Barclays 2013 Annual Report Download - page 422

Overview
Capital risk is the risk that the Group has
insufficient capital resources to:
 Meet minimum regulatory requirements in the
UK and in other jurisdictions such as the United
States and South Africa where regulated
activities are undertaken. The Group’s authority
to operate as a bank is dependent upon the
maintenance of adequate capital resources;
 Support its credit rating. A weaker credit rating
would increase the Group’s cost of funds; and
 Support its growth and strategic options.
These disclosures are unaudited unless otherwise stated
Overview (audited)
Capital Management is integral to the Group’s approach to financial
stability and sustainability management and is therefore embedded in
the way our businesses and legal entities operate. Our Capital
Management strategy is driven by the strategic aims of the Group and
the risk appetite set by the Board.
Our objectives are achieved through well embedded capital
management practices:
Primary objectives Core practices
Provide a viable and sustainable
business offering by
maintaining adequate capital to
cover the Group’s current and
forecast business needs and
associated risks
 Maintain a capital and leverage
plan on a short-term and
medium-term basis aligned with
strategic objectives
 Meet minimum regulatory
requirements at all times in the
UK and in all other jurisdictions
that the Group operates in, such
as the United States and South
Africa where regulated activities
are undertaken
Ensure the Group and legal
entities maintain adequate
capital to withstand the impact
of the risks that may arise
under the stressed conditions
analysed by the Group
 Perform Group-wide internal and
regulatory stress tests
 Maintain capital buffers over
regulatory minimums
 Develop contingency plans for
severe (stress management
actions) and extreme stress tests
(recovery actions)
Support a strong credit rating  Maintain capital and leverage
ratios aligned with rating agency
expectations
Our approach to capital risk management
We adopt a forward-looking, risk based approach to Capital Risk
Management. Capital demand and supply is actively managed on a
centralised basis, at a business level, at a local entity level and on a
regional basis taking into account the regulatory, economic and
commercial environment in which Barclays operates.
Capital planning
Capital forecasts are managed on a top-down and bottom-up analysis
through both short-term (monthly for year 1) and medium-term (3
year) financial planning cycles. Barclays’ capital plans are developed
with the objective of maintaining capital that is adequate in quantity
and quality to support the approved risk profile and business needs,
including our Transform financial commitments. As a result, the Group
holds a diversified pool of capital resources that provides strong loss
absorbing capacity and optimised returns.
Capital planning also includes managing capital against leverage
targets. These requirements are being developed by the Basel
Committee and by national regulators. The Group is required to meet
the PRA’s leverage requirements calculated on a PRA adjusted CET1
capital base plus qualifying Additional Tier 1 capital using CRD IV
leverage exposure.
Barclays’ capital plans are continually monitored against relevant
internal target capital ratios to ensure they remain appropriate, and
consider risks to the plan including possible future regulatory changes.
Local management ensures compliance with an entity’s minimum
regulatory capital requirements by reporting to local asset and liability
committees with oversight by the Group’s Capital Committee, as
required.
Target ratios
The Group’s capital plan and target ratios are set in consideration of
CRD IV, and draft Recovery and Resolution Directive (RRD)
requirements. The target capital structure expected to be achieved
during the course of 2015 in consideration of these requirements and
the Transform commitments anticipate a target:
 Fully loaded CRD IV CET1 ratio of 10.5% comprising of an expected
4.5% regulatory minimum CET1 ratio requirement leading to a 9.0%
regulatory target CET1 ratio including Conservation and Global
Systemic buffers (but excluding Pillar 2A and counter-cyclical buffer)
and a 1.5% CET1 ‘internal management buffer’;
 1.5% Additional Tier 1 layer (excluding Pillar 2A); and
 5.0% Tier 2 debt capital to meet a internal target 17% total capital
ratio.
In addition to Barclays’ end state capital structure, target ratios have
also been set in respect of the PRA’s leverage ratio expectation of 3.0%
applicable from June 2014.
Capital allocation
Capital allocations are approved by the Group Executive Committee
and monitored by the Treasury Committee, taking into consideration
the risk appetite, growth and strategic aims of the Group. Barclays Bank
PLC (BBPLC) is the primary source of capital to its legal entities.
Regulated legal entities are, at a minimum, allocated adequate capital
to meet their current and forecast regulatory and business
requirements.
Risk management
Capital risk management
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420 Barclays PLC Annual Report 2013