Barclays 2012 Annual Report Download - page 306

40 Securitisations continued
Continuing involvement in financial assets that have been derecognised
In some cases, the Group may have transferred a financial asset in its entirety but may have continuing involvement in it. This arises in asset
securitisations where loans and asset backed securities were derecognised as a result of the Group’s involvement with CLOs, CDOs, RMBS and
CMBS. Continuing involvement largely arises from providing financing into these structures in the form of retained notes, which do not bear
first losses.
The table below shows the potential financial implications of such continuing involvement:
Continuing involvement as at
31 December 2012
Gain/(loss) from
continuing involvement
Type of transfer
Carrying
amount
£m
Fair value
£m
Maximum
exposure
to loss
£m
For the
year ended
31 December
2012
£m
Cumulative
to
31 December
2012
£m
CLO and other assets 2,546 2,495 2,556 126 (839)
ABS CDO Super Senior 1,387 922 1,387 (230) (1,708)
US sub-prime and Alt-A 781 781 781 8 (1,336)
Commercial mortgage backed securities 239 239 239 1 (41)
Total 4,953 4,437 4,963 (95) (3,924)
Assets which represent the Group’s continuing involvement in derecognised assets are recorded in the following line items:
Type of transfer
Loans and
advances
£m
Trading
portfolio
assets
£m
Derivatives
£m
Available
for sale
investments
£m
Total
£m
CLO and other assets 1,624 899 7 16 2,546
ABS CDO Super Senior 1,387 – – – 1,387
US sub-prime and Alt-A 703 78 – – 781
Commercial mortgage backed securities – 239 – – 239
Total 3,714 1,216 7 16 4,953
41 Off-balance sheet arrangements
In the ordinary course of business and primarily to facilitate client transactions, the Group enters into transactions which may involve the use of
off-balance sheet arrangements and special purpose entities (SPEs). These arrangements include the provision of guarantees, loan commitments,
retained interests in assets which have been transferred to an unconsolidated SPE or obligations arising from the Group’s involvements with
such SPEs.
Guarantees
The Group issues guarantees on behalf of its customers. In the majority of cases, the Group will hold collateral against the exposure, have a right
of recourse to the customer or both. In addition, the Group issues guarantees on its own behalf. The main types of guarantees provided are:
financial guarantees given to banks and financial institutions on behalf of customers to secure loans; overdrafts; and other banking facilities,
including stock borrowing indemnities and standby letters of credit. Other guarantees provided include performance guarantees, advance
payment guarantees, tender guarantees, guarantees to Her Majesty’s Revenue and Customs and retention guarantees. The nominal principal
amount of contingent liabilities with off-balance sheet risk is set out in Note 28.
Loan commitments
The Group enters into commitments to lend to its customers subject to certain conditions. Such loan commitments are made either for a fixed
period or are cancellable by the Group subject to notice conditions. Information on loan commitments and similar facilities is set out in Note 28.
Leasing
The Group leases various offices, branches, other premises and equipment under non-cancellable operating lease arrangements. With such
operating lease arrangements, the asset is kept on the lessor’s balance sheet and the Group reports the future minimum lease payments as an
expense over the lease term. Information on leasing can be found in Note 25.
Special Purpose Entities (SPEs)
SPEs are entities that are created to accomplish a narrow and well defined objective. There are often specific restrictions or limits around their
ongoing activities. The Group’s transactions with SPEs take a number of forms, including:
 the provision of financing to fund asset purchases, or commitments to provide finance for future purchases;
 derivative transactions to provide investors in the SPE with a specified exposure;
 the provision of liquidity or backstop facilities which may be drawn upon if the SPE experiences future funding difficulties; and
 direct investment in the notes issued by SPEs.
barclays.com/annualreport304 I Barclays PLC Annual Report 2012
Notes to the financial statements
For the year ended 31 December 2012 continued