Barclays 2008 Annual Report Download - page 42

Structured investment vehicles (SIVs)
The Group has not structured or managed SIVs. Group exposure to third
party SIVs comprised:
– £41m of senior liquidity facilities.
– Derivative exposures included on the balance sheet at their net fair
value of £273m.
– Bonds issued by the SIVs included within trading portfolio assets at
their fair value of £11m.
SIV-Lites
The Group has exposure to two SIV-Lite transactions. The Group is not
involved in their ongoing management. Exposures have increased by
£531m relating to a SIV-Lite which had previously been hedged with
Lehman Brothers. Following the Lehman Brothers bankruptcy this facility
was reflected as a new exposure to the underlying assets. The other SIV-
Lite of £107m represents drawn liquidity facilities supporting a CP
programme.
During 2008 exposure to a third SIV-Lite through bond holdings was
written down to zero.
Commercial paper and medium-term note conduits
The Group provided £22bn in undrawn backstop liquidity facilities to its
own sponsored CP conduits. The Group fully consolidates these entities
such that the underlying assets are reflected on the Group balance sheet.
These consolidated entities in turn provide facilities of £899m to third
party conduits containing prime UK buy-to-let RMBS. As at
31st December 2008, the entire facility had been drawn and is included
in available for sale financial investments.
The Group provided backstop facilities to support the paper issued by
four third party conduits. These facilities totalled £866m, with underlying
collateral comprising 100% auto loans. Drawings on these facilities were
£25m as at 31st December 2008 and are included within loans and
advances to customers.
The Group provided backstop facilities to six third party SPEs that
fund themselves with medium-term notes. These notes are sold to
investors as a series of 12 month securities and remarketed to investors
annually. If investors decline to renew their holdings at a price below a pre-
agreed spread, the backstop facility requires the Group to purchase the
outstanding notes at scheduled maturity. The Group has provided
facilities of £2.6bn to SPEs holding prime UK and Australian owner-
occupied Residential Mortgage Back Securities (RMBS) assets. As at the
balance sheet date these facilities had been drawn and were included in
loans and advances.
Asset securitisations
The Group has assisted companies with the formation of asset
securitisations, some of which are effected through the use of SPEs. These
entities have minimal equity and rely on funding in the form of notes to
purchase the assets for securitisation. As these SPEs are created for other
companies, the Group does not usually control these entities and
therefore does not consolidate them. The Group may provide financing in
the form of senior notes or junior notes and may also provide derivatives to
the SPE. These transactions are included on the balance sheet.
The Group has used SPEs to securitise part of its originated and
purchased retail and commercial lending portfolios and credit card
receivables. These SPEs are usually consolidated and de-recognition only
occurs when the Group transfers its contractual right to receive cash flows
from the financial assets, or retains the contractual rights to receive the
cash flows, but assumes a contractual obligation to pay the cash flows to
another party without material delay or reinvestment, and also transfers
substantially all the risks and rewards of ownership, including credit risk,
prepayment risk and interest rate risk. The carrying amount of securitised
assets together with the associated liabilities are set out in Note 29.
Client intermediation
The Group has structured transactions as a financial intermediary to meet
investor and client needs. These transactions involve entities structured
by either the Group or the client and they are used to modify cash flows
of third party assets to create investments with specific risk or return
profiles or to assist clients in the efficient management of other risks.
Such transactions will typically result in a derivative being shown on the
balance sheet, representing the Group’s exposure to the relevant asset.
The Group also invests in lessor entities specifically to acquire assets
for leasing. Client intermediation also includes arrangements to fund
the purchase or construction of specific assets (most common in the
property industry).
Fund management
The Group provides asset management services to a large number of
investment entities on an arm’s length basis and at market terms and prices.
The majority of these entities are investment funds that are owned by a
large and diversified number of investors. These funds are not consolidated
because the Group does not own either a significant portion of the equity
or the risks and rewards inherent in the assets.
During 2008, Group operating expenses included charges of £263m
related to selective support of liquidity products managed by Barclays Global
Investors and not consolidated by the Group. The Group have not provided
any additional selective support subsequent to 31st December 2008.
40 Barclays PLC Annual Report 2008 |Find out more at www.barclays.com/annualreport08
Financial review
Additional financial disclosure
Off-balance sheet arrangements