Barclays 2014 Annual Report Download - page 152

150 I Barclays PLC Annual Report 2014 barclays.com/annualreport
Risk performance
Credit risk
Risk review
Credit risk concentrations by geography (audited)
As at 31 December 2013
United
Kingdom
£m
Europe
£m
Americas
£m
Africa and
Middle East
£m
Asia
£m
Total
£m
On-balance sheet:
Cash and balances at central banks 7,307 29,983 4,320 2,111 1,966 45,687
Items in the course of collection from other banks 756 242 – 284 – 1,282
Trading portfolio assets 15,936 21,040 37,113 2,165 9,953 86,207
Financial assets designated at fair value 17,487 2,632 3,399 1,372 648 25,538
Derivative financial instruments 108,095 114,931 98,568 2,904 25,802 350,300
Loans and advances to banks 6,457 12,510 10,468 2,553 7,434 39,422
Loans and advances to customers 236,686 74,021 70,661 39,584 13,285 434,237
Reverse repurchase agreements and other similar secured lending 34,027 32,820 102,922 1,887 15,123 186,779
Available for sale debt securities 29,540 33,816 20,189 5,875 1,878 91,298
Other assets 917 380 260 324 117 1,998
Total on-balance sheet 457,208 322,375 347,900 59,059 76,206 1,262,748
Off-balance sheet:
Contingent liabilities 10,349 2,475 4,521 2,110 220 19,675
Documentary credits and other short-term trade related transactions 496 121 – 163 – 780
Forward starting reverse repurchase agreements 5,254 3,903 4,753 4 6,022 19,936
Standby facilities, credit lines and other commitments 102,456 35,612 99,240 15,584 1,963 254,855
Total off-balance sheet 118,555 42,111 108,514 17,861 8,205 295,246
Total 575,763 364,486 456,414 76,920 84,411 1,557,994
Exposures to Eurozone countries (audited)
Overview
The Group recognises the credit and market risk resulting from the on-going volatility in the Eurozone and continues to monitor events closely
while taking coordinated steps to mitigate the risks associated with the challenging economic environment. Risks associated with a potential
partial break-up of the European Union (EU) include:
Q Direct risk arising from sovereign default of a country exiting the EU and the impact on the economy of, and the Group’s counterparties in, that
country;
Q Indirect risk arising from the subsequent impact on the economy of, and the Group’s counterparties in, other Eurozone countries; and
Q Indirect risk arising from credit derivatives that reference Eurozone sovereign debt (see page 154).
Contingency planning began in early 2012 based on a series of potential scenarios that might arise from an escalation in the crisis. Multiple tests
have subsequently been run to establish the impact on customers, systems, processes and staff in the event of the most plausible scenarios.
Where issues have been identified, appropriate remedial actions have been completed.
As a consequence of renewed concerns over a potential Greek exit from the Eurozone, these contingency plans have been reviewed and refreshed
to ensure they remain effective. Whilst the Group’s net exposure to Greece is low, a risk of contagion spreading to other EU countries is evident
and plans are in place for such a scenario.
During 2014, the Group’s net on-balance sheet exposures to Spain, Italy, Portugal, Ireland, Cyprus and Greece reduced by 18% to £43bn. This
primarily reflects a reduction of 17% in exposures to Spain, Italy and Portugal as part of the Non-Core strategy. During 2014, the net funding
mismatch decreased €1.7bn to €9.9bn in Italy and decreased €1.1bn to €1.9bn in Portugal. The surplus in Spain increased €1.2bn to €4.3bn.
For Ireland there is no local balance sheet funding requirement by the Group as total liabilities in this country exceeds assets.
Net exposure to Greece was £27m (2013: £85m) with negligible net funding required from Group. On a gross basis exposure to Greece was
£1,279m (2013: £906m) consisting of derivative assets with financial institutions. The exposure is mitigated by offsetting derivative liabilities and
cash collateral.
Other emerging risks being monitored outside the Eurozone include Russia and China.
Q Net exposure to Russia of £1,943m largely consists of loans and advances to financial institutions of £1,076m. Gross exposure to Russia was
£3,776m including derivative assets with financial institutions. The gross exposure is mitigated by offsetting derivative liabilities
Q Net exposure to China of £4,831m largely consists of loans and advances (mainly cash collateral and settlement balances) to sovereign
(£1,664m) and financial institutions (£1,388m). The gross exposure to China excluding offsetting derivative liabilities was £4,999m.
Basis of preparation
The Group presents the direct balance sheet exposure to credit and market risk by country, with the totals reflecting allowance for impairment,
netting and cash collateral held where appropriate.
Trading and derivatives balances relate to Investment Bank activities, principally as market-maker for government bond positions. Positions are
held at fair value, with daily movements taken through profit and loss:
Q Trading assets and liabilities are presented by issuer type, whereby positions are netted to the extent allowable under IFRS. Where liability
positions exceed asset positions by counterparty type, exposures are presented as nil
Q Derivative assets and liabilities are presented by counterparty type, whereby positions are netted to the extent allowable under IFRS. Cash
collateral held is then added to give a net credit exposure. Where liability positions and collateral held exceed asset positions by counterparty
type, exposures are presented as nil
Q Assets designated at fair value include debt and equity securities, loans and reverse repurchase agreements that have been designated at fair
value.