Barclays 2010 Annual Report Download - page 45

Capital management
At 31st December 2010, on a Basel II basis, the Group’s Core Tier 1 ratio
was 10.8% (2009: 10.0%) and the Tier 1 ratio was 13.5% (2009: 13.0%),
representing a strengthening of our capital ratios ahead of the effects of
expected regulatory capital changes.
Risk weighted assets increased 4% from £383bn to £398bn in 2010. Year
on year there was a £22bn reduction in underlying risk weighted assets
(predominantly in Barclays Capital) as a result of capital management
efficiencies and reduced levels of risk and inventory. This was offset by
both methodology and model changes, which increased risk weighted
assets by approximately £28bn. Foreign exchange and other movements
accounted for a further increase of £9bn.
Retained profit contributed approximately 70bps increase to Core Tier 1
ratio from 10.0% to 10.8%. Other movements in Core Tier 1 included the
exercise of warrants in February and October 2010, which generated
shareholders’ equity of £1.5bn, contributing approximately 40bps to the
Core Tier 1 ratio. The movement in the fair value of the Group’s holding in
BlackRock, Inc. resulted in an adverse impact of approximately 20bps on
the Core Tier 1 ratio over the year.
The Basel Committee of Banking Supervisors issued final Basel III
guidelines in December 2010 and January 2011. The new standards
include changes to risk weights applied to our assets and to the
definition of capital resources and are applicable from 1st January 2013
with some transitional rules to 2018. The Basel III guidelines have yet to
be implemented into European and UK law and therefore remain subject
to refinement and change. Recognising the new rules are not complete,
based on our current assessment of the guidelines, we expect that we
will continue to have a strong capital position post implementation.
Liquidity and Funding
The liquidity pool held by the Group increased £27bn to £154bn at
31st December 2010 (2009: £127bn), of which £140bn was in FSA-eligible
pool assets.
The Basel III guidelines propose two new liquidity metrics: the Liquidity
Coverage Ratio, which measures short-term liquidity stress and is broadly
consistent with the FSA framework, and the Net Stable Funding Ratio,
which measures the stability of long-term structural funding. Applying
the metrics to the Group balance sheet as at 31st December 2010, the
Liquidity Coverage Ratio was estimated at 80% and the Net Stable
Funding Ratio was estimated at 94%.
The Group continues to attract deposits in unsecured money markets
and to raise additional secured and unsecured term funding in a variety
of markets. As at 31st December 2009, the Group had £15bn of publicly
issued term debt maturing during 2010. The corresponding figure for
2011 is £25bn. During 2010 the Group issued approximately £35bn of
term funding, which refinanced the 2010 requirement, comprising both
maturities and early repayments, as well as pre-financed some of the 2011
and 2012 maturities. Additional term funding raised in 2011 will support
balance sheet growth, further extension of liability maturities and
strengthening of our liquidity position.
Barclays PLC Annual Report 2010 www.barclays.com/annualreport10 43
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