RBS 2003 Annual Report Download - page 210

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Additional information continued
Additional information
Risk elements in lending and potential problem loans
The Group’s loan control and review procedures do not include the classification of loans as non-accrual, accruing past due,
restructured and potential problem loans, as defined by the SEC in the US. The following table shows the estimated amount of
loans that would be reported using the SEC’s classifications. The figures incorporate estimates and are stated before deducting
the value of security held or related provisions.
31 December 30 September
2003 2002 2001 2000 1999
£m £m £m £m £m
Loans accounted for on a non-accrual basis (3):
Domestic 3,221 3,077 2,829 2,482 378
Foreign 1,211 1,098 737 344 170
Total 4,432 4,175 3,566 2,826 548
Accruing loans which are contractually overdue 90 days
or more as to principal or interest (4):
Domestic 561 363 643 662 322
Foreign 81 129 142 168 110
Total 642 492 785 830 432
Loans not included above which are classified
as ‘troubled debt restructurings’ by the SEC:
Domestic 53 144 26 43 13
Foreign 30 60 116 122 104
Total 83 204 142 165 117
Total risk elements in lending 5,157 4,871 4,493 3,821 1,097
Potential problem loans (5)
Domestic 492 639 801 699 171
Foreign 99 544 279 73 75
Total potential problem loans 591 1,183 1,080 772 246
Closing provisions for bad and doubtful debts as
a % of total risk elements in lending 76% 81% 81% 83% 67%
Closing provisions for bad and doubtful debts as a % of
total risk elements in lending and potential problem loans 68% 65% 66% 69% 55%
Risk elements in lending as a % of gross loans
and advances to customers 2.01% 2.14% 2.31% 2.23% 2.19%
Notes:
(1) For the analysis above, ‘Domestic’ consists of the UK domestic transactions of the Group. ‘Foreign’ comprises the Group’s transactions conducted through offices outside the UK
and through those offices in the UK specifically organised to service international banking transactions.
(2) The classification of a loan as non-accrual, past due 90 days or troubled debt restructuring does not necessarily indicate that the principal of the loan is uncollectable in whole
or in part. Collection depends in each case on the individual circumstances of the loan, including the adequacy of any collateral securing the loan and therefore classification of
a loan as non-accrual, past due 90 days or troubled debt restructuring does not always require that a provision be made against such a loan. In accordance with the Group’s
provisioning policy for bad and doubtful debts, it is considered that adequate provisions for the above risk elements in lending have been made.
(3) The Group’s UK banking subsidiary undertakings account for loans on a non-accrual basis from the point in time at which the collectability of interest is in significant doubt.
Certain subsidiary undertakings of the Group, principally Citizens, generally account for loans on a non-accrual basis when interest or principal is past due 90 days.
(4) Overdrafts generally have no fixed repayment schedule and consequently are not included in this category.
(5) Loans that are current as to the payment of principal and interest but in respect of which management has serious doubts about the ability of the borrower to comply with
contractual repayment terms. Substantial security is held in respect of these loans and appropriate provisions have already been made in accordance with the Group’s
provisioning policy for bad and doubtful debts.
31 December 30 September
2003 2002 2001 2000 1999
£m £m £m £m £m
Gross income not recognised but which would have been
recognised under the original terms of non-accrual and
restructured loans
Domestic 237 234 173 148 53
Foreign 55 73 60 48 32
292 307 233 196 85
Interest on non-accrual and restructured loans included in
net interest income
Domestic 60 47 42 30 4
Foreign 3714 813
63 54 56 38 17