Barclays 2004 Annual Report Download - page 219

Barclays PLC Annual Report 2004
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52 Differences between UK GAAP and US GAAP accounting principles (continued)
(p) Consolidation (continued)
The Group is the primary beneficiary in the following VIEs, classified by type of activity:
2004 2003(a)
Total assets Total assets
Activity £m £m
Asset securitisations(b) 3,926 4,982
Multi-seller conduit programmes 12,404 –
Client intermediation 216 –
Credit structuring 2,343 –
Asset realisations 68 –
The creditors do not have recourse to the general credit of the Group in respect of the variable interest entities consolidated by the Group.
Under UK GAAP, the Group consolidates all of the above entities with the exception of certain asset securitisation entities.
The Group also has significant variable interests in the following VIEs, classified by type of activity, where the Group is not the primary beneficiary.
2004 2003(a)
Total Maximum Total Maximum
assets loss(c) assets loss
£m £m £m £m
Asset securitisations 10,199 282 4,435 2,271
Client intermediation 9,799 989 5,400 453
Credit structuring 281 6 ––
Fund management 2,380 1,028 ––
Notes
(a) Due to the transitional arrangements of FIN 46, the disclosures provided for 31st December 2003 reflect only VIEs created after 31st January 2003 where Barclays
either was the primary beneficiary or had a significant variable interest.
(b) Resulting from a refinement of Group policy in respect of vanilla derivative transactions executed with VIEs, the Group no longer believes it is the primary
beneficiary of certain entities consolidated in 2003, amounting to £2,978m, which have not been consolidated in 2004.
(c) 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.
Qualifying Special Purpose Entities (QSPEs)
In accordance with SFAS 140 and FIN 46-R, 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 52(q) below.
(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.