Barclays 2013 Annual Report Download - page 360

Note 39: Structured Entities
A structured entity is an entity in which voting or similar rights are not the dominant factor in deciding control. Structured entities are generally
created to achieve a narrow and well defined objective with restrictions around their ongoing activities.
Depending on the Group’s power over the activities of the entity and its exposure to and ability to influence its own returns, it may consolidate the
entity. In other cases it may sponsor or have exposure to such an entity but not consolidate it.
Consolidated Structured Entities
The Group has contractual arrangements which may require it to provide financial support to the following types of consolidated structured
entities:
Securitisation vehicles
The Group uses securitisation as a source of financing and a means of risk transfer. Refer to Note 41 for further detail.
The Group provides liquidity facilities to entities and provides interest rate and foreign currency swaps to enable the entities to make certain
payments when due. At 31 December 2013, there were outstanding loan commitments to these entities totalling £195m.
Commercial paper (CP) and medium term note conduits
The Group provided £8.1bn in undrawn contractual backstop liquidity facilities to its own sponsored CP conduits.
Fund management entities
Barclays has contractually guaranteed the performance of certain cash investments in a number of managed investment funds which have
resulted in their consolidation. As at 31 December 2013, the notional value of the guarantee was £991m.
Covered bonds
During the reporting period, the Group provided non-contractual capital contributions totalling £1.3bn to Barclays Covered Bonds Limited Liability
Partnership as a result of regulatory requirements to pre fund upcoming contractual covered bond redemptions. It will continue to provide such
support in 2014.
Employee benefit trusts
The Group provides capital contributions to employee share trusts to enable them to meet their obligations to employees under share-based
payment plans.
Unconsolidated Structured Entities in which the Group has an interest
The business activities within the Group where structured entities are used principally include multi-seller conduit programmes, asset
securitisations, and asset management. The later sections provide quantitative information on the Group’s involvements. For a description of these
activities see the Glossary.
An interest in a structured entity is any form of contractual or non-contractual involvement which creates variability in returns arising from the
performance of the entity for the Group. Such interests include holdings of debt or equity securities, derivatives that transfer financial risks from
the entity to the Group, lending, loan commitments, financial guarantees and investment management agreements.
Interest rate swaps, foreign exchange derivatives that are not complex and which expose the Group to insignificant credit risk by being senior in
the payment waterfall of a securitisation and derivatives that are determined to introduce risk or variability to a structured entity are not
considered to be an interest in an entity and have been excluded from the disclosures below.
The nature and extent of the Group’s interests in structured entities is summarised below:
Summary of interests in unconsolidated structured entities
Assets
Secured
financing
£m
Short term
traded
interests
£m
Traded
derivatives
£m
Other
interests
£m
Total
£m
Trading portfolio assets – 11,272 – 5,111 16,383
Financial assets designated at fair value – – – 1,035 1,035
Derivative financial instruments – – 3,758 1,464 5,222
Available for sale investments – – – 2,073 2,073
Loans and advances to banks – – – 4,143 4,143
Loans and advances to customers – – – 24,971 24,971
Reverse repurchase agreements and other similar secured lending 51,112 – – – 51,112
Other assets – – – 35 35
Total assets 51,112 11,272 3,758 38,832 104,974
Liabilities
Derivative financial instruments – – 4,895 1,457 6,352
Secured financing arrangements, short term traded interests and traded derivatives are typically managed under market risk described in
page 190 which includes an indication on the change of risk measures compared to last year. For this reason, the total assets of these entities
are not considered meaningful for the purposes of understanding the related risks and so have not been presented. Other interest materially
includes a portfolio under exit quadrant which is being managed down and conduits and corporate lending where the interest is driven by
normal customer demand.
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358 Barclays PLC Annual Report 2013
Notes to the financial statements
For the year ended 31 December 2013 continued