RBS Secured Funding LLP BF 35 Great St. Helen's, London, EC3A 6AP, England
RBSM Capital Ltd BF 24/25 St. Andrew Square, Edinburgh, EH2 1AF, Scotland
RBSSAF (2) Ltd BF The Quadrangle, The Promenade, Cheltenham, GL50 1PX, England
RBSSAF (4) Ltd BF The Quadrangle, The Promenade, Cheltenham, GL50 1PX, England
RBSSAF (6) Ltd BF The Quadrangle, The Promenade, Cheltenham, GL50 1PX, England
RBSSAF (8) Ltd BF The Quadrangle, The Promenade, Cheltenham, GL50 1PX, England
Entity name Activity(1) Address Notes RBSSAF (11) Ltd BF The Quadrangle, The Promenade, Cheltenham, GL50 1PX, England
RBSSAF (12) Ltd BF The Quadrangle, The Promenade, Cheltenham, GL50 1PX, England RBSSAF (25) Ltd BF The Quadrangle, The Promenade, Cheltenham, GL50 1PX, England
RoboScot Ventures Ltd BF 24/25 St Andrew Square, Edinburgh, EH2 1AF, Scotland
Royal Bank Invoice Finance Ltd BF Smith House, PO Box 50, Elmwood Avenue, Feltham, TW13 7QD, England
Royal Bank of Scotland (Industrial Leasing) Ltd BF 24/25 St Andrew Square, Edinburgh, EH2 1AF, Scotland
Royal Bank Ventures Ltd BF 24/25 St Andrew Square, Edinburgh, EH2 1AF, Scotland
RoyScot Financial Services Ltd BF 135 Bishopsgate, London, EC2M 3UR, England
Sandford Leasing Ltd BF The Quadrangle, The Promenade, Cheltenham, GL50 1PX, England
SIG Number 2 Ltd BF 24/25 St Andrew Square, Edinburgh, EH2 1AF, Scotland
The One Account Ltd BF 135 Bishopsgate, London, EC2M 3UR, England
Theobald Film Productions LLP BF The Quadrangle, The Promenade, Cheltenham, GL50 1PX, England
Ulster Bank Commercial Services (NI) Ltd BF 11-16 Donegall Square East, Belfast, BT1 5UB, Northern Ireland
Voyager Leasing Ltd BF The Quadrangle, The Promenade, Cheltenham, GL50 1PX, England
Walton Lake Developments Ltd INV 1 Princes Street, London, EC2R 8PB, England
West Register (Northern Ireland) Property Ltd INV 11-16 Donegall Square East, Belfast, BT1 5UB, Northern Ireland
West Register (Realisations) Ltd INV 24/25 St Andrew Square, Edinburgh, EH2 1AF, Scotland
Williams & Glyn's Leasing Company Ltd BF The Quadrangle, The Promenade, Cheltenham, GL50 1PX, England
WR (NI) Property Investments Ltd INV 11-16 Donegall Square East, Belfast, BT1 5UB, Northern Ireland
WR (NI) Property Realisations Ltd INV 11-16 Donegall Square East, Belfast, BT1 5UB, Northern Ireland
The following table details active related undertakings incorporated outside the United Kingdom which are 100% owned by the Group and fully consolidated for accounting purposes.
Centre of Commerce, One Bay Street, PO Box N-3944, Nassau, JE4 8ND
Bermuda KEB Investors, L.P. BF Clarendon House, Two Church Street, Suite 104, Reid Street, Hamilton, HM 11
Brazil RBS Assessoria Ltda SC Rua Iguatemi, 151, conj. 161, CEP 01451-011, Cidade de Sao Paulo
Cayman Islands Redlion Investments Ltd OTH Coutts House, 1446, West Bay Road, PO Box 707, Georgetown, Grand Cayman, KY1-1107
Cayman Islands Redshield Holdings Ltd BF Estera Trust (Cayman)Limited, Clifton House, 75 Fort Street, PO Box 1350, Grand Cayman, KY1-1108, Cayman Islands
Cayman Islands Royhaven Secretaries Ltd BF Coutts House, 1446, West Bay Road, PO Box 707, Georgetown, Grand Cayman, KY1-1107
China The Royal Bank of Scotland (China) Co., Ltd BF Level 25F, Azia Center, 1233 Lu Jia Zui Ring Road, Shanghai 200120, China
Denmark Kastrup V & L Building K/S BF c/o Visma Services, Lyskaer 3 CD, Herlev, 104 40 Denmark Finland Artul Kiinteistöt Oy BF C/O Nordisk Renting OY, Eteläesplanadi 12, Box 14044, FI-00130
Finland Fab Ekenäs Formanshagen 4 BF C/O Nordisk Renting OY, Eteläesplanadi 12, Box 14044, FI-00130 Finland, Helsingfors
Finland Forssa Liikekiinteistöt Oy BF C/O Nordisk Renting OY, Eteläesplanadi 12, Box 14044, FI-00130 Finland, Helsingfors
Finland Koy Espoon Niittysillantie 5 BF C/O Nordisk Renting OY, Eteläesplanadi 12, Box 14044, FI-00130 Finland, Helsingfors
Finland Koy Helsingin Mechelininkatu 1 BF C/O Nordisk Renting OY, Eteläesplanadi 12, Box 14044, FI-00130 Finland, Helsingfors
Finland Koy Helsingin Panuntie 11 BF C/O Nordisk Renting OY, Eteläesplanadi 12, Box 14044, FI-00130 Finland, Helsingfors
Finland Koy Helsingin Panuntie 6 BF C/O Nordisk Renting OY, Eteläesplanadi 12, Box 14044, FI-00130 Finland, Helsingfors
Finland Koy Jämsän Keskushovi BF Södra esplanaden 12 c/o Nordisk Renting Oy, 00130 Helsingfors, Finland
Finland Koy Kokkolan Kaarlenportti Fab BF C/O Nordisk Renting OY, Eteläesplanadi 12, Box 14044, FI-00130 Finland, Helsingfors
Finland Koy Millennium BF C/O Nordisk Renting OY, Eteläesplanadi 12, Box 14044, FI-00130 Finland, Helsingfors
Finland Koy Nuolialan päiväkoti BF C/O Nordisk Renting OY, Eteläesplanadi 12, Box 14044, FI-00130 Finland, Helsingfors
Finland Koy Päiväläisentie 1-6 BF C/O Nordisk Renting OY, Eteläesplanadi 12, Box 14044, FI-00130 Finland, Helsingfors
Finland Koy Peltolantie 27 BF C/O Nordisk Renting OY, Eteläesplanadi 12, Box 14044, FI-00130 Finland, Helsingfors
Germany RBS (Deutschland) GmbH CI Junghofstrasse 22, Frankfurt am Main, D-60311 Germany RBS Deutschland Holdings GmbH BF Junghofstrasse 22, Frankfurt am Main, D-60311 Germany RBS Structured Financial Services GmbH BF Junghofstrasse 22, Frankfurt am Main, D-60311 Gibraltar RBS (Gibraltar) Ltd CI 1 Corral Road, Gibraltar
India RBS Equities (India) Ltd BF Empire Complex (South Wing), 414, Senapati Bapat Marg, Lower Parel, Mumbai 400013
India RBS Services India Private Ltd SC DLF Cyber Green, Tower C, DLF Cyber City, Haryana, 122 002
Easycash (Ireland) Ltd BF Ulster Bank Group Centre, George's Quay, Dublin 2, Ireland
First Active Holdings Ltd BF Ulster Bank Group Centre, George's Quay, Dublin 2, Ireland
First Active Insurances Services Ltd BF Ulster Bank Group Centre, George's Quay, Dublin 2, Ireland
First Active Investments No. 4 Ltd BF Ulster Bank Group Centre, George's Quay, Dublin 2, Ireland
Hume Street Nominees Ltd BF Ulster Bank Group Centre, George's Quay, Dublin 2, Ireland
Norgay Property Ltd BF Ulster Bank Group Centre, George's Quay, Dublin 2
RBS Asset Management (Dublin) Ltd BF Guild House, Guild Street, IFSC, Dublin, 1
RBS Investments (Ireland) Ltd BF Ulster Bank Group Centre, George's Quay, Dublin 2 (3)
Ulster Bank Holdings (ROI) Ltd BF Ulster Bank Group Centre, George's Quay, Dublin 2
Utras Unlimited Company BF Ulster Bank Group Centre, George's Quay, Dublin 2 (3)
(Isle of Man) Ltd BF Sixty Circular Road, Douglas, IM1 1AE Isle Of Man
Mauritius RBS Asia (Mauritius) Ltd BF 10th Floor, Raffles Tower, 19 Cybercity, Ebene, M20 Netherlands AA Merchant Banking B.V. BF Gustav Mahlerlaan 350, Amsterdam, 1082 ME (3) Netherlands Alternative Investment Fund B.V. BF Gustav Mahlerlaan 350, Amsterdam, 1082 ME (3) Netherlands FI Equity Partners B.V. BF Gustav Mahlerlaan 350, Amsterdam, 1082 ME (3) Netherlands Global Infranet B.V. BF Gustav Mahlerlaan 350, Amsterdam, 1082 ME (3) Netherlands National Westminster International
Singapore The Royal Bank of Scotland Asia Merchant Bank (Singapore) Ltd
Sweden Backsmedjan KB BF C/O Nordisk Renting AB, Box 14044, SE-104 40 Sweden, Stockholm
Sweden Braheberget KB BF C/O Nordisk Renting AB, Box 14044, SE-104 40 Sweden, Stockholm
Sweden Dalklockan 6 KB BF C/O Nordisk Renting AB, Box 14044, SE-104 40 Sweden, Stockholm
Sweden Fastighet Kallebäck 2:4 i Göteborg AB BF C/O Nordisk Renting AB, Box 14044, SE-104 40 Sweden, Stockholm
Sweden Fastighets AB Kabisten 1 BF C/O Nordisk Renting AB, Box 14044, SE-104 40 Sweden, Stockholm
Sweden Fastighets AB Stockmakaren BF C/O Nordisk Renting AB, Box 14044, SE-104 40 Sweden, Stockholm
Sweden Fastighets AB Xalam BF C/O Nordisk Renting AB, Box 14044, SE-104 40 Sweden, Stockholm
Sweden Fastighetsbolaget Holma i Höör AB BF C/O Nordisk Renting AB, Box 14044, SE-104 40 Sweden, Stockholm
Sweden Gredelinen KB BF C/O Nordisk Renting AB, Box 14044, SE-104 40 Sweden, Stockholm
Sweden IR Fastighets AB BF C/O Nordisk Renting AB, Box 14044, SE-104 40 Sweden, Stockholm
Sweden IR IndustriRenting AB BF C/O Nordisk Renting AB, Box 14044, SE-104 40 Sweden, Stockholm
Sweden KB Likriktaren BF C/O Nordisk Renting AB, Box 14044, SE-104 40 Sweden, Stockholm
Sweden LerumsKrysset KB BF C/O Nordisk Renting AB, Box 14044, SE-104 40 Sweden, Stockholm
Sweden Mjälgen KB BF C/O Nordisk Renting AB, Box 14044, SE-104 40 Sweden, Stockholm
Sweden Nordisk Specialinvest AB BF C/O Nordisk Renting AB, Box 14044, SE-104 40 Sweden, Stockholm
Sweden Nordiska Strategifastigheter Holding AB BF C/O Nordisk Renting AB, Box 14044, SE-104 40 Sweden, Stockholm
Sweden Sjöklockan KB BF C/O Nordisk Renting AB, Box 14044, SE-104 40 Sweden, Stockholm
Sweden Strand European Holdings AB BF C/O Nordisk Renting AB, Box 14044, SE-104 40 Sweden, Stockholm
Sweden Vansbroviken KB BF C/O Nordisk Renting AB, Box 14044, SE-104 40 Sweden, Stockholm
Switzerland Alcover A.G. BF Baarerstrasse 98, 6302 Zug, Switzerland CH-6300 (3) Switzerland Coutts & Co Ltd CI Lerchenstrasse 18, Zurich, 8022 Switzerland Switzerland Coutts & Co Trustees (Suisse) S.A. BF Rue du Rhône 14, c/o Regus Rue du Rhône Sàrl, 1204 Genève
Switzerland RBS Services (Switzerland) Ltd SC Lerchenstrasse 18, Zurich, CH 8022 United Arab Emirates
United States Candlelight Acquisition LLC BF 2711 Centerville Road Suite 400, Wilmington, Delaware, 19808 United States Communications Capital Group I, LLC BF 2711 Centerville Road Suite 400, Wilmington, Delaware, 19808
United States Communications Capital Group II, LLC BF 2711 Centerville Road Suite 400, Wilmington, Delaware, 19808 United States Financial Asset Securities Corp. BF 2711 Centerville Road Suite 400, Wilmington, Delaware, 19808 United States Greenwich Capital Derivatives, Inc. BF 2711 Centerville Road Suite 400, Wilmington, Delaware, 19808 United States Lease Plan North America LLC BF 1209 Orange Street, Wilmington, New Castle, Delaware, 2903
United States Random Properties Acquisition Corp. IV INV 2711 Centerville Road Suite 400, Wilmington, Delaware, 19808 United States RBS Acceptance Inc. CI 2711 Centerville Road Suite 400, Wilmington, Delaware, 19808 United States RBS Americas Property Corp. SC 2711 Centerville Road Suite 400, Wilmington, Delaware, 19808 United States RBS Commercial Funding Inc. BF 2711 Centerville Road Suite 400, Wilmington, Delaware, 19808
BF PO Box 986, Mill Wall, Wickhams Cay, Tortola, JE4 8ND
The following table details active related undertakings incorporated in the United Kingdom where the Group ownership is less than 100%.
BF FC 0 35 Great St Helens, London, EC3A 6AP England
Attlee Personal Loans Plc BF FC 0 35 Great St Helens, London, EC3A 6AP England Attraction Inns Ltd BF IA 30 4 Gillespie Road, Edinburgh, EH13 0LL Scotland Ballymore (London Arena) Ltd BF IA 45 St John's House, 5 South Parade, Summertown, Oxford,
Bevan Loan Interest Purchaser Plc BF FC 0 35 Great St Helens, London, EC3A 6AP England Business Growth Fund plc BF EAA 27 13-15 York Buildings, London, WC2N 6JU England CFN Packaging Group Ltd BF IA 25 27-29 Lumley Avenue, Skegness, PE25 2AT England Cloud Electronics Holdings Ltd BF IA 20 140 Staniforth Road, Darnall, Sheffield, South Yorkshire, S9 3HF England
DF Ventures Ltd BF IA 20 7 Whiteladies Road, Clifton, Bristol, BS8 1NN Wales Ferrostatics Holdings Ltd BF IA 35 c/o John Hardman & Co, Blackfriars House, Parsonage,
Greenock Funding No 5 Plc BF FC 0 35 Great St Helens, London, EC3A 6AP England GWNW City Developments Ltd BF EAJV 50 Gate House, Turnpike Road, High Wycombe,
Hamsard 3120 Ltd BF IA 40 Sycamore Road, Eastwood Trading Estate, Rotherham, South Yorkshire, S65 1EN England
Isobel AssetCo Ltd BF FC 75 40 Berkeley Square, London, W1J 5AL England Isobel EquityCo Ltd BF FC 75 40 Berkeley Square, London, W1J 5AL England Isobel Finance HoldCo No2 Ltd BF FC 0 35 Great St Helens, London, EC3A 6AP England Isobel Finance No2 Plc BF FC 0 35 Great St Helens, London, EC3A 6AP England
Isobel HoldCo Ltd BF FC 75 40 Berkeley Square, London, W1J 5AL England Isobel Intermediate HoldCo Ltd BF FC 75 40 Berkeley Square, London, W1J 5AL England Isobel Loan Capital Ltd BF FC 75 40 Berkeley Square, London, W1J 5AL England Isobel Mezzanine Borrower Ltd BF FC 75 40 Berkeley Square, London, W1J 5AL England
Jaguar Cars Finance Ltd BF FC 50 280 Bishopsgate, London, EC2M 4RB England JCB Finance (Leasing) Ltd BF FC 75 The Mill, High Street, Rocester, ST14 5JW England JCB Finance Ltd BF FC 75 The Mill, High Street, Rocester, ST14 5JW England Land Options (East) Ltd BF EAJV 50 24/25 St Andrew Square, Edinburgh, EH2 1AF Scotland
Landpower Leasing Ltd BF FC 75 The Mill, High Street, Rocester, ST14 5JW England London Rail Leasing Ltd BF EAJV 50 99 Queen Victoria Street, London, EC4V 4EH, England Lyalvale Property Ltd INV IA 31 Lyalvale Express Ltd, Express Estate, Fisherwick, Nr
Tay Valley Lighting (Stoke on Trent) Ltd BF EAJV 50 The Quadrangle, The Promenade, Cheltenham, GL50 1PX England
BF IA 33 30 St Vincent Place, Glasgow, G1 2EU Scotland
Uniconn Ltd OTH IA 30 Howe Moss Drive, Kirkhill Industrial Estate, Dyce, Aberdeen, AB21 0GL Scotland
Lunar Funding VIII Ltd BF FC 0 Boundary Hall, Cricket Square, 171 Elgin Avenue, Grand Cayman, KY1-1104
China Hua Ying Securities Company Ltd BF EAJV 33 Units 01-11, 15th Floor, 19 Gao Lang Dong Road, Wuxi New District
France Cinquième Lease G.I.E. BF EAJV 33 94, Boulevard Haussman, Paris, 75008
MSE Holding Ltd INV IA 37 C/O Gentoo Fund Services Ltd, Mill Court, La Charrotiere, St Peter Port GY1 3GG
BF FC 0 Riverside One, Sir John Rogersons Quay, Dublin 1
Ireland Cesium Structured Funding Ltd BF FC 0 5 Harbourmaster Place, Dublin 1, Ireland
Ireland CHESS III Ltd BF FC 0 77 Sir John Rogerson's Quay, Dublin 2, Ireland
The Drive4Growth Company Ltd OTH IA 20 C/O Denis Crowley & Co, Chartered Accountants, Unit 6 Riverside Grove, Riverstick, Co. Cork Ireland
Zrko Ltd BF FC 67 70 Sir John Rogerson's Quay, Dublin 2
Italy Eris Finance S.R.L. BF IA 45 Via V Alfieri, 31015, Conegliano
BF EAJV 50 Royal Bank House, 71 Bath Street, St Helier JE4 8PJ
Jersey Chess II Ltd BF FC 0 13 Castle Street, St Helier, Jersey, JE4 5UT
Jersey Spring Allies Jersey Ltd BF IA 49 Whiteley Chambers, Don Street, St Helier, JE4 9WG
BF EAJV 50 De entree 99 -197, 1101HE Amsterdam Zuidoost, Amsterdam, 1101HE
Netherlands STAR NO.1 B.V. OTH FC 0 Hoogoorddreef 15, 1101 BA Amsterdam, Netherlands
Netherlands STICHTING STAR NO. 1 OTH FC 0 Hoogoorddreef 15, 1101 BA Amsterdam, Netherlands
Poland Wiśniowy Management sp. z o.o. SC EAA 25 Ilzecka 26 Street, Warsaw, 02-135
Sweden Stora Kvarnen KB BF FC 51 C/O Nordisk Renting AB, Box 14044, SE-104 40 Sweden, Stockholm
BF FC 0 2711 Centerville Road Suite 400, Wilmington, Delaware, 19808
Republic of Ireland Marnin Ltd BF NC Ulster Bank Group Centre, George's Quay, Dublin 2 Jersey RBS Retirement And Death Provision
Company Ltd BF NC Po Box 236 First Island House, Peter Street, St Helier, Jersey,
United States RBS Capital LP B BF NC 1209 Orange Street, Wilmington, Delaware, 19801 (10) United States RBS Capital LP C BF NC 1209 Orange Street, Wilmington, Delaware, 19801 (10) United States RBS Capital LP D BF NC 1209 Orange Street, Wilmington, Delaware, 19801 (10)
United States RBS Capital Trust D BF NC 100, Suite 102, White Clay Center, Newark, New Castle County, Delaware, 19711, United States
United States RBS Capital Trust II BF NC 100, Suite 102, White Clay Center, Newark, New Castle County, Delaware, 19711, United States
Australia RBS Holdings II (Australia) Pty Ltd FC 98 Level 23, 88 Phillip Street, Sydney, NSW, 2000 Australia RBS Services (Australia) Pty Ltd FC 100 Level 23, 88 Phillip Street, Sydney, NSW, 2000
Cayman Islands Bluegate Holdings Ltd FC 98 Queensgate House, South Church Street, P.O. Box 1093GT, George Town, Grand Cayman
Curaçao RBSG Holdings N.V. FC 100 Kaya Flambayan 9, Curacao, Netherlands Antilles Germany West Register Prime Holding GmbH i. L. INV 100 Emil-Riedl-Weg 6, Pullach i.Isartal, D-82049 Gibraltar Bantam (Gibraltar) Ltd FC 98 6A Queensway, P.O. Box 64, Gibraltar Gibraltar Borneo (Gibraltar) Ltd FC 98 6A Queensway, P.O. Box 64, Gibraltar
Gibraltar Sotomar Ltd FC 100 1 Corral Road Guernsey (Channel Islands)
Indonesia PT Altron Indonesia FC 98 Indonesia Stock Exchange Building, Tower II, 11th floor, Jl. Jendr. Sudirman Kav. 52-53, Jakarta, 12190
First Active Nominees Ltd FC 100 Ulster Bank Group Centre, George's Quay, Dublin 2
NatWest Holdings (Ireland) FC 100 24/26 City Quay, Dublin 2, Ireland
RBS Pension Trustees (Ireland) Ltd NC 98 Ulster Bank Group Centre, George's Quay, Dublin 2
UB SIG (ROI) Ltd FC 100 Ulster Bank Group Centre, George's Quay, Dublin 2
Ulster Bank Group Treasury Ltd FC 100 Ulster Bank Group Centre, George's Quay, Dublin 2
Ulster International Finance FC 100 Ulster Bank Group Centre, George's Quay, Dublin 2
Norway Airside Properties Norway AS FC 100 C/O Visma Services, Lyskaer 3 CD, Herlev, Denmark
Spain Labiana Life Sciences Services SL FC 80 Calle Venus, Poligono Can Parellada 26, Terrassa, Barcelona
United Kingdom Burridge Holdings Ltd IA 40 Squires Farm Industrial Estate, Easons Green, Framfield, East Sussex, TN22 5RB England
United Kingdom Cala Campus Ltd EAJV 50 Ledingham Chalmers, Johnstone House, 52-54 Rose Street, Aberdeen, AB10 1HA Scotland
FC 100 11-16 Donegall Square East, Belfast, Belfast, BT1 5UB, Nothern Island
United Kingdom Honroe (UK) Ltd FC 100 135 Bishopsgate, London, EC2M 3UR England United Kingdom Libra No 1 Ltd FC 100 135 Bishopsgate, London, EC2M 3UR England United Kingdom Lombard GATX Holdings Ltd EAJV 50 1 Dorset Street, Southampton, SO15 2DP England
United Kingdom NatWest (HMHP) Ltd FC 100 135 Bishopsgate, London, EC2M 3UR England United Kingdom NatWest Corporate Services (Ireland) FC 100 No. 1 Dorset Street, Southampton, Hampshire, SO15 2DP,
United Kingdom Northants Developments Ltd FC 100 1 Princes Street, London, EC2R 8PB England United Kingdom Primemodern Ltd FC 100 135 Bishopsgate, London, EC2M 3UR, England
United Kingdom RBS Finance (UK) Ltd FC 100 250 Bishopsgate, London, EC2M 4AA, England United Kingdom RBS GTS Services Ltd FC 98 250 Bishopsgate, London, EC2M 4AA, England (3) United Kingdom RBS Health Trustee (UK) Ltd FC 100 250 Bishopsgate, London, EC2M 4AA, England United Kingdom RBS Hotel Development Company Ltd FC 100 135 Bishopsgate, London, EC2M 3UR England United Kingdom RBS Hotel Investments Ltd FC 100 135 Bishopsgate, London, EC2M 3UR England
United Kingdom The Financial Trading Company Ltd FC 100 135 Bishopsgate, London, EC2M 3UR England United Kingdom The Mortgage Corporation FC 100 Group Secretariat, RBS Group plc., 1 Princes Street,
United Kingdom Van Finance Ltd FC 100 280 Bishopsgate, London, EC2M 4RB England United Kingdom West Register (Bankside) Ltd FC 100 24/25 St Andrew Square, Edinburgh, EH2 1AF Scotland
Sweden Svenskt Energikapital AB FC 100 C/O Nordisk Renting AB, Box 14044, SE-104 40 Sweden, Stockholm
United Kingdom Dixon Motorcycle Holdings Ltd FC 100 1 Princes Street, London, EC2R 8PB England United Kingdom Dixon Vehicle Sales Ltd FC 100 1 Princes Street, London, EC2R 8PB England United Kingdom Dormaco (No.12) Ltd FC 100 1 Princes Street, London, EC2R 8PB England United Kingdom Dunfly Trustee Ltd FC 100 1 Princes Street, London, EC2R 8PB England
United Kingdom Emperor Holdings Ltd FC 100 1 Princes Street, London, EC2R 8PB England United Kingdom FIT Nominee Ltd FC 100 135 Bishopsgate, London, EC2M 3UR England
United Kingdom FIT Nominee 2 Ltd FC 100 135 Bishopsgate, London, EC2M 3UR England
United Kingdom Greenwich NatWest Ltd FC 100 135 Bishopsgate, London, EC2M 3UR England United Kingdom JCB Credit Ltd FC 75 The Mill, High Street, Rocester, ST14 5JW England United Kingdom JCB Finance Pension Ltd FC 88 11-16 Donegall Square East, Belfast, BT1 5UB Northern
EH3 9GL Scotland United Kingdom Lombard Bank FC 100 Lee House, Baird Road, Enfield, Middlesex, EN1 1SJ
United Kingdom NatWest Invoice Finance Ltd FC 100 Smith House, Elmwood Avenue, Feltham, TW13 7QD England
United Kingdom RBOS Nominees Ltd FC 100 250 Bishopsgate, London, EC2M 4AA, England United Kingdom RBOS Trustees Ltd FC 100 250 Bishopsgate, London, EC2M 4AA, England United Kingdom RBS CIF Trustee Ltd FC 100 1 Princes Street, London, EC2R 8PB England United Kingdom RBS Investment Executive Ltd NC 100 24/25 St Andrew Square, Edinburgh, EH2 1AF Scotland
United Kingdom RBS Trustees Ltd FC 100 24/25 St Andrew Square, Edinburgh, Midlothian, EH2 1AF Scotland
United Kingdom RBSG Collective Investments Nominees Ltd FC 100 24/25 St Andrew Square, Edinburgh, Midlothian, EH2 1AF Scotland
United Kingdom Rover Finance Holdings Ltd FC 100 135 Bishopsgate, London, EC2M 3UR, England United Kingdom Rover Finance Ltd FC 100 135 Bishopsgate, London, EC2M 3UR, England
United Kingdom Royal Bank Business Asset Finance Ltd FC 100 280 Bishopsgate, London, EC2M 4RB England United Kingdom Royal Bank Insurance Consultants Ltd FC 100 24/25 St Andrew Square, Edinburgh, Midlothian, EH2 1AF
Scotland United Kingdom RoyScot Auto Credit Ltd FC 100 280 Bishopsgate, London, EC2M 4RB England
United Kingdom RoyScot Industrial Leasing Ltd FC 100 280 Bishopsgate, London,, EC2M 4RB England United Kingdom RoyScot Leasing Ltd FC 100 280 Bishopsgate, London, EC2M 4RB England United Kingdom RoyScot Motor Finance Ltd FC 100 280 Bishopsgate, London, EC2M 4RB England United Kingdom Sixty Seven Nominees Ltd FC 100 1 Princes Street, London, EC2R 8PB England
United Kingdom Topco (No1) Ltd IA 45 Macdonalds Hotels, Whiteside House, Whiteside Industrial Estate, Bathgate, West Lothian, EH48 2RX Scotland
BF IA 50 FRP ADVISORY LLP, Apex 3 95 Haymarket Terrace, Edinburgh, EH12 5HD Scotland
The Royal Bank of Scotland plc Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Hong Kong, Republic of Ireland, Italy, Japan, Jersey, Republic of Korea, Luxembourg, Malaysia, Netherlands, Norway, Poland, Singapore, Spain, Sweden, Switzerland, Turkey, United Arab Emirates, United States
Derivatives, settlement balances and short positions 262,197 278,904 377,337 318,861 467,802
Return on average total equity (3) (10.2%) (2.9%) (4.6%) (12.8%) (7.8%)
Return on average ordinary shareholders' equity (4) (15.3%) (4.0%) (6.5%) (14.7%) (8.9%)
Notes: (1) None of the convertible securities had a dilutive effect in the years 2012 to 2016. (2) Return on average total assets represents loss attributable to ordinary shareholders as a percentage of average total assets. (3) Return on average total equity represents loss attributable to equity owners expressed as a percentage of average shareholder funds. (4) Return on average ordinary shareholders' equity represents loss attributable to ordinary shareholders expressed as a percentage of average ordinary shareholders' equity. (5) 2016, 2015 and 2014 are calculated on a PRA transitional basis; 2013 and 2012 are calculated on a Basel 2.5 basis. (6) For this purpose, earnings consist of income before tax and non-controlling interests, plus fixed charges less the unremitted income of associated undertakings (share of profits less dividends received). Fixed charges consist of total interest expense, including or excluding interest on deposits and debt securities in issue, as appropriate, and the proportion of rental expense deemed representative of the interest factor (one third of total rental expenses).
Service industries and business activities 21,373 22,186 9,459 53,018 51,257 50,621 52,253 56,435
Loans and advances to customers - net 351,950 333,892 378,238 440,722 500,135
Loans and advances to banks - UK 27,986 159 0.57 38,626 253 0.65
Debt securities in issue - UK 20,065 551 2.75 29,502 762 2.58
Internal funding of trading business - UK (15,302) (4) 0.03 (13,909) 104 (0.75)
Notes: (1) Interest receivable and interest payable have both been decreased by £76 million in respect of negative interest relating to financial assets that attracted negative interest. (2) There was no increase in interest receivable (2015 - nil; 2014 - £11 million) and no increase in interest payable (2015 - £15 million; 2014 - £58 million) in respect of interest on financial assets and liabilities designated as at fair value through profit or loss. Related interest-earning assets and interest-bearing liabilities have been adjusted where applicable.
Average loans and advances to customers - gross 373,644 387,956 472,545 509,937 541,588
Notes: (1) Includes nil release relating to loans and advances to banks (2015 - £4 million release; 2014 - £10 million release; 2013 - £15 million release; 2012 - £23 million loss.) (2) Excludes reverse repos.
Accruing loans which are contractually overdue 90 days or more as to principal or interest
Closing provisions for impairment as a % of total REIL 43% 59% 65% 64% 52%
REIL as a % of gross lending to customers excluding reverse repos 3.1% 3.9% 7.6% 9.5% 9.1%
Notes: (1) The write-off of impaired loans affects closing provisions for impairment as a % of total REIL (the coverage ratio). The coverage ratio reduces if the loan written-off carries a higher than average provision and increases if the loan written-off carries a lower than average provision. (2) Impaired loans at 31 December 2016 include £2,496 million (2015 - £2,300 million; 2014 - £7,052 million) of loans subject to forbearance granted during the year.
Gross income not recognised but which would have been recognised under the original terms of impaired loans
Notes: (1) Wholesale loans subject to forbearance include only those arrangements above thresholds set individually by the segments, ranging from nil to £3 million. (2) For 2016, wholesale loans subject to forbearance were £1,807 million (2015 - £2,258 million; 2014 - £3,040 million) and secured retail loans subject to forbearance were £450 million (2015 - £1,502 million; 2014 - £3,051 million). Unsecured retail loans subject to forbearance amounting to £37 million (2015 - £96 million; 2014 - £244 million) are not included.
The table below sets out cross border exposures greater than 0.5% of RBS’s total assets. None of these countries have experienced repayment difficulties that have required restructuring of outstanding debt.
Government Banks Other Total positions positions £m £m £m £m £m £m
Balance interest rate balance balance interest rate 2016 £bn % £bn £bn %
Contractual obligations to purchase goods or services 64 168 266 93 7 —
Undrawn formal facilities, credit lines and other commitments to lend were £134,324 million (2015 - £132,198 million; 2014 - £212,777 million). While RBS has given commitments to provide these funds, some facilities may be subject to certain conditions being met by the counterparty. RBS does not expect all facilities to be drawn, and some may lapse before drawdown.
The company and its subsidiaries are party to various contracts in the ordinary course of business. Material contracts include the following: B Share Acquisition and Contingent Capital Agreement
On 16 December 2013, the company announced that, having received approval from the PRA, it had terminated the £8 billion
Subscription as a result of the actions announced in the second half of 2013 to further strengthen its capital position.
On 9 October 2015, the company announced that on 8 October 2015, it had received a valid conversion notice from HM Treasury in respect of all outstanding B shares held by HM Treasury. The new ordinary shares issued on conversion of the B shares were admitted to the official list of the UKLA, and to trading on the
London Stock Exchange plc, on 14 October 2015. Following such conversion, HM Treasury no longer holds any B shares and its resulting holding represents 72.6% of the company’s ordinary share capital.
Treasury at the time of the initial EC decision and following the
Scotland branch based business by the end of 2017. The agreement entered into with a consortium of investors on 27
Set out below are certain risk factors that could adversely affect the Group's future results, its financial condition and prospects and cause them to be materially different from what is expected.
The factors discussed below and elsewhere in this report should not be regarded as a complete and comprehensive statement of all potential risks and uncertainties facing the Group.
Group has settled a number of legal and regulatory actions over the past several years but continues to be, and may in the future be, involved in a number of legal and regulatory actions in the
The legal and regulatory actions specifically referred to below are, in the Group’s view, the most significant legal and regulatory actions to which the Group is currently exposed. However, the
(both formal and informal) by governmental law enforcement and other agencies and litigation proceedings (including class action litigation), relating to, among other matters, the offering of securities, including residential mortgage-backed securities
(RMBS), conduct in the foreign exchange market, the setting of benchmark rates such as LIBOR and related derivatives trading, the issuance, underwriting, and sales and trading of fixed-income securities (including structured products and government securities), product mis-selling, customer mistreatment, antimoney laundering, sanctions, and various other compliance issues. See pages 370 to 386 for details for these matters. The
Group continues to cooperate with governmental and regulatory authorities in relation to ongoing regulatory actions. Legal and regulatory actions are subject to many uncertainties, and their outcomes, including the timing, amount of fines or settlements or the form of any settlements, which may be material, are often difficult to predict, particularly in the early stages of a case or investigation. It is expected that the Group will continue to have a material exposure to legal and regulatory actions relating to legacy issues in the medium term.
In the US, ongoing matters include various civil claims relating to legacy RMBS activities, the most material of which are those of the Federal Housing Finance Agency (FHFA), and investigations by the civil and criminal divisions of the U.S. Department of
Group of the Financial Fraud Enforcement Task Force (including several state attorneys general). On 26 January 2017, the Group announced that it was taking a further £3.1bn ($3.8bn) provision in relation to these litigation and investigation matters including in relation to the Group’s issuance and underwriting of RMBS as well as other RMBS litigation matters.
These may include consequences resulting from the need to reapply for various important licences or obtain waivers to conduct certain existing activities of the Group, particularly but not solely in the US, which may take a significant period of the time and the results of which are uncertain. Failure to obtain such licenses or waivers could adversely impact the Group’s business, in particular the NatWest Markets business in the US, including if it results in the Group being precluded from carrying out certain activities. A further provision of £3.1 billion ($3.8 billion) was recorded by the Group in Q4 2016 in relation to RBS’s various
Group may not manage to reach a settlement agreement with the remaining claimants, and as a result remains exposed to continuing litigation. Trial is scheduled to commence in March 2017.
between 2008 and 2013. This new complaints review process and the automatic refund of complex fees was developed with the involvement of the Financial Conduct Authority (FCA). The FCA’s review into these activities is continuing and fines or additional redress commitments may be accepted by or imposed upon the
The Group is subject to political risks, including economic, regulatory and political uncertainty arising from the outcome of the referendum on the UK’s membership of the European
The longer term effects of the EU Referendum on the Group’s operating environment are difficult to predict, and subject to wider global macro-economic trends and events, but are likely to significantly impact the Group and its customers and counterparties who are themselves dependent on trading with the
There is related uncertainty as to the respective legal and regulatory arrangements under which the Group and its subsidiaries will operate when the UK is no longer a member of the EU. In addition, the Group and its counterparties may no longer be able to rely on the EU passporting framework for financial services and could be required to apply for authorisation in multiple jurisdictions in the EU, the costs, timing and viability of which is uncertain. This uncertainty and any actions taken as a result of this uncertainty, as well as new or amended rules, could have a significant impact on the Group’s operations or legal entity structure, including attendant restructuring costs, capital requirements and tax implications and as a result adversely impact the Group’s profitability, business model and product offering. See also “Changes to the prudential regulatory framework for banks and investment banks within the EU may require additional structural changes to the Group’s operations which may affect current restructuring plans and have a material adverse effect on the Group.”
Changes to the prudential regulatory framework for banks and investment banks within the EU may require additional structural changes to the Group’s operations which may affect current restructuring plans and have a material adverse effect on the Group.
The exit from the European Union by the UK following the EU
Group actively sought to fully divest Williams & Glyn and engaged in discussions with a number of interested parties concerning a transaction related to substantially all of the
Williams & Glyn business. However, as none of these proposals could deliver full divestment by 31 December 2017, the Group announced on 28 April 2016 that there was a significant risk that the previously planned separation and divestment of Williams &
On 5 August 2016, the Group announced that the Board had determined that it would not be prudent to continue with the plan for separating and divesting Williams & Glyn and announced that various alternative divestment structures were being actively explored.
The Group subsequently announced on 17 February 2017 that the Commissioner responsible for EU competition policy planned to propose to the European Commission to open proceedings to develop an alternative plan for the Group to meet its remaining
State Aid obligations in regards to Williams & Glyn. If adopted, it is intended that this alternative plan would replace the existing requirement to achieve separation and divestment of Williams &
Glyn by 31 December 2017 and the current conditions set out in the State Aid Commitment Deed would be amended accordingly.
Discussions will continue between the Group, HM Treasury and the European Commission to further develop the design of this package of alternative measures and the duration of them. The timing of the approval for this or any package of alternative measures is uncertain and there is no guarantee that the
Glyn. In addition, the final scope and content of the package of alternative measures will be subject to further market testing by
Implementation of the package, or if required as a result of the above process a more onerous package, and any associated business restructuring could divert resources from the Group’s operations and jeopardise the delivery and implementation of other significant plans and initiatives. The incentivised transfer of
SME customers to third parties places reliance on those third parties to achieve satisfactory customer outcomes which could give rise to reputational damage if these are not forthcoming.
Group will lose existing customers and deposits and associated revenues and margins. Furthermore, the SME banking capability fund and financial services innovation fund envisaged by the alternative plan is intended to benefit challenger banks and negatively impact the Group’s competitive position. To support this incentivised switching initiative, the Group will also have to agree to grant business customers of eligible challenger banks access to its branch network for cash and cheque handling, which may result in reputational and financial exposure for the
A failure to comply with the terms of the revised State Aid
Commitment Deed, once agreed, could result in the imposition of additional measures or limitations on the Group’s operations, additional supervision by the Group’s regulators, and loss of investor confidence, any of which could have a material adverse impact on the Group. Delays in execution may also impact the
The requirement to “ring-fence” retail banking operations was introduced under the UK Financial Services (Banking Reform)
The Royal Bank of Scotland plc) and Ulster Bank Ireland DAC
As part of this restructuring, in mid-2018, the majority of existing personal, private, business and commercial customers of RBS
Westminster Bank Plc and Adam & Company PLC which (on the same day) will be renamed The Royal Bank of Scotland plc. At the same time, RBS plc (which will sit outside the RFB) will be renamed NatWest Markets Plc to bring its legal name in line with the rebranding of the NatWest Markets franchise which was initiated in December 2016, and will continue to operate the
As a result of the changes described above, the establishment of the RFB sub-group will have a material impact on how the Group conducts its business and requires a significant legal and organisational restructuring of the Group and the transfer of large numbers of assets, liabilities and customers between legal entities and the realignment of employees which started in early 2017. The Group is still considering whether a number of its current activities will be conducted within or outside of the RFB.
The Group’s final ring-fenced legal structure and the actions taken to achieve it, remain subject to, amongst other factors, additional regulatory, board and other approvals as well as employee representative information and consultation procedures. In particular, transfers of assets and liabilities through a ring-fencing transfer scheme are now subject to review by an Independent Skilled Person designated by the PRA in advance of commencing the formal court process in late 2017 prior to such transfers and migrations taking place in 2018, which may result in amendments being required to be made to the
Group’s current plan and in delays in the implementation of the
The implementation of these changes involves a number of risks related to both the revised Group structure and also the process of transition to that new structure. Those risks include the following: • The Group is unable to predict how some customers may react to the required changes, including for some customers a requirement to deal with both the RFB and other Group entities outside the RFB to obtain the full range of products and services or to take any affirmative steps in connection with the reorganisation.
• As part of the establishment of the RFB, the RFB will need to operate independently from the rest of the Group and material changes to the existing corporate governance structure will need to be put in place by the Group to ensure the RFB’s independence. This new structure may result in divergences between the various governance bodies within the Group and create operational challenges. In addition, the Group may experience difficulties in attracting qualified candidates to occupy these new positions and the new governance structure may result in an increase in overhead and compliance costs.
Group entities that are not RFB entities or wholly owned subsidiaries of the RFB to participate in the same defined benefit pension plan. As a result, it will be necessary to restructure the Group’s defined benefit pension plans
Scheme”)), such that either the RFB or other Group entities that are not wholly owned subsidiaries of the RFB leave the current scheme. The costs of separation may be material and may trigger certain legal and regulatory obligations including possibly increased contributions. Such restructuring may also result in additional or increased cash contributions in the event the pension trustees determine that the employer covenant has been weakened as a result of such separation.
• In addition, the proposed transfers may have tax costs, or may impact the tax attributes of the RFB or other Group entities and the ability to transfer tax losses between RFB
External or internal factors including new and developing legal requirements relating to the regulatory framework for the banking industry and the evolving regulatory and economic landscape resulting from the UK’s planned exit from the EU, as well as further political developments or changes to the Group’s current strategy or means of compliance with its EU State Aid
Commitment, may require the Group to further restructure its operations (including its operations in Western Europe) and may in turn require further changes to be made to the Group’s ringfencing plans (including the planned structure of the Group post implementation). See “Changes to the prudential regulatory framework for banks and investment banks within the EU may require additional structural changes to the Group’s operations which may affect current restructuring plans and have a material adverse effect on the Group”. There is no certainty that the Group will be able to complete the legal restructuring and migration of customers by the 1 January 2019 deadline or in accordance with future rules and the consequences of non-compliance are currently uncertain. Conducting the Group’s operations in accordance with the new rules may result in additional costs
(transitional and recurring) following implementation and impact the Group’s profitability. As a result, the implementation of the UK
The Group has been, and will remain, in a period of major restructuring through to 2019, which carries significant execution and operational risks, and the Group may not be a viable, competitive, customer-focused and profitable bank as a result.
Part of the focus of this transformation programme is to downsize and simplify the Group, reduce underlying costs, strengthen its overall capital position, improve customer experience and employee engagement, update its operational and technological capabilities, strengthen governance and control frameworks and better position the Group for the implementation of the UK ringfencing regime by 1 January 2019. Together, these initiatives are referred to as the Group’s “transformation programme”.
As part of its transformation programme, a number of financial, capital, operational and diversity targets, expectations and trends have been set by management for the Group, both for the short term and throughout the restructuring period. These include (but are not limited to) expectations relating to the Group’s return to profitability and the timing thereof, one-off costs incurred in connection with material litigation and conduct matters and the timing thereof, expected growth rates in income, customer loans and advances and volumes and underlying drivers and trends, cost:income ratio targets, expectations with respect to reductions in operating costs, including remediation costs, expectations relating to restructuring costs and charges as well as impairment charges, disposal losses relating to Capital Resolution, CET1 ratio targets and expectations regarding funding plans and requirements, expectations with respect to reductions in riskweighted assets and the timing thereof, expectations with respect to employees engagement and diversity targets.
More generally, the targets, expectations and trends which accompany the Group’s transformation programme are based on management plans, projections and models and are subject to a number of key assumptions and judgments any of which may prove to be inaccurate. Among others, the targets, expectations and trends set as part of the Group’s transformation programme assume that the Group will be successful in implementing its business model and strategy, in executing its transformation programme and reducing the complexity of its business and infrastructure at the same time that it will be implementing significant structural changes to comply with the regulatory environment and that it will implement and maintain a robust control environment and effective culture, including with respect to risk management.
The Group may not be able to successfully implement any part of its transformation programme or reach any of its related targets or expectations in the time frames contemplated or at all. The
Group’s transformation programme comprises a large number of concurrent actions and initiatives, any of which could fail to be implemented due to operational or execution issues.
Group over the medium term concurrent with the implementation of significant structural changes to comply with the UK ringfencing regime and resulting from the Group’s seeking to comply with its State Aid obligations. This restructuring period will be disruptive, will increase operational and people risks for the
In particular, there may be a need to further restructure the
Group is no longer able to rely on the passporting framework for financial services applicable in the EU. Any such additional restructuring will be likely to increase operational and people risks for the Group.
Operational risks are and will continue to be heightened as a result of the number of initiatives being concurrently implemented by the Group, including the implementation of its transformation programme, including its cost-reduction programme, the implementation of the UK ring-fencing regime compliance with its
The Group takes measures to protect itself from attacks designed to prevent the delivery of critical business processes to its customers. Despite these preventative measures, the Group’s computer systems, software, networks and mobile devices, and those of third parties on whom the Group relies, are vulnerable to cyberattacks, sabotage, unauthorised access, computer viruses, worms or other malicious code, and other events that have a security impact. Financial institutions, such as the Group, with complex legacy infrastructure may be even more susceptible to attack due to the increased number of potential entry points and weaknesses.
The Bank of England, the FCA and HM Treasury in the UK and regulators, in the US and in Europe have identified cybersecurity as a systemic risk to the financial sector and highlighted the need for financial institutions to improve resilience to cyberattacks and the Group expects greater regulatory engagement, supervision and enforcement on cybersecurity in the future. The Group continues to participate in initiatives led by the Bank of England and other regulators designed to test how major firms respond to significant cyberattacks. The outputs of this exercise and other regulatory and industry-led initiatives are being incorporated into the Group’s on-going IT priorities and improvement measures.
The Group’s business performance and financial position could be adversely affected if its capital is not managed effectively or if it is unable to meet its capital targets.
Effective management of the Group’s capital is critical to its ability to operate its businesses, comply with its regulatory obligations, pursue its strategy of returning to stand-alone strength, resume dividend payments on its ordinary shares and maintain discretionary payments. The Group is required by regulators in the UK, the EU and other jurisdictions in which it undertakes regulated activities to maintain adequate capital resources.
throughout the period until completion of its restructuring. On a fully loaded basis, the Group’s CET1 ratio was 13.4% at 31
The Group’s target capital ratio is based on its expected regulatory requirements and internal modelling, including of stress scenarios. However, the Group’s ability to achieve such targets depends on a number of factors, including the implementation of its transformation programme and any of the factors described below. A shortage of capital, which could in turn affect the Group’s capital ratio, could arise from: • a depletion of the Group’s capital resources through increased costs or liabilities (including pension, conduct and litigation costs), reduced profits or increased losses (which would in turn impact retained earnings), sustained periods of low or lower interest rates, reduced asset values resulting in write-downs or impairments or accounting charges; • an increase in the amount of capital that is required to meet the Group’s regulatory requirements, including as a result of changes to the actual level of risk faced by the Group, factors influencing the Group’s regulator’s determination of the firm-specific Pillar 2B buffer applicable to the Group
Further losses or a failure to meet profitability targets or reduce risk-weighted assets in accordance with or within the timeline contemplated by the Group’s capital plan, a depletion of its capital resources, earnings and capital volatility resulting from the implementation of IFRS 9 as of 1 January 2018, or an increase in the amount of capital it needs to hold (including as a result of the reasons described above), would adversely impact the Group’s ability to meet its capital targets or requirements and achieve its capital strategy during the restructuring period.
If the Group is determined to have a shortage of capital as a result of any of the circumstances described above, the Group may suffer a loss of confidence in the market with the result that access to liquidity and funding may become constrained or more expensive or may result in the Group being subject to regulatory interventions and sanctions. The Group’s regulators may also request that the Group carry out certain capital management actions or, in an extreme scenario, this may also trigger the implementation of its recovery plans. Such actions may, in turn, affect the Group’s product offering, capacity to continue its business operations, pay future dividends and make other distributions (including discretionary coupons on capital instruments) or pursue strategic opportunities, affecting the underlying profitability of the Group and future growth potential.
for the Group (from 1 January 2017), and is being phased in over the period to 1 January 2019. The systemic risk buffer will be applicable from 1 January 2019. The Bank of England’s Financial
FPC’s framework. In early 2019, the PRA is expected to determine which institutions the systemic risk buffer should apply to, and if so, how large the buffer should be up to a maximum of 3% of a firm’s risk-weighted assets. The systemic risk buffer will apply to ring-fenced entities only and not all entities within a banking group. The systemic risk buffer is part of the UK
framework for identifying and setting higher capital buffers for domestic systemically important banks (D-SIBs), which are groups that, upon distress or failure, could have an important impact on their domestic financial systems. This follows on the 2012 framework recommendations by the FSB that national authorities should identify D-SIBs and take measures to reduce the probability and impact of the distress or failure of D-SIBs.
PRA has also introduced the PRA buffer which is a forwardlooking requirement set annually and based on various factors including firm-specific stress test results and credible recovery and resolution planning and is to be met with CET1 capital (in addition to any CET1 Capital used to meet any Pillar 1 or Pillar 2A requirements).
CET1 capital broadly comprises retained earnings and equity instruments, including ordinary shares. As a result, the Group’s ability meet applicable CET1 capital requirements is dependent on organic generation of CET1 through sustained profitability and/or the Group’s ability to issue ordinary shares, and there is no guarantee that the Group may be able to generate CET1 capital through either of these alternatives.
The Basel Committee is currently consulting on new rules relating to the risk weighting of real estate exposures and other changes to risk-weighting calculations, including proposals to introduce floors for the calculation of risk-weighted assets, which could directly affect the calculation of capital ratios. However, given recent delays, the timing and outcome of this consultation is increasingly uncertain. In the UK, the PRA is also considering ways of reducing the sensitivity of UK mortgage risk weights to economic conditions. The Basel Committee is also consulting on a revised standardised measurement approach for operational risk. Certain EU officials have raised concerns in relation to the new proposed rules and there is therefore uncertainty as to the way in which the FSB’s proposals would be implemented in the
EU. The new approach for operational risk would replace the three existing standardised approaches for calculating operational risk, as well as the internal model-based approach.
The proposed new methodology combines a financial statementbased measure of operational risk, with an individual firm’s past operational losses. While the quantum of impact of these reforms remains uncertain owing to lack of clarity of the proposed changes and the timing of their introduction, the implementation of such initiatives may result in higher levels of risk-weighted assets and therefore higher levels of capital, and in particular
CET1 capital, required to be held by the Group, under Pillar 1 requirements. Such requirements would be separate from any further capital overlays required to be held as part of the PRA’s determination of the Group’s Pillar 2A or PRA buffer requirements with respect to such exposures.
November 2016, the European Commission published a comprehensive package of reforms including proposed amendments to CRD IV and the EU Bank Recovery and
This uncertainty is compounded by the UK’s decision to leave the
EU following the outcome of the EU Referendum which may result in further changes to the prudential and regulatory framework applicable to the Group.
If the Group is unable to raise the requisite amount of regulatory capital (including loss absorbing capital), or to otherwise meet regulatory capital and leverage requirements, it may be exposed to increased regulatory supervision or sanctions, loss of investor confidence, restrictions on distributions and it may be required to reduce further the amount of its risk-weighted assets or total assets and engage in the disposal of core and other non-core businesses, which may not occur on a timely basis or achieve prices which would otherwise be attractive to the Group.
This may also result in write-down or the conversion into equity of certain regulatory capital instruments issued by the Group or the issue of additional equity by the Group, each of which could result in the dilution of the Group’s existing shareholders. A
breach of the Group’s applicable capital or leverage requirements may also trigger the application of the Group’s recovery plan to remediate a deficient capital position.
Failure by the Group to comply with its capital requirements or to maintain sufficient distributable reserves may result in the application of restrictions on its ability to make discretionary distributions, including the payment of dividends to its ordinary shareholders and coupons on certain capital instruments.
IV Directive, as transposed in the UK, institutions that fail to meet the “combined buffer requirement” will be subject to restricted
RBSG must be cancelled in the event that RBSG has insufficient
RBSG’s distributable reserves, providing greater flexibility for potential future distributions and preference share redemptions (if any).
Failure by the Group to meet the combined buffer requirement or retain sufficient distributable reserves or distributable items as a result of reduced profitability or losses, or changes in regulation or taxes adversely impacting distributable reserves or distributable items, may therefore result in limitations on the
Group’s ability to make discretionary distributions which may negatively impact the Group’s shareholders, holders of additional tier 1 instruments, staff receiving variable compensation (such as bonuses) and other stakeholders and impact its market valuation and investors’ and analysts’ perception of its financial soundness.
The Group is subject to stress tests mandated by its regulators in the UK and in Europe which may result in additional capital requirements or management actions which, in turn, may impact the Group’s financial condition, results of operations and investor confidence or result in restrictions on distributions.
The Group is subject to annual stress tests by its regulator in the
December 2015, the Group did not meet its CET1 capital or Tier 1 leverage hurdle rates before additional tier 1 conversion. After additional tier 1 conversion, it did not meet its CET1 systemic reference point or Tier 1 leverage ratio hurdle rate. In light of the stress test results the Group agreed a revised capital plan with the PRA to improve its stress resilience in light of the various challenges and uncertainties facing both the Group and the wider economy highlighted by the concurrent stress testing process. As part of this revised capital plan, the Group intends to execute an array of capital management actions to supplement organic capital generation from its core franchises and further improve its stress resilience, including: further decreasing the cost base of the Group; further reductions in risk-weighted assets across the
Failure by the Group to meet the thresholds set as part of the stress tests carried out by its regulators in the UK and elsewhere may result in the Group’s regulators requiring the Group to generate additional capital, increased supervision and/or regulatory sanctions, restrictions on capital distributions and loss of investor confidence, which may impact the Group’s financial condition, results of operations and prospects.
IV, the BRRD introduces, among other things, a requirement for banks to maintain at all times a sufficient aggregate amount of own funds and “eligible liabilities” (that is, liabilities that can absorb loss and assist in recapitalising a firm in accordance with a predetermined resolution strategy), known as the minimum requirements for own funds and eligible liabilities (MREL), designed to ensure that the resolution of a financial institution may be carried out, without public funds being exposed to the risk of loss and in a way which ensures the continuity of critical economic functions, maintains financial stability and protects depositors.
standards and published an interim report setting out the conclusions of its review in July 2016 and its final report in
BRRD, in part in order to transpose the FSB’s final TLAC term sheet.
The UK government is required to transpose the BRRD's provisions relating to MREL into law through further secondary legislation. In November 2016, the Bank of England published its final rules setting out its approach to setting MREL for UK banks.
MREL framework in force in the EU) do not take into account the
MREL and differ in a number of respects. In addition, rules relating to a number of specific issues under the framework remain to be implemented, following the publication of further rules by the FSB, in particular rules on internal MREL
(including the Group). Under the revised timeline, G-SIBs will be expected to (i) meet the minimum requirements set out in the
(ii) meet the full MREL requirements to be phased in from 1
January 2022 (i.e. for G-SIBs two times Pillar 1 plus Pillar 2A or the higher of two times the applicable leverage ratio requirement or 6.75% of leverage exposures). MREL requirements are expected to be set on consolidated, sub-consolidated and individual bases, and are in addition to regulatory capital requirements(so that there can be no double counting of instruments qualifying for capital requirements).
(which include insured deposits, short-term debt, derivatives, structured notes and tax liabilities).
The final PRA rules set out a number of liabilities which cannot qualify as MREL and are therefore “excluded liabilities”. As a result, senior unsecured issuances by RBSG will need to be subordinated to the excluded liabilities described above. The proceeds from such issuances will be transferred downstream to material operating subsidiaries in the form of capital or another form of subordinated claim. In this way, MREL resources will be
UK by the relevant deadline will require the Group to restructure its balance sheet and issue additional capital compliant with the rules which may be costly whilst certain existing Tier 1 and Tier 2 securities and other senior instruments issued by the Group will cease to count towards the Group’s loss-absorbing capital for the purposes of meeting MREL/TLAC requirements. The Group’s resolution authority can impose an MREL requirement over and above the regulatory minima and potentially higher than the
Group’s peers, if it has concerns regarding the resolvability of the
Group. As a result, RBSG may be required to issue additional loss-absorbing instruments in the form of CET1 capital or subordinated or senior unsecured debt instruments or may result in an increased risk of a breach of the Group’s combined buffer requirement, triggering the restrictions relating to the MDA
The European Commission’s recent proposals also include a proposal seeking to harmonise the priority ranking of unsecured debt instruments under national insolvency proceedings to facilitate the implementation of MREL across Europe. This rule is currently subject to consideration and negotiation by the
European institutions but, to the extent it were to apply to the
The Group’s borrowing costs, its access to the debt capital markets and its liquidity depend significantly on its credit ratings and, to a lesser extent, on the rating of the UK
Moody’s is currently positive and is stable for S&P and Fitch.
Rating agencies regularly review the RBSG and Group entity credit ratings and their ratings of long-term debt are based on a number of factors, including the Group’s financial strength as well as factors not within the Group’s control, including political developments and conditions affecting the financial services industry generally. In particular, the rating agencies may further review the RBSG and Group entity ratings as a result of the implementation of the UK ring-fencing regime, pension and litigation/regulatory investigation risk, including potential fines relating to investigations relating to legacy conduct issues, and other macroeconomic and political developments, including in light of the outcome of the negotiations relating to the shape and timing of the UK’s exit from the EU. A challenging macroeconomic environment, reduced profitability and greater market uncertainty could negatively impact the Group’s performance and potentially lead to credit ratings downgrades which could adversely impact the Group’s ability and cost of funding. The Group’s ability to access capital markets on acceptable terms and hence its ability to raise the amount of capital and funding required to meet its regulatory requirements and targets, including those relating to loss-absorbing instruments to be issued by the Group, could be affected.
Group to replace funding lost due to the downgrade, which may include the loss of customer deposits and may limit the Group’s access to capital and money markets and trigger additional collateral or other requirements in derivatives contracts and other secured funding arrangements or the need to amend such arrangements, limit the range of counterparties willing to enter into transactions with the Group and its subsidiaries and adversely affect its competitive position, all of which could have a material adverse impact on the Group’s earnings, cash flow and financial condition.
Markets franchise, is in part dependent upon the relevant banking entities obtaining a sustainable credit rating. A failure to obtain such a rating, or any subsequent downgrades to current ratings may threaten the ability of the NatWest Markets franchise or other entities outside of the RFB, in particular with respect to their ability to meet prudential capital requirements. At 31 December 2016, a simultaneous one-notch long-term and associated shortterm downgrade in the credit ratings of RBSG and RBS plc by the three main ratings agencies would have required the Group to post estimated additional collateral of £3.3 billion, without taking account of mitigating action by management. Individual credit ratings of RBSG, RBS plc, RBS N.V, RBS International and
Ulster Bank are also important to the Group when competing in certain markets such as corporate deposits and over-the-counter derivatives.
Credit markets worldwide, including interbank markets, have experienced severe reductions in liquidity and term funding during prolonged periods in recent years. In 2016, although the
The Group relies on retail and wholesale deposits to meet a considerable portion of its funding. The level of deposits may fluctuate due to factors outside the Group’s control, such as a loss of confidence, increasing competitive pressures for retail customer deposits or the repatriation of deposits by foreign wholesale depositors, which could result in a significant outflow of deposits within a short period of time.
An inability to grow, or any material decrease in, the Group’s deposits could, particularly if accompanied by one of the other factors described above, have a material adverse impact on the
The Group is using the Bank of England’s term funding scheme which was introduced in August 2016, in order to reduce the funding costs for the Group. Such funding has a short maturity profile and hence the Group will diversify its sources of funding.
In addition, the Group is subject to certain regulatory requirements with respect to liquidity coverage, including a liquidity coverage ratio set by the PRA in the UK. This requirement is currently being phased in and is set at 90% from 1
would be calculated as the ratio of an institution's available stable funding relative to the required stable funding it needs over a one-year horizon.
UK and globally and other global risks and the Group will be increasingly impacted by developments in the UK as its operations become increasingly concentrated in the UK.
Actual or perceived difficult global economic conditions create challenging economic and market conditions and a difficult operating environment for the Group’s businesses and its customers and counterparties. As part of its revised strategy, the
Group has been refocusing its business in the UK, the ROI and
Referendum are difficult to predict, and subject to wider global macro-economic trends, but may include periods of financial market volatility and slower economic growth, in the UK in particular, but also in the ROI, Europe and the global economy, at least in the short to medium term.
India and Saudi Arabia) or increased financing needs as existing debt matures, may give rise to further instability and financial market volatility. Any of the above developments could impact the
Group directly by resulting in credit losses and indirectly by further impacting global economic growth and financial markets.
In addition, the Group is exposed to risks arising out of geopolitical events or political developments, such as trade barriers, exchange controls, sanctions and other measures taken by sovereign governments that can hinder economic or financial activity levels. Furthermore, unfavourable political, military or diplomatic events, armed conflict, pandemics and terrorist acts and threats, and the responses to them by governments, could also adversely affect economic activity and have an adverse effect upon the Group’s business, financial condition and results of operations.
Changes in interest rates or foreign exchange rates have significantly affected and will continue to affect the Group’s business and results of operations.
Some of the most significant market risks that the Group faces are interest rate and foreign exchange risks. Monetary policy has been highly accommodative in recent years, including as a result of certain policies implemented by the Bank of England and HM
Treasury such as the ‘Funding for Lending’ scheme, which have helped to support demand at a time of very pronounced fiscal tightening and balance sheet repair. In the UK, the Bank of
England lowered interest rates to 0.25% in August 2016 and there remains considerable uncertainty as to whether or when the
Bank of England and other central banks will increase interest rates. While the ECB has been conducting a quantitative easing programme since January 2015 designed to improve confidence in the Eurozone and encourage more private bank lending, there remains considerable uncertainty as to whether such measures have been or will be sufficient or successful and the extension of this programme during 2017 may put additional pressure on margins. Further decreases in interest rates by the Bank of
England or other central banks, continued sustained low or negative interest rates or any divergences in monetary policy approach between the Bank of England and other major central banks could put further pressure on the Group’s interest margins and adversely affect the Group’s profitability and prospects. A
Conversely while increases in interest rates may support Group income, sharp increases in interest rates could lead to generally weaker than expected growth, or even contracting GDP, reduced business confidence, higher levels of unemployment or underemployment, adverse changes to levels of inflation, potentially higher interest rates and falling property prices in the markets in which the Group operates. In turn, this could cause stress in the loan portfolio of the Group, particularly in relation to non-investment grade lending or real estate loans and consequently to an increase in delinquency rates and default rates among customers, leading to the possibility of the Group incurring higher impairment charges. Similar risks result from the exceptionally low level of inflation in developed economies, which in Europe particularly could deteriorate into sustained deflation if policy measures prove ineffective. Reduced monetary stimulus and the actions and commercial soundness of other financial institutions have the potential to impact market liquidity.
Such changes may result from the decisions of the Bank of
The Group’s businesses and performance are affected by financial market conditions. The performance and volatility of financial markets affect bond and equity prices and have caused, and may in the future cause, changes in the value of the Group’s investment and trading portfolios. Financial markets have recently experienced and may in the near term experience significant volatility, including as a result of concerns about the outcome of the EU Referendum, political and financial developments in the US and in Europe, including as a result of general elections, geopolitical developments and developments relating to trade agreements volatility and instability in the
Chinese and global stock markets, expectations relating to or actions taken by central banks with respect to monetary policy, and weakening fundamentals of the Chinese economy, resulting in further short-term changes in the valuation of certain of the
Group’s assets. Uncertainty about potential fines for past misconduct and concerns about the longer-term viability of business models have also weighed heavily on the valuations of some financial institutions in Europe and in the UK, including the
Any further deterioration in economic and financial market conditions or weak economic growth could require the Group to recognise further significant write-downs and realise increased impairment charges or goodwill impairments, all of which may have a material adverse effect on its financial condition, results of operations and capital ratios. As part of its transformation programme, the Group is executing the run-down or disposal of a number of businesses, assets and portfolios. In addition, the
Group may be materially different from the current or estimated fair value. As part of its ongoing derivatives operations, the Group also faces significant basis, volatility and correlation risks, the occurrence of which are also impacted by the factors noted above.
In addition, for accounting purposes, the Group carries some of its issued debt, such as debt securities, at the current market price on its balance sheet. Factors affecting the current market price for such debt, such as the credit spreads of the Group, may result in a change to the fair value of such debt, which is recognised in the income statement as a profit or loss.
The Group has exposure to many different industries, customers and counterparties, and risks arising from actual or perceived changes in credit quality and the recoverability of monies due from borrowers and other counterparties are inherent in a wide range of the Group’s businesses.
Bank ROI and Capital Resolution. If the risk profile of these loans were to increase, including as a result of a degradation of economic or market conditions, this could result in an increase in the cost of risk and the Group may be required to make additional provisions, which in turn would reduce earnings and impact the
Group’s profitability. The Group’s lending strategy or processes may also fail to identify or anticipate weaknesses or risks in a particular sector, market or borrower category, which may result in an increase in default rates, which may, in turn, impact the
Group’s profitability. Any adverse impact on the credit quality of the Group’s customers and other counterparties, coupled with a decline in collateral values, could lead to a reduction in recoverability and value of the Group’s assets and higher levels of impairment allowances, which could have an adverse effect on the Group’s operations, financial position or prospects.
Group’s core markets, in particular the UK and Ireland, as these economies have improved. However, a further deterioration in economic and market conditions or changes to legal or regulatory landscapes could worsen borrower and counterparty credit quality and also impact the Group’s ability to enforce contractual security rights. In particular, the UK’s decision to leave the EU
The Group also remains exposed to certain counterparties operating in certain industries which have been under pressure in recent years, including the oil and gas and shipping industries, and any further deterioration in the outlook the credit quality of these counterparties may require the Group to make additional provisions, which in turn would reduce earnings and impact the
Even the perceived lack of creditworthiness of, or questions about, a counterparty may lead to market-wide liquidity problems and losses for, or defaults by, the Group. This systemic risk may also adversely affect financial intermediaries, such as clearing agencies, clearing houses, banks, securities firms and exchanges with which the Group interacts on a daily basis.
The trends and risks affecting borrower and counterparty credit quality have caused, and in the future may cause, the Group to experience further and accelerated impairment charges, increased repurchase demands, higher costs, additional writedowns and losses for the Group and an inability to engage in routine funding transactions.
systems. A failure of the Group’s IT systems, including as a result of the lack of or untimely investments, could adversely affect its operations, competitive position and investor and customer confidence and expose the Group to regulatory sanctions.
The Group experienced a limited number of IT failures in 2016 affecting customers, although improvements introduced since 2012 allowed the Group to contain the impact of such failures.
The Group has made, and will continue to make, considerable investments in its IT systems to further simplify and upgrade the systems and capabilities to make them more cost-effective and improve controls and procedures, strengthen cyber security defences, enhance the digital services provided to its bank customers and improve its competitive position and address system failures which adversely affect its relationship with its customers and reputation and may lead to regulatory investigations and redress. However, the Group’s current focus on cost-saving measures as part of its transformation programme may impact the resources available to implement further improvements to the Group IT infrastructure or limit the resources available for investments in technological developments and innovations. Should such investment and rationalisation initiatives fail to achieve the expected results, or prove to be insufficient, it could have a material adverse impact on the Group’s operations, its ability to retain or grow its customer business or its competitive position and could negatively impact the Group’s financial position.
Recent regulatory changes, proposed or future developments and heightened levels of public and regulatory scrutiny in the UK,
Europe and the US have resulted in increased capital, funding and liquidity requirements, changes in the competitive landscape, changes in other regulatory requirements and increased operating costs, and have impacted, and will continue to impact, product offerings and business models.
Such changes may also result in an increased number of regulatory investigations and proceedings and have increased the risks relating to the Group’s ability to comply with the applicable body of rules and regulations in the manner and within the time frames required.
Such risks are currently exacerbated by the outcome of the EU
Referendum and the UK’s decision to leave the EU and the unprecedented degree of uncertainty as to the respective legal and regulatory frameworks in which the Group and its subsidiaries will operate when the UK is no longer a member of the EU. For example, current proposed changes to the European prudential regulatory framework for banks and investment banks may result in additional prudential or structural requirements being imposed on financial institutions based outside the EU
wishing to provide financial services within the EU (which may apply to the Group once the UK has formally exited the EU). See also “Changes to the prudential regulatory framework for banks and investment banks within the EU may require additional structural changes to the Group’s operations which may affect current restructuring plans and have a material adverse effect
Any of these developments (including failures to comply with new rules and regulations) could have a significant impact on how the
banking and PCAs; • financial market infrastructure reforms establishing new rules applying to investment services, short selling, market abuse, derivatives markets and investment funds, including the European Market Infrastructure Regulation and the
EU (whether issued by agencies in European member states or in other countries, such as the US); and
The Group is subject to pension risks and may be required to make additional contributions to cover pension funding deficits as a result of degraded economic conditions or as a result of the restructuring of its pension schemes in relation to the implementation of the UK ring-fencing regime.
In addition, as the Group expects to continue to materially reduce the scope of its operations as part of the implementation of its transformation programme and of the UK ring-fencing regime, pension liabilities will therefore increase relative to the size of the
Given economic and financial market difficulties and volatility, the low interest rate environment and the risk that such conditions may occur again over the near and medium term, some of the
The next triennial period valuation will take place in Q4 2018 and the Main Scheme pension trustee has agreed that it would not seek a new valuation prior to that date, except where a material change arises. The 2018 triennial valuation is expected to result in a significant increase in the regular annual contributions in respect of the ongoing accrual of benefits. Notwithstanding the 2016 accelerated payment and any additional contributions that may be required beforehand as a result of a material change, the
Scheme following new actuarial valuations would trigger the recognition of a significant additional liability on the Group’s balance sheet and/or an increase in any pension surplus derecognised, which in turn could have a material adverse effect on the Group’s results of operations, financial position and prospects.
The Group is developing a strategy to meet these requirements, which has been discussed with the PRA and is likely to require the agreement of the pension scheme trustee. Discussions with the pension scheme trustee are ongoing and will be influenced by the Group’s overall ring-fence strategy and its pension funding and investment strategies.
Pension risk and changes to the Group’s funding of its pension schemes may have a significant impact on the
The Group’s capital position is influenced by pension risk in several respects: Pillar 1 capital is impacted by the requirement that net pension assets are to be deduced from capital and that actuarial gains/losses impact reserves and, by extension, CET1 capital; Pillar 2A requirements result in the Group being required to carry a capital add-on to absorb stress on the pension fund and finally the risk of additional contributions to the Group’s pension fund is taken into account in the Group’s capital framework plan.
Group’s regulators resulting in increased regulatory capital requirements could have a material adverse effect on the
Group’s risk exposure or the risk profile of the Group’s financial instruments or result in the Group being required to hold additional capital as a function of the PRA buffer. The Group also uses valuation models that rely on market data inputs. If incorrect market data is input into a valuation model, it may result in incorrect valuations or valuations different to those which were predicted and used by the Group in its forecasts or decision making. Internal stress test models may also rely on different, less severe, assumptions or take into account different data points than those defined by the Group’s regulators.
The Group could face adverse consequences as a result of decisions which may lead to actions by management based on models that are poorly developed, implemented or used, or as a result of the modelled outcome being misunderstood or such information being used for purposes for which it was not designed. Risks arising from the use of models could have a material adverse effect on the Group’s business, financial condition and/or results of operations, minimum capital requirements and reputation.
The reported results of the Group are sensitive to the accounting policies, assumptions and estimates that underlie the preparation of its financial statements. Its results in future periods may be affected by changes to applicable accounting rules and standards.
Due to the inherent uncertainty in making estimates, results reported in future periods may reflect amounts which differ from those estimates. Estimates, judgements and assumptions take into account historical experience and other factors, including market practice and expectations of future events that are believed to be reasonable under the circumstances.
Board (the IASB) but which have not yet been adopted by the
Group are discussed in “Accounting developments” on pages 310 to 315. Changes in accounting standards or guidance by internal accounting bodies or in the timing of their implementation, whether mandatory or as a result of recommended disclosure relating to the future implementation of such standards could result in the Group having to recognise additional liabilities on its balance sheet, or in further write-downs or impairments and could also significantly impact the financial results, condition and prospects of the Group.
The valuation of financial instruments, including derivatives, measured at fair value can be subjective, in particular where models are used which include unobservable inputs. Generally, to establish the fair value of these instruments, the Group relies on quoted market prices or, where the market for a financial instrument is not sufficiently active, internal valuation models that utilise observable market data. In certain circumstances, the data for individual financial instruments or classes of financial instruments utilised by such valuation models may not be available or may become unavailable due to prevailing market conditions. In such circumstances, the Group’s internal valuation models require the Group to make assumptions, judgements and estimates to establish fair value, which are complex and often relate to matters that are inherently uncertain. Resulting changes in the fair values of the financial instruments has had and could continue to have a material adverse effect on the Group’s earnings, financial condition and capital position.
expectations of the Group’s conduct, performance and business profile, is inherent in the Group’s business.
Brand damage can be detrimental to the business of the Group in a number of ways, including its ability to build or sustain business relationships with customers, low staff morale, regulatory censure or reduced access to, or an increase in the cost of, funding. In particular, negative public opinion resulting from the actual or perceived manner in which the Group conducts its business activities and operations, including as a result of speculative or inaccurate media coverage, the Group’s financial performance, ongoing investigations and proceedings and the settlement of any such investigations and proceedings, IT failures or cyberattacks resulting in the loss or publication of confidential customer data or other sensitive information, the level of direct and indirect government support, or the actual or perceived strength or practices in the banking and financial industry may adversely affect the Group’s ability to keep and attract customers and, in particular, corporate and retail depositors.
In recent years, a number of multinational financial institutions, including the Group, have suffered material losses due to the actions of employees, including, for example, in connection with the foreign exchange and LIBOR investigations and the Group may not succeed in protecting itself from such conduct in the future. It is not always possible to deter employee misconduct and the precautions the Group takes to prevent and detect this activity may not always be effective.
Group’s exposure to uncertainty and the consequent adverse effect on profitability or financial condition arising from different sources of uncertainty and risks as described throughout these risk factors.
Group’s reputation or its relationship with its customers, shareholders or other stakeholders, which in turn could have a significant effect on the Group’s business prospects, financial condition and/or results of operations.
Risk management is also strongly related to the use and effectiveness of internal stress tests and models. See “The Group relies on valuation, capital and stress test models to conduct its business, assess its risk exposure and anticipate capital and funding requirements. Failure of these models to provide accurate results or accurately reflect changes in the micro-and macroeconomic environment in which the Group operates or findings of deficiencies by the Group’s regulators resulting in increased regulatory capital requirements could have a material adverse effect on the Group’s business, capital and results.”
Group is currently seeking to embed a strong risk culture within the organisation based on a robust risk appetite and governance framework. A key component of this approach is the three lines of defence model designed to identify, manage and mitigate risk across all levels of the organisation. This framework has been implemented and improvements continue and will continue to be made to clarify and improve the three lines of defence and internal risk responsibilities and resources, including in response to feedback from regulators. Notwithstanding the Group’s efforts, changing an organisation’s risk culture requires significant time, investment and leadership, and such efforts may not insulate the
The Group’s business and results of operations may be adversely affected by increasing competitive pressures and technology disruption in the markets in which it operates.
Competition and Markets Authority (CMA) designed to support the objectives of this initiative.
Group’s ability to develop such services has become increasingly important to retaining and growing the Group’s customer business in the UK.
Group’s competitors may be better able to attract and retain customers and key employees and may have access to lower cost funding and/or be able to attract deposits on more favourable terms than the Group. Although the Group invests in new technologies and participates in industry and research led initiatives aimed at developing new technologies, such investments may be insufficient, especially against a backdrop of cost savings targets for the Group, or the Group may fail to identify future opportunities or derive benefits from disruptive technologies. If the Group is unable to offer competitive, attractive and innovative products that are also profitable, it will lose market share, incur losses on some or all of its activities and lose opportunities for growth.
The competitive landscape for banks and other financial institutions in the UK, the rest of Europe and the US is changing rapidly. Recent regulatory and legal changes have and may continue to result in new market participants and changed competitive dynamics in certain key areas, such as in retail and
SME banking in the UK where the introduction of new entrants is being actively encouraged by the UK Government. The competitive landscape in the UK is also likely to be affected by the UK Government’s implementation of the UK ring-fencing regime and other customer protection measures introduced by the Banking Reform Act 2013. The implementation of these reforms may result in the consolidation of newly separated businesses or assets of certain financial institutions with those of other parties to realise new synergies or protect their competitive position and is likely to increase competitive pressures on the
Market Investigation report sets out measures primarily intended to make it easier for consumers and businesses to compare PCA
The impact of any such developments in the UK will become more significant as the Group’s business becomes increasingly concentrated in the UK retail sector. These and other changes to the competitive framework in which the Group operates could have a material adverse effect on the Group’s business, margins, profitability, financial condition and prospects.
Any offers or sale, or expectations relating to the timing thereof, of a substantial number of ordinary shares by HM Treasury, could negatively affect prevailing market prices for the outstanding ordinary shares of RBSG and other securities issued by the
Group and lead to a period of increased price volatility for the
In addition, UKFI manages HM Treasury’s shareholder relationship with the Group and, although HM Treasury has indicated that it intends to respect the commercial decisions of the Group and that the Group will continue to have its own independent board of directors and management team determining its own strategy, its position as a majority shareholder (and UKFI’s position as manager of this shareholding) means that HM Treasury or UKFI might be able to exercise a significant degree of influence over, among other things, the election of directors and appointment of senior management, the Group’s capital strategy, dividend policy, remuneration policy or the conduct of the Group’s operations.
Failure by the Group to do so on commercially favourable terms could have a material adverse effect on the Group’s operations, operating results, financial position and reputation.
The Group’s ability to dispose of the remaining businesses, portfolios and assets forming part of the businesses and activities being exited by the Group and the price achieved for such disposals will be dependent on prevailing economic and market conditions, which remain volatile.
The fair value of these CDSs, as well as the Group’s exposure to the risk of default by the underlying counterparties, depends on the valuation and the perceived credit risk of the instrument against which protection has been bought. Many market counterparties have been adversely affected by their exposure to residential mortgage-linked and corporate credit products, whether synthetic or otherwise, and their actual and perceived creditworthiness may deteriorate rapidly. If the financial condition of these counterparties or their actual or perceived creditworthiness deteriorates, the Group may record further credit valuation adjustments on the credit protection bought from these counterparties under the CDSs. The Group also recognises any fluctuations in the fair value of other credit derivatives.
The Group and its subsidiaries are subject to a new and evolving framework on recovery and resolution, the impact of which remains uncertain, and which may result in additional compliance challenges and costs.
Implementation of certain provisions of the BRRD remains subject to secondary rulemaking as well as a review by the
European Parliament and the European Commission of certain topics mandated by the BRRD. In November 2016, as a result of this review, the European Commission published a package of proposals seeking to introduce certain amendments to CRD IV
Referendum, there remains uncertainty as to the rules which may apply to the Group going forward. In addition, banks headquartered in countries which are members of the Eurozone are now subject to the European banking union framework. In
Single Supervisory Mechanism (SSM). As a result of the above, there remains uncertainty as to how the relevant resolution regimes in force in the UK, the Eurozone and other jurisdictions, would interact in the event of a resolution of the Group.
The application of such rules to the Group may require the Group to restructure certain of its activities or reorganise the legal structure of its operations, may limit the Group’s ability to outsource certain functions and/or may result in increased costs resulting from the requirement to ensure the financial and operational resilience and independent governance of such critical services.
The Group may become subject to the application of stabilisation or resolution powers in certain significant stress situations, which may result in various actions being taken in relation to the Group and any securities of the
Group, including the write-off, write-down or conversion of the Group’s securities.
These powers enable the relevant UK resolution authority to implement resolution measures with respect to a UK bank or investment firm and certain of its affiliates (including, for example,
modify or cancel contractual arrangements to which an entity in resolution is party, in certain circumstances; (ii) suspend or override the enforcement provisions or termination rights that might be invoked by counterparties facing an entity in resolution, as a result of the exercise of the resolution powers; and (iii)
resolution authority: (i) is satisfied that a UK bank or investment firm is failing, or is likely to fail; (ii) determines that it is not reasonably likely that (ignoring the stabilisation powers) action will be taken by or in respect of a UK bank or investment firm that will result in condition (i) above ceasing to be met; (iii) considers the exercise of the stabilisation powers to be necessary, having regard to certain public interest considerations (such as the stability of the UK financial system, public confidence in the UK
banking system and the protection of depositors, being some of the special resolution objectives) and (iv) considers that the special resolution objectives would not be met to the same extent by the winding-up of the UK bank or investment firm.
(such as RBSG), the relevant UK resolution authority has to be satisfied that (A) the conditions set out in (i) to (iv) above are met in respect of a UK bank or investment firm in the same banking group (or, in respect of an EEA or third country credit institution or investment firm in the same banking group, the relevant EEA
or third country resolution authority is satisfied that the conditions for resolution applicable in its jurisdiction are met) and (B) certain criteria are met, such as the exercise of the powers in relation to such UK banking group company being necessary having regard to public interest considerations. The use of different stabilisation powers is also subject to further “specific conditions” that vary according to the relevant stabilisation power being used.
powers in the UK to a large financial institution, such as RBSG, to date, which could provide an indication of the relevant UK
resolution authority’s approach to the exercise of the resolution powers, and even if such examples existed, they may not be indicative of how such powers would be applied to RBSG.
Group may not be able to anticipate a potential exercise of any such powers.
The UK bail-in tool is one of the powers available to the UK
(including altering the maturity (if any) and/or the amount of interest payable and/or imposing a temporary suspension on payments) and discontinue the listing and admission to trading of financial instruments. The exercise of the bail-in tool will be determined by the Bank of England which will have discretion to determine whether the institution has reached a point of nonviability or whether the conditions for resolution are met, by application of the relevant provisions of the Banking Act, and involves decisions being taken by the PRA and the Bank of
If these powers were to be exercised (or there is an increased risk of exercise) in respect of the Group or any entity within the
Group such exercise could result in a material adverse effect on the rights or interests of shareholders which would likely be extinguished or very heavily diluted. Holders of debt securities
(which may include holders of senior unsecured debt), would see the conversion of part (or all) of their claims into equity or written down in part or written off entirely. In accordance with the rules of the Special Resolution Regime, the losses imposed on holders of equity and debt instruments through the exercise of bail-in powers would be subject to the “no creditor worse off” safeguard, which requires losses not to exceed those which would be realised in insolvency.
Group’s securities, changes to the scope of, or conditions for the exercise of the UK bail-in power may be introduced as a result of further political or regulatory developments. In addition, further political, legal or strategic developments may lead to structural changes to the Group, including at the holding company level.
Notwithstanding any such changes, the Group expects that its securities would remain subject to the exercise of a form of bail-in power, either pursuant to the provisions of the Banking Act, the
FSCS funds compensation for customers by raising levies on the industry, including the Group. In relation to protected deposits, each deposit-taking institution contributes towards these levies in proportion to their share of total protected deposits.
Acquired goodwill is recognised initially at cost and subsequently at cost less any accumulated impairment losses. As required by
IFRS Standards, the Group tests goodwill for impairment annually, or more frequently when events or circumstances indicate that it might be impaired. An impairment test involves comparing the recoverable amount (the higher of the value in use and fair value less cost to sell) of an individual cash generating unit with its carrying value.
At 31 December 2016, the Group carried goodwill of £5.6 billion on its balance sheet. The value in use and fair value of the
Group and may impact the recoverability of certain deferred tax assets recognised by the Group.
In accordance with IFRS Standards, the Group has recognised deferred tax assets on losses available to relieve future profits from tax only to the extent it is probable that they will be recovered. The deferred tax assets are quantified on the basis of current tax legislation and accounting standards and are subject to change in respect of the future rates of tax or the rules for computing taxable profits and offsetting allowable losses.
Shareholder centre section of our website, www.rbs.com. You will need the shareholder reference number printed on your share certificate or tax voucher to gain access to this information.
Litigation Reform Act of 1995, such as statements that include the words ‘expect’, ‘estimate’, ‘project’, ‘anticipate’, ‘commit’, ‘believe’,
In particular, this document includes forward-looking statements relating, but not limited to: future profitability and performance, including financial performance targets such as return on tangible equity; cost savings and targets, including cost:income ratios; litigation and government and regulatory investigations, including the timing and financial and other impacts thereof; structural reform and the implementation of the UK ring-fencing regime; the implementation of RBS’s transformation programme, including the further restructuring of the NatWest Markets business; the satisfaction of the Group’s residual EU State Aid obligations; the continuation of
Pillar 2 and other regulatory buffer requirements, minimum requirement for own funds and eligible liabilities, and other funding plans; funding and credit risk profile; capitalisation; portfolios; net interest margin; customer loan and income growth; the level and extent of future impairments and write-downs, including with respect to goodwill; restructuring and remediation costs and charges; future pension contributions; RBS’s exposure to political risks, operational risk, conduct risk, cyber and IT risk and credit rating risk and to various types of market risks, including as interest rate risk, foreign exchange rate risk and commodity and equity price risk; customer experience including our Net Promotor Score (NPS); employee engagement and gender balance in leadership positions.
These statements are based on current plans, estimates, targets and projections, and are subject to significant inherent risks, uncertainties and other factors, both external and relating to the Group’s strategy or operations, which may result in the Group being unable to achieve the current targets, predictions, expectations and other anticipated outcomes expressed or implied by such forwardlooking statements. In addition certain of these disclosures are dependent on choices relying on key model characteristics and assumptions and are subject to various limitations, including assumptions and estimates made by management. By their nature, certain of these disclosures are only estimates and, as a result, actual future gains and losses could differ materially from those that have been estimated. Accordingly, undue reliance should not be placed on these statements. Forward-looking statements speak only as of the date we make them and we expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forwardlooking statements contained herein to reflect any change in the Group’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
We caution you that a large number of important factors could adversely affect our results or our ability to implement our strategy, cause us to fail to meet our targets, predictions, expectations and other anticipated outcomes or affect the accuracy of forward-looking statements we describe in this document including in the risk factors set out in the Group’s 2016 Annual Report and other uncertainties discussed in this document. These include the significant risks for RBS presented by the outcomes of the legal, regulatory and governmental actions and investigations that RBS is or may be subject to (including active civil and criminal investigations) and any resulting material adverse effect on RBS of unfavourable outcomes and the timing thereof (including where resolved by settlement); economic, regulatory and political risks, including as may result from the uncertainty arising from the EU Referendum; RBS’s ability to satisfy its residual EU State Aid obligations and the timing thereof; RBS’s ability to successfully implement the significant and complex restructuring required to be undertaken in order to implement the UK ring-fencing regime and related costs; RBS’s ability to successfully implement the various initiatives that are comprised in its transformation programme, particularly the proposed further restructuring of the NatWest Markets business, the balance sheet reduction programme and its significant cost-saving initiatives and whether RBS will be a viable, competitive, customer focused and profitable bank especially after its restructuring and the implementation of the UK ringfencing regime; the exposure of RBS to cyber-attacks and its ability to defend against such attacks; RBS’s ability to achieve its capital and leverage requirements or targets which will depend in part on RBS’s success in reducing the size of its business and future profitability as well as developments which may impact its CET1 capital including additional litigation or conduct costs, additional pension contributions, further impairments or accounting changes; ineffective management of capital or changes to regulatory requirements relating to capital adequacy and liquidity or failure to pass mandatory stress tests; RBS’s ability to access sufficient sources of capital, liquidity and funding when required; changes in the credit ratings of RBS, RBS entities or the UK government; declining revenues resulting from lower customer retention and revenue generation in light of RBS’s strategic refocus on the UK; as well as increasing competition from new incumbents and disruptive technologies.
In addition, there are other risks and uncertainties that could adversely affect our results, ability to implement our strategy, cause us to fail to meet our targets or the accuracy of forward-looking statements in this document. These include operational risks that are inherent to RBS’s business and will increase as a result of RBS’s significant restructuring initiatives being concurrently implemented; the potential negative impact on RBS’s business of global economic and financial market conditions and other global risks; the impact of a prolonged period of low interest rates or unanticipated turbulence in interest rates, yield curves, foreign currency exchange rates, credit spreads, bond prices, commodity prices, equity prices; basis, volatility and correlation risks; the extent of future write-downs and impairment charges caused by depressed asset valuations; deteriorations in borrower and counterparty credit quality; heightened regulatory and governmental scrutiny and the increasingly regulated environment in which RBS operates as well as divergences in regulatory requirements in the jurisdictions in which RBS operates; the risks relating to RBS’s IT systems or a failure to protect itself and its customers against cyber threats, reputational risks; risks relating to increased pension liabilities and the impact of pension risk on
RBS’s capital position; risks relating to the failure to embed and maintain a robust conduct and risk culture across the organisation or if its risk management framework is ineffective; RBS’s ability to attract and retain qualified personnel; limitations on, or additional requirements imposed on, RBS’s activities as a result of HM Treasury’s investment in RBS; the value and effectiveness of any credit protection purchased by RBS; risks relating to the reliance on valuation, capital and stress test models and any inaccuracies resulting therefrom or failure to accurately reflect changes in the micro and macroeconomic environment in which RBS operates, risks relating to changes in applicable accounting policies or rules which may impact the preparation of RBS’s financial statements or adversely impact its capital position; the impact of the recovery and resolution framework and other prudential rules to which RBS is subject; the recoverability of deferred tax assets by the Group; and the success of RBS in managing the risks involved in the foregoing.
‘euro’, and the abbreviations ‘€m’ and ‘€bn’ represent millions and thousands of millions of euros, respectively.
Asset-backed securities (ABS) - securities that represent interests in specific portfolios of assets. They are issued by a structured entity following a securitisation. The underlying portfolios commonly comprise residential or commercial mortgages but can include any class of asset that yields predictable cash flows. Payments on the securities depend primarily on the cash flows generated by the assets in the underlying pool and other rights designed to assure timely payment, such as guarantees or other credit enhancements.
CP), often issued through a commercial paper conduit, to fund working capital. Maturities typically range from two to 270 days.
The EBA’s technical standards are still to be finalised through adoption by the European Commission and implemented within the UK.
Credit valuation adjustment (CVA) - the CVA is the difference between the risk-free value of a portfolio of trades and its market value, taking into account the counterparty’s risk of default. It represents the market value of counterparty credit risk, or an estimate of the adjustment to fair value that a market participant would make to reflect the creditworthiness of its counterparty.
generally is the weighted average of credit losses; for collectively assessed portfolios it is the product of the exposure, probability of default at the reporting date and the lifetime loss given default. At initial recognition of a financial asset, an allowance is made for the 12 month expected credit loss, using the probability of default in the first 12 months only. On a significant increase in credit risk, the expected credit loss is increased to the lifetime probability of default. ECL is applied to exposures to all financial assets and contractual facilities whose performance is not recognised at fair value in the income statement.
Exposure - a claim, contingent claim or position which carries a risk of financial loss.
Exposure at default (EAD) - an estimate of the extent to which the bank will be exposed under a specific facility, in the event of the default of a counterparty.
(b) for impaired available-for-sale financial assets, the cumulative loss that had been recognised directly in equity is removed from equity and recognised in profit or loss as an impairment loss.
Individually assessed loan impairment provisions - impairment loss provisions for individually significant impaired loans assessed on a case-by-case basis, taking into account the financial condition of the counterparty and any guarantor and the realisable value of any collateral held.
Internal Capital Adequacy Assessment Process (ICAAP) - RBS’s own assessment, as part of Basel III requirements, of its risks, how it intends to mitigate those risks and how much current and future capital is necessary having considered other mitigating factors.
Internal funding of trading business - the internal funding of the trading book comprises net banking book financial liabilities that fund financial assets in RBS’s trading portfolios. Interest payable on these financial liabilities is charged to the trading book.
International Accounting Standards Board (IASB) - the independent standard-setting body of the IFRS Foundation. Its members are responsible for the development and publication of
International Financial Reporting Standards (IFRSs) and for approving Interpretations of IFRS as developed by the IFRS
Process with the PRA, that involves a comprehensive review of the RBS ILAAP, liquidity policies and risk management framework.
(MREL) – Tier 1 and Tier 2 capital plus specific loss absorbing instruments, including senior notes, that may be used to cover certain gone concern requirements in the EU.
probability of default and have been assigned an AQ10 internal credit grade.
Over-the-counter (OTC) derivatives - derivatives with tailored terms and conditions negotiated bilaterally, in contrast to exchange traded derivatives that have standardised terms and conditions.
Pillar 1 requirements, is the minimum level of regulatory capital a bank should maintain at all times to cover adequately the risks to which it is or might be exposed, and to comply with the overall financial adequacy rules. Pillar 2B is a capital buffer which helps to ensure that a bank can continue to meet minimum requirements during a stressed period, and is determined by the
Pillar 3 - the part of CRD IV that sets out the information banks must disclose about their risks, the amount of capital required to absorb them, and their approach to risk management. The aim is to strengthen market discipline.
US Alt-A RMBS, together with RMBS in jurisdictions other than the US where the underlying mortgages are not classified as either prime or sub-prime. Classification of RMBS as subprime or
Alt-A is based on Fair Isaac Corporation (FICO) scores, level of documentation and loan-to-value ratios of the underlying mortgage loans. US RMBS are classified as sub-prime if the mortgage portfolio comprises loans with FICO scores between 500 and 650 with full or limited documentation. Mortgages in Alt-
Risk elements in lending (REIL) - impaired loans and accruing loans which are contractually overdue 90 days or more as to principal or interest.