Barclays 2012 Annual Report Download - page 173

The strategic report Governance Risk review Financial review Financial statements Risk management Shareholder information
Economic capital
Economic capital is an internal measure of the risk profile of the bank expressed as the estimated stress loss at a 99.98% confidence level. Barclays
assesses capital requirements by measuring the Group’s risk profile using internally developed models. The Group assigns economic capital
primarily within the following risk categories: credit risk, market risk, operational risk, fixed asset risk (property and equipment) and pension risk.
The Group regularly reviews its economic capital methodology and benchmarks outputs to external reference points. The framework uses default
probabilities during average credit conditions, rather than those prevailing at the balance sheet date, thus seeking to remove cyclicality from the
economic capital calculation. The economic capital framework takes into consideration time horizon, correlation of risks and risk concentrations.
Economic capital is allocated on a consistent basis across all of Barclays businesses and risk activities.
Economic capital is used as part of the Group’s Internal Capital Adequacy Assessment Process (ICAAP) and for assessing the Group’s Financial
Volatility within the Risk Appetite framework.
3,750
3,700
1,750
2,000
2,000
2,150
3,450
3,300
11,250
13,550
4,200
4,500
600
600
1,750
3,450
Average economic capital allocation by business £ma,b,c
UKRBB
Barclaycard
Africa RBB
Europe RBB
Investment Bank
Corporate Banking
Wealth and Invest-
ment Management
Head Office and
Other Functionsd
2012
2011
10,400
11,100
7,950
8,100
1,950
2,100
4,000
5,150
2,050
2,100
2,400
4,700
Average economic capital allocation by risk type £ma,b,c
Wholesale credit risk
(incl. CRLs)e
Retail credit riske
Operational risk
Market risk
Fixed asset risk
Other risksf
2012
2011
Notes
a Calculated using an adjusted average over the year and rounded to the nearest £50m for presentation purposes.
b Total period end average economic capital requirement (including pension risk) as at 31 December 2012 stood at £32,050m (2011: £35,800m).
c Average economic capital charts exclude the economic capital calculated for pension risk (average pension risk for 2012 is £3,300m compared with £2,550m in
2011).
d Includes transition businesses and capital for central function risk. Also includes the Group’s investment in BlackRock, Inc. which was sold during the second
quarter of 2012.
e Includes credit risk loans.
f Includes investments in associates, private equity risk, insurance risk, residual value and business risk. Also includes the Group’s investment in BlackRock, Inc. which
was sold in during the second quarter of 2012.
barclays.com/annualreport Barclays PLC Annual Report 2012 I 171