Barclays 2014 Annual Report Download - page 182

180 I Barclays PLC Annual Report 2014 barclays.com/annualreport
Risk performance
Market risk
Risk review
Non-traded market risk
Net interest income sensitivity
The table below shows sensitivity analysis on the pre-tax net interest income for the non-trading financial assets and financial liabilities. The
sensitivity has been measured using the Annual Earnings at Risk (AEaR) methodology as described on page 145 in Barclays PLC Pillar 3 Report.
The benchmark interest rate for each currency is set as at 31 December of the same year. The effect of structural hedging is taken into account.
The tables below show that net interest income would increase given a rise in rates; however, this analysis does not include the potential impacts
on the impairment charge due to the effect of interest rates on affordability. This effect would depend on the wider economic environment and
have the opposite effect on total profit.
Banking book exposures held or issued by the Investment Bank are excluded from the interest rate sensitivity tables as these are measured and
managed using VaR.
Net interest income sensitivity (AEaR) by business unit
As at 31 December 2014
Personal &
Corporate
Banking
£m
Barclaycard
£m
Africa
£m
BNCa
£m
Otherb
£m
Total
£m
+200bps 464 (59) 26 6 (97) 340
+100bps 239 (27) 13 3 (58) 170
-100bps (426) 26 (9) (1) 26 (384)
-200bps (430) 29 (17) (1) 39 (380)
As at 31 December 2013
+200bps 373 (84) 19 9 (92) 225
+100bps 195 (42) 9 5 (57) 110
-100bps (315) 25 (8) (1) 56 (243)
-200bps (352) 26 (15) (1) 49 (293)
AEaR increased 51% to £340m to a +200bp parallel shock. This was predominantly due to an increase in PCB account balances for which a
structural hedge is in place. AEaR to the -200bp shock increased to £380m (2013: £293m) predominantly due to the inclusion of re-pricing lag risk
in the PCB model. This is the risk of being unable to re-price products immediately after a change in rates due to mandatory notification periods.
Net interest income sensitivity (AEaR) by currency (audited)
As at 31 December 2014 2013
+100 basis
points
£m
-100 basis
points
£m
+100 basis
points
£m
-100 basis
points
£m
GBP 126 (373) 92 (199)
USD 25 (19) 9 (21)
EUR (9) 24 (18) (7)
ZAR 11 (8) 10 (9)
Other currencies 17 (8) 17 (7)
Total 170 (384) 110 (243)
As percentage of net interest income 1.40% 3.18% 0.95% 2.09%
Net interest income sensitivity mainly arises in GBP, driven by PCB as discussed in the above table.
Barclays measure some non-traded market risks using an economic capital (EC) methodology. EC is predominantly calculated using a daily VaR
model and then scaled up to a 1 year EC confidence interval (99.98%). For more information on definitions of prepayment, recruitment and
residual risk, and on how EC is used to manage market risk, see the market risk management section on page 145 in Barclays PLC Pillar 3 Report.
The table on the next page shows the EC figures for the main non-trading businesses, where non-traded market risk EC is part of the business
limit framework.
Notes
a Only retail exposures within BNC are included in the calculation.
b Other consists of Treasury and adjustments made for hedge ineffectiveness. The hedge ineffectiveness accounts for the portion of the movements in hedging instruments that
cannot be deferred from the income statements to the hedge reserves. This arises where the movement in the hedging instrument exceeds the movement of the hedged item in
absolute terms.