Capital and Funding strategy

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• Capital strategy

  The Group’s capital management activities attempt to maximise shareholders’ value by optimising the level and mix of its capital resources.
  
  The Group’s authority to operate as a bank is dependent upon the maintenance of adequate capital resources. The Group is required to meet minimum regulatory requirements in the UK and in other jurisdictions such as the United States and South Africa where regulated activities are undertaken.
  
  Barclays operates a centralised capital management model considering regulatory and economic capital.
  
  The Group’s capital management objectives are to:
   

  • Maintain sufficient capital resources to meet the minimum regulatory capital requirements set by the UK FSA and the US requirements that a financial holding company be ‘well capitalised’
  • Maintain sufficient capital resources to support the Group’s risk appetite and economic capital requirements
  • Support the Group’s credit rating
  • Ensure locally regulated subsidiaries can meet their minimum capital requirements
  • Allocate capital to support the Group’s strategic objectives, including optimising returns on economic and regulatory capital.

   
  As a regular borrower in the capital markets, the Group aims to diversify its capital base by currency, product and investor type, whilst seeking to avoid over-reliance on any particular market.
  
  We expect to maintain our Core Tier 1 and Tier 1 ratios at levels which significantly exceed the current minimum requirements of the UK FSA.
  
  Our capital ratios remain strong. Based on our interpretation of the Basel III new rules, we are well equipped to deal with regulatory change as Basel III is implemented between now and 2019.

• Funding strategy

  Barclays manages its funding position to comply with regulatory requirements prescribed by the UK FSA and to meet the higher standards for prudent liquidity management set by the Board.

  Barclays operates a centralised governance and control process that covers all of the Group’s liquidity risk management activities.

  Funding Structure
  Global Retail Banking, Barclays Corporate, Barclays Wealth and Head Office Functions are structured to be self-funded through customer deposits and Barclays equity and other long-term capital. Barclays Capital and, in part, Absa are funded through the wholesale secured and unsecured funding markets.

  Liquidity Pool
  The Group Liquidity Pool as at 30th September 2010 was £162bn (30th June 2010: £160n), of which £149bn was in FSA eligible pool assets (30th June 2010 £146bn).

  Intraday Liquidity
  The need to monitor, manage and control intraday liquidity in real time is recognised by the Group as a critical process.

  Major currency payment flows and payment system collateral are monitored and managed in real time to ensure that at all times there is sufficient collateral to make payments. In practice, the Group maintains a significant buffer of surplus intraday liquidity to ensure that payments are made on a timely basis.

  Day to day funding
  Day to day funding is managed through limits on wholesale borrowings, secured borrowings and funding mismatches. These ensure that on any day and over any period there is a limited amount of refinancing requirement.

  In addition to cash flow management, the Group also monitors term mismatches between assets and liabilities, as well as the level and type of undrawn lending commitments, the usage of overdraft facilities and the impact of contingent liabilities such as standby letters of credit and guarantees.

  Diversification of liquidity sources
  Sources of liquidity are regularly reviewed to maintain a wide diversification by currency, geography, provider, product and term. In addition, to avoid reliance on a particular group of customers or market sectors, the distribution of sources and the maturity profile of deposits are also carefully managed.