Barclays 2014 Annual Report Download - page 187

barclays.com/annualreport Barclays PLC Annual Report 2014 I 185
Overview
This section provides an overview of Barclays’ capital position and
details i) capital resources on a PRA transitional basis ii) movement
analysis on fully loaded CET1 capital iii) CRD IV capital requirements by
risk type and business and movement analysis. It also provides details
of the BCBS 270 leverage ratio and underlying exposures.
Capital ratios
Barclays’ current regulatory target is to meet a fully loaded CET1 ratio
of 9% by 2019, plus a Pillar 2A add-on. The 9% comprises the required
4.5% minimum CET1 ratio and, phased in from 2016, a Combined
Buffer Requirement made up of a Capital Conservation Buffer (CCB) of
2.5% and an expected Globally Systemically Important Institution
(G-SII) buffer of 2%.
Under current PRA guidance, the Pillar 2A add-on will need to be met
with 56% CET1 from 2015, which would equate to approximately
1.6%a of RWAs. The Pillar 2A add-on would be expected to vary over
time according to the PRA’s individual capital guidance.
In addition, a Counter-Cyclical Capital Buffer (CCCB) and/or additional
Sectoral Capital Requirements (SCR) may be required by the Bank of
England to protect against perceived threats to financial stability. CRD
IV also includes the potential for a Systemic Risk Buffer (SRB). These
buffers could be applied at the Group level or at a legal entity, sub-
consolidated or portfolio level. No CCCB, SCR or SRB has currently been
set by the Bank of England.
Capital resources
The PRA announced the acceleration of transitional provisions relating
to CET1 deductions and filters so the fully loaded requirements are
applicable from 1 January 2014, with the exception of unrealised gains
on available for sale debt and equity. As a result, transitional capital
ratios are now closely aligned to fully loaded ratios.
Grandfathering limits on capital instruments, previously qualifying as
Tier 1 and Tier 2, are unchanged under the PRA transitional rules.
Leverage
In addition to the Group’s capital structure, target ratios have also been
set in respect of both the PRA leverage ratio requirement of 3% and the
final recommendations on leverage proposed by the FPC’s review on
leverage published 31st October 2014.
The review recommends a minimum leverage ratio requirement, a
supplementary leverage ratio buffer applicable to globally systemically
important banks and a countercyclical leverage ratio buffer. These
recommendations would result in a fully phased in leverage ratio of
3.7% for Barclays (based on current GSIFI and Countercyclical Buffer
assumptions) applicable by 2018.
Summary of performance in the period
Barclays continues to be in excess of minimum CRD IV capital ratios on
both a transitional and fully loaded basis.
As at 31 December 2014, Barclays exceeded the PRA target fully loaded
CET1 ratio of 7%. On a transitional basis, the PRA has implemented a
minimum requirement CET1 ratio of 4%, Tier 1 ratio of 5.5% and Total
Capital ratio of 8%.
The fully loaded CRD IV CET1 ratio increased to 10.3% (2013: 9.1%)
due to a £40.6bn reduction in risk weighted assets to £401.9bn and an
increase in the fully loaded CRD IV CET1 capital of £1.1bn to £41.5bn.
The increase in capital, after absorbing £3.3bn of adjusting items, was
driven by a £1.6bn increase in other qualifying reserves and a £0.6bn
increase due to lower regulatory adjustments and deductions. This was
partially offset by £1.2bn recognised for dividends.
The RWA reduction was mainly driven by a £35bn reduction in
Non-Core to £75bn reflecting the disposal of businesses, run-down and
exit of securities and loans, and derivative risk reductions.
The BCBS 270 leverage ratio increased to 3.7% (September 2014:
3.5%), reflecting a reduction in the BCBS 270 leverage exposure to
£1,233bn (September 2014: £1,324bn) driven by a seasonal reduction
in settlement balances and continued reductions in Non-Core
exposure.
Capital risk is the risk that the Group has insufficient
capital resources to:
Q Meet minimum regulatory requirements in the UK and
in other jurisdictions such as the United States and
South Africa where regulated activities are undertaken.
The Group’s authority to operate as a bank is
dependent upon the maintenance of adequate capital
resources;
Q Support its credit rating. A weaker credit rating would
increase the Group’s cost of funds; and
Q Support its growth and strategic options.
More details on monitoring and managing capital risk may be
found in the Risk Management sections on pages 132 and 133.
All disclosures in this section (pages 185 to 190) are unaudited unless otherwise stated
Note
a Based on a point in time assessment made by the PRA, at least annually. The PRA
issued its requirements in May 2014. The EBA issued guidelines on the Supervisory
Review and Evaluation Process (SREP) and on Pillar 2 capital which are effective from
2016, which are likely to affect how the PRA approaches Pillar 2 thereafter.
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