RBS 2007 Annual Report Download - page 152

RBS Group • Annual Report and Accounts 2007
150
Notes on the accounts continued
Financial statements
Asset Annual probability of default
quality Minimum Midpoint Maximum
grade % % %
AQ1 0.00 0.10 0.20
AQ2 0.21 0.40 0.60
AQ3 0.61 1.05 1.50
AQ4 1.51 3.25 5.00
AQ5 5.01 52.50 100.00
Asset grades
Internal reporting and oversight of risk assets is principally
differentiated by credit ratings. Internal ratings are used to
assess the credit quality of borrowers. Customers are assigned
an internal credit grade based on various credit grading
models that reflect the probability of default. All credit ratings
across the Group map to a Group level asset quality scale.
Expressed as an annual probability of default, the upper and
lower boundaries and the midpoint for each of these Group
level asset quality grades are as follows:
The following table provides an analysis of the credit quality of financial assets by the Group’s internal credit ratings.
Group
Accruing Non- Impairment
AQ1 AQ2 AQ3 AQ4 AQ5 past due accrual provision Total
2007 £m £m £m £m £m £m £m £m £m
Cash and balance at central banks 17,866———————17,866
Treasury and other eligible bills 18,218 — 11—————18,229
Loans and advances to banks* 204,083 5,797 4,937 407 1,119 — 25 (3) 216,365
Loans and advances to customers 275,926 174,249 221,701 84,896 55,343 13,236 10,337 (6,438) 829,250
Debt securities 240,677 15,688 2,328 1,372 16,361 — 5 (4) 276,427
Settlement balances 14,491 98 344 21 68 1,567 — — 16,589
Derivatives 300,122 23,333 11,299 2,352 304———337,410
Other financial instruments 649 — — 20 143 65 — — 877
1,072,032 219,165 240,620 89,068 73,338 14,868 10,367 (6,445)1,713,013
Commitments 131,750 89,682 74,126 25,320 17,301———338,179
Contingent liabilities 26,120 16,314 11,740 4,032 3,714———61,920
Total off-balance sheet 157,870 105,996 85,866 29,352 21,015———400,099
2006
Cash and balance at central banks 6,121———————6,121
Treasury and other eligible bills 5,491———————5,491
Loans and advances to banks* 77,513 748 416 346 111 1 2 (2) 79,135
Loans and advances to customers 149,221 85,511 124,215 72,622 24,703 8,324 6,230 (3,933) 466,893
Debt securities 122,152 2,707 1,206 345 841 — 3 (3) 127,251
Settlement balances 4,936 473 261 454 — 1,301 — — 7,425
Derivatives 89,292 18,827 7,776 505 281———116,681
Other financial instruments 604 — — 29 269 51 — — 953
455,330 108,266 133,874 74,301 26,205 9,677 6,235 (3,938) 809,950
Commitments 112,505 52,279 46,742 18,954 14,577———245,057
Contingent liabilities 6,172 7,870 3,453 1,468 883———19,846
Total off-balance sheet 118,677 60,149 50,195 20,422 15,460———264,903
* Excluding items in the course of collection of £3,095 million (2006 – £3,471 million).
11 Asset quality