Barclays 2004 Annual Report Download - page 68

Liquidity Risk Measurement
Monitoring and reporting take the form of cash flow measurement
and projections for the next day, week and month as these are key
periods for liquidity management. This is based on principles agreed
by the UK Financial Services Authority.
In addition to cash flow management, Treasury also monitors
unmatched medium-term assets and the level and type of undrawn
lending commitments, the usage of overdraft facilities and the
impact of contingent liabilities such as standby letters of credit
and guarantees.
Treasury develops and implements the process for submitting the
Group’s projected cash flows to stress scenarios. The output of stress
testing informs the Group’s contingency funding plan. This is
maintained by Treasury and is aligned with the Group and country
business resumption plans to encompass decision-making authorities,
internal and external communication and, in the event
of a systems failure, the restoration of liquidity management and
payment systems.
Sources of liquidity are regularly reviewed to maintain a wide
diversification by currency, geography, provider, product and term.
Whilst 2004 saw relatively stable markets, with no significant
consequences for the Group’s liquidity, significant market events over
recent years including corporate scandals contributed to a short-term
flight to quality in financial markets from which Barclays benefited.
An important source of structural liquidity is provided by our core
retail deposits in the UK and Europe, mainly current accounts and
savings accounts. Although current accounts are repayable on demand
and savings accounts at short notice, the Group’s broad base of
customers – numerically and by depositor type – helps to protect
against unexpected fluctuations. Such accounts form a stable funding
base for the Group’s operations and liquidity needs.
To avoid reliance on a particular group of customers or market sectors,
the distribution of sources and the maturity profile of deposits are
also carefully managed. Important factors in assuring liquidity are
competitive rates and the maintenance of depositors’ confidence.
Such confidence is based on a number of factors including the Group’s
reputation, the strength of earnings and the Group’s financial position.
Securitisation represents a relatively modest proportion of the Group’s
current funding profile, but provides additional flexibility. The Group
has a large residential mortgage portfolio which could be securitised
and hence forms a large – and as yet untapped – source of liquidity.
For further details see contractual cash obligations and commercial
commitments of the Group on page 67.
Risk management
Capital and liquidity risk management
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