Final Results - Part 12 of 13

RNS Number : 7733B
Royal Bank of Scotland Group PLC
24 February 2011
 



 

 

 

 

 

 

 

 

 

Appendix 3

 

Additional risk management

disclosures

 

 



 

Contents




Page 



Credit risk



Other risk exposures

16 

 

 

Presentation of information

The disclosures in this section include only those businesses of RBS N.V. that are retained by RBS.

Appendix 3 Additional risk management disclosures

 

Risk management: Credit risk

 

Loans, REIL and impairment provisions by geography and industry

The tables below analyse loans and advances (excluding reverse repos and disposal groups) and related REIL, provisions, impairments and write-offs by industry and geography (by location of office), for the Group, Core and Non-Core.

 

 

Gross 

loans 

£m 

REIL 

£m 

Provisions 

£m 

REIL 

 as a %

 of loans 

Provisions 

  as a %

of REIL 

%

Provisions 

as a % 

 gross 

 loans 

Impairment 

charge 

£m 

Amounts 

written-off 

£m 

31 December 2010


 

 

 

 

 

 

 

 

Group

 

 

 

 

 

 

 

 

Central and local government

8,452 

Finance   - banks

58,036 

145 

127 

0.2 

88 

0.2 

(13)

12 

                - other

54,561 

1,129 

595 

2.1 

53 

1.1 

198 

141 

Residential mortgages

146,501 

4,276 

877 

2.9 

21 

0.6 

1,014 

669 

Personal lending

37,472 

3,544 

2,894 

9.5 

82 

7.7 

1,370 

1,577 

Property

90,106 

19,584 

6,736 

21.7 

34 

7.5 

4,682 

1,009 

Construction

12,032 

2,464 

875 

20.5 

36 

7.3 

530 

146 

Manufacturing

32,317 

1,199 

503 

3.7 

42 

1.6 

(92)

1,547 

Service industries and business activities

117,510 

5,258 

2,285 

4.5 

43 

1.9 

1,293 

822 

Agriculture, forestry and fishing

3,893 

152 

86 

3.9 

57 

2.2 

31 

Finance leases and instalment

  credit

16,850 

847 

554 

5.0 

65 

3.3 

252 

113 

Interest accruals

1,109 

Latent

2,650 

(121)


 

 

 

 

 

 

 

 


578,839 

38,598 

18,182 

6.7 

47 

3.1 

9,144 

6,042 


 

 

 

 

 

 

 

 

of which:

 

 

 

 

 

 

 

 

UK

382,609 

18,111 

8,537 

4.7 

47 

2.2 

3,912 

2,271 

Europe

94,119 

16,436 

7,270 

17.5 

44 

7.7 

3,878 

1,663 

US

75,430 

2,330 

1,643 

3.1 

71 

2.2 

1,020 

1,660 

RoW

26,681 

1,721 

732 

6.5 

43 

2.7 

334 

448 


 

 

 

 

 

 

 

 


578,839 

38,598 

18,182 

6.7 

47 

3.1 

9,144 

6,042 

 



 

Appendix 3 Additional risk management disclosures (continued)

 

Risk management: Credit risk (continued)

 

Loans, REIL and impairment provisions by geography and industry (continued)

 


Gross 

loans 

£m 

REIL 

£m 

Provisions 

£m 

REIL 

 as a % 

 of loans 

Provisions 

  as a % 

of REIL 

Provisions 

as a % 

 gross loans 

Impairment 

charge 

£m 

Amounts 

written-off 

£m 

30 September 2010










Group









Central and local government

10,970 

Finance   - banks

60,457 

142 

127 

0.2 

89 

0.2 

11 

                - other

63,373 

1,014 

561 

1.6 

55 

0.9 

269 

130 

Residential mortgages

145,808 

4,194 

753 

2.9 

18 

0.5 

737 

512 

Personal lending

38,312 

3,839 

3,129 

10.0 

82 

8.2 

1,136 

1,071 

Property

92,188 

19,270 

6,273 

20.9 

33 

6.8 

3,564 

513 

Construction

12,617 

2,225 

764 

17.6 

34 

6.1 

384 

114 

Manufacturing

35,594 

1,120 

515 

3.1 

46 

1.4 

(257)

1,480 

Service industries and business activities

123,721 

5,381 

2,215 

4.3 

41 

1.8 

1,001 

622 

Agriculture, forestry and fishing

4,110 

173 

93 

4.2 

54 

2.3 

27 

Finance leases and instalment

  credit

17,774 

837 

482 

4.7 

58 

2.7 

133 

69 

Interest accruals

1,125 

Latent

2,758 

(5)











606,049 

38,195 

17,670 

6.3 

46 

2.9 

6,989

4,526 










of which:









UK

400,336 

19,008 

8,634 

4.7 

45 

2.2 

3,192 

1,387 

Europe

101,342 

14,695 

6,202 

14.5 

42 

6.1 

2,465 

1,584 

US

75,813 

2,465 

1,798 

3.3 

73 

2.4 

937 

1,327 

RoW

28,558 

2,027 

1,036 

7.1 

51 

3.6 

395 

228 











606,049 

38,195 

17,670 

6.3 

46 

2.9 

6,989 

4,526 

 

 



 

Appendix 3 Additional risk management disclosures (continued)

 

Risk management: Credit risk (continued)

 

Loans, REIL and impairment provisions by geography and industry (continued)

 


Gross 

loans 

£m 

REIL 

£m 

Provisions 

£m 

REIL 

 as a % 

 of loans 

Provisions 

  as a % 

of REIL 

Provisions 

as a % 

 gross loans 

Impairment 

charge 

£m 

Amounts 

written-off 

£m 

31 December 2009










Group









Central and local government

7,660 

Finance  - banks

48,934 

206 

157 

0.4 

76 

0.3 

34 

               - other

60,386 

1,539 

419 

2.5 

27 

0.7 

886 

692 

Residential mortgages

140,907 

3,284 

551 

2.3 

17 

0.4 

909 

642 

Personal lending

41,671 

3,940 

2,926 

9.5 

74 

7.0 

2,517 

2,002 

Property

99,426 

14,318 

3,422 

14.4 

24 

3.4 

3,296 

650 

Construction

14,760 

2,232 

519 

15.1 

23 

3.5 

479 

287 

Manufacturing

44,674 

3,131 

2,088 

7.0 

67 

4.7 

1,520 

784 

Service industries and business activities

134,076 

5,308 

1,860 

4.0 

35 

1.4 

1,964 

1,281 

Agriculture, forestry and fishing

4,279 

137 

73 

3.2 

53 

1.7 

30 

Finance leases and instalment

  credit

20,103 

894 

418 

4.4 

47 

2.1 

271 

135 

Interest accruals

1,728 

Latent

2,740 

1,184 











618,604 

34,989 

15,173 

5.7 

43 

2.5 

13,090 

6,478 










of which:









UK

394,297 

16,104 

6,922 

4.1 

43 

1.8 

5,593 

2,924 

Europe

107,803 

13,390 

5,449 

12.4 

41 

5.1 

3,270 

427 

US

84,072 

4,115 

2,020 

4.9 

49 

2.4 

3,273 

2,656 

RoW

32,432 

1,380 

782 

4.3 

57 

2.4 

954 

471 











618,604 

34,989 

15,173 

5.7 

43 

2.5 

13,090 

6,478 



 

Appendix 3 Additional risk management disclosures (continued)

 

Risk management: Credit risk (continued)

 

Loans, REIL and impairment provisions by geography and industry (continued)

 


Gross 

loans 

£m 

REIL 

£m 

Provisions 

£m 

REIL 

 as a % 

 of loans 

Provisions 

  as a % 

of REIL 

Provisions 

as a % 

 gross 

 loans 

Impairment 

charge 

£m 

Amounts 

written-off 

£m 

31 December 2010










Core









Central and local government

6,781 

Finance  - banks

57,033 

144 

126 

0.3 

88 

0.2 

(5)

               - other

46,910 

567 

402 

1.2 

71 

0.9 

191 

53 

Residential mortgages

140,359 

3,999 

693 

2.8 

17 

0.5 

578 

243 

Personal lending

33,581 

3,131 

2,545 

9.3 

81 

7.6 

1,157 

1,271 

Property

42,455 

3,287 

818 

7.7 

25 

1.9 

739 

98 

Construction

8,680 

610 

222 

7.0 

36 

2.6 

189 

38 

Manufacturing

25,797 

555 

266 

2.2 

48 

1.0 

119 

124 

Service industries and business activities

95,127 

2,576 

948 

2.7 

37 

1.0 

687 

349 

Agriculture, forestry and fishing

3,758 

94 

57 

2.5 

61 

1.5 

24 

Finance leases and instalment

  credit

8,321 

244 

140 

2.9 

57 

1.7 

63 

42 

Interest accruals

831 

Latent

1,649 

(5)











469,633 

15,207 

7,866 

3.2 

52 

1.7 

3,737 

2,224 










of which:









UK

319,679 

9,337 

4,797 

2.9 

51 

1.5 

2,234 

1,519 

Europe

65,874 

3,905 

2,027 

5.9 

52 

3.1 

936 

111 

US

62,085 

1,027 

824 

1.7 

80 

1.3 

425 

556 

RoW

21,995 

938 

218 

4.3 

23 

1.0 

142 

38 











469,633 

15,207 

7,866 

3.2 

52 

1.7 

3,737 

2,224 

 

 



 

Appendix 3 Additional risk management disclosures (continued)

 

Risk management: Credit risk (continued)

 

Loans, REIL and impairment provisions by geography and industry (continued)

 


Gross 

loans 

£m 

REIL 

£m 

Provisions 

£m 

REIL 

 as a % 

 of loans 

Provisions 

  as a % 

of REIL 

Provisions 

as a % 

 gross loans 

Impairment 

charge 

£m 

Amounts 

written-off 

£m 

30 September 2010










Core

 

 

 

 

 




Central and local government

9,766 


Finance  - banks

59,279 

141 

127 

0.2 

90 

0.2 

               - other

54,723 

610 

408 

1.1 

67 

0.7 

199 

45 

Residential mortgages

139,457 

3,910 

590 

2.8 

15 

0.4 

389 

174 

Personal lending

34,129 

3,353 

2,762 

9.8 

82 

8.1 

947 

812 

Property

42,269 

2,751 

613 

6.5 

22 

1.5 

517 

81 

Construction

8,994 

486 

171 

5.4 

35 

1.9 

120 

26 

Manufacturing

26,255 

438 

246 

1.7 

56 

0.9 

54 

72 

Service industries and business activities

97,738 

2,307 

882 

2.4 

38 

0.9 

475 

239 

Agriculture, forestry and fishing

3,952 

111 

54 

2.8 

49 

1.4 

22 

Finance leases and instalment

  credit

8,233 

231 

134 

2.8 

58 

1.6 

39 

25 

Interest accruals

847 

Latent

1,804 

63 











485,642 

14,338 

7,791 

3.0 

54 

1.6 

2,825 

1,479 










of which:

 

 

 

 

 

 



UK

330,939 

9,081 

4,698 

2.7 

52 

1.4 

1,621 

953 

Europe

71,092 

3,421 

1,999 

4.8 

58 

2.8 

738 

92 

US

60,872 

961 

891 

1.6 

93 

1.5 

387 

426 

RoW

22,739 

875 

203 

3.8 

23 

0.9 

79 


 

 

 

 

 

 




485,642 

14,338 

7,791 

3.0 

54 

1.6 

2,825 

1,479 

 



 

Appendix 3 Additional risk management disclosures (continued)

 

Risk management: Credit risk (continued)

 

Loans, REIL and impairment provisions by geography and industry (continued)

 


Gross 

loans 

£m 

REIL 

£m 

Provisions 

£m 

REIL 

 as a % 

 of loans 

Provisions 

  as a % 

of REIL 

Provisions 

as a % 

gross loans

%

Impairment 

charge 

£m 

Amounts 

written-off 

£m 

31 December 2009










Core

 

 

 

 

 

 

 

 

Central and local government

6,128 

Finance   - banks

47,574 

168 

135 

0.4 

80 

0.3 

12 

                - other

50,673 

1,038 

259 

2.0 

25 

0.5 

256 

113 

Residential mortgages

127,975 

2,670 

341 

2.1 

13 

0.3 

305 

146 

Personal lending

35,313 

3,344 

2,560 

9.5 

77 

7.2 

1,816 

1,398 

Property

49,054 

1,766 

468 

3.6 

27 

1.0 

417 

37 

Construction

9,502 

457 

131 

4.8 

29 

1.4 

58 

30 

Manufacturing

30,272 

491 

191 

1.6 

39 

0.6 

136 

93 

Service industries and business activities

100,438 

1,762 

669 

1.8 

38 

0.7 

500 

365 

Agriculture, forestry and fishing

3,726 

90 

46 

2.4 

51 

1.2 

24 

Finance leases and instalment

  credit

8,147 

303 

116 

3.7 

38 

1.4 

52 

100 

Interest accruals

1,179 

Latent

2,005 

991 











469,981 

12,089 

6,921 

2.6 

57 

1.5 

4,567 

2,286 










of which:

 

 

 

 

 

 

 

 

UK

315,254 

7,704 

4,209 

2.4 

55 

1.3 

2,884 

1,645 

Europe

66,707 

2,607 

1,709 

3.9 

66 

2.6 

750 

46 

US

64,526 

1,497 

876 

2.3 

59 

1.4 

813 

576 

RoW

23,494 

281 

127 

1.2 

45 

0.5 

120 

19 


 

 

 

 

 

 

 

 


469,981 

12,089 

6,921 

2.6 

57 

1.5 

4,567 

2,286 

 



 

Appendix 3 Additional risk management disclosures (continued)

 

Risk management: Credit risk (continued)

 

Loans, REIL and impairment provisions by geography and industry (continued)

 


Gross 

loans 

£m 

REIL 

£m 

Provisions 

£m 

REIL 

 as a %

 of loans 

Provisions

  as a %

of REIL 

Provisions 

as a % 

 gross 

 loans 

Impairment 

charge 

£m 

Amounts 

written-off 

£m 

31 December 2010










Non-Core

 

 

 

 

 

 

 

 

Central and local government

1,671 

Finance  - banks

1,003 

0.1 

100 

0.1 

(8)

11 

               - other

7,651 

562 

193 

7.3 

34 

2.5 

88 

Residential mortgages

6,142 

277 

184 

4.5 

66 

3.0 

436 

426 

Personal lending

3,891 

413 

349 

10.6 

85 

9.0 

213 

306 

Property

47,651 

16,297 

5,918 

34.2 

36 

12.4 

3,943 

911 

Construction

3,352 

1,854 

653 

55.3 

35 

19.5 

341 

108 

Manufacturing

6,520 

644 

237 

9.9 

37 

3.6 

(211)

1,423 

Service industries and business  activities

22,383 

2,682 

1,337 

12.0 

50 

6.0 

606 

473 

Agriculture, forestry and fishing

135 

58 

29 

43.0 

50 

21.5 

Finance leases and instalment

  credit

8,529 

603 

414 

7.1 

69 

4.9 

189 

71 

Interest accruals

278 

Latent

1,001 

(116)











109,206 

23,391 

10,316 

21.4 

44 

9.4 

5,407 

3,818 










of which:









UK

62,930 

8,774 

3,740 

13.9 

43 

5.9 

1,678 

752 

Europe

28,245 

12,531 

5,243 

44.4 

42 

18.6 

2,942 

1,552 

US

13,345 

1,303 

819 

9.8 

63 

6.1 

595 

1,104 

RoW

4,686 

783 

514 

16.7 

66 

11.0 

192 

410 











109,206 

23,391 

10,316 

21.4 

44 

9.4 

5,407 

3,818 

 



 

Appendix 3 Additional risk management disclosures (continued)

 

Risk management: Credit risk (continued)

 

Loans, REIL and impairment provisions by geography and industry (continued)

 


Gross 

loans 

£m 

REIL 

£m 

Provisions 

£m 

REIL 

 as a %

 of loans 

%

Provisions 

  as a %

of REIL 

%

Provisions 

as a %

 gross loans

%

Impairment 

charge 

£m 

Amounts 

written-off 

£m 

30 September 2010










Non-Core

 

 

 

 

 

 

 

 

Central and local government

1,204 

Finance  - banks

1,178 

0.1 

10 

               - other

8,650 

404 

153 

4.7 

38 

1.8 

70 

85 

Residential mortgages

6,351 

284 

163 

4.5 

57 

2.6 

348 

338 

Personal lending

4,183 

486 

367 

11.6 

76 

8.8 

189 

259 

Property

49,919 

16,519 

5,660 

33.1 

34 

11.3 

3,047 

432 

Construction

3,623 

1,739 

593 

48.0 

34 

16.4 

264 

88 

Manufacturing

9,339 

682 

269 

7.3 

39 

2.9 

(311)

1,408 

Service industries and business activities

25,983 

3,074 

1,333 

11.8 

43 

5.1 

526 

383 

Agriculture, forestry and fishing

158 

62 

39 

39.2 

63 

24.7 

Finance leases and instalment

  credit

9,541 

606 

348 

6.4 

57 

3.6 

94 

44 

Interest accruals

278 

Latent

954 

(68)











120,407 

23,857 

9,879 

19.8 

41 

8.2 

4,164 

3,047 










of which:









UK

69,397 

9,927 

3,936 

14.3 

40 

5.7 

1,571 

434 

Europe

30,250 

11,274 

4,203 

37.3 

37 

13.9 

1,727 

1,492 

US

14,941 

1,504 

907 

10.1 

60 

6.1 

550 

901 

RoW

5,819 

1,152 

833 

19.8 

72 

14.3 

316 

220 


 

 

 

 

 

 

 



120,407 

23,857 

9,879 

19.8 

41 

8.2 

4,164 

3,047 

 

 

 



 

Appendix 3 Additional risk management disclosures (continued)

 

Risk management: Credit risk (continued)

 

Loans, REIL and impairment provisions by geography and industry (continued)

 


Gross 

loans 

£m 

REIL 

£m 

Provisions 

£m 

REIL 

 as a % 

of loans 

Provisions 

as a % 

of REIL 

Provisions 

as a %

 gross loans

%

Impairment 

charge 

£m 

Amounts 

written-off 

£m 

31 December 2009










Non-Core

 

 

 

 

 

 

 

 

Central and local government

1,532 

Finance  - banks

1,360 

38 

22 

2.8 

58 

1.6 

22 

               - other

9,713 

501 

160 

5.2 

32 

1.6 

630 

579 

Residential mortgages

12,932 

614 

210 

4.7 

34 

1.6 

604 

496 

Personal lending

6,358 

596 

366 

9.4 

61 

5.8 

701 

604 

Property

50,372 

12,552 

2,954 

24.9 

24 

5.9 

2,879 

613 

Construction

5,258 

1,775 

388 

33.8 

22 

7.4 

421 

257 

Manufacturing

14,402 

2,640 

1,897 

18.3 

72 

13.2 

1,384 

691 

Service industries and business activities

33,638 

3,546 

1,191 

10.5 

34 

3.5 

1,464 

916 

Agriculture, forestry and fishing

553 

47 

27 

8.5 

57 

4.9 

Finance leases and instalment

  credit

11,956 

591 

302 

4.9 

51 

2.5 

219 

35 

Interest accruals

549 

Latent

735 

193 











148,623 

22,900 

8,252 

15.4 

36 

5.6 

8,523 

4,192 










of which:









UK

79,043 

8,400 

2,713 

10.6 

32 

3.4 

2,709 

1,279 

Europe

41,096 

10,783 

3,740 

26.2 

35 

9.1 

2,520 

381 

US

19,546 

2,618 

1,144 

13.4 

44 

5.9 

2,460 

2,080 

RoW

8,938 

1,099 

655 

12.3 

60 

7.3 

834 

452 


 

 

 

 

 

 

 

 


148,623 

22,900 

8,252 

15.4 

36 

5.6 

8,523 

4,192 

 



 

Appendix 3 Additional risk management disclosures (continued)

 

Risk management: Credit risk (continued)

 

Loans, REIL, PPL and provision coverage ratios by division

The table below analyses the Group's loans and advances to banks and customers (excluding reverse repos and disposal groups) and related REIL, PPL, provisions, impairments, write-offs and coverage ratios by division.

 


Gross

loans 

REIL 

PPL 

REIL & 

 PPL 

Provisions

Provisions

as a % of REIL

Provisions

as  a% of REIL

& PPL

REIL & PPL

as a % of

gross loans

Impairment charge

Amounts 

written-off 


£m 

£m 

 £m 

£m 

£m 

£m 

£m 












31 December 2010











UK Retail

108,813 

4,620 

175 

4,795 

2,741 

59 

57 

4.4 

1,160 

1,135 

UK Corporate

111,744 

3,967 

221 

4,188 

1,732 

44 

41 

3.7 

761 

349 

Wealth

18,350 

223 

38 

261 

66 

30 

25 

1.4 

18 

Global Transaction Services

17,484 

146 

152 

147 

101 

97 

0.9 

49 

Ulster Bank

39,786 

3,619 

3,621 

1,633 

45 

45 

9.1 

1,161 

48 

US Retail & Commercial

48,661 

913 

913 

505 

55 

55 

1.9 

483 

547 












Retail and Commercial

344,838 

13,488 

442 

13,930 

6,824 

51 

49 

4.0 

3,591 

2,137 

Global Banking & Markets

122,054 

1,719 

31 

1,750 

1,042 

61 

60 

1.4 

146 

87 

Insurance and other

2,741 












Core

469,633 

15,207 

473 

15,680 

7,866 

52 

50 

3.3 

3,737 

2,224 

Non-Core

109,206 

23,391 

160 

23,551 

10,316 

44 

44 

21.6 

5,407 

3,818 













578,839 

38,598 

633 

39,231 

18,182 

47 

46 

6.8 

9,144 

6,042 












30 September 2010











UK Retail

108,072 

4,994 

4,994 

2,937 

59 

59 

4.6 

938 

696 

UK Corporate

113,530 

3,343 

299 

3,642 

1,623 

49 

45 

3.2 

542 

228 

Wealth

17,247 

203 

35 

238 

63 

31 

26 

1.4 

12 

Global Transaction Services

16,885 

171 

11 

182 

173 

101 

95 

1.1 

15 

Ulster Bank

43,432 

3,172 

3,173 

1,289 

41 

41 

7.3 

785 

39 

US Retail & Commercial

48,090 

833 

833 

523 

63 

63 

1.7 

393 

412 












Retail & Commercial

347,256 

12,716 

346 

13,062 

6,608 

52 

51 

3.8 

2,676 

1,396 

Global Banking & Markets

135,534 

1,622 

22 

1,644 

1,183 

73 

72 

1.2 

149 

83 

RBS Insurance and other

2,851 

-












Core

485,641 

14,338 

368 

14,706 

7,791 

54 

53 

3.0 

2,825 

1,479 

Non-Core

120,408 

23,857 

249 

24,106 

9,879 

41 

41 

20.0 

4,164 

3,047 













606,049 

38,195 

617 

38,812 

17,670 

46 

46 

6.4 

6,989 

4,526 

 



 

Appendix 3 Additional risk management disclosures (continued)

 

Risk management: Credit risk: Loans, REIL and impairment provisions (continued)

 

Loans, REIL, PPL and provision coverage ratios by division (continued)


Gross

loans 

REIL 

PPL 

REIL & 

 PPL 

Provisions

Provisions

 as a % of REIL

Provisions

as  a% of REIL

& PPL

REIL & PPL

as a % of gross loans

Impairment charge

Amounts 

written-off 


£m 

£m 

 £m 

£m 

£m 

£m 

£m 












31 December 2009











UK Retail

103,812 

4,641 

4,641 

2,677 

58 

58 

4.5 

1,679 

1,150 

UK Corporate

111,671 

2,330 

97 

2,427 

1,271 

55 

52 

2.2 

923 

352 

Wealth

15,525 

218 

38 

256 

55 

25 

21 

1.6 

33 

12 

Global Transaction Services

14,146 

197 

201 

189 

96 

94 

1.4 

39 

23 

Ulster Bank

42,344 

2,260 

2,262 

962 

43 

43 

5.3 

649 

34 

US Retail & Commercial

48,937 

643 

643 

478 

74 

74 

1.3 

702 

546 












Retail & Commercial

336,435 

10,289 

141 

10,430 

5,632 

55 

54 

3.1 

4,025 

2,117 

Global Banking & Markets

130,898 

1,800 

131 

1,931 

1,289 

72 

67 

1.5 

542 

169 

RBS Insurance and other

2,648 












Core

469,981 

12,089 

272 

12,361 

6,921 

57 

56 

2.6 

4,567 

2,286 

Non-Core

148,623 

22,900 

652 

23,552 

8,252 

36 

35 

15.8 

8,523 

4,192 













618,604 

34,989 

924 

35,913 

15,173 

43 

42 

5.8 

13,090 

6,478 

 



 

Appendix 3 Additional risk management disclosures (continued)

 

Risk management: Credit risk: Balance sheet by internal credit quality bands

 

The table below provides an analysis of the credit quality and distribution of financial assets by the Group's internal credit quality gradings. 

 


Cash and balances at central banks

Loans and advances to banks (1)

Loans and advances to customers

Settlement balances

Derivatives

Other financial instruments

Commitments

Contingent liabilities

Total

31 December 2010

£m 

£m 

£m 

£m 

£m 

£m 

£m 

£m 

£m 











Total










AQ1

56,655 

91,952 

126,679 

6,815 

408,489 

658 

78,728 

9,745 

779,721 

AQ2

14 

598 

13,282 

1,271 

2,659 

26,128 

1,980 

45,935 

AQ3

48 

2,197 

25,981 

156 

3,317 

25,731 

4,337 

61,767 

AQ4

188 

639 

95,777 

571 

3,391 

41,027 

6,522 

148,121 

AQ5

99 

2,322 

114,796 

64 

4,860 

144 

38,612 

5,169 

166,066 

AQ6

159 

65,497 

34 

1,070 

25,991 

2,230 

94,984 

AQ7

178 

46,072 

857 

69 

18,752 

2,456 

68,387 

AQ8

15 

16,573 

14 

403 

9,289 

9,545 

35,839 

AQ9

115 

14,263 

450 

80 

3,889 

932 

19,731 

AQ10

355 

5,644 

1,581 

2,829 

407 

10,823 

Past due

10 

13,430 

2,675 

16,115 

Impaired

145 

35,321 

375 

35,841 

Impairment provision

(127)

(18,055)

(29)

(18,211)












57,014 

98,558 

555,260 

11,605 

427,077 

1,306 

270,976 

43,323 

1,465,119 











Core










AQ1

56,637 

91,298 

103,776 

6,814 

396,419 

366 

71,091 

9,651 

736,052 

AQ2

14 

550 

10,534 

1,271 

2,243 

24,923 

1,728 

41,266 

AQ3

48 

2,165 

22,851 

155 

3,132 

23,546 

4,268 

56,165 

AQ4

10 

539 

85,779 

571 

3,017 

36,909 

5,070 

131,901 

AQ5

99 

2,247 

100,051 

64 

3,988 

15 

35,302 

4,924 

146,690 

AQ6

138 

53,498 

34 

805 

24,050 

2,140 

80,668 

AQ7

154 

38,438 

595 

69 

17,605 

2,309 

59,173 

AQ8

15 

13,290 

14 

257 

8,617 

9,434 

31,627 

AQ9

107 

9,898 

237 

50 

3,442 

886 

14,622 

AQ10

300 

2,777 

368 

1,500 

250 

5,202 

Past due

10,744 

2,629 

13,376 

Impaired

144 

13,236 

375 

13,755 

Impairment provision

(126)

(7,740)

(29)

(7,895)












56,818 

97,534 

457,132 

11,557 

411,061 

855 

246,985 

40,660 

1,322,602 

 



 

Appendix 3 Additional risk management disclosures (continued)

 

Risk management: Credit risk: Balance sheet by internal credit quality bands (continued)

 


Cash and balances at central banks

Loans and advances to banks (1)

Loans and advances to customers

Settlement balances

Derivatives

Other financial instruments

Commitments

Contingent liabilities

Total

31 December 2010

£m 

£m 

£m 

£m 

£m 

£m 

£m 

£m 

£m 











Non-Core










AQ1

18 

654 

22,903 

12,070 

292 

7,637 

94 

43,669 

AQ2

48 

2,748 

416 

1,205 

252 

4,669 

AQ3

32 

3,130 

185 

2,185 

69 

5,602 

AQ4

178 

100 

9,998 

374 

4,118 

1,452 

16,220 

AQ5

75 

14,745 

872 

129 

3,310 

245 

19,376 

AQ6

21 

11,999 

265 

1,941 

90 

14,316 

AQ7

24 

7,634 

262 

1,147 

147 

9,214 

AQ8

3,283 

146 

672 

111 

4,212 

AQ9

4,365 

213 

30 

447 

46 

5,109 

AQ10

55 

2,867 

1,213 

1,329 

157 

5,621 

Past due

2,686 

46 

2,739 

Impaired

22,085 

22,086 

Impairment provision

(1)

(10,315)

(10,316)












196 

1,024 

98,128 

48 

16,016 

451 

23,991 

2,663 

142,517 











31 December 2009










Total










AQ1

51,521 

72,384 

106,062 

6,582 

389,019 

755 

62,084 

9,446 

697,853 

AQ2

1,725 

10,780 

306 

11,550 

27,598 

4,526 

56,494 

AQ3

2,175 

29,958 

199 

10,791 

28,364 

6,088 

77,576 

AQ4

23 

1,357 

102,922 

605 

8,296 

52,496 

14,948 

180,647 

AQ5

2,497 

124,724 

149 

8,270 

37 

43,239 

7,387 

186,305 

AQ6

424 

94,513 

40 

2,548 

30,847 

2,448 

130,821 

AQ7

110 

46,928 

33 

2,181 

98 

26,724 

2,352 

78,426 

AQ8

137 

23,593 

1,448 

12,507 

1,008 

38,693 

AQ9

184 

16,025 

2,030 

5,141 

1,279 

24,659 

AQ10

277 

9,142 

2,026 

3,618 

507 

15,573 

Past due

36 

14,475 

3,910 

40 

18,461 

Impaired

206 

31,588 

197 

31,991 

Impairment provision

(157)

(15,016)

(15,173)












51,548 

81,355 

595,694 

12,024 

438,199 

899 

292,618 

49,989 

1,522,326 

 

Note:

(1)

Excludes items in the course of collection from other banks of £1,958 million (31 December 2009 - £2,519 million).

 

 

 

 

 

 



 

Appendix 3 Additional risk management disclosures (continued)

 

Other risk exposures

 

Explanatory note

These disclosures provide information on certain elements of the Group's credit market activities, the majority of which are in Non-Core and, to a lesser extent, Global Banking & Markets, US Retail & Commercial and Group Treasury. For credit valuation adjustments (CVA), leveraged finance and conduits disclosures, the information presented has been analysed between the Group's Core and Non-Core businesses.

 

Asset-backed securities

The Group structures, originates, distributes and trades debt in the form of loan, bond and derivative instruments, in all major currencies and debt capital markets in North America, Western Europe, Asia and major emerging markets. The carrying value of the Group's debt securities is detailed below.

 


31 December 

 2010 

30 September

 2010 

31 December 

2009 


£bn 

£bn 

£bn 





Securities issued by central and local governments

124.0 

132.5 

134.1 

Asset-backed securities

70.8 

70.0 

87.6 

Securities issued by corporates and other entities

9.7 

12.1 

13.4 

Securities issued by banks and building societies

13.0 

11.8 

14.0 






217.5 

226.4 

249.1 

 

The Group's credit market activities gave rise to risk concentrations in asset-backed securities (ABS). The Group has exposures to ABS which are predominantly debt securities, but can also be held in derivative form. ABS have an interest in an underlying pool of referenced assets. The risks and rewards of the referenced pool are passed onto investors by the issue of securities with varying seniority, by a special purpose entity. 

 

Debt securities include residential mortgage-backed securities (RMBS), commercial mortgage-backed securities (CMBS), ABS, collateralised debt obligations (CDOs), collateralised loan obligations (CLOs) and other ABS. In many cases the risk associated with these assets is hedged by way of credit derivative protection, purchased over the specific asset or relevant ABS indices. The counterparty to some of these hedge transactions are monoline insurers.

 

The following tables summarise, gross and net exposures and carrying values of these securities by geography of the underlying assets at 31 December 2010. Gross exposures represent the principal amounts relating to ABS. G10 government RMBS comprises securities that are: (a) guaranteed or effectively guaranteed by the US government, by way of its support for US federal agencies and government sponsored enterprises or (b) guaranteed by the Dutch government. Net exposures represent the carrying value after taking account of the hedge protection purchased from monoline insurers and other counterparties, but exclude the effect of counterparty credit valuation adjustments. The hedge provides credit protection of both principal and interest cash flows in the event of default by the counterparty. The value of this protection is based on the underlying instrument being protected.

 

 



 

Appendix 3 Additional risk management disclosures (continued)

 

Other risk exposures: Asset-backed securities (continued)

 

Analysis by geography and measurement classification

 







FVTPL (1)




US 

UK 

Other 

 Europe 

 

RoW (2) 

Total 

HFT (3) 

DFV (4) 

 

AFS (5) 

LAR (6) 

31 December 2010

£m 

£m 

£m 

£m 

£m 

£m 

£m 

£m 

£m 




















RMBS: G10 government

24,207 

16 

6,422 

30,645 

13,840 

16,805 

RMBS: covered bond

138 

208 

8,525 

8,871 

8,871 

RMBS: prime

1,784 

3,385 

1,118 

192 

6,479 

1,605 

4,749 

124 

RMBS: non-conforming

1,249 

2,107 

92 

3,448 

708 

1,313 

1,427 

RMBS: sub-prime

792 

365 

139 

221 

1,517 

819 

496 

202 

CMBS

3,086 

1,451 

912 

45 

5,494 

2,646 

120 

1,409 

1,319 

CDOs

12,156 

128 

453 

12,737 

7,951 

4,687 

99 

CLOs

6,038 

134 

879 

7,060 

1,062 

5,572 

426 

Other ABS

3,104 

1,144 

2,871 

1,705 

8,824 

1,533 

4,523 

2,768 












52,554 

8,938 

21,411 

2,172 

85,075 

30,164 

121 

48,425 

6,365 











Carrying value










RMBS: G10 government

24,390 

16 

5,958 

30,364 

13,765 

16,599 

RMBS: covered bond

142 

208 

7,522 

7,872 

7,872 

RMBS: prime

1,624 

3,000 

931 

192 

5,747 

1,384 

4,249 

113 

RMBS: non-conforming

1,084 

1,959 

92 

3,135 

605 

1,102 

1,428 

RMBS: sub-prime

638 

255 

120 

205 

1,218 

681 

344 

193 

CMBS

2,936 

1,338 

638 

38 

4,950 

2,262 

118 

1,281 

1,289 

CDOs

3,135 

69 

254 

3,458 

1,341 

2,021 

96 

CLOs

5,334 

102 

635 

6,074 

691 

4,958 

425 

Other ABS

2,780 

945 

2,615 

1,667 

8,007 

1,259 

4,089 

2,659 












42,063 

7,892 

18,765 

2,105 

70,825 

21,988 

119 

42,515 

6,203 











Net exposure










RMBS: G10 government

24,390 

16 

5,958 

30,364 

13,765 

16,599 

RMBS: covered bond

142 

208 

7,522 

7,872 

7,872 

RMBS: prime

1,523 

2,948 

596 

192 

5,259 

897 

4,248 

113 

RMBS: non-conforming

1,081 

1,959 

92 

3,132 

602 

1,102 

1,428 

RMBS: sub-prime

289 

253 

112 

176 

830 

305 

332 

193 

CMBS

1,823 

1,336 

458 

38 

3,655 

1,188 

10 

1,230 

1,227 

CDOs

1,085 

39 

245 

1,369 

743 

530 

96 

CLOs

1,387 

102 

629 

2,119 

673 

1,021 

425 

Other ABS

2,293 

748 

2,609 

1,659 

7,309 

690 

4,081 

2,538 












34,013 

7,609 

18,221 

2,066 

61,909 

18,863 

11 

37,015 

6,020 

 

For notes to this table refer to page 19.

Appendix 3 Additional risk management disclosures (continued)

 

Other risk exposures: Asset-backed securities (continued)

 

Analysis by geography and measurement classification (continued)

 







FVTPL (1)




US 

UK 

Other 

 Europe 

RoW (2) 

Total 

HFT (3) 

DFV (4) 

AFS (5) 

LAR (6) 

30 September 2010

£m 

£m 

£m 

£m 

£m 

£m 

£m 

£m 

£m 











Gross exposure










RMBS: G10 government

20,924 

17 

6,592 

27,533 

11,519 

16,014 

RMBS: covered bond

137 

208 

8,580 

8,925 

8,925 

RMBS: prime

1,897 

4,324 

1,845 

196 

8,262 

2,836 

5,291 

134 

RMBS: non-conforming

1,241 

2,109 

92 

3,442 

679 

1,331 

1,432 

RMBS: sub-prime

852 

499 

141 

221 

1,713 

934 

565 

214 

CMBS

2,883 

1,704 

1,667 

100 

6,354 

3,203 

205 

1,553 

1,393 

CDOs

11,776 

141 

466 

12,386 

7,519 

4,746 

121 

CLOs

5,936 

106 

1,312 

424 

7,778 

1,673 

5,674 

431 

Other ABS

2,847 

1,346 

2,715 

2,675 

9,583 

1,971 

4,967 

2,645 












48,493 

10,454 

23,410 

3,619 

85,976 

30,334 

206 

49,066 

6,370 











Carrying value










RMBS: G10 government

21,276 

17 

6,167 

27,460 

11,526 

15,934 

RMBS: covered bond

141 

215 

7,864 

8,220 

8,220 

RMBS: prime

1,493 

3,751 

1,279 

192 

6,715 

2,152 

4,470 

92 

RMBS: non-conforming

1,030 

1,993 

92 

3,115 

550 

1,133 

1,432 

RMBS: sub-prime

654 

336 

120 

202 

1,312 

718 

387 

207 

CMBS

2,843 

1,463 

1,085 

75 

5,466 

2,448 

226 

1,383 

1,409 

CDOs

2,606 

89 

262 

2,957 

920 

1,924 

113 

CLOs

5,142 

74 

899 

284 

6,399 

1,004 

5,022 

373 

Other ABS

2,697 

1,144 

2,557 

1,970 

8,368 

1,157 

4,450 

2,761 












37,882 

9,082 

20,325 

2,723 

70,012 

20,475 

227 

42,923 

6,387 











Net exposure










RMBS: G10 government

21,276 

17 

6,167 

27,460 

11,526 

15,934 

RMBS: covered bond

141 

215 

7,864 

8,220 

8,220 

RMBS: prime

1,321 

3,107 

732 

184 

5,344 

787 

4,464 

92 

RMBS: non-conforming

1,027 

1,993 

92 

3,112 

547 

1,133 

1,432 

RMBS: sub-prime

304 

242 

112 

171 

829 

300 

322 

207 

CMBS

1,146 

1,310 

679 

50 

3,185 

905 

46 

841 

1,393 

CDOs

600 

49 

242 

891 

308 

470 

113 

CLOs

1,268 

64 

762 

45 

2,139 

708 

1,058 

373 

Other ABS

2,203 

916 

2,555 

1,970 

7,644 

561 

4,441 

2,642 












29,286 

7,913 

19,205 

2,420 

58,824 

15,642 

47 

36,883 

6,252 

 

For notes to this table refer to page 19.

Appendix 3 Additional risk management disclosures (continued)

 

Other risk exposures: Asset-backed securities (continued)

 

Analysis by geography and measurement classification (continued)

 







FVTPL (1)




US 

UK 

Other 

 Europe 

RoW (2) 

Total 

HFT (3) 

DFV (4) 

AFS (5) 

LAR (6) 

31 December 2009

£m 

£m 

£m 

£m 

£m 

£m 

£m 

£m 

£m 











Gross exposure










RMBS: G10 government

26,644 

17 

7,016 

94 

33,771 

13,536 

20,235 

RMBS: covered bond

49 

297 

9,019 

9,365 

9,365 

RMBS: prime

2,965 

5,276 

4,567 

222 

13,030 

6,274 

147 

5,761 

848 

RMBS: non-conforming

1,341 

2,138 

128 

3,607 

635 

1,498 

1,474 

RMBS: sub-prime

1,668 

724 

195 

561 

3,148 

1,632 

17 

1,020 

479 

CMBS

3,422 

1,781 

1,420 

75 

6,698 

2,936 

209 

1,842 

1,711 

CDOs

12,382 

329 

571 

27 

13,309 

9,080 

3,923 

305 

CLOs

9,092 

166 

2,169 

1,173 

12,600 

5,346 

6,581 

673 

Other ABS

3,587 

1,980 

5,031 

1,569 

12,167 

2,912 

18 

5,252 

3,985 












61,150 

 12,708 

30,116 

3,721 

107,695 

42,351 

392 

55,477 

9,475 











Carrying value










RMBS: G10 government

26,984 

17 

6,870 

33 

33,904 

13,397 

20,507 

RMBS: covered bond

50 

288 

8,734 

9,072 

9,072 

RMBS: prime

2,696 

4,583 

4,009 

212 

11,500 

5,133 

141 

5,643 

583 

RMBS: non-conforming

958 

1,957 

128 

3,043 

389 

1,180 

1,474 

RMBS: sub-prime

977 

314 

146 

387 

1,824 

779 

17 

704 

324 

CMBS

3,237 

1,305 

924 

43 

5,509 

2,279 

216 

1,637 

1,377 

CDOs

3,275 

166 

400 

27 

3,868 

2,064 

1,600 

203 

CLOs

6,736 

112 

1,469 

999 

9,316 

3,296 

5,500 

520 

Other ABS

2,886 

1,124 

4,369 

1,187 

9,566 

1,483 

19 

4,621 

3,443 


 

 

 

 

 

 

 

 

 


47,799 

9,866 

27,049 

2,888 

87,602 

28,820 

394 

50,464 

7,924 











Net exposure










RMBS: G10 government

26,984 

17 

6,870 

33 

33,904 

13,397 

20,507 

RMBS: covered bond

50 

288 

8,734 

9,072 

9,072 

RMBS: prime

2,436 

3,747 

3,018 

172 

9,373 

3,167 

142 

5,480 

584 

RMBS: non-conforming

948 

1,957 

128 

3,033 

379 

1,180 

1,474 

RMBS: sub-prime

565 

305 

137 

290 

1,297 

529 

17 

427 

324 

CMBS

2,245 

1,228 

595 

399 

4,467 

1,331 

203 

1,556 

1,377 

CDOs

743 

124 

382 

26 

1,275 

521 

550 

203 

CLOs

1,636 

86 

1,104 

39 

2,865 

673 

1,672 

520 

Other ABS

2,117 

839 

4,331 

1,145 

8,432 

483 

19 

4,621 

3,309 


 

 

 

 

 

 

 

 

 


37,724 

8,591 

25,299 

2,104 

73,718 

20,480 

382 

45,065 

7,791 

 

Notes:

(1)

Fair value through profit or loss.

(2)

Rest of the world.

(3)

Held-for-trading.

(4)

Designated as at fair value.

(5)

Available-for-sale.

(6)

Loans and receivables.



 

Appendix 3 Additional risk management disclosures (continued)

 

Other risk exposures: Asset-backed securities (continued)

 

Analysis by rating

 

The table below summarises the rating levels of ABS carrying values. Credit ratings are based on those from rating agencies Standard & Poor's (S&P), Moody's and Fitch and have been mapped onto the S&P scale.

 


AAA 

AA  to AA+ 

A to AA- 

BBB- to A- 

Non- 

investment 

 grade 

 

Unrated 

Total 

31 December 2010

£m 

£m 

£m 

£m 

£m 

£m 

£m 









RMBS: G10 government

28,835 

1,529 

30,364 

RMBS: covered bond

7,107 

357 

408 

- 

7,872 

RMBS: prime

4,355 

147 

67 

82 

900 

196 

5,747 

RMBS: non-conforming

1,754 

144 

60 

316 

809 

52 

3,135 

RMBS: sub-prime

317 

116 

212 

39 

458 

76 

1,218 

CMBS

2,789 

392 

973 

500 

296 

4,950 

CDOs

444 

567 

296 

203 

1,863 

85 

3,458 

CLOs

2,490 

1,786 

343 

527 

332 

596 

6,074 

Other ABS

3,144 

1,297 

885 

1,718 

265 

698 

8,007 










51,235 

6,335 

3,244 

3,385 

4,923 

1,703 

70,825 









30 September 2010








RMBS: G10 government

25,883 

1,555 

22 

27,460 

RMBS: covered bond

7,649 

309 

262 

8,220 

RMBS: prime

4,852 

496 

260 

196 

846 

65 

6,715 

RMBS: non-conforming

1,748 

115 

115 

451 

649 

37 

3,115 

RMBS: sub-prime

312 

150 

227 

48 

476 

99 

1,312 

CMBS

3,131 

479 

1,156 

434 

258 

5,466 

CDOs

514 

422 

317 

217 

1,376 

111 

2,957 

CLOs

2,437 

1,830 

648 

850 

275 

359 

6,399 

Other ABS

3,499 

1,235 

904 

1,702 

333 

695 

8,368 










50,025 

6,591 

3,911 

3,898 

4,213 

1,374 

70,012 









31 December 2009








RMBS: G10 government

33,779 

125 

33,904 

RMBS: covered bond

8,645 

360 

67 

9,072 

RMBS: prime

9,211 

676 

507 

547 

558 

11,500 

RMBS: non-conforming

1,981 

197 

109 

160 

594 

3,043 

RMBS: sub-prime

578 

121 

306 

87 

579 

153 

1,824 

CMBS

3,441 

599 

1,022 

298 

147 

5,509 

CDOs

615 

944 

254 

944 

849 

262 

3,868 

CLOs

2,718 

4,365 

607 

260 

636 

730 

9,316 

Other ABS

4,099 

1,555 

1,014 

1,947 

152 

799 

9,566 


 

 

 

 

 

 

 


65,067 

8,942 

3,886 

4,243 

3,515 

1,949 

87,602 

 



 

Appendix 3 Additional risk management disclosures (continued)

 

Other risk exposures: Asset-backed securities (continued)

 

Key points

·

Carrying values of asset-backed securities decreased by £16.8 billion during 2010 with net reductions across all portfolios.



·

Within G-10 government RMBS, net sell-downs by the US Mortgage Trading business in GBM in the first quarter of 2010, as part of the Group's repositioning in light of the US government's purchase of US assets, was off-set by purchases in the second half of the year, with the latter reflecting the perceived investor appetite. The decrease in the US AFS portfolio reflected balance sheet restructuring in US Retail & Commercial during the third quarter of 2010.



·

A £5.8 billion reduction was seen in prime RMBS primarily GBM and Group Treasury, across European (£4.7 billion) and US (£1.1 billion) portfolios reflecting respectively balance sheet management and repositioning in light of increased liquidity in the US RMBS market.




·

Both CDO and CLO portfolios declined by £3.7 billion reflecting asset reductions in Non-Core; however, some CDO exposures were downgraded during the year resulting in increased non-investment grade positions.



 

Appendix 3 Additional risk management disclosures (continued)

 

Other risk exposures: Credit valuation adjustments

 

CVA represents an estimate of the adjustment to arrive at fair value that a market participant would make to incorporate the credit risk inherent in counterparty derivative exposures. The table below details the Group's CVA by type of counterparty.

 


31 December 

2010 

30 September 

2010 

30 June 

2010 

31 March 

 2010 

31 December 

2009 


£m 

£m 

£m 

£m 

£m 







Monoline insurers

2,443 

2,678 

3,599 

3,870 

3,796 

CDPCs

490 

622 

791 

465 

499 

Other counterparties

1,714 

1,937 

1,916 

1,737 

1,588 








4,647 

5,237 

6,306 

6,072 

5,883 

 

Monoline insurers

 

The table below summarises the Group's exposure to monolines, all of which are in Non-Core.

 


31 December 

2010 

30 September 

2010 

30 June 

2010 

31 March 

 2010 

31 December 

2009 


£m 

£m 

£m 

£m 

£m 







Gross exposure to monolines

4,023 

4,445 

5,495 

6,189 

6,170 

Hedges with financial institutions

(71)

(70)

(73)

(548)

(531)

Credit valuation adjustment

(2,443)

(2,678)

(3,599)

(3,870)

(3,796)







Net exposure to monolines

1,509 

1,697 

1,823 

1,771 

1,843 







CVA as a % of gross exposure

61% 

60% 

65% 

63% 

62% 







Counterparty and credit risk RWAs

£17.8bn 

£19.1bn 

£25.5bn 

£8.6bn 

£13.7bn 

 

The net effect to the income statement relating to monoline exposures is detailed below.

 


Quarter ended


Year ended


31 December 

2010 

30 September 

2010 

31 December 

2009 


31 December 

2010 

31 December 

2009 


£m 

£m 

£m 


£m 

£m 








Credit valuation adjustment at beginning of period

(2,678)

(3,599)

(6,300)


(3,796)

(5,988)

Credit valuation adjustment at end of period

(2,443)

(2,678)

(3,796)


(2,443)

(3,796)








Decrease in credit valuation adjustment

235 

921 

2,504 


1,353 

2,192 

Net debit relating to realisation, hedges, foreign

  exchange and other movements

(102)

(687)

(2,125)


(844)

(3,290)

Net debit relating to reclassified debt securities

(69)

(16)

(1,040)


(305)

(1,468)








Net credit/(debit) to income statement (1)

64 

218 

(661)


204 

(2,566)

 

Note:

(1)

Comprises the following elements for the year ended 31 December 2010 and 31 December 2009:


·      a loss of £5 million (31 December 2009 - £2,387 million) in income from trading activities,


·      impairment reversals/(losses) of £71 million (31 December 2009 - £(239) million); and


·      other income of £138 million (31 December 2009 - £60 million) relating to reclassified debt securities.

 



 

Appendix 3 Additional risk management disclosures (continued)

 

Other risk exposures: Credit valuation adjustments (continued)

 

Monoline insurers (continued)

The table below summarises monoline exposures by rating. Credit ratings are based on those from rating agencies, S&P and Moody's. Where the ratings differ, the lower of the two is taken.

 


Notional: 

protected 

 assets 

Fair value: 

Reference 

protected 

 assets 

Gross 

 exposure 

Credit 

valuation 

adjustment 

Hedges 

Net 

 exposure 


£m 

£m 

£m 

£m 

£m 

£m 








31 December 2010







A to AA-

6,336 

5,503 

833 

272 

561 

Non-investment grade

8,555 

5,365 

3,190 

2,171 

71 

948 









14,891 

10,868 

4,023 

2,443 

71 

1,509 








Of which:







CMBS

4,149 

2,424 

1,725 

1,253 



CDOs

1,133 

256 

877 

593 



CLOs

6,724 

6,121 

603 

210 



Other ABS

2,393 

1,779 

614 

294 



Other

492 

288 

204 

93 











14,891 

10,868 

4,023 

2,443 










30 September 2010







A to AA-

6,641 

5,616 

1,025 

376 

649 

Non-investment grade

8,661 

5,241 

3,420 

2,302 

70 

1,048 









15,302 

10,857 

4,445 

2,678 

70 

1,697 








Of which:







CMBS

4,226 

2,284 

1,942 

1,336 



CDOs

1,146 

230 

916 

602 



CLOs

6,969 

6,265 

704 

273 



Other ABS

2,410 

1,744 

666 

343 



Other

551 

334 

217 

124 











15,302 

10,857 

4,445 

2,678 










31 December 2009







A to AA-

7,143 

5,875 

1,268 

378 

890 

Non-investment grade

12,598 

7,696 

4,902 

3,418 

531 

953 









19,741 

13,571 

6,170 

3,796 

531 

1,843 








Of which:







CMBS

4,253 

2,034 

2,219 

1,562 



CDOs

2,284 

797 

1,487 

1,059 



CLOs

10,007 

8,584 

1,423 

641 



Other ABS

2,688 

1,861 

827 

412 



Other

509 

295 

214 

122 











19,741 

13,571 

6,170 

3,796 



 



 

Appendix 3 Additional risk management disclosures (continued)

 

Other risk exposures: Credit valuation adjustments (continued)

 

Monoline insurers (continued)

 

Key points

·

Exposure to monolines decreased in the fourth quarter of 2010 and year ended 31 December 2010 due to a combination of restructuring certain exposures and higher prices of underlying reference instruments, partially offset by US dollar strengthening against sterling. 



·

The CVA decreased on a total basis, reflecting the reduction in exposures, but was stable on a relative basis with the impact of tighter credit spreads offset by an increase in the expected lives of certain trades. 



·

The reduction in the Group's RWA requirements over the quarter was driven by the reduction in exposure to monolines and the impact of restructuring certain risk structures.  



·

During the year there was a significant increase in the RWA requirements of RBS N.V. following its migration to the Basel II regime. Regulatory intervention at certain monoline counterparties triggered International Swaps and Derivative Association (ISDA) credit events in the period. At the point of trigger the exposure to these counterparties was excluded from the RWA calculations and capital deductions of £171 million were taken instead. The impact of this together with restructuring certain exposures and an improvement in the rating of underlying reference bonds held by the Group to investment grade status were the main drivers of the reduction in RWA requirements during the second half of the year.

 

The Group also has indirect exposures to monoline insurers through wrapped securities and other assets with credit enhancement from monoline insurers. These securities are traded with the benefit of this credit enhancement. Any deterioration in the credit rating of the monoline is reflected in the fair value of these assets.

 



 

Appendix 3 Additional risk management disclosures (continued)

 

Other risk exposures: Credit valuation adjustments (continued)

 

Credit derivative product companies

 

A summary of the Group's exposure to credit derivative product companies (CDPCs), all of which is in Non-Core, is detailed below.

 


31 December 

 2010 

30 September 

 2010 

30 June 

 2010 

31 March 

2010 

31 December 

 2009 


£m 

£m 

£m 

£m 

£m 







Gross exposure to CDPCs

1,244 

1,467 

1,747 

1,253 

1,275 

Credit valuation adjustment

(490)

(622)

(791)

(465)

(499)







Net exposure to CDPCs

754 

845 

956 

788 

776 







CVA as a % of gross exposure

39% 

42% 

45% 

37% 

39%







Counterparty and credit risk RWAs

£7.2bn 

£8.1bn 

£8.8bn 

£7.9bn 

£7.5bn 







Capital deductions

£280m 

£297m 

£292m 

£309m 

£347m 

 

The table below summarises CDPC exposures by rating.

 


Notional 

protected 

 assets 

Fair value 

protected 

reference 

assets 

Gross 

exposure 

Credit 

valuation 

adjustment 

Net 

exposure 


£m 

£m 

£m 

£m 

£m 







31 December 2010






AAA

213 

212 

A to AA-

644 

629 

15 

11 

Non-investment grade

20,066 

19,050 

1,016 

401 

615 

Unrated

4,165 

3,953 

212 

85 

127 








25,088 

23,844 

1,244 

490 

754 







30 September 2010






AAA

1,070 

1,060 

10 

A to AA-

637 

618 

19 

11 

Non-investment grade

19,468 

18,286 

1,182 

476 

706 

Unrated

3,426 

3,170 

256 

132 

124 








24,601 

23,134 

1,467 

622 

845 







31 December 2009






AAA

1,658 

1,637 

21 

16 

BBB- to A-

1,070 

1,043 

27 

18 

Non-investment grade

17,696 

16,742 

954 

377 

577 

Unrated

3,926 

3,653 

273 

108 

165 








24,350 

23,075 

1,275 

499 

776 

 

Credit ratings are based on those from rating agencies S&P and Moody's. Where the ratings differ, the lower of the two is taken.

 



 

Appendix 3 Additional risk management disclosures (continued)

 

Other risk exposures: Credit valuation adjustments (continued)

 

Credit derivative product companies (continued)

 

The table below details the net income statement effect arising from CDPC exposures.  

 


Quarter ended


Year ended


31 December 

 2010 

30 September 

 2010 

31 December

2009


31 December 

2010 

31 December 

2009 


£m 

£m 

£m 


£m 

£m 








CVA at beginning of period

(622)

(791)

(592)


(499)

(1,311)

CVA at end of period

(490)

(622)

(499)


(490)

(499)








Decrease in CVA

132 

169 

93 


812 

Hedges, foreign exchange and other movements

(170)

(184)

(205)


(150)

(1,769)








Income from trading activities - net losses

(38)

(15)

(112)


(141)

(957)

 

Key points

·

Losses reduced significantly in 2010 due to smaller exposures and reduced losses on hedges that were introduced to cap the exposures.



·

The CVA decrease for the year reflected exposure reduction, due to trade commutations, tighter credit spreads of the underlying reference portfolios, partially offset by an increase in the relative value of senior tranches compared with the underlying reference portfolios and foreign currency movements. 



·

Counterparty and credit RWAs and capital deductions decreased in line with exposure reduction.



·

Certain CDPCs, where the Group has hedges in place to cap the exposure, are excluded from the RWA calculations with capital deduction taken instead.

 



 

Appendix 3 Additional risk management disclosures (continued)

 

Other risk exposures: Credit valuation adjustments (continued)

 

Other counterparties

 

The net income statement effect arising from the change in level of CVA for all other counterparties and related trades is detailed below.

 


Quarter ended


Year ended


31 December 

 2010 

30 September 

 2010 

31 December 

2009 


31 December 

 2010 

31 December 

2009 


£m 

£m 

£m 


£m 

£m 








CVA at beginning of the period

(1,937)

(1,916)

(1,856)


(1,588)

(1,738)

CVA at end of the period

(1,714)

(1,937)

(1,588)


(1,714)

(1,588)








Decrease/(increase) in CVA

223 

(21)

268 


(126)

150 

Net (debit)/credit relating to hedges, foreign

  exchange and other movements

(252)

37 

(204)


(19)

(841)








Net (debit)/credit to income statement

  (income from trading activities)

(29)

16 

64 


(145)

(691)

 

Key points

·

The decrease in the 31 December 2010 quarter ended CVA held against exposures to other counterparties was driven by restructuring certain exposures and credit spreads tightening.



·

Losses on hedges and realised defaults are the primary driver of the losses arising on foreign exchange, hedges, realisations and other movements.


 

Appendix 3 Additional risk management disclosures (continued)

 

Other risk exposures: Leveraged finance

 

The table below details the Group's global markets sponsor-led leveraged finance exposures, all of which are in Non-Core, by industry and geography.  

 


31 December 2010


30 September 2010


31 December 2009


UK  

Americas 

Other 

Europe 

RoW 

Total 


UK  

Americas 

Other 

Europe 

RoW 

Total 


UK  

Americas 

Other 

Europe 

RoW 

Total 


£m 

£m 

£m 

£m 

£m 


£m 

£m 

£m 

£m 

£m 


£m 

£m 

£m 

£m 

£m 



















Gross exposure:


















TMT (1)

1,451 

689 

686 

473 

3,299 


1,513 

871 

775 

519 

3,678 


1,656 

1,781 

1,081 

605 

5,123 

Industrial

1,009 

273 

1,144 

285 

2,711 


1,052 

393 

1,249 

312 

3,006 


1,523 

1,584 

1,781 

207 

5,095 

Retail

290 

8 

867 

61 

1,226 


437 

1,060 

63 

1,568 


476 

17 

1,354 

71 

1,918 

Other

1,074 

188 

627 

182 

2,071 


1,100 

198 

771 

216 

2,285 


1,527 

244 

1,168 

191 

3,130 




















3,824 

1,158 

3,324 

1,001 

9,307 


4,102 

1,470 

3,855 

1,110 

10,537 


5,182 

3,626 

5,384 

1,074 

15,266 



















Net exposure:


















TMT (1)

1,267 

656 

633 

338 

2,894 


1,325 

795 

759 

401 

3,280 


1,532 

1,502 

1,045 

590 

4,669 

Industrial

911 

181 

1,094 

277 

2,463 


949 

274 

1,083 

302 

2,608 


973 

524 

1,594 

205 

3,296 

Retail

277 

8 

817 

57 

1,159 


424 

1,006 

60 

1,498 


445 

17 

1,282 

68 

1,812 

Other

1,014 

188 

622 

182 

2,006 


1,025 

197 

765 

216 

2,203 


1,461 

244 

1,147 

191 

3,043 




















3,469 

1,033 

3,166 

854 

8,522 


3,723 

1,274 

3,613 

979 

9,589 


4,411 

2,287 

5,068 

1,054 

12,820 



















Of which:


















Drawn

2,952 

673 

2,433 

694 

6,752 


3,260 

938 

2,829 

806 

7,833 


3,737 

1,944 

3,909 

950 

10,540 

Undrawn

517 

360 

733 

160 

1,770 


463 

336 

784 

173 

1,756 


674 

343 

1,159 

104 

2,280 




















3,469 

1,033 

3,166 

854 

8,522 


3,723 

1,274 

3,613 

979 

9,589 


4,411 

2,287 

5,068 

1,054 

12,820 

 

Notes:

(1)

Telecommunications, media and technology.

(2)

All of the above exposures are classified as LAR, except for £154 million (30 September 2010 - £153 million; 31 December 2009 - £143 million) which are classified as HFT.

 


 

Appendix 3 Additional risk management disclosures (continued)

 

Other risk exposures: Leveraged finance (continued)

 

The table below shows the Group's movement in leveraged finance exposures.

 

Quarter ended


Year ended


31 December 2010

30 September 

 2010 

31 December 

 2009 


31 December 

 2010 

31 December 

 2009 

Drawn 

Undrawn 

Total 


£m 

£m 

£m 

£m 

£m 


£m 

£m 










Balance at beginning of period

7,833 

1,756 

9,589 

10,859 

13,719 


12,820 

15,769 

(66)

(7)

(73)

(29)

43 


(26)

604 

(1,055)

- 

(1,055)

(1,263)

(389)


(3,848)

(391)

(90)

(36)

(126)

(148)


(760)

(1,326)

- 

- 

- 


(19)

(51)

51 

- 


17 

- 

17 

41 

13 


73 

(31)

13 

- 

13 

21 


50 

100 

124 

- 

124 

(192)


131 

(1,041)

Exchange and other movements

25 

6 

31 

112 

(395)


80 

(845)










Balance at end of period

6,750 

1,770 

8,520 

9,589 

12,820 


8,520 

12,820 

 

Key points

·

Reduction in exposures reflects the Non-Core strategy.



·

Approximately 92% of the above exposures represent senior lending at 31 December 2010.

 

In addition to the above, UK Corporate and Ulster Bank have leveraged finance exposures as set out below.

 


31 December 

2010 

30 September 

2010 

31 December 

2009 





UK Corporate




  - Debt financing (1)

3,664 

3,804 

4,041 

  - Senior debt transactions (2)

2,604 

2,721 

3,034 





Total UK Corporate

6,268 

6,525 

7,075 

Ulster Bank

597 

608 

621 






6,865 

7,133 

7,696 

 

Notes:

(1)

Loans for UK mid-market buyouts, supplementing equity capital provided by third party private equity investors.

(2)

Loans to UK mid-corporates supporting acquisitions, recapitalisations or general corporate purposes where higher leverage criteria were met.



 

Appendix 3 Additional risk management disclosures (continued)

 

Other risk exposures: Special purpose entities

 

The table below sets out the asset categories, together with the carrying value of the assets and associated liabilities for those securitisations and other asset transfers, other than conduits (discussed below), where the assets continue to be recorded on the Group's balance sheet.

 


31 December 2010


30 September 2010


31 December 2009


Assets 

Liabilities 


Assets 

Liabilities 


Assets 

Liabilities 


£m 

£m 


£m 

£m 


£m 

£m 










Residential mortgages

76,212 

18,215 


74,351 

18,164 


69,927 

15,937 

Credit card receivables

3,993 

34 


4,059 

1,592 


2,975 

1,592 

Other loans

30,988 

974 


31,364 

1,003 


36,448 

1,010 

Finance lease receivables

510 

510 


582 

582 


597 

597 

 

Assets are significantly greater than liabilities, as all notes issued by funding related own asset securitisation SPEs are purchased by Group companies.

 

Conduits

Group-sponsored conduits can be divided into multi-seller conduits and own-asset conduits. The Group consolidates both types of conduits where the substance of the relationship between the Group and the conduit vehicle is such that the vehicle is controlled by the Group. Liquidity commitments from the Group to the conduit exceed the nominal amount of assets funded by the conduit as liquidity commitments are sized to cover the funding cost of the related assets.

 

During the year both multi-seller and own asset conduit assets have been reduced in line with wider Group balance sheet management. The total assets held by Group-sponsored conduits were £20.0 billion at 31 December 2010 (30 September 2010 - £19.8 billion; 31 December 2009 - £27.4 billion).

 

The exposure to conduits which are consolidated by the Group, the assets held and commercial papers issued by these vehicles are analysed in the table below.

 


31 December 2010


30 September 2010


31 December 2009


Core 

Non-Core 

Total 


Core 

Non-Core 

Total 


Core 

Non-Core 

Total 


£m 

£m 

£m 


£m 

£m 

£m 


£m 

£m 

£m 













Total assets

16,390 

3,624 

20,014 


16,183 

3,642 

19,825 


23,409 

3,957 

27,366 

Commercial paper issued (1)

15,522 

2,540 

18,062 


15,430 

2,563 

17,993 


22,644 

2,939 

25,583 













Liquidity and credit

  enhancements:












Deal specific liquidity:












-  drawn

868 

1,109 

1,977 


733 

1,104 

1,837 


738 

1,059 

1,797 

-  undrawn

21,935 

2,980 

24,915 


22,472 

3,277 

25,749 


28,628 

3,852 

32,480 

PWCE (2)

1,025 

257 

1,282 


918 

275 

1,193 


1,167 

341 

1,508 














23,828 

4,346 

28,174 


24,123 

4,656 

28,779 


30,533 

5,252 

35,785 













Maximum exposure to loss (3)

22,803 

4,089 

26,892 


23,205 

4,381 

27,586 


29,365 

4,911 

34,276 

 

Notes:

(1)

Includes £0.7 billion of ABCP issued to RBS plc at 31 December 2010.

(2)

Programme-wide credit enhancement.

(3)

Maximum exposure to loss is determined as the Group's total liquidity commitments to the conduits and additionally programme-wide credit support which would absorb first loss on transactions where liquidity support is provided by a third party.  

 

Appendix 3 Additional risk management disclosures (continued)

 

Other risk exposures: Conduits (continued)

 

Multi-seller conduits accounted for 44% of the total liquidity and credit enhancements committed by the Group at 31 December 2010 (30 September 2010 - 42%; 31 December 2009 - 43%). The Group's multi-seller conduits have continued to fund the vast majority of their assets solely through asset-backed commercial paper (ABCP) issuance. There have been no significant systemic failures within the financial markets similar to that experienced in the second half of 2008 following Lehman Brothers bankruptcy filing in September 2008. The improvement in market conditions has allowed these conduits to move to normal ABCP funding conditions and reduced the need for backstop funding from the Group.

 

Key points

·

Total assets decreased during the year by £7.4 billion in line with the Group's strategy of reducing conduit exposure.



·

The average maturity of ABCP issued by the Group's conduits has risen throughout 2010, at 69.4 days at 31 December 2010 compared with 68.3 days at 30 September 2010 and 58.4 days at 31 December 2009.



·

The maturity of the commercial paper issued by the Group's conduits is managed to mitigate the short-term contingent liquidity risk of providing back-up facilities. The Group's limits sanctioned for such liquidity facilities at 31 December 2010 totalled approximately £22.6 billion for multi-seller conduits (30 September 2010 - £21.9 billion; 31 December 2009 - £25.0 billion). For a very small number of transactions within one multi-seller conduit the liquidity facilities have been provided by third-party banks. This typically occurs on transactions where the third-party bank does not use, or have, its own conduit vehicles.



·

The Group's maximum exposure to loss on its multi-seller conduits is £22.8 billion (30 September 2010 - £22.0 billion; 31 December 2009 - £25.2 billion), being the total amount of the Group's liquidity commitments plus the extent of PWCE of conduit assets for which liquidity facilities were not provided by third parties.



·

The Group holds two own-asset conduits, which have assets that were previously funded by the Group. The Group's maximum exposure to loss on these two conduits was £4.1 billion at 31 December 2010 (30 September 2010 - £5.6 billion; 31 December 2009 - £9.1 billion), with £2.2 billion of ABCP outstanding at that date (30 September 2010 - £3.2 billion; 31 December 2009 - £7.7 billion).



·

Additionally the Group has established an own-asset conduit with a committed liquidity of £26.0 billion (30 September 2010 - £26.0 billion; 31 December 2009 - £25.1 billion) to access the Bank of England's open market operations for contingent funding purposes.

 

The Group also extends liquidity commitments to multi-seller conduits sponsored by other banks, but typically does not consolidate these entities as the Group does not retain the majority of risks and rewards. The Group's exposure from third-party conduits was £136 million (30 September 2010 - £136 million; 31 December 2009 - £587 million) representing deal specific liquidity.


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