Barclays 2014 Annual Report Download - page 181

barclays.com/annualreport Barclays PLC Annual Report 2014 I 179
In order to provide an estimation of the scale of the balance sheet instruments that generate market risk, as defined by the Group for purposes of
risk management, assets and liabilities that are expected to generate market risk have been aggregated by main business lines. Note, however,
that due to differences in data sets for market risk and IFRS reporting some assets that do not generate market risk could be included. The ‘Other
assets’ line contains (i) business lines that are primarily defined as banking book, and (ii) line items that should not generate market risk.
Management VaR is shown at 95th percentile for Q4 2014. Market risks arising from the individual portfolios listed above diversify to provide total
management VaR for the Investment Bank, Non-Core and Head Office. Some functions such as Treasury and Client Capital Management show
exposure as a result of the service it provides to the client facing franchise, such as managing the firm’s exposure to counterparty default or
providing funding to execute business.
Business Scenario Stresses
As part of the Group’s risk management framework, on a regular basis the performance of the trading business in hypothetical scenarios
characterised by severe macroeconomic conditions is modelled. Up to six global scenarios are modelled on a regular basis, for example, a sharp
deterioration in liquidity, a slowdown in the global economy, terrorist attacks, global recession and a sovereign peripheral crisis.
Similarly to 2013, throughout 2014, the scenario analyses showed the biggest market risk related impact would be due to a severe deterioration in
liquidity and a rapid slowdown in the global economy.
Review of regulatory measures
The following disclosures provide details on regulatory measures of market risk. See pages 141 and 145 of the Barclays PLC Pillar 3 Report for
more detail on regulatory measures and the differences when compared to management measures.
The Group’s market risk capital requirements comprise two elements:
Q Trading book positions booked to legal entities within the scope of the Group’s PRA waiver where the market risk is measured under a PRA
approved internal models approach, including regulatory VaR, Stressed Value at Risk (SVaR), Incremental Risk Charge (IRC) and All Price Risk
(APR) as required; and
Q Trading book positions that do not meet the conditions for inclusion within the approved Internal Models Approach. Their capital requirement is
calculated using standardised rules.
The below table summarises the regulatory market risk measures, under the internal models approach. See table “Minimum capital requirement
for market risk” in Barclays PLC Pillar 3 Report for a breakdown of capital requirements by approach.
Analysis of regulatory VaR, SVaR, IRC and APR
As at 31 December 2014 Year-end
£m
Average
£m
Max
£m
Min
£m
Regulatory VaR 29 39 66 29
SVaR 72 74 105 53
IRC 80 118 287 58
APR 24 28 39 24
As at 31 December 2013
Regulatory VaR 42 46 67 31
SVaR 90 85 112 61
IRC 139 238 539 115
APR 29 141 183 29
Overall, there was a lower risk profile during 2014:
Q SVaR decreased by 20% to £72m driven by equities and foreign exchange;
Q IRC decreased by 42% to £80m as a result of a reduction in exposure to lower-rated sovereigns as well as increased diversification; and
Q APR decreased by 17% to £24m as a result of the sale of positions.
The table below shows the primary portfolios which are driving the trading businesses’ modelled capital requirement as at 2014 year end. The
standalone portfolio results diversify at the total level and are not necessarily additive. Regulatory VaR, SVaR, IRC and APR in the prior table show
the diversified results.
Breakdown of the major regulatory risk measures by portfolio
As at 31 December 2014 Macro
£m
Equities
£m
Credit
£m
Client Capital
Management
£m
Treasury
£m
Africa
£m
BNC
£m
Regulatory VaR 11 17 7 21 1 2 8
SVaR 29 82 19 42 10 3 21
IRC 195 16 211 62 – – 94
APR – – – – – – 24
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