Notes 6-10

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10 Financial instruments

The following tables analyse the Group's financial assets and financial liabilities in accordance with the categories of financial instruments in IAS 39. Assets and liabilities outside the scope of IAS 39 are shown separately.

	Group
2007	Held-for- trading £m	Designated as at fair value through profit or loss £m	Hedging derivatives £m	Available- for-sale £m	Loans and receivables £m	Other (amortised cost) £m	Finance leases £m	Non financial assets/ liabilities £m	Total £m
Assets
Cash and balances at central banks	–	–		–	17,866		–		17,866
Treasury and other eligible bills ⁽¹⁾	18,027	–		202	–		–		18,229
Loans and advances to banks ⁽²⁾	71,639	–		–	147,821		–		219,460
Loans and advances to customers ⁽³⁾	104,387	3,067		–	709,226		12,570		829,250
Debt securities	172,644	5,777		95,334	2,672		–		276,427
Equity shares	37,546	7,866		7,614	–		–		53,026
Settlement balances	–	–		–	16,589		–		16,589
Derivatives	334,857	–	2,553	–	–		–		337,410
Intangible assets								48,492	48,492
Property, plant and equipment								18,750	18,750
Prepayments, accrued income and other assets	–	–		–	877		–	18,189	19,066
Assets of disposal groups								45,954	45,954
	739,100	16,710	2,553	103,150	895,051		12,570	131,385	1,900,519

Liabilities
Deposits by banks ⁽⁴⁾	65,491	–				247,142	–		312,633
Customer accounts ^{(5, 6)}	60,425	7,505				614,435	–		682,365
Debt securities in issue ^{(7, 8)}	9,455	41,834				222,326	–		273,615
Settlement balances and short positions	73,501	–				17,520	–		91,021
Derivatives	329,351	–	2,709			–	–		332,060
Accruals, deferred income and other liabilities	210	–				1,545	19	32,250	34,024
Retirement benefit liabilities								496	496
Deferred taxation								5,510	5,510
Insurance liabilities								10,162	10,162
Subordinated liabilities	–	898				37,081	–	–	37,979
Liabilities of disposal groups								29,228	29,228
	538,433	50,237	2,709			1,140,049	19	77,646	1,809,093

Equity									91,426
									1,900,519

2006
Assets
Cash and balances at central banks	–	–		–	6,121		–		6,121
Treasury and other eligible bills ⁽¹⁾	4,516	–		975	–		–		5,491
Loans and advances to banks ⁽²⁾	52,736	376		–	29,494		–		82,606
Loans and advances to customers ⁽³⁾	72,462	1,327		–	381,583		11,521		466,893
Debt securities	95,192	5,989		25,509	561		–		127,251
Equity shares	3,038	2,610		7,856	–		–		13,504
Settlement balances	–	–		–	7,425		–		7,425
Derivatives	115,500	–	1,181	–	–		–		116,681
Intangible assets								18,904	18,904
Property, plant and equipment								18,420	18,420
Prepayments, accrued income and other assets	–	–		–	953		–	7,183	8,136
	343,444	10,302	1,181	34,340	426,137		11,521	44,507	871,432

Liabilities
Deposits by banks ⁽⁴⁾	57,452	–				74,691	–	–	132,143
Customer accounts ^{(5, 6)}	46,797	3,922				333,503	–	–	384,222
Debt securities in issue ^(7,8)	2,141	10,499				73,323	–	–	85,963
Settlement balances and short positions	43,809	–				5,667	–	–	49,476
Derivatives	117,277	–	835			–	–	–	118,112
Accruals, deferred income and other liabilities	–	–				1,453	89	14,118	15,660
Retirement benefit liabilities								1,992	1,992
Deferred taxation								3,264	3,264
Insurance liabilities								7,456	7,456
Subordinated liabilities	–	124				27,530	–	–	27,654
	267,476	14,545	835			516,167	89	26,830	825,942

Equity									45,490
									871,432

Notes:

(1) Comprises treasury bills and similar securities of £16,315 million (2006 – £5,407 million) and other eligible bills of £1,914 million (2006 – £84 million).

(2) Includes reverse repurchase agreements of £175,941 million (2006 – £54,152 million) and items in the course of collection from other banks of £3,095 million (2006 – £3,471 million).

(3) Includes reverse repurchase agreements of £142,357 million (2006 – £62,908 million).

(4) Includes repurchase agreements of £163,038 million (2006 – £76,376 million) and items in the course of transmission to other banks of £372 million (2006 – £799 million).

(5) Includes repurchase agreements of £134,916 million (2006 – £63,984 million).

(6) The carrying amount of other customer accounts designated as at fair value through profit or loss is £77 million (2006 – £140 million) greater than the principal amount. No amounts have been recognised in profit or loss for changes in credit risk associated with these liabilities as the changes are immaterial measured as the change in fair value from movements in the period in the credit risk premium payable. The amounts include investment contracts with a carrying value of £5,555 (2006 – £2,246 million).

(7) Comprises bonds and medium term notes of £119,021 million (2006 – £43,408 million) and certificates of deposit and other commercial paper of £154,594 (2006 – £42,555 million).

(8) £162 million (2006 – nil) has been recognised in profit or loss for changes in credit risk associated with these liabilities measured as the change in fair value from movements in the period in the credit risk premium payable by the Group. The carrying amount is £317 million (2006 – £383 million) lower than the principal amount.

Amounts included in the consolidated income statement:

	Group
	2007 £m	2006 £m	2005 £m
Gains on financial assets/liabilities designated as at fair value through profit or loss	1,074	573	364
Gains on disposal or settlement of loans and receivables	3	21	25

On the initial recognition of financial assets and liabilities valued using valuation techniques incorporating information other than observable market data, any difference between the transaction price and that derived from the valuation technique is deferred. Such amounts are recognised in profit or loss over the life of the transaction; when market data become observable; or when the transaction matures or is closed out as appropriate. At 31 December 2007, net gains of £72 million (2006 – £15 million) were carried forward in the balance sheet. During the year net gains of £67 million (2006 – £3 million) were deferred and £10 million (2006 – £4 million) released to profit or loss.

The following tables analyse the company's financial assets and financial liabilities in accordance with the categories of financial instruments in IAS 39. Assets and liabilities outside the scope of IAS 39 are shown separately.

	Company
2007	Held-for- trading £m	Hedging derivatives £m	Loans and receivables £m	Other (amortised cost) £m	Non financial assets/ liabilities £m	Total £m
Assets
Loans and advances to banks ⁽¹⁾	–	–	7,686		–	7,686
Loans and advances to customers ⁽²⁾	–	–	307		–	307
Investment in Group undertakings	–	–	–		43,542	43,542
Derivatives	173	–	–		–	173
Prepayments, accrued income and other assets	–	–	–		127	127
	173	–	7,993		43,669	51,835
Liabilities
Deposits by banks ⁽³⁾	–	–		5,572	–	5,572
Debt securities in issue	–	–		13,453	–	13,453
Derivatives	125	54		–	–	179
Accruals, deferred income and other liabilities	–	–		–	8	8
Deferred taxation	–	–		–	3	3
Subordinated liabilities	–	–		7,743	–	7,743
	125	54		26,768	11	26,958

Equity						24,877
						51,835

2006
Assets
Loans and advances to banks ⁽¹⁾	–	–	7,252		–	7,252
Loans and advances to customers ⁽²⁾	–	–	286		–	286
Investment in Group undertakings	–	–	–		21,784	21,784
Prepayments, accrued income and other assets	–	–	–		3	3
	–	–	7,538		21,787	29,325
Liabilities
Deposits by banks ⁽³⁾	–	–		738	–	738
Debt securities in issue	–	–		2,139	–	2,139
Derivatives	42	–		–	–	42
Accruals, deferred income and other liabilities	–	–		–	15	15
Subordinated liabilities	–	–		8,194	–	8,194
	42	–		11,071	15	11,128

Equity						18,197
						29,325

Notes:

(1) Includes amounts due from subsidiaries of £7,130 million (2006 – £7,252 million).

(2) Due from subsidiaries.

(3) Due to subsidiaries.

The following table shows the carrying values and the fair values of financial instruments on the balance sheets carried at amortised cost.

	Group				Company
	2007	2007	2006	2006	2007	2007	2006	2006
	Carrying	Fair	Carrying	Fair	Carrying	Fair	Carrying	Fair
	value	value	value	value	value	value	value	value
	£m	£m	£m	£m	£m	£m	£m	£m
Financial assets
Cash and balances at central banks	17,866	17,866	6,121	6,121	–	–	–	–
Loans and advances to banks
Loans and receivables	147,821	147,818	29,494	29,474	7,686	7,686	7,252	7,252
Loans and advances to customers
Loans and receivables	709,226	711,481	381,583	382,671	307	307	286	286
Finance leases	12,570	12,376	11,521	11,504	–	–	–	–
Debt securities
Loans and receivables	2,672	2,644	561	561	–	–	–	–

Settlement balances	16,589	16,589	7,425	7,425	–	–	–	–

Financial liabilities
Deposits by banks
Amortised cost	247,142	246,966	74,691	74,510	5,572	5,572	738	738
Customers accounts
Amortised cost	614,435	614,069	333,503	333,286	–	–	–	–
Debt securities in issue
Amortised cost	222,326	222,206	73,323	73,580	13,453	13,453	2,139	2,139

Settlement balances	17,520	17,520	5,667	5,667	–	–	–	–
Subordinated liabilities
Amortised cost	37,081	35,729	27,530	28,606	7,743	6,983	8,194	8,369

Remaining maturity

	Group
	2007			2006
	Less than 12 months £m	More than 12 months £m	Total £m	Less than 12 months £m	More than 12 months £m	Total £m
Assets
Cash and balances at central banks	17,866	–	17,866	6,121	–	6,121
Treasury and other eligible bills	18,108	121	18,229	5,491	–	5,491
Loans and advances to banks	187,969	31,491	219,460	82,193	413	82,606
Loans and advances to customers	396,453	432,797	829,250	263,504	203,389	466,893
Debt securities	51,980	224,447	276,427	25,324	101,927	127,251
Equity shares	–	53,026	53,026	–	13,504	13,504
Settlement balances	16,561	28	16,589	7,425	–	7,425
Derivatives	56,668	280,742	337,410	27,984	88,697	116,681

Liabilities
Deposits by banks	303,273	9,360	312,633	124,584	7,559	132,143
Customer accounts	650,687	31,678	682,365	372,604	11,618	384,222
Debt securities in issue	155,742	117,873	273,615	41,957	44,006	85,963
Settlement balances and short positions	44,466	46,555	91,021	26,450	23,026	49,476
Derivatives	60,451	271,609	332,060	30,082	88,030	118,112
Subordinated liabilities	1,867	36,112	37,979	675	26,979	27,654

	Company
	2007			2006
	Less than 12 months £m	More than 12 months £m	Total £m	Less than 12 months £m	More than 12 months £m	Total £m
Assets
Loans and advances to banks	1,655	6,031	7,686	1,171	6,081	7,252
Loans and advances to customers	307	–	307	286	–	286
Derivatives	127	46	173	–	–	–

Liabilities
Deposits by banks	5,572	–	5,572	–	738	738
Debt securities in issue	8,855	4,598	13,453	1,681	458	2,139
Derivatives	102	77	179	23	19	42
Subordinated liabilities	119	7,624	7,743	104	8,090	8,194

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Annual Report and Accounts 2007

Notes 6-10

10 Financial instruments

Remaining maturity

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