Barclays 2003 Annual Report Download - page 199

Barclays PLC Annual Report 2003 197
61 Differences between UK GAAP and US GAAP accounting principles (continued)
(p) Consolidation (continued)
The Group also has significant variable interests in certain asset securitisations and client intermediation entities, created or acquired after 31st
January 2003 where the Group is not the primary beneficiary.
31st
December
Total 2003
assets Maximum
£m loss(a)
Asset securitisations 4,435 2,271
Client intermediation 5,400 453
The Group has also created or acquired VIEs prior to 1st February 2003. Where it is reasonably possible the Group will be the primary beneficiary and
therefore be required to consolidate the following types of entities on adoption of FIN46-R or that the Group will have a significant variable interest,
the maximum loss and total assets have been provided below.
31st December 2003
Already
consolidated
Total under Maximum
assets US GAAP(b) loss(a)
£m £m £m
Multi-seller conduit programmes 12,650 3,035 12,650(c)
Asset securitisations 7,949 178 230
Client intermediation 1,815 289 738
Credit structuring 3,186 2,877 1,478
Notes
(a) The maximum exposure to loss represents a ‘worst case’ scenario in the event that all such entities simultaneously fail. It does not provide an
indication of ongoing exposure which is managed within the Group’s risk management framework. Where a maximum exposure to loss is quoted,
this represents the Group’s total exposure and includes both drawn and undrawn lending facilities. The Group’s exposure is determined by
changes in the value of the variable interests it holds within these entities, which primarily comprise liquidity, credit enhancements, derivative
transactions and financing arrangements.
(b) Currently consolidated under US GAAP as at 31st December 2003 using guidance provided by EITF90-15 and Topic D-14 where the Group holds
a majority of the entity’s substantive risks and rewards.
(c) Represents commitments to provide liquidity up to this amount. These would be required to be provided in the event of the conduit’s access to
funding markets being restricted.
Qualifying Special Purpose Entities (QSPEs)
In accordance with SFAS 140 and FIN 46, the Group does not consolidate QSPEs. QSPEs are passive entities used by the Group to hold financial assets
transferred to them by the Group and are commonly used in mortgage and other securitisation transactions as described in Note 61(q) below.
Prior to the adoption of FIN 46, the Group consolidated all non-qualifying SPEs if the Group controlled the SPE and held a majority of the SPE’s
substantive risks and rewards.
(q) Securitisations
Credit card securitisations
The Group transfers portfolios of credit card receivable assets to Gracechurch Receivables Trustee Limited. Barclaycard Funding PLC, a subsidiary of
Barclays Bank, has an equitable interest in the cash flows arising from the securitised assets and has issued Loan Note Certificates to the Gracechurch
Card Funding vehicles which are Qualifying Special Purpose Entities (‘QSPEs’). QSPEs sell the Medium Term Notes to investors entitling them to receive
specified cash flows during the life of the security. The proceeds of the issuance of Medium Term Notes are then distributed by the QSPEs to the Group
as consideration for the Loan Note Certificates transferred. Following a securitisation, the Group receives fees for servicing the receivables and providing
cash management services and payment of deferred consideration for the sale of the beneficial interest in the excess income over and above the interest
paid to the noteholder. The Group maintains an interest in the pool of receivables that are available for securitisation, referred to as the seller’s interest.
Investors have no recourse against the Group if cash flows generated from the securitised assets are not sufficient to service the obligations of
the QSPEs.
The Group has no right or obligation to repurchase the benefit of any securitised balance, except if certain representations and warranties given by
the Group at the time of transfer are breached.
The Group has entered into interest rate currency swaps with the QSPEs. These swaps convert a proportion of the Sterling variable interest flows
arising from the Loan Note Certificates to US Dollar variable and fixed rate interest flows to match the interest payable on the Medium Term
Notes issued.