Barclays 2005 Annual Report Download - page 78

Barclays PLC
Annual Report 2005
76
Risk management
Disclosures about certain trading activities
including non-exchange traded contracts
The following tables analyse the overall fair value of the commodity derivative contracts by movement over time and source of fair value.
As at 31st December 2005 this reflected a gross positive fair value of £21,744m (2004: £4,955m) and a gross negative value of £21,217m
(2004: £4,780m). Realised and unrealised profits relating to physical commodity and commodity derivative activities are included within dealing
profits. Physical commodity positions are held at fair value and reported under Trading Portfolio Assets in Note 13 to the accounts.
Total Total
2005 2004(a)
£m £m
Fair value of contracts outstanding at the beginning of the period 175 (106)
Contracts realised or otherwise settled during the period (137) 171
Fair value of new contracts entered into during the period 156 313
Other changes in fair values 333 (203)
Fair value of contracts outstanding at the end of the period 527 175
Movement in fair value of commodity derivative positions
Fair value source and maturity analysis
Fair value of contracts at 31st December 2005
Maturity Maturity Maturity in Total
less than one to excess of fair
one year five years five years value
Source of fair value £m £m £m £m
Valuation models supported by observable market data 33 182 326 541
Valuation models not supported by observable market data – (32) 18 (14)
Total 33 150 344 527
The following table analyses the positive fair value arising on commodity derivative contracts. As at 31st December 2005, this reflects a gross
positive fair value of £21,744m. The comparative figure for 2004 of £1,757m reflected the Group’s ability under UK GAAP to net amounts due to
the same counterparties.
Analysis of positive commodity derivative fair values included in the balance sheet by counterparty credit risk rating
Total Total
value value
2005 2004(a)
£m £m
A- to AAA 12,234 1,004
BBB- to BBB+ 8,726 538
BB+ and below 784 215
Total 21,744 1,757
All credit risk exposures are actively managed by the Group. Refer to page 57 for more information on the Group’s approach to credit risk
management. In particular, at 31st December 2005, 89% of all commodities credit exposure was to counterparties with cross-asset class netting
agreements which allow exposure on commodities products to be reduced by amounts owed to the same counterparties in other asset classes.
This percentage is consistent across the credit ratings applying to BBB+ and below as well as higher rated counterparties.
Additionally, collateral agreements are held with a majority of these same counterparties that allow collateral to be called against commodity
exposures. All non-collateralised exposures are subject to credit limits, and impairment allowances are created against these exposures
if appropriate.
Note
(a) Does not reflect the application of IAS 32, IAS 39 and IFRS 4 which became effective from 1st January 2005. Further explanation is provided on page 134.