Barclays 2010 Annual Report Download - page 108

Risk management
Credit risk management continued
Financial statement descriptions can be summarised as follows:
Strong – there is a very high likelihood of the asset being recovered in full.
Satisfactory – whilst there is a high likelihood that the asset will be
recovered and therefore, of no cause for concern to the Group, the asset
may not be collateralised, or may relate to retail facilities, such as credit
card balances and unsecured loans, which have been classified as
satisfactory, regardless of the fact that the output of internal grading
models may have indicated a higher classification. At the lower end of
this grade there are customers that are being more carefully monitored,
for example, corporate customers which are indicating some evidence
of some deterioration, mortgages with a high loan to value ratio, and
unsecured retail loans operating outside normal product guidelines.
Higher risk – there is concern over the obligor’s ability to make payments
when due. However, these have not yet converted to actual delinquency.
There may also be doubts over value of collateral or security provided.
However, the borrower or counterparty is continuing to make payments
when due and is expected to settle all outstanding amounts of principal
and interest.
Credit quality of loans and advances neither past due nor individually impaired (audited)
2010 2009
As at 31st December Strong
£m
Satisfactory
£m
Higher risk
£m
Total
£m
Strong
£m
Satisfactory
£m
Higher risk
£m
Total
£m
Trading portfolio:
Traded loans 352 1,203 615 2,170 1,366 1,290 306 2,962
Financial assets designated at fair value:
Loans and advances 17,496 2,100 2,677 22,273 15,909 3,809 2,492 22,210
Other financial assets – – – – 261 – 296 557
Loans and advances to banks 35,666 1,360 123 37,149 35,825 2,492 542 38,859
Loans and advances to customers:
Home loans 85,351 69,784 1,773 156,908 66,831 69,890 2,324 139,045
Credit card receivables – 20,538 196 20,734 – 20,038 157 20,195
Other personal lending 5,555 16,130 2,678 24,363 3,417 18,108 2,271 23,796
Wholesale and corporate 115,783 59,921 5,769 181,473 119,764 70,132 9,904 199,800
Finance lease receivables 3,684 5,228 426 9,338 2,664 7,082 382 10,128
Total loans and advances 263,887 176,264 14,257 454,408 246,037 192,841 18,674 457,552
For the purposes of the analysis of credit quality, the following internal measures of credit quality have been used:
Retail lending Wholesale lending
Financial statements description Probability of default Probability of default Default grade
Strong 0.0-0.60% 0.0-0.05% 1-3
0.05-0.15% 4-5
0.15-0.30% 6-8
0.30-0.60% 9-11
Satisfactory 0.60-10.00% 0.60-2.15% 12-14
2.15-11.35% 15-19
Higher risk 10.00%+ 11.35%+ 20-21
106 Barclays PLC Annual Report 2010 www.barclays.com/annualreport10