Barclays 2010 Annual Report Download - page 76

Risk management
Risk factors continued
A summary of the Group’s 13 principal risks is as follows
Principal Risk Factor Principal Risk Management Key Specific Risks and Mitigation
1. Wholesale Credit Risk
and
2. Retail Credit Risk
Credit Risk is the risk of the
Group suffering financial loss
if any of its customers, clients
or market counterparties fails
to fulfil their contractual
obligations to the Group.
This can also arise when
an entity’s credit rating is
downgraded, leading to a
fall in the value of Barclays
investment in its issued
financial instruments.
The Board and management have established
a number of key committees to review credit risk
management, approve overall Group credit policy
and resolve all significant credit policy issues.
These comprise: the Board Risk Committee, the
Risk Oversight Committee, the Wholesale Credit
Risk Management Committee and the Retail
Credit Risk Management Committee.
Barclays constantly reviews its concentration in a
number of areas including, for example, portfolio
segments, geography, maturity, industry and
investment grade.
Diversification is achieved through setting
maximum exposure guidelines to individual
counterparties sectors and countries, with
excesses reported to the Risk Oversight
Committee and the Board Risk Committee.
For further information see pages 88 to 94.
Specific areas and scenarios where credit risk could lead
to higher impairment charges in future years include:
Credit Market Exposures
Barclays Capital holds certain exposures to credit markets
that became illiquid during 2007. These exposures primarily
relate to commercial real estate, leveraged finance and a
loan to Protium. The Group actively managed down some
of these exposures in 2010.
For further information see pages 112 to 116.
Sovereign Risk
EU deficits approached very high levels during 2010,
leading to a loss of market confidence in certain countries
to which the Group is exposed. The Group has put certain
countries on watch list status with detailed monthly reporting
to the Wholesale Credit Risk Management Committee.
For further information see page 117.
Economic Uncertainty
Conditions have continued to show signs of improvement
in many key markets, although the UK has experienced a
slowdown in growth in the fourth quarter, US unemployment
rates remain high and the Spanish housing sector continues
to be depressed, impacting our wholesale and retail credit
risk exposures.
In particular, in Spain, the Group has experienced elevated
impairment across its operations, following a marked
reduction in construction activity and shrinking consumer
spending. The Group has reduced its credit risk appetite
to the most severely affected segments of the economy. In
particular, new lending to the property and construction
sector ceased and workout team resources have been
increased significantly.
For further information see pages 99 to 104.
74 Barclays PLC Annual Report 2010 www.barclays.com/annualreport10