Barclays 2011 Annual Report Download - page 131

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 39 on page 261.
Asset management structural risk arises where the fee and commission income earned by asset management products 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 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 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 under the Trading Portfolio in
Note 15 on page 219.
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 20
on page 225.
Credit risk exposures are actively managed by the Group. Refer to the Credit Risk section on page 107 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
31 December 2011 the fair value of the commodity derivative contracts reflects a gross positive fair value of £20,588m (2010: £22,521m) and a gross
negative value of £20,133m (2010: £22,884m).
Movement in fair value of commodity derivative positions 2011
£m
2010
£m
Fair value of contracts outstanding as at 1 January (363) 907
Contracts realised or otherwise settled during the period 1,494 (3,124)
Fair value of new contracts entered into during the period (33) (1,068)
Other changes in fair values (643) 2,922
Fair value of contracts outstanding as at 31 December 455 (363)
Maturity analysis of commodity derivative fair value 2011
£m
2010
£m
Not more than one year 447 (1,859)
Over one year but not more than five years 35 977
Over five years (27) 519
Total 455 (363)
On occasion, Barclays will hold dominant positions in base metals on the London Metal Exchange (LME), as per the Exchange’s definition. Barclays
complies fully with LMEs Lending Guidance, which is the Exchange’s mechanism for limiting the impact of dominant market positions by prescribing
the amount and level at which positions must be lent.
Barclays PLC Annual Report 2011 www.barclays.com/annualreport 129
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