Barclays 2012 Annual Report Download - page 175

The strategic report Governance Risk review Financial review Financial statements Risk management Shareholder information
Key LRA assumptions include:
Liquidity risk driver Barclays specific stress
Net wholesale funding outflow  Outflows at contractual maturity of wholesale funding and conduit commercial paper, with no rollover/new
issuance; and
 Prime Brokerage: 100% loss of excess client derivative margin and 100% loss of excess client cash.
Loss of secured financing and
increased haircuts
 Loss of repo capacity at contractual maturity date and incremental haircut widening, depending upon
collateral type.
Retail and commercial bank
deposit outflows
 Substantial outflows as Barclays is seen as greater credit risk than competitors.
Intra-day risk  Liquid collateral held against intra-day requirement at clearing and payment systems is regarded as
encumbered with no liquidity value assumed; and
 Liquid collateral is held against withdrawal of unsecured intra-day lines provided by third parties.
Intra-group risk  Risk of liquidity within subsidiaries becoming unavailable to the wider Group.
Funding concentration risk  Additional outflows recognised against concentration of providers of wholesale secured financing.
Off-balance sheet risk
 Collateral outflows due to market movements, taking account of disputes and mismatches between
collateralised and uncollateralised OTC and exchange-traded positions;
 Outflow of all collateral owed by Barclays to counterparties but not yet called;
 Anticipated increase in the firm's derivative initial margin requirement in a stressed environment;
 Collateral outflows contingent upon a multi-notch credit rating downgrade of Barclays Bank PLC;
 Significant drawdown on committed facilities provided to corporates, based on counterparty type,
creditworthiness and facility type; and
 Drawdown on retail commitments.
Franchise viability  Barclays liquidity stress testing recognises that it will be necessary to hold additional liquidity in order to
meet outflows that are non-contractual in nature, but are necessary in order to support the firm's ongoing
franchise (for example, market-making activities).
Mitigating actions  Unencumbered marketable assets that are held outside of the liquidity pool, and that are of known liquidity
value to the firm, are assumed to be monetised (subject to haircut/valuation adjustment).
In the summer of 2012, Barclays reduced its risk appetite by tightening limits and extending the time horizon of the LRA. The reduction was a
pre-emptive and precautionary measure in response to market conditions and the LIBOR announcement and senior management resignations.
No material deterioration in funding conditions materialised.
Liquidity regulation
Since June 2010, the Group has reported its liquidity position against Individual Liquidity Guidance (ILG) provided by the FSA. The FSA defines
both eligible liquidity pool assets and stress outflows against reported balances.
The Group also monitors its position against anticipated Basel 3 liquidity metrics – the Liquidity Coverage Ratio (LCR) and the Net Stable Funding
Ratio (NSFR). The LCR is designed to promote short term resilience of a bank’s liquidity risk profile by ensuring that it has sufficient high quality
liquid resources to survive an acute stress scenario lasting for 30 days. The NSFR has a time horizon of one year and has been developed to
promote a sustainable maturity structure of assets and liabilities.
barclays.com/annualreport Barclays PLC Annual Report 2012 I 173