Barclays 2003 Annual Report Download - page 202

Notes to the Accounts
For the Year Ended 31st December 2003
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61 Differences between UK GAAP and US GAAP accounting principles (continued)
(r) Fair value amortisation credit
Fair value adjustments that are different from those recognised under UK GAAP are amortised over the expected life of the relevant asset/liability.
This resulted in an additional credit of £8m (2002: £8m, 2001: £8m) under US GAAP.
(s) Collateral
Under a repo (sale and repurchase agreement), an asset is sold to a counterparty with a commitment to repurchase it at a future date at an agreed
price. The Group engages in repos and reverse repos, which are the same transaction in the opposite direction, i.e. the Group buying an asset with a
fixed commitment to resell.
The following amounts were included in the balance sheet for repos and reverse repos and are reported on a net basis where permitted:
2003 2002 2001
£m £m £m
Reverse repos (assets)
Loans and advances to banks 50,392 41,001 32,042
Loans and advances to customers 49,962 42,505 29,731
100,354 83,506 61,773
Repos (liabilities)
Deposits by banks 39,810 37,857 25,048
Customer accounts 23,661 24,580 16,204
63,471 62,437 41,252
The average and maximum amount of reverse repos for 2003 were £109,315m and £137,025m (2002: £76,215m and £103,895m, 2001: £95,849m
and £119,942m) respectively. The average and maximum amount of repos for 2003 were £84,040m and £109,445m (2002: £61,416m and £92,219m,
2001: £88,311m and £116,458m).
Reverse repos and stock borrowing transactions are accounted for as collateralised loans. It is the Group’s policy to seek collateral at the outset equal
to 100% to 105% of the loan amount. The level of collateral held is monitored daily and further collateral calls made to bring the level of cash held
and the market value of collateral in line with the loan balance.
Under certain transactions including reverse repo and stock borrowing transactions the Group is allowed to sell or repledge the collateral held. At
31st December 2003, the fair value of collateral held was £126,085m (2002: £108,935m) of which £91,280m (2002: £93,148m) related to items that
have been sold or repledged.
Repos and stock lending transactions are accounted for as secured borrowings. At 31st December 2003, the Group had given £58,316m
(2002: £52,427m) of its assets as collateral in respect of these transactions. Of the total collateral given £44,002m (2002: £35,573m) was on terms
which gave the recipient the right to sell or repledge, comprising debt securities of £43,665m (2002: £33,729m) and equity securities of £337m
(2002: £1,844m). The residual £14,314m (2002: £16,854m) was on terms by which the counterparty cannot sell or repledge comprised £14,024m
(2002: £16,854m) of debt securities and £290m (2002: £nil) of equity securities.
For the pledge of collateral to secure on-balance sheet liabilities see Note 41.
(t) Provisions for bad and doubtful debts
During 2003, there was a net write-back of £nil (2002: £2m write-back, 2001: £9m charge) in respect of credit losses on derivatives. None of the year
end specific provisions related to credit losses on derivatives (2002: £nil).
During 2003, there was a net write-back of £14m (2002: £nil, 2001: £nil) of the general provision in the respect of off-balance sheet exposures
(including derivatives). At 31st December 2003, £nil of the general provision (2002: £14m) was held in respect of off-balance sheet exposures
(including derivatives).
The specific provision for contingent liabilities and commitments is £12m (2002: £14m).
(u) Guarantees
An element of Barclays normal banking business is to issue guarantees on behalf of its customers. In almost all cases, Barclays will hold collateral
against the exposure, have a right of recourse to the customer or both. In addition, Barclays issues guarantees on its own behalf. The major
categories of these guarantees are:
Financial guarantees
These are given to banks and financial institutions on behalf of customers to secure loans, overdrafts and other banking facilities. These are
commonly called facility guarantees.
Included within this category are stock borrowing indemnities. These relate to funds managed by Barclays on behalf of clients, which participate in
stock lending programmes. Barclays indemnifies the clients against any losses incurred by the clients resulting from borrower default. Collateral,
principally cash, is maintained against all stock borrowing transactions ranging from 102% to 105% of the securities loaned with adjustments to
collateral made daily. It is possible that the exposure could exceed the collateral provided should the value of the security rise concurrently with the
default of the borrowers.