Annual Financial Report

RNS Number : 3490A

Close Brothers Group PLC

28 September 2020

 

Annual Financial Report

Close Brothers Group plc (the "group" or "Close Brothers") announces that it has today published its Annual Report and Accounts 2020 (the "Annual Report"). The document is available to view on the group's website at:

https://www.closebrothers.com/investor-relations/investor-information/results-reports-and-presentations  

In accordance with Listing Rule 9.6.1, a copy of the document has also been submitted to the UK Listing Authority and will shortly be available for inspection on the National Storage Mechanism at:

https://data.fca.org.uk/#/nsm/nationalstoragemechanism

The Annual Report will be sent to shareholders on or around 15 October 2020, together with the Notice of Annual General Meeting. The 2020 Annual General Meeting ("AGM") will be held at 10 Crown Place, London EC2A 4FT on Thursday 19 November 2020, commencing at 11am.

In light of the ongoing Coronavirus (Covid-19) pandemic, the Board's current expectation is that government guidance will not allow shareholders to attend the AGM in person. If that is the case, the proceedings will be restricted to formal business only and any shareholder seeking to attend (other than those forming the quorum, which will be facilitated by the group) will not be admitted. The Board encourages shareholders to vote on the resolutions to be proposed at the AGM by submitting their proxy forms in advance of the deadline to be set out in the Notice of AGM. Further details regarding the AGM can be found on page 78 of the Annual Report, and will also be set out in the Notice of AGM.

The information included in the Appendix to this announcement has been extracted from the Annual Report and is reproduced here solely for the purposes of complying with the requirements of Disclosure Guidance and Transparency Rule ("DTR") 6.3.5 in respect of how to make annual financial reports available to the public.

The content of this announcement, including the Appendix, should be read in conjunction with the group's preliminary results announcement for the year ended 31 July 2020, which was released on 22 September 2020 and is available on the group's website at:

https://www.closebrothers.com/investor-relations/investor-information/results-reports-and-presentations

Together, these announcements constitute the material required by DTR 6.3.5 to be communicated in unedited full text through a Regulatory Information Service. This material is not a substitute for reading the full Annual Report. Defined terms used in the Appendix refer to terms as defined in the Annual Report. Page numbers and cross references in the Appendix refer to pages and sections of the Annual Report.

Enquiries: Alex Dunn, Company Secretary & Head of Legal (Corporate & Bank Retail)

020 3857 6057

About Close Brothers

Close Brothers is a leading UK merchant banking group providing lending, deposit taking, wealth management services and securities trading.  We employ over 3,500 people, principally in the UK. Close Brothers Group plc is listed on the London Stock Exchange and is a member of the FTSE 250.

Appendix

Directors' Responsibility Statement

The directors, whose names and functions are listed on pages 60 and 61, are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the group financial statements in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union and the parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland", and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and parent company and of the profit or loss of the group and parent company for that period.

In preparing the financial statements, the directors are required to:

·	select suitable accounting policies and then apply them consistently;
·	make judgements and accounting estimates that are reasonable and prudent;
·	state whether applicable IFRSs as adopted by the European Union have been followed for the group financial statements, and whether United Kingdom Accounting Standards, comprising FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" and applicable law have been followed for the parent company financial statements, subject to any material departures disclosed and explained in the group and parent company financial statements; and
·	prepare the group and parent company financial statements on the going concern basis unless it is inappropriate to presume that the group and the parent company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group and parent company's transactions and disclose with reasonable accuracy at any time the financial position of the group and parent company and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006 and, as regards the group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the group and parent company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Each of the directors confirms that, to the best of their knowledge:

·	the group and parent company financial statements, prepared in accordance with the relevant financial reporting frameworks, give a true and fair view of the assets, liabilities, financial position and profit or loss of the group and parent company respectively;
·	the Strategic Report, together with the Directors' Report and the Corporate Governance Report, include a fair review of the development and performance of the business and the position of the group and parent company, together with a description of the principal risks and uncertainties that they face; and
·	the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the group and parent company's position, performance, business model and strategy.

Principal Risks and Uncertainties

Pages 53 to 59 of the Annual Report contain the following statement on principal risks together with the emerging risks and uncertainties faced by the group. Further information on the group's approach to risk can be found in the Risk Report (which forms part of the Strategic Report in the Annual Report) on pages 48 to 59 of the Annual Report.

Principal Risks

The following pages set out the principal risks that may impact the group's ability to deliver its strategy, how we seek to mitigate these risks, and relevant key developments, both over the last year and anticipated for the next financial year.

While we constantly monitor our portfolio for emerging risks, the group's activities, business model and strategy remain unchanged. As a result, the principal risks that the group faces and our approach to mitigating them remain broadly consistent with prior years. This consistency has underpinned the group's track record of trading successfully and supporting our clients over many years.

The summary should not be regarded as a complete and comprehensive statement of all potential risks faced by the group, but reflects those which the group currently believes may have a significant impact on its future performance.

Business Risk

Risk

The group operates in an environment where it is exposed to an array of independent factors. Its profitability is impacted by the broader UK economic climate, changes in technology, regulation and customer behaviour, cost movements and competition from traditional and new players, varying in both nature and extent across its divisions.

Changes in these factors may affect the bank's ability to write loans at its desired risk and return criteria, result in lower new business volumes in Asset Management or impact levels of trading activity at Winterflood.

Risk Management and Mitigation 

The group's long track record of successful trading is supported by a consistent and disciplined approach to pricing and credit quality, both in competitive markets and through periods of heightened risk. This allows us to continue to support our customers at all stages in the financial cycle.

We build long-term relationships with our clients and intermediaries based on:

·	the speed and flexibility of services;
·	our local presence and personal approach;
·	the experience of our people and subject matter experts; and
·	our offering of tailored and client-driven product solutions.

This differentiated approach and the consistency of our lending results in strong customer relationships and high levels of repeat business.

We are further protected by the diversity of our businesses and product portfolio, which provides resilience against competitive pressure or market weakness in any one of the sectors we operate in.

The group is planning for a range of different economic and business scenarios to ensure it has the resources and operational capacity to continue operating effectively.

Change/Outlook

Risk increased

Covid-19 has significantly impacted UK economic activity and has increased uncertainty regarding future economic conditions and the resulting impact on our customers and clients. Whilst a range of measure to support businesses have been introduced, their long-term effectiveness and impact on the broader competitive environment remain uncertain.

We continue to focus on supporting our customers, maintaining underwriting standards and investing in our business.

Further commentary on the market environment and its impact on each of our divisions is outlined on pages 34 to 47. Our business model is set out on pages 12 and 13.

Capital Risk

Risk

The group is required to hold sufficient regulatory capital (including equity and other loss-absorbing debt instruments) to enable it to operate effectively. This includes meeting minimum regulatory requirements, operating within risk appetites set by the board and supporting its strategic goals.

Risk Management and Mitigation 

Capital risk is measured using CET1 and total capital ratios, determined in line with regulatory capital adequacy requirements. These ratios, and associated metrics, are actively monitored, and reported quarterly to the regulator. They are also disclosed annually in the group's Pillar 3 disclosures as well as in the Annual Report - see pages 36 and 37.

Both actual and forecast capital adequacy is reported through the group's governance framework with oversight from the Capital Adequacy Committee. Annually, as part of the ICAAP, the group also undertakes its own assessment of its capital requirements against its principal risks (Pillar 2a) together with an assessment of how capital adequacy could be impacted in a range of stress scenarios (Pillar 2b). Under both assessments, the group ensures that it retains sufficient levels of capital adequacy.

The group retains a range of capital risk mitigants, the most notable being its strong capital generating capacity, arising from its track record of sustained profitability. The group also maintains access to capital markets and has in recent years successfully issued Tier 2 capital instruments.

Change/Outlook

No change

While Covid-19 has affected capital generation due to lower than expected profits, the impact has been offset by a moderation in the loan book, reducing RWAs. Regulatory actions to bolster capital, most notably guidance on distributions and the removal of countercyclical capital buffers, have also increased the group's capital surplus, allowing lending to continue where demand exists.

Further commentary on the group's capital is outlined in note 22 on pages 156 to 158.

Conduct Risk

Risk

The group's relationship-focused model amplifies the importance of exhibiting strong behaviours in order to ensure positive outcomes for our customers.

Failing to treat customers fairly, to safeguard client assets or to provide advice and products which are in clients' best interests, also has the potential to damage our reputation and may lead to legal or regulatory sanctions, litigation or customer redress. This applies to current, past and future business.

Risk Management and Mitigation 

The group is committed to treating all customers fairly and delivering an appropriate product suite.

We seek to mitigate conduct risk by:

·	providing straightforward and transparent products and services to our clients and customers;
·	maintaining a clear governance and approval process for both existing and new products to ensure they meet the needs for which they are designed;
·	employing appropriate arrangements to confirm regulatory requirements and guidance aimed at ensuring positive client and customer outcomes are sufficiently embedded within business practices. A programme of risk-based monitoring is also employed to verify adherence; and
·	utilising a range of regularly reviewed conduct risk measures to identify and respond to adverse thematic trends.

Change/Outlook

Risk increased

Regulatory focus and prioritisation of conduct risk continues to increase. Over the course of the year, the FCA has issued specific guidance around vulnerable customers and motor commissions as well as general guidance aimed at supporting customers during the Covid-19 pandemic, all of which directly impact the group. Separate workstreams have been established to ensure the group can meet all minimum requirements and regulatory expectations.

Credit Risk

Risk

As a lender to businesses and individuals, the bank is exposed to credit losses if customers are unable to repay loans and outstanding interest and fees. At 31 July 2020 the group had loans and advances to customers amounting to £7.6 billion.

The group also has exposure to counterparties with which it places deposits or trades, and also has in place a small number of derivative contracts to hedge interest rate and foreign exchange exposures.

Risk Management and Mitigation 

We seek to minimise our exposure to credit losses from our lending by:

·	applying strict lending criteria when testing the credit quality and covenant of the borrower;
·	maintaining consistent and conservative loan to value ratios with low average loan size and short-term tenors;
·	lending on a predominantly secured basis against identifiable and accessible assets;
·	maintaining rigorous and timely collections and arrears management processes; and
·	operating strong control and governance both within our lending businesses and with oversight by a central credit risk team.

Our exposures to counterparties are mitigated by:

·	excess liquidity of £1.4 billion placed with the Bank of England;
·	continuous monitoring of the credit quality of our counterparties within approved set limits; and
·	Winterflood's trading relating to exchange traded cash securities being settled on a delivery versus payment basis. Counterparty exposure and settlement failure monitoring controls are also in place.

Change/Outlook

Risk increased

Credit losses have increased in the year to 31 July 2020, primarily as a result of Covid-19. The macroeconomic shock resulting from the pandemic has caused increased forbearance levels and migration of accounts from Stage 1 to Stages 2 and 3. Expected Credit Loss ("ECL") has also increased as a result of the IFRS 9 macroeconomic adjustments and management has made further adjustments to modelled outputs where considered appropriate. Other counterparty exposures are broadly unchanged, with the majority of our liquidity requirements and surplus funding placed with the Bank of England.

We continue to closely monitor Covid-19 impacts as well as uncertainty over Brexit and the UK economic outlook. These factors could increase the risk of higher credit losses in the future.

Further commentary on the credit quality of our loan book is outlined on pages 38 to 43. Further details on loans and advances to customers and debt securities held are in notes 11 and 12 on pages 144 to 148 of the financial statements.

Our approach to credit risk management and monitoring is outlined in more detail in note 28 on pages 165 to 178.

Funding and Liquidity Risk

Risk

The Banking division's access to funding remains key to support our lending activities and the liquidity requirements of the group.

Risk Management and Mitigation 

Our funding approach is based on the principles of "borrow long, lend short" and diversity by source and channel. This approach provides resilience and flexibility.

Total available funding is kept well in excess of the loan book to ensure funding is available when needed.

A strong liquidity position is maintained to ensure that we remain comfortably ahead of both internal risk appetites and regulatory requirements. Liquidity risk is assessed on a daily basis to ensure adequate liquidity is held and remains readily accessible in stressed conditions.

Funding and liquidity risks are reviewed at each meeting of the bank's Asset and Liability Committee.

Change/Outlook

No change

While economic uncertainty has the potential to impact funding markets, the group remains conservatively funded and continues to have access to a wide range of funding sources and products.

During the last year, a third public motor finance securitisation was executed, evidencing our ability to access debt markets, while online savings were introduced.

In response to Covid-19, Treasury successfully migrated its funding and liquidity operations to remote working while funding was increased through an uplift in customer deposits. This action facilitated an increase in treasury assets, predominantly deposits placed with the Bank of England, ensuring the maintenance of sufficient headroom to both internal and external liquidity requirements.

Further commentary on funding and liquidity is provided on pages 36 and 37. Further financial analysis of our funding is shown in note 19 on page 155 of the financial statements.

Market risk

Risk

Market volatility impacting equity and fixed income exposures, and/or changes in interest and exchange rates, have the potential to impact the group's performance.

Risk Management and Mitigation 

Our policy is to minimise interest rate risk by matching fixed and variable interest rate assets and liabilities, and using swaps where appropriate. The capital and reserves of the group do not have interest rate liabilities and as such are not hedged.

When measuring interest rate risk in the Banking book the following components are considered:

·	repricing risk: the risk presented by assets and liabilities that reprice at different times and rates;
·	embedded optionality risk: the risk presented by contract terms embedded in certain assets and liabilities; and
·	basis risk: the risk presented when yields on assets, and costs on liabilities, are based on two different bases.

Two core measures are subsequently monitored on a monthly basis: Earnings at Risk ("EaR") and Economic Value ("EV").

Foreign exchange exposures are generally hedged using foreign exchange forwards or currency swaps with exposures monitored daily against approved limits.

Winterflood is a market maker providing liquidity to its clients in equity and fixed income instruments. Our trading is predominantly short term, with most transactions settling within two days. Trading positions are monitored on a real time basis.

Change/Outlook

Risk increased

Interest rate risk has increased during the year with base rates currently at historic lows, increasing the potential for a negative rate environment. Where relevant, systems have been tested and confirmed as able to support negative rates.

The traded market risk environment has also been affected by Covid-19 and its impact on the economy, driving elevated volatility and an increase in corporate insolvencies.

Further detail on the group's exposure to market risk is outlined in note 28 on pages 175 and 176 of the financial statements.

The sensitivity analysis on interest rate exposures shown in note 28 on page 175 demonstrates the limited level of exposure to interest rate and foreign exchange movements.

Operational Risk

Risk

The group is exposed to various operational risks through its day-to-day operations, all of which have the potential to result in financial loss or adverse impact.

Losses typically crystallise as a result of inadequate or failed internal processes, people, models and systems, or as a result of external factors.

Impacts to the business, customers, third parties and the markets in which we operate are considered within a maturing framework for resilient end-to-end delivery of critical business services.

Legal and regulatory risks are also considered as part of operational risk. Failure to comply with existing legal or regulatory requirements, or to react to changes to these requirements, may have negative consequences for the group. Similarly, changes to regulation can impact our financial performance, capital, liquidity and the markets in which we operate.

Risk Management and Mitigation 

The group seeks to maintain its operational resilience through effective management of operational risks, including by:

·	sustaining robust operational risk management processes, governance and management information;
·	identifying key systems, third party relationships, processes and staff, informing investment decisions;
·	investing in technology to provide reliable and contemporary customer service offerings and effective model outputs;
·	attracting, retaining and developing high-quality staff through the operation of competitive remuneration and benefit structures and an inclusive environment that embraces diversity and recognises behaviours aligned to our cultural attributes;
·	investing in cyber security including expertise, tools and staff engagement;
·	maintaining focus on data protection;
·	adopting fraud prevention and detection capabilities aligned with our risk profile; and
·	planning and rehearsing strategic and operational responses to severe but plausible stress scenarios.

Legal and regulatory risks are mitigated by:

·	responding in an appropriate, risk-based and proportionate manner to any changes to the legal and regulatory environment as well as those driven by strategic initiatives;
·	implementing appropriate and proportionate policies, standards and procedures designed to capture relevant regulatory and legal requirements;
·	providing clear advice on legal and regulatory requirements, including in relation to the scope of regulatory permissions and perimeter guidance;
·	delivering relevant training to all staff, including anti-money laundering, anti-bribery and corruption, conduct risk, data protection and information security. This is augmented by tailored training to relevant employees in key areas;
·	deploying a risk-based monitoring programme designed to assess the extent to which compliant practices are embedded within the business;
·	maintaining, where possible, constructive and positive relationships and dialogue with regulatory bodies and authorities; and
·	maintaining a prudent capital position with headroom above minimum capital requirements.

Change/Outlook

Risk increased

Existing incident and crisis management capabilities were mobilised upon the emergence of Covid-19, enabling the business to sustain operations whilst adjusting to new ways of working. Notwithstanding, the current pandemic may lead to increased risks associated with people, operational process execution, third party management, information security and fraud. The group continues to utilise its operational risk management framework to manage these risks with oversight by relevant risk committees.

Despite the challenges arising from Covid-19, improvements are continuing across the operational risk framework including further enhancement of information security management and strengthening of the firm's operational resilience.

The volume and complexity of regulatory and legal requirements applicable to the group also continues to increase.

We continue to invest in experienced people and relevant systems and processes to help us navigate the increasingly complex regulatory and legal landscape. Arrangements in place to mitigate these risks continue to evolve in their sophistication, application and effectiveness.

Reputational Risk

Risk

Protection and effective stewardship of the group's reputation are fundamental to its long-term success.

Detrimental stakeholder perception could lead to impairment of the group's current business and future goals. This could arise from any action or inaction of the company, its employees or associated third parties.

Risk Management and Mitigation 

Reputational risk monitoring and management are embedded throughout the organisation, including via:

·	focus on employee conduct, with cultural attributes embedded throughout the group;
·	supplier and intermediary conduct management through the relationship lifecycle;
·	new product approval and existing product review processes for business products and services;
·	a proactive approach to environmental, social and governance matters;
·	embedding of reputational risk management within the management frameworks of other risk types; and
·	proactive communication and engagement with investors, analysts and other market participants.

A key responsibility of the group's board is to define, promote and monitor the company's culture, and adherence to our cultural framework is reported regularly to the board via the group's culture dashboard; see page 75 of the Corporate Governance Report.

Change/Outlook

No change

The group's strong culture, responsible approach to stakeholders and commitment to open and transparent communication continue to mitigate potential reputational risk, despite heightened business, conduct and operational risks arising from Covid-19.

The group's prudent business model also continues to act as a natural mitigant of reputational risk.

The group's proactive approach to engaging with emerging topics such as environmental, social and governance matters continues to mitigate the risk of rapidly changing external factors.

Note: Both Defined Benefit Pension Obligation Risk and Tax Risk are also classified internally as principal risks, however neither is deemed sufficiently material to impact the group's ability to deliver its strategy. The group's defined benefit pension scheme was closed to new entrants in 1996 and to future accrual in 2012. For further information see note 25 on pages 160 and 161.

Emerging Risks and Uncertainties

In addition to day-to-day management of its principal risks, the group utilises an established framework to monitor its portfolio for emerging risks and consider broader market uncertainties, supporting organisational readiness for external volatility.

This incorporates input and insight from both a top-down and bottom-up perspective:

·	Top-down: identified by directors and executives at a group level via the Group Risk and Compliance Committee and the board.
·	Bottom-up: identified at a business-level and escalated, where appropriate, via risk updates into the Group Risk and Compliance Committee.

Group-level emerging risks are monitored by the Group Risk and Compliance Committee on an ongoing basis, with agreed actions tracked to ensure the group's preparedness should an emerging risk crystallise.

Emerging risks and uncertainties currently tracked by the group are detailed below.

Risk

Economic Uncertainty

Mitigating Actions and Key Developments

The group's business model aims to ensure that we are able to trade successfully and support our clients in all economic conditions. By maintaining a strong financial position we aim to be able to absorb short-term economic downturns, continuing to lend when competitors pull back and in so doing building long-term relationships by supporting our clients when it really matters.

We test the robustness of our financial position by carrying out regular stress testing on our performance and financial position in the event of adverse economic conditions.

Outlook

Covid-19 has notably increased economic uncertainty in the UK and across global markets more generally. Notwithstanding the resilience of our model, we are continuing to plan for a range of different economic and business scenarios.

Further commentary on the attributes and resilience of the group's diversified business model is shown on pages 12 and 13 with commentary on the market  environment and its impact on each of our divisions outlined on pages 34 to 46.

Risk

Economic and Political Uncertainty as a Result of the UK's Exit from the EU

Mitigating Actions and Key Developments

A transition programme was implemented in 2016 with group-wide participation and regular senior management oversight. This included the launch of a Brexit Forum, responsible for tracking ongoing developments and progressing appropriate contingency plans.

Preparations have been made for a potential "no deal" exit, including the establishment of a new Irish subsidiary and subsequent approval of a MoneyLender licence in the Republic of Ireland to support continuation of our continental Retail and SME Premium Finance business.

Outlook

While direct impact remains low given the group's limited presence within the European Union, developments continue to be closely monitored ahead of the end of the current transition period.

Plans are now in place for all plausible outcomes and will be initiated as required.

Risk

Financial Loss Resulting from the Physical or Transitional Impacts of Climate Change

Mitigating Actions and Key Developments

Development of an appropriate and regulatory-compliant climate risk framework is ongoing and is managed by a Climate Risk Working Group. Regular updates are provided to the Risk Committee which retains oversight responsibility, while senior management responsibility is assigned to the group chief risk officer.

Climate risk is now embedded within the risk governance framework at all levels of the organisation with a review of processes, procedures and policies underway to ensure appropriate consideration of climate-related risks. A group-wide impact analysis exercise has identified a set of core risk themes with work underway to enhance corresponding risk management frameworks.

Outlook

Climate risk represents an area of increasing focus, both within the group and across the industry more broadly. We are closely monitoring regulatory developments as well as emerging best practice and are exploring various avenues to leverage this as appropriate to support framework development.

The short-dated tenor of our lending book and strong resilience capabilities mitigate current risk exposure, however a strategic review is underway to further assess both the opportunities and risks posed by climate change. Outputs from this will further shape the group's response and support our planned alignment with the recommendations of the Taskforce for Climate Related Financial Disclosures ("TCFD").

Risk

Transition from LIBOR

Mitigating Actions and Key Developments

A programme is underway to transition the firm away from the use of LIBOR in loan documentation, Treasury transactions and other forms of contract in favour of alternative Risk-Free Rates ("RFRs").

The scope of this work encompasses both new contracts and existing contracts that mature after 31 December 2021, the deadline set by the Prudential Regulatory Authority and the Financial Conduct Authority.

Outlook

We have made good progress in making the relevant changes to loan documentation to move away from the use of LIBOR and upgrading, where necessary, our processing systems. We will continue to support industry initiatives relating to the transition from LIBOR and remain on track to effect the necessary changes by 31 December 2021.

Risk

Disruption from Scottish Independence

Mitigating Actions and Key Developments

Monitoring is in place to track changes in the political landscape with regard to Scottish independence.

In the event that Scotland does vote for independence in a future referendum, we are confident that any resulting disruption can be managed effectively with minimal impact on business operations.

Outlook

An increase in support for Scottish independence has been observed in recent opinion polls. We continue to monitor developments closely.

Risk

Legal and Regulatory Change

Mitigating Actions and Key Developments

The group maintains an established horizon scanning framework to identify future regulatory and legal changes that could materially impact its operations.

High-level gap and impact analyses are undertaken to assess new compliance requirements with programmes of work initiated to address any identified issues. The extent and nature of this work ranges from simple isolated remedial activity to large multi-year projects, depending on the complexity and scale of the change.

Outlook

A sustained increase in legal and regulatory change has been experienced in recent years and this is expected to continue in the short to medium term with the continued implementation of existing EU legislation into UK law, and possible future regulatory and legal divergence. The evolving government and regulatory response to Covid-19 is also expected to drive further change.

Related party transactions

Page 159 of the Annual Report discloses the following related party transactions.

Transactions with key management

Details of directors' remuneration and interests in shares are disclosed in the Directors' Remuneration Report on pages 87 to 114.

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of an entity; the group's key management are the members of the group's Executive Committee, which includes all executive directors, together with its non-executive directors.

The table below details, on an aggregated basis, key management personnel emoluments :

	2020 £ million	2019 £ million
Emoluments Salaries and fees  Benefits and allowances  Performance related awards in respect of the current year: Cash  Deferred	4.0 0.4 3.6 1.5	3.9 0.5 3.4 2.1
	9.5	9.9
Share-based awards	0.9	1.7
	10.4	11.6

Gains upon exercise of options by key management personnel, expensed to the income statement in previous years, totalled £4.2 million (2019: £4.1 million).

Key management have banking and asset management relationships with group entities which are entered into in the normal course of business. Amounts included in deposits by customers at 31 July 2020 attributable, in aggregate, to key management were £0.3 million (31 July 2019: £0.1 million).

 

END

 

 

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