Barclays 2012 Annual Report Download - page 182

Encumbrance
Asset encumbrance arises from collateral pledged against secured funding and other collateralised obligations. Barclays funds a portion of trading
portfolio assets and other securities via repurchase agreements and other similar secured borrowing and pledges a portion of customer loans and
advances as collateral in securitisation, covered bond and other similar secured structures.
Barclays monitors the mix of secured and unsecured funding sources within the Group’s funding plan and seeks to efficiently utilise available
collateral to raise secured funding and meet other collateralised obligations. Over the last 18 months the proportion of term funding requirements
met with secured funding has increased, resulting in an increase in the encumbrance of loans and advances to customers. We expect to
moderately increase encumbrance of loans and advances to customers through additional term secured funding in the Group’s Funding Plan,
however, this is not expected to materially impact the overall proportion of assets that are encumbered.
As at 31 December 2012, only £231bn of the Group’s balance sheet assets were encumbered (excluding reverse repurchase agreements), which
primarily related to firm financing of trading portfolio assets and other securities and to funding secured against loans and advances to customers.
In addition, £308bn of the total £359bn securities accepted as collateral, and held off-balance sheet, were on-pledged, the significant majority of
which relates to matched-book activity where reverse repurchase agreements are matched by repurchase agreements entered into to facilitate
client activity. The remainder relates primarily to reverse repurchases used to settle trading portfolio liabilities as well as collateral posted against
derivatives margin requirements.
Asset encumbrance
Unencumbered assets
On-balance sheet Assets
£bn
Encumbered
assetsa
£bn
Readily
availableb
£bn
Otherc
£bn
Cash and balances at central banks 84.6 – 82.1 2.5
Trading portfolio assets 142.0 85.0 54.6 2.4
Financial assets at fair valued 37.1 8.1 6.9 22.1
Available for sale investments 70.3 12.3 58.0 –
Loans and advances to bankse 16.0 – – 16.0
Loans and advances to customerse 327.7 72.9 40.4 214.4
Other (incl. derivatives) 489.0 – – 489.0
Cash collateral and settlement balances 85.1 52.5 – 32.6
Total on-balance sheet (excl. reverse repurchase agreements) 1,251.8 230.8 242.0 779.0
Off-balance sheet
Collateral
received
£bn
Collateral
received of
which
on-pledge
£bn
Unencumbered assets
Readily
availableb
£bn
Otherc
£bn
Fair value of securities accepted as collateral 359.1 308.0 51.1 –
Total unencumbered collateral 293.1 779.0
Of the £1,072bn total unencumbered assets, £293bn are classified as readily available for use as collateral. This includes cash and securities held
in the Group liquidity pool as well as additional unencumbered assets which provide a source of contingent liquidity. While these additional assets
are not relied on in the Group’s LRA, a portion of these assets may be monetised in a stress to generate liquidity through use as collateral for
secured funding or through outright sale.
Unencumbered assets not classified as readily available for use as collateral consist primarily of derivatives and loans and advances to customers.
Loans and advances to customers are only classified as readily available if they are already in a form such that they can be used to raise funding
without further management actions. This includes excess collateral already in secured funding vehicles and collateral pre-positioned at central
banks and available for use in secured financing transactions. All other loans and advances are conservatively classified as not readily available,
however a proportion would be suitable for use in secured funding structures.
Notes
a Encumbered assets have been identified via the Group’s assets pledged process. For securities and commodities assets are considered encumbered if there has been
legal title transfer against repurchase, stock lending and other similar secured borrowing agreements, trading portfolio liabilities or derivatives margin. Encumbered
loans and advances have been identified where assets are pledged against external securitisations or covered bonds or have been used in external repurchase or
other similar agreements with market counterparts or central banks. Additionally, encumbered assets include cash collateral posted. Encumbered assets do not
include assets which may have been pledged for other reasons and does not include client activity.
b Readily available assets are those on and off-balance sheet assets that have not been identified as encumbered and are in transferable form.
c Other unencumbered cash and balances at central banks represents required central bank reserves.
d Excluding reverse repurchase agreements at fair value.
e Excluding cash collateral and settlement balances.
barclays.com/annualreport180 I Barclays PLC Annual Report 2012
Risk review
Funding risk – Liquidity continued