Barclays 2012 Annual Report Download - page 323

The strategic report Governance Risk review Financial review Financial statements Risk management Shareholder information
Credit risk management overview
Credit risk is the risk of suffering financial loss should any of the
Group’s customers, clients or market counterparties fail to fulfil their
contractual obligations to the Group. The granting of credit is one of
the Group’s major sources of income and, as the most significant risk,
the Group dedicates considerable resources to its control.
Overview (audited)
The credit risk that the Group faces arises mainly from wholesale and
retail loans and advances together with the counterparty credit risk
arising from derivative contracts entered into with our clients. Other
sources of credit risk arise from trading activities, including debt
securities; settlement balances with market counterparties, available for
sale assets and reverse repurchase loans.
Credit risk management objectives are to:
 maintain a framework of controls to ensure credit risk-taking is
based on sound credit risk management principles;
 identify, assess and measure credit risk clearly and accurately across
the Group and within each separate business, from the level of
individual facilities up to the total portfolio;
 control and plan credit risk-taking in line with external stakeholder
expectations and avoiding undesirable concentrations;
 monitor credit risk and adherence to agreed controls; and
 ensure that risk-reward objectives are met.
Organisation and structure (audited)
Barclays has structured the responsibilities of credit risk management
so that decisions are taken as close as possible to the business, whilst
ensuring robust review and challenge of performance, risk
infrastructure and strategic plans. The credit risk management teams
in each business are accountable to the business risk directors in those
businesses who, in turn, report to the heads of their businesses and
also to the Chief Risk Officer.
The responsibilities of the credit risk management teams in the
businesses include: sanctioning new sources of risk; monitoring risk
against limits and other parameters; ensuring all elements of post
sanction fulfilment are completed in line with terms of the sanction;
maintaining robust systems, data gathering, quality, storage and
reporting methods for effective credit risk management; and
performing effective turnaround and workout scenarios via dedicated
restructuring and recoveries teams.
Credit risk approval is undertaken by experienced credit risk
professionals operating within a clearly defined delegated authority
framework, with only the most senior credit officers entrusted with the
higher levels of delegated authority. The largest credit exposures are
approved at the Credit Committee which is managed by Group Risk. In
the wholesale portfolios, credit risk managers are organised in
sanctioning teams by geography, industry and/or product.
The role of the Group Risk function is to provide Group-wide direction,
oversight and challenge of credit risk-taking. Group Risk sets the Credit
Risk Control Framework, which provides a structure within which credit
risk is managed together with supporting Group Credit Risk Policies.
Group Risk also provides technical support, review and validation of
credit risk measurement models across the Group.
Wholesale account status Retail account status
Performing (Current)
Areas Status 0
Business Support
EWL3, WL3.5
Delinquent (Collections)
Arrears Status 1-6
Performing
Including EWL 1-2, WL 1-3
■ Watchlist Committee flags
client on the basis of evidence
of financial difficulty.
■ Business support assists
the client to return to in
order position.
Default (Recovery)
Write Off
Default (Charge-off) (Recovery)
Arrears Status 6+
■ Customer’s financial difficulty
requires a decision on the
form of future relationship.
■ Asset is considered
irrecoverable and is
written off.
■ Asset is considered
irrecoverable and is
written off.
■ Customer misses contractual
payment and moves to
collections function.
■ Customer reaches high
arrears status and is moved
to the recovery function
where legal action is taken.
■ Customer pays total overdue
payments and returns back
to in order position.
Monitoring weaknesses in portfolios
barclays.com/annualreport Barclays PLC Annual Report 2012 I 321
Risk management
Credit risk management