Barclays 2013 Annual Report Download - page 198

Risk review
Market risk continued
Economic capital
As at 31 December UK RBB
£m
Europe RBB
£m
Africa RBB
£m
Barclaycard
£m
Corporate
Banking
£m
Wealth and
Investment
Management
£m
Total
£m
2013
Prepayment risk 29 – – 10 2 – 41
Recruitment risk 111 – – 2 1 – 114
Residual risk 6 13 38 4 1 3 65
2012
Prepayment risk 38 – – 13 2 – 53
Recruitment risk 27 – – 1 1 – 29
Residual risk 5 15 35 2 1 1 59
Total Economic Capital (EC) increased by 56% to £220m, predominately due to the increase in recruitment risk, the risk that
arises when the Group commits to providing a product at a predetermined price for a future period, but where the customer has no contractual
obligation to take up the product. Recruitment risk EC in UK RBB increased from £27m to £111m driven by an increase in mortgage pre-hedging
due to continuing high volumes (particularly in the five year term).
Analysis of equity sensitivity
The table below measures the overall impact of a +/- 100bps movement in interest rates on available for sale and cash flow hedge reserves.
This data is captured using PV01 (Present Value of 1bp) which is an indicator of the shift in asset value for a 1bp shift in the yield.
Analysis of equity sensitivity (audited)
As at 31 December 2013 2012
+100 bps
£m
-100 bps
£m
+100 bps
£m
-100 bps
£m
Net Interest Income 110 (243) 182 (374)
Taxation effects on the above (27) 61 (51) 105
Effect on profit for the year 83 (182) 131 (269)
As percentage of net profit after tax 6.40% (14.03%) 72.38% (148.62%)
Effect on profit for the year (per above) 83 (182) 131 (269)
Available for sale reserve (861) 861 (673) 673
Cash flow hedge reserve (2,831) 2,808 (2,179) 2,260
Taxation effects on the above 923 (917) 799 (821)
Effect on equity (2,686) 2,570 (1,922) 1,843
As percentage of equity (4.20%) 4.02% (3.20%) 3.07%
The higher sensitivity on AFS reserves is driven by an increase in debt securities held for liquidity purposes. The higher sensitivity on cash flow
hedge reserves is driven by an increased volume of positions during the period.
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196 Barclays PLC Annual Report 2013