Barclays 2009 Annual Report Download - page 343

www.barclays.com/annualreport09 Barclays PLC Annual Report 2009 341
‘Monoline’ An entity which specialises in providing credit protection to the
holders of debt instruments in the event of default by a debt security
counterparty. This protection is typically held in the form of derivatives such
as credit default swaps (CDS) referencing the underlying exposures held.
See Risk Management section – Credit Market Exposures.
‘Monoline Wrapped’ Debt instruments for which credit enhancement or
protection by a monoline insurer has been obtained. The wrap is credit
protection against the notional and principal interest cash flows due to the
holders of debt instruments in the event of default in payment of these by
the underlying counterparty. Therefore, if a security is monoline wrapped
its payments of principal and interest are guaranteed by a monoline insurer.
See Risk Management section – Credit Market Exposures.
‘Mortgage Backed Securities (MBS)’ Securities that represent interests
in a group of 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.
‘Mortgage vintage’ The year the mortgage was issued.
‘Mortgage related securities’ Securities which are referenced to underlying
mortgages. See RMBS, CMBS and MBS.
‘Net Asset Value per Share’ Computed by dividing shareholders’ equity
excluding non-controlling interests by the number of issued ordinary shares.
‘Net Equity’ The change in shareholders’ equity between one period
and another.
‘Net Interest Income’ The difference between interest received on assets
and interest paid on liabilities including the interest income on Group equity.
‘Net Interest Margin’ The margin is expressed as annualised net interest
income for GRCB and Barclays Wealth divided by the sum of the average
assets and average liabilities for GRCB and Barclays Wealth.
‘Net Tangible Asset Value per Share’ Computed by dividing shareholders’
equity excluding non-controlling interests less goodwill and intangible
assets, by the number of issued ordinary shares.
‘Non-asset backed debt instruments’ As used in Note 50, these products
are debt instruments. This category includes government bonds; US agency
bonds; corporate bonds; commercial paper; certificates of deposit;
convertible bonds; corporate bonds and issued notes.
‘Non-investment grade’ A debt security, treasury bill or similar instrument
with a credit rating measured by external agencies of BB+ or below.
‘Notional Collateral’ Collateral based on the notional amount of
a financial instrument.
‘Over the counter derivatives (OTC)’ Contracts that are traded (and privately
negotiated) directly between two parties, without going through an
exchange or other intermediary. They offer flexibility because, unlike
standardised exchange-traded products, they can be tailored to fit
specific needs.
‘Own Credit’ The effect of the Group’s own credit standing on the fair value
of financial liabilities.
‘PCRL Coverage ratio’ Impairment allowances as a percentage of total CRL
(credit risk loan) & PPL (potential problem loan) balances. See CRL and PPL.
‘Potential Credit Risk Loans (PCRLs)’ Comprise the outstanding balances
to Potential Problem Loans (defined below) and the three categories of
Credit Risk Loans (defined above).
‘Potential Problem Loans (PPLs)’ Loans where serious doubt exists as to
the ability of the borrowers to continue to comply with repayment terms
in the near future.
‘Prime’ Loans of a higher credit quality and would be expected to satisfy
the criteria for inclusion into Government programmes.
‘Principal transactions’ Principal transactions comprise net trading income
and net investment income.
‘Private equity investments’ As used in Note 50, private equity is equity
securities in operating companies not quoted on a public exchange.
Investment in private equity often involves the investment of capital in
private companies or the acquisition of a public company that results in
the delisting of public equity. Capital for private equity investment is raised
by retail or institutional investors and used to fund investment strategies
such as leveraged buyouts, venture capital, growth capital, distressed
investments and mezzanine capital.
‘Probability of default (PD)’ The likelihood that a loan will not be repaid
and will fall into default. PD may be calculated for each client who has a loan
(normally applicable to wholesale customers/clients) or for a portfolio
of clients with similar attributes (normally applicable to retail customers).
To calculate PD, Barclays assesses the credit quality of borrowers and other
counterparties and assigns them an internal risk rating. Multiple rating
methodologies may be used to inform the rating decision on individual large
credits, such as internal and external models, rating agency ratings, and for
wholesale assets market information such as credit spreads. For smaller credits,
a single source may suffice such as the result from an internal rating model.
‘Product structural hedge’ An interest rate hedge which functions to reduce
the impact of the volatility of short-term interest rate movements on-balance
sheet positions that can be matched to a specific product, e.g. customer
balances that do not reprice with market rates.
‘Renegotiated loans’ Loans and advances are generally renegotiated either
as part of an ongoing customer relationship or in response to an adverse
change in the circumstances of the borrower. In the latter case renegotiation
can result in an extension of the due date of payment or repayment plans
under which the Group offers a concessionary rate of interest to genuinely
distressed borrowers. This will result in the asset continuing to be overdue
and will be individually impaired where the renegotiated payments of
interest and principal will not recover the original carrying amount of the
asset. In other cases, renegotiation will lead to a new agreement, which
is treated as a new loan.
‘Repo/Reverse repo’ A repurchase agreement that allows a borrower to
use a financial security as collateral for a cash loan at a fixed rate of interest.
In a repo, the borrower agrees to sell a security to the lender subject to a
commitment to repurchase the asset at a specified price on a given date.
For the party selling the security (and agreeing to repurchase it in the future)
it is a repo; for the party on the other end of the transaction (buying the
security and agreeing to sell in the future) it is a reverse repurchase
agreement or reverse repo.
‘Residential Mortgage Backed Securities (RMBS)’ Securities that represent
interests in a group of residential 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.
‘Restructured loans’ ‘Impaired and restructured loans’ comprises loans
where, for economic or legal reasons related to the debtor’s financial
difficulties, a concession has been granted to the debtor that would not
otherwise be considered. Where the concession results in the expected
cash flows discounted at the original effective interest rate being less than
the loan’s carrying value, an impairment allowance will be raised.
‘Retail Loans’ Loans to individuals rather than institutions. This includes both
secured and unsecured loans such as mortgages and credit card balances.
‘Return on average economic capital’ Profit for the year attributable
to equity holders of the Parent divided by average economic capital.
‘Return on average shareholders’ equity’ Calculated as profit for the year
attributable to equity holders of the Parent divided by the average
shareholders’ equity for the year, excluding non-controlling interests.
‘Risk asset ratio’ A measure of the risk attached to the assets of a business
using definitions of capital and risk weightings established in accordance
with the Basel Capital Accord as implemented by the FSA.
‘Risk weighted assets’ A measure of a bank’s assets adjusted for their
associated risks. Risk weightings are established in accordance with the
Basel Capital Accord as implemented by the FSA.