Barclays 2011 Annual Report Download - page 127

Risk control
Market risk is controlled through the use of limits on the above risk measures. Limits are set at the total business level and then cascaded down.
The total business level limits for AEaR, EVE, EC, DVaR and stress are agreed by the Market Risk Committee. Compliance with limits is monitored by
the respective business market risk team with oversight provided by Group Market Risk.
Market risk is also controlled through an ongoing programme of conformance reviews by both the business market risk departments and Group Market
Risk. These reviews examine both the current market risk profile and potential market risk developments, as well as verifying adherence with Barclays
policies and standards as detailed in the Barclays Market Risk Control Framework.
The interest rate risk for balances with no defined maturity date and an interest rate that is not linked to the base rate is managed by Group Treasury.
A series of continuous rolling hedges are used to mitigate the interest rate risk in the banking book. In 2011, the maturity of the rolling hedge
programme was extended following a review by Group Treasury Committee of the most appropriate maturity. This revision was agreed by the
Group Executive Committee.
Risk reporting
Each business area is responsible for their respective market risk reports. A combination of daily and monthly risk reports are produced and used by the
business. These are also sent to Group Market Risk for review and inclusion in the daily market risk report. A risk summary is also presented at the
Market Risk Committee and respective Asset and Liability Committees.
Analysis of net interest income sensitivity
The table below shows sensitivity analysis on the pre-tax net interest income for the non-trading financial assets and financial liabilities held at 31
December 2011 and 31 December 2010. The sensitivity has been measured using AEaR methodology as described above. The benchmark interest rate
for each currency is set as at 31 December 2011. The figures include the effect of hedging instruments but exclude banking book exposures held or
issued by Barclays Capital as these are measured and managed using DVaR.
Net interest income sensitivity (AEaR) by currency (audited) 31 December 2011 31 December 2010
+100 basis
points
-100 basis
points
+100 basis
points
-100 basis
points
£m £m £m £m
GBP 68 (321) 297 (377)
US$ (9) (11) (12) (8)
EUR (41) (5) (16) 12
ZAR 31 (29) 13 (10)
Others 14 (5) ––
Total 63 (371) 282 (383)
As percentage of net interest income 0.52% (3.04%) 2.25% (3.06%)
Non-traded interest rate risk, as measured by AEaR, was £371m as at 31 December 2011, a decrease of £12m compared to 31 December 2010.
The decrease in risk reflects a reduction between Group Equity Balances and associated hedges, partly offset by margin compression in the retail bank.
If the interest rate hedges had not been in place the AEaR for 2011 would have been £553m (2010: £601m). AEaR is measured for a reduction in rates
for the purposes of this analysis.
Analysis of equity sensitivity
Analysis of equity sensitivity (audited) 31 December 2011 31 December 2010
+100 basis
points
-100 basis
points
+100 basis
points
-100 basis
points
£m £m £m £m
Net interest income 63 (371) 282 (383)
Taxation effects on the above (21) 122 (71) 96
Effect on profit for the year 42 (249) 211 (287)
As percentage of net profit after tax 1.06% (6.30%) 4.64% (6.31%)
Effect on profit for the year (per above) 42 (249) 211 (287)
Available for sale reserve (1,108) 1,102 (2,051) 2,051
Cash flow hedge reserve (2,248) 2,280 (1,298) 1,288
Taxation effects on the above 1,101 (1,109) 837 (835)
Effect on equity (2,213) 2,024 (2,301) 2,217
As percentage of equity (3.39%) 3.10% (3.70%) 3.56%
Barclays PLC Annual Report 2011 www.barclays.com/annualreport 125
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