Barclays 2006 Annual Report Download - page 79

Barclays PLC
Annual Report 2006 75
Operating review
1
0605
06
05
06
05
06
05
06
05
0605
06
05
06
05
Barclays
Capital
Barclays
Global
Investors
Barclays
Wealth
Barclaycard International
Retail and
Commercial
Banking
– Absa
Head office
functions
and other
operations(a)
0
5,000
4,000
3,000
2,000
1,000
6,000
UK Retail
Banking
Group
centre(b)
Average economic capital allocation by business £m
300
750
0605
International
Retail and
Commercial
Banking
– ex Absa
1,150
1,200
2,900
3,750
150
150
450
400
300
300
1,050
1,450
2,350
2,400
2,800
2,850
06
05
UK
Business
Banking
2,600
2,700
06
05
06
05
06
05
06
05
0605
06
05
06
05
Retail
credit risk
Operational
risk
Market
risk
Business
risk
Fixed asset
risk
Other
risks(c)
0
4,000
3,000
2,000
1,000
6,000
5,000
Wholesale
credit risk
Average economic capital allocation by risk type £m
1,150
1,450
600
850
750
650
400
450
1,900
2,550
4,850
5,200
4,400
4,800
Notes
(a) Includes Transition business and Capital for centre functional risk.
(b) The Group’s practice is to maintain an appropriate level of excess capital held at the Group centre, which is not allocated to business units. This variance arises as
a result of capital management timing and includes Captial held to cover pension contributions.
(c) Includes excess capital held at the Group centre; investments in associates; private equity risk and insurance risk.
In 2006, the average allocated economic capital of the Group was
£15.95bn (2005: £14.05bn). In addition, average economic capital
held against unamortised goodwill was £7.75bn for the year ended
31st December 2006 (2005: £6.45bn), resulting in the total economic
capital requirement of £23.7bn (2005: £20.5bn).
UK Retail Banking economic capital allocation increased £50m to
£2,400m (2005: £2,350m), reflecting exposure growth in the portfolio.
UK Business Banking economic capital allocation increased £100m to
£2,700m (2005: £2,600m) as a consequence of asset growth offset by
changes to estimates of risk correlation.
Barclaycard economic capital allocation increased £50m to £2,850m
(2005: £2,800m). Exposure growth, primarily in the international cards
and secured loans portfolio, was partially offset by risk transfer activity,
the decline in UK Card balances and the transition to default probability
methodology which is based on average credit conditions rather than
those prevailing at the balance sheet date.
International Retail and Commercial Banking – excluding Absa
economic capital allocation increased £50m to £1,200m (2005:
£1,150m). This was due to lending growth primarily in Africa and Iberia.
International Retail and Commercial Banking – Absa economic capital
allocation (excluding the risk borne by the minority interest) increased
£450m to £750m (2005: £300m), reflecting loan growth and the
inclusion of Absa for a full year.
Barclays Capital economic capital increased £850m to £3,750m (2005:
£2,900m) due to growth in equity investments, market, business and
operational risk and changes in the sector mix of the corporate lending
portfolio. The growth also reflects holding the Absa Capital portfolio for
the full year.
Barclays Wealth economic capital allocation decreased £50m to £350m
(2005: £400m) due to changes to estimates of risk correlation on
average economic capital.
Capital held at the Group centre increased £400m to £1,450m (2005:
£1,050m). Demand for economic capital in the businesses was more
than offset by growth in the funds available to support economic capital.