Barclays 2005 Annual Report Download - page 61

Barclays PLC
Annual Report 2005 59
Credit Risk Mitigation
Barclays employs a range of policies and practices to mitigate credit
risk. The most traditional of these is the taking of security for funds
advanced which is common practice. See the discussion of loan-to-
value ratios for mortgages on page 61.
Barclays manages the diversification of its portfolio to avoid unwanted
credit risk concentrations. This takes several dimensions. Maximum
exposure guidelines are in place relating to the exposures to any
individual counterparty. These permit higher exposures to highly
rated borrowers than to lower rated borrowers. They also distinguish
between types of counterparty, for example, between sovereign
governments, banks and corporations. Excesses are considered
individually at the time of credit sanctioning, are reviewed regularly,
and are reported to the Risk Oversight Committee and the Board Risk
Committee. Similarly the Country Risk policy specifies risk appetite by
country and avoids excessive concentrations of credits in individual
countries. Finally, there are policies that limit lending to certain
industries, for example, commercial real estate.
Barclays actively manages its credit exposures. When weaknesses in
exposures are detected – either in individual exposures or in groups of
exposures – action is taken to mitigate the risks. These include steps to
reduce the amounts outstanding (in discussion with the customers, if
appropriate), the use of credit derivatives and, sometimes, the sale of
the loan assets. Credit derivatives are traded for profit and used for
managing non-trading credit exposures. Details of these activities may
be found in the statistical section (page 85) and Note 15 to the
Accounts.
The value of assets held as loans and advances to customers that
have been securitised or subject to similar risk transfer increased
£17.3bn to £21.6bn (2004: £4.3bn).
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