Barclays 2011 Annual Report Download - page 133

Risk identification
Capital demand is assessed and quantified for credit, market, operational, interest rate risk on the banking book, pension obligation risk and
securitisation risks, in line with the FSA’s regulatory requirements.
Treasury works closely with Group Risk, businesses and legal entities to support a proactive approach to identifying sources of capital ratio volatilities
which are incorporated in the Group’s capital plan. We monitor capital risks against firm-specific and macroeconomic early warning indicators and
report to the Treasury Committee, associated with clear escalation channels to senior management.
Following the financial crisis, managing for regulatory change has become fundamental to our capital planning process as it provides a forward looking
assessment of the impact of mandated changes which allows us to understand the commercial implications.
Stress testing
Internal stress testing is undertaken to quantify and understand the impact of sensitivities on the capital plan and capital ratios, arising from 1 in 7 year
and 1 in 25 year stresses. Actual recent economic, market and peer institution stresses are used to inform the assumptions of our stress tests and
assess the effectiveness of our mitigation strategies.
Group also undertakes stress tests prescribed by the FSA and EBA. Legal entities undertake stress tests prescribed by their local regulators. These stress
tests inform decisions on the size and quality of capital buffers required and the results are incorporated into the Group capital plan to ensure adequacy
of capital under normal and severe, but plausible stressed conditions.
Risk mitigation
As part of the stress testing process we identify the actions that should be taken to mitigate the risks that could arise in the event of material adverse
changes in the current economic and business outlook.
As an additional layer of protection, the Barclays Recovery Plan also defines the actions and implementation strategies for these actions available
for the Group to increase or preserve our capital resources in the event that stress events are more extreme than originally forecast. Barclays has
participated in the FSA’s Pilot project of developing a Recovery Plan since 2010 and is progressing with compliance by June 2012.
Transferability of capital
The Group’s policy is for surplus capital held in Group entities to be repatriated to Barclays Bank PLC in the form of dividends and/or capital repatriation,
subject to local regulatory requirements, exchange controls and tax implications. This approach provides optimal flexibility on the re-deployment of
capital across legal entities. The Group is not aware of any material impediments to the prompt transfer of capital resources or repayment of intra-group
liabilities when due.
Governance
Our capital plans are underpinned by the Capital Management Framework, which includes our capital management policies and practices that are
approved by the Capital Committee, implemented consistently and aimed at delivering on our objectives. The Treasury Committee and the Board
approve the Group capital plan, stress tests and Recovery Plan. The Group Treasury Committee manages compliance with the Group’s capital
management objectives. The Committee reviews actual and forecast capital demand and resources on a monthly basis. The BRC annually reviews
risk appetite and then analyses the impacts of stress scenarios on the Group capital forecast (see pages 142 and 143) in order to understand and
manage the Group’s projected capital adequacy, amongst other things.
Resources
Global teams operate in accordance with the Group’s policies and procedures, having direct access to local regulators and businesses in order
to support individual capital management at a legal entity level.
Senior Management awareness and transparency
Capital ratios, early warning indicators and movements in capital demand and supply are reported to Treasury Committee monthly.
Capital management information is readily available at all times to support the Executive Managements strategic and day-to-day business decision
making, as may be required.
The Group submits its Board approved ICAAP document to the FSA on an annual basis, which forms the basis of the Individual Capital Guidance
set by the FSA.
Pillar 3 disclosures are publicly available as a separate document in line with the Basel 2 and FSA requirements.
Barclays PLC Annual Report 2011 www.barclays.com/annualreport 131
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