Barclays 2009 Annual Report Download - page 341

www.barclays.com/annualreport09 Barclays PLC Annual Report 2009 339
‘Collateralised Loan Obligation (CLO)’ A security backed by the repayments
from a pool of commercial loans. The payments may be made to different
classes of owners (in tranches). See Risk Management section – Credit
Market Exposures.
‘Collateralised Synthetic Obligation (CSO)’ A form of synthetic collateralised
debt obligation (CDO) that does not hold assets like bonds or loans but
invests in credit default swaps (CDSs) or other non-cash assets to gain
exposure to a portfolio of fixed income assets.
‘Commercial Mortgage Backed Securities (CMBS)’ Securities that represent
interests in a pool of commercial mortgages. Investors in these securities
have the right to cash received from future mortgage payments (interest
and/or principal). See Risk Management section – Credit Market Exposures.
‘Commercial Real Estate’ Includes office buildings, industrial property,
medical centres, hotels, malls, retail stores, shopping centres, farm land,
multifamily housing buildings, warehouses, garages, and industrial
properties. Commercial real estate loans are those backed by a package
of commercial real estate assets. See Risk Management section –
Credit Market Exposures.
‘Commercial Paper’ An unsecured promissory note issued to finance
short-term credit needs. It specifies the face amount paid to investors
on the maturity date.
‘Commodity products’ As used in Note 50, these products are exchange
traded and OTC derivatives based on a commodity underlying (e.g. metals,
precious metals, oil and oil related, power and natural gas).
‘Compensation:income ratio’ Staff compensation based costs compared
to total income net of insurance claims.
‘Conduits’ A financial vehicle that holds asset-backed debt such as
mortgages, vehicle loans, and credit card receivables, all financed with
short-term loans (generally commercial paper) that use the asset-backed
debt as collateral. The profitability of a conduit depends on the ability to roll
over maturing short-term debt at a cost that is lower than the returns
earned from asset-backed securities held in the portfolio. See Risk
Management section – Credit Market Exposures.
‘Core Tier 1 capital’ Called-up share capital and eligible reserves plus equity
non-controlling interests, less intangible assets and deductions relating to
the excess of expected loss over regulatory impairment allowance and
securitisation positions as specified by the FSA.
‘Core Tier 1 capital ratio’ Core Tier 1 capital as a percentage of risk
weighted assets.
‘Cost:income ratio’ Operating expenses compared to total income net
of insurance claims.
‘Cost:net income ratio’ Operating expenses compared to total income net
of insurance claims less impairment charges.
‘Coverage ratio (CRL)’ Impairment allowances as a percentage of
CRL balances.
‘Credit conversion factors (CCFs)’ The portion of an off-balance sheet
commitment drawn in the event of a future default. The conversion factor
is expressed as a percentage. The conversion factor is used to calculate
the exposure at default (EAD).
‘Credit Default Swaps (CDS)’ A credit derivative is an arrangement whereby
the credit risk of an asset (the reference asset) is transferred from the buyer
to the seller of protection. A credit default swap is a contract where the
protection seller receives premium or interest-related payments in return
for contracting to make payments to the protection buyer in the event of a
defined credit event. Credit events normally include bankruptcy, payment
default on a reference asset or assets, or downgrades by a rating agency.
‘Credit Derivative Product Company (CDPC)’ A company that sells
protection on credit derivatives. CDPCs are similar to monoline insurers.
However, unlike monoline insurers, they are not regulated as insurers.
See Risk Management section – Credit Market Exposures.
‘Credit market exposures’ Relates to commercial real estate and leveraged
finance businesses that have been significantly impacted by the continued
deterioration in the global credit markets. The exposures include positions
subject to fair value movements in the Income Statement, positions that are
classified as loans and advances and available for sale.
‘Other credit products’ As used in Note 50, these are products linked to the
credit risk of a referenced entity, index or a basket. This category includes
collateralised synthetic obligations (non-asset backed CDOs) and OTC
derivatives. The OTC derivatives are namely, CDS single name; CDS index;
CDS index tranche and Nth to default basket swaps (in which the payout is
linked to one in a series of defaults, such as first-, second- or third-to-default,
with the contract terminating at that point).
‘Credit Risk Loans (CRLs)’ A loan becomes a credit risk loan when evidence
of deterioration has been observed, for example a missed payment or other
breach of covenant. A loan may be reported in one of three categories:
impaired loans, accruing past due 90 days or more or impaired and
restructured loans. These may include loans which, while impaired, are still
performing but have associated individual impairment allowances raised
against them.
‘Credit spread’ The yield spread between securities with the same coupon
rate and maturity structure but with different associated credit risks, with
the yield spread rising as the credit rating worsens. It is the premium over
the benchmark or risk-free rate required by the market to accept a lower
credit quality.
‘Credit Valuation Adjustment (CVA)’ The difference between the risk-free
value of a portfolio of trades and the market value which takes into account
the counterparty’s risk of default. The CVA therefore represents an estimate
of the adjustment to fair value that a market participant would make to
incorporate the credit risk of the counterparty due to any failure to perform
on contractual agreements.
‘Customer deposits’ Money deposited by all individuals and companies that
are not credit institutions. Such funds are recorded as liabilities in the Group’s
balance sheet under Customer Accounts.
‘Daily Value at Risk (DVaR)’ An estimate of the potential loss which might
arise from market movements under normal market conditions, if the
current positions were to be held unchanged for one business day,
measured to a confidence level. (Also see VaR).
‘Debit Valuation Adjustment (DVA)’ The opposite of credit valuation
adjustment (CVA). It is the difference between the risk-free value of a
portfolio of trades and the market value which takes into account Barclays
Group’s risk of default. The DVA, therefore, represents an estimate of the
adjustment to fair value that a market participant would make to incorporate
the credit risk of Barclays Group due to any failure to perform on contractual
agreements. The DVA decreases the value of a liability to take into account
a reduction in the remaining balance that would be settled should Barclays
Group default or not perform in terms of contractual agreements.
‘Debt restructuring’ This is when the terms and provisions of outstanding
debt agreements are changed. This is often done in order to improve cash
flow and the ability of the borrower to repay the debt. It can involve altering
the repayment schedule as well as reducing the debt or interest charged
on the loan.
‘Delinquency’ See ‘Arrears’.
‘Dividend payout ratio’ Yearly dividends paid per share as a fraction of
earnings per share.
‘Economic capital’ An internal measure of the minimum equity and
preference capital required for the Group to maintain its credit rating based
upon its risk profile.
‘Economic profit’ Profit after tax and non-controlling interests excluding
amortisation of acquired intangible assets less a capital charge representing
adjusted average shareholders’ equity excluding non-controlling interests
multiplied by the Group cost of capital.