Barclays 2004 Annual Report Download - page 72

Risk management
Disclosures about certain trading activities including non-exchange traded contracts
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The following tables analyse the overall fair value of the commodity derivative contracts by movement over time and source of fair value. As at
31st December 2004 this reflects a gross positive fair value of £4,955m (31st December 2003: £1,982m) and a gross negative fair value of
£4,780m (31st December 2003: £2,088m). Realised and unrealised profits related to physical commodity and commodity derivative activities are
included with dealing profits. Physical commodity positions are held at fair value and reported with other assets in Note 21 on page 156.
Movement in fair value of commodity derivative positions
Total Total
2004 2003
£m £m
Fair value of contracts outstanding at the beginning of the year (106) 40
Contracts realised or otherwise settled during the year 171 (8)
Fair value of new contracts entered into during the year 313 (101)
Other changes in fair value (203) (37)
Fair values of contracts outstanding at the end of the year 175 (106)
Source of commodity derivative fair values
Fair value of contracts at 31st December 2004
Maturity Maturity Maturity Maturity Total
less than one to four to over fair
one year three years five years five years value
£m £m £m £m £m
Prices actively quoted (38) 86 16 17 81
Prices provided by other external sources (8) – – – (8)
Prices based on models and other valuation methods (5) 63 23 21 102
Total (51) 149 39 38 175
The following table analyses the positive fair value, adjusted for the impact of netting, arising on commodity derivative contracts. As at
31st December 2004, this reflects a gross positive fair value of £4,955m (31st December 2003: £1,982m) adjusted for the Group’s ability to net
amounts due to the same counterparties (31st December 2004: £3,198m, 31st December 2003: £864m).
Analysis of net positive commodity derivative fair value by counterparty credit risk rating
Total Total
value value
2004 2003
£m £m
A- to AAA 1,004 792
BBB- to BBB+ 538 280
BB+ and below 215 46
Total 1,757 1,118
All credit exposures are actively managed by the Group. Refer to page 49 for more information on the Group’s approach to credit risk
management. In particular, at 31st December 2004, 69% of all of the commodities credit exposure was to counterparties with cross asset class
netting agreements, that is, netting agreements allowing exposure on commodities products to be reduced by amounts owed to the same
counterparties in other asset classes. This percentage is consistent across the credit ratings applying to BBB+ and below as well as higher
rated counterparties.
Additionally, collateral agreements are held with a majority of these same counterparties that allow collateral to be called against commodity
exposures. All non-collateralised exposures are subject to credit limits, and credit or risk tendency reserves are created against these exposures