Barclays 2005 Annual Report Download - page 58

Barclays PLC
Annual Report 2005
56
Risk management
Risk management and control – overview
Management of Regulatory Capital
In addition to the Group’s internal assessment of economic capital
demand, Barclays manages consumption of regulatory capital.
The Financial Services Authority (FSA) requires the Group to hold
sufficient capital to meet minimum regulatory capital requirements,
expressed as the ratio of capital to risk weighted assets (Risk Asset
Ratio). The risk weights applied to the Group’s assets use calculations
developed by the Basel Committee on Banking Supervision.
The Group’s policy of disciplined capital management continued. The
tier 1 ratio was 7% for the year ended 31st December 2005, reflecting
strong cash flow generation and the efficient use of capital markets.
The mix of the Group’s tier 1 capital altered during the year, with an
increased use of preference share capital than previously.
The graph opposite shows the Group’s regulatory capital base for
Barclays PLC Group broken down by tier. As at December 2005, the
Barclays PLC Group Risk Asset Ratio was 11.3%, which is in excess of
the minimum requirements of our regulators. Further information on
the Group’s capital base is provided in the Financial Overview on pages
103 and 104.
2003 20052004
(e)
24,223
30,502
25,216
0 Tier 1
Tiers
2 & 3
(d)
Regulatory capital by tiers £m
35,000
30,000
25,000
20,000
15,000
10,000
5,000
UK GAAP IFRS
Notes
(a) Includes Transition Businesses and capital for central functional risks.
(b) The Group’s practice is to maintain an appropriate level of excess capital held at the Group’s 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.
(c) Includes excess capital held of the Group centre; investments in associates; private equity risk; and insurance risk.
(d) Less supervisory deductions.
(e) The regulatory capital reported to the FSA at 31st December 2004 was based on UK GAAP and has not been restated under IFRS.
Barclays
Capital
Barclays
Global
Investors
Wealth
Management
Barclaycard International
Retail and
Commercial
Banking
UK
Banking
5,250
4,650
2,550
2,100
150150 450
400
2,800
2,450
1,000
1,550
250
200
Head office
functions
and other
operations(a)
Average economic capital allocation by business £m
In 2005, the average allocated economic capital of the Group was £14.1bn (2004: £12.4bn).
In addition, average economic capital held against unamortised goodwill was £6.5bn for the year ended 31st December 2005 (2004: £5.6bn).
6,000
5,000
4,000
3,000
2,000
1,000
0
1,050
1,400
Group
centre(b)
2005
2004
Wholesale
credit risk
4,800 4,400
1,150
600 750 400
2,000(c)
4,150 3,700
900 650 600 500
1,850
Retail
credit risk
Operational
risk
Market risk Business risk Fixed
asset risk
Other risks
5,000
4,000
3,000
2,000
1,000
02005
2004
Average economic capital allocation by risk type £m