Strategic Shareholder Climate and Risk Financial Financial Barclays PLC 301 report information sustainability report Governance review review statements Annual Report 2022 Risk performance - Credit risk (continued) Credit quality Charge Credit risk A gradual increase in delinquencies has Credit impairment charges were £1,220m All disclosures in this section are unaudited been observed driven by resumption of (2021: £(653)m release). The charges unless otherwise stated. more regular spend activity in retail. A range reflect an updated macroeconomic Overview of activities are in progress to protect our scenario together with a partial return to Credit risk represents a significant risk to existing defensive positioning against the more normalised levels of customer current macroeconomic headwinds. behaviour. the Group and mainly arises from exposure Gross exposures for government to wholesale and retail loans and advances Management Adjustments supported loan schemes stands at £8bn as together with the counterparty credit risk Macroeconomic uncertainty PMAs at 31 at 2022 (2021: £11.4bn). arising from derivative contracts entered December 2022 amount to £317m (2021: with clients. In wholesale, loans to high-risk sectors as £1,692m). The reduction is informed by the release of COVID-19 related adjustments well as the broader portfolio benefited from Credit risk disclosures include many of the as credit performance stabilises at or below high-quality exposure and credit recommendations of the Taskforce on pre-pandemic levels which is reflected in protection. Disclosures about Expected Credit Losses the models, and a rebuild of certain models (DECL) and it is expected that relevant Further analysis on the credit quality of assets is to better capture the macroeconomic + presented in the approach to management and disclosures will continue to be developed in representation of credit quality section. outlook. Refer to the Management future periods. adjustment to models for impairment Credit risk disclosures exclude other Stage Decomposition section on page 315 for further details. financial assets not subject to credit risk, A net increase of £5.6bn is observed in Refer to the Management adjustment to models for + mainly equity securities. For off-balance Stage 2 gross exposures driven by a weaker impairment section on page 315 for further details. sheet exposures certain contingent macroeconomic forecast in wholesale liabilities not subject to credit risk such as lending (£4.5bn) and normalisation of PDs in Climate performance guarantees are excluded. retail lending (£1.1bn), predominantly credit Whilst there have been no separately cards. Summary of performance in the identifiable charges relating to climate risk in the 2022 reported ECL, it is period Stage 3 balances have decreased by £0.2bn acknowledged that impairment could to £7.1bn compared to 2021 primarily Loans increase over time as risks become more driven by write-offs partially offset by Gross loans and advances at amortised tangible and impact consumers and clients delinquencies in retail unsecured lending. cost to customers and banks have through physical risk or via impacts from increased by £37bn compared to £367bn in Refer to pages 313 to 314 for further details. + the transition to a low carbon economy. 2021. This includes £14bn increase in debt Further detail can be found in the Financial securities driven by Treasury investments. Scenario + statements section in Note 8 Credit impairment Of the remaining growth, £21bn is charges/(releases). Description of terminology can During the year, the economic risk from the be found in the glossary, available at home.barclays/ attributable to strong lending activity in COVID-19 pandemic has receded; annualreport. investment banking and home loans. however, economic uncertainty linked to Further, £9bn in credit cards and unsecured high inflation in major economies and Refer to credit risk management section for the lending is driven by increased customer + details of governance, policies and procedures. heightened geopolitical tensions persists. spending and strategic acquisitions. For Q422, macroeconomic scenarios have Maximum exposure been refreshed and are designed around a broad range of economic outcomes. The The Group’s net exposure to credit risk Downside 2 scenario has been updated increased 13% to £1,033bn (2021: £912bn) with reference to the most recent BoE which is mainly driven by increase in off- Annual Cyclical Scenarios (ACS) stress test. balance sheet loan commitments (£53bn), This has resulted in a movement in weights cash collateral and settlement balances from the upside scenarios to the downside (£20bn), cash held at central banks (£18bn) scenarios. and debt securities issued by governments (£13bn), all of which are considered to be ECL lower risk. Overall, the extent to which the Impairment allowances on loans and Group held mitigation against its total advances at amortised cost including off- exposure remained stable at 44% (2021: balance sheet has decreased to £6,175m 44%). (2021:£6,284m) primarily driven by write- offs. On-balance sheet coverage has reduced to 1.4% (2021: 1.6%) due to movement in portfolio mix towards lower ECL balances, revised recovery expectations and evolving macroeconomic scenarios. Coverage levels remain strong.