Barclays 2010 Annual Report Download - page 110

Risk management
Credit risk management continued
Renegotiated loans and advances (audited)
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.
Collateral and other credit enhancements held (audited)
Financial assets that are past due or individually assessed as impaired
may be partially or fully collateralised or subject to other forms of credit
enhancement.
Assets in these categories subject to collateralisation are mainly
corporate loans, Home Loans and finance lease receivables. Credit card
receivables and other personal lending are generally unsecured (although
in some instances a charge over the borrower’s property or other assets
may be sought).
Corporate loans (audited)
Security is usually taken in the form of a fixed charge over the borrower’s
property or a floating charge over the assets of the borrower. Loan
covenants may be put in place to safeguard the Group’s financial position.
If the exposure is sufficiently large, either individually or at the portfolio
level, credit protection in the form of guarantees, credit derivatives or
insurance may be taken out. For these and other reasons collateral given
is only accurately valued on origination of the loan or in the course of
enforcement actions and as a result it is not practicable to estimate the
fair value of the collateral held.
Home loans (audited)
Home loans are secured by a fixed charge over residential property.
The estimated fair value of collateral held as at 31st December 2010
in respect of Home Loans that are past due or individually assessed
as impaired was £10,057m (2009: £9,628m).
Collateral held reflects the Group’s interest in the property in the event of
default. That held in the form of charges against residential property in the
UK is restricted to the outstanding loan balance. In other territories, where
the Group is not obliged to return any sale proceeds to the mortgagee, the
full estimated fair value has been included.
Finance lease receivables (audited)
The net investment in the lease is secured through retention of legal title
to the leased assets.
Collateral and other credit enhancements obtained (audited)
The carrying value of assets held by the Group as at 31st December 2010
as a result of the enforcement of collateral was as follows:
Assets received (audited) 2010
Carrying
amount
£m
2009
Carrying
amount
£m
As at 31st December
Residential property 71 71
Commercial and industrial property 14 66
Other credit enhancements 210 248
Total 295385
Any properties repossessed are made available for sale in an orderly and
timely fashion, with any proceeds realised being used to reduce or repay
the outstanding loan. For business customers, in some circumstances,
where excess funds are available after repayment in full of the outstanding
loan, they are offered to any other, lower ranked, secured lenders. Any
additional funds are returned to the customer. Barclays does not, as a rule,
occupy repossessed properties for its business use.
The Group does not use assets obtained in its operations. Assets obtained
are normally sold, generally at auction, or realised in an orderly manner for
the maximum benefit of the Group, the borrower and the borrower’s other
creditors in accordance with the relevant insolvency regulations.
108 Barclays PLC Annual Report 2010 www.barclays.com/annualreport10