Barclays 2014 Annual Report Download - page 336

334 I Barclays PLC Annual Report 2014 barclays.com/annualreport
Notes to the financial statements
Scope of consolidation
39 Securitisations continued
A summary of the main transactions, and the assets and liabilities and the financial risks arising from these transactions, is set out below:
Transfers of financial assets that do not result in derecognition
Securitisations
The Group was party to securitisation transactions involving its residential mortgage loans, business loans and credit card balances. In addition,
the Group acts as a conduit for commercial paper, whereby it acquires static pools of residential mortgage loans from other lending institutions for
securitisation transactions.
In these transactions, the assets, interests in the assets, or beneficial interests in the cash flows arising from the assets, are transferred to a special
purpose entity, which then issues interest bearing debt securities to third-party investors.
Securitisations may, depending on the individual arrangement, result in continued recognition of the securitised assets and the recognition of the
debt securities issued in the transaction. Partial continued recognition of the assets to the extent of the Group’s continuing involvement in those
assets can also occur or derecognition of the assets and the separate recognition, as assets or liabilities, of any rights and obligations created or
retained in the transfer.
The following table shows the carrying amount of securitised assets that have not resulted in full derecognition, together with the associated
liabilities, for each category of asset on the balance sheet:
2014 2013
Assets Liabilities Assets Liabilities
Carrying
amount
£m
Fair
Value
£m
Carrying
amount
£m
Fair
Value
£m
Carrying
amount
£m
Carrying
amount
£m
Loans and advances to customers
Residential mortgage loans 2,830 2,619 (2,352) (2,360) 3,930 (3,545)
Credit cards, unsecured and other retail lending 7,060 7,162 (5,160) (5,178) 6,563 (5,017)
Corporate loans 157 154 (135) (146) 331 (294)
Total 10,047 9,935 (7,647) (7,684) 10,824 (8,856)
Assets designated at fair value through profit or loss
Retained interest in residential mortgage loans 66 n/a – n/a 68 –
Balances included within loans and advances to customers represent securitisations where substantially all the risks and rewards of the asset have
been retained by the Group.
The relationship between the transferred assets and the associated liabilities is that holders of notes may only look to cash flows from the
securitised assets for payments of principal and interest due to them under the terms of their notes, although the contractual terms of their notes
may be different to the maturity and interest of the transferred assets.
Residential mortgage loans in 2014 exclude Barclays Non-Core securitised assets of £1,345m (2013: £1,566m) and liabilities of £1,305m (2013:
£1,561m) which relate to the European Geneva securitisation which has been designated as held for sale. The 2013 balances have not been
restated.
Retained interests in residential mortgage loans are securities which represent a continuing exposure to the prepayment and credit risk in the
underlying securitised assets. The carrying amount of the loans before transfer was £120m (2013: £124m). The retained interest is initially
recorded as an allocation of the original carrying amount based on the relative fair values of the portion derecognised and the portion retained.
For transfers of assets in relation to repurchase agreements, see Notes 22 and 40.
Continuing involvement in financial assets that have been derecognised
In some cases, the Group may have transferred a financial asset in its entirety but may have continuing involvement in it. This arises in asset
securitisations where loans and asset backed securities were derecognised as a result of the Group’s involvement with CLOs, CDOs, RMBS and
CMBS. Continuing involvement largely arises from providing financing into these structures in the form of retained notes, which do not bear first
losses.
The table below shows the potential financial implications of such continuing involvement:
Type of transfer
Continuing involvement
as at 31 December 2014
Gain/(loss) from
continuing involvement
Carrying
amount
£m
Fair
value
£m
Maximum
exposure
to loss
£m
For the year
ended 31
December
2014
£m
Cumulative
to 31
December
2014
£m
CLO and other assets 1,370 1,354 1,370 14 (720)
US sub-prime and Alt-A 208 195 208 – (1,365)
Commercial mortgage backed securities 200 200 200 15 (8)
Total 1,778 1,749 1,778 29 (2,093)