Barclays 2013 Annual Report Download - page 213

Liquidity pool
The Group liquidity pool as at 31 December 2013 was £127bn (2012: £150bn). During 2013, the month-end liquidity pool ranged from £127bn to
£157bn (2012: £150bn to £173bn), and the month-end average balance was £144bn (2012: £162bn). The liquidity pool is held unencumbered and
is not used to support payment or clearing requirements. Such requirements are treated as part of our regular business funding. The liquidity pool
is intended to offset stress outflows and comprises cash and unencumbered assets set out below. The decrease of the size of the liquidity pool
during 2013 is consistent with Group plans to optimise the size of the liquidity pool, within our established liquidity risk appetite framework, while
maintaining compliance with regulatory requirements. The change in the composition of the liquidity pool, from cash and deposits with central
banks to government bonds, was done to reduce the overall cost of the liquidity pool.
Composition of the Group liquidity pool as at 31 December 2013
Liquidity pool of which
Basel 3 LCR eligibleb
Liquidity
pool
£bn
Liquidity pool
of which PRA
eligiblea
£bn
Level 1
£bn
Level 2A
£bn
2012
Liquidity
pool
Cash and deposits with central banksc 43 42 41 – 85
Government bondsd
AAA rated 52 51 52 – 40
AA+ to AA- rated 9 8 8 – 5
Other government bonds 1 – – – 1
Total government bonds 62 59 60 – 46
Other
Supranational bonds and multilateral development banks 3 3 3 – 4
Agencies and agency mortgage-backed securities 10 – 5 5 7
Covered bonds (rated AA- and above) 6 – – 6 5
Other 3 – – – 3
Total Other 22 3 8 11 19
Total as at 31 December 2013 127 104 109 11
Total as at 31 December 2012 150 129 136 8
The Group liquidity pool is well diversified by major currency and the Group monitors LRA stress scenarios for major currencies.
Liquidity pool by currency
USD
£bn
EUR
£bn
GBP
£bn
Other
£bn
Total
£bn
Liquidity pool as at 31 December 2013 31 32 38 26 127
Liquidity pool as at 31 December 2012 26 66 25 33 150
Management of the Group liquidity pool
The composition of the Group liquidity pool is efficiently managed. The maintenance of the liquidity pool increases the Group’s costs as the
interest expense paid on the liabilities used to fund the liquidity pool is greater than the interest income received on liquidity pool assets. This cost
can be reduced by investing a greater portion of the Group liquidity pool in highly liquid assets other than cash and deposits with central banks.
These assets primarily comprise government bonds and their inclusion in the liquidity pool does not compromise the liquidity position of the
Group.
The composition of the liquidity pool is subject to limits set by the Board, Treasury Committee and the independent credit risk and market risk
functions. In addition, the investment of the liquidity pool is monitored for concentration risk by issuer, currency, asset type and country. Given the
incremental returns generated by these highly liquid assets, the risk and reward profile is continuously managed.
As at 31 December 2013, the portion of the Group liquidity pool comprised of cash and deposits with central banks reduced to £43bn (2012:
£85bn) as a result of a reallocation to government bonds and other highly liquid assets.
Barclays manages the liquidity pool on a centralised basis. As at 31 December 2013, 90% of the liquidity pool was located in Barclays Bank PLC
(2012: 90%) and was available to meet liquidity needs across the Group. The residual liquidity pool is held predominantly within Barclays Capital
Inc. (BCI). The portion of the liquidity pool outside of Barclays Bank PLC is held against entity-specific stressed outflows and regulatory
requirements. To the extent the use of this portion of the liquidity pool is restricted due to regulatory requirements, it is assumed to be unavailable
to the rest of the Group.
Notes
a £104bn of the liquidity pool is PRA eligible as per BIPRU 12.7. In addition, there are £9bn of Level 2 assets available, as per PRA’s announcement in August 2013 that certain assets
specified by PRA as Level 2 assets can be used on a transitional basis.
b The LCR-eligible assets presented in this table represent only those assets which are also eligible for the Group liquidity pool and do not include any Level 2B assets as defined by
the Basel Committee on Banking Supervision.
c Of which over 95% (2012: over 95%) was placed with the Bank of England, US Federal Reserve, European Central Bank, Bank of Japan and Swiss National Bank.
d Of which over 85% (2012: over 80%) of securities are comprised of UK, US, Japan, France, Germany, Denmark and the Netherlands.
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