Barclays 2005 Annual Report Download - page 128

Capital Ratios
Capital adequacy and the use of regulatory capital are monitored by the Group, employing techniques based on the guidelines developed by the
Basel Committee on Banking Supervision (the Basel Committee) and European Union Directives, as implemented by the Financial Services
Authority (FSA) for supervisory purposes.
These techniques include the risk asset ratio calculation, which the FSA regards as a key supervisory tool. The FSA sets ratio requirements for
individual banks in the UK at or above the internationally agreed minimum of 8%. The ratio calculation involves the application of designated risk
weightings to reflect an estimate of credit, market and other risks associated with broad categories of transactions and counterparties. Regulatory
guidelines define three ‘tiers’ of capital resources. Tier 1 capital, comprising mainly shareholders’ funds and including Reserve Capital Instruments
and Tier One Notes, is the highest tier and can be used to meet trading and banking activity requirements. Tier 2 includes perpetual, medium-term
and long-term subordinated debt, general provisions for bad and doubtful debts and fixed asset revaluation reserves. Tier 2 capital can also be
used to support both trading and banking activities. Tier 3 capital also comprises short-term subordinated debt with a minimum original maturity
of two years. The use of tier 3 capital is restricted to trading activities only and it is not eligible to support counterparty or settlement risk.
The aggregate of tiers 2 and 3 capital included in the risk asset ratio calculation may not exceed tier 1 capital.
Capital ratios
IFRS UK GAAP
2005 2004(a)
Barclays Barclays Barclays Barclays
PLC Bank PLC PLC Bank PLC
Group Group Group Group
£m £m £m £m
Capital ratios
Tier 1 ratio 7.0 6.9 7.6 7.6
Risk asset ratio 11.3 11.2 11.5 11.5
Weighted risk assets
Banking book
on-balance sheet 180,808 179,955 148,621 148,621
off-balance sheet 31,351 32,204 26,741 26,741
Associates and joint ventures 3,914 3,914 3,020 3,020
Total banking book 216,073 216,073 178,382 178,382
Trading book
Market risks 23,216 23,216 22,106 22,106
Counterparty and settlement risks 29,859 29,859 18,113 18,113
Total trading book 53,075 53,075 40,219 40,219
Total weighted risk assets 269,148 269,148 218,601 218,601
Barclays PLC
Annual Report 2005
126
Note
(a) Regulatory capital, weighted risk assets and resultant capital ratios for 2004 are based on UK GAAP and have not been restated as these remain as reported to the
FSA. As at 1st January 2005, for Barclays PLC Group and Barclays Bank PLC Group the tier 1 ratio was 7.1% and the risk asset ratio was 11.8% reflecting the
impact of IFRS including the adoption of IAS 32, IAS 39 and IFRS 4.
Financial review
Capital management and resources