Barclays 2006 Annual Report Download - page 179

Barclays PLC
Annual Report 2006 175
Financial statements
3
13 Financial assets designated at fair value
Held on own account
2006 2005
£m £m
Loans and advances designated at fair value 13,196 8,600
Debt securities designated at fair value 12,100 171
Equity securities designated at fair value 3,711 3,915
Other financial assets designated at fair value 2,792 218
Financial assets designated at fair value – held on own account 31,799 12,904
Credit risk on loans and advances designated at fair value
The maximum exposure to credit risk on loans and advances designated at fair value at 31st December 2006 was £13,196m (2005: £8,600m).
The amount by which related credit derivatives and similar instruments mitigate the exposure to credit risk at 31st December 2006 was £28m
(2005: £2,505m).
The net gain attributable to changes in credit risk for loans and advances designated at fair value was £nil in 2006 (2005: £3m). The gains or losses
on related credit derivatives was £nil for the year (2005: £nil).
The cumulative net gain attributable to changes in credit risk for loans and advances designated at fair value since initial recognition is £3m at
31st December 2006 (2005: £3m). The cumulative change in fair value of related credit derivatives at 31st December 2006 is £nil (2005: £nil).
Certain loans and advances designated at fair value are subject to securitisation. See Note 34.
Held in respect of linked liabilities to customers under investment contracts/liabilities arising from investment contracts
2006 2005
£m £m
Financial assets designated at fair value held in respect of linked liabilities to customers under investment contracts 82,798 83,193
Cash and bank balances within the portfolio 1,839 2,008
Assets held in respect of linked liabilities to customers under investment contracts 84,637 85,201
Liabilities to customers under investment contracts (84,637) (85,201)
A portion of the Group’s fund management business takes the legal form of insurance policies, under which legal title to the underlying investment
is held by the Group, but the inherent risks and rewards in the investments are borne by the customer. In the normal course of business, the Group’s
financial interest in such investments is restricted to fees for investment management services.
Due to the nature of these contracts, the carrying value of the assets is always the same as the value of the liabilities and any change in the value of
the assets results in an equal but opposite change in the value of the amounts due to the policyholders.
In the balance sheet, the assets are included as ‘Financial assets designated at fair value – held in respect of linked liabilities to customers under
investment contracts’. Cash balances within the portfolio have been included in the Group’s cash balances. The associated obligation to deliver the
value of the investments to customers at their fair value on balance sheet date is included as ‘Liabilities to customers under investment contracts’.
The increase/decrease in the value arising from the return on the investments and the corresponding increase/decrease in linked liabilities to
customers is included in the Other income note in Note 6.