Barclays 2015 Annual Report Download - page 200

198 I Barclays PLC Annual Report 2015 home.barclays/annualreport
Risk review
Risk performance
Funding risk – liquidity
Repurchase agreements and reverse repurchase agreements
Barclays enters into repurchase and other similar secured borrowing agreements to finance its trading portfolio assets. The majority of reverse
repurchase agreements are matched by offsetting repurchase agreements entered into to facilitate client activity. The remainder are used to settle
trading portfolio liabilities.
Due to the high quality of collateral provided against secured financing transactions, the liquidity risk associated with this activity is significantly
lower than unsecured financing transactions. Nonetheless, Barclays manages to gross and net secured mismatch limits to limit refinancing risk under
a severe stress scenario and a portion of the Group’s liquidity pool is held against stress outflows on these positions. The Group secured mismatch
limits are calibrated based on market capacity, liquidity characteristics of the collateral and risk appetite of the Group.
The cash value of repurchase and reverse repurchase transactions will typically differ from the market value of the collateral against which these
transactions are secured by an amount referred to as a haircut (or over-collateralisation). Typical haircut levels vary depending on the quality of the
collateral that underlies these transactions. For transactions secured against extremely liquid fixed income collateral, lenders demand relatively small
haircuts (typically ranging from 0-2%). For transactions secured against less liquid collateral, haircuts vary by asset class (typically ranging from
5-10% for corporate bonds and other less liquid collateral).
As at 31 December 2015, the significant majority of repurchases related to matched-book activity. The Group may face refinancing risk on the net
maturity mismatch for matched-book activity.
Net matched-book activitya,b
Negative number represents net repurchase agreement (net liability)
Less than
one month
£bn
One month
to three
months
£bn
Over three
months
£bn
As at 31 December 2015
Extremely liquid fixed income (12.9) 7.3 5.6
Liquid fixed income 0.3 0.6 (0.9)
Equities 7.0 (1.5) (5.5)
Less liquid fixed income 1.6 (0.4) (1.2)
Total (4.0) 6.0 (2.0)
As at 31 December 2014
Extremely liquid fixed income (8.9) 6.3 2.6
Liquid fixed income (0.1) 0.5 (0.4)
Equities 8.9 (3.0) (5.9)
Less liquid fixed income 1.2 0.3 (1.5)
Total 1.1 4.1 (5.2)
The residual repurchase agreement activity is the firm-financing component and reflects the Group funding of a portion of its trading portfolio
assets. The primary risk related to firm-financing activity is the inability to roll-over transactions as they mature. However, 50% (2014: 54%) of
firm-financing activity was secured against highly liquid assets.
Firm financing repurchase agreementsa, b
Less than
one month
£bn
One month
to three
months
£bn
Over three
months
£bn
Total
£bn
As at 31 December 2015
Extremely liquid fixed income 28.8 8.3 0.3 37.4
Liquid fixed income 2.0 0.6 1.1 3.7
Highly liquid 10.9 6.3 10.2 27.4
Less liquid 2.7 1.1 1.9 5.7
Total 44.4 16.3 13.5 74.2
As at 31 December 2014
Extremely liquid fixed income 33.4 4.1 2.2 39.7
Liquid fixed income 3.6 0.3 0.6 4.5
Highly liquid 13.1 5.0 4.1 22.2
Less liquid 2.3 1.3 3.3 6.9
Total 52.4 10.7 10.2 73.3
Notes
a Includes collateral swaps.
b Includes financing positions for prime brokerage clients which are reported as customer payables/receivables on-balance sheet.