Barclays 2008 Annual Report Download - page 128

Secured Financing by Asset Class (% of Total Secured Funding)a
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The ability to raise funds is in part dependent on maintaining the
Bank’s credit rating. The funding impact of a credit downgrade is closely
tracked. Whilst the impact of a single downgrade may affect the price at
which funding is available, the effect on liquidity is not considered material
in Group terms.
For further details see contractual obligations and commercial
commitments of the Group on page 33.
Year end assessment of liquidity
Barclays maintained a strong liquidity profile in 2008, sufficient to absorb
the impact of a stressed funding environment. The Group has access to a
substantial pool of liquidity both in secured markets and from unsecured
depositors including numerous foreign governments and central banks.
In addition, our limited reliance on securitisations as a source of funding
has meant that the uncertainty in securitisation markets has not impacted
our liquidity risk profile.
Whilst funding markets were extremely difficult in the latter half
of 2008, and particularly since September 2008, Barclays was able to
increase available liquidity, extend the term of unsecured liabilities, and
reduce reliance on unsecured funding. Barclays has participated in various
government and central bank liquidity facilities, both to aid central banks
implementation of monetary policy and support central bank initiatives,
where participation has enabled the lengthening of the term of our
refinancing. These facilities have improved access to term funding,
and helped moderate money market rates.
For the Group, loans and advances to customers and banks are more
than covered by the combination of customer deposits and longer term
debt at 112% at 31st December 2008 (2007: 125%).
Global Retail and Commercial Banking
The sum of liabilities in Global Retail and Commercial Banking, Barclays
Wealth and Head office functions exceeds assets in those businesses.
As a result they have no reliance on wholesale funding. The balance sheet
is modelled to reflect behavioural experience in both assets and liabilities,
and is managed to maintain a positive cash profile (table 1).
Throughout 2008 Global Retail and Commercial Banking continued
to grow the amount of deposits despite competitive pressures (table 2).
Barclays Capital
Barclays Capital manages liquidity to be self-funding through wholesale
sources, managing access to liquidity to ensure that potential cash
outflows in a stressed environment are covered.
1
2
3
4
5
1Government
2Agy
3MBS
4ABS
5Corporate
6Equity
7Other
67
Sources of Readily Available Contingent Liquidity
1
2
3
4
5
1Deposits with central banks
2Deposits with other financial
institutions
3Government guaranteed issuance
4Collateral eligible for repo
5Other contingent liquidity
Note
aMBS includes only agency mortgages. ABS includes private label issuance of residential
mortgage backed securities.
Table 1: Expected Net Cash Inflows/(Outflows) on a Behavioural Basis
Up to 1 yr 1-3yrs 3-5yrs Over 5 yrs
£bn £bn £bn £bn
As at 31.12.08 20 34 14 (95)
Table 2: Global Retail and Commercial Banking Deposit Balances
As at As at As at As at As at
31.12.08 30.06.08 31.12.07 30.06.07 31.12.06
£bn £bn £bn £bn £bn
Total customer deposits 235 218 211 200 190
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Funding reliability is maintained by accessing a wide variety of
investors and geographies and by building and maintaining strong
relationships with these providers of liquidity.
Unsecured funding
Additionally, unsecured funding is managed within specific term limits.
The term of unsecured liabilities has been extended, with average life
improving by four months from eight months at the end of December
2007 to 12 months at the end of December 2008.
Our capital markets debt issuance includes issues of senior and
subordinated debt in US registered offerings and medium term note
programmes and European medium term note programs. Substantially
all of our unsecured senior issuance is without covenants that trigger
increased cost or accelerate maturity. Furthermore, between September
and December 2008 we issued £11bn in government guaranteed debt,
£9bn in maturities of one to three years and £2bn in under one-year
maturities.
Secured funding
Barclays funds securities based on liquidity characteristics. Limits are
in place for each security asset class reflecting liquidity in the cash and
financing markets for these assets. Approximately 80% of assets funded
in repurchase and stock loan transactions are fundable within central bank
facilities (excluding Bank of England Emergency facilities and the Federal
Reserve Primary Dealer Credit Facility).
Liquidity risk to secured funding is also mitigated by:
– selecting reliable counterparties
–maintainingtermfinancingandbylimitingtheamountofovernightfunding
– limiting overall secured funding usage
Readily available liquidity
Substantial resources are maintained to offset maturing deposits and
debt. These readily available assets are sufficient to absorb stress level
losses of liquidity from unsecured as well as contingent cash outflows,
such as collateral requirements on ratings downgrades.The sources
of liquidity and contingent liquidity are from a wide variety of sources,
including deposits held with central banks and unencumbered securities.
In addition, the Group maintains significant pools of
securitisable assets.
Risk management
Liquidity risk management
Key elements