TIDMRBS
RNS Number : 0959C
Royal Bank of Scotland Group PLC
06 November 2009
?
Appendix 3
Asset Protection Scheme
Appendix 3 Asset Protection Scheme
THE ASSET POOLS TO BE COVERED BY THE ASSET PROTECTION SCHEME WERE ONLY AGREED
VERY RECENTLY. THE DATA FOR 30 SEPTEMBER 2009 ARE ESTIMATES AND ACTUAL NUMBERS
WILL BE PROVIDED IN THE CIRCULAR TO SHAREHOLDERS.
+-------------+-------------+-------------+-------------+-------------+-------------+
| | | Page |
+---------------------------+---------------------------+---------------------------+
| | | |
+---------------------------+---------------------------+---------------------------+
| | | |
+---------------------------+---------------------------+---------------------------+
| 1. Summary of APS | | 2 |
| revisions | | |
+---------------------------+---------------------------+---------------------------+
| | | |
+---------------------------+---------------------------+---------------------------+
| 2. Asset coverage | | |
+---------------------------+---------------------------+---------------------------+
| 2.1 Roll forward of | | 3 |
| covered assets to 30 June | | |
| 2009 | | |
+---------------------------+---------------------------+---------------------------+
| 2.2 Covered assets at | | 4 |
| 30 June 2009 and 31 | | |
| December 2008 | | |
+---------------------------+---------------------------+---------------------------+
| 2.3 Credit impairments | | 6 |
| and write downs | | |
+---------------------------+---------------------------+---------------------------+
| 2.4 Risk elements in | | 6 |
| lending and potential | | |
| problem loans | | |
+---------------------------+---------------------------+---------------------------+
| 2.5 Credit quality | | 7 |
+---------------------------+---------------------------+---------------------------+
| 2.6 Risk-weighted | | 7 |
| assets | | |
+---------------------------+---------------------------+---------------------------+
| | | |
+---------------------------+---------------------------+---------------------------+
| 3. Basis of asset | | 8 |
| selection | | |
+---------------------------+---------------------------+---------------------------+
| | | |
+---------------------------+---------------------------+---------------------------+
| 4. Pro forma capital | | 9 |
| ratios | | |
+-------------+-------------+-------------+-------------+-------------+-------------+
Appendix 3 Asset Protection Scheme
1. Summary of APS revisions
+----------------------------------+--+------------------+----------------------+
| | | Original APS | Revised APS |
+----------------------------------+--+------------------+----------------------+
| | | | |
+----------------------------------+--+------------------+----------------------+
| Capital injection | | GBP19.5 billion | GBP25.5 billion |
+----------------------------------+--+------------------+----------------------+
| Contingent capital reserve | | GBP6.0 billion | GBP8.0 billion, |
| | | | (fee of 4% p.a.) |
+----------------------------------+--+------------------+----------------------+
| Details on Insurance cover: | | | |
+----------------------------------+--+------------------+----------------------+
| Covered assets at 31 December | | GBP325 billion | GBP282 billion |
| 2008 | | | |
+----------------------------------+--+------------------+----------------------+
| RWA relief at 30 June 2009 | | GBP149.6 billion | GBP140.7 billion |
+----------------------------------+--+------------------+----------------------+
| | | | |
+----------------------------------+--+------------------+----------------------+
| First loss | | GBP42.2 billion | GBP60.0 billion |
+----------------------------------+--+------------------+----------------------+
| - provisions recorded at 31 | | GBP22.7 billion | GBP21.3 billion |
| December 2008 | | | |
+----------------------------------+--+------------------+----------------------+
| - remaining | | GBP19.5 billion | GBP38.7 billion |
+----------------------------------+--+------------------+----------------------+
| | | | |
+----------------------------------+--+------------------+----------------------+
| Fees: | | | |
+----------------------------------+--+------------------+----------------------+
| - base | | GBP6.5 billion | GBP700 million p.a. |
| | | | (2009 to 2011), |
| | | | GBP500 million |
| | | | thereafter |
+----------------------------------+--+------------------+----------------------+
| | | | |
+----------------------------------+--+------------------+----------------------+
| - in deferred tax assets | | GBP5.2 billion | Nil |
| ('DTA') give up | | historical plus | |
| | | DTA on future | |
| | | tax losses | |
+----------------------------------+--+------------------+----------------------+
| | | | |
+----------------------------------+--+------------------+----------------------+
| Termination rights | | Limited | At any time provided |
| | | | FSA stress test |
| | | | framework is met |
+----------------------------------+--+------------------+----------------------+
| | | | |
+----------------------------------+--+------------------+----------------------+
| Exit fees | | Negotiable | GBP2.5 billion less |
| | | | cumulative fees paid |
+----------------------------------+--+------------------+----------------------+
| | | | |
+----------------------------------+--+------------------+----------------------+
| FSA stress test | | Meets FSA | Meets FSA framework |
| | | framework | |
+----------------------------------+--+------------------+----------------------+
| | | | |
+----------------------------------+--+------------------+----------------------+
Key messages:
* RBS continues to meet the FSA stress test framework
* RBS is exposed to higher credit losses and less capital relief under revised APS
* However, RBS will have more capital to serve as offsets through:
(a) lower fees and retention of deferred tax assets
(b) issuance of additional B shares
(c) access to contingent capital
* Original APS structure provided higher equivalent capital benefits relative to
8% CT1 target than revised APS because of the way the securitisation formula
works. Lower deductible policy resulted in lower capital charges through the
period as the first loss is fully utilised.
Appendix 3 Asset Protection Scheme
2. Asset coverage
2.1 Roll forward of covered assets to 30 June 2009
+-----------------------------+--------------------+--------------------+--------------------+
| | |
+--------------------------------------------------+-----------------------------------------+
| | GBPbn |
+--------------------------------------------------+-----------------------------------------+
| | |
+--------------------------------------------------+-----------------------------------------+
| Covered assets at 31 December 2008 - | 325.0 |
| as announced on 26 February 2009 | |
+--------------------------------------------------+-----------------------------------------+
| Asset pool refinements | (9.2) |
+--------------------------------------------------+-----------------------------------------+
| | |
+--------------------------------------------------+-----------------------------------------+
| Covered assets at 31 December 2008 - | 315.8 |
| as published on 7 August 2009 | |
+--------------------------------------------------+-----------------------------------------+
| Refinements and exclusions | |
+--------------------------------------------------+-----------------------------------------+
| oasset | (1.1) |
| pool | |
| refinements | |
+--------------------------------------------------+-----------------------------------------+
| ocredit | (7.2) |
| derivative | |
| product | |
| companies | |
+--------------------------------------------------+-----------------------------------------+
| oderivatives | (4.8) |
| buffer | |
+--------------------------------------------------+-----------------------------------------+
| oconduits | (6.3) |
+--------------------------------------------------+-----------------------------------------+
| oreverse | (5.2) |
| repurchase | |
| agreements | |
+--------------------------------------------------+-----------------------------------------+
| oassets | (6.9) |
| potentially | |
| eligible | |
| for other | |
| sovereign | |
| schemes | |
+--------------------------------------------------+-----------------------------------------+
| oother | (2.8) |
| asset | |
| removals | |
+--------------------------------------------------+-----------------------------------------+
| | |
+--------------------------------------------------+-----------------------------------------+
| Covered assets at 31 December 2008 - | 281.5 |
| as announced on 3 November 2009 | |
+--------------------------------------------------+-----------------------------------------+
| Disposals, rollovers and repayments | (12.9) |
+--------------------------------------------------+-----------------------------------------+
| Effect of foreign currency movements | (14.8) |
+--------------------------------------------------+-----------------------------------------+
| Amortisations and other movements | (11.0) |
+--------------------------------------------------+-----------------------------------------+
| | |
+--------------------------------------------------+-----------------------------------------+
| Covered assets at 30 June 2009 | 242.8 |
+-----------------------------+--------------------+--------------------+--------------------+
Removals are a function of ineligibility in line with the Scheme rules,
operational complexity, eligibility for other sovereign schemes and more
economic forms of covering risk.
Appendix 3 Asset Protection Scheme
2. Asset coverage (continued)
2.2 Covered assets* at 30 June 2009 and 31 December 2008
The tables below show balances by asset classes, as defined by the Scheme, with
underlying product categories, at 30 June 2009 and 31 December 2008.
+----------------------------+----------+-------------+-------------+------------------+----------------+
| | Carrying | Provisions | Par value | Undrawn | Covered |
| | value | and | | commitments, and | amount |
| | (1) | adjustments | | other | |
| | | to par | | adjustments (2) | |
| | | value | | | |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| | GBPm | GBPm | GBPm | GBPm | GBPm |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| 30 June 2009 | (a) | (b) | (c)=(a)+(b) | (d) | (e)=(c)+(d) |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| | | | | | |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| Residential mortgages | 15,052 | 204 | 15,256 | 10 | 15,266 |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| | | | | | |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| Consumer finance | 17,944 | 2,405 | 20,349 | 2,361 | 22,710 |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| Personal loans | 8,203 | 1,864 | 10,067 | 1,395 | 11,462 |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| Business and commercial | 9,741 | 541 | 10,282 | 966 | 11,248 |
| loans | | | | | |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| | | | | | |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| Commercial real estate | 33,241 | 1,179 | 34,420 | 4,727 | 39,147 |
| finance | | | | | |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| | | | | | |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| Leveraged finance | 14,549 | 3,820 | 18,369 | 5,201 | 23,570 |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| | | | | | |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| Lease finance | 4,945 | 331 | 5,276 | 614 | 5,890 |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| | | | | | |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| Project finance | 1,535 | 24 | 1,559 | 312 | 1,871 |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| | | | | | |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| Structured finance | 16,782 | 7,523 | 24,305 | 4,397 | 28,702 |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| Structured loans | 11,188 | 743 | 11,931 | 3,002 | 14,933 |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| Asset-backed securities | 5,594 | 6,780 | 12,374 | 1,395 | 13,769 |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| | | | | | |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| Loans | 42,201 | 4,008 | 46,209 | 23,795 | 70,004 |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| | | | | | |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| Bonds (3) | 719 | (8) | 711 | 21 | 732 |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| | | | | | |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| Derivatives | 13,231 | 7,178 | 20,409 | 14,464 | 34,873 |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| Monoline insurers | 4,104 | 6,845 | 10,949 | 8,832 | 19,781 |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| Other counterparties | 9,127 | 333 | 9,460 | 5,632 | 15,092 |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| | | | | | |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| Total | 160,199 | 26,664 | 186,863 | 55,902 | 242,765 |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| | | | | | |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| UK Retail | 16,909 | 1,772 | 18,681 | 1,363 | 20,044 |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| UK Corporate | 33,608 | 504 | 34,112 | 13,245 | 47,357 |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| Global Banking & Markets | 33,023 | 1,453 | 34,476 | 20,035 | 54,511 |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| Ulster | 10,170 | 210 | 10,380 | 829 | 11,209 |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| Non-Core | 66,489 | 22,725 | 89,214 | 20,430 | 109,644 |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| | | | | | |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| | 160,199 | 26,664 | 186,863 | 55,902 | 242,765 |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| | | | | | |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| Loans and advances | 142,455 | 10,914 | 153,369 | 40,022 | 193,391 |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| Debt securities | 6,313 | 6,772 | 13,085 | 1,416 | 14,501 |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| Derivatives | 11,431 | 8,978 | 20,409 | 14,464 | 34,873 |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| | | | | | |
+----------------------------+----------+-------------+-------------+------------------+----------------+
| | 160,199 | 26,664 | 186,863 | 55,902 | 242,765 |
+----------------------------+----------+-------------+-------------+------------------+----------------+
Appendix 3 Asset Protection Scheme
4. Asset coverage (continued)
2.2 Covered assets* at 30 June 2009 and 31 December 2008 (continued)
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| | Carrying | Provisions and | Par value | Undrawn | Covered |
| | value (1) | adjustments to | | commitments and | amount |
| | | par value | | other | |
| | | | | adjustments (2) | |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| | GBPm | GBPm | GBPm | GBPm | GBPm |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| 31 December 2008 | (a) | (b) | (c)=(a)+(b) | (d) | (e)=(c)+(d) |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| | | | | | |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| Residential mortgages | 15,283 | 144 | 15,427 | - | 15,427 |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| | | | | | |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| Consumer finance | 20,297 | 2,003 | 22,300 | 2,085 | 24,385 |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| Personal loans | 9,544 | 1,687 | 11,231 | 1,440 | 12,671 |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| Business and commercial | 10,753 | 316 | 11,069 | 645 | 11,714 |
| loans | | | | | |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| | | | | | |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| Commercial real estate | 41,367 | 975 | 42,342 | 9,077 | 51,419 |
| finance | | | | | |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| | | | | | |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| Leveraged finance | 16,290 | 2,944 | 19,234 | 5,112 | 24,346 |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| | | | | | |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| Lease finance | 5,880 | 236 | 6,116 | 890 | 7,006 |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| | | | | | |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| Project finance | 1,642 | 58 | 1,700 | 414 | 2,114 |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| | | | | | |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| Structured finance | 19,478 | 7,047 | 26,525 | 5,700 | 32,225 |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| Structured loans | 12,674 | 261 | 12,935 | 3,294 | 16,229 |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| Asset-backed securities | 6,804 | 6,786 | 13,590 | 2,406 | 15,996 |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| | | | | | |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| Loans | 55,537 | 1,373 | 56,910 | 27,510 | 84,420 |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| | | | | | |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| Bonds (3) | 1,285 | (103) | 1,182 | 65 | 1,247 |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| | | | | | |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| Derivatives | 21,068 | 6,575 | 27,643 | 11,272 | 38,915 |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| Monoline insurers | 5,620 | 5,892 | 11,512 | 10,758 | 22,270 |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| Other counterparties | 15,448 | 683 | 16,131 | 514 | 16,645 |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| | | | | | |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| Total | 198,127 | 21,252 | 219,379 | 62,125 | 281,504 |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| | | | | | |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| UK Retail | 18,186 | 1,565 | 19,751 | 1,415 | 21,166 |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| UK Corporate | 39,191 | 330 | 39,521 | 12,165 | 51,686 |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| Global Banking & Markets | 49,487 | 2,142 | 51,629 | 23,415 | 75,044 |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| Ulster | 11,772 | 167 | 11,939 | 1,163 | 13,102 |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| Non-Core | 79,491 | 17,048 | 96,539 | 23,967 | 120,506 |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| | | | | | |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| Total | 198,127 | 21,252 | 219,379 | 62,125 | 281,504 |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| | | | | | |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| Loans and advances | 168,970 | 7,994 | 176,964 | 48,382 | 225,346 |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| Debt securities | 8,089 | 6,683 | 14,772 | 2,471 | 17,243 |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| Derivatives | 21,068 | 6,575 | 27,643 | 11,272 | 38,915 |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| | | | | | |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
| Total | 198,127 | 21,252 | 219,379 | 62,125 | 281,504 |
+-----------------------------+------------+----------------+-------------+------------------+---------------+
Notes:
+--------------------+--------------------+--------------------+--------------------+
| (1) | Carrying value represents the amounts |
| | recorded on the balance sheet and |
| | includes assets classified as loans and |
| | receivables, fair valued through profit |
| | or loss and available-for-sale |
+-----------------------------------------+-----------------------------------------+
| (2) | Other adjustments include: add-back of |
| | available-for-sale reserves (taken |
| | through equity) and adjustment to |
| | covered amounts for derivatives (for 30 |
| | June 2009 only) and rollovers and |
| | refinancing (for 30 June 2009 only) |
+-----------------------------------------+-----------------------------------------+
| (3) | Comprises non asset-backed securities |
+--------------------+--------------------+--------------------+--------------------+
*Detailed information is presented as at 30 June 2009 and 31 December 2008.
Information as at 30 September 2009 is being updated for incorporation in the
APS shareholder circular.
Appendix 3 Asset Protection Scheme
2. Asset coverage (continued)
2.3 Credit impairments and write downs
Cumulative credit impairment losses and adjustments to par value relating to
covered assets are set out below:
+-------------+-------------+-------------+-------------+-------------+-------------+
| | Closing balance |
+---------------------------+-------------------------------------------------------+
| | 30 June 2009 | 31 December 2008 |
+---------------------------+---------------------------+---------------------------+
| | GBPm | GBPm |
+---------------------------+---------------------------+---------------------------+
| | | |
+---------------------------+---------------------------+---------------------------+
| Loans and advances | 10,914 | 7,994 |
+---------------------------+---------------------------+---------------------------+
| Debt securities | 6,772 | 6,683 |
+---------------------------+---------------------------+---------------------------+
| Derivatives | 8,978 | 6,575 |
+---------------------------+---------------------------+---------------------------+
| | | |
+---------------------------+---------------------------+---------------------------+
| Total | 26,664 | 21,252 |
+---------------------------+---------------------------+---------------------------+
| | | |
+---------------------------+---------------------------+---------------------------+
| UK Retail | 1,772 | 1,565 |
+---------------------------+---------------------------+---------------------------+
| UK Corporate | 504 | 330 |
+---------------------------+---------------------------+---------------------------+
| Global Banking & Markets | 1,453 | 2,142 |
+---------------------------+---------------------------+---------------------------+
| Ulster | 210 | 167 |
+---------------------------+---------------------------+---------------------------+
| Non-Core | 22,725 | 17,048 |
+---------------------------+---------------------------+---------------------------+
| | | |
+---------------------------+---------------------------+---------------------------+
| | 26,664 | 21,252 |
+-------------+-------------+-------------+-------------+-------------+-------------+
2.4 Risk elements in lending and potential problem loans
Risk elements in lending (REILs) and potential problem loans (PPLs) for the
Group and the amount relating to assets in the Scheme are set out below.
+--------------------+--------------+--------------+--+-------------+-------------+
| | 30 June 2009 | | 31 December 2008 |
+--------------------+-----------------------------+--+---------------------------+
| | Group | APS | | Group | APS |
+--------------------+--------------+--------------+--+-------------+-------------+
| | GBPm | GBPm | | GBPm | GBPm |
+--------------------+--------------+--------------+--+-------------+-------------+
| | | | | | |
+--------------------+--------------+--------------+--+-------------+-------------+
| Non-performing | 27,229 | 20,627 | | 17,082 | 12,679 |
| loans | | | | | |
+--------------------+--------------+--------------+--+-------------+-------------+
| Other REIL | 3,500 | 2,900 | | 1,709 | 1,498 |
+--------------------+--------------+--------------+--+-------------+-------------+
| | | | | | |
+--------------------+--------------+--------------+--+-------------+-------------+
| Total REIL | 30,729 | 23,527 | | 18,791 | 14,177 |
+--------------------+--------------+--------------+--+-------------+-------------+
| PPLs | 296 | 239 | | 226 | 187 |
+--------------------+--------------+--------------+--+-------------+-------------+
| | | | | | |
+--------------------+--------------+--------------+--+-------------+-------------+
| REIL and PPLs | 31,025 | 23,766 | | 19,017 | 14,364 |
+--------------------+--------------+--------------+--+-------------+-------------+
| | | | | | |
+--------------------+--------------+--------------+--+-------------+-------------+
| Core | 10,364 | 6,711 | | | |
+--------------------+--------------+--------------+--+-------------+-------------+
| Non-Core | 20,661 | 17,055 | | | |
+--------------------+--------------+--------------+--+-------------+-------------+
| | | | | | |
+--------------------+--------------+--------------+--+-------------+-------------+
| | 31,025 | 23,766 | | | |
+--------------------+--------------+--------------+--+-------------+-------------+
Key points:
* More than 75% of the Group's REILs and PPLs relate to assets in the Scheme.
* Of the REILs and PPLs in Non-Core, more than 80% were in APS.
Appendix 3 Asset Protection Scheme
2. Asset coverage (continued)
2.5 Credit quality
The internal reporting and oversight of risk assets principles are set out in
the Group 2008 Report and Accounts credit risk section on page 90. The table
below shows the credit quality of the Group's credit risk assets by risk bands
and the proportion relating to assets in the Scheme.
+------+------+------+------+------+------+------+------+------+------+------+------+------+------+
| | | 30 June 2009 | | 31 December 2008 |
+-------------+-------------+---------------------------+-------------+---------------------------+
| Asset | Probability | Group | % relating | | Group | % relating |
| quality | of default | | to assets | | | to assets |
| band | | | in the | | | in the |
| | | | Scheme | | | Scheme |
+-------------+-------------+-------------+-------------+-------------+-------------+-------------+
| | | GBPbn | | | GBPbn | |
+-------------+-------------+-------------+-------------+-------------+-------------+-------------+
| | | | | | | |
+-------------+-------------+-------------+-------------+-------------+-------------+-------------+
| AQ1 | 0% - 0.034% | 109 | 2% | | 127 | 3% |
+-------------+-------------+-------------+-------------+-------------+-------------+-------------+
| AQ2 | 0.034% - | 20 | 9% | | 26 | 16% |
| | 0.048% | | | | | |
+-------------+-------------+-------------+-------------+-------------+-------------+-------------+
| AQ3 | 0.048% - | 33 | 10% | | 38 | 17% |
| | 0.095% | | | | | |
+-------------+-------------+-------------+-------------+-------------+-------------+-------------+
| AQ4 | 0.095% - | 114 | 16% | | 150 | 15% |
| | 0.381% | | | | | |
+-------------+-------------+-------------+-------------+-------------+-------------+-------------+
| AQ5 | 0.381% - | 121 | 26% | | 148 | 28% |
| | 1.076% | | | | | |
+-------------+-------------+-------------+-------------+-------------+-------------+-------------+
| AQ6 | 1.076% - | 99 | 32% | | 103 | 36% |
| | 2.153% | | | | | |
+-------------+-------------+-------------+-------------+-------------+-------------+-------------+
| AQ7 | 2.153% - | 49 | 45% | | 46 | 52% |
| | 6.089% | | | | | |
+-------------+-------------+-------------+-------------+-------------+-------------+-------------+
| AQ8 | 6.089% - | 25 | 42% | | 26 | 46% |
| | 17.222% | | | | | |
+-------------+-------------+-------------+-------------+-------------+-------------+-------------+
| AQ9 | 17.222% - | 17 | 55% | | 12 | 69% |
| | 100% | | | | | |
+-------------+-------------+-------------+-------------+-------------+-------------+-------------+
| AQ10 | 100% | 33 | 81% | | 18 | 72% |
+-------------+-------------+-------------+-------------+-------------+-------------+-------------+
| Other (1) | | 38 | 5% | | 41 | 8% |
+-------------+-------------+-------------+-------------+-------------+-------------+-------------+
| | | | | | | |
+-------------+-------------+-------------+-------------+-------------+-------------+-------------+
| | | 658 | 24% | | 735 | 24% |
+------+------+------+------+------+------+------+------+------+------+------+------+------+------+
Notes:
+--------------------+--------------------+--------------------+--------------------+
| (1) | 'Other' largely comprises assets |
| | covered by the standardised approach |
| | for which a probability of default (PD) |
| | equivalent to those assigned to assets |
| | covered by the internal ratings based |
| | approach is not available. |
+-----------------------------------------+-----------------------------------------+
| (2) | Reverse repurchase agreements, carrying |
| | value relating to net derivative |
| | positions and issuer risk relating to |
| | debt securities are excluded from both |
| | Group numbers and APS covered assets |
| | above. |
+--------------------+--------------------+--------------------+--------------------+
Over 80% of Group's credit risk assets with 100% probability of default are in
the Scheme.
2.6 Risk-weighted assets
Risk-weighted assets (RWAs) were as follows:
+-------------------+----------+--------+--+--------+--------+--+--------+--------+
| |30 September 2009 | | 30 June 2009 | | 31 December |
| | | | | | 2008 |
+-------------------+-------------------+--+-----------------+--+-----------------+
| | GBPbn | % | | GBPbn | % | | GBPbn | % |
+-------------------+----------+--------+--+--------+--------+--+--------+--------+
| APS | 166.5 | 28 | | 140.7 | 26 | | 158.7 | 27 |
+-------------------+----------+--------+--+--------+--------+--+--------+--------+
| Non APS | 428.2 | 72 | | 406.6 | 74 | | 419.1 | 73 |
+-------------------+----------+--------+--+--------+--------+--+--------+--------+
| Group | 594.7 | 100 | | 547.3 | 100 | | 577.8 | 100 |
+-------------------+----------+--------+--+--------+--------+--+--------+--------+
| | | | | | | | | |
+-------------------+----------+--------+--+--------+--------+--+--------+--------+
+--------------------------------------------+----------+----------+------------+
| | 30 June 2009 |
+--------------------------------------------+----------------------------------+
| | APS | Non APS | Total |
+--------------------------------------------+----------+----------+------------+
| Risk-weighted assets by division: | GBPbn | GBPbn | GBPbn |
+--------------------------------------------+----------+----------+------------+
| UK Retail | 18.3 | 35.7 | 54.0 |
+--------------------------------------------+----------+----------+------------+
| UK Corporate | 32.5 | 57.0 | 89.5 |
+--------------------------------------------+----------+----------+------------+
| Global Banking & Markets | 29.3 | 93.1 | 122.4 |
+--------------------------------------------+----------+----------+------------+
| Ulster | 8.1 | 18.1 | 26.2 |
+--------------------------------------------+----------+----------+------------+
| Other divisions | - | 91.1 | 91.1 |
+--------------------------------------------+----------+----------+------------+
| | | | |
+--------------------------------------------+----------+----------+------------+
| Core | 88.2 | 295.0 | 383.2 |
+--------------------------------------------+----------+----------+------------+
| Non-Core | 52.5 | 111.6 | 164.1 |
+--------------------------------------------+----------+----------+------------+
| | | | |
+--------------------------------------------+----------+----------+------------+
| Group | 140.7 | 406.6 | 547.3 |
+--------------------------------------------+----------+----------+------------+
Appendix 3 Asset Protection Scheme
3. Basis of asset selection
The selection has been carried out primarily between February and April 2009 and
was driven by three principal criteria
(1) Risk and degree of impairment in base case and stressed scenarios;
(2) Liquidity of exposure; and
(3) Capital intensity under procyclicality.
The approach for high volume commercial and retail exposures was on a portfolio
basis. Selection for large corporates and GBM was at the counterparty/asset
level. Set out below are the selection criteria for the affected divisions.
+----------------+------------------------------------------------------------+
| GBM* | * Banking book: Selection by |
| | individual asset pool (e.g., |
| | Corporate loans, Real estate |
| | finance, Leveraged finance), |
| | Global Restructuring Group (GRG) |
| | work-out unit |
| | counterparties/assets and high |
| | risk counterparties/assets. |
| | Additional counterparties/assets |
| | were selected through an |
| | individual risk review of the |
| | total portfolio.* |
| | Trading book: Selection by |
| | individual assets (e.g., |
| | Monolines, Derivatives, Mortgage |
| | trading). |
+----------------+------------------------------------------------------------+
| UK Corporate* | * Commercial & Corporate real |
| | estate: All defaulted assets in |
| | the work-out/restructuring unit |
| | or in high risk bands.* |
| | Corporate: All defaulted assets |
| | in the work-out/restructuring |
| | unit. Corporate banking clients |
| | in high risk sectors or with high |
| | concentration risk.* |
| | Business Banking: Portfolios in |
| | the work out / restructuring unit |
| | or in high risk bands. |
+----------------+------------------------------------------------------------+
| UK Retail* | * Mortgages: assets with higher |
| | Loan to Values and in higher risk |
| | segments (e.g. LTVs >97% on |
| | general book, LTVs >85% on |
| | buy-to-let book), and those |
| | assets in arrears (at 31 December |
| | 2008).* |
| | Loans and overdrafts - higher |
| | risk customers based on internal |
| | bandings, and those assets in |
| | arrears (as at 31 December 2008). |
+----------------+------------------------------------------------------------+
| EME* | * Mortgages: Assets with greater |
| (Corporate & | than 85% LTV, broker mortgages |
| Retail) | and interest only with a higher |
| | probability of default.* |
| | Retail: Portfolios of accounts in |
| | default, >1 month arrears, <2 |
| | years old and a higher |
| | probability of default.* |
| | Corporate: Counterparties/assets |
| | in work-out / restructuring |
| | groups or in high risk bands, and |
| | other assets identified as part |
| | of an individual review of cases. |
+----------------+------------------------------------------------------------+
* including assets transferred to Non-Core division
Appendix 3 Asset Protection Scheme
4. Pro forma capital ratios
+---------+-----+-----+-----+-----+-----+-----+-----+-----+-----+-----+-----+-----+-----+-----+-----+
| 30 | RWAs | Core tier | Core tier | Tier 1 | Tier 1 | Total | Total |
| September | | 1 capital | 1 capital | capital | capital | capital | capital |
| 2009 | | | ratio | | ratio | | ratio |
| (estimated) | | | | | | | |
+---------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+
| | GBPbn | GBPbn | % | GBPbn | % | GBPbn | % |
+---------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+
| | | | | | | | |
+---------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+
| As | 594.7 | 33.0 | 5.5% | 47.6 | 8.0% | 62.1 | 10.4% |
| reported | | | | | | | |
+---------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+
| | | | | | | | |
+---------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+
| Pro | | | | | | | |
| forma | | | | | | | |
| effects: | | | | | | | |
+---------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+
| B share | | 25.5 | | 25.5 | | 25.5 | |
| issuance | | | | | | | |
+---------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+
| | | | | | | | |
+---------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+
| Less | | | | | | | |
+---------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+
| CDS | | (2.5) | | (2.5) | | (2.5) | |
| Value | | | | | | | |
+---------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+
| Contingent | | (1.6) | | (1.6) | | (1.6) | |
| Capital | | | | | | | |
| fee | | | | | | | |
| deducted | | | | | | | |
| upfront | | | | | | | |
+---------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+
| | | | | | | | |
+---------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+
| Capital | | (13.4) | | | | | |
| requirements | | | | | | | |
| at 8% | | | | | | | |
+---------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+
| APS | | 6.7 | | | | | |
| coverage | | | | | | | |
| benefit | | | | | | | |
| at 4% | | | | | | | |
+---------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+
| Net | | (6.7) | | (6.7) | | (6.7) | |
| (BiPru | | | | | | | |
| 9) | | | | | | | |
| deduction | | | | | | | |
+---------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+
| | | | | | | | |
+---------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+
| Tier 2 | | | | | | (6.7) | |
| deduction | | | | | | | |
+---------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+
| RWA | (166.5) | | | | | | |
| relief | | | | | | | |
+---------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+
| | 428.2 | 47.7 | 11.1% | 62.3 | 14.5% | 70.1 | 16.4% |
+---------+-----+-----+-----+-----+-----+-----+-----+-----+-----+-----+-----+-----+-----+-----+-----+
+---------+-----+-----+-----+-----+-----+-----+-----+-----+-----+-----+-----+-----+-----+-----+-----+
| 30 June | RWAs | Core tier | Core tier | Tier 1 | Tier 1 | Total | Total |
| 2009 | | 1 capital | 1 capital | capital | capital | capital | capital |
| | | | ratio | | ratio | | ratio |
+---------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+
| | GBPbn | GBPbn | % | GBPbn | % | GBPbn | % |
+---------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+
| | | | | | | | |
+---------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+
| As | 547.3 | 35.2 | 6.4% | 49.4 | 9.0% | 64.0 | 11.7% |
| reported | | | | | | | |
+---------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+
| | | | | | | | |
+---------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+
| Pro | | | | | | | |
| forma | | | | | | | |
| effects: | | | | | | | |
+---------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+
| B share | | 25.5 | | 25.5 | | 25.5 | |
| issuance | | | | | | | |
+---------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+
| | | | | | | | |
+---------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+
| Less | | | | | | | |
+---------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+
| CDS | | (2.5) | | (2.5) | | (2.5) | |
| Value | | | | | | | |
+---------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+
| Contingent | | (1.6) | | (1.6) | | (1.6) | |
| Capital | | | | | | | |
| fee | | | | | | | |
| deducted | | | | | | | |
| upfront | | | | | | | |
+---------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+
| | | | | | | | |
+---------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+
| Capital | | (11.2) | | | | | |
| requirements | | | | | | | |
| at 8% | | | | | | | |
+---------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+
| APS | | 5.6 | | | | | |
| coverage | | | | | | | |
| benefit | | | | | | | |
| at 4% | | | | | | | |
+---------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+
| Net | | (5.6) | | (5.6) | | (5.6) | |
| (BiPru | | | | | | | |
| 9) | | | | | | | |
| deduction | | | | | | | |
+---------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+
| | | | | | | | |
+---------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+
| Tier 2 | | | | | | (5.6) | |
| deduction | | | | | | | |
+---------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+
| RWA | (140.7) | | | | | | |
| relief | | | | | | | |
+---------------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+
| | 406.6 | 51.0 | 12.5% | 65.2 | 16.0% | 74.2 | 18.2% |
+---------+-----+-----+-----+-----+-----+-----+-----+-----+-----+-----+-----+-----+-----+-----+-----+
Key messages:
* CT1, Tier 1 and Total Capital ratios are significantly improved on a pro forma
basis
* Legacy credit losses will be absorbed through higher capital base
* APS coverage provides capital equivalent benefit versus the RBS Group targeted
8% CT1 ratio of approximately GBP6.7 billion (30 June 2009: GBP5.6 billion)
which, net of the valuation of the CDS (minimum fee), is approximately GBP4.2
billion (30 June 2009: GBP3.1 billion).
* Contingent capital fee for 5 year option deducted upfront
This information is provided by RNS
The company news service from the London Stock Exchange
END
IMSBFBITMMAMMLL
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