Barclays 2008 Annual Report Download - page 112

110 Barclays PLC Annual Report 2008 |Find out more at www.barclays.com/annualreport08
Risk management
Credit risk management
Barclays Capital credit market exposures
A2. Other US Sub-Prime
As at As at Marks at Marks at
31.12.08 31.12.07 31.12.08 31.12.07
£m £m
Whole loans – performing 1,290 2,805 80% 100%
Whole loans – more than 60 days past due 275 372 48% 65%
Total whole loans 1,565 3,177 72% 94%
AAA securities 111 735 40% 92%
Other sub-prime securities 818 525 23% 61%
Total securities gross of hedges 929 1,260 25% 76%
Hedges –(369)
Securities (net of hedges) 929 891
Residuals –233 –24%
Other exposures with underlying sub-prime collateral:
– Derivatives 643 333 87% 100%
– Loans 195 346 70% 100%
– Real Estate 109 57 46% 68%
Total other direct and indirect exposure 1,876 1,860
Total 3,441 5,037
The majority of Other US sub-prime exposures are measured at fair value through profit and loss. US sub-prime securities held in conduits and a
collateralised debt obligation (CDO) are categorised as available for sale and are recognised in equity.
Exposure declined from £5,037m to £3,441m driven by gross losses of £1,728m and net sales, paydowns and other movements of £1,649m. Weaker
Sterling resulted in an increase in exposure of £1,086m. Exposures at 31st December 2008 included assets acquired from Lehman Brothers North
American businesses of £83m in AAA securities and £124m in other US sub-prime securities.
At 31st December 2008, 82% of the whole loan exposure was performing. Whole loans included £1,422m (31st December 2007: £2,843m) acquired on
or originated since the acquisition of EquiFirst in March 2007. Of this balance, £281m of new sub-prime loans were originated in 2008. At 31st December
2008, the average loan to value at origination of all the sub-prime whole loans was 79%. Loans guaranteed by Federal Housing Administration (FHA) are
not included in the exposure above. An FHA loan is a mortgage loan fully insured by the US Federal Housing Administration and therefore not considered
to be a credit sensitive product. EquiFirst has only originated FHA eligible loans since April 2008, and held £132m of these loans at 31st December 2008.
Securities included £37m held by consolidated conduits and £110m held in a CDO on which impairment charges of £16m and £53m respectively have
been recorded.
Other exposures with underlying sub-prime collateral include counterparty derivative exposures to vehicles which hold sub-prime collateral. Derivatives of
£643m (31st December 2007: £333m) relate to US Dollar denominated interest rate swaps.The increase in the balance principally relates to the decline in
interest rates globally and the 37% depreciation of Sterling relative to the US Dollar, especially in the second half of 2008. The majority of all other
exposures with underlying sub-prime collateral was the most senior obligation of the vehicle.