Capital management


Total shareholders’ equity

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2007 2006 2005
£m £m £m
Barclays PLC Group
Called up share capital 1,651 1,634 1,623
Share premium account 56 5,818 5,650
Available for sale reserve 154 132 225
Cash flow hedging reserve 26 (230) 70
Capital redemption reserve 384 309 309
Other capital reserve 617 617 617
Currency translation reserve (307) (438) 156
Other reserves 874 390 1,377
Retained earnings 20,970 12,169 8,957
Less: Treasury shares (260) (212) (181)
Shareholders’ equity excluding
minority interests 23,291 19,799 17,426
Minority interests 9,185 7,591 7,004
Total shareholders’ equity 32,476 27,390 24,430

2007/06

Total shareholders’ equity increased £5,086m to £32,476m (2006: £27,390m).

Called up share capital comprises 6,600 million (2006: 6,535 million) ordinary shares of 25p each and 1 million (2006: 1 million) staff shares of £1 each. Called up share capital increased by £17m representing the nominal value of shares issued to Temasek Holdings, China Development Bank (CDB) and employees under share option plans largely offset by a reduction in nominal value arising from share buy-backs. Share premium reduced by £5,762m; the reclassification of £7,223m to retained earnings resulting from the High Court approved cancellation of share premium was partly offset by additional premium arising on the issuance to CDB and on employee options. The capital redemption reserve increased by £75m representing the nominal value of the share buy-backs.

Retained earnings increased by £8,801m. Increases primarily arose from profit attributable to equity holders of the parent of £4,417m, the reclassification of share premium of £7,223m and the proceeds of the Temasek issuance in excess of nominal value of £941m. Reductions primarily arose from external dividends paid of £2,079m and the total cost of share repurchases of £1,802m.

Movements in other reserves, except the capital redemption reserve, reflect the relevant amounts recorded in the consolidated statement of recognised income and expense on page 178.

Minority interests increased £1,594m to £9,185m (2006: £7,591m). The increase was primarily driven by preference share issuances of £1,322m and an increase in the minority interest in Absa of £225m.

The Group’s authority to buy-back equity shares was renewed at the 2007 AGM.

2006/05

Total shareholders’ equity increased £2,960m to £27,390m (2005: £24,430m).

Called up share capital and share premium increased by £11m and £168m respectively representing the issue of shares to employees under share option plans.

Retained earnings increased by £3,212m primarily reflecting profit attributable to equity holders of the parent of £4,571m partly offset by dividends paid of £1,771m.

Movements in other reserves reflect the relevant amounts recorded in the consolidated statement of recognised income and expense.

Minority interests increased £587m primarily reflecting the issuance of preference shares by Barclays Bank PLC and Absa.

Barclays Bank PLC

Preference shares issued by Barclays Bank PLC are included within share capital and share premium in the Barclays Bank PLC Group but represent minority interests in the Barclays PLC Group. Certain issuances of reserve capital instruments and capital notes by Barclays Bank PLC are included within other shareholders’ equity in the Barclays Bank PLC Group but represent minority interests in Barclays PLC Group.

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2007 2006 2005
£m £m £m
Barclays Bank PLC Group
Called up share capital 2,382 2,363 2,348
Share premium account 10,751 9,452 8,882
Available for sale reserve 111 184 257
Cash flow hedging reserve 26 (230) 70
Currency translation reserve (307) (438) 156
Other reserves (170) (484) 483
Other shareholders’ equity 2,687 2,534 2,490
Retained earnings 14,222 11,556 8,462
Shareholders’ equity excluding
minority interests 29,872 25,421 22,665
Minority interests 1,949 1,685 1,578
Total shareholders’ equity 31,821 27,106 24,243

Capital ratios

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Basel II Basel I Basel I Basel I
2007 2007 2006 2005
Barclays
PLC
Group 		 Barclays
PLC
Group 		 Barclays
Bank PLC
Group 		 Barclays
PLC
Group 		 Barclays
Bank PLC
Group 		 Barclays
PLC
Group 		 Barclays
Bank PLC
Group 
Capital ratios  %  %  %  %  %  %  % 
Tier 1 ratio  7.6  7.8  7.5  7.7  7.5  7.0  6.9 
Risk asset ratio  11.2  12.1  11.8  11.7  11.5  11.3  11.2 
 
Risk weighted assets  £m  £m  £m  £m  £m  £m  £m 
Banking book 
on-balance sheet  n/a  231,496  231,491  197,979  197,979  180,808  180,808 
off-balance sheet  n/a  32,620  32,620  33,821  33,821  31,351  31,351 
Associates and joint ventures  n/a  1,354  1,354  2,072  2,072  3,914  3,914 
Total banking book  244,474  265,470  265,465  233,872  233,872  216,073  216,073 
Trading book 
Market risks  39,812  36,265  36,265  30,291  30,291  23,216  23,216 
Counterparty and settlement risks  41,203  51,741  51,741  33,670  33,670  29,859  29,859 
Total trading book  81,015  88,006  88,006  63,961  63,961  53,075  53,075 
Operational risk  28,389  n/a  n/a  n/a  n/a  n/a  n/a 
Total risk weighted assets  353,878  353,476  353,471  297,833  297,833  269,148  269,148 

Minimum requirements under the FSA’s Basel rules are expressed as a ratio of capital resources to risk weighted assets (Risk Asset Ratio). Risk weighted assets are a function of risk weights applied to the Group’s assets using calculations developed by the Basel Committee on Banking Supervision.

Basel I

At 31st December 2007, the Tier 1 capital ratio was 7.8% and the risk asset ratio was 12.1%. From 31st December 2006, total net capital resources rose £7.9bn and risk weighted assets increased £55.6bn.

Tier 1 capital rose £4.4bn, including £2.3bn arising from profits attributable to equity holders of the parent net of dividends paid. Minority interests within Tier 1 capital increased £2.7bn primarily due to the issuance of reserve capital instruments and preference shares. The deduction for goodwill and intangible assets increased by £1.1bn. Tier 2 capital increased £3.1bn mainly as a result of an increase of £3.0bn of dated loan capital.

Basel II

Under Basel II, effective from 1st January 2008, the Group has been granted approval by the FSA to adopt the advanced approaches to credit and operational risk management. Pillar 1 risk weighted assets will be generated using the Group’s risk models. Pillar 1 minimum capital requirements under Basel II are Pillar 1 risk weighted assets multiplied by 8%, the internationally agreed minimum ratio.

Under Pillar 2 of Basel II, the Group is subject to an overall regulatory capital requirement (expressed in £ terms) based on individual capital guidance (‘ICG’) received from the FSA. The ICG imposes additional capital requirements in excess of Pillar 1 minimum capital requirements. Barclays received its ICG from the FSA in December 2007.

Risk weighted assets calculated on a Basel II basis are broadly in line with risk weighted assets calculated on a Basel I basis. A reduction in credit and counterparty risk weighted assets of £31.5bn more than offset the identification of capital equivalent risk weighted assets of £28.4bn attributable to operational risk. The reduced risk weighted assets attributable to credit risk were mainly driven by recognition of the low risk profile of first charge residential mortgages in UK Retail Banking and Absa and the use of internal models to assess exposures to counterparty risk in the trading book. These were partially offset by higher counterparty risk weightings in emerging markets and greater recognition of undrawn commitments.

Compared to Basel I, deductions from Tier 1 and Tier 2 capital under Basel II include additional amounts relating to expected loss and securitisations. For advanced portfolios, any excess of expected loss over impairment allowances is deducted half from Tier 1 and half from Tier 2 capital. Deductions relating to securitisation transactions, which are made from total capital under Basel I, are deducted half from Tier 1 and half from Tier 2 capital under Basel II.

For portfolios treated under the standardised approach, the inclusion of collectively assessed impairment allowances in Tier 2 capital remains the same under Basel II. Collectively assessed impairment allowances against exposures treated under Basel II advanced approaches are not eligible for direct inclusion in Tier 2 capital.