Final Results - Part 13 of 13
Appendix 4
Asset Protection Scheme
Appendix 4 Asset Protection Scheme
Asset Protection Scheme
Covered assets: roll forward to 31 December 2010
The table below shows the movement in covered assets:
|
|
Covered amount |
|
|
£bn |
|
|
|
|
Covered assets at 31 December 2009 |
230.5 |
|
Disposals |
(6.7) |
|
Maturities, amortisation and early repayments |
(20.4) |
|
Reclassified assets (2) |
3.1 |
|
Withdrawals |
(2.9) |
|
Effect of foreign currency movements and other adjustments |
1.8 |
|
|
|
|
Covered assets at 30 September 2010 |
205.4 |
|
Disposals |
(3.0) |
|
Maturities, amortisation and early repayments |
(8.3) |
|
Effect of foreign currency movements and other adjustments |
0.6 |
|
|
|
|
Covered assets at 31 December 2010 |
194.7 |
Notes:
|
(1) |
The Asset Protection Agency (APA) and the Group have now reached agreement on substantially all eligibility issues. |
|
(2) |
In Q2 2010, the APA and the Group reached agreement over the classification of some structured credit assets which resulted in adjustments to the covered amount, without affecting the underlying risk protection. |
Key points
|
· |
The reduction in covered assets was due to run-off of the portfolio, disposals, early repayments and maturing loans. |
|
|
|
|
· |
As part of the Group's risk reduction strategy significant disposals were made from the Structured Credit Portfolio (Q4 2010 - £0.4 billion; 2010 - £3.0 billion). The Group also took advantage of market conditions and executed sales from its derivative, loan and leveraged finance portfolios (Q4 2010 - £2.6 billion; 2010 - £6.7 billion). |
|
|
|
Appendix 4 Asset Protection Scheme (continued)
Asset Protection Scheme (continued)
Credit impairments and write downs
The table below analyses the cumulative credit impairment losses and adjustments to par value (including AFS reserves) relating to the covered assets.
|
|
31 December 2010 |
30 September 2010 |
31 December 2009 |
|
|
£m |
£m |
£m |
|
|
|
|
|
|
Loans and advances |
18,033 |
17,360 |
14,240 |
|
Debt securities |
11,747 |
12,113 |
7,816 |
|
Derivatives |
2,043 |
2,341 |
6,834 |
|
|
|
|
|
|
|
31,823 |
31,814 |
28,890 |
|
|
|
|
|
|
By division: |
|
|
|
|
UK Retail |
2,964 |
2,880 |
2,431 |
|
UK Corporate |
1,382 |
1,026 |
1,007 |
|
Ulster Bank |
804 |
697 |
486 |
|
|
|
|
|
|
Retail & Commercial |
5,150 |
4,603 |
3,924 |
|
Global Banking & Markets (GBM) |
1,496 |
1,769 |
1,628 |
|
|
|
|
|
|
Core |
6,646 |
6,372 |
5,552 |
|
Non-Core |
25,177 |
25,442 |
23,338 |
|
|
|
|
|
|
|
31,823 |
31,814 |
28,890 |
Key points
Q4 2010 compared with Q3 2010
|
· |
Impairments in Ulster Bank and UK Corporate increased during the quarter but decreased in GBM and Non-Core. |
2010 compared with 2009
|
· |
The increase in Non-Core impairments of £1.8 billion accounted for the majority of the increase in credit impairments and write downs in 2010. |
|
|
|
|
· |
The APA and the Group reached agreement for the purposes of the Scheme, on the classification of some structured credit assets which has resulted in adjustments to credit impairments and write-downs mainly between debt securities and derivatives. |
|
|
|
|
· |
The reduction in GBM is largely a result of transfers to Non-Core in the second half of the year. |
Appendix 4 Asset Protection Scheme (continued)
Asset Protection Scheme (continued)
First loss utilisation
Definitions of triggered amounts and other related aspects are set out in the Group's 2010 Annual Report and Accounts.
The table below summarises the triggered amount and related cash recoveries by division.
|
|
31 December 2010 |
|
30 September 2010 |
|
31 December 2009 |
||||||
|
|
Triggered amount |
Cash recoveries to date |
Net triggered amount |
|
Triggered amount |
Cash recoveries to date |
Net triggered amount |
|
Triggered amount |
Cash recoveries to date |
Net triggered amount |
|
|
£m |
£m |
£m |
|
£m |
£m |
£m |
|
£m |
£m |
£m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK Retail |
3,675 |
455 |
3,220 |
|
3,613 |
371 |
3,242 |
|
3,340 |
129 |
3,211 |
|
UK Corporate |
4,640 |
1,115 |
3,525 |
|
4,027 |
1,032 |
2,995 |
|
3,570 |
604 |
2,966 |
|
Ulster Bank |
1,500 |
160 |
1,340 |
|
1,387 |
109 |
1,278 |
|
704 |
47 |
657 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail & Commercial |
9,815 |
1,730 |
8,085 |
|
9,027 |
1,512 |
7,515 |
|
7,614 |
780 |
6,834 |
|
Global Banking & Markets |
2,547 |
749 |
1,798 |
|
3,057 |
464 |
2,593 |
|
1,748 |
108 |
1,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core |
12,362 |
2,479 |
9,883 |
|
12,084 |
1,976 |
10,108 |
|
9,362 |
888 |
8,474 |
|
Non-Core |
32,138 |
4,544 |
27,594 |
|
29,502 |
2,888 |
26,614 |
|
18,905 |
777 |
18,128 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,500 |
7,023 |
37,477 |
|
41,586 |
4,864 |
36,722 |
|
28,267 |
1,665 |
26,602 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss credits |
|
|
1,241 |
|
|
|
732 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,718 |
|
|
|
37,454 |
|
|
|
26,602 |
Notes:
|
(1) |
The triggered amount on a covered asset is calculated when an asset is triggered (due to bankruptcy, failure to pay after a grace period or restructuring with an impairment) and is the lower of the covered amount and the outstanding amount for each covered asset. The Group expects additional assets to trigger upon expiry of relevant grace periods based on the current risk rating and level of impairments on covered assets. |
|
(2) |
Following the reclassification of some structured credit assets from derivatives to debt securities, the APA and the Group also reached agreement on an additional implied write down trigger in respect of these assets. This occurs if (a) on two successive relevant payment dates, the covered asset has a rating of Caa2 or below by Moody's, CCC or below by Standard & Poor's or Fitch or a comparable rating from an internationally recognised credit rating agency and/or (b) on any two successive relevant payment dates, the mark-to-market value of the covered asset is equal to or less than 40 per cent of the par value of the covered asset, in each case as at such relevant payment date. |
|
(3) |
Under the Scheme rules, the Group may apply to the APA for loss credits in respect of the disposal of non-triggered assets. A loss credit counts towards the first loss threshold and is typically determined by the APA based on the expected loss of the relevant asset. |
|
(4) |
The Group and the APA remain in discussion with regard to loss credits in relation to the withdrawal of £2.0 billion of derivative assets during Q2 2010 and the disposal of approximately £1.6 billion of structured finance and leveraged finance assets in 2010. |
|
(5) |
The Scheme rules contain provision for on-going revision of data. |
Key points
|
· |
The Group received loss credits in relation to some of the withdrawals and disposals (Q4 2010 - £0.5 billion; 2010 - £1.2 billion). |
|
|
|
|
· |
The Group currently expects recoveries on triggered amounts to be approximately 45% over the life of the relevant assets. On this basis, the expected loss on triggered assets at 31 December 2010 is approximately £25 billion (42%) of the £60 billion first loss threshold under APS. |
Appendix 4 Asset Protection Scheme (continued)
Asset Protection Scheme (continued)
Risk-weighted assets
The table below analyses by division, risk-weighted assets (RWAs) covered by APS.
|
|
31 December 2010 |
30 September 2010 |
31 December 2009 |
|
|
£bn |
£bn |
£bn |
|
|
|
|
|
|
UK Retail |
12.4 |
13.4 |
16.3 |
|
UK Corporate |
22.9 |
24.0 |
31.0 |
|
Ulster Bank |
7.9 |
8.3 |
8.9 |
|
|
|
|
|
|
Retail & Commercial |
43.2 |
45.7 |
56.2 |
|
Global Banking & Markets |
11.5 |
13.2 |
19.9 |
|
|
|
|
|
|
Core |
54.7 |
58.9 |
76.1 |
|
Non-Core |
50.9 |
58.0 |
51.5 |
|
|
|
|
|
|
APS RWAs |
105.6 |
116.9 |
127.6 |
Key points
|
· |
The decrease (Q4 2010 - £11.3 billion; 2010 - £22.0 billion) in RWAs reflects disposals and early repayments as well as changes in risk parameters. |
|
|
|
|
· |
In Non-Core, disposals and early repayments were offset by changes in risk parameters. |
This information is provided by RNS