Strategic Shareholder Climate and Risk Financial Financial Barclays PLC 292 report information sustainability report Governance review review statements Annual Report 2022 Principal risk management (continued) to meet pension payments is achieved Liquidity risk management Capital risk management with investments and contributions. (audited) (audited) Pension risk arises because the market Overview Overview value of pension fund assets might decline; The efficient management of liquidity is Capital risk is managed through ongoing investment returns might reduce; or the essential to the Group in order to retain monitoring and management of the capital estimated value of pension liabilities might the confidence of the financial markets position, regular stress testing and a increase. The Group monitors the pension and maintain the sustainability of the robust capital governance framework. The risks arising from its defined benefit business. Treasury and Capital Risk have objectives of the framework are to pension schemes and works with the created a framework to manage all liquidity maintain adequate capital for the Group relevant pension fund’s trustees to risk exposures under both normal and and legal entities to withstand the impact address shortfalls. In these circumstances, stressed conditions. The framework is of the risks that may arise under normal the Group could be required or might designed to maintain liquidity resources and stressed conditions, and maintain choose to make extra contributions to the that are sufficient in amount, quality and adequate capital to cover current and pension fund. The Group’s main defined funding tenor profile to remain within the forecast business needs and associated benefit scheme was closed to new liquidity risk appetite as expressed by the risks to provide a viable and sustainable entrants in 2012. Barclays PLC Board. The liquidity risk business offering. Interest rate risk in the banking appetite is monitored against both internal Organisation, roles and responsibilities and regulatory liquidity metrics. book management (IRRBB) Treasury has the primary responsibility for Organisation, roles and responsibilities Overview managing and monitoring capital Treasury has the primary responsibility for adequacy. The Treasury and Capital Risk Interest rate risk in the banking book is managing liquidity risk within the set risk function provides oversight of capital risk. driven by customer deposit taking and appetite. Both Risk and Treasury Production of the Barclays PLC Internal lending activities, investments in the liquid contribute to the production of the Capital Adequacy Assessment Process asset portfolio and funding activities. As Internal Liquidity Adequacy Assessment (ICAAP) is the responsibility of Treasury. per the Group’s policy to remain within the Process (ILAAP). The Treasury and Capital defined risk appetite, hedging strategies Capital risk management is underpinned by Risk function is responsible for the are executed to mitigate the various IRRBB a control framework and policy. The capital management and governance of the risks that result from these activities. management strategy, outlined in the liquidity risk mandate, as defined by the However, the Group remains susceptible Group and legal entity capital plans, is Board. to interest rate risk and other non-traded developed in alignment with the control market risks from the following key The framework established by Treasury framework and policy for capital risk, and is sources: and Capital Risk is designed to deliver the implemented consistently in order to appropriate term and structure of funding, deliver on the Group’s objectives. • Interest rate and repricing risk: the risk consistent with the liquidity risk appetite that net interest income could be The Board approves the Group capital set by the Board. The framework adversely impacted by a change in plan, internal stress tests and results of incorporates a range of ongoing business interest rates, differences in the timing regulatory stress tests, and the Group management tools to monitor, limit and of interest rate changes between assets recovery plan. The Group Treasury stress test the Group’s balance sheet, and liabilities, and other constraints on Committee is responsible for monitoring contingent liabilities and the recovery plan. interest rate changes as per product and managing capital risk in line with the Limit setting and transfer pricing are tools terms and conditions. Group’s capital management objectives, designed to control the level of liquidity risk capital plan and risk frameworks. The • Customer behavioural risk: the risk that taken and drive the appropriate mix of Treasury and Capital Risk Committee net interest income could be adversely funds. Adherence to limits reduces the monitors and reviews the capital risk profile impacted by the discretion that likelihood that a liquidity stress event could and control environment, providing customers and counterparties may have lead to an inability to meet Group’s second line oversight of the management in respect of being able to vary from obligations as they fall due. of capital risk. The BRC reviews the risk their contractual obligations with The Board approves the Group funding profile, and reviews risk appetite at least Barclays. This risk is often referred to by annually and the impact of stress scenarios plan, internal stress tests, regulatory stress industry regulators as ‘embedded option test results, recovery plan and liquidity risk on the Group capital plan/forecast in order risk’. appetite. The Group Treasury Committee to agree the Group’s projected capital • Investment risks in the liquid asset is responsible for monitoring and adequacy. portfolio: the risk that the fair value of managing liquidity risk in line with the Local management assures compliance assets held in the liquid asset portfolio Group’s funding management objectives, with an entity’s minimum regulatory capital and associated risk management funding plan and risk appetite. The requirements by reporting to local Asset portfolios could be adversely impacted Treasury and Capital Risk Committee and Liability Committees (ALCOs) with by market volatility, creating volatility in monitors and reviews the liquidity risk oversight by the Group Treasury capital directly. profile and control environment, providing Committee, as required. In 2022, Barclays Organisation, roles and responsibilities second line oversight of the management complied with all regulatory minimum The entity ALCOs and/or treasury of liquidity risk. The BRC reviews the risk capital requirements. committees, together with the Group profile, and reviews liquidity risk appetite at Pension risk Treasury Committee, are responsible for least annually and the impact of stress The Group maintains a number of defined monitoring and managing IRRBB risk in line scenarios on the Group funding plan/ benefit pension schemes for past and with the Group’s management objectives forecast in order to agree the Group’s current employees. The ability of schemes and risk frameworks. The GRC and projected funding abilities.