Barclays 2009 Annual Report Download - page 134

132 Barclays PLC Annual Report 2009 www.barclays.com/annualreport09
Risk management
Liquidity risk management
continued
Group policy is to ensure that the assets of the retail, wealth and
corporate bank, together with Head Office functions, on a global basis,
do not exceed customer deposits and subordinated funding so that these
businesses place no reliance on wholesale markets. The exception to this
policy is Absa, which has a large portion of wholesale funding due to the
structure of the South African financial sector.
In order to assess liquidity risk, the balance sheet is modelled to reflect
behavioural experience in both assets and liabilities and is managed to
maintain a cash surplus. The maturity profile, excluding Absa, resulting
from this behavioural modelling is set out above. This shows that there is a
funding surplus of £94.5bn, and that there are expected outflows of £10.2bn
within one year from asset repayments being less than liability attrition. For
subsequent years the expected repayments on assets are larger than the
roll off of liabilities resulting in cash inflows. Maturities of net liabilities are,
therefore, behaviourally expected to occur after five years.
Barclays Capital
Barclays Capital manages its liquidity to be primarily funded through
wholesale sources, managing access to liquidity to ensure that potential
cash outflows in a stressed environment are covered.
73% of the inventory is funded on a secured basis (31st December
2008: 50%). Additionally, much of the short-term funding is invested in
highly liquid assets and central bank cash and therefore contributes towards
the Group liquidity pool.
Barclays Capital undertakes secured funding in the repo markets based
on liquidity characteristics. Limits are in place for each security asset class
reflecting liquidity in the cash and financing markets for these assets. The
percentage of secured funding using each asset class as collateral is set
out below.
Unsecured wholesale funding for the Group (excluding Absa) is
managed by Barclays Capital within specific term limits. Excluding short-
term deposits that are included within the Group’s liquidity pool, the term
of unsecured liabilities has been extended, with average life improving
from at least 14 monthsaat 31st December 2008 to at least 26 months
at 31st December 2009.
The extension of the term of the wholesale financing has meant that,
as at 31st December 2009, 81% of net wholesale funding had remaining
maturity of greater than one year and, as at the same date, there was no
net wholesale unsecured re-financing required within six months.
Regulatory Changes in 2009
The FSA issued its policy document on ‘strengthening liquidity standards’
on 5th October detailing the requirements for liquidity governance to be in
place by 1st December 2009, and the quantitative requirements for liquidity
buffers, which will be in place from 1st June 2010, although with an
extended transition period of several years to meet the expected standards.
This is the most comprehensive liquidity regime imposed by any
regulator globally, requiring increased quantitative reporting from June 2010
and additional evidential reporting to demonstrate adherence to new
qualitative requirements. In addition, the Basel Committee on Banking
Supervision released a consultative document ‘International framework for
liquidity risk measurement, standards and monitoring’ in December 2009.
This included two new key liquidity metrics. A liquidity coverage ratio aimed
at ensuring banks have sufficient unencumbered high quality assets to meet
cash outflows in an acute short-term stress and a Net Stable Funding Ratio
to promote longer-term structural funding of the Bank’s balance sheet and
capital market activities.
Secured funding by asset class Government Agency MBS ABS Corporate Equity Other
%%%%%%%
As at 31st December 2009 597761083
As at 31st December 2008 49 9 11 9 15 4 3
Contractual maturity of unsecured liabilitiesbNot more Not more Not more Not more Not more
(Net of assets available from the Group Liquidity pool) than than than than than Over
1 month 2 months 3 months 6 months 1 year 1 year
%%%%%%
As at 31st December 2009 – – – – 19 81
Notes
aThe 31st December 2008 average unsecured liability term has been restated to at least
14 months to reflect refinements in the underlying calculation.
bPrior years’ figures have not been provided as these measures have not previously been
reported on a comparable basis.