RBS 2006 Annual Report Download - page 150
Download and view the complete annual report
Please find page 150 of the 2006 RBS annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.149
RBS Group • Annual Report and Accounts 2006
Financial statements
Securitisations and other asset transfers
The Group engages in securitisation transactions of its
financial assets including commercial and residential mortgage
loans, commercial and residential mortgage related securities,
US Government agency collateralised mortgage obligations,
and other types of financial assets. In such transactions, the
assets, or interests in the assets, are transferred generally to a
special purpose entity (“SPE”) which then issues liabilities to
third party investors.
Securitisations may, depending on the individual arrangement,
result in continued recognition of the securitised assets;
continued recognition of the assets to the extent of the Group’s
continuing involvement in those assets; or derecognition of the
assets and the separate recognition, as assets or liabilities, of
any rights and obligations created or retained in the transfer
(see Accounting policy on page 135). The Group has
securitisations in each of these categories.
Continued recognition
The table below sets out the asset categories together with the carrying amounts of the assets and associated liabilities.
2006 2005
Assets Liabilities Assets Liabilities
Asset type £m £m £m £m
Residential mortgages (1) 15,698 15,375 2,388 2,366
Finance lease receivables (2) 1,211 953 1,467 1,170
Other loans (3) 1,931 1,346 2,189 1,543
Credit card receivables (4) 2,891 2,585 2,891 2,836
Commercial paper conduits (5) 8,360 8,284 6,688 6,685
Notes:
(1) Mortgages have been transferred to special purpose vehicles, held ultimately by charitable trusts, funded principally through the issue of floating rate notes. The Group has
entered into arm’s length fixed/floating interest rate swaps and cross-currency swaps with the securitisation vehicles and provides mortgage management and agency services
to the vehicles. On repayment of the financing, any further amounts generated by the mortgages will be paid to the Group.
(2) Certain finance lease receivables (leveraged leases) involve the Group as lessor obtaining non-recourse funding from third parties. This financing is secured on the underlying
leases and the provider of the finance has no recourse whatsoever to the other assets of the Group.
(3) Other loans originated by the Group have been transferred to special purpose vehicles funded through the issue of notes. Any proceeds from the loans in excess of the amounts
required to service and repay the notes are payable to the Group after deduction of expenses.
(4) Credit card receivables in the UK have been securitised. Notes have been issued by a special purpose vehicle. The note holders have a proportionate interest in a pool of credit
card receivables that have been equitably assigned by the Group to a receivables trust. The Group continues to be exposed to the risks and rewards of the transferred
receivables through its right to excess spread (after charge-offs).
(5) The Group sponsors commercial paper conduits. Customer assets are transferred into an SPE which issues notes in the commercial paper market. The Group supplies certain
services and contingent liquidity support to these vehicles on an arm’s length basis as well as programme credit enhancement.