Barclays 2015 Annual Report Download - page 140

138 I Barclays PLC Annual Report 2015 home.barclays/annualreport
Risk review
Risk management
Funding risk – Liquidity
Overview
The Board has formally recognised a series of risks that are continuously
present in Barclays and materially impact the achievement of Barclays
objectives, one of which is Funding risk. Liquidity risk is recognised as
a key risk within Funding risk. The efficient management of liquidity
is essential to the Group in retaining the confidence of the financial
markets and ensuring that the business is sustainable. Liquidity risk
is managed through the Liquidity Risk Management Framework (the
Liquidity Framework) which is designed to meet the following objectives:
 to maintain liquidity resources that are sufficient in amount and
quality and a funding profile that is appropriate to meet the liquidity
risk appetite (LRA) as expressed by the Board
 to maintain market confidence in the Group’s name.
This is achieved via a combination of policy formation, review and
governance, analysis, stress testing, limit setting and monitoring.
Together, these meet internal and regulatory requirements.
Organisation and structure
Barclays Treasury operates a centralised governance control process that
covers all of the Group’s liquidity risk management activities. As per the
ERMF, the Key Risk Officer (KRO) approves the Key Risk Control
Framework for Liquidity Risk (Key Risk Control Framework) under which
the Treasury function operates. The KRO is in the Risk function. The Key
Risk Control Framework is subject to annual review. The Key Risk Control
Framework describes liquidity policies and controls that the Group has
implemented to manage liquidity risk within the LRA and is subject to
annual review.
The Board sets the LRA, over Group stress tests, being the level of
risk the Group chooses to take in pursuit of its business objectives
and in meeting its regulatory obligations. The approved LRA is
implemented and managed by the Treasury Committee through
the Key Risk Control Framework.
Liquidity risk management
Barclays has a comprehensive Key Risk Control Framework for managing
the Group’s liquidity risk. The Key Risk Control Framework describes
liquidity policies and controls that the Group has implemented to
manage liquidity risk within the LRA. The Key Risk Control Framework is
designed to deliver the appropriate term and structure of funding
consistent with the LRA set by the Board.
Liquidity is monitored and managed on an ongoing basis through:
Group Stress test risk appetite and planning: Established Group stress
test LRA together with the appropriate limits for the management of
liquidity risk. This is the level of liquidity risk the Group chooses to take in
pursuit of its business objectives and in meeting its regulatory obligations.
Liquidity limits: Management of limits on a variety of on and off-balance
sheet exposures and these serve to control the overall extent and
composition of liquidity risk taken by managing exposure to the cash
outflows.
Internal pricing and incentives: Active management of the composition
and duration of the balance sheet and of contingent liquidity risk
through the transfer of liquidity premium directly to the business.
Early warning indicators: Monitoring of a range of market indicators for
early signs of liquidity risk in the market or specific to Barclays. These are
designed to immediately identify the emergence of increased liquidity
risk to maximise the time available to execute appropriate mitigating
actions.
Contingency Funding Plan: Maintenance of a Contingency Funding Plan
(CFP) which is designed to provide a framework where a liquidity stress
could be effectively managed. The CFP provides a communication plan
and includes management actions to respond to liquidity stresses of
varying severity.
RRP: In accordance with the requirements of the PRA Rulebook:
Recovery and Resolution, Barclays has developed a Group Recovery Plan.
The key objectives are to provide the Group with a range of options to
ensure the viability of the firm in a stress, set consistent early warning
indicators to identify when the Recovery Plan should be invoked and to
enable the Group to be adequately prepared to respond to stressed
conditions. The Group continues to work with the authorities on RRP,
including identifying and addressing any impediments to resolvability.
Liquidity risk
The risk that the Group, although solvent,
either does not have sufficient financial
resources available to enable it to meet its
obligations as they fall due, or can secure
such resources only at excessive cost.
This also results in a firm’s inability to meet
regulatory liquidity requirements. This risk
is inherent in all banking operations and
can be affected by a wide range of Group-
specific and market-wide events.
■ Stress testing and planning
■ Liquidity limits
■ Early warning indicators
■ Monitoring and review
■ Management actions
not requiring business
rationalisation
■ Activate Contingency
Funding Plan
■ Management actions
with a positive impact
on the franchise
■ Activate appropriate
recovery option to restore
the capital and/or liquidity
position of the Group
■ Ensure an orderly resolution
can be carried out if
necessary, without adverse
systemic risk or exposing
the public funds to loss
Ongoing business
management
Early signs/
Mild stress
Severe stress Recovery Resolution