Barclays 2007 Annual Report Download - page 219

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Financial statements
Barclays PLC Annual Report 2007 217
34 Contingent liabilities and commitments (continued)
Guarantees and letters of credit are given as security to support the performance of a customer to third parties. As the Group will only be required to
meet these obligations in the event of the customer’s default, the cash requirements of these instruments are expected to be considerably below their
nominal amounts.
Other contingent liabilities include transaction related customs and performance bonds and are, generally, short-term commitments to third parties
which are not directly dependent on the customer’s creditworthiness.
Commitments to lend are agreements to lend to a customer in the future, subject to certain conditions. Such commitments are either made for a fixed
period, or have no specific maturity but are cancellable by the lender subject to notice requirements.
Documentary credits commit the Group to make payments to third parties, on production of documents, which are usually reimbursed immediately
by customers.
Capital commitments
At 31st December 2007 the commitments for capital expenditure under contract amounted to £6m (2006: £9m).
Assets pledged
Assets are pledged as collateral to secure liabilities under repurchase agreements, securitisations and stock lending agreements or as security deposits
relating to futures and options. The disclosure includes any asset transfers associated with liabilities under repurchase agreements and securities lending
transactions.
The following table summarises the nature and carrying amount of the assets pledged as security against these liabilities:
2007 2006
£m £m
Trading portfolio assets 76,226 77,255
Loans and advances 32,846 23,715
Available for sale investments 16,378 20,495
Other 580 4
Assets pledged 126,030 121,469
Collateral held as security for assets
Under certain transactions, including reverse repurchase agreements and stock borrowing transactions, the Group is allowed to resell or repledge the
collateral held. The fair value at the balance sheet date of collateral accepted and repledged to others was as follows:
2007 2006
£m £m
Fair value of securities accepted as collateral 343,986 279,591
Of which fair value of securities repledged / transferred to others 269,157 210,182
35 Legal proceedings
Barclays has for some time been party to proceedings, including a class action, in the United States against a number of defendants following the collapse
of Enron; the class action claim is commonly known as the Newby litigation. On 20th July 2006, Barclays received an Order from the United States District
Court for the Southern District of Texas Houston Division which dismissed the claims against Barclays PLC, Barclays Bank PLC and Barclays Capital Inc. in
the Newby litigation. On 4th December 2006 the Court stayed Barclays dismissal from the proceedings and allowed the plaintiffs to file a supplemental
complaint. On 19th March 2007 the United States Court of Appeals for the Fifth Circuit issued its decision on an appeal by Barclays and two other
financial institutions contesting a ruling by the District Court allowing the Newby litigation to proceed as a class action. The Court of Appeals held that
because no proper claim against Barclays and the other financial institutions had been alleged by the plaintiffs, the case could not proceed against them.
The plaintiffs applied to the United States Supreme Court for a review of this decision. On 22nd January 2008, the United States Supreme Court denied
the plaintiffs’ request for review. Following the Supreme Court’s decision, the District Court ordered a further briefing concerning the status of the
plaintiffs’ claims. Barclays plans to seek the dismissal of the plaintiffs’ claims.
Barclays considers that the Enron related claims against it are without merit and is defending them vigorously. It is not possible to estimate Barclays
possible loss in relation to these matters, nor the effect that they might have upon operating results in any particular financial period.
Barclays has been in negotiations with the staff of the US Securities and Exchange Commission with respect to a settlement of the Commission’s
investigations of transactions between Barclays and Enron. Barclays does not expect that the amount of any settlement with the Commission would have
a significant adverse effect on its financial position or operating results.
Like other UK financial services institutions, Barclays faces numerous County Court claims and complaints by customers who allege that its unauthorised
overdraft charges either contravene the Unfair Terms in Consumer Contracts Regulations 1999 or are unenforceable penalties or both. Pending resolution
of the test case referred to below (the ‘test case’), existing and new claims in the County Courts are stayed, and there is an FSA waiver of the complaints
handling process and a standstill of Financial Ombudsman Service decisions. In July 2007, and by agreement with all parties, the OFT launched the test
case by commencing proceedings against seven banks and one building society including Barclays, the first stage of which seeks declarations on two
issues of legal principle. The hearing commenced on 17th January 2008. Barclays is defending the test case vigorously. It is not practicable to estimate
Barclays possible loss in relation to these matters, nor the effect that they may have upon operating results in any particular financial period.
Barclays is engaged in various other litigation proceedings both in the United Kingdom and a number of overseas jurisdictions, including the United
States, involving claims by and against it which arise in the ordinary course of business. Barclays does not expect the ultimate resolution of any of the
proceedings to which Barclays is party to have a significant adverse effect on the financial position of the Group and Barclays has not disclosed the
contingent liabilities associated with these claims either because they cannot reasonably be estimated or because such disclosure could be prejudicial
to the conduct of the claims.