Barclays 2007 Annual Report Download - page 90

Capital resources
In 2007, UK Retail Banking economic capital allocation increased £100m to
£3,400m (2006: £3,300m), reflecting lending growth in UK mortgages offset
by a reduction in consumer lending following methodology enhancements.
Barclays Commercial Bank economic capital allocation increased £500m
to £3,200m (2006: £2,700m) as a consequence of lending growth and
implementation of updated Credit and Operational Risk models.
Barclaycard economic capital allocation increased £150m to £2,100m
(2006: £1,950m), as a consequence of asset growth, predominantly
in secured lending and in Barclaycard international, offset by a reduction
in UK Cards following the sale of Monument card portfolio.
International Retail and Commercial Banking – excluding Absa economic
capital allocation increased £400m to £1,600m (2006: £1,200m). This was
driven by lending growth across Western Europe and Emerging Markets
and some credit deterioration in Africa. International Retail and Commercial
Banking – Absa economic capital allocation (excluding the risk borne by the
minority interest) increased £200m to £950m (2006: £750m), reflecting
lending growth in the business bank portfolio.
Barclays Capital economic capital increased £1,450m to £5,200m
(2006: £3,750m). This was driven by growth in the investment portfolio,
exposure to drawn leveraged finance underwriting positions and
deterioration in credit quality in the US.
Risk management
Barclays approach to risk management
88 Barclays PLC Annual Report 2007
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Barclays
Capital
Barclays
Global
Investors
Barclays
Wealth
Barclaycard International
Retail and
Commercial
Banking
– Absa
Head office
functions
and other
operations d
UK Retail
Banking
Average economic capital allocation by business £m
950
750
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International
Retail and
Commercial
Banking
– ex Absa
1,600
1,200
5,200
3,750
150
200
500
400
300
250
1,700
1,450
3,400
3,300
2,100
1,950
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06
Barclays
Commercial
Bank
3,200
2,700
Group
Centre e
Notes
a Averages for the period will not correspond to period-end balances disclosed in the balance
sheet. Numbers are rounded to the nearest £50m for presentational purposes only.
bAverage goodwill relates to purchased goodwill and intangible assets from business
acquisitions.
cAvailable funds for economic capital as at 31st December 2007 stood at £29,700m
(2006: £25,150m).
dIncludes Transition Businesses and capital for central functional risks.
eThe Group’s practice is to maintain an appropriate level of excess capital held at
the Group’s centre, which is not allocated to business units. This variance arises as
a result of capital management timing and includes capital held to cover pension
contribution risk.
fIncludes excess capital held of the Group centre; investments in associates; private
equity risk; and insurance risk.
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Retail
credit risk
Operational
risk
Market
risk
Business
risk
Fixed asset
risk
Wholesale
credit risk
Average economic capital allocation by risk type £m
1,800
1,250
800
600
1,450
5,850
5,650
1,450
850
650
450
1,100
5,200
4,800
Other
risks f
The average supply of capital to support the economic capital framework a
2007 2006
£m £m
Shareholders’ equity excluding minority interests less goodwill b14,150 11,400
Retirement benefits liability 1,150 1,300
Cash flow hedging reserve 250 100
Available for sale reserve (150) (50)
Preference shares 3,700 3,200
Available funds for economic capital excluding goodwill 19,100 15,950
Average historic goodwill and intangible assets b8,400 7,750
Available funds for economic capital c27,500 23,700