Notes to the accounts

For the year ended 31st December 2007


50 Capital Management

Barclays operates a centralised capital management model, considering both regulatory and economic capital. The capital management strategy is to continue to maximise shareholder value through optimising both the level and mix of capital resources. Decisions on the allocation of capital resources are conducted as part of the strategic planning review.

The Group’s capital management objectives are to:

  • – Support the Group’s AA credit rating.
  • – Maintain sufficient capital resources to support the Group’s risk appetite and economic capital requirements.
  • – Maintain sufficient capital resources to meet the FSA’s minimum regulatory capital requirements and the US Federal Reserve Bank’s requirements that a financial holding company be well capitalised.
  • – Ensure locally regulated subsidiaries can meet their minimum capital requirements.
External Regulatory Capital Requirements

The Group is subject to minimum capital requirements imposed by the Financial Services Authority (FSA), following guidelines developed by the Basel Committee on Banking Supervision (the Basel Committee) and implemented in the UK via European Union Directives.

Minimum requirements under 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.

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 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.

Outside the UK, the Group has operations (and main regulators) located in continental Europe, in particular France, Germany, Spain, Portugal and Italy (local central banks and other regulatory authorities); Asia Pacific (various regulatory authorities including the Hong Kong Monetary Authority, the Japanese FSA and the Monetary Authority of Singapore); Africa, where the Group’s operations are headquartered in Johannesburg, South Africa (The South African Reserve Bank and the Financial Services Board (FSB)) and the United States of America (the Board of Governors of the Federal Reserve System (FRB) and the Securities and Exchange Commission).

The Group manages its capital resources to ensure that those Group entities that are subject to local capital adequacy regulation in individual countries meet their minimum capital requirements. Local management manages compliance with subsidiary entity minimum regulatory capital requirements with reporting to local Asset and Liability Committees and to Treasury Committee, as required.

Regulatory Capital Ratios

The table below provides details under Basel I of the Group’s capital ratios and risk weighted assets at 31st December 2007 and 2006.

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2007  2006 
%  % 
Capital Ratios 
Tier 1 ratio  7.8  7.7 
Risk asset ratio  12.1  11.7 
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£m  £m 
Total risk weighted assets  353,476  297,833 

The table below provides details of the regulatory capital resources managed by the Group.

2007  2006 
£m  £m 
Total qualifying Tier 1 capital  27,408  23,005 
Total qualifying Tier 2 capital  17,123  14,036 
Total deductions  (1,889) (2,330)
Total net capital resources  42,642  34,711 

Insurance businesses

Insurance businesses are subject to separate regulation regarding Capital management and have constraints on the transfer of capital. Capital resource requirements are assessed at company level in accordance with local laws and regulations. However, the requirement is that each life fund should be able to meet its own liabilities. In the event that this should not be the case, shareholders’ equity would be required to meet its liabilities to the extent that they could not otherwise be met.

The capital resource requirement of the insurance businesses at 31st December 2007 was £216m (31st December 2006: £225m).

51 Segmental reporting

Business segments

The Group reports the results of its operations through seven business segments: UK Banking, Barclaycard, International Retail and Commercial Banking, Barclays Capital, Barclays Global Investors, Barclays Wealth, and Head Office and other operations.

UK Banking provides banking solutions to Barclays UK retail and commercial banking customers. Barclaycard provides credit card services across Europe and the United States. International Retail and Commercial Banking provides banking services to personal and corporate customers in Europe, Africa and the Middle East. Barclays Capital conducts the Group’s investment banking business providing corporate, institutional and government clients with financing and risk management products. Barclays Global Investors provides investment management products and services to international institutional clients. Barclays Wealth provides banking and asset management services to affluent and high net worth clients. Head Office functions and other operations comprise all the Group’s central function costs and other central items including businesses in transition.

During 2007 Barclays realigned a number of reportable business segments to better reflect the type of client served, the nature of the products offered and the associated risks and rewards. The changes have no impact on the Group Income Statement or Balance Sheet, and are summarised as follows:

UK Retail Banking. The unsecured lending business, previously managed and reported within Barclaycard and the Barclays Financial Planning business, previously managed and reported within Barclays Wealth are now managed and reported within UK Retail Banking. The changes combine these products with related products already offered by UK Retail Banking. In the UK certain UK Premier customers are now managed and reported within Barclays Wealth.

Barclaycard. The unsecured lending portfolio, previously managed and reported within Barclaycard, is now managed and reported within UK Retail Banking.

International Retail and Commercial Banking – excluding Absa. A number of high net worth customers are now managed and reported within Barclays Wealth in order to better match client profiles to wealth services.

Barclays Wealth. In the UK and Western Europe certain Premier and high net worth customers are now managed and reported within Barclays Wealth having been previously reported within UK Retail Banking and International Retail and Commercial Banking – excluding Absa.

The Barclays Financial Planning business previously managed and reported within Barclays Wealth, is now managed and reported within UK Retail Banking. Finally with effect from 1st January 2007 Barclays Wealth – closed life assurance activities continues to be managed within Barclays Wealth and for reporting purposes has been combined rather than being reported separately.

The structure and reporting remains unchanged for Barclays Commercial Bank, International Retail and Commercial Banking – Absa, Barclays Capital and Barclays Global Investors.

All transactions between business segments are conducted on an arms length basis. Internal charges and transfer pricing adjustments are reflected in the performance of each business. Head office functions and other operations contains a centralised treasury function, which deals with the Group’s funding requirements. The funding requirements of each business segment reflects funding at market rates and not internally generated transfer prices and is therefore not separately disclosed within inter-segment net income.

Notes to the accounts

For the year ended 31st December 2007


51 Segmental reporting (continued)

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International  Head office 
Retail and  Barclays  functions 
UK  Commercial  Barclays  Global  Barclays  and other 
Banking  Barclaycard  Banking  Capital  Investors  Wealth  operations  Total 
As at 31st December 2007  £m  £m  £m  £m  £m  £m  £m  £m 
Income from external customers, 
net of insurance claims  6,913  2,340  3,510  6,934  1,915  1,343  45  23,000 
Inter-segment income  (62) 146  13  185  11  (56) (237) – 
Total income net of insurance claims  6,851  2,486  3,523  7,119  1,926  1,287  (192) 23,000 
Impairment charge and other 
credit provisions  (849) (838) (252) (846) –  (7) (3) (2,795)
Segment expenses – external  (2,521) (909) (3,494) (3,989) (1,180) (829) (277) (13,199)
Inter-segment expenses  (849) (192) 1,138  16  (12) (144) 43  – 
Total expenses  (3,370) (1,101) (2,356) (3,973) (1,192) (973) (234) (13,199)
Share of post-tax results of 
associates and joint ventures  7  (7) 7  35  –  –  –  42 
Profit on disposal of subsidiaries, 
associates and joint ventures  14  –  13  –  –  –  1  28 
Business segment 
performance before tax  2,653  540  935  2,335  734  307  (428) 7,076 
Additional information 
Depreciation and amortisation  107  57  242  181  22  18  26  653 
Impairment loss – intangible assets  13  –  1  –  –  –  –  14 
Capital expenditure a   393  105  456  407  687  196  55  2,299 
Investments in associates and 
joint ventures  (6) 19  108  171  –  –  85  377 
Total assets  161,777  22,164  89,457  839,662  89,224  18,024  7,053  1,227,361 
Total liabilities  166,988  1,559  48,809  811,516  87,101  43,988  34,924  1,194,885 

Excel File Download table as excel file
International  Head office 
Retail and  Barclays  functions 
UK  Commercial  Barclays  Global  Barclays  and other 
Banking  Barclaycard  Banking  Capital  Investors  Wealth  operations  Total 
As at 31st December 2006  £m  £m  £m  £m  £m  £m  £m  £m 
Income from external customers, 
net of insurance claims  6,804  2,355  3,220  6,206  1,670  1,198  142  21,595 
Inter-segment income  (63) 159  29  61  (5) (38) (143) – 
Total income net of insurance claims  6,741  2,514  3,249  6,267  1,665  1,160  (1) 21,595 
Impairment charge and other 
credit provisions  (887) (1,067) (167) (42) –  (2) 11  (2,154)
Segment expenses – external  (2,626) (712) (2,177) (3,988) (940) (772) (1,459) (12,674)
Inter-segment expenses  (763) (269) 15  (21) (11) (141) 1,190  – 
Total expenses  (3,389) (981) (2,162) (4,009) (951) (913) (269) (12,674)