Barclays 2014 Annual Report Download - page 135

barclays.com/annualreport Barclays PLC Annual Report 2014 I 133
Primary objectives Core practices
Support a strong credit rating ■ Maintain capital ratios aligned
with rating agency expectations
Provide a viable and sustainable
business offering by maintaining
adequate capital to cover the
Group’s current and forecast
business needs and associated risks
■ Maintain a capital plan on a
short-term and medium-term
basis aligned with strategic
objectives, balancing capital
generation of the business with
business growth and shareholder
distributions
Ensure the Group and legal entities
maintain adequate capital to
withstand the impact of the risks
that may arise under the stressed
conditions analysed by the Group
■ Meet minimum regulatory
requirements at all times in the
UK and in all other jurisdictions
that the Group operates in, such
as the United States and South
Africa where regulated activities
are undertaken
■ Perform Group-wide internal and
regulatory stress tests
■ Maintain capital buffers over
regulatory minimums
■ Develop contingency plans for
severe (stress management
actions) and extreme stress tests
(recovery actions)
Regulatory requirements
Capital planning is set in consideration of minimum regulatory
requirements in all jurisdictions in which the Group operates. Barclays’
regulatory capital requirements are determined by the PRA under the
Basel III and CRD IV requirements.
Under these regulatory frameworks, capital requirements are set in
consideration of the level of risk that the firm is exposed to which is
measured through both risk-weighted assets (RWAs) and leverage.
Capital held to support the level of risk identified is set in consideration
of minimum ratio requirements and internal buffers. Capital
requirements are set to support the firm’s level of risk both on a going
concern basis and in resolution.
Governance
The Group and legal entity capital plans are underpinned by the Capital
Risk Framework, which includes capital management policies and
practices approved by the Treasury Committee. These plans are
implemented consistently in order to deliver on the Group objectives.
The Board approves the Group capital plan, stress tests and recovery
plan. The 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 in order to
understand and manage the Group’s projected capital adequacy.
Monitoring and managing capital
Capital is monitored and managed on an ongoing basis through:
Stress testing: internal stress testing is undertaken to quantify and
understand the impact of sensitivities on the capital plan and capital
ratios, arising from 1 in 7 year and 1 in 25 year stresses. Actual recent
economic, market and peer institution stresses are used to inform the
assumptions of the stress tests and assess the effectiveness of
mitigations strategies.
The Group also undertakes stress tests prescribed by the PRA and ECB.
Legal entities undertake stress tests prescribed by their local regulators.
These stress tests inform decisions on the size and quality of capital
buffer required and the results are incorporated into the Group capital
plan to ensure adequacy of capital under normal and severe, but
plausible, stressed conditions.
Risk mitigation: as part of the stress testing process actions are
identified 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 capital resources in the event that stress events are
more extreme than anticipated. In addition, the strong regulatory focus
on resolvability has continued in 2014, 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.
Senior management awareness and transparency: Treasury works
closely with Central Risk, businesses and legal entities to support a
proactive approach to identifying sources of capital ratio volatilities
which are considered in the Group’s capital plan. Capital risks against
firm-specific and macroeconomic early warning indicators are
monitored and reported to the Treasury Committee, associated with
clear escalation channels to senior management.
Capital management information is readily available at all times to
support the Executive Managements strategic and day-to-day business
decision making, as may be required.
The Group submits its Board approved ICAAP document to the PRA on
an annual basis, which forms the basis of the Individual Capital
Guidance (ICG) set by the PRA.
Capital allocation: capital allocations are approved by the Group
Executive Committee and monitored by the Treasury Committee,
taking into consideration the risk appetite, growth and strategic aims of
the Group. Barclays Bank PLC (BBPLC) is the primary source of capital
to its legal entities. Regulated legal entities are, at a minimum, allocated
adequate capital to meet their current and forecast regulatory and
business requirements.
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.
More information on capital risk management can be found in Barclays
PLC Pillar 3 document pages 158 and 159.
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Risk review
Governance