Barclays 2013 Annual Report Download - page 362

Note 39: Structured Entities continued
The contracts that most expose the Group to the risk of loss arising from the performance of the structured entity are as follows:
Credit default swaps – entity specific
In addition to index based credit default swaps, the Group provides tailored credit risk protection to structured entities where its loss exposure is
based on the actual performance of the structured entity counterparty and the assets that it holds. The underlying for these exposures are mainly
related to corporate and commercial loans, corporate bonds and retail mortgages.
Balance guaranteed swaps
These are single or cross-currency swaps where the notional amount of the arrangement is not defined at trade inception and instead tracks the
balance of a reference pool of collateral or securities. The swap exchanges the cash flows of the referenced collateral into those of the issued debt
securities which pay a different coupon and in a different currency. Swaps may be super-senior in the capital structure or pari-passu with the
issued notes. The Group holds debt securities issued by the entities as a hedge against the credit risk of the balance guaranteed swaps. At 31
December 2013 £1,457m of such bonds were held within the trading portfolio asset.
Other interests in unconsolidated structured entities
The Group’s interests in structured entities not held for the purposes of short term trading activities are set out below, summarised by the purpose
of the entities and limited to significant categories, based on maximum exposure to loss.
Nature of interest
Structured
credit
portfolio
£m
Multi-seller
conduit
programmes
£m
Lending
£m
Mortgage
backed
securities
£m
Investment
funds and
trusts
£m
Others
£m
Total
£m
Trading portfolio assets
– Debt securities 4,944 – 50 – – 106 5,100
– Equity securities – – – – – 11 11
Financial assets designated at fair value
– Loans and advances to customers – – 935 – – 34 969
– Debt securities – – – – – 32 32
– Equity securities – – – – – 34 34
Derivative financial instruments – – 7 – – 1,457 1,464
Available for sale investments
– Debt securities 1 564 2 1,476 – 30 2,073
Loans and advances to customers 3,115 7,927 13,183 – – 746 24,971
Loans and advances to banks – – 4,066 – – 77 4,143
Other assets – 1 1 – 25 8 35
Total on balance sheet exposures 8,060 8,492 18,244 1,476 25 2,535 38,832
Total notional amounts of off balance sheet amounts 1,411 8,400 2,186 – – 54 12,051
Maximum exposure to loss 9,471 16,892 20,430 1,476 25 2,589 50,883
Total assets of the entity 80,565 138,199 138,980 246,062 44,679 11,098 659,583
Maximum exposure to loss
Unless specified otherwise below, the Group’s maximum exposure to loss is the total of its on-balance sheet positions and its off-balance sheet
arrangements, being loan commitments and financial guarantees. Exposure to loss is mitigated through collateral, financial guarantees, the
availability of netting and credit protection held.
Structured Credit Portfolio
The portfolio forms a subset of the exit quadrant disclosed on page 181 which are being managed down. It comprises interests in debt securities
issued by securitisation vehicles, mainly Collateralised Loan Obligations (CLOs), Collateralised Debt Obligations (CDOs), Retail and Commercial
Mortgage Backed Securitisation structures (RMBSs and CMBSs), and drawn and undrawn loan facilities to these entities. In some cases, the
securities are ‘wrapped’ with credit protection from a monoline insurer, which transfers the credit risk to the monoline. The entities are wholly debt
financed through the issuance of tranches of debt securities or through direct funding, such as the loan facilities provided by the Group. As the
underlying assets of the entities amortise and pay down, the debt securities issued by the entities are repaid in order of seniority. Where the
entities experience significant credit deterioration, debt securities may be written off or cancelled in reverse order of seniority.
The creditworthiness of the Group’s funded exposures within structured credit portfolio is presented below along with the Group’s unfunded
commitments. Funded exposures are classified as either debt securities or loans and advances. Refer to Note 20 for an additional description of
the loans and advances.
Non-
monoline
CLOs
£m
Monoline
wrapped
CLOs
£m
RMBS
£m
Monoline
wrapped
CDOs
£m
CMBS
£m
Non-
monoline
CDOs
£m
Others
£m
Total
£m
Investment grade 3,175 2,947 137 16 38 122 141 6,576
Non investment grade – – 46 502 175 191 – 914
Non rated 353 123 17 – 24 47 6 570
Total on balance sheet 3,528 3,070 200 518 237 360 147 8,060
Undrawn liquidity commitments 117 2 1,074 – 174 – 44 1,411
Maximum exposure to loss 3,645 3,072 1,274 518 411 360 191 9,471
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360 Barclays PLC Annual Report 2013
Notes to the financial statements
For the year ended 31 December 2013 continued