Barclays 2012 Annual Report Download - page 343

The strategic report Governance Risk review Financial review Financial statements Risk management Shareholder information
Risk mitigation
As part of the stress testing process we identify the actions that should
be taken to mitigate the risks that could arise in the event of material
adverse changes in the current economic and business outlook.
As an additional layer of protection, the Barclays Recovery Plan defines
the actions and implementation strategies available for the Group to
increase or preserve our capital resources in the event that stress
events are more extreme than anticipated. In addition, the strong
regulatory focus on resolvability has continued in 2012, from both UK
and international regulators. The Group continues to work with the
authorities on recovery and resolution planning (RRP), and the detailed
practicalities of the resolution process, including the provision of
information that would be required in the event of a resolution, so as
to enhance Barclays resolvability (a Citizenship commitment made in
May 2012). The Group made its first formal RRP submissions to the UK
and US regulators in mid-2012 and has since continued to work with
the authorities to identify and address any impediments to resolvability.
Transferability of capital
The Group’s policy is for surplus capital held in Group entities to be
repatriated to BBPLC in the form of dividends and/or capital
repatriation, subject to local regulatory requirements, exchange
controls and tax implications. This approach provides optimal flexibility
on the re-deployment of capital across legal entities. The Group is not
aware of any material impediments to the prompt transfer of capital
resources, in line with the above policy, or repayment of intra-group
liabilities when due.
Governance
Our Group and legal entity capital plans are underpinned by the Capital
Management Framework, which includes our capital management
policies and practices approved by the Capital Committee and
implemented consistently and aimed at delivering on our objectives.
The Group Treasury Committee and the Board approve the Group
capital plan, stress tests and Recovery Plan. The Group Treasury
Committee manages compliance with the Group’s capital management
objectives. The Committee reviews actual and forecast capital demand
and resources on a monthly basis. The Board Risk Committee annually
reviews risk appetite and then analyses the impacts of stress scenarios
on the Group capital forecast (see pages 56-58) in order to understand
and manage the Group’s projected capital adequacy, amongst other
things.
Resources
Global teams operate in accordance with the Group’s policies and
procedures, having direct access to local regulators and businesses in
order to support individual capital management at a legal entity level.
Senior management awareness and transparency
Capital ratios, early warning indicators and movements in capital
demand and supply are reported to Group Treasury Committee
monthly.
Capital management information is readily available at all times to
support the Executive Management’s strategic and day-to-day
business decision making, as may be required.
The Group submits its Board approved ICAAP document to the FSA on
an annual basis, which forms the basis of the Individual Capital
Guidance set by the FSA.
Pillar 3 disclosures are approved by the Board and publicly available as
a separate document in line with the Basel 2 and FSA requirements.
Ongoing capital management risks
Capital ratio sensitivity to foreign exchange rate movements
The Group has capital resources and risk weighted assets denominated
in foreign currencies. Changes in foreign exchange rates result in
changes in the Sterling equivalent value of foreign currency
denominated capital resources and risk weighted assets. As a result,
the Group’s regulatory capital ratios are sensitive to foreign currency
movements.
The Group’s capital ratio management strategy is to minimise the
volatility of the capital ratios caused by foreign exchange rate
movements. To achieve this, the Group aims to maintain the ratio of
foreign currency Core Tier 1, Tier 1 and Total capital resources to
foreign currency RWAs the same as the Group’s consolidated capital
ratios.
The Group’s investments in foreign currency subsidiaries and branches,
to the extent that they are not hedged for foreign exchange
movements, translate into Sterling upon consolidation creating Core
Tier 1 capital resources sensitive to foreign currency movements.
Changes in the Sterling value of the investments due to foreign
currency movements are captured in the currency translation reserve,
resulting in a movement in Core Tier 1 capital.
To create foreign currency Tier 1 and Total Capital resources additional
to the Core Tier 1 capital resources, the Group issues, where possible,
debt capital in non-Sterling currencies. This is primarily achieved by the
issuance of debt capital from Barclays Bank PLC in USD and EUR, but
can also be achieved by subsidiaries issuing capital in local currencies,
such as ABSA in South Africa.
barclays.com/annualreport Barclays PLC Annual Report 2012 I 341