RBS 2003 Annual Report Download - page 215

213
Annual Report and Accounts 2003
Lending commitments and other commitments
Under a loan commitment, the Group agrees to make funds
available to a customer in the future. Loan commitments, which
are usually for a specified term, may be unconditionally
cancellable or may persist, provided all conditions in the loan
facility are satisfied or waived. Commitments to lend include
commercial standby facilities and credit lines, liquidity facilities
to commercial paper conduits and unutilised overdraft facilities.
Other commitments include documentary credits, which are
commercial letters of credit providing for payment by the
Group to a named beneficiary against presentation of
specified documents, forward asset purchases, forward
deposits placed and undrawn note issuance and revolving
underwriting facilities.
Guarantees and other contingent liabilities
The Group gives guarantees on behalf of customers. A
financial guarantee represents an irrevocable undertaking that
the Group will meet a customer’s obligations to third parties if
the customer fails to do so. The maximum amount that the
Group could be required to pay under a guarantee is its
principal amount. The Group expects most guarantees it
provides to expire unused. Other contingent liabilities include
contingent liabilities arising out of acceptances, endorsements,
standby letters of credit, performance and customs bonds,
warranties and indemnities. In accepting a bill of exchange
drawn on it by a customer a bank undertakes to pay the holder
of the bill at maturity. Most acceptances are presented for
payment and reimbursement by the customer is usually
immediate. In the UK, bills accepted by certain banks
designated by the Bank of England are eligible for rediscount
at the Bank of England. In endorsing a bill of exchange, a
bank accepts liability for payment of any shortfall on the bill at
maturity. Unlike acceptances, the endorsing bank receives
value for the bill, which is then rediscounted.
The Group’s contingent liabilities and commitments are set out below.
More than More than
1 year but 3 years but
Less than less than less than Over
1 year 3 years 5 years 5 years Total
2003 £m £m £m £m £m
Acceptances and endorsements 595———595
Guarantees and assets pledged as collateral security 4,632 1,422 782 1,951 8,787
Other contingent liabilities 1,872 987 351 2,272 5,482
Documentary credits and trade related transactions 368 210 2 25 605
Undrawn formal standby facilities, credit lines and other commitments to lend 95,062 18,082 14,053 10,054 137,251
Other commitments 1,304 476 15 42 1,837
Total 103,833 21,177 15,203 14,344 154,557
Contractual obligations
The table below summarises the Group’s contractual cash obligations by remaining maturity.
More than More than
1 year but 3 years but
Less than less than less than Over
1 year 3 years 5 years 5 years Total
2003 £m £m £m £m £m
Contractual cash obligations
Dated loan capital 709 691 1,034 6,878 9,312
Operating leases 262 479 434 2,124 3,299
Finance leases 19 29 8 126 182
Unconditional obligations to purchase goods or services 661 211 3 — 875
Total 1,651 1,410 1,479 9,128 13,668
The tables above do not include undated loan capital. The maturity of deposits by banks is given in Note 23 on the accounts, of
customer accounts in Note 24, and of debt securities in issue in Note 25.
Additional information