Barclays 2011 Annual Report Download - page 114

Risk management
Credit risk continued
Group exposures to selected Eurozone countries (audited)
Overview
Credit conditions will deteriorate in a recessionary environment, such as that recently seen in the UK, US, the Eurozone and other economies.
Deteriorating credit conditions will impact exposures to retail and wholesale counterparties, including a country’s government or its agencies
(via sovereign risk) thus impairing or reducing the value of Barclays credit assets.
The impact of these conditions could adversely affect Barclays and the solvency of its counterparties, custodians, customers and service providers;
its credit rating; its share price; the value and liquidity of its assets and liabilities; and the ability of the Group to meet its debt obligations more generally.
The following disclosures present the Group’s exposures to selected Eurozone countries, representing Eurozone countries that have a credit rating of
AA or below from Standard and Poor’s and where the Group has an exposure of over £0.5bn. The Group’s exposure to Greece, though under £0.5bn,
is also presented due to continuing market focus.
The Group continues to closely monitor its exposure to Eurozone countries:
– Spanish sovereign exposure reduced 45% to £2.5bn due to the disposal of available for sale government bonds, held for the purpose of interest
rate hedging and liquidity, that have been replaced by interest rate swaps with alternative counterparties;
– Italian sovereign exposure increased 57% to £3.5bn principally due to the acquisition of government issued bonds reflecting improved yields and
holdings as part of the Treasury liquidity management portfolio;
– Italian non-sovereign exposures increased £0.8bn to £21.9bn, principally due to a £2.2bn increase in new mortgage lending (with an average LTV of
59.6%), offset by £1.1bn reduction in exposures to financial institutions;
– Portuguese sovereign exposure reduced 21% to £0.8bn, principally due to a reduction in government bonds held as available for sale;
– Ireland exposures increased 5% to £5.7bn, principally reflecting increased lending to financial institutions of £4.3bn (31 December 2010: £3.8bn),
including £0.9bn of trading assets and £1.3bn of loans to entities domiciled in Ireland whose principal business and exposures are outside of Ireland.
Exposure to domestic Irish banks remains minimal;
– Exposure to Greece remains minimal and the sovereign exposure is predominantly marked to market on a daily basis through income; and
– Belgium is included in the following disclosures because its credit rating was downgraded to AA in November 2011. Exposure increased marginally
to £2.4bn (2010: £2.2bn) principally relating to available for sale holdings of sovereign debt.
Exposure by country and counterparty (audited)
Spain
£m
Italy
£m
Portugal
£m
Ireland
£m
Greece
£m
Belgium
£m
As at 31 December 2011
Sovereign 2,530 3,493 810 244 14 2,033
Financial institutions 987 669 51 4,311 2 42
Residential mortgages 14,654 15,934 3,651 94 5 10
Corporate 5,345 2,918 3,295 977 67 282
Other retail lending 3,031 2,335 2,053 86 18 –
Total on-balance sheet exposure 26,547 25,349 9,860 5,712 106 2,367
Total off-balance sheet contingent liabilities and commitments 3,842 3,140 2,536 1,807 26 881
Total exposure 30,389 28,489 12,396 7,519 132 3,248
As at 31 December 2010a
Sovereign 4,641 2,224 1,023 296 31 1,780
Financial institutions 1,586 1,756 165 3,769 21 98
Residential mortgages 15,977 13,741 3,476 109 4 10
Corporate 6,473 2,938 3,728 1,123 103 304
Other retail lending 3,081 2,599 2,074 125 19 1
Total on-balance sheet exposure 31,758 23,258 10,466 5,422 178 2,193
Total off-balance sheet contingent liabilities and commitments 3,716 3,588 3,010 1,786 34 897
Total exposure 35,474 26,846 13,476 7,208 212 3,090
Note
a 2010 comparatives have been updated from those reported in the preliminary announcement to include certain additional exposures held at fair value through profit and loss relating to
corporates in Spain (£75m), Italy (£110m) and Portugal (£130m), and £184m in relation to financial institutions in Italy.
112 Barclays PLC Annual Report 2011 www.barclays.com/annualreport