ICAAP Knowledge Share

Question 1

What is the purpose of the ICAAP

Answer 1

To review Barclays’ strategy as reflected in the MTP against the risk the bank faces

To access if the Bank is adequately capitalized

Question 2

What are the three main reasons banks hold capital?

Answer 2

1) Internal Perspective: As a buffer against losses

2) Market Perspective: Maintain confidence of Liquidity providers (avoid run on the bank)

3) Regulatory perspective: Satisfy regulatory requirements

Question 3

What is the Individual Capital Requirements?

(ICR)

Answer 3

The minimum level of regulatory capital set by the PRA for Barclays

P1 + P2A

Question 4

What are the three tests used to access capital adequacy?

Answer 4

1) Regulatory requirements

Does Barclays hold sufficient headroom?

2) Ability to withstand stress

Does the IST pass the risk appetite constraints set by the Board

3) Capital Supply Vs Demand

Does Barclays hold sufficient loss absorbing capital for it’s risks