Barclays 2011 Annual Report Download - page 105

Wholesale forbearance programmes
Whilst there are no standardised wholesale forbearance programmes, as part of the ongoing provision of lending facilities to corporates and businesses,
credit terms are reviewed and may be revised where this is the optimum strategy for the performance of our customers’ businesses and therefore
Barclays loans and advances.
Wholesale client relationships are individually managed with lending decisions made with reference to specific circumstances and on bespoke terms.
As changes in original terms are made for a variety of reasons and in a variety of ways including those not related to the customer’s ability to repay a
loan, comprehensive data is not currently compiled to quantify the lending where changes in original terms have been agreed as a result of forbearance.
Impairment is assessed for each individual counterparty and recognised where relevant impairment triggers have been reached, including where
customers are in arrears and require renegotiation of terms.
A control framework exists along with regular sampling to ensure watch list and impairment policies are implemented as defined and to ensure that all
assets have suitable levels of impairment applied. Portfolios are subject to independent assessment.
Corporate loans modified on a commercial basis in the normal course of business are not considered to be renegotiated or restructured (forborne)
loans.
Wholesale collateral
When property is taken as collateral it is monitored to ensure that the current value is not less than its value at origination. Monitoring is undertaken at
least once every three years for residential property, and annually for commercial property. More frequent monitoring is carried out where the property
sector is subject to significant deterioration.
Deterioration is monitored principally by geography. Specific exercises to monitor property values may be undertaken where the property sector
in a given geography has been subject to significant deterioration and where Barclays has a material concentration of property collateral.
Monitoring may be undertaken either at the level of an individual property or at a portfolio level.
Monitoring on a portfolio level refers to a more frequent process of indexing collateral values on each individual loan, using a regional or national index,
and updating LGD values. Where an appropriate local index is not available, property values are monitored on an individual basis as part of the annual
review process for the loan.
For larger loans property valuation is reviewed by an independent valuer at least every 3 years, and an independent valuer also reviews the property
valuation where information indicates that the value of the property may have declined materially relative to general market prices. In addition, trigger
points are defined under which property values must be reviewed.
Liens over fluctuating assets of a borrower such as inventory and trade receivables, known as floating charges, are monitored regularly. The valuation of
this type of collateral takes into account the ability to establish objectively a price or market value, the frequency with which the value can be obtained
(including a professional appraisal or valuation), and the volatility or a proxy for the volatility of the value of the collateral.
Additional revaluations are usually performed when a loan is moved to EWL or WL. More detail of when a corporate account may be moved to an EWL
or WL may be found on page 88. Exceptions to this may be considered where it is clear a revaluation is not necessary, for instance where there is a very
high margin of security or a recent valuation has been undertaken. Conversely, a material reduction in the value of collateral held represents an increase
in credit risk and will often cause a loan to be placed on the EWL or WL.
Any one of these events may also trigger a test for impairment, depending on individual circumstances of the loan. When calculating impairment, the
difference between an asset’s carrying amount and the present value of all estimated cash flows discounted at the original effective interest rate will be
recognised as an impairment. Such cash flows include the estimated fair value of the collateral which reflects the results of the monitoring and review
of collateral values as detailed above and valuations undertaken as part of our impairment process.
Whether property values are updated as part of the annual review process, or by indexation of collateral values, the updated collateral values feed into
the calculation of risk parameters (for example LGD) which, in turn, feed into identified and unidentified impairment calculations at each balance sheet
date. See the impairment allowances section on page 94 for more detail.
Trends in loan loss rates incorporate the impact of any decrease in the fair value of collateral held.
For further information on collateral and other credit enhancements held against the Group’s assets, refer to pages 79 to 83.
Barclays PLC Annual Report 2011 www.barclays.com/annualreport 103
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