Barclays 2014 Annual Report Download - page 205

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Credit ratings
In addition to monitoring and managing key metrics related to the financial strength of the Group, we also subscribe to independent credit rating
agency reviews by Standard & Poor’s, Moody’s, Fitch and DBRS. These ratings assess the creditworthiness of the Group, its subsidiaries and
branches and are based on reviews of a broad range of business and financial attributes including risk management processes and procedures,
capital strength, earnings, funding, liquidity, accounting and governance.
Credit ratingsa
As at 31 December 2014 Standard & Poor’s Moody’s Fitch DBRS
Barclays Bank PLC
Long-term A (Negative) A2 (Negative) A (Stable) AA (Low) (Stable)
Short-term A-1 P-1 F1 R-1 (mid) (Stable)
Stand-alone rating bbb+ C- (Stable) a A (high) (Stable)
Barclays PLC
Long-term A- (Negative) A3 (Negative) A (Stable) n/a
Short-term A-2 P-2 F1 n/a
The credit ratings of most financial institutions, including Barclays benefit from sovereign support notches to reflect the historic propensity for
governments to support systemically important banks. As regulation has evolved, credit rating agencies have communicated their intention to
remove part or all of this support over time.
In line with this intent, on 3 February 2015, S&P took action to remove the government support notches from certain UK and Swiss bank non-
operating holding companies, including Barclays PLC, the holding company of Barclays Bank PLC. This resulted in a downgrade of Barclays PLC by
two notches to BBB/A-2 with stable outlook as they believe the prospect of extraordinary government support to its senior creditors is now
unlikely. S&P also placed the long-term and short-term ratings of most UK, German and Austrian bank operating companies, including Barclays
Bank PLC (A/A-1) and its subsidiaries and branches, the counterparties for customer and client relationships on ‘Credit Watch with negative
implications’ as they assess how the legislative bail-in powers may operate for bank operating companies in practice.
A credit rating downgrade could result in contractual outflows to meet collateral requirements on existing contracts. Outflows related to a
multiple-notch credit rating downgrade are included in the LRA stress scenarios and a portion of the liquidity pool is held against this risk. Credit
ratings downgrades could also result in increased costs or reduced capacity to raise funding.
The table below shows contractual collateral requirements following one- and two-notch long-term and associated short-term simultaneous
downgrades across all credit rating agencies, which are fully reserved for in the liquidity pool. These numbers do not assume any management or
restructuring actions that could be taken to reduce posting requirements. These outflows do not include the potential liquidity impact from loss of
unsecured funding, such as from money market funds, or loss of secured funding capacity. However, unsecured and secured funding stresses are
included in the LRA stress scenarios and a portion of the liquidity pool is held against these risks.
Contractual credit rating downgrade exposure (cumulative cash flow)
Cumulative cash outflow
As at 31 December 2014
One-notch
downgrade
£bn
Two-notch
downgrade
£bn
Securitisation derivatives 5 6
Contingent liabilities 8 8
Derivatives margining –1
Liquidity facilities 1 2
Total contractual funding or margin requirements 14 17
As at 31 December 2013
Securitisation derivatives 7 8
Contingent liabilities 6 6
Derivatives margining –1
Liquidity facilities 1 2
Total contractual funding or margin requirements 14 17
Note
a Refers to Standard & Poor’s Stand-Alone Credit Profile (SACP), Moody’s Bank Financial Strength Ratio (BFSR)/Baseline Credit Assessment (BCA), Fitch Viability Rating (VR) and
DBRS Intrinsic Assessment (IA).
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