Barclays 2008 Annual Report Download - page 126

124 Barclays PLC Annual Report 2008 |Find out more at www.barclays.com/annualreport08
Liquidity risk is the risk that the Group is unable to meet its obligations
when they fall due as a result of customer deposits being withdrawn, cash
requirements from contractual commitments, or other cash outflows,
such as debt maturities. Such outflows would deplete available cash
resources for client lending, trading activities and investments. In extreme
circumstances lack of liquidity could result in reductions in balance
sheet and sales of assets, or potentially an inability to fulfil lending
commitments. The risk that it will be unable to do so is inherent in all
banking operations and can be affected by a range of institution-specific
and market-wide events including, but not limited to, credit events,
merger and acquisition activity, systemic shocks and natural disasters.
Barclays Treasury operates a centralised governance and control process
that covers all of the Group’s liquidity risk management activities.
Businesses assist Barclays Treasury in policy formation and limit setting by
providing relevant and expert input for their local markets and customers.
Execution of the Group’s liquidity risk management strategy is carried
out at country level within agreed policies, controls and limits,
with the Country Treasurer providing reports directly to Barclays Treasury
to evidence conformance with the agreed risk profile. Liquidity risk is
a standing agenda item at Country and Cluster Asset and Liability
Committees and on a consolidated basis is reported to the Group’s
Treasury Committee.
The objective of the Group’s liquidity risk management strategy is to
ensure that the funding profile of individual businesses and the Group as
a whole is appropriate to underlying market conditions and the profile of
our business in each given country. Liquidity risk limits and controls are
flexed to achieve that profile and are based on regular qualitative and
quantitative assessments of conditions and abilities under both normal
and stressed conditions. Businesses are only allowed to have funding
exposure to wholesale markets where they can demonstrate that their
market is sufficiently deep and liquid and then only relative to the size and
complexity of their business.
Liquidity limits reflect both local regulatory requirements as well as the
behavioural characteristics of their balance sheets. Breaches of limits are
reported to Treasury Committee together with details of the requirements
to return to compliance.
Risk management
Liquidity risk management
Organisation and structure