Barclays 2005 Annual Report Download - page 74

The Board Risk Committee has approved minimum control
requirements for capital and liquidity risk management.
The Treasurer has established risk control frameworks and a policy
and assurance structure to ensure that capital and liquidity risks are
managed in accordance with the requirements of the Board. Policies
are set by the Treasury Committee which is chaired by the Group
Finance Director.
Capital Risk Management
Capital risk is the risk that the Bank fails to comply with FSA mandated
regulatory requirements, resulting in a breach of its minimum capital
ratios and the possible suspension or loss of its banking licence. Capital
risk also includes the risk that the capital base is not managed in a
prudent manner thereby endangering the Group’s credit rating.
Barclays views its strong credit rating as a source of competitive
advantage. A solid capital position, together with a diverse portfolio
of activities, an increasingly international presence, consistent profit
performance, prudent risk management and a focus on value creation,
underpins that rating.
The Group’s capital management will continue to maximise
shareholder value through optimising both the level and mix of its
capital resources, seeking to:
•meet the individual capital ratios required by our regulators;
•maintain an AA credit rating;
•generate sufficient capital to support asset growth and corporate
activity;
•manage the currency exposure to its overall Sterling Risk Asset Ratio.
See page 104 in the Financial Overview for information on the Group’s
capital position.
Liquidity Risk Management
Liquidity risk is the risk that the Group is unable to meet its payment
obligations when they fall due and to replace funds when they are
withdrawn, the consequence of which may be the failure to meet
obligations to repay depositors and fulfil commitments to lend.
Liquidity management within the Group has several strands. The first
is day to day funding, managed by monitoring future cash flows to
ensure that requirements can be met. This includes replenishment
of funds as they mature or are borrowed by customers. The Group
maintains an active presence in global money markets to enable that
to happen. The second is maintaining a portfolio of highly marketable
assets that can easily be liquidated as protection against any
unforeseen interruption to cash flow. Finally, the ability to monitor,
manage and control intraday liquidity in real time is recognised by the
Group as a mission critical process: any failure to meet specific intraday
commitments would be a public event and may have an immediate
impact on the Group’s reputation.
Securitisation remains a proportion of the Group’s current funding
profile, providing additional flexibility, and is an important tool in the
management of the Group’s capital and funding. During 2005 the
Group has continued to securitise elements of the balance sheet, such
as credit cards, and has selectively securitised other parts, such as UK
mortgages and commercial loans. The Group will look to build on the
success of the existing securitisation programmes in broadening the
range of asset classes securitised.
The ability to raise funds is in part dependent on maintaining the
Bank’s credit rating. The funding impact of a credit downgrade is
regularly estimated. Whilst the impact of a single downgrade may
affect the price at which funding is available, the effect on liquidity
is not considered material in Group terms.
Absa monitor their cash flow against limits expressed as a percentage
of their total deposits and current accounts rather than against
absolute mismatch limits. Absa also continues to assess the ongoing
Rand money markets’ appetite for the Absa name and to improve their
stress testing. The difference in approach is not a major risk, and the
integration project is working to more closely align Absa’s policies and
practices with the Barclays liquidity control requirements.
Risk management
Capital and liquidity risk management
Barclays PLC
Annual Report 2005
72