Barclays 2003 Annual Report Download - page 64

62
Total DVaR Daily exposures in 2002 and 2003
Trading revenue
The histograms below show the distribution of market risk daily trading
revenue for Barclays Capital in 2003 and 2002. Market risk daily trading
revenue includes all primary income (net fees and commissions) and
secondary income (net interest income and dealing profits). The average
daily revenue in 2003 was £10.0m (2002: £8.7m) and there were 244
positive revenue days out of 254 (2002: 238 positive revenue days out
of 252).
0
10
2002£m
20
30
40
2003
Barclays Capital Trading Revenue 2003 (£m)
Barclays Capital Trading Revenue 2002 (£m)
Regulatory DVaR and back-testing
Barclays Capital’s DVaR model, along with the market risk management
and control infrastructure, has been approved by the FSA under the
internal model approach for calculating regulatory capital for general
market risk. For regulatory DVaR, the methodology maps interest rate
risk into one category (interest rate swaps), rather than the eight
categories described above. Model recognition was first given in 1999.
Barclays recognises the importance of assessing the effectiveness of its
DVaR model. The main approach employed is the technique known as
back-testing, which counts the number of days when trading related losses
are bigger than the estimated DVaR figure. The regulatory standard for
back-testing is to measure DVaR assuming a one-day holding period with
a 99% level of confidence. For Barclays Capital’s regulatory trading book,
there were no instances in 2003 of a daily trading revenue loss exceeding
the corresponding back-testing DVaR. In 2002, there were two instances.
0
20
40
<(10) >(10)
to (5) >(5) to 0 >0 to 5Number of days
60
100
80
>5
to 10 >10 to 15 >15 to 20 >20 to 25 >25
47
79
69
9
3
2
28
87
0
20
40
<(10) >(10)
to (5) >(5) to 0 >0 to 5Number of days
60
100
80
>5
to 10 >10 to 15 >15 to 20 >20 to 25 >25
58
94
42
9
1
0
30
13 7
Other Market Risks
Asset management structural market risk
Asset management structural market risk is the risk that fee and
commission income is affected by a change in equity market levels.
It affects Barclays Private Clients’ assets under management, Barclays
Life and Barclays Global Investors. This risk is measured and managed
using Annual Earnings at Risk (AEaR) where the potential reduction in
income is measured over a year. For more detail on AEaR, see market
risk measurement on page 60. In 2003, Barclays Private Clients placed
a series of hedges which reduced the market risk for 2003 and 2004.
Defined benefit pension scheme risk
Barclays maintains a number of defined benefit pension schemes for past
and current employees. The ability of the pension fund to meet the
projected pension payments is maintained through investments. Market
risk arises because the market value of the pension fund assets might
decline or their investment returns might reduce or because the present
value of the pension liabilities might increase. In these circumstances,
Barclays might be required or might choose to make extra contributions
to the pension fund.
Risk Management
Market Risk Management