Barclays 2010 Annual Report Download - page 134

Risk management
Liquidity risk management continued
Liquidity regulation
Since June 2010, the Group has reported its liquidity position against
backstop Individual Liquidity Guidance (ILG) provided by the FSA.
Calibration of the Group’s Liquidity Framework anticipated final FSA rules
and is therefore broadly consistent with current FSA standards.
The Basel Committee of Banking Supervisors (BCBS) issued its final
guidelines for liquidity risk management, standards and monitoring in
December 2010. These guidelines include a short term liquidity stress
metric (the Liquidity Coverage Ratio (LCR)) and a longer term liquidity
metric (the Net Stable Funding Ratio (NSFR)). The BCBS guidelines have
yet to be implemented into European and UK law and therefore remain
subject to refinement and change.
However, the Group monitors compliance against these BCBS metrics and
the FSA is expected to bring its ILG metrics into line with the Basel LCR
over time. Applying the expected BCBS guidelines to the Group’s liquidity
position as at 31st December 2010, the relevant ratios were estimated at
80% of the LCR requirement and 94% of the NSFR requirement.
Term financing (audited)
The Group continues to attract deposits in unsecured money markets
and to raise additional secured and unsecured term funding in a variety of
markets. As at 31st December 2009, the Group had £15bn of publicly
issued term debt maturing during 2010. The corresponding figure for 2011
is £25bn. During 2010, the Group issued approximately £35bn of term
funding, comprising:
– £8bn equivalent of public senior term funding;
– £4bn equivalent of public covered bonds/ABS;
– £2bn equivalent of public subordinated debt; and
– £21bn equivalent of structured notes.
This £35bn of term funding refinanced the 2010 requirement, both
maturities and early repayments, as well as pre-financed some of the 2011
and 2012 maturities. Additional term funding raised in 2011 will support
balance sheet growth, further extension of liability maturities and
strengthening of our liquidity position.
The Group liquidity pool is sufficient to cover more than one year of
wholesale maturities.
Funding structure (audited)
Global Retail Banking, Barclays Corporate, Barclays Wealth and Head
Office Functions are structured to be self-funded through customer
deposits, Barclays equity and other long term funding. Barclays Capital
and, in part, Absa are funded through the wholesale secured and
unsecured funding markets.
The loan to deposit and long term funding ratio improved to 77% at
31st December 2010 (2009: 81%). The loan to deposit ratio also improved
to 124% at 31st December 2010 (2009: 130%).
Global Retail Banking, Barclays Corporate, Barclays Wealth
and Head Office functions (audited)
An important source of structural liquidity is provided by our core retail
deposits in the UK, Europe and Africa; mainly current accounts and savings
accounts. Although, contractually, current accounts are repayable on
demand and savings accounts at short notice, the Group’s broad base of
customers – numerically and by depositor type – helps to protect against
unexpected fluctuations. Such accounts form a stable funding base for the
Group’s operations and liquidity needs.
The Global Retail Banking, Barclays Corporate, Barclays Wealth businesses,
together with Head Office functions, do not rely on short term wholesale
funding. Rather, these businesses are funded through a combination of
customer deposits and long term debt and equity.
In order to assess the funding requirement for these businesses, the
balance sheet is modelled to reflect behavioural experience in both assets
and liabilities. The maturity profile, excluding Absa, resulting from this
behavioural modelling is set out below. As at 31st December 2010,
behavioural modelling showed that expected repayments on assets are
larger than the roll off of liabilities resulting in cash inflows for each of the
first five years. Maturities of net liabilities are, therefore, behaviourally
expected to occur after 5 years.
Included within the ‘Not More Than 1 yr’ time bucket in the below analysis
are £18.9bn of Group liquidity pool assets. These assets have a contractual
maturity of greater than 1 year. However, they could be used to generate
short-term cash flows, either through the sale or secured funding and so the
balance has been classified as generating cash flow inflows within 1 year.
132 Barclays PLC Annual Report 2010 www.barclays.com/annualreport10