Barclays 2014 Annual Report Download - page 52

50 I Barclays PLC Annual Report 2014 barclays.com/annualreport
The Committee’s work
The significant matters addressed by the Committee during 2014 are described below:
Area of focus Matter addressed Role of the Committee Conclusion/action taken
Financial risk
appetite, i.e. the level
of risk the Group
chooses to take in
pursuit of its
business objectives
The level of financial risk appetite the
Group is prepared to take in 2015,
including liquidity risk appetite
Q Scrutinised and debated
management’s recommendations
on the financial volatility
parameters to be used, i.e.
parameters for the Group’s
performance under varying levels
of financial stress, and the
proposed financial risk appetite
Q The Committee recommended the
proposed financial risk appetite for
2015 to the Board for approval,
suggesting some minor adjustments
to be made to the financial volatility
parameters
Q It also requested a review of the
process and methodology for setting
risk appetite given the regulatory
environment, the increasing
significance of conduct and
operational risk and changes to the
structure of the Group. This review
will take place in 2015
Liquidity and
funding, i.e. having
sufficient financial
resources available to
enable the Group to
meet its obligations
as they fall due
Compliance with regulatory
requirements and internal liquidity
risk appetite. The potential impact of
a credit rating downgrade for Barclays
and the impact of a rise in interest
rates on customer behaviours
Q Requested specific reports and
analysis on these matters assessed
the potential impact on funding
costs and flows of a credit rating
agency downgrade, given the loss
of sovereign support notching and
potential management actions to
maintain the liquidity coverage
ratio
Q Evaluated the potential impact on
planned deposit balances of an
increase in interest rates and
available management actions
Q The Committee was satisfied that
Barclays’ liquidity risk profile was
appropriate
Q It also endorsed the range of
management actions that had been
identified to address any impact on
funding of a credit rating downgrade
and an increase in interest rates
Capital and leverage,
i.e. having sufficient
capital resources to
meet the Group’s
regulatory
requirements,
maintain its credit
rating and support
growth and strategic
options
The flight path to achieving required
regulatory and internal targets and
capital and leverage ratios
Q Tracked progress against target
capital and leverage ratios and
available management actions to
achieve the target, debating regular
reports from Barclays’ Treasurer
Q The Committee supported the
forecast trajectory and the identified
management actions
Stress testing, i.e.
testing whether the
Group’s financial
position and risk
profile provide
sufficient resilience
to withstand the
impact of severe
economic stress
The scenarios for stress testing, the
results and implications, including
stress tests run by the Bank of
England (BoE) and European Banking
Authority (EBA)
Q Evaluated the scenarios proposed
by management and those required
by the BoE and EBA
Q Examined the impact of differences
in assumptions and methodologies
between internal and regulatory
stress tests
Q Assessed the available
management actions to mitigate
the impact of the stress
Q The Committee agreed the scenarios
for Barclays’ internal stress test and
endorsed the identified management
actions
Q It also approved the results of the
stress tests run by the BoE and EBA,
which demonstrated that Barclays
maintains acceptable leverage and
capital ratios at the low points of the
stress
Country risk The potential impact of political and
economic instability outside the UK
(in particular, Russia and Ukraine) and
the economic outlook for the South
African economy
Q Examined Barclays’ exposures to
Russian counterparties and how
these were being managed in light
of sanctions imposed as a result of
the Ukrainian political situation
Q Assessed the implementation of
sanctions requirements in respect
of Russian clients
Q Debated Barclays’ risk strategy for
South Africa given the economic
and political environment and the
size of Barclays’ business and the
capital invested
Q The Committee encouraged
management to continue to manage
down Barclays’ risks and exposures to
Russia: by 31 December 2014 these
exposures had reduced by £1.3bn
Q In respect of South Africa, the
Committee suggested a number of
factors for further consideration by
the risk function in managing the
Group’s exposure
Governance: Directors’ report
What we did in 2014
Board Financial Risk Committee Report