barclays Capital 191,275 181,117
Barclays Corporate 70,796 76,928
Barclays Wealth 12,398 11,353
Investment Management 74 73
Absa 30,398 21,410
Head Office Functions and Other Operations 631 870
Total risk weighted assets 398,031 382,653
Adjusted gross leverage 2010
£m
2009
£m
Total assets 1,489,645 1,378,929
Counterparty net/collateralised derivativesb(377,756) (374,099)
Assets held in respect of linked liabilities to
customers under investment contracts (1,947) (1,679)
Net settlement balances and cash collateralc(48,108) (25,825)
Goodwill and intangible assets (8,697) (8,795)
Adjusted total tangible assets 1,053,137 968,531
Total qualifying Tier 1 capital 53,546 49,637
Adjusted gross leveragec20 20
Ratio of total assets to shareholders’ equity 24 24
Risk weighted assets by risk 2010
£m
2009
£m
Credit risk 260,998 252,054
Counterparty risk 43,863 45,450
Market risk
– Modelled – VaR 9,209 10,623
– Modelled – IDRCa and Non-VaR 3,769 5,378
– Standardised 48,073 38,525
Operational risk 32,119 30,623
Total risk weighted assets 398,031 382,653
Notes
a IDRC – Incremental Default Risk Charge.
b Comprising counterparty netting of £340,467m (2009: £342,628m) and collateral held
of £37,289m (2009: £31,471m) as disclosed on page 111.
c As at 31st December 2010 the Group has amended the calculation of adjusted gross
leverage to reflect the deduction of £20,996m cash collateral on derivative liability contracts.
Applying this approach to 2009 would result in an adjusted gross leverage of 19x.
128 Barclays PLC Annual Report 2010 www.barclays.com/annualreport10