Barclays 2010 Annual Report Download - page 118

Risk management
Credit risk management continued
The following table shows movements in the Level 3 balances during the year.
Analysis of movements in Level 3 financial assets Trading
portfolio
assets
£m
Derivative
financial
instruments
£m
Total
£m
As at 1st January 2010 4,516 2,038 6,554
Purchases –––
Sales (14) – (14)
Settlements (415) (87) (502)
Total gains and losses in the period recognised in the income statement 1,225 (1,805) (580)
Transfers in/(transfers out) 75 (146) (71)
As at 31st December 2010 5,387 – 5,387
The significant movements in the Level 3 positions during the year ended 31st December 2010 are explained below:
– Settlements represent assets that were paid in full, amortisation of principal, and payments from monoline insurers.
– Total gains and losses represent changes in the fair value of the assets, and losses due to commutation of contracts with monoline insurers.
Sensitivity analysis of valuations using unobservable inputs 2010 2009
As at 31st December Total assets
£m
Favourable
changes
£m
Unfavourable
changes
£m
Total assets
£m
Favourable
changes
£m
Unfavourable
changes
£m
Trading portfolio assets
Other US sub-prime whole loans and real estate 528 75 (43) 641 112 (92)
Other US sub-prime securities 372 53 (31) 306 54 (44)
Alt-A 1,399 198 (115) 1,234 216 (178)
Other trading portfolio assets 308 5 (4) 122 6 (3)
Fair value of underlying assets wrapped by monoline insurers 2,780 166 (162) 2,213 227 (446)
Derivative financial assets
Monoline protection – – – 2,038 209 (411)
Total 5,387 497 (355) 6,554 824 (1,174)
The effect of stressing the unobservable assumptions to a range of reasonably possible alternatives would be to increase the fair values by up to £0.5bn
(2009: £0.8bn) or to decrease the fair values by up to £0.4bn (2009: £1.2bn) with all the potential effect impacting profit and loss.
The stresses applied take account of the nature of valuation techniques used, as well as the availability and reliability of observable proxy and historic data.
In all cases, an assessment is made to determine the suitability of available data. The sensitivity methodologies that are used to assess the Protium
assets are described on pages 261 to 263 and are consistent with that of Barclays valuation control framework.
E. Barclays Capital Credit Market Exposures by asset class
Analysis of Barclays Capital Credit Market Exposures by asset class
As at 31st December
Trading
portfolio
assets –
debt
securities
£m
Financial
assets
designated
at fair
value –
equity
securities
£m
Financial
assets
designated
at fair
value –
debt
securities
£m
Financial
assets
designated
at fair
value – L&A
£m
Derivative
financial
instruments
£m
L&A to
customers
£m
Available
for sale
debt
securities
£m
Other
assets
£m
2010
Total
£m
2009
Total
£m
ABS CDO Super Senior – – – – – 1,992 – – 1,992 1,931
Other US Sub-prime and Alt-A – – – – 250 5 407 – 662 894
Monoline Protection on US RMBS – – – – – – – – – 6
Commercial Real Estate Loans
and Property – 743 – 4,712 – – – 1,651 7,106 7,734
CMBS 154 – – – (35) – – – 119 218
Monoline Protection on CMBS – – – – 12 – – – 12 30
Leveraged Financea – – – – – 4,666 – – 4,666 5,250
SIVs, SIV-lites and CDPCs – – 345 – 54 – – – 399 553
Monoline Protection on CLO
and Other – – – – 1,641 – – – 1,641 2,126
Loan to Protium Finance LP – – – – – 7,028 – – 7,028 7,859
Total exposures 154 743 345 4,712 1,922 13,691 407 1,651 23,625 26,601
Note
a Undrawn commitments of £264m (2009: £257m) are off-balance sheet
and therefore not included in the table above.
116 Barclays PLC Annual Report 2010 www.barclays.com/annualreport10