Barclays 2005 Annual Report Download - page 69

Market Risk is the risk that Barclays earnings or capital, or its ability to
meet business objectives, will be adversely affected by changes in the
level or volatility of market rates or prices such as interest rates, credit
spreads, foreign exchange rates, equity prices, and commodity prices.
The main market risks arise from trading activities. Barclays is also
exposed to non-trading market risks relating to the Pension Fund and,
to a lesser extent, asset and liability management.
Categorisation of Market Risk
To facilitate the management, control, measurement and reporting
of market risk, Barclays has grouped market risk into three broad
categories:
•Trading market risk
These risks arise in trading transactions where Barclays acts as
principal with clients or with the market. Barclays policy is that
market risks arising from trading activities are concentrated in
Barclays Capital.
•Asset and liability risk
These risks arise from banking activities, including those incurred
on non-trading positions such as customer assets and liabilities and
capital balances.
•Other market risks
Barclays also incurs market risks that do not fit into the above
categories. The principal risks of this type are defined benefit
pension scheme risk and asset management structural market risk.
Market Risk Management and Control Responsibilities
The Board Risk Committee approves the market risk appetite for all
types of market risk. The Market Risk Director is responsible for the
market risk control framework and, under delegated authority from the
Risk Director and Risk Oversight Committee, sets a limit framework
within the context of the approved market risk appetite.
The Market Risk Director is assisted by a central market risk team and
by risk management departments in the businesses. A daily market risk
report summarises Barclays market risk exposures against agreed limits.
This daily report is sent to the Risk Director, the Market Risk Director,
the Finance Director and the appropriate Business Risk Directors.
The Head of each business, assisted by the business risk management
team, is accountable for identifying, measuring and managing all
market risks associated with its activities. In managing market risk,
businesses also consider liquidity risk where relevant.
In Barclays Capital, the Head of Market Risk is responsible for the
market risk governance and control framework. Day to day
responsibility for market risk lies with the senior management of
Barclays Capital, supported by the Global Market Risk Management
team that operates independently of the trading areas. Daily market
risk reports are produced for the main Barclays Capital business areas
covering the six main risk factor categories, namely interest rate,
credit spread, inflation, foreign exchange, equity and commodity risk.
A more detailed trading market risk presentation is discussed at
Barclays Capital’s Traded Products Risk Review meeting, held
fortnightly. The attendees at this meeting include the senior managers
from Barclays Capital and the central market risk team.
Outside Barclays Capital, Treasury manages treasury market and
structural interest rate risk. Retail market risk, a consequence of the
UK banking operations, is managed by the Retail Market Risk team.
In the non-UK banking operations, market risk is managed mainly
by local treasuries. The chart overleaf gives an overview of the business
control structure.
Risk management
Market risk management
Barclays PLC
Annual Report 2005 67
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