Barclays 2005 Annual Report Download - page 202

42 Contingent liabilities and commitments
Contingent liabilities and commitments
In common with other banks, the Group conducts business involving acceptances, performance bonds and indemnities. The majority of these
facilities are offset by corresponding obligations of third parties. In addition, there are other derivative financial instruments, including swaps, futures,
forwards and option contracts or combinations thereof (all commonly known as derivatives), the nominal amounts of which are not reflected in the
consolidated balance sheet.
Nature of instruments
An acceptance is an undertaking by a bank to pay a bill of exchange drawn on a customer. The Group expects most acceptances to be presented,
but reimbursement by the customer is normally immediate. Endorsements are residual liabilities of the Group in respect of bills of exchange, which
have been paid and subsequently rediscounted.
Assets are pledged as collateral for security to support the performance of a customer to third parties. As the Group will only be required to meet
these obligations in the event of the customer’s default, the cash requirements of these instruments are expected to be considerably below their
nominal amounts.
Other contingent liabilities include transaction related customs and performance bonds and are, generally, short-term commitments to third parties
which are not directly dependent on the customer’s creditworthiness.
Commitments to lend are agreements to lend to a customer in the future, subject to certain conditions. Such commitments are either made for a
fixed period, or have no specific maturity but are cancellable by the lender subject to notice requirements.
Documentary credits commit the Group to make payments to third parties, on production of documents, which are usually reimbursed immediately
by customers.
The following tables summarise the nominal principal amount of contingent liabilities and commitments with off-balance sheet risk.
2005 2004
£m £m
Acceptances and endorsements 283 303
Assets pledged as collateral for security 38,035 30,011
Other contingent liabilities 8,825 8,245
Contingent liabilities 47,143 38,559
Documentary credits and other short-term trade related transactions 380 522
Undrawn note issuance and revolving underwriting facilities:
Forward asset purchases and forward deposits placed 43 55
Standby facilities, credit lines and other 203,362 133,474
Commitments 203,785 134,051
United Kingdom obligations to purchase goods and services
The table below gives details of the Group’s obligations to purchase goods and services at 31st December 2005:
2005 2004
£m £m
Less than one year 277 296
Over one year but not more than three years 361 493
Over three years but not more than five years 198 193
Over five years 40 103
Obligations payable 876 1,085
The obligations mainly relate to contracts for the provision of services such as cash management, information technology, telecommunications
maintenance and sponsorship agreements.
Capital commitments
At 31st December 2005 the commitments for capital expenditure under contract amounted to £1m (2004: £2m).
Notes to the accounts
For the year ended 31st December 2005
Barclays PLC
Annual Report 2005
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