(2) Indicative Core attributable profit, excluding fair value of own debt, taxed at 28% on Core average tangible equity (circa 70% of Group tangible equity based on risk-weighted assets).
On tax, the Government will introduce a levy on banks’ balance sheets from 1 January 2011. This policy was announced by the Chancellor of the Exchequer in the June Budget, with the details finalised as part of the February 2011 agreement outlined above. If the levy had been applied to the balance sheet at 31 December 2010, the cost of the levy to RBS would be in the region of £350 to £400 million in 2011.
Two years on from the global financial crisis, our recovery is ahead of schedule. In 2010 we made big strides in risk reduction and an early return to operating profits. We have much work still to do and there are significant obstacles still to overcome. We aim for continued progress this year.
RBS in 2011 Our goals for 2011 are clear. External events can still blow us off course and caution is needed until these clarify. But for our part, the strategy is delivering. We are focussing on serving our customers well and better. We are stripping away excess risk inherited from the past. We are building enduring strength and value in the new RBS and supporting the economies we serve.
Serving our customers well is the cornerstone of the Group’s strategy. It is embedded in our Operational Objectives, our Customer Charters and in our ‘How we do business’ framework, which we describe below. It is encouraging that most of our core franchises showed gains on a variety of customer measures during the year. But we are not complacent. Our customers’ needs and preferences change over time, so good service today does not guarantee good service tomorrow. And financial services is a competitive, dynamic industry. So it is important that we work hard to streamline and enhance our customer service proposition.
Strong retail and commercial banking Activity focused on UK, US and Ireland and supported by significant business investment plans.
In 2010, Non-Core run-off accelerated, reducing the division’s funded assets to £138 billion, over £100 billion lower than the December 2008 portfolio of £258 billion. Our Tier 1 leverage ratio decreased slightly in 2010 to 16.9x, down from 17.0x in 2009.
We made comprehensive changes to the Board and Executive Management team in 2009, so 2010 was a year of relative stability. Brendan Nelson was appointed as a new Non-executive Director with effect from 1 April 2010, and is now Chair of the Group Audit Committee. Penny Hughes joined the Group Board on 1 January 2010, also as a Non-executive Director, and assumed the responsibility of Chair of our Remuneration Committee.
The increase in risk aversion also caused some sharp currency movements. At one point the pound was 11 per cent down against the dollar, but sterling rallied in the second half of 2010, to end the year just slightly lower than where it started ($1.57 from $1.61). Sterling rose by 10 per cent against the euro in the first half of the year, before giving up most of these gains, to end the year at €1.17 (from €1.13).
Strategy and policy These strategic risk objectives are the bridge between the Group-level business strategy and the frameworks, measures and metrics we use to set appetite and manage risk in our business divisions. Our Risk Appetite Framework is aligned with business objectives, with underlying and cascading frameworks and limits.
Listening to our customers and being clear about our commitments to them: our Customer Charter Our customer satisfaction already compares well with our competitors’ but we know we can do more. In June, we launched our Customer Charter setting out our commitment to delivering helpful banking. The views of more than 30,000 customers contributed to the Charter, consisting of 14 long-term customer promises. We are now working hard to deliver on the commitments we have made. This won't happen overnight but our Customer Charter is our pledge that we will be held to account against the progress we make, publishing an independentlyassured report on our performance every six months.
While these are early days for the Charter, initial progress has been encouraging. We asked Deloitte LLP to track our progress in the first six months. They told us that we achieved 80% of the goals during that time.
Along with our partners, including the British Chambers of Commerce and Smarta, we launched the ‘Fitness for Growth’ campaign. It provides firms with information and advice that will be useful as they try to grow. In October, we launched the first of a series of training seminars in conjunction with the Federation of Small Businesses.
In times of heightened financial pressures, we know we have to provide more intensive support for some customers. Our Specialised Relationship
• Operating profit fell by 28% • Assets under management grew by 5%
We were one of the first global banks to facilitate cross-border trade settlement in Chinese Renminbi (RMB) and to offer RMB accounts, currency exchange and trade finance services. For financial institutions, we unveiled the new Euro Trade Deduct product that maximises the benefits available from our cash and trade services.
• Net interest income decreased by 1% • Non-interest income decreased by 14% • Expenses decreased by 24% • Impairment losses increased by £512 million
2013 >15 <55 <90target reduction in average time to answer a customer call over the last two years loan to deposit ratio
Re-investing in the core franchise We are committed to upgrading our infrastructure, with a 41% increase in capital investment in 2010 compared with the previous year. Key initiatives include new commercial loan and mortgage systems, a new teller system with image capture at our branches, and online banking enhancements, as well as the iPhone mobile banking.
• In New Hampshire, Citizens Bank was named the Business of the Decade in the financial services category by Business NH Magazine.
Operating profit before impairment losses and fair value of own debt 3,515 6,398
In the US, GBM cemented our place as a leader in the bond market. We were ranked the Number Two Manager by Asset-Backed Alert after the US ABS team closed 73 deals worth USD58 billion and we executed covered bonds that re-opened the US market after a three-year gap. In September alone, GBM was active bookrunner on about USD11 billion of investment grade debt offerings.
Investing in our people and communities Our achievements in 2010 were made possible by our people. We focused on attracting the best talent – welcoming more than 200 new graduates globally. We nurtured almost 300 new joiners through our revamped induction programme and hired experienced leaders. We combined these efforts with activities that embedded our GBM Values of accountability, connectivity, thoughtful decisions and success among employees.
The increase in bodily injury claims continued to affect our financial results. We took steps to meet genuine claims more efficiently and ensure that suspect cases can be highlighted at an earlier stage. We also implemented changes to mitigate any future impact of bodily injury claims. This included NIG exiting its personal lines broker business to focus on its expanding commercial business.
Direct Line for Business Customer policies times that Green Flag was called to reach and help stranded customers in
Direct Line celebrated its 25th birthday in 2010. Its spirit of innovation continued as it launched its free “On the Road” application for the iPhone. This provides a route planner and live traffic updates to help plan journeys. Should an accident happen, it also features an easy-to-use tool to record and store key information and to send the details straight through to the Direct Line claims team.
We are now the UK’s largest home insurer, adding to the position that we already held as the UK’s largest motor insurer.
Operating profit/(loss) before other operating charges and impairment losses 708 (4,748)
M For biographies see pages 226-229 fall in operating losses wholesale country exits in the year
Maximising shareholder value We achieved a significant reduction in the division’s operating loss from £14.6 billion in 2009 to £5.5 billion, largely due to improvements in income from trading activities and lower impairments.
Taking risk ‘off the table’ We also concentrated on strengthening risk management, through reducing risk exposures and responding to risks that emerge. In the markets area, risk management has reduced the daily income volatility of traded assets, helping to protect the Bank against sudden market changes.
Our sustainability activities focus on five themes that we chose because our stakeholders have told us that they are the topics that matter most to them. The themes are: • Fair banking
Newsweek magazine placed us 27th in their recent ‘Green Rankings’ where three environmental research organisations ranked the world’s 100 biggest listed companies across a number of environmental issues.
MoneySense The aim of our MoneySense programme is to increase financial education, capability and inclusion, which is part of our wider commitment to Fair Banking.
In 2010, the Citizens Charitable Foundation invested more than $14 million in charitable grants to more than 1,000 non-profit organisations across 12 states.
Consistent with the manner in which the Group is managed, Group operating profit on a pro forma basis excludes: amortisation of purchased intangible assets; integration and restructuring costs; gain on redemption of own debt; strategic disposals; bonus tax; Asset Protection Scheme credit default swap - fair value changes; gains on pensions curtailment; write-down of goodwill and other intangible assets; and other Consortium Members’ interest in shared assets.
The Group had total assets of £1,453.6 billion and owners' equity of £75.1 billion at 31 December 2010. The Group's capital ratios, were a Total capital ratio of 14.0 per cent, a Core Tier 1 capital ratio of 10.7 per cent and a Tier 1 capital ratio of 12.9 per cent, at 31 December 2010.
Tax (charge)/credit (663) 339 1,280 (634) 429 2,167 Loss from continuing operations (902) (1,589) (7,016) (1,033) (2,218) (23,524) Loss from discontinued operations, net of tax (28) (72) (86) (633) (105) (11,018)
Notes: (1) The analysis into UK and Overseas has been compiled on the basis of location of office. (2) Interest-earning assets and interest-bearing liabilities exclude the Retail bancassurance long-term assets and liabilities attributable to policyholders, in view of their distinct nature. As a result, net interest receivable has been increased by £6 million (2009 - £20 million; 2008 - £84 million). (3) Interest receivable has been increased by £11 million (2009 - £46 million; 2008 - £332 million) and interest payable has been decreased by £30 million (2009 - £350 million increase; 2008 - £860 million increase) to record interest on financial assets and liabilities designated as at fair value through profit or loss. Related interest-earning assets and interest-bearing liabilities have also been adjusted.
A gain of £553 million was booked associated with the liability management exercise undertaken in May 2010, through which the Group strengthened its Core Tier 1 capital base by repurchasing existing Tier 1 securities and exchanging selected existing Upper Tier 2 securities for new senior debt securities. A similar series of exchange and tender offers concluded in April 2009 resulted in a gain of £3,790 million.
Staff costs - redundancy 255 255 (309) 201 Staff costs - other 4 98 (85) 17 Premises and equipment 37 117 (37) 117 Other 35 104 (93) 46 331 574 (524) 381
UK corporation tax rate 28.0 28.0 28.5 28.0 28.0 28.5 Effective tax rate nm 17.6 15.4 nm 16.2 8.4 nm = not meaningful
Assets under management grew by 5% largely through improving market conditions. On a constant currency basis, assets fell 2% with valuation gains being offset by client losses in the international businesses, resulting from the private banker attrition previously experienced.
Net interest income was up 7%, despite a smaller balance sheet, with net interest margin improving by 48 basis points to 2.85%.
Performance ratios Return on equity (1) 16.6% 29.8% (9.1%) Net interest margin 1.05% 1.38% 1.34% Cost:income ratio 56% 42% 169% Compensation ratio (2) 34% 26% 86%
Notes: (1) Divisional return on equity is based on divisional operating profit/(loss) after tax divided by average notional equity (based on 10% of the monthly average of divisional RWAs, adjusted for capital deductions). (2) Compensation ratio is based on staff costs as a percentage of total income, excluding the fair value of own debt.
In an often volatile market environment, GBM responded quickly to its clients' needs to strengthen their balance sheets and to take advantage of the attractive environment for debt and equity issues. RBS participated in the five largest equity issues worldwide in 2009, and in six out of the ten largest debt capital markets transactions.
Higher impairments principally reflected a large individual failure recognised in the third quarter. Impairments represented 0.6% of loans and advances to customers compared with 0.3% in the prior year, reflecting the marked reduction in loans and advances.
2010 compared with 2009 RBS Insurance has embarked on a significant programme of investment designed to achieve a substantial lift in operational and financial performance, ahead of the planned divestment of the business, with a current target date of 2012. This programme encompasses the enhancement of pricing capability, transformation of claims operations and expense reduction, together with a range of other improvements across the business, including a greater focus on capital management.
Several programmes to further improve the overall efficiency of the business took effect during the year, including a reduction of six sites and operational process improvements, which will continue to improve efficiency.
Risk-weighted assets increased by 0.2% in 2009, and at constant exchange rates increased by 3%. The reduction of 15% since 30 September 2009, reflects active management to reduce trading book exposures, largely offset by the impact of procyclicality, monoline downgrades and adverse market risk.
2010 compared with 2009 Total assets of £1,452.6 billion at 31 December 2010 were down £69.8 billion, 5%, compared with 31 December 2009. This principally reflects the continuing planned disposal of Non-Core assets, together with a reduction in the level of debt securities and mark-to-market value of derivatives in Global Banking & Markets.
The ECG decides on requests for the extension of existing or new credit limits on behalf of the Board of directors where the proposed aggregate facility limits are in excess of the credit approval authorities granted to individuals in divisions or in RBS Risk Management, or where an appeal against the decline decision of the Group Chief Credit Officer (or delegates) or Group Chief Risk Officer is referred for final decision.
Group Chief Executive Head of Restructuring and Risk Deputy Group Chief Risk Officer Group Finance Director Chief Executive from each division
Head of Restructuring and Risk Deputy Chief Risk Officer Group Chief Credit Officer Global Head of: Market and Insurance Risk; Operational Risk; Country Risk and Firm Wide Risk Director, Group Finance Chief Operating Officer, RBS Risk Management Director Group Compliance Director Group Regulatory Affairs Divisional Chief Executive Officers’ nominees Chief Administrative Officer’s nominee for Business Services Divisional Chief Risk Officers Chief Operating Officer Global Restructuring Group
The Group has continued to engage in discussions with relevant stakeholders, regulators and other governmental and nongovernmental bodies, including those in the UK and US, regarding the Group’s efforts to satisfy all relevant standards and ensure compliance with applicable existing and prospective laws, rules and regulations.
The Group’s stress testing framework is designed to embed stress testing as a key risk management technique into mainstream risk reporting, capital planning and business processes at both the Group and divisional level.
At beginning of the year 59,524 Attributable loss net of movements in fair value of own debt (1,250) Gain on redemption of equity preference shares recorded in equity 651 Foreign currency reserves 610 Issue of ordinary shares 804 Impact of disposals - reduction in non-controlling interests (15,107) - reduction in intangibles 3,732 Decrease in capital deductions including APS first loss 571 Other movements 69 At end of the year 49,604
Contingency planning The Group has a Contingency Funding Plan (CFP) which is maintained and updated as the balance sheet evolves. The CFP is linked to stress test results and forms the foundation for liquidity risk limits. Limits in the business-as-usual environment are bounded by capacity to satisfy the Group’s liquidity needs in the stress environments. The CFP provides a detailed description of the availability, size and timing of all sources of contingent liquidity available to the Group in a stress event. These are ranked in order of economic impact and effectiveness to meet the anticipated stress requirement. The CFP includes documented procedures and sign-offs for actions that may require businesses to provide access to customer assets for collateralized borrowing, securitisation or sale. Roles and responsibilities for the effective implementation of the CFP are also documented.
Debt securities in issue - medium-term notes and other bonds 131,026 17.7 125,800 15.6 108,529 11.4
Notes: (1) Excludes derivative cash collateral of £28 billion at 31 December 2010 (2009 - £33 billion; 2008 - £46 billion), 2010 average of £34 billion (2009 - £40 billion; 2008 - £20 billion). (2) Includes federal funds purchased of £1.5 billion at 31 December 2010 (2009 - £3 billion; 2008 - £4 billion), 2010 average of £2 billion (2009 - £3 billion; 2008 - £3 billion).
Private - unsecured 17,450 14,895 24,172 - unsecured: guaranteed — 15,459 8,151 Gross issuance 38,378 58,403 43,823
Balance sheet management: Funding and liquidity risk continued Credit Guarantee Scheme The table below shows the residual maturity of the Group’s outstanding term funding issued under the UK Government’s Credit Guarantee Scheme at 31 December 2010.
Equity 76 76 80 80 64 64 100 Wholesale funding > 1 year 154 154 144 144 149 149 100 Wholesale funding < 1 year 157 — 250 — 343 — — Derivatives 424 — 422 — 969 — — Repurchase agreements 115 — 106 — 142 — — Deposits - Retail and SME - more stable 172 155 166 149 184 166 90 - Retail and SME - less stable 51 41 50 40 55 44 80 - Other 206 103 199 99 221 110 50 Other (2) 98 — 105 — 92 — — Total liabilities and equity 1,453 529 1,522 512 2,219 533
Held-for-trading assets and liabilities amounting to £665 billion (assets) and £586 billion (liabilities) (2009 - £651 billion assets, £568 billion liabilities; 2008 - £1,227 billion assets, £1,147 billion liabilities) have been excluded from the table in view of their short-term nature.
Equity risk The Group holds equity positions in order to achieve strategic objectives, support venture capital transactions or in respect of customer restructuring arrangements. The Group is exposed to market risk on these banking book equity positions because they are measured at fair value. Fair values are based on available market prices wherever possible. In the event that market prices are not available, fair value is based on appropriate valuation techniques or management estimates.
Originating business units consult with GRG prior to transfer to GRG when a potentially negative event or trend emerges which might affect a customer’s ability to service its debt or increase the Group’s risk exposure to that customer. Such circumstances include deteriorating trading performance, likely breach of covenant, challenging macroeconomic conditions, a missed payment or the expectation of a missed payment to the Group or another creditor.
Note: (1) ‘Other’ largely comprises assets covered by the standardised approach for which a PD equivalent to those assigned to assets covered by the internal ratings based approach is not available.
There have been no major changes in the specific sectors contributing to AQ10 band with property (55%) remaining the dominant contributor.
As at 31 December 2010, 55% of the Group’s credit risk assets rated AQ10 related to the property sector, up from 51% at 31 December 2009. Consistent with the trend seen in the total portfolio, the rate of migration to default slowed during the second half of 2010 in most portfolios. In Non-Core and Ulster Bank property remains the primary driver of growth in the defaulted loan book.
Residential mortgages The table below details the distribution of residential mortgages by indexed LTV.
Non-banks and financial institutions 190 19 209 170 16 186 3 — 3 363 35 398
Residential mortgages The table below shows how the steep value correction has affected the distribution of residential mortgages by loan-to-value (LTV) (indexed). LTV is based upon gross loan amounts and, whilst including defaulted loans, does not account for impairments already taken.
The following tables provide an analysis of financial assets by industry sector, geography and internal credit quality gradings. Credit risk assets analysed on the preceding pages are reported internally to senior management, however they exclude certain exposures, primarily debt securities, and take account of legal agreements, including master netting arrangements that provide a right of legal set-off but do not meet the criteria for offset in IFRS. The analysis below is therefore provided to supplement the credit risk assets analysis and to reconcile to the consolidated balance sheet.
At 1 January 2010 12,089 22,900 34,989 272 652 924 12,361 23,552 35,913 Intra-group transfers (142) 142 — 147 (147) — 5 (5) — Currency translation and other adjustments 22 (124) (102) (1) 2 1 21 (122) (101)
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 6 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 Group before RFS MI 578,839 38,598 18,182 6.7 47 3.1 9,144 6,042 RFS MI 2 — — — — — 42 —
Provisions and AFS reserves The Group's consumer portfolios, which consist of high volume, small value credits, have highly efficient largely automated processes for identifying problem credits and very short timescales, typically three months, before resolution or adoption of various recovery methods. Corporate portfolios consist of higher value, lower volume credits, which tend to be structured to meet individual customer requirements.
Charge relating to customer loans as a % of gross customer loans (1) 1.7% 2.3% 0.9%
CEM trading VaR also increased as a consequence of the implementation of a discounting approach based on the real funding cost for the collateralised derivatives.
Also excluded from the non-traded VaR are the loans and receivables products that are managed within the credit risk management framework. The 2009 and 2010 VaR data below is shown on this basis; however the VaR data for the 2008 period could not be recalculated excluding the SCP and LAR portfolios mentioned above due to data and system constraints.
Insurance risk arises through fluctuations in the timing, frequency and/or severity of insured events, relative to the expectations at the time of underwriting. Insurance risk is managed in four distinct ways: underwriting and pricing risk management is managed through the use of underwriting guidelines which detail the class, nature and type of business that may be accepted, pricing policies by product line and brand, and centralised control of wordings and any subsequent changes; claims risk management is handled using a range of automated controls and manual processes; reserving risk management is applied to ensure that sufficient funds have been retained to handle and pay claims as the amounts fall due, both in relation to those claims which have already occurred or will occur in future periods of insurance. Reserving risk is managed through the detailed analysis of historical and industry claims data and robust control procedures around reserving models; and reinsurance risk management is used to protect against adverse claims experience on business which exceeds internal risk appetite. The Group uses various types of reinsurance to transfer risk that is outside the Group's risk appetite, including individual risk excess of loss reinsurance, catastrophe excess of loss reinsurance and quota share reinsurance.
Accountable for the ownership and day-to-day management and control of operational risk.
As at 31 December 2010 Fall in nominal swap yields of 0.25% at all durations with no change in credit spreads 422 193 229 Fall in real swap yields of 0.25% at all durations with no change in credit spreads 355 799 (444) Fall in credit spreads of 0.25% at all durations with no change in nominal or real swap yields 98 1,005 (907) Fall in equity values of 10% (1,083) — (1,083)
Gross exposure 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 1 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 9 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
Of which: CMBS 4,849 2,388 2,461 1,429 CDOs 5,779 1,395 4,384 2,201 CLOs 12,865 9,673 3,192 1,556 Other ABS 3,759 2,525 1,234 627 Other 768 458 310 175
The CVA decreased on a total basis, reflecting the reduction in exposure, 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.
Credit derivative product companies A credit derivative product company (CDPC) is a company that sells protection on credit derivatives. CDPCs are similar to monoline insurers, however, they are not regulated as insurers.
Approximately 92% of the above exposures represent senior lending at 31 December 2010.
Residential mortgages 76,212 18,215 69,927 15,937 55,714 20,075 Credit card receivables 3,993 34 2,975 1,592 3,004 3,197 Other loans 30,988 974 36,448 1,010 1,679 1,071 Finance lease receivables 510 510 597 597 1,077 857
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 (31 December 2009 - £27.4 billion; 31 December 2008 - £49.9 billion).
Auto loans 4,293 356 4,649 2,526 — 7,175 Corporate loans 106 7,695 7,801 161 — 7,962 Credit card receivables 4,083 — 4,083 1,058 — 5,141 Trade receivables 806 — 806 1,351 — 2,157 Student loans 915 — 915 263 (132) 1,046 Consumer loans 1,686 — 1,686 222 — 1,908 Mortgages - prime 2,739 3 2,742 750 — 3,492 - non-conforming 1,548 — 1,548 193 — 1,741 - commercial 413 458 871 155 (22) 1,004 Other 872 1,393 2,265 232 (12) 2,485 17,461 9,905 27,366 6,911 (166) 34,111 2008 Auto loans 9,924 383 10,307 1,871 — 12,178 Corporate loans 430 11,042 11,472 534 — 12,006 Credit card receivables 5,844 — 5,844 922 — 6,766 Trade receivables 2,745 — 2,745 1,432 (71) 4,106 Student loans 2,555 — 2,555 478 (132) 2,901 Consumer loans 2,371 — 2,371 409 — 2,780 Mortgages - prime 4,416 2,250 6,666 1,188 — 7,854 - non-conforming 2,181 — 2,181 727 — 2,908 - commercial 1,228 507 1,735 66 (23) 1,778 Other 1,851 2,130 3,981 1,615 — 5,596 33,545 16,312 49,857 9,242 (226) 58,873 219RBS Group 2010
Asset Protection Scheme* All the disclosures in this section (pages 221 to 224) are unaudited and are marked with an asterisk (*).
Ron Teerlink (age 50) Chief Administrative Officer In April 2008, Ron Teerlink joined the RBS Group as Chief Executive of Business Services, becoming the Group Chief Administrative Officer in February 2009. At the same time he was re-appointed to the Managing Board of ABN AMRO to oversee the integration programme. Ron started his career with ABN Bank in 1986 as an IT/Systems analyst and held various functional positions before becoming Chief Operating Officer of the Wholesale Clients Business in 2002. He was appointed Chief Executive Officer of Group Shared Services in 2004 and joined ABN AMRO’s Managing Board in January 2006, where he was responsible for Services and Market Infrastructure. Ron holds a Masters degree in Economics from Amsterdam’s Vrije Universiteit.
Employee learning and development The Group maintains a strong commitment to creating and providing learning opportunities for all its employees through a variety of personal development, training programmes, learning networks and targeted leadership programmes. Employees are also encouraged to do voluntary work with community partners.
The Group has two European employee fora that provide elected representatives with an opportunity to understand better its European operations. Engagement with its employees and such bodies remains important to the Group.
The Audit Committee complies with the provisions of the NYSE corporate governance listing standards that relate to the composition, responsibilities and operation of audit committees. In May 2010, the company submitted its required annual written affirmation to the NYSE confirming its full compliance with those and other applicable provisions. More detailed information about the Audit Committee and its work during 2010 is set out in the Audit Committee report on pages 240 to 243.
Notes: (1) Stood down from the Remuneration Committee with effect from 1 June 2010. (2) Stood down from the Audit Committee with effect from 30 April 2010. (3) Appointed as a director on 1 April 2010. (4) Unable to attend a number of Board and Committee meetings during 2010 due to family illness. (5) Ceased to be a director on 28 April 2010. (6) Ceased to be a director on 31 March 2010.
The Senior Independent Director is available if any shareholder has concerns that they feel are not being addressed through the normal channels.
Based on its assessment, management has concluded that, as of 31 December 2010, the Group's internal control over financial reporting is effective.
The Audit Committee received regular updates on accounting issues and developments from both the Group Chief Accountant and from the external auditors, who presented for approval to the Committee their audit plan, their audit fee proposal and engagement letter, as well as confirmation of their independence and a comprehensive report of all non-audit fees.
The Audit Committee is responsible for making recommendations to the Board in relation to the appointment, re-appointment and removal of the external auditors. In order to make a recommendation to the Board, the Audit Committee consider and discuss the performance of the external auditor in the previous year, taking account of the outcomes of the annual evaluation carried out. The Board submits the Audit Committee's recommendations to shareholders for their approval at the Annual General Meeting. The Board has endorsed the Audit Committee's recommendation that shareholders be requested to approve the reappointment of Deloitte LLP as external auditors at the Annual General Meeting in April 2011.
The Audit Committee reviews the policy annually and prospectively approves the provision of audit services and certain non-audit services by the external auditors.
The retention and motivation of our executive directors is crucial over the next three years and whilst most aspects of our remuneration policy remain unchanged, we are making some changes to enhance the overall effectiveness of executive director remuneration. These include replacing the annual incentive plan with a long-term Share Bank and changes to the performance measures for the Long Term Incentive Plan (LTIP). We have introduced a scorecard of measures relating to risk and strategic goals to sit alongside the existing measures of total shareholder return and economic profit. These measures ensure that rewards for executive directors are aligned with achieving a sustainable long-term platform for the future success of the Group across a range of areas including risk, profitability, franchise strength and people. Details of these changes are set out in the Remuneration Report.
Changes to approach In addition to the changes made to executive directors’ remuneration arrangements, the Remuneration Committee reached decisions on the following key areas during 2010: establishing a governance framework for incentive plans and bonus funding across the Group, involving the Finance, Risk and Human Resources functions at all key decision points; a structure of deferment for incentives for up to three years, with the ability to clawback if appropriate; and the introduction of a new Long Term Incentive Plan following consultation with a number of institutional shareholders.
The approach to determining an appropriate annual incentive pool is based around four technical workstreams led by the central control functions (Finance, Human Resources and RBS Risk Management). The workstreams provide context around how much a market-competitive/on target pool would be on financial performance, on risk performance, on capital adequacy and on the impact of incentive awards on the balance sheet.
The companies in the comparator group for 2011 awards are as follows: Comparator companies Weighting 2 Lloyds Banking Group 3 Santander 150% 4 HSBC 5 Standard Chartered 6 Citigroup 100% 7 Deutsche Bank 8 JP Morgan Chase 9 Bank of America 50% 10 BBVA 11 BNP Paribas 12 Credit Agricole 13 Credit Suisse Group 14 National Australia Bank Limited 15 Royal Bank of Canada 16 Societe Generale 17 The Toronto-Dominion Bank Group 18 UBS 19 Unicredito 20 Wells Fargo & Company
Targets for each measure will be set at the start of the performance period. Where applicable these will be aligned with the bank’s published Strategic Plan targets. At the end of the period each measure will be assessed against the target, and vesting will be based on the proportion of targets fully met (see below), qualified by Remuneration Committee discretion taking other relevant factors into account. Consideration will also be given to volume of lending over the performance period, subject to commercial viability.
Relative TSR The relative TSR measure compares the Group's performance against a group of comparator banks from the UK and overseas, weighted towards those companies most similar to the Group. The comparator companies and relevant weightings and vesting schedule are the same as those for the 2011 LTIP awards, as set out on page 252.
Executive A 736 Executive B 294 Executive C 293 Executive D 647 Executive E 244
The directors are required by Article 4 of the IAS Regulation (European Commission Regulation No 1606/2002) to prepare Group accounts, and as permitted by the Companies Act 2006 have elected to prepare company accounts, for each financial year in accordance with International Financial Reporting Standards as adopted by the European Union. They are responsible for preparing accounts that present fairly the financial position, financial performance and cash flows of the Group and the company. In preparing those accounts, the directors are required to: select suitable accounting policies and then apply them consistently; make judgements and estimates that are reasonable and prudent; and state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the accounts.
Loss attributable to: Non-controlling interests (665) 349 (10,832) Preference shareholders 7 105 878 536 Paid-in equity holders 7 19 57 60 Ordinary and B shareholders (1,125) (3,607) (24,306)
A financial liability is removed from the balance sheet when the obligation is discharged, or cancelled, or expires. On the redemption or settlement of debt securities (including subordinated liabilities) issued by the Group, the Group derecognises the debt instrument and records a gain or loss being the difference between the debt's carrying amount and the cost of redemption or settlement. The same treatment applies where the debt is exchanged for a new debt issue that has terms substantially different from those of the existing debt. The assessment of whether the terms of the new debt instrument are substantially different takes into account qualitative and quantitative characteristics including a comparison of the discounted present value of the cash flows under the new terms with the discounted present value of the remaining cash flows of the original debt issue.
Fair value hedge - in a fair value hedge, the gain or loss on the hedging instrument is recognised in profit or loss. The gain or loss on the hedged item attributable to the hedged risk is recognised in profit or loss and adjusts the carrying amount of the hedged item. Hedge accounting is discontinued if the hedge no longer meets the criteria for hedge accounting; or if the hedging instrument expires or is sold, terminated or exercised; or if hedge designation is revoked. If the hedged item is one for which the effective interest rate method is used, any cumulative adjustment is amortised to profit or loss over the life of the hedged item using a recalculated effective interest rate.
Collective component - this is made up of two elements: loan impairment provisions for impaired loans that are below individual assessment thresholds (collectively assessed provisions) and for loan losses that have been incurred but have not been separately identified at the balance sheet date (latent loss provisions). Collectively assessed provisions are established on a portfolio basis using a present value methodology taking into account the level of arrears, security, past loss experience, credit scores and defaults based on portfolio trends. The most significant factors in establishing these provisions are the expected loss rates and the related average life. These portfolios include credit card receivables and other personal advances including mortgages. The future credit quality of these portfolios is subject to uncertainties that could cause actual credit losses to differ materially from reported loan impairment provisions. These uncertainties include the economic environment, notably interest rates and their effect on customer spending, the unemployment level, payment behaviour and bankruptcy trends. Latent loss provisions are held against estimated impairment losses in the performing portfolio that have yet to be identified as at the balance sheet date. To assess the latent loss within its portfolios, the Group has developed methodologies to estimate the time that an asset can remain impaired within a performing portfolio before it is identified and reported as such.
(3) Measured as the change in fair value from movements in the period in the credit risk premium payable by the Group. (4) Includes income from activities other than banking and insurance.
Wages, salaries and other staff costs 7,945 8,039 7,471 Bonus tax 99 208 — Social security costs 661 675 648 Share-based compensation 397 329 169 Pension costs - defined benefit schemes (see Note 4) 519 638 473 - curtailment gains (see Note 4) (78) (2,148) — - defined contribution schemes 128 104 137 Staff costs 9,671 7,845 8,898
Attributable to: Preference shareholders 105 878 536 Paid-in equity holders 19 57 60 Ordinary and B shareholders (4,677) (2,435) (10,197) Total comprehensive loss for the year (4,553) (1,500) (9,601)
Notes: (1) Includes amounts due from subsidiaries of £19,535 million (2009 - £31,238 million; 2008 - £27,031 million). (2) Due from subsidiaries. (3) Includes amounts due to subsidiaries of nil (2009 - £4 million; 2008 - £1,706 million). (4) Due to subsidiaries.
The effect of change in credit spreads could be reversed in future periods, provided the liability is not repaid at a premium or a discount.
Of which: Core 129.4 617.6 7.2 754.2 Non-Core 1.1 22.3 8.5 31.9 130.5 639.9 15.7 786.1 Of which AFS debt securities: Government 53.0 6.4 — 59.4 70.1 7.5 — 77.6 16.4 33.6 — 50.0 MBS — 31.1 0.4 31.5 — 39.1 0.2 39.3 — 45.6 0.4 46.0 CDOs — 0.6 1.4 2.0 — 1.2 0.4 1.6 — 3.6 0.6 4.2 CLOs — 3.5 1.5 5.0 — 5.4 0.1 5.5 — 4.7 0.6 5.3 Other ABS — 2.9 1.1 4.0 — 4.0 0.6 4.6 — 5.5 1.0 6.5 Corporate — 2.0 — 2.0 — 3.3 — 3.3 0.6 4.4 0.4 5.4 Banks and building societies 0.1 7.1 — 7.2 0.2 11.0 — 11.2 3.8 9.3 — 13.1 Other — — — — — 0.2 — 0.2 0.1 2.2 — 2.3
The type of instruments that trade in markets that are not considered to be active, but are based on quoted market prices, banker dealer quotations, or alternative pricing sources with reasonable levels of price transparency and those instruments valued using techniques include most government agency securities, investment-grade corporate bonds, certain mortgage products, most bank and bridge loans, repos and reverse repos, less liquid listed equities, state and municipal obligations, most physical commodities, investment contracts issued by the Group's life assurance (2009 and 2008) and certain money market securities and loan commitments and most OTC derivatives.
For some instruments with a wide number of available price sources, there may be differing quality of available information and there may be a wide range of prices from different sources. In these situations an assessment is made as to which source is the highest quality and this will be used to determine the classification of the asset. For example, a tradable quote would be considered a better source than a consensus price.
Credit derivatives - APS The Group purchased credit protection over a portfolio of specified assets and exposures (covered assets) from HMT. The Group has a right to terminate the APS at any time provided that the Financial Services Authority has confirmed in writing to HMT that it has no objection to the proposed termination. On termination the Group must pay HMT the higher of the regulatory capital relief received and £2.5 billion less premiums paid plus the aggregate of amounts received from the UK Government under the APS. In consideration for the protection provided by the APS, the Group paid an initial premium of £1.4 billion on 31 December 2009. A further premium of £700 million was paid on 31 December 2010. Quarterly premiums of £125 million will be payable from 31 December 2011 and subsequently until the earlier of 2099 and the termination of the agreement.
Gross gains of £635 million (2009 - £1,155 million; 2008 - £880 million) and gross losses of £159 million (2009 - £1,255 million; 2008 - £838 million) were realised on the sale of available-for-sale securities.
UK central and local governments 851 1.4 2,525 2.8 3,333 3.9 1,668 4.2 8,377 3.4 US central and local governments 363 0.4 6,806 1.5 10,698 3.3 23 5.1 17,890 2.6 Other central and local governments 10,235 2.2 10,960 3.2 8,878 3.3 3,049 4.0 33,122 3.0 Bank and building societies 2,756 3.6 4,020 2.8 408 4.6 14 2.8 7,198 3.2 Asset backed securities (1) 2,688 2.5 14,628 1.9 10,058 2.3 15,141 2.7 42,515 2.3 Corporates 366 2.7 1,034 3.9 544 4.9 67 4.8 2,011 4.0 Other (2) 4 1.6 12 — — — 1 — 17 0.3 17,263 2.4 39,985 2.4 33,919 3.1 19,963 3.0 111,130 2.7
The recoverable amount of US Retail & Commercial, based on a 5% (2009 - 5%) terminal growth rate and a 14.9% (2009 - 14.8%) pre tax discount rate, exceeded its carrying value by £1.6 billion (2009 - £2.1 billion). A 1% change in the discount rate or the terminal growth rate would change the recoverable amount by approximately £1.6 billion (2009 - £1.0 billion) and £0.8 billion (2009 - £0.8 billion) respectively. In addition, a 5% change in the forecast pre tax earnings would change the recoverable amount by approximately £0.7 billion (2009 - £0.7 billion).
Life assurance business Unit linked insurance contracts — 292 256 Index linked insurance contracts — 1,090 1,331 Participating bonds — 2,793 2,602 Other insurance contracts 68 304 309 68 4,479 4,498 General insurance business 6,726 5,802 5,478 6,794 10,281 9,976
26 Insurance business continued Loss ratios The following table shows loss ratios for each major class of business, gross and net of reinsurance.
Company Currently 2011 2012 2013-2015 2016-2020 Thereafter Perpetual Total 2010 - call date £m £m £m £m £m £m £m £m
Company 2009 2010 2011-2013 2014-2018 Thereafter Perpetual Total 2008 - final redemption £m £m £m £m £m £m £m
The company US$400 million 6.4% subordinated notes 2009 — — 278 US$300 million 6.375% subordinated notes 2011 (redeemed February 2011) (1) 199 201 231
ABN AMRO represents the other Consortium Members' interests in RFS Holdings B.V. The capital and income rights of shares issued by RFS Holdings B.V. are linked to the net assets and income of the ABN AMRO business units which the individual Consortium Members agreed to acquire. The distribution to other Consortium Members of their respective interests occurred in 2010. Other non-controlling interests include trust preferred securities of £556 million (2009 - £664 million; 2008 - £1,821 million) and in 2008 RBS China Sarl (£1,898 million). Equity withdrawn in respect of ABN AMRO relates to distributions to Consortium Members.
The FSCS has borrowed from HM Treasury to fund the compensation costs associated with Bradford & Bingley, Heritable Bank, Kaupthing Singer & Friedlander, Landsbanki ‘Icesave’ and London Scottish Bank plc. These borrowings are on an interest-only basis until 31 March 2012. The annual limit on the FSCS interest and management expenses levy for the period September 2008 to March 2012 in relation to these institutions has been capped at £1 billion per annum.
The levy will be based upon the total chargeable equity and liabilities as reported in the balance sheet at the end of a chargeable period. In determining the chargeable equity and liabilities the following amounts are excluded: Tier 1 capital; certain “protected deposits” (for example those protected under the Financial Services Compensation Scheme); liabilities that arise from certain insurance business within banking groups; liabilities in respect of currency notes in circulation; Financial Services Compensation Scheme liabilities; liabilities representing segregated client money; and deferred tax liabilities, current tax liabilities, liabilities in respect of the levy, revaluation of property liabilities, liabilities representing the revaluation of business premises and defined benefit retirement liabilities. It will also be permitted in specified circumstances to reduce certain liabilities by: netting against them certain assets; offsetting assets on the relevant balance sheets that would qualify as high quality liquid assets (in accordance with the FSA definition); and repo liabilities secured against sovereign and supranational debt.
RBS Group has also received notification of similar prospective claims in the United Kingdom and elsewhere but no court proceedings have been commenced in relation to these claims.
US mortgages RBS's Global Banking & Markets N.A. (GBM N.A.), has been a purchaser of non-agency US residential mortgages in the secondary market, and an issuer and underwriter of non-agency residential mortgage backed securities (RMBS). GBM N.A. did not originate or service any US residential mortgages and it was not a significant seller of mortgage loans to government sponsored enterprises (GSEs) (e.g. the Federal National Mortgage Association and the Federal Home Loan Mortgage Association).
Other assets sold 4,539 896 739 Non-cash consideration — — (103) (Loss)/profit on disposal (107) (135) 943 Net inflow of cash in respect of disposals 4,432 761 1,579 Dividends received from joint ventures 7 21 89 Cash expenditure on intangible assets (783) (562) 2,411 Net inflow 3,446 105 2,252
The Group enters into transactions with many of these bodies on an arms' length basis. The principal transactions during 2010 and 2009 were: the Asset Protection Scheme, Bank of England facilities and the issue of debt guaranteed by the UK Government described below.
Loans and advances 1,009,374 655,778 820,146 1,012,919 1,047,998 549,499 Debt securities and equity shares 368,912 239,678 286,782 293,879 347,682 146,246 Derivatives and settlement balances 675,219 438,682 453,487 1,010,391 293,991 109,506 Other assets 183,839 119,438 136,071 84,463 151,158 51,581 Total assets 2,237,344 1,453,576 1,696,486 2,401,652 1,840,829 856,832
(Disposals)/acquisitions of businesses Domestic — — (108) 10 — Foreign (2,172) (65) (70) 2,211 — (2,172) (65) (178) 2,221 — Amounts written-off Domestic (2,252) (2,895) (1,446) (1,222) (1,360)
Customer charge to income statement as a % of gross loans and advances to customers (3) Domestic 1.38% 1.81% 0.86% 0.44% 0.66%
Notes: (1) Includes release relating to loans and advances to banks of £13 million (2009 - £34 million charge; 2008 - £118 million charge; 2007 and 2006 - nil). (2) Includes closing provisions against loans and advances to banks of £127 million (2009 - £157 million; 2008 - £127 million; 2007 - £3 million; 2006 - £2 million). (3) For the purpose of these ratios, closing customer provisions and customer charge exclude loans and advances to banks.
The Royal Bank undertook to HM Treasury, among other things, to: (i) provide all such assistance and information and data as is reasonably requested which is pertinent to the implementation of the APS and the Royal Bank's potential participation in the APS; (ii) provide, as soon as practicable, an indicative list of the assets, commitments and exposures that the Royal Bank propose to include within the APS with a view to agreeing such list by 30 April 2009; (iii) provide, as promptly as practicable, information and data relating to the Proposed Assets reasonably requested for due diligence purposes and to provide certain other information concerning the Group's business and the financial performance and risk of the Proposed Assets; (iv) provide access to the Group's premises, books, records, senior executives, relevant personnel and professional advisers on reasonable terms; (v) consult with HM Treasury regarding the management and operations of the Proposed Assets and to ensure that the management of the Proposed Assets is in accordance with usual business practices and also without regard to the possible benefits under the APS; (vi) develop and, subject to market conditions, implement a liability management plan which is designed to enable the Group to meet certain Core Tier 1 capital targets for 2009; and
Pursuant to this lending commitment, the company agreed to increase its lending in the 12 months commencing 1 March 2009 from its UK banking operations to UK businesses by, in aggregate, £16 billion above the amount previously budgeted.
Such additional lending was subject to the company's ordinary course pricing and other terms, and certain commercial, risk, credit and regulatory considerations.
In addition, the Group may be liable for any deterioration in businesses being sold between the announcement of the disposal and its completion. In certain cases, the period between the announcement of a transaction and its completion may be lengthy and may span many months. Other risks that may arise out of the disposal of the Group’s assets include ongoing liabilities up to completion of the relevant transaction in respect of the assets and businesses disposed of, commercial and other risks associated with meeting covenants to the buyer during the period up to completion, the risk of employee and customer attrition in the period up to completion, substantive indemnity obligations in favour of the buyer, the risk of liability for breach of warranty, the need to continue to provide transitional service arrangements for potentially lengthy periods following completion of the relevant transaction to the businesses being transferred and redundancy and other transaction costs. Further, the Group may be required to enter into covenants agreeing not to compete in certain markets for specific periods of time. In addition, as noted above in the context of the State Aid restructuring plan and in the context of other disposals, the Group will lose existing customers, deposits and other assets (both directly through the sale and potentially through the impact on the rest of the Group’s business arising from implementing the restructuring plans) and the potential for realising additional associated revenues and margins that it otherwise might have achieved in the absence of such disposals.
Any of the above factors could negatively affect the Group's ability to implement its strategic plan and have a material adverse effect on the Group's business, results of operations, financial condition, capital ratios and liquidity and could result in a loss of value in the Securities.
In addition, there is also a risk that corporate and financial institution counterparties with credit exposures may seek to reduce their credit exposures to banks, given current risk aversion trends. It is possible that credit market dislocation becomes so severe that overnight funding from non-government sources ceases to be available.
In addition, certain of the Group’s employees in the UK, continental Europe and other jurisdictions in which the Group operates are represented by employee representative bodies, including trade unions. Engagement with its employees and such bodies is important to the Group and a breakdown of these relationships could adversely affect the Group’s business, reputation and results. As the Group implements costsaving initiatives and disposes of, or runs-down, certain assets or businesses (including as part of its restructuring plans), it faces increased risk in this regard and there can be no assurance that the Group will be able to maintain good relations with its employees or employee representative bodies in respect of all matters. As a result, the Group may experience strikes or other industrial action from time to time, which could have an adverse effect on its business and results of operations and could cause damage to its reputation.
On 31 December 2010, the share capital of RFS Holdings B.V. was amended, such that approximately 98 per cent. of RFS Holdings B.V.’s issued share capital is now held by RBSG, with the remainder being held by Santander and the Dutch State. Ultimately it is expected that RFS Holdings B.V. will become a wholly-owned subsidiary of the company.
HM Treasury may, following consultation with the Group, modify or replace certain of the Scheme Conditions in such a manner as it considers necessary (acting reasonably) in certain circumstances. Such modifications or replacements may be retrospective and may result in (i) a loss of or reduction in the protection expected by the Group under the APS, (ii) an increase in the risk weightings of the Covered Assets, (iii) a material increase in the continuing reporting obligations or asset management conditions applicable to the Group under the Scheme Conditions, (iv) a material increase in the costs of the APS and/or (v) restrictions or limitations on the Group’s operations. The consequences of any such modifications by HM Treasury are impossible to quantify and are difficult to predict and may have a material adverse effect on the Group’s financial condition and results of operations.
Warning to shareholders - boiler room scams In recent years, many companies have become aware that their shareholders have received unsolicited phone calls or correspondence concerning investment matters. These are typically from overseas based 'brokers' who target UK shareholders, offering to sell them what often turn out to be worthless or high risk shares in US or UK investments. These operations are commonly known as 'boiler rooms'. These 'brokers' can be very persistent and extremely persuasive, and a 2006 survey by the Financial Services Authority (FSA) has reported that the average amount lost by investors is around £20,000.
Pension trusts 40 9.0 — Other corporate bodies 103 429.7 0.7 425RBS Group 2010
Trading market Non-cumulative dollar preference shares On 26 March 1997, 8 February 1999, 30 September 2004, 26 August 2004, 19 May 2005, 9 November 2005, 25 May 2006, 27 December 2006, 28 June 2007, 27 September 2007 and 4 October 2007, the company issued the following Series of American Depository Shares (ADSs) representing noncumulative dollar preference shares of the company, in the United States, of which the following were outstanding at 31 December 2010: 6,255,408 Series F ("Series F ADSs") representing 6,255,408 non-cumulative dollar preference shares, Series F; 9,687,654 Series H ("Series H ADSs") representing 9,687,654 non-cumulative dollar preference shares, Series H; 30,027,877 Series L ("Series L ADSs") representing 30,027,877 non-cumulative dollar preference shares, Series L; 23,125,869 Series M (“Series M ADSs”) representing 23,125,869 non-cumulative dollar preference shares, Series M; 22,113,160 Series N ("Series N ADSs") representing 22,113,160 non-cumulative dollar preference shares, Series N; 9,883,307 Series P ("Series P ADSs") representing 9,883,307 non-cumulative dollar preference shares, Series P; 20,646,938 Series Q ("Series Q ADSs") representing 20,646,938 non-cumulative dollar preference shares, Series Q; 10,163,932 Series R ("Series R ADSs") representing 10,163,932 non-cumulative dollar preference shares, Series R; 26,449,040 Series S ("Series S ADSs") representing 26,449,040 non-cumulative dollar preference shares, Series S; 51,245,839 Series T ("Series T ADSs") representing 51,245,839 non-cumulative dollar preference shares, Series T; and 10,130 Series U ("Series U ADSs") representing 10,130 non-cumulative dollar preference shares, Series U.
January 2011 High 0.4494 2010: Q4 High 0.4949 2010 High 0.5804 Low 0.3950 Low 0.3759 Low 0.3125
Asset-backed commercial paper (ABCP) - a form of asset-backed security generally issued by a commercial paper conduit.
Customer accounts - comprise money deposited with the Group by counterparties other than banks and classified as liabilities. They include demand, savings and time deposits; securities sold under repurchase agreements; and other short term deposits. Deposits received from banks are classified as deposits by banks.
Gross yield - is the interest rate earned on average interest-earning assets i.e. interest income divided by average interest-earning assets.
Negative equity mortgages - mortgages where the value of the property mortgaged is less than the outstanding balance on the loan.
Market risk 193 Loans and advances Operational risk 199 Loans and advances to banks 300 Other risk exposures 204 Loans and advances to customers 300 Pension risk 203 Regulatory risk 202 Material contracts 399 Reputation risk 203 Structural foreign currency exposures 144 441RBS Group 2010