Barclays 2010 Annual Report Download - page 84

Overview of Barclays Group Credit Risk Exposures
Credit risk is the risk of suffering financial loss should any of the Group’s
customers, clients or market counterparties fail to fulfil their contractual
obligations to the Group.
The credit risk that the Group faces arises mainly from wholesale and retail
loans and advances, together with the counterparty credit risk arising from
derivative contracts entered into with clients. Other sources of credit risk
arise from trading activities, including debt securities, settlement balances
with market counterparties, available for sale assets and reverse
repurchase agreements.
Losses arising from exposures held for trading (derivatives, debt securities)
are accounted for as trading losses, rather than impairment charges, even
though the fall in value causing the loss may be attributable to credit
deterioration.
Risk management
Credit risk management
All disclosures in this section (pages 82-117) are unaudited unless otherwise stated
Analysis of the Group’s maximum exposure to credit risk before
collateral held or other credit enhancements
The following tables present the maximum exposure at 31st December
2010 and 2009 to credit risk of balance sheet and off-balance sheet
financial instruments, before taking account of any collateral held or other
credit enhancements and after allowance for impairment and netting
where appropriate.
For financial assets recognised on the balance sheet, the exposure to credit
risk equals their carrying amount. For financial guarantees granted, the
maximum exposure to credit risk is the maximum amount that Barclays
would have to pay if the guarantees were to be called upon. For loan
commitments and other credit related commitments that are irrevocable
over the life of the respective facilities, the maximum exposure to credit
risk is the full amount of the committed facilities.
This analysis and all subsequent analyses of credit risk include only
financial assets subject to credit risk. They exclude other financial assets,
mainly equity securities held in the trading portfolio or as available for sale
assets, as well as non-financial assets. The nominal value of off-balance
sheet credit related instruments is also shown, where appropriate.
Financial assets designated at fair value in respect of linked liabilities to
customers under investment contracts have not been included as the
Group is not exposed to credit risk on these assets. Credit losses in these
portfolios, if any, would lead to a reduction in the linked liabilities and result
in no direct loss to the Group.
Whilst the Group’s maximum exposure to credit risk is the carrying value
of the assets or, in the case of off-balance sheet items, the amount
guaranteed, committed, accepted or endorsed, in most cases the likely
exposure is far less due to collateral, credit enhancements and other
actions taken to mitigate the Group’s exposure.
82 Barclays PLC Annual Report 2010 www.barclays.com/annualreport10