Barclays 2014 Annual Report Download - page 291

barclays.com/annualreport Barclays PLC Annual Report 2014 I 289
18 Fair value of financial instruments continued
Complex derivative instruments
Valuation estimates made by counterparties with respect to complex derivative instruments, for the purpose of determining the amount of
collateral to be posted, often differ, sometimes significantly, from Barclays’ own estimates. In almost all cases, Barclays has been able to
successfully resolve such differences or otherwise reach an accommodation with respect to collateral posting levels, including in certain cases by
entering into compromise collateral arrangements. Due to the ongoing nature of collateral calls, Barclays will often be engaged in discussion with
one or more counterparties in respect of such differences at any given time. Valuation estimates made by counterparties for collateral purposes
are, like any other third-party valuation, considered when determining Barclays’ fair value estimates.
Sensitivity analysis of valuations using unobservable inputs
Fair value Favourable changes Unfavourable changes
Total
assets
£m
Total
liabilities
£m
Income
statement
£m
Equity
£m
Income
statement
£m
Equity
£m
As at 31 December 2014
Interest rate derivatives 1,239 (1,344) 70 – (71) –
Foreign exchange derivatives 108 (138) 36 – (36) –
Credit derivativesa1,966 (409) 81 – (229) –
Equity derivatives 1,247 (2,092) 220 – (220) –
Commodity derivatives 185 (337) 46 – (46) –
Government and government sponsored debt 1,014 (346) – – (2) –
Corporate debt 3,061 (13) 26 (1) (9) (4)
Certificates of deposit, commercial paper and other money market
instruments – (665) 3 – 3 –
Non-asset backed loans 17,744 – 1,164 – (820) –
Asset backed securities 1,631 – 46 1 (72) (1)
Commercial real estate loans 1,180 – 20 – (19) –
Issued debt – (749) – – – –
Equity cash products 171 – – 11 – (11)
Funds and fund linked products 631 (210) 14 – (14) –
Otherb17,663 (13,297) 180 82 (156) (55)
Total 47,840 (19,600) 1,906 93 (1,691) (71)
As at 31 December 2013
Interest rate derivatives 1,031 (1,046) 246 – (251) –
Foreign exchange derivatives 117 (86) 32 – (32) –
Credit derivativesa2,200 (780) 145 – (287) –
Equity derivatives 1,266 (1,867) 234 – (234) –
Commodity derivatives 399 (540) 41 – (41) –
Government and government sponsored debt 220 – 1 – (1) –
Corporate debt 3,040 (12) 10 – (4) –
Certificates of deposit, commercial paper and other money market
instruments – (409) ––––
Non-asset backed loans 16,132 – 151 – (1,177) –
Asset backed securities 2,112 – 104 1 (74) (1)
Commercial real estate loans 1,198 – 61 – (29) –
Issued debt 1 (1,164)
Equity cash products 168 – – 12 – (12)
Funds and fund linked products 550 (54) 25 – (25) –
Otherb4,509 (1) 208 58 (203) (47)
Total 32,943 (5,959) 1,258 71 (2,358) (60)
The effect of stressing unobservable inputs to a range of reasonably possible alternatives, alongside considering the impact of using alternative
models, would be to increase fair values by up to £1.9bn (2013: £1.3bn) or to decrease fair values by up to £1.7bn (2013: £2.4bn) with substantially
all the potential effect impacting the income statement rather than directly impacting equity. The increase in favourable change and corresponding
decrease in unfavourable change for non-asset backed loans between 2014 and 2013 has resulted from the fair value methodology change
described on page 281, which moved the fair valuation for the ESHLA portfolio towards the middle of the range of potential outcomes.
Notes
a Credit derivatives includes derivative exposure to monoline insurers.
b Other includes non-current assets and liabilities held for sale, which are measured at fair value on a non-recurring basis, private equity investments, asset backed loans,
US Lehman acquisition assets and investment property.
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