Interim Management Statement

RNS Number : 6740V
Royal Bank of Scotland Group PLC
05 November 2010
 

 

 

 

 

 

 

 

Appendix 2

 

The Asset Protection Scheme

 

 

 

Appendix 2 The Asset Protection Scheme

 

Covered assets: roll forward to 30 September 2010

 

The movements in covered assets during the quarter are detailed below.

 


Covered 

 amount 


£bn 



Covered assets at 30 June 2010

215.5 

Disposals

(3.5)

Maturities, amortisation and early repayments

(7.3)

Effect of foreign currency movements and other adjustments

0.7  



Covered assets at 30 September 2010

205.4 



Covered assets at 31 December 2009

230.5 

 

Note:

(1)

The Asset Protection Agency (APA) and the Group have now reached agreement on substantially all eligibility issues. 

 

Key points

·

The reduction in covered assets was due to disposals, early repayments and maturing loans.



·

As part of the Group's risk reduction strategy significant disposals were made from the structured credit portfolio (£1.8 billion); additionally the Group took advantage of market conditions and executed sales from its derivative, loan and leveraged finance portfolios (£1.7 billion).

 



 

Appendix 2 The Asset Protection Scheme

 

Credit impairments and write downs

 

The table below analyses the cumulative credit impairment losses and adjustments to par value (including AFS reserves) relating to covered assets.

 


30 September 

2010 

30 June 

2010 

31 December 

2009 


£m 

£m 

£m 





Loans and advances

17,360 

16,702 

14,240 

Debt securities

12,113 

13,980 

7,816 

Derivatives

2,341 

1,828 

6,834 






31,814 

32,510 

28,890 





By division:




UK Retail

2,880 

2,765 

2,431 

UK Corporate

1,026 

927 

1,007 

Ulster Bank

697 

730 

486 





Retail & Commercial

4,603 

4,422 

3,924 

Global Banking & Markets

1,769 

1,528 

1,628 





Core

6,372 

5,950 

5,552 

Non-Core

25,442 

26,560 

23,338 






31,814 

32,510 

28,890 

 

Key points

·

Cumulative credit impairments and write downs decreased by £0.7 billion in the quarter, primarily due to disposals of debt securities in the Non-Core division of £1.2 billion and movements in exchange rates of £0.5 billion, partially offset by impairments and write downs of £0.7 billion.



·

The APA and the Group have reached agreement on the classification for the purposes of the Scheme of some structured credit assets which has resulted in adjustments to credit impairments and write downs mainly between debt securities and derivatives.



 

Appendix 2 The Asset Protection Scheme (continued)

 

First loss utilisation

 

For definitions of triggered amounts and other related aspects, refer to page 174 of the Group's 2009 Annual Report and Accounts - Business review - Asset Protection Scheme.

 

The table below summarises the triggered amount and related cash recoveries by division.

 


30 September 2010


30 June 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

3,613 

371 

3,242 


3,503 

232 

3,271 


3,340 

129 

3,211 

UK Corporate

4,027 

1,032 

2,995 


3,431 

777 

2,654 


3,570 

604 

2,966 

Ulster Bank

1,387 

109 

1,278 


917 

78 

839 


704 

47 

657 













Retail & Commercial

9,027 

1,512 

7,515 


7,851 

1,087 

6,764 


7,614 

780 

6,834 

Global Banking &

  Markets

3,057 

464 

2,593 


2,579 

289 

2,290 


1,748 

108 

1,640 













Core

12,084 

1,976 

10,108 


10,430 

1,376 

9,054 


9,362 

888 

8,474 

Non-Core

29,502 

2,888 

26,614 


26,590 

1,792 

24,798 


18,905 

777 

18,128 


41,586 

4,864 

36,722 


37,020 

3,168 

33,852 


28,267 

1,665 

26,602 













Loss credits



732 






















37,454 




33,852 




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 regarding changes to triggers in respect of these assets. An additional criterion - implied write down - was agreed. 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 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 are currently in discussion with regard to loss credits in relation to the withdrawal of £2.9 billion of derivative assets during Q2 2010 and the disposal of approximately £1.5 billion of structured finance and leveraged finance assets in Q3 2010.

(5)

Under the rules of the Scheme the data in the table above at the quarterly reporting date may be revised over a rolling twelve month period.

 

Key point

·

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 30 September 2010 is approximately £23 billion (38%) of the £60 billion first loss threshold under the APS.

 

 



 

Appendix 2 The Asset Protection Scheme

 

Risk-weighted assets

 

The table below analyses the divisional risk-weighted assets (RWAs) covered by the APS.

 


30 September 

2010 

30 June 

2010 

31 December 

 2009 


£bn 

£bn 

£bn 





UK Retail

13.4 

13.5 

16.3 

UK Corporate

24.0 

25.7 

31.0 

Ulster Bank

8.3 

8.3 

8.9 





Retail & Commercial

45.7 

47.5 

56.2 

Global Banking & Markets

13.2 

15.5 

19.9 





Core

58.9 

63.0 

76.1 

Non-Core

58.0 

60.4 

51.5 





APS RWAs

116.9 

123.4 

127.6 

 

Key point

·

APS RWAs decreased by £6.5 billion, reflecting disposals and early repayments as well as changes in risk parameters.

 

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
IMSBABMTMBMMMBM
UK 100

Latest directors dealings