Barclays 2013 Annual Report Download - page 221

Credit ratings
In addition to monitoring and managing key metrics related to the financial strength of Barclays, we also subscribe to independent credit rating
agency reviews by Standard & Poor’s, Moody’s, Fitch and DBRS. These ratings assess the credit worthiness of Barclays and are based on reviews of
a broad range of business and financial attributes including risk management processes and procedures, capital strength, earnings, funding,
liquidity, accounting and governance.
A credit rating downgrade could result in contractual outflows to meet collateral requirements on existing contracts. Outflows related to a
multiple-notch credit rating downgrade are included in the LRA stress scenarios and a portion of the liquidity pool is held against this risk. Credit
ratings downgrades could also result in increased costs or reduced capacity to raise funding.
Credit ratings
As at 31 December 2013 Standard & Poor’s Moody’s Fitch DBRS
Barclays Bank PLC
Long-term
Short-term
A (Stable)
A-1
bbb+
A2 (Negative)
P-1
C-/baa2
A (Stable)
F1
a
AA (Low) (Stable)
R-1 (mid)
A (high)
Barclays PLC
Long-term
Short-term
A- (Stable)
A-2
A3 (Negative)
P-2
A (Stable)
F1
n/a
n/a
During 2013, Barclays was downgraded one notch by Standard & Poor’s, as the rating agency views increased risk for some large European banks
operating in investment banking due to tightening regulation and uncertain market conditions. As a result Barclays Bank PLC’s rating moved to
A/A-1 from A+/A-1, and Barclays PLC’s to A-/A-2 from A/A-1. Similarly, DBRS downgraded Barclays Bank PLC, to AA (Low)/R-1 (Mid) from
AA/R-1 (High), mainly driven by the changing regulatory environment. The downgrades were fully reserved for in the liquidity pool and there was
no significant change in deposit funding or wholesale funding. Fitch and Moody’s affirmed Barclays Bank PLC and Barclays PLC ratings.
Barclays’ ratings currently benefit from sovereign support assumptions made by rating agencies. Levels of sovereign supports are reflected in the
difference between the standalone rating and Barclays Bank PLC’s long-term rating. As regulation evolves, rating agencies have communicated
their intention to remove all or part of this support over time. As a consequence, Moody’s put Barclays’ long-term and short-term ratings on a
Negative outlook.
The table below shows contractual collateral requirements and contingent obligations following one and two notch long-term and associated
short-term simultaneous downgrades across all credit rating agencies, which are fully reserved for in the liquidity pool. These numbers do not
assume any management or restructuring actions that could be taken to reduce posting requirements.
Further credit rating downgrades could result in contractual outflows to meet collateral requirements on existing contracts. These outflows do
not include the potential liquidity impact from loss of unsecured funding, such as from money market funds, or loss of secured funding capacity.
However, unsecured and secured funding stresses are included in the LRA stress scenarios and a portion of the liquidity pool is held against
these risks.
Contractual credit rating downgrade exposure (cumulative cash flow)
Cumulative cash outflow
As at 31 December 2013
One-notch
downgrade
£bn
Two-notch
downgrade
£bn
Securitisation derivatives 7 8
Contingent liabilities 6 6
Derivatives margining – 1
Liquidity facilities 1 2
Total contractual funding or margin requirements 14 17
As at 31 December 2012
Securitisation derivatives 5 7
Contingent liabilities 7 7
Derivatives margining – 1
Liquidity facilities 1 2
Total contractual funding or margin requirements 13 17
Note
a Refers to Standard & Poor’s Stand-Alone Credit Profile (SACP), Moody’s Bank Financial Strength Ratio (BFSR) Baseline Credit Assessment (BCA), Fitch Viability Rating (VR) and
DBRS Intrinsic Assessment (IA).
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