Barclays 2009 Annual Report Download - page 98

96 Barclays PLC Annual Report 2009 www.barclays.com/annualreport09
Risk management
Credit risk management
continued
Reporting
The Group dedicates considerable resources to gaining a clear and accurate
understanding of credit risk across the business and ensuring that its
balance sheet correctly reflects the value of the assets in accordance with
applicable accounting principles. This process can be summarised in five
broad stages:
– measuring exposures and concentrations;
– monitoring weaknesses in portfolios;
– identifying potential problem loans and credit risk loans (collectively
known as potential credit risk loans or PCRLs);
– raising allowances for impaired loans; and
– writing off assets when the whole or part of a debt is considered
irrecoverable.
Measuring exposures and concentrations
Loans and advances to customers provide the principal source of credit risk
to the Group although Barclays can also be exposed to other forms of credit
risk through, for example, loans to banks, loan commitments and debt
securities.
Barclays risk management policies and processes are designed to
identify and analyse risk, to set appropriate risk appetite, limits and controls,
and to monitor the risks and adherence to limits by means of reliable and
timely data.
One area of particular review is concentration risk. A concentration of
credit risk exists when a number of counterparties are engaged in similar
activities and have similar economic characteristics that would cause their
ability to meet contractual obligations to be similarly affected by changes in
economic and other conditions.
As a result, Barclays constantly reviews its concentration in a number of
areas including, for example, geography, maturity, industry and investment
grade (see below).
Diversification is achieved through setting maximum exposure
guidelines to individual counterparties. Excesses are reported to the
Group Risk Oversight Committee and the Board Risk Committee. Mandate
and Scale limits are used to limit the stock of current exposures in a loan
portfolio and the flow of new exposures into a loan portfolio. Limits are
typically based on the nature of the lending and the amount of the portfolio
meeting certain standards of underwriting criteria.
— 2008
— 2009
Home loans
0
25,000 50,000 75,000
100,000 125,000 150,000
Financial services
Other personal
Business and other services
Property
Finance lease receivables
Transport
Postal and Communication
Wholesale and retail,
distribution and leisure
Energy and water
Manufacturing
Construction
Agriculture, forestry
and fishing
Government
Fig. 3: Loans and advances to customers by industry
£m
1 UK
2 Other EU
3 US
4 Africa
5 Rest of World
1
2
3
45
1
2
3
45
08
09
Fig. 1: Geographical analysis of loans and advances to customers
£m
— 2008
— 2009
Fig. 4: Exposure to sub-investment grade countries
% of total cross-border limitsa
Egypt
Turkey
Kenya
Indonesia
Tanzania
Ghana
Pakistan
Zambia
Uganda
Columbia
Angola
Philippines
Venezuela
Mozambique
Argentina
0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40
1
3
4
5
1 On demand
2 Not more than
three months
3 Over three months
but not more than
one year
4 Over one year but
not more than five
years
5 Over five years
08
09
1
2
3
4
5
Fig. 2: Maturity analysis of loans and advances to customers
£m
2
Note
aTotal comprises all limits to cross-border counterparties (non-UK) where limits are
greater than £10m.