Barclays 2014 Annual Report Download - page 195

barclays.com/annualreport Barclays PLC Annual Report 2014 I 193
Key LRA assumptions include:
For the year ended 31 December 2014
Liquidity risk driver Barclays specific stress
Wholesale unsecured
funding
Q Zero rollover of wholesale deposits, senior unsecured debt and conduit commercial paper
Q Prime brokerage: 100% withdrawal of non-segregated client excess (cash and independent amount)
Wholesale secured
funding
Q Zero rollover of trades secured on less-liquid collateral
Q Rollover of trades secured on highly-liquid collateral, subject to haircut widening
Deposit outflow Q Substantial deposit outflows in PCB and Barclaycard as the Group is seen as greater credit risk than competitors
Funding concentration Q Additional outflows recognised against concentration of providers of wholesale secured financing
Intra-day liquidity Q Anticipated liquidity required to support intra-day requirements at payment and settlement systems
Intra-group Q Anticipated liquidity required to support material subsidiaries, based on stand-alone stress tests. Excess liquidity held
within certain subsidiaries not available to the wider Group
Off-balance sheet Q Drawdown on committed facilities based on facility type, counterparty type and counterparty creditworthiness
Q Outflow of all collateral owed to counterparties but not yet called
Q Collateral outflows contingent upon a multi-notch credit rating downgrade of Barclays Bank PLC
Q Variation margin posting requirement on collateralised derivatives
Q Increase in the Group’s initial margin requirement across all major exchange
Franchise viability Q Liquidity required in order to meet outflows that are non-contractual in nature but necessary in order to support the
Group’s ongoing franchise (for example, market-making activities)
Cross currency risk Q Net liquidity flows at maturity for FX forwards and cross currency swaps evaluated at current FX rate
Q Haircuts are applied to inflows on non-G10 FX markets to restrict reliance
Mitigating actions Q Monetisation of unencumbered assets that are of known liquidity value to the firm but held outside the liquidity pool
(subject to haircut/valuation adjustment)
Liquidity regulation
The Group has reported its liquidity position against Individual Liquidity Guidance (ILG) provided by the PRA. The PRA defines both eligible
liquidity pool assets and stress outflows against reported balances.
The Group also monitors its position against the CRD IV Liquidity Coverage Ratio (LCR) and the Basel III Net Stable Funding Ratio (NSFR). The LCR
is designed to promote short-term resilience of a bank’s liquidity risk profile by ensuring that it has sufficient high quality liquid resources to
survive an acute stress scenario lasting for 30 days. The NSFR has a time horizon of at least six months and has been developed to promote a
sustainable maturity structure of assets and liabilities.
In October 2014, the European Commission published a final Delegated Act for the LCR under the European CRD IV regime. The CRD IV requires
phased compliance with the LCR standard from 1 October 2015 at a minimum of 60% increasing to 100% by January 2018. The methodology for
estimating the LCR is based off the final published Delegated Act which becomes EU law in October 2015. The PRA released a consultation paper
in November 2014 setting out the proposed new regime, requiring 80% compliance with the LCR standard from 1 October 2015.
In October 2014, the BCBS published a final standard for the NSFR with the minimum requirement to be introduced in January 2018 at 100%. The
methodology for calculating the NSFR is based on an interpretation of the Basel standards published in October 2014 and includes a number of
assumptions which are subject to change prior to adoption by the European Commission through the CRD IV.
Based on the CRD IV and Basel III standards respectively, as at 31 December 2014, the Group had a surplus to both of these metrics with an
estimated CRD IV LCR of 124% (2013: 96%) and an estimated Basel III NSFR of 102% (2013: 94%).
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