Barclays 2012 Annual Report Download - page 341

The strategic report Governance Risk review Financial review Financial statements Risk management Shareholder information
Early Warning Indicators
Barclays monitors a range of market indicators for early signs of
liquidity risk either in the market or specific to Barclays, a sample of
which are shown in the table below. Additionally country and business
level Asset and Liability Committees monitor early warning indicators
appropriate to their businesses. These are designed to immediately
identify the emergence of increased liquidity risk to maximise the time
available to execute appropriate mitigating actions. A deterioration in
Early Warning Indicators can lead to invocation of the Group’s
Contingency Funding Plan, which provides a framework for how the
liquidity stress would be managed.
Risk appetite and planning
Regulatory requirements are complied with at the Group and entity
level, with the Liquidity Risk Appetite (LRA) providing a consistent
Group wide perspective that supplements these requirements. Under
the Liquidity Framework, the Group has established the LRA, which is
the level of liquidity risk the Group chooses to take in pursuit of its
business objectives and in meeting its regulatory obligations. It is
measured with reference to the liquidity pool compared to anticipated
stressed net contractual and contingent outflows for each of three
stress scenarios.
The stress outflows are used to determine the size of the Group
Liquidity Pool, which represents those resources immediately available
to meet outflows in a stress. In addition to the liquidity pool, the
Liquidity Framework provides for other management actions, including
generating liquidity from other liquid assets on the Group’s balance
sheet in order to meet additional stress outflows, or to preserve or
restore the Liquidity Pool in the event of a liquidity stress.
Contingency Funding Plan and Recovery Resolution Plan
Barclays maintains a Contingency Funding Plan (CFP), which is
designed to provide a framework where a liquidity stress could be
effectively managed. The CFP is proportionate to the nature, scale and
complexity of the business and is tested to ensure that it is
operationally robust. The CFP details the circumstances in which the
plan could be invoked, including as a result of adverse movements in
Early Warning Indicators. As part of the plan the Barclays Treasurer has
established a Liquidity Management Committee (LMC.) On invocation
of the CFP, the LMC would meet to identify the likely impact of the
event on the Group and determine the response, which would be
proportionate to the nature and severity of the stress.
The CFP provides a communication plan and includes management
actions to respond to liquidity stresses of varying severity. This could
include monetising the liquidity pool, slowing the extension of credit,
increasing the tenor of funding and securitising or selling assets.
The Group continues to work with the authorities on recovery and
resolution planning (RRP). The Group made its first formal RRP
submissions to the UK and US regulators in mid-2012 and has since
continued to work with the authorities to identify and address any
impediments to resolvability.
Change in composition of deposits Level of debt buybacks Rising funding costs
Widening CDS spreads Change in maturity profile Repo haircut widening
Examples of Early Warning Indicators
barclays.com/annualreport Barclays PLC Annual Report 2012 I 339