In an ever-changing world it has never been more important to stand for something. Our Purpose is our North Star – it is the cornerstone of everything we do. It recognises that our business is made up of a network of relationships with multiple stakeholders with different interests. We know relationships run deeper than transactions and that we need to consider the interests of all our stakeholders. In 2020, Our Purpose could be seen in action, as we stepped up quickly to put in place extraordinary measures to support our customers, colleagues and communities through the COVID-19 pandemic.
The strength of our culture underpins everything we do. We deliver on our promises and live by our values as one bank; serving customers, working together, doing the right thing and thinking long-term.
Sustainable returns In March 2020, following a formal request from the Prudential Regulation Authority (PRA), and in line with all our UK peers, the Board undertook not to make any dividend payments in 2020. We also undertook not to set out any distribution plans or to take part in a share buyback during the course of the year. We understand the actions taken by the regulator given the exceptional circumstances. However, these restrictions were clearly a disappointment for many shareholders and impacted the investability and share price performance of all UK banks.
Our intention remains to return capital to shareholders or pursue other options that create value and we have now set out a clear guidepath to reach our target CET1 ratio of 13 to 14% by 2023.
Against this extraordinary backdrop, we provided exceptional levels of support to the customers, colleagues and communities we serve whilst making strong progress against our strategic priorities and protecting the business in the face of significant and ongoing uncertainty.
Financial performance Despite reporting a loss for the year, NatWest Group delivered a resilient underlying performance through the strength of our core franchises and brands in a challenging operating environment.
We continue to create opportunities for new talent from a range of backgrounds to join our organisation, including through our Social Mobility Apprenticeship Programme – one of the first of its kind in the UK – as well as providing existing colleagues with easy access to the very best learning through the NatWest Group Learning Academy.
development of customer propositions such as Mettle. We have also partnered with Pollinate to produce the award-winning Tyl. And we established a new relationship with BlackRock to support our investment management processing activity.
We will use new technology and digital expertise to deliver an excellent customer experience by harnessing our internal knowledge and experience of partnering with leading external organisations around the world.
(2) Comprises customer loans in our UK and RBS International retail and commercial businesses, excluding UK Government financial support schemes.
Payit We launched Payit our new payment platform in June 2020, which uses the UK’s Open Banking infrastructure to enable online payments direct from consumer bank accounts in close to real time.
Simple to deal with New technologies present opportunities to provide a more personalised experience to our customers. Through the re-engineering of our processes and changes to our organisation, we will focus on building capabilities once and reusing those capabilities across the entire bank. This will result in simpler customer journeys, such as the development of a best-in-class account opening process, allowing us to stand out in a competitive market.
Powered by innovation and partnerships By making it quick and easy for companies to engage with us and by allocating investment efficiently, we can form partnerships and advance the innovations most relevant to our customers.
Supporting customers at every stage of their lives Using data, we will align ourselves to our customers to better understand their behaviour, ensuring we can adapt quickly to meet their needs. This includes expanding our digital service, to become the most accessible bank. We want our customers to be able to bank with us anytime, anywhere.
Leading learning organisation; enhancing the financial capability of the UK and Ireland and the skills of colleagues
The past year has shown NatWest Group at its best as we responded to the challenges of COVID-19.
£10m raised as we matched customer donations to the National Emergencies Trust (NET).
Customers’ needs and behaviours are changing as a result of new technologies, demographic shifts and changing labour patterns. The impact of COVID-19 accelerated trends toward digital technology, changed ways of working, shopping, socialising and communication and how people use the physical spaces. We understand the importance of supporting customers' needs, being simple to deal with and supporting customers at every stage of their lives to tailor banking services and products that meet their evolving needs and expectations.
We anticipate RWA inflation from Basel 3 amendments to be less than 5% of RWAs as at 31 December 2020 and currently expect implementation in 2023. The details of Basel 3 amendments remain subject to regulatory uncertainty on both quantum and timing.
We earn income from interest charged on lending to our customers and fees from transactions and other services. We pay interest to customers who place deposits with us and to investors who buy our debt securities. We also make reward payments on products like our Reward bank accounts and credit cards. The attributable profit generated is either returned to shareholders or retained and reinvested into new and improved products and services for our customers.
Progress continues on our inclusion agenda to value diversity in all its forms and to be gender balanced, ethnically diverse, disability smart and LGBT+ innovative.
Throughout the COVID-19 crisis we supported our customers by approving £13.8 billion in UK Government scheme lending, without the requirement for personal guarantees from the outset, providing payment holiday on over 74,000 customer accounts and extending our existing Growth Fund Package by £5 billion. We launched a £1 million Coronavirus Response Fund and donated £5 million to the Prince’s Trust fund for supporting young entrepreneurs across the UK affected by the crisis.
Challenging operating conditions, the low interest rate environment and subdued business activity due to COVID-19 resulted in a £399 million operating loss, including impairment losses of £1,927 million and £37 million fair value and disposal losses. Net loans to customers were £7.0 billion, or 6.9%, higher than 2019 as £12.6 billion UK Government scheme drawdowns were partially offset by increased loan provisions and lower specialised business lending.
Our relationship-led and digitally enabled strategy has ensured ongoing support to our clients through the COVID-19 crisis. We have led with purpose, improving client satisfaction scores to new highs, increasing client engagement and progressing on our climate commitments. Our newly formed relationship with BlackRock will support our investment management processing activity and enable savings to be passed on directly to our clients.
(1) Private Banking manages assets under management portfolios on behalf of Retail Banking and RBSI and receives a management fee in respect of providing this service
NatWest Group has committed to £3 billion of new funding to the housing association sector by the end of 2022 to increase the provision of social housing, as well as to improve existing properties, ensuring that more people and families can have a sanctuary they can call home.
Further information: • Our Colleagues, pages 57-61. • Colleague Advisory Panel, page 49. • Supporting our customers, colleagues and communities, page 22.
At Board meetings the CAP Chair provided an update on issues discussed at the CAP, and raised specific questions for Board feedback. Afterwards, the CAP Chair shared the Board's views and feedback with CAP members. The diagram above illustrates the CAP feedback loop in action, on the topic of COVID-19 colleague support.
July 16th – virtual shareholder event 31st – H1 results announced; investor presentation + Q&A
A second event held in September 2020 hosted by the Chairman covered our half-year financial results. We plan to hold further similar events in 2021.
The Board also reviewed in detail the proposed communications plan and the approach to engaging with key stakeholders as well as our regulators, the media and politicians. Acknowledging that there was likely to be some potential adverse reaction, particularly from those with a strong affinity to RBS and Royal Bank of Scotland, the Board noted that the communications plan had been developed to help to mitigate this reaction and manage the interests and sensitivities for colleagues, media, politicians, customers and investors.
The Board wholeheartedly endorsed the work of the Taskforce and confirmed its support for the 10 Commitments including the introduction of a new target to have 3% of Black colleagues in senior UK roles by 2025. A subsequent update to the Board was provided on the publication of the Taskforce’s report “Banking on Racial Equality; A Roadmap for Positive Change” including the key insights from the report.
Each brand takes a clear and differentiated position to help us strengthen our relationship with our customers. For this reason, we measure customer advocacy by brand. The tables on the following pages show NPS and Trust scores for our key brands.
Listening to our customers We respond to the needs of our customers by acting on the feedback we receive from them. We have in place a framework of customer feedback surveys that measure satisfaction with the services and products we offer across our franchises. We also look beyond our existing offering by engaging in continuous research to identify new opportunities for us to address the evolving needs of our customers. Insights from these surveys and research are reported at the most senior levels of the bank and play a crucial role in shaping the development of our strategy, services and products.
Source: Strategic NPS. Question: “For NatWest's Current Account / Savings Account, how likely are you to recommend the experience of applying for & setting up the account?”. Latest base size: 1,014.
In addition to supporting colleagues, running events, informing and educating, the combined expertise from the ELNs contributes to the development of inclusive products and services for customers and to the NatWest Group’s learning resources.
• We have been rated in the top organisations in Bloomberg's Global Gender Equality Index, retained our position in The Times Top 50 Employers for Women and continued to report our progress to HMT Women in Finance Charter and the Hampton-Alexander Review.
• In 2020 we supported our People Pledge by establishing a programme of Inclusion Champions. With over 1,100 members, the champions form a global network of positive disrupters, who educate colleagues on Inclusion, and will work together to drive change on topics like ethnicity, LGBT+, gender balance, disability awareness and inclusivity.
Management of these risks – detailed in the Risk and Capital Management section of the 2020 Annual Report and Accounts on pages 157 to 164 – is overseen by the Group’s independent Risk function. While all colleagues share ownership of risk management, the three lines of defence model is used to define responsibilities and accountabilities. This ensures that risks are properly identified, measured, monitored, controlled and reported.
Though the impact of the pandemic was a priority for the Group’s risk management activity, the uncertainties relating to the UK’s withdrawal from the European Union also continued to be a focus. Outcomes remain difficult to predict but oversight of planning for the economic, regulatory and legislative impacts remained a critical part of forward-looking risk management throughout the year. While the longer-term effects on the operating environment remain unpredictable, the potential second and third order effects on the Group and its customers continue to be an area of focus. This includes planning for the results of periodic financial volatility and slower economic growth.
Cyber security remained a consistent focus through the year – particularly given the importance of technological solutions to addressing customer needs during the pandemic. The Group continues to operate a multi-layered defence approach and continues to invest in control enhancements to ensure it minimises cyber-related risks.
Litigation and conduct Litigation and conduct costs of £113 million represent £473 million of additional charges, mainly representing the increased cost of review and execution of Other Customer Redress as well as Litigation provisions, offset by various releases as programmes conclude, including a £277 million PPI release.
Our stakeholders • Stakeholder engagement • Section 172(1) statement • Our Customers • Our Colleagues
Planning has also taken into account a range of correlated risks in order to ensure that the Group’s strategy and forecasts remain appropriate for the evolving environment. There has been considerable management focus on the potential crystallisation of a severe but plausible combination of significant risks.
The Group has been heavily focused on supporting people, families and businesses through the pandemic – either by providing repayment holidays, facilitating lending under the government-backed schemes or even delivering cash to the homes of vulnerable customers. As well as the higher credit risk profile (discussed in the Risk and Capital Management section of the 2020 Annual Report and Accounts) there was also awareness of the potential increase in conduct risk due to the need for different ways of working and for processes to be developed at pace. The Group maintains a strong and purposeful conduct culture, with a significant emphasis on key tools – such as the Yes check – as well as mandatory training. In Q3 2020 an internal survey based on responses from nearly 50,000 colleagues showed positive and improving results for culture, engagement and leadership.
• Purchasing Renewable Energy Certificates (RECs) for our landlord-supplied properties in India, Europe and the UK, where we are currently unable to specify a requirement for renewable electricity.
Scenario analysis allows us to test a range of possible future climate pathways and understand the nature and magnitude of the risks they present. The purpose of scenario analysis is not to forecast the future but to understand and prepare to manage risks that could arise.
2. While climate-related risks are distributed, some sectors are particularly exposed e.g. automotive, oil and gas, mining and metals. Companies in these sectors can experience large changes in creditworthiness and valuation in scenarios with stronger climate action. NatWest Group is progressing work to assess financed emissions related to loans and investment to these sectors. In addition, we are engaging with customers as part of the on-going work on CTP and other climate ambition initiatives.
As part of its climate ambition, NatWest Group will work with customers who are particularly exposed to improve their energy efficiency.
(1) During 2020, the CSFI criteria excluded personal lending and NatWest Group own bond issuances. As a result, amounts related to these aren't included in the table above. In early 2021, the CSFI criteria has been amended to provide additional clarity on existing criteria, and also to include lending to personal customers for properties with EPC A and B ratings. The inclusion of personal customers in the CSFI criteria going forward does not impact the scope £20 billion climate and sustainable funding and financing commitment, as set in 2020.
(*) Within the scope of EY assurance. Refer to page 66.
S tra te g ic R e p o rtReducing emissions associated with our residential mortgage portfolio will be critical to meeting our climate ambitions. The analysis presented is based on residential mortgages of £174 billion at December 2019.
This results in overall weighted data quality score of 4.3. To improve the quality of data inputs for the agriculture sector in future years, we plan to collect data on production and processes from agricultural customers to better measure their carbon footprint and track progress over time.
Net interest income 7,749 8,047 8,656 8,987 8,708 Non-interest income 3,047 6,206 4,746 4,146 3,882 Total income 10,796 14,253 13,402 13,133 12,590 Operating expenses (7,905) (9,325) (9,645) (10,401) (16,194) Profit/(loss) before impairment losses 2,891 4,928 3,757 2,732 (3,604)
Cash and balances at central banks* 124,489 80,993 91,368 100,724 76,608
Notable items within total income Own credit adjustments (OCA) (24) (80) Alawwal bank merger gain in NatWest Markets — 444 FX recycling (loss)/gain in Central items & other (2) (40) 1,459 Legacy liability release in Central items & other — 256 Loss on redemption of own debt (324) — Liquidity Asset Bond sale gain/(loss) 113 (16) IFRS volatility in Central items & other (3) 83 9 Retail Banking debt sale gain 8 49 Metro Bank mortgage portfolio acquisition loss (58) — Vocalink gain on disposal — 45 Commercial Banking fair value and disposal (loss)/gain (37) (16) NatWest Markets asset disposals/strategic risk reduction (4) (83) (35) Share of losses under equity accounting for Business Growth Fund (22) —
(4) Comparisons with prior periods are impacted by the transfer of the Private Client Advice business from Retail Banking from 1 January 2020. The net impact on full year 2019 operating profit would have been to increase total income by £44 million and other expenses by £8 million. The net impact on the Q4 2019 balance sheet would have been to increase customer deposits by £0.2 billion. AUMs would have been £4.6 billion higher, with a corresponding decrease in AUAs. Variances in the commentary below have been adjusted for the impact of this transfer.
2020 compared with 2019  As at 31 December 2020, RBS International has supported 1,240 mortgage repayment breaks, reflecting a mortgage value of £268 million, and has provided financial support for 622 business customers with working capital facilities, reflecting a value of £588 million, while continuing to suspend a range of fees and charges for its personal and business customers.
Executive Officer of France Telecom. Prior to that he was Chairman of SG Warburg France and Managing Director of SG Warburg.
6 Morten Friis Appointed: 10 April 2014 Experience: Prior to being appointed to the Board, Morten had a 34 year financial services career. He held various roles at Royal Bank of Canada and its subsidiaries including Associate Director at Orion Royal Bank; Vice President, Business Banking; and Vice President, Financial Institutions. In 1997, he was appointed as Senior Vice President, Group Risk Management and served as the Chief Credit Officer, then Chief Risk Officer, from 2004 to 2014. He was also previously a Director of RBC Bank (USA); Westbury Life Insurance Company; RBC Life Insurance Company; and RBC Dexia Investor Services Trust Company.
11 Lena Wilson, CBE Appointed: 1 January 2018 Experience: Lena is an experienced CEO with an international career, who spent a significant proportion of her executive career with Scottish Enterprise, latterly as Chief Executive from 2009 until 2017. Prior to that, Lena held the role of Senior Investment Advisor to The World Bank in Washington DC. She is a visiting Professor at the University of Strathclyde and has previously served as a member of Scotland's Financial Services Advisory Board and as Chair of Scotland's Energy Jobs Taskforce. In June 2015 she received a CBE for services to economic development in Scotland. Lena chairs the Colleague Advisory Panel established by NatWest Group in 2018.
Information on how the company has applied the Principles and complied with the Provisions of the UK Corporate Governance Code 2018 (the Code) can be found in this Corporate governance report under the Code’s 5 main section headings. A formal statement of compliance with the Code can be found on page 151.
The DINEDs are independent in two respects: (i) independent of management as nonexecutives; and (ii) independent of the rest of NatWest Group by virtue of their NWH Sub Group-only directorships.
Senior Independent Director Throughout 2020, Mark Seligman, as Senior Independent Director, acted as a sounding board for the Chairman, and as an intermediary for other directors when necessary. He was also available to shareholders to discuss any concerns they may have had, as appropriate.
Implementation of the 2020 Board evaluation actions will be overseen by the Group Nominations and Governance Committee during 2021.
Members of the GAC are selected with a view to the expertise and experience of the Committee as a whole and with proper regard to the key issues and challenges facing the NatWest Group. The Board is satisfied that all GAC members have recent and relevant financial experience and are independent as defined in the SEC rules under the US Securities Exchange Act of 1934 (the ‘Exchange Act’) and related guidance. The Board has further determined that Patrick Flynn, Mark Seligman, Robert Gillespie and, during her tenure as a member of the Committee, Baroness Noakes, are all ‘financial experts’ for the purposes of compliance with the Exchange Act Rules and the requirements of the New York Stock Exchange, and that they have competence in accounting and/or auditing as required under the Disclosure Guidance and Transparency Rules.
Provisions and disclosures – The GAC debated the level and appropriateness of provisions for regulatory, litigation and conduct issues during the year and was satisfied with them. The Committee considered the various conduct provisions during the year and are satisfied that the levels are appropriate. The Committee supported the release of £277m of the provision for Payment Protection Insurance (PPI) during the year.
External audit Ernst & Young LLP (EY) has been NatWest Group’s external auditor since 2016, following a tender process carried out in 2014.
COVID-19 headwinds will dominate our operating environment for some time, and I anticipate this will impact much of BRC’s work in 2021. BRC will also continue to focus on financial crime and the delivery of regulatory programmes due in 2021 (LIBOR transition and the Resolvability Self-Assessment) and regulatory stress tests (including the biennial exploratory scenario on the financial risks from climate and the 2021 Solvency Stress Test).
BRC continued its oversight of NatWest Group’s control environment, focusing on the impact of COVID-19, major change programmes and strategic initiatives.
LIBOR Transition – BRC received reports on NatWest Group’s plans and preparedness for LIBOR transition to new risk-free rates. Consideration was given to the re-plan of LIBOR transition factoring in the impact of COVID-19, and steps being taken by management to assess and quantify potential conduct, litigation and other key risks and drive mitigating actions.
Conduct and regulatory compliance risk – BRC reviewed conduct risk profile, including impacts of the COVID-19 pandemic and activity underway to improve performance relative to risk appetite. Similarly, it reviewed the regulatory compliance risk profile, including compliance with current regulatory requirements, identification and management of regulatory breaches, and plans to achieve compliance with future regulatory requirements. In particular, BRC oversaw management’s progress in demonstrating compliance with and embedding into business as usual of UK ring-fencing rules and completion of required remediation activity.
Below are the key discussion points and outcomes from the year: COVID-19 & Customer Treatment  The Committee considered how the bank was approaching customer treatment in response to the COVID-19 pandemic.
At the start of the pandemic, Alison Rose, CEO and Howard Davies, our Chairman, felt the need to send clear leadership messages to all stakeholders in order to signify that NatWest Group was aware of the need to demonstrate responsibility, even though the magnitude of events relating to COVID-19 was unclear at the time. Accordingly, Ms Rose decided to forgo 25% of her fixed pay for the rest of the year with NatWest Group making a comparable donation to the National Emergencies Trust (NET) Coronavirus Appeal and the Chairman made a similar commitment to donate 25% of his fees for the rest of the year. Ms Rose also indicated she did not wish to receive a variable pay award for 2020. The Committee is grateful for the clear leadership given by the Chairman and CEO through these actions.
Executive directors also entitled to benefits in line with the policy, as detailed later in this report. Had Ms Rose not indicated that she would not accept an LTI award for 2020 her total compensation excluding benefits would have been £2,783,000.
The Committee undertook the pre-vest assessment at the end of 2020. It operates as a ‘look back’ to the performance year for which the award was made so we can consider whether anything has come to light since the grant that would change our original view of performance. A structured set of questions and evidence factors were used to guide discussions on whether we correctly assessed performance for 2017 and whether any further adjustment should be made prior to vesting. From the analysis, three areas were identified for further investigation covering share price, customer and risk performance.
Turning to risk, there had been no decline in performance but the expected improvement in the control environment rating had not been attained in subsequent years as the progress envisaged on Customer Due Diligence and associated matters (CDD) had not been achieved.
Performance is assessed before grant and again before vesting. Awards are adjusted for underperformance or risk failings and are released over eight years, subject to the application of malus and clawback, for a longterm view of performance.
400% of salary 250% of salary A post-employment requirement was introduced in 2020. Executive directors must hold a set number of shares for a period of two years post departure. Nominee accounts will be used to hold shares subject to restrictions.
6. Clarity Clear communications are provided on pay and performance decisions. Clear expectations are set on how colleagues are rewarded and the principles guiding decisions, including having clearly defined performance goals, regular checkins with managers and feedback.
 Wellbeing hub created to support colleagues through COVID-19.  Mandatory mental health awareness module for line managers.
Complying with the UK Corporate Governance Code (the ‘Code’) The table below supplements other information in this report in order to evidence compliance with Code requirements. The Committee continues to monitor and reflect on best practice when developing remuneration practices for NatWest Group.
Consider factors such as clarity, simplicity, risk, predictability, proportionality and alignment to culture when determining the policy
Set level of funding for standard benefits (currently £26,250) which is subject to periodic review. The total value of benefits provided is disclosed each year in the Annual report on remuneration.
Where indicated in the margins with a bracket, information is within the scope of the independent auditor’s report.
YES The share price has fallen by just under 40% since the end of 2017.
NatWest Group and NWH Group to achieve a control environment rating of 2, with NatWest Group and NWH Group change programmes managed and executed within policy and risk appetite.
Achieve or maintain a ‘systematic’ risk culture rating which reflects target risk management practices and behaviours in line with the Enterprise Wide Risk Management Framework.
(3) Willis Towers Watson’s Global Financial Services Norm. The Banking Standards Board Norm is based on the average score across all participating banks. (4) For the CFO, performance was assessed in line with the framework above and the performance of the Finance function was also taken into account.
There are no weightings set for the performance categories, however, the Committee follows a robust process to review performance against pre-set goals, measures and targets with certain ‘priority measures’ having been identified below for 2021. These priority measures will be a key focus for the Committee as it applies its judgement to the assessment of performance for the year. Full details of the targets and the assessment of performance against such targets will be set out in next year’s report. Priority measures for 2021 are highlighted in grey shading.
Above market rate lending growth across our UK and RBS International retail and commercial businesses, excluding UK
Achieve or maintain a ‘systematic’ risk culture rating, as evidenced by intelligent risk taking and leadership role modelling in line with practices and behaviours set out in the Enterprise Wide
Achieve net lending growth target for retail and commercial franchises consisting of Retail
NatWest Group and NWH Group to be 6 points above the Banking Standards Board Norm.
total remuneration 143:1 97:1 56:1 total remuneration 3,578 25 37 642018 A salary only 44:1 30:1 19:1 salary only 1,000 23 33 51 total remuneration 175:1 118:1 69:1 total remuneration 4,517 26 38 662019 A salary only 44:1 30:1 19:1 salary only 1,017 23 34 52 total remuneration 99:1 66:1 39:1 total remuneration 2,615 26 40 662020 A salary only 46:1 31:1 20:1 salary only 1,100 24 36 54
Annual change in directors’ pay compared to average change in employee pay Under new reporting regulations, it is necessary to show a comparison of the annual change in director pay to the average pay of employees of the parent company. However, NatWest Group plc is a holding company and is not an employing entity, and therefore the disclosure below is made on a voluntary basis to compare any change with all employees based in the UK. In each case, remuneration is based on salary, benefits and annual bonus. The CEO and CFO receive fixed share allowances and are eligible for LTI awards rather than annual bonus. Non-executive directors receive fixed fees rather than salary and do not receive any variable pay. Fees for Board and Committee attendance have remained unchanged over the year other than an increase to the Chairman of the Colleague Advisory Panel. Further details on the fees and benefits for the Chairman and non-executive directors and the percentage change between 2019 and 2020 can be found on page 139.
and Stephen Hester (SH) with figures based on the single total figure of remuneration for the relevant year. (2) The maximum opportunity is set according to the approved policy and, for LTI awards granted in 2015 and onwards, the regulatory cap.
Key tasks for the Committee in 2020 included securing approval from shareholders for the renewal of the directors’ remuneration policy and expanding its review of wider workforce remuneration and fair pay across the organisation. The Committee also considered the impact of COVID-19 on remuneration decisions.
Statement of shareholder voting The tables below set out the latest resolutions to approve the directors’ remuneration policy and the Annual report on remuneration.
NatWest Markets Cash remuneration — 0.21 0.21 Deferred bonds — 5.31 5.31 Deferred shares — 23.66 23.66 RBS International Cash remuneration — 0.13 0.13 Deferred bonds — 1.28 1.28 Deferred shares — 0.17 0.17
6. Ratio between fixed and variable remuneration The variable component of total remuneration for MRTs at NatWest Group shall not exceed 100% of the fixed component (except where local jurisdictions apply a lower maximum ratio for variable pay). The average ratio between fixed and variable remuneration for 2020 is approximately 1 to 0.30. The majority of MRTs were based in the UK.
The effectiveness of NatWest Group’s internal controls is reviewed regularly by the Board, the Group Audit Committee and the Board Risk Committee.
 the Strategic report and Directors’ report (incorporating the Business review) include a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
Strategic risks are those that threaten the safety and soundness of NatWest Group or its ability to achieve strategic objectives. For certain strategic risks, risk capacity defines the maximum level of risk NatWest Group can assume before breaching constraints determined by regulatory capital and liquidity requirements, the operational environment, and from a conduct perspective. Establishing risk capacity helps determine where risk appetite should be set, ensuring there is a buffer between internal risk appetite and NatWest Group’s ultimate capacity to absorb losses.
 Scenario results and management actions are reviewed and agreed by senior committees, including the Executive Risk Committee, the Board Risk Committee and the Board.
Capital sufficiency – going concern forward-looking view Going concern capital requirements are examined on a forwardlooking basis – including as part of the annual budgeting process – by assessing the resilience of capital adequacy and leverage ratios under hypothetical future states. These assessments include assumptions about regulatory and accounting factors (such as IFRS 9). They are linked to economic variables and impairments and seek to demonstrate that NatWest Group and its operating subsidiaries maintain sufficient capital. A range of future states are tested. In particular, capital requirements are assessed:  Based on a forecast of future business performance, given expectations of economic and market conditions over the forecast period.
 Developing a recovery playbook to provide a concise description of the actions required during recovery.
Scenario analysis based on hypothetical adverse scenarios is performed on non-traded exposures as part of the Bank of England and European Banking Authority stress exercises. NatWest Group also produces an internal scenario analysis as part of its financial planning cycles.
Non-traded exposures are capitalised through the ICAAP. This covers gap risk, basis risk, credit spread risk, pipeline risk, structural foreign exchange risk, prepayment risk, equity risk and accounting volatility risk. The ICAAP is completed with a combination of value and earnings measures. The total non-traded market risk capital requirement is determined by adding the different charges for each sub risk type. The ICAAP methodology captures at least ten years of historical volatility, produced with a 99% confidence level. Methodologies are reviewed by NatWest Group Model Risk and the results are approved by the NatWest Group Technical Asset & Liability Management Committee.
Additionally, post model ECL adjustments were made in Personal to ensure that the ECL was adjusted for known model over and underpredictions pre-existing COVID-19, pending the systematic recalibration of the underlying models.
(2) The table contains some cases which as at 31 December 2020 were approved but not yet drawn down. Approved limits as at 31 December 2020 were as follows: BBLS – £8.6 billion (96% drawn); CBILS – £4.2 billion (91% drawn); and CLBILS – £1.3 billion (62% drawn).
Financial instruments within the scope of the IFRS 9 ECL framework Refer to Note 11 to the consolidated financial statements for balance sheet analysis of financial assets that are classified as amortised cost or fair value through other comprehensive income (FVOCI), the starting point for IFRS 9 ECL framework assessment.
 NatWest Group-originated securitisations, where ECL was captured on the underlying loans of £0.4 billion (2019 – £0.4 billion).
 Commercial Banking – Balance sheet growth was primarily due to further drawdowns on existing facilities and new lending under the COVID-19 government lending schemes. The deteriorated economic outlook, including significant reductions in GDP and commercial real estate valuations, resulted in increased IFRS 9 PDs. Consequently, compared to 2019, a larger proportion of the exposures exhibited a SICR which caused a migration of assets from Stage 1 to Stage 2. As a result, the ECL requirement increased. Reflecting the continued high level of uncertainty arising from COVID-19, management judged that certain ECL post model adjustments were necessary, refer to the Governance and post model adjustments section for further details. The increase in Stage 2 assets due to PD deterioration was also the primary driver of the increase in the Stage 2 exposures less than 30 days past due. A small number of large cases resulted in the increase in the 1-30 DPD category. The various COVID-19 related customer support mechanisms mitigated against flows into default in the short-term. Increased coverage in Stage 1 and Stage 2 was mainly due to the increased ECL, primarily as a result of the deteriorated economic outlook, which was partially offset by a decrease in Stage 3 coverage driven by a small number of individual cases with low ECL. The loss rate was significantly higher than in the prior year.
 Other businesses – The drivers of the increased ECL requirement were similar to those described above.
Notes: (1) Geographical splits are based on country of collateral risk.
 2020 trends – The portfolio remained broadly unchanged in composition although a migration of some assets from the mixed/other sub-sector was noted, following a reclassification carried out during the year. While new activity in 2020 was subdued due to COVID-19, NatWest Group supported existing customers with capital repayment holidays, interest roll-ups and extensions using CRE specific criteria and government backed COVID-19 support schemes. Demand for scheme support reduced in the latter part of the year.
Stage 1 Stage 2 Stage 3 Total Financial Financial Financial Financial assets ECL assets ECL assets ECL assets ECL Ulster Bank RoI - mortgages £m £m £m £m £m £m £m £m
Currency translation and other adjustments 589 1 66 2 95 (32) 750 (29) Transfers from Stage 1 to Stage 2 (2,010) (7) 2,010 7 — — — — Transfers from Stage 2 to Stage 1 1,665 47 (1,665) (47) — — — —
Net re-measurement of ECL on stage transfer (9) 43 4 38 Changes in risk parameters (model inputs) 6 18 (9) 15 Other changes in net exposure 2,922 1 (245) (10) (15) 5 2,662 (4) Other (P&L only items) — 3 (12) (9) Income statement (releases)/charges (2) 54 (12) 40
Vintage (time in default): Key points  Retail Banking and Ulster Bank RoI mortgages – The proportion of the Stage 3 defaulted population which have been in default for over five years reflected NatWest Group’s support for customers in financial difficulty. When customers continue to engage constructively with NatWest Group, making regular payments, NatWest Group continues to support them. NatWest Group’s provisioning approach retains customers in Stage 3 for a life-time loss provisioning calculation, even when their arrears status reverts to below 90 days past due.
Credit risk – Trading activities This section details the credit risk profile of NatWest Group’s trading activities.
 Impact assessment captures input from across NatWest Group including from businesses.
In response to COVID-19, a number of relief measures to alleviate the financial stability impact have been announced and recommended by regulatory and supervisory bodies. One significant announcement in the year was on 26 June when the European Parliament passed an amended regulation to the CRR in response to the COVID-19 pandemic (“the CRR COVID-19 amendment”); NatWest Group has applied a number of the CRR amendments for FY 2020 reporting. The impact on capital and leverage of the CRR amendment and other relief measures are set out below.
Notes: (1) The published LCR excludes Pillar 2 add-ons. NatWest Group calculates the LCR using its own interpretations of the EU LCR Delegated Act, which may change over time and may not be fully comparable with those of other financial institutions.
Capital, liquidity and funding risk continued Weighted undrawn commitments The table below provides a breakdown of weighted undrawn commitments.
LAC as a ratio of RWAs 37.5% 33.3% LAC as a ratio of UK leverage exposure 11.2% 10.5%
Capital, liquidity and funding risk continued Liquidity portfolio The table below shows the liquidity portfolio by product, with primary liquidity aligned to internal stressed outflow coverage and regulatory LCR categorisation. Secondary liquidity comprises assets eligible for discount at central banks, which do not form part of the liquid asset portfolio for LCR or stressed outflow purposes.
Key points  The net customer funding surplus has increased by £44 billion during 2020 to £92 billion driven by £61 billion deposit growth and £17 billion loan growth.
Encumbered as a result of transactions with Unencumbered assets not counterparties Pre-positioned Collateral pre-positioned other than central banks & encumbered ring - fenced with central banks Covered SFT, assets held to meet reg Readily Other Cannot debts & derivatives at central requirement available available be used and similar (3) (4) Total (5) banks (6) (7) (8) (9) (10) Total Total 2020 £bn £bn £bn £bn £bn £bn £bn £bn £bn £bn Cash and balances at central banks — 4.9 4.9 — — 119.6 — — 119.6 124.5
(3) Repos and other secured deposits, cash, coin and nostro balance held with the Bank of England as collateral against deposits and notes in circulation are included here rather than within those positioned at the central bank as they are part of normal banking operations. Securities financing transactions (SFT) include collateral given to secure derivative liabilities.
The non-traded interest rate risk VaR metrics for NatWest Group’s retail and commercial banking activities are included in the banking book VaR table presented earlier in this section. The VaR captures the risk resulting from mismatches in the repricing dates of assets and liabilities.
Trading activities may also give rise to counterparty credit risk. For further detail refer to the Credit risk section.
Notes: (1) Non-trading businesses are entities that primarily have exposures that are not classified as trading book. For these exposures, with the exception of pensionrelated activities, the main measurement methods are sensitivity analysis of net interest income, internal non-traded VaR and fair value calculations. For more information refer to the non-traded market risk section above.
(3) Foreign exchange risk affects all non-sterling denominated exposures on the balance sheet across trading and non-trading businesses, and therefore has not been listed in the above tables.
Governance The Group Asset & Liability Management Committee is chaired by the Chief Financial Officer. Having replaced the Group Pension Committee during 2020, the Group Asset & Liability Management Committee is a key component of NatWest Group’s approach to managing pension risk and it considers the pension impact of the capital plan for NatWest Group and reviews performance of NatWest Group’s material pension funds and other issues material to NatWest Group’s pension strategy on behalf of NatWest Group. It also considers investment strategy proposals from the Trustee of the Main section.
Monitoring and measurement Pension risk is monitored by the Executive Risk Committee and the Board Risk Committee by way of the monthly Risk Management Report.
The stress testing framework includes pension risk capital calculations for the purposes of the Internal Capital Adequacy Assessment Process as well as additional stress tests for a number of internal management purposes. The results of the stress tests and their consequential impact on NatWest Group’s balance sheet, income statement and capital position are incorporated into the overall NatWest Group stress test results.
Sources of risk Compliance and conduct risks exist across all stages of NatWest Group’s relationships with its customers and arise from a variety of activities including product design, marketing and sales, complaint handling, staff training, and handling of confidential insider information. As set out in Note 26 to the consolidated financial statements, NatWest Group and certain members of staff are party to legal proceedings and are subject to investigation and other regulatory action in the UK, the US and other jurisdictions.
Monitoring and measurement Financial crime risks are identified and reported through continuous risk management and regular monthly reporting to the NatWest Group’s senior risk committees and the NatWest Group Board. Quantitative and qualitative data is reviewed and assessed to measure whether financial crime risk is within risk appetite.
 A NatWest Group-wide response was mobilised – supported by additional reporting on customer needs, people, processes and systems – to ensure the Board and senior management were regularly updated and to facilitate decision-making as COVID-19 evolved.
Risks are mitigated by applying key preventative and detective controls, an integral step in the risk assessment methodology which determines residual risk exposure. Control owners are accountable for the design, execution, performance and maintenance of key controls. Key controls are regularly assessed for adequacy and tested for effectiveness. The results are monitored and, where a material change in performance is identified, the associated risk is re-evaluated.
Refer to the Capital, liquidity and funding risk section for operational risk capital requirement figures.
Risk appetite Model risk appetite is set in order to limit the level of model risk that NatWest Group is willing to accept in the course of its business activities. It is approved by relevant Executive Risk Committees. Business areas are responsible for monitoring performance against appetite and remediating models outside appetite.
Risk mitigation By their nature – as approximations of reality – model risk is inherent in the use of models. It is managed by refining or redeveloping models where appropriate – either due to changes in market conditions, business assumptions or processes – and by applying adjustments to model outputs (either quantitative or based on expert opinion). Enhancements may also be made to the process within which the model output is used in order to further limit risk levels.
Mitigation Reputational risk is mitigated through the policy and governance framework, with ongoing staff training to ensure early identification, assessment and escalation of material issues. External events that could cause reputational damage are identified and mitigated through NatWest Group’s top and emerging risks process. The most material threats to NatWest Group’s reputation continued to originate from historical and more recent conduct issues. NatWest Group has in recent years been the subject of investigations and reviews by a number of regulators and governmental authorities, some of which have resulted in past fines, settlements and public censure. Refer to the Litigation and regulatory matters section of Note 26 to the consolidated financial statements for details of material matters currently impacting NatWest Group.
An overview of the scope of the Parent Company and Group audits Tailoring the scope Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each company within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements. We take into account the size and risk profile of the component and its activities, the organisation of the Group and effectiveness of group-wide controls, changes in the business environment and other factors such as recent internal audit results when assessing the level of work to be performed at each component.
 Disclosure - The completeness and preparation of disclosures considering the key judgments, sources of data and the design of the disclosures.
Risk Our response to the risk Provisions for conduct and litigation claims At 31 December 2020, the Group has reported £1.9 billion (2019: £2.7 billion) of provisions for liabilities and charges, including £1.1 billion (2019: £1.9 billion) for conduct and litigation claims, including Payment Protection Insurance (PPI) as detailed in Note 20 of the financial statements.
 Disclosure - Judgement is required to assess the adequacy of disclosures of provision for contingent liabilities given the underlying estimation uncertainty in the provisions.
Key observations communicated to the Group Audit Committee We are satisfied that provisions for conduct, litigation and regulatory matters, customer remediation and claims are reasonable and recognised in accordance with IFRS. We concurred with the recognition, measurement and level of disclosures of other conduct and litigation provisions. We did not identify any material unrecorded provisions. We communicated the following matters to the Group Audit Committee:  The level of provisions by their nature incorporate significant judgements to be made and may change as a result of future developments.  Continued vigilance in assessing conduct risks from the impact of COVID-19, which may not manifest until well after the pandemic has passed.
In preparing the financial statements, the directors are responsible for assessing the Group and Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.
Attributable to: Paid-in equity holders 355 367 355 Non-controlling interests (62) 261 (8)
The accompanying notes on pages 269 to 322, the accounting policies on pages 264 to 268 and the audited sections of the Business review and Risk and capital management sections on pages 84 to 96 and 157 to 246 form an integral part of these financial statements.
4. Assets held for sale A non-current asset (or disposal group) is classified as held for sale if NatWest Group will recover its carrying amount principally through a sale transaction rather than through continuing use and is measured at the lower of its carrying amount or fair value less cost to sell.
Actuarial gains and losses (i.e. gains and/or losses on re-measuring the net defined benefit asset or liability) are recognised in other comprehensive income in full in the period in which they arise. The difference between scheme assets and scheme liabilities, the net defined benefit asset or liability, is recognised in the balance sheet subject to the asset celling test which requires the net defined benefit surplus to be limited to the present value of any economic benefits available to NatWest Group in the form of refunds from the plan or reduced contributions to it.
Goodwill on the acquisition of a subsidiary is the excess of the fair value of the consideration transferred, the fair value of any existing interest in the subsidiary and the amount of any non-controlling interest measured either at fair value or at its share of the subsidiary’s net assets over the net fair value of the subsidiary’s identifiable assets, liabilities and contingent liabilities.
Provision is made for restructuring costs, including the costs of redundancy, when
 Commercial loans: write-offs are determined in the light of individual circumstances; and Business loans are generally written off within five years.
16. Derecognition A financial asset is derecognised when the contractual right to receive cash flows from the asset has expired or when it has been transferred and the transfer qualifies for derecognition. Conversely, an asset is not derecognised by a contract under which NatWest Group retains substantially all the risks and rewards of ownership. If substantially all the risks and rewards have been neither retained nor transferred, NatWest Group does not derecognise an asset over which it has retained control but limits its recognition to the extent of its continuing involvement.
18. Netting Financial assets and financial liabilities are offset and the net amount presented in the balance sheet when, and only when, NatWest Group currently has a legally enforceable right to set off the recognised amounts and it intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. NatWest Group is party to a number of arrangements, including master netting agreements, that give it the right to offset financial assets and financial liabilities, but where it does not intend to settle the amounts net or simultaneously, the assets and liabilities concerned are presented gross.
Continuing employment or leavers in certain circumstances and/or satisfaction of the pre-vest assessment and underpins
Notes: (1) Cash awards are limited to £2,000 for all employees. (2) Excludes other performance related compensation. (3) Operating profit before tax and bonus expense.
Fair Present value Asset Net Fair Present value Asset Net value of of defined ceiling/ pension value of of defined ceiling/ pension plan benefit minimum (asset)/ plan benefit minimum (asset)/ assets obligation (1) funding (2) liability assets obligation (1) funding (2) liability
Currency translation and other adjustments — — — — (85) (76) — 9
Discount rate 1.4 2.1 Fixed interest swap yield curve plus 0.8% per annum
Critical accounting policy: Deferred Tax NatWest Group has recognised a deferred tax asset of £901 million (31 December 2019 - £1,011 million) that principally comprises losses that arose in the UK, temporary differences, and a deferred tax liability of £291 million (31 December 2019 - £266 million). This includes amounts recognised in respect of UK trading losses of £862 million (31 December 2019 - £770 million). Deferred tax assets are recognised to the extent that it is probable that there will be future taxable profits to recover them.
Fair value hedges of interest rate risk involve interest rate swaps transforming the fixed interest rate risk in recognised financial assets and financial liabilities to floating. The hedged risk is the risk of changes in the hedged item’s fair value attributable to changes in the benchmark interest rate embedded in the hedged item. The significant embedded benchmarks are LIBOR, EURIBOR and SONIA. This risk component is identified using the risk management systems of NatWest Group. This risk component comprises the majority of the hedged items fair value risk.
 The assessment as to whether a non-contractually specified IBOR risk component is separately identifiable, is done only at the inception of the relationship.
The following phase 2 reliefs have been applied:  Where forecasted cash flows in cash flow hedge relationships have transitioned to an alternative benchmark interest rate, the relevant hedge accounting designations have been amended.
Financial statem ents 10 Derivatives continued The following table shows the period in which the hedging contract ends: 0-3 months 3-12 months 1-3 years 3-5 years 5-10 years 10-20 years 20+ years Total 2020 £bn £bn £bn £bn £bn £bn £bn £bn Fair value hedging Hedging assets - interest rate risk 1.2 2.3 6.3 7.4 8.9 5.1 4.2 35.4 Hedging liabilities - interest rate risk — 0.6 10.1 11.6 7.1 0.5 0.2 30.1 Cash flow hedging Hedging assets
Cash flow hedging - interest rate Bank and customer deposits 72,880 409 Other financial liabilities - debt securities in issue 1,014 13
Note: (1) The net IFRS offset balance of £733 million (2019 - £811 million) relates to variation margin netting reflected on other balance sheet lines.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. It also uses the assumptions that market participants would use when pricing the asset or liability. In determining fair value, NatWest Group maximises the use of relevant observable inputs and minimises the use of unobservable inputs.
Modelled products valued using a pricing model range in complexity from comparatively vanilla products such as interest rate swaps and options (e.g. interest rate caps and floors) through to more complex derivatives. The valuation of modelled products requires an appropriate model and inputs into this model. Sometimes models are also used to derive inputs (e.g. to construct volatility surfaces). NatWest Group uses a number of modelling methodologies.
Initial classification of a financial instrument is carried out by the Product Control team following the principles in IFRS 13. They base their judgment on information gathered during the IPV process for instruments which include the sourcing of independent prices and model inputs. The quality and completeness of the information gathered in the IPV process gives an indication as to the liquidity and valuation uncertainty of an instrument. These initial classifications are subject to senior management review. Particular attention is paid to instruments crossing from one level to another, new instrument classes or products, instruments that are generating significant profit and loss and instruments where valuation uncertainty is high.
Other financial liabilities - debt securities in issue — — — 141 10 (10)
Other considerations Whilst certain inputs used to calculate CVA, FVA and own credit adjustments are not based on observable market data, the uncertainty of the inputs is not considered to have a significant effect on the net valuation of the related derivative portfolios and issued debt. The classification of the derivative portfolios and issued debt is not determined by the observability of these inputs and any related sensitivity does not form part of the level 3 sensitivities presented.
Loans to banks and customers In estimating the fair value of net loans to customers and banks measured at amortised cost, NatWest Group’s loans are segregated into appropriate portfolios reflecting the characteristics of the constituent loans. Two principal methods are used to estimate fair value: (a) Contractual cash flows are discounted using a market discount rate that incorporates the current spread for the borrower or where this is not observable, the spread for borrowers of a similar credit standing. This method is used for portfolios where counterparties have external ratings: institutional and corporate lending in NatWest Markets.
Financial statem ents 13 Financial instruments - maturity analysis Remaining maturity The following table shows the residual maturity of financial instruments, based on contractual date of maturity.
MFVTPL assets of £235.9 billion (2019 - £227.3 billion) and HFT liabilities of £232.8 billion (2019 - £220.8 billion) have been excluded from the following tables.
Net book value at 31 December 5,607 1,048 6,655 5,607 1,015 6,622
Note: (1) Includes interest in Business Growth Fund £442 million (2019 - £424 million).
Deferred income 361 362 Current tax 63 132 Deferred tax (Note 7) 291 266
Number of Movement in allotted, called up and fully paid ordinary shares £m shares - 000s
On 6 February 2019 the company held a General Meeting and shareholders approved a special resolution to give the company authority to make off-market purchases of its ordinary shares from HM Treasury (or its nominee) at such times as the directors may determine is appropriate. Full details of the proposal are set out in the Circular and Notice of General Meeting. This authority was renewed at the Annual General Meeting in 2020 and shareholders will be asked to renew this authorisation at the Annual General Meeting in 2021.
Non-cumulative preference shares Non-cumulative preference shares entitle their holders to periodic noncumulative cash dividends at specified fixed rates for each series payable out of distributable profits of the company.
Shares of US$0.01 - Series U 10,130 floating 29 September 2017 US$100,000 Note: (1) Preference shares where distributions are discretionary are classified as equity.
Financial statem ents 22 Leases Lessee NatWest Group is party to lease contracts as lessee to support its operations. The following table provides information in respect of those lease contracts as lessee.
Consolidated structured entities Securitisations In a securitisation, assets, or interests in a pool of assets, are transferred generally to an SE which then issues liabilities to third party investors. The majority of securitisations are supported through liquidity facilities or other credit enhancements. NatWest Group arranges securitisations to facilitate client transactions and undertakes own asset securitisations to sell or to fund portfolios of financial assets. NatWest Group also acts as an underwriter and depositor in securitisation transactions in both client and proprietary transactions.
Litigation and regulatory matters NatWest Group plc and certain members of NatWest Group are party to legal proceedings and involved in regulatory matters, including as the subject of investigations and other regulatory and governmental action (‘Matters’) in the United Kingdom (UK), the United States (US), the European Union (EU) and other jurisdictions.
Among the non-class claims dismissed by the SDNY in December 2016 were claims that the Federal Deposit Insurance Corporation (FDIC) had asserted on behalf of certain failed US banks. In July 2017, the FDIC, on behalf of 39 failed US banks, commenced substantially similar claims against NatWest Group companies and others in the High Court of Justice of England and Wales. The action alleges that the defendants breached English and European competition law, as well as asserting common law claims of fraud under US law.
Loss on sale of MRELs and subordinated liabilities 324 — — — — —
Members of NatWest Group that are UK authorised institutions are required to maintain non-interest bearing (cash ratio) deposits with the Bank of England amounting to 0.368% of their average eligible liabilities in excess of £600 million. They also have access to Bank of England reserve accounts: sterling current accounts that earn interest at the Bank of England Base Rate.
Other related parties (a) In their roles as providers of finance, NatWest Group companies provide development and other types of capital support to businesses. These investments are made in the normal course of business. In some instances, the investment may extend to ownership or control over 20% or more of the voting rights of the investee company. However, these investments are not considered to give rise to transactions of a materiality requiring disclosure under IAS 24.
(b) NatWest Group recharges NatWest Group Pension Fund with the cost of administration services incurred by it. The amounts involved are not material to NatWest Group.
Liabilities Amounts due to subsidiaries 4 723 439 Derivatives with subsidiaries 1,102 711 Other financial liabilities 21,056 19,331
Changes in fair value of subordinated liabilities/MRELs — — 173 268 (49) 499 (46) (95) Redeemed/reclassified (1,277) AT1 reclassification to subordinated liability 1,632 Loss on sale of MRELs and subordinated liabilities 324 Interest on subordinated liabilities/MRELs — — 399 409 438 138 104 406 11 Directors’ and key management remuneration Directors’ remuneration is disclosed in Note 30 on the consolidated accounts. The directors had no other reportable related party transactions or balances with the company.
Regulatory Entity name Activity treatment Notes NatWest Ventures Investments Ltd BF FC (6) Northern Isles Ferries Ltd BF FC (6) P of A Productions Ltd BF FC (6) Patalex Productions Ltd BF FC (6) Patalex III Productions Ltd BF FC (6) Patalex V Productions Ltd BF FC (6) Pittville Leasing Ltd BF FC (6) Premier Audit Company Ltd BF FC (6) Price Productions Ltd BF FC (6) Priority Sites Investments Ltd BF DE (6) Priority Sites Ltd INV DE (6) Property Venture Partners Ltd INV FC (1) R.B. Capital Leasing Ltd BF FC (6) R.B. Equipment Leasing Ltd BF FC (6) R.B. Leasing (April) Ltd BF FC (6) R.B. Leasing (September) Ltd BF FC (6) R.B. Leasing Company Ltd BF FC (1) R.B. Quadrangle Leasing Ltd BF FC (6) R.B.S. Special Investments Ltd BF FC (6) RB Investments 3 Ltd OTH FC (6) RBOS (UK) Ltd BF FC (6) RBS AA Holdings (UK) Ltd BF FC (6) RBS Asset Finance Europe Ltd BF FC (6) RBS Asset Management (ACD) Ltd BF FC (50) RBS Asset Management Holdings BF FC (50) RBS Collective Investment Funds Ltd BF FC (11) RBS HG (UK) Ltd BF FC (6) RBS Invoice Finance Ltd BF FC (6) RBS Management Services (UK) Ltd SC FC (6) RBS Mezzanine Ltd BF FC (1) RBS Property Developments Ltd INV FC (36) RBS Property Ventures Investments Ltd BF FC (1) RBS SME Investments Ltd BF FC (2) RBSG Collective Investments Holdings Ltd BF FC (11) RBSG International Holdings Ltd BF FC (1) RBSM Capital Ltd BF FC (1) RBSSAF (2) Ltd BF FC (6) RBSSAF (6) Ltd BF FC (6) RBSSAF (7) Ltd BF FC (6) RBSSAF (8) Ltd BF FC (6) RBSSAF (12) Ltd BF FC (6) RBSSAF (25) Ltd BF FC (6) RoboScot Equity Ltd BF FC (1) Royal Bank Investments Ltd BF FC (1) Royal Bank Leasing Ltd BF FC (1) Royal Bank of Scotland (Industrial Leasing) Ltd BF FC (1) Royal Bank Ventures Investments Ltd BF FC (1) Royal Scot Leasing Ltd BF FC (1) RoyScot Trust Plc BF FC (6) SIG 1 Holdings Ltd BF FC (1) SIG Number 2 Ltd BF FC (1) The One Account Ltd BF FC (6) The Royal Bank of Scotland Group Independent Financial Services Ltd BF FC (25) The Royal Bank of Scotland plc CI FC (36) Theobald Film Productions LLP BF FC (6) Ulster Bank Ltd CI FC (33) Ulster Bank Pension Trustees Ltd TR DE (33)
Entity name Activity treatment Notes RBS Employment (Guernsey) Ltd SC FC (28) RBS Financial Products Inc. BF FC (9) RBS Group (Australia) Pty Ltd BF FC (35) RBS Holdings III (Australia) Pty Ltd BF FC (35) RBS Holdings N.V. BF FC (4) RBS Holdings USA Inc. BF FC (9) RBS Hollandsche N.V. BF FC (4) RBS International Depositary Services S.A. CI FC (8) RBS Investments (Ireland) Ltd BF FC (23) RBS Netherlands Holdings B.V. BF FC (4) RBS Nominees (Hong Kong) Ltd BF FC (58) RBS Nominees (Ireland) Ltd BF FC (23) RBS Nominees (Netherlands) B.V. BF FC (4) RBS Polish Financial Advisory Services Sp. Z o.o. BF FC (31) RBS Prime Services (India) Private Ltd OTH FC (71) RBS Services India Private Ltd SC FC (18) RBS WCS Holding Company BF FC (44) Redlion Investments Ltd OTH FC (34) Redshield Holdings Ltd BF FC (34) Ringdalveien 20 AS BF FC (24) Royhaven Secretaries Ltd BF FC (34)
Cost:income ratio Total operating expenses less operating lease depreciation, divided by total income less operating lease depreciation.
Note: (1) Metric based on GAAP measures, included as not defined under IFRS and reported for compliance with ESMA adjusted performance measure rules.
V. Loan:deposit ratio As at 31 December 31 December 31 December £m £m £m
The effects of the COVID-19 pandemic on the UK, global economies and financial markets, and NatWest Group’s customers, as well as its competitive environment may continue to have a material adverse effect on NatWest Group’s business, results of operations and outlook.
Group’s mortgage and wholesale property loans portfolio may also be subject to higher impairment charges as a result of the COVID19 pandemic if volatility in the property market results in weakened property prices, particularly if default rates increase. If
9 ECL (Expected Credit Loss). The recognition and measurement of ECL is complex and involves the use of significant judgement and estimation. This includes the formulation and incorporation of multiple forward-looking economic scenarios into ECL
Group’s ability to manage climate-related risks’ and ‘A failure to adapt NatWest Group’s business strategy, governance, procedures, systems and controls to manage emerging sustainability-related risks and opportunities may have a material adverse effect on
Sustained periods of remote working may also negatively affect workforce morale. While
COVID-19 pandemic or other events trigger the recognition of a goodwill impairment.
The goodwill held by NatWest Group plc relies on management’s assumptions on future profitability. Goodwill is particularly sensitive to changes in assumed future profitability, including as a result of the effects of the
COVID-19 pandemic. If actual performance were to fall below management’s forecasts, then there is a risk that an impairment of goodwill would become necessary.
There can be no certainty as to the continuation of the sell-down process or the timing or extent of such sell-downs, which could result in a prolonged period of increased price volatility on NatWest Group’s ordinary shares.
Group operates or regulatory uncertainty and changes, strong market competition and industry disruption or economic volatility, including as a result of the economic impact of the COVID-19 pandemic, continued uncertainty surrounding the terms of the UK’s future trading arrangements with the EU or changes in the scale and timing of policy responses on climate change, may require
NatWest Group’s current or future competitors may be more successful in implementing innovative technologies for delivering products or services to their customers. NatWest Group may also fail to identify future opportunities or derive benefits from disruptive technologies in the context of rapid technological innovation, changing customer behaviour and growing regulatory demands, resulting in increased competition from traditional banking businesses as well as new providers of financial services, including technology companies with strong brand recognition, that may be able to develop financial services at a lower cost base.
Adequate capital also gives NatWest Group financial flexibility in the face of turbulence and uncertainty in the global economy and specifically in its core UK and European operations, as well as permitting NatWest
Group’s control, such as a loss of investor confidence (including in individual NatWest
(CJEU) decision (known as Schrems II), in which the CJEU ruled that Privacy
Bank Levy, increases in the bank corporation tax surcharge in the UK, restrictions on the tax deductibility of interest payments or further restrictions imposed on the treatment of carryforward tax losses that reduce the value of deferred tax assets and require increased payments of tax.
These and other recent regulatory changes, proposed or future developments and heightened levels of public and regulatory scrutiny in the UK, the EU 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. Any of these developments
Bank Ireland DAC in relation to the treatment of customers who were sold mortgages with a tracker interest rate or with a tracker interest rate entitlement.
UK competition authorities, government and by other bodies, including the FCA and the
On 28 September 2018, the implementation of the MoU was documented through a Framework Agreement entered into between the company and the trustee of the Group Fund.
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