Barclays 2012 Annual Report Download - page 339

The strategic report Governance Risk review Financial review Financial statements Risk management Shareholder information
Liquidity risk management overview (audited)
Liquidity risk is the failure to meet obligations leading to an inability to
support normal business activity and to meet liquidity regulatory
requirements. Such outflows would deplete available cash resources for
client lending, trading activities and investments. These outflows could
be principally through customer withdrawals, wholesale counterparties
removing financing, collateral posting requirements or loan draw-
downs.
This risk is inherent in all banking operations and can be affected by a
range of Group-specific and market-wide events which can result in:
 An inability to support normal business activity; and
 A failure to meet liquidity regulatory requirements.
During periods of market dislocation, the Group’s ability to manage
liquidity requirements may be impacted by a reduction in the
availability of wholesale term funding as well as an increase in the cost
of raising wholesale funds. Asset sales, balance sheet reductions and
the increasing costs of raising funding will affect the earnings of the
Group.
In illiquid markets, the Group may decide to hold assets rather than
securitising, syndicating or disposing of them. This could affect the
Group’s ability to originate new loans or support other customer
transactions as both capital and liquidity are consumed by existing or
legacy assets.
In addition, the introduction of capital controls or new currencies by
countries to mitigate current stresses could have a consequential effect
on performance of the balance sheets of certain Group companies
based on the asset quality, types of collateral and mix of liabilities.
The efficient management of liquidity is essential to the Group in
retaining the confidence of the financial markets and ensuring that the
business is sustainable. Liquidity risk is managed through the Liquidity
Risk Framework, which is designed to meet the following objectives:
 To maintain liquidity resources that are sufficient in amount and
quality and a funding profile that is appropriate to meet the liquidity
risk framework as expressed by the Board;
 To maintain market confidence in the Group’s name;
 To set limits to control liquidity risk within and across lines of
business and legal entities;
 To accurately price liquidity costs, benefits and risks and incorporate
those into product pricing and performance measurement;
 To set early warning indicators to identify immediately the
emergence of increased liquidity risk or vulnerabilities including
events that would impair access to liquidity resources;
 To project fully over an appropriate set of time horizons cash flows
arising from assets, liabilities and off-balance sheet items; and
 To maintain a Contingency Funding Plan that is comprehensive and
proportionate to the nature, scale and complexity of the business
and that is regularly tested to ensure that it is operationally robust.
Governance and organisation
Barclays Treasury operates a centralised governance control process
that covers all of the Group’s liquidity risk management activities. The
Barclays Treasurer is responsible for designing the Group Liquidity Risk
Management framework (the Liquidity Framework) which is
sanctioned by the Board Risk Committee (BRC). The Liquidity
Framework incorporates liquidity policies, systems and controls that
the Group has implemented to manage liquidity risk within tolerances
approved by the Board and regulatory agencies. The Board sets the
Group’s Liquidity Risk Appetite (LRA), being the level of risk the Group
chooses to take in pursuit of its business objectives and in meeting its
regulatory obligations. The Treasury Committee is responsible for the
management and governance of the mandate defined by the Board and
includes the following sub-committees:
 The Group Funding and Liquidity Management Committee is
responsible for the review, challenge and approval of the Liquidity
Framework. The Liquidity Framework is reviewed regularly at
Treasury Committee and BRC;
 The Group Asset and Liability Management Committee oversees the
management and governance of asset and liability management
including behavioural mismatch, structural risk and transfer pricing;
and
 The Investment Advisory Group supervises the investment of a
portion of the Group liquidity pool in longer-dated liquid assets. The
Investment Advisory Group approves a detailed allocation framework
across assets and tenors, and reviews the performance and risks
associated with these holdings. The holdings are subject to limits set
by the BRC and by the independent Group market and credit risk
functions.
Liquidity is recognised as a key risk and the Barclays Treasurer is the
Group Key Risk owner, supported by Key Risk Owners at regional and
country levels. Execution of the Group’s liquidity risk management
strategy is carried out at country level, with the country Key Risk
Owners providing reports to Barclays Treasury to evidence
conformance with the agreed risk profile. Further oversight is
provided by country, regional and business level committees.
Group Funding and Liquidity
Management Committee
Barclays Treasury Committee
Group Asset and Liability
Management Committee
Investment Advisory Group
Governance and organisation
barclays.com/annualreport Barclays PLC Annual Report 2012 I 337
Risk management
Liquidity risk management