Download table as excel file 13 Financial assets designated at fair value
| Held on own account | ||||||||||||||
| 2007 | 2006 | |||||||||||||
| £m | £m | |||||||||||||
| Loans and advances | 23,491 | 13,196 | ||||||||||||
| Debt securities | 24,217 | 12,100 | ||||||||||||
| Equity securities | 5,376 | 3,711 | ||||||||||||
| Other financial assets | 3,545 | 2,792 | ||||||||||||
| Financial assets designated at fair value – held on own account | 56,629 | 31,799 | ||||||||||||
The maximum exposure to credit risk on loans and advances designated at fair value at 31st December 2007 was £23,491m (2006: £13,196m). The amount by which related credit derivatives and similar instruments mitigate the exposure to credit risk at 31st December was £2,605m (2006: £28m).
The net loss attributable to changes in credit risk for loans and advances designated at fair value was £401m in 2007 (2006: £nil; 2005; £nil). The gains or losses on related credit derivatives was £4m for the year (2006: £nil; 2005; £nil).
The cumulative net loss attributable to changes in credit risk for loans and advances designated at fair value since initial recognition is £401m at 31st December 2007 (2006: £3m; 2005: £3m). The cumulative change in fair value of related credit derivatives at 31st December 2007 is £4m (2006: £nil; 2005; £nil).
Held in respect of linked liabilities to customers under investment contracts/liabilities arising from investment contracts
| 2007 | 2006 | |||||||||||||
| £m | £m | |||||||||||||
| Financial assets designated at fair value held in respect of linked liabilities to customers under investment contracts | 90,851 | 82,798 | ||||||||||||
| Cash and bank balances within the portfolio | 1,788 | 1,839 | ||||||||||||
| Assets held in respect of linked liabilities to customers under investment contracts | 92,639 | 84,637 | ||||||||||||
| Liabilities to customers under investment contracts | (92,639) | (84,637) | ||||||||||||
A portion of the Group’s fund management business takes the legal form of investment contracts, under which legal title to the underlying investment is held by the Group, but the inherent risks and rewards in the investments are borne by the investors. In the normal course of business, the Group’s financial interest in such investments is restricted to fees for investment management services.
Due to the nature of these contracts, the carrying value of the assets is always the same as the value of the liabilities and any change in the value of the assets results in an equal but opposite change in the value of the amounts due to the policyholders.
The Group is therefore not exposed to the financial risks – market risk, credit risk and liquidity risk inherent in the investments and they are omitted from the disclosures on financial risks in Notes 46 to 48.
In the balance sheet, the assets are included as ‘Financial assets designated at fair value – held in respect of linked liabilities to customers under investment contracts’. Cash balances within the portfolio have been included in the Group’s cash balances. The associated obligation to deliver the value of the investments to customers at their fair value on balance sheet date is included as ‘Liabilities to customers under investment contracts’.
The increase/decrease in the value arising from the return on the investments and the corresponding increase/decrease in linked liabilities to customers is included in the Other income note in Note 6.