Barclays 2004 Annual Report Download - page 62

Risk management
Provisions for bad and doubtful debts
60
(See also Table 33 on page 85.)
Performing loans comprise gross loans and advances less non-
performing loans. The ratio of general provisions to performing loans
has declined since 2000 following the acquisition of Woolwich Plc
whose portfolio needs comparatively low general provisions as
it consists predominantly of secured residential mortgage loans.
It declined further in 2004 following transfers to specific provisions.
Write-offs
Debts are written off to the extent that there is no realistic prospect of
a change in the customers’ condition, or where local conditions dictate,
and the whole or part of the debt is considered irrecoverable.
Total write-offs increased to £1,595m (2003: £1,474m).
Provisioning under International Financial Reporting Standards
From 2005, the Group will prepare its accounts in accordance with the
International Financial Reporting Standards (IFRS) published by the
International Accounting Standards Board (IASB) as required under
European Commission Regulation 1606/2002. This standard does not
differentiate between specific and general provisions for bad and
doubtful debts. Instead, provisions are replaced by an allowance for
impairment. Thus the Group will not show distinct specific and general
provisioning information in future reports but will report on the
allowance for impairment instead.
2000 2001 2002 2003 2004%
General provisions coverage of performing loans
0.4
0.3
0.2
0.1
0.0
GP cover
of perf
loans
Average
0.38
0.33
0.28 0.28
0.17
Provisions coverage of non-performing loans and potential credit
risk loans (NPLs and PPLs)
(See also Table 32 on page 84.)
Another way of assessing provision balances is to recognise that
specific provisions are created to cover non-performing loans, whereas
general provisions relate to as yet unidentified losses on performing
loans. This is shown in the next two charts.
Specific provisions coverage of non-performing loans and general
provisions coverage of performing loans
2000 2001 2002 2003 2004%
Specific provisions cover of non-performing loans
60
50
40
30
20
10
0
SP cover
of NPLs
Average
49.7 51.9 55.3
48.4
46,2
2000 2001 2002 2003 2004%
70
Provisions coverage of potential credit risk loans
60
50
40
30
20
10
0
PCRL
Coverage
Average
54.5 52.9 52.8 54.6 59.2
2000 2001 2002 2003 2004%
71.0 70.4 71.5 70.4
80
Provisions coverage of non-performing loans
70
60
50
40
30
20
10
0
NPL
Coverage
Average
65.9