Barclays 2012 Annual Report Download - page 335

The strategic report Governance Risk review Financial review Financial statements Risk management Shareholder information
Organisation and structure
The Board Risk Committee reviews and approves market risk appetite
for the group. The Group Market Risk Director is responsible for
the Barclays Market Risk Control Framework and, under delegated
authority from the Chief Risk Officer, sets a limit framework within
the context of the approved market risk appetite. Market risk reports
summarise Barclays market risk exposures against agreed limits and
are distributed to the principal risk owners.
The Market Risk Committee approves and makes recommendations
concerning the market risk profile across Barclays Group. This includes
approving the Barclays Market Risk Control Framework and Group
Market Risk Policies; reviewing issues, limits and utilisation; and
proposing risk appetite levels to the Board. The Committee is chaired
by the Group Market Risk Director and attendees include the Chief Risk
Officer, respective business aligned risk managers and senior managers
from Group Market Risk as well as Internal Audit.
The head of each business is accountable for all market risks associated
with its activities. The head of the market risk team covering each
business is responsible for implementing the risk control framework
for market risk. The control frameworks for traded, non-traded and
pensions risk are all governed by the Market Risk Control Framework,
which sets out how market risk should be identified, measured,
controlled, reported and reviewed. The Framework also outlines
and references Group Market Risk policies.
Market risk oversight and challenge is provided by business committees,
Group committees including the Market Risk Committee and Group Market
Risk. The chart above gives an overview of the business control structure.
Traded market risk
Traded market risk arises primarily as a result of client facilitation in
wholesale markets. This involves market making, risk management
solutions and execution of syndications. Mismatches between client
transactions and hedges result in market risk due to changes in asset
prices. At Investment Bank and Absa, trading risk is measured for
the trading book, as defined for regulatory purposes, and certain
banking books.
Trading book positions in the Investment Bank and Absa generate
market risk capital requirements, in line with the regulatory
requirements set out in the Capital Requirements Directive (‘CRD III’)
and the FSA’s Prudential Sourcebook for Banks, Building Societies and
Investment Firms (‘BIPRU’). Positions which cannot be included in the
trading book are included within the banking book and generate risk
capital requirements in line with this treatment.
Barclays maintains a Trading Book Policy Statement (‘TBPS’) which
defines the minimum requirements a business must meet to run trading
positions and the process by which positions are allocated to trading
or banking books. Trading intent is a key element in deciding whether
a position should be treated as a trading or banking book exposure.
Currently all trading books must be managed by either Investment
Bank or separately by Absa Capital. Businesses with trading books are
required to document their implementation of trading book standards
which define how the Barclays-wide TBPS requirements will be
implemented. The requirements also consider some of the points
raised by the Fundamental Review of the Trading Book consultation
paper. In particular, businesses are expected to evidence trading intent,
e.g. by setting and enforcing risk and position limits and defining the
consequences of breaching these limits.
Overview of the business market risk control structure
Traded
■ Interest rate risk
■ Spread risk
■ Currency risk
■ Equity risk
■ Commodity risk
■ Inflation risk
■ Traded credit risk
■ Basis risk
Pension
■ Discount rate risk
■ Inflation risk
■ Asset value risk
Non-traded
■ Interest rate risk
■ Foreign exchange risk
■ Asset management risk
Investment
Bank
■ Traded products
risk review
■ Investment
Committee
■ Asset and Liability Committees
■ New product sign-off process
■ Conformance reviews
■ Absa Market Risk Committee
■ Treasury Committee
■ Treasury Hedge Committee
■ Pension
management
group
■ Pension Executive
Board
Retail and
Business Banking
Corporate
Banking
Wealth and
Investment
Management
Absa Treasury Pension Fund
Trustees and
Barclays central
functions
Risk type
...managed by
…with oversight and challenge provided by Market Risk Committee and…
Group Market Risk Director
barclays.com/annualreport Barclays PLC Annual Report 2012 I 333