Barclays 2005 Annual Report Download - page 305

Barclays PLC
Annual Report 2005 303
3.5
Economic capital demand(a)
2005 2004
£m £m
UK Banking 5,250 4,650
UK Retail Banking 2,300 2,200
UK Business Banking 2,950 2,450
Barclays Capital 2,550 2,100
Barclays Global Investors 150 150
Wealth Management 400 300
Wealth Management – closed life assurance activities 50 100
Barclaycard 2,800 2,450
International Retail and Commercial Banking 1,550 1,000
International Retail and Commercial Banking – ex Absa 1,150 1,000
International Retail and Commercial Banking – Absa(b) 400 –
Head office functions and other operations(c) 250 200
Business unit economic capital 13,000 10,950
Capital held at Group centre(d) 1,050 1,400
Economic capital requirement (excluding goodwill) 14,050 12,350
Average historic goodwill and intangible assets(e) 6,450 5,600
Total economic capital requirement(f ) 20,500 17,950
UK Retail Banking economic capital allocation increased £100m to £2.3bn. The impact of growth was offset by risk transfer transactions within UK
mortgages. UK Business Banking economic capital allocation increased £500m to £2.95bn as a consequence of asset growth and the acquisition of
the Iveco Finance business.
Barclays Capital economic capital increased £450m to £2.55bn reflecting underlying growth in loan and derivative portfolios, additional equity
investments and the growth in business and operational risk economic capital.
Wealth Management economic capital allocation increased £100m to £400m as a consequence of general growth across the business and the
recalibration of business and operational risk economic capital.
Wealth Management – closed life assurance activities economic capital allocation reduced £50m to £50m reflecting the impact of IFRS removing the
volatility previously associated with embedded value accounting.
Barclaycard economic capital allocation increased £350m to £2.8bn, due to growth in outstandings and the inclusion of Barclaycard US for the full year.
International Retail and Commercial Banking excluding Absa economic capital allocation increased £150m to £1.15bn due to the recalibration of
business and operational risk economic capital together with exposure growth in Africa and Spain. Absa added £400m to the average economic
capital demand reflecting five months of the allocation after excluding the risk borne by the minority interest.
Capital held at the Group centre fell £350m to £1.05bn as a result of the acquisition of Absa, partially offset by an increase in available funds to
support economic capital (see Economic capital supply overleaf).
Note
(a) Calculated using a five-point average over the year.
(b) Average economic capital demand for Absa relates to five months of 2005. As at 31st December 2005 the capital demand amounted to £950m.
(c) Includes Transition Businesses and capital for central functional risks.
(d) The Group’s practice is to maintain an appropriate level of excess capital, held at Group centre, which is not allocated to business units. This variance arises as a
result of capital management timing and includes capital held to cover pension contribution risk.
(e) Average goodwill relates to purchased goodwill and intangible assets from business acquisitions. Absa goodwill is included for five months of 2005. As at
31st December 2005 Absa goodwill and intangibles amounted to £1.8bn and total goodwill and intangibles was £7.9bn.
(f) Total period-end economic capital requirement as at 31st December 2005 stood at £21,850m (2004: £19,400m).