Barclays 2010 Annual Report Download - page 282

Glossary of terms
continued
‘Credit Risk Loans (CRLs)’ A loan becomes a credit risk loan when evidence
of deterioration has been observed, for example a missed payment or
other breach of covenant. A loan may be reported in one of three categories:
impaired loans, accruing past due 90 days or more or impaired and
restructured loans. These may include loans which, while impaired, are
still performing but have associated individual impairment allowances
raised against them.
‘Credit spread’ The yield spread between securities with the same coupon
rate and maturity structure but with different associated credit risks, with
the yield spread rising as the credit rating worsens. It is the premium over
the benchmark or risk-free rate required by the market to accept a lower
credit quality.
‘Credit Valuation Adjustment (CVA)’ The difference between the risk-free
value of a portfolio of trades and the market value which takes into
account the counterparty’s risk of default. The CVA therefore represents
an estimate of the adjustment to fair value that a market participant would
make to incorporate the credit risk of the counterparty due to any failure to
perform on contractual agreements.
‘Customer deposits’ Money deposited by all individuals and companies
that are not credit institutions. Such funds are recorded as liabilities in the
Group’s balance sheet under Customer Accounts.
‘Daily Value at Risk (DVaR)’ An estimate of the potential loss which might
arise from market movements under normal market conditions, if the
current positions were to be held unchanged for one business day,
measured to a confidence level. (Also see VaR).
‘Debit Valuation Adjustment (DVA)’ The opposite of credit valuation
adjustment (CVA). It is the difference between the risk-free value of a
portfolio of trades and the market value which takes into account Barclays
Group’s risk of default. The DVA, therefore, represents an estimate of the
adjustment to fair value that a market participant would make to
incorporate the credit risk of Barclays Group due to any failure to perform
on contractual agreements. The DVA decreases the value of a liability to
take into account a reduction in the remaining balance that would be
settled should Barclays Group default or not perform in terms of
contractual agreements.
‘Debt restructuring’ This is when the terms and provisions of outstanding
debt agreements are changed. This is often done in order to improve cash
flow and the ability of the borrower to repay the debt. It can involve altering
the repayment schedule as well as reducing the debt or interest charged
on the loan.
‘Debt securities in issue’ Transferable certificates of indebtedness of the
Group to the bearer of the certificates. These are liabilities of the Group
and include certificates of deposits.
‘Delinquency’ See ‘Arrears’.
‘Dividend payout ratio’ Yearly dividends paid per share as a fraction of
earnings per share.
‘Economic capital’ An internal measure of the minimum equity and
preference capital required for the Group to maintain its credit rating based
upon its risk profile.
‘Economic profit’ Profit attributable to equity holders of the Parent
excluding amortisation of acquired intangible assets less a capital charge
representing adjusted average shareholders’ equity excluding non-
controlling interests multiplied by the Group cost of capital.
‘Equities and Prime Services’ The Barclays Capital trading businesses
encompassing Cash Equities, Equity Derivatives & Equity Financing.
‘Equity products’ As used in Note 41 ‘Fair value of financial instruments’,
these products are linked to equity markets. This category includes listed
equities, exchange traded derivatives, equity derivatives, preference shares
and contract for difference (CFD) products.
‘Equity structural hedge’ An interest rate hedge which functions to reduce
the impact of the volatility of short-term interest rate movements on equity
positions on the balance sheet that do not reprice with market rates.
‘Europe region’ The geographic segment comprising countries in which
Barclays operates within the EU (excluding UK & Ireland), Northern,
Continental and Eastern Europe, including Russia.
‘Expected loss’ The Group measure of anticipated loss for exposures
captured under an internal ratings based credit risk approach for capital
adequacy calculations. It is measured as the Barclays modelled view of
anticipated loss based on Probability of Default (PD), Loss Given Default
(LGD) and Exposure at Default (EAD), with a one-year time horizon.
‘Exposure in the event of default (EAD)’ The estimation of the extent to
which Barclays may be exposed to a customer or counterparty in the event
of, and at the time of, that counterparty’s default. At default, the customer
may not have drawn the loan fully or may already have repaid some of the
principal, so that exposure is typically less than the approved loan limit.
‘First/Second Lien’ First lien: debt that places its holder first in line to
collect compensation from the sale of the underlying collateral in the event
of a default on the loan. Second lien: debt that is issued against the same
collateral as higher lien debt but that is subordinate to it. In the case of
default, compensation for this debt will only be received after the first lien
has been repaid and thus represents a riskier investment than the first lien.
See Risk Management section – Barclays Capital Credit Market Exposures.
‘Fixed charge’ Security taken over a specific asset of a borrower to secure
the repayment of a loan. In this arrangement the asset is signed over to
the creditor and the borrower would need the lender’s permission to sell it.
The lender also registers a charge against the asset which remains in force
until the loan is repaid.
‘Fixed Income, Currency and Commodities’ The Barclays Capital trading
businesses encompassing Rates, Credit, Emerging Markets, Commodities,
Foreign Exchange & Fixed Income Financing.
‘Forbearance’ Forbearance Programmes that assist customers in financial
difficulty through agreements to accept less than contractual amounts
due where financial distress would otherwise prevent satisfactory
repayment within the original terms and conditions of the contract. These
agreements may be initiated by the customer, Barclays or a third party and
include approved debt counselling plans, minimum due reductions,
interest rate concessions and switches from capital and interest
repayments to interest-only payments.
‘FSA-eligible pool assets (liquid assets buffer)’ High quality unencumbered
assets that meet the FSA’s requirements for liquidity. These assets include,
for example, high quality government or central bank securities, certain
sight deposits with central banks, and securities issued by designated
multilateral development banks.
‘Full time equivalent’ Full time equivalent employee units are the on-job
hours paid for employee services divided by the number of ordinary-time
hours normally paid for a full-time staff member when on the job (or
contract employee where applicable).
‘Funds and fund-linked products’ As used in Note 41 ‘Fair value of financial
instruments’, this category includes holdings in mutual funds, hedge
funds, fund of funds and fund linked derivatives.
280 Barclays PLC Annual Report 2010 www.barclays.com/annualreport10