Barclays 2010 Annual Report Download - page 120

Risk management
Market risk management
All disclosures in this section (pages 118 to 125) are unaudited unless otherwise stated
Market Risk is the risk that Barclays earnings or capital,
or its ability to meet business objectives, will be adversely
affected by changes in the level or volatility of market rates
or prices such as interest rates, credit spreads, commodity
prices, equity prices and foreign exchange rates.
Overview (audited)
The main sources of risk are traded market risk, non-traded interest rate
risk, translational foreign exchange risk and pension risk. Traded risk
resides primarily in Barclays Capital while non-traded market risk resides
mainly in Global Retail Banking, Barclays Corporate, Barclays Wealth
and Group Treasury. Translational foreign exchange risk is managed by
Group Treasury. Pension risk is managed centrally with the cost borne
by respective businesses.
Barclays market risk objectives are to:
– understand and control market risk by robust measurement and the
setting of limits;
– facilitate business growth within a controlled and transparent risk
management framework;
– ensure traded market risk resides primarily in Barclays Capital; and
– minimise non-traded market risk.
Overview of the business control structure
Group Market Risk Director
Non-traded
– Interest rate risk
– Foreign exchange risk
Traded
– Interest
rate risk
–
Credit
spread
risk
– Commodity
risk
– Equity risk
– Foreign
exchange
risk
Risk type
…with oversight
and challenge
provided by
Group including
Market Risk
Committee
and…
…managed by
Non-traded
– Pension risk
Non-traded
–
Asset
management
risk
Barclays
Capital
Group
Treasury
Barclays
Corporate
Global Retail
Banking
Barclays Wealth
Absa Retail
and
Corporate
Banking
Barclays
Wealth
Pension Fund
Trustees and
Barclays
Central
Functions
– Traded
Products
Risk Review
Meeting
– Investment
Committee
– Asset and Liability Committees
– New Product Process team
– Supervisory visits from business centre team
– Investment
Committee
– Pension
Management
Group
– Pension
Executive
Board
– Barclays
Wealth
Asset and
Liability
Committee
–
Absa Market
Risk
Committee
– Treasury
Committee
– Treasury
Hedge
Committee
Organisation and structure
The Board approves market risk appetite for trading and non-trading
activities. The Group Market Risk Director is responsible for the Barclays
Market Risk Control Framework and, under delegated authority from
the Chief Risk Officer, sets a limit framework within the context of the
approved market risk appetite. A daily market risk report summarises
Barclays market risk exposures against agreed limits. This daily report is
sent to the Chief Risk Officer, the Group Market Risk Director, the Group
Finance Director and the appropriate Business Risk Directors.
Market Risk Committee approves, and makes recommendations
concerning the market risk profile across Barclays. This includes approving
Barclays Market Risk Control Framework and Group Policies; reviewing
current and forward issues, limits and utilisation; and proposing risk
appetite levels for the Board. The Committee is chaired by the Group
Market Risk Director and attendees include the Chief Risk Officer, respective
business risk managers and senior managers from Group Market Risk.
The head of each business, assisted by the business market risk
management team, is accountable for all market risks associated with
its activities. The head of each business market risk team is responsible
for implementing the Barclays Market Risk Control Framework which
sets out how market risk should be identified, measured, controlled,
reported and reviewed. The Framework also outlines and references
Group market risk policies.
Market risk oversight and challenge is provided by business committees,
Group Committees including Market Risk Committee and the Group
Market Risk team.
The chart below gives an overview of the business control structure.
118 Barclays PLC Annual Report 2010 www.barclays.com/annualreport10