Barclays 2007 Annual Report Download - page 241

3
Financial statements
Barclays PLC Annual Report 2007 239
46 Market risk (continued)
Effective interest rates
Weighted average effective interest rates were as follows:
2007 2006
%%
As at 31st December
Assets
Cash and balances at central banks 4.2 4.1
Loans and advances to banks 4.5 4.1
Loans and advances to customers 7.1 6.5
Available for sale financial instruments 5.0 4.6
Reverse repurchase agreements and cash collateral on securities borrowed 4.2 4.2
Liabilities
Deposits from other banks 4.2 4.3
Customer accounts 3.8 3.4
Debt securities in issue 5.3 5.0
Repurchase agreements and cash collateral on securities lent 3.9 4.2
Subordinated liabilities 5.9 5.9
Foreign exchange risk
The group is exposed to two sources of foreign exchange risk.
(a) Transactional foreign currency exposure
Transactional foreign exchange exposures represent exposure on banking assets and liabilities, denominated in currencies other than the functional
currency of the transacting entity.
The Group’s risk management policies prevent the holding of significant open positions in foreign currencies outside the trading portfolio managed by
Barclays Capital which is monitored through DVaR.
There were no material net transactional foreign currency exposures outside the trading portfolio at either 31st December 2007 or 2006. Due to the low
level of non-trading exposures no reasonably possible change in foreign exchange rates would have a material effect on either the Group’s profit or
movements in equity for the year ended 31st December 2007 or 2006.
(b) Translational foreign exchange exposure
The Group operates in a number of economic environments resulting in structural foreign exchange exposures on net investments in branches,
subsidiaries or associated undertakings, the functional currencies of which are currencies other than Sterling.
Exchange differences are created by the translation of these net assets measured in their functional currencies to Sterling, the Group’s presentational
currency. These exchange differences are recorded in the consolidated translation reserve and reflected in the statement of recognised income and expense.
Additionally the Group’s regulatory capital ratios are sensitive to foreign exchange movements in reserves, goodwill, minority interests and other non-
Sterling debt capital as well as non sterling risk weighted assets.
The Group’s policy is to economically hedge foreign currency net investments, where practical, after taking consideration of available markets to
conduct hedging, the size of the investment and the cost of hedging; unless doing so would result in capital ratios which are overly sensitive to
foreign exchange movements.