RBS 2007 Annual Report Download - page 193

RBS Group • Annual Report and Accounts 2007 191
Financial statements
Company
0-3 months 3-12 months 1-3 years 3-5 years 5-10 years 10-20 years
2007 £m £m £m £m £m £m
Deposits by banks 116 5,544————
Debt securities in issue 824 8,477 3,447 1,372 — —
Derivatives held for hedging 52 1 — 2 — —
Subordinated liabilities 116 347 1,119 1,045 3,282 3,909
1,108 14,369 4,566 2,419 3,282 3,909
2006
Deposits by banks 1030778———
Debt securities in issue 537 1,217 474———
Subordinated liabilities 553 336 1,145 1,503 3,117 3,542
1,100 1,583 2,397 1,503 3,117 3,542
The tables above show the timing of cash outflows to settle
financial liabilities. They have been prepared on the following
basis:
Prepayable liabilities – where a financial liability can be
prepaid by the counterparty, the cash outflow has been
included at the earliest date on which the counterparty can
require repayment regardless of whether or not such early
repayment results in a penalty. If the repayment of a financial
liability is triggered by, or is subject to, specific criteria such as
market price hurdles being reached, it is included at the
earliest possible date that the conditions could be fulfilled
without considering the probability of the conditions being met.
For example, if a structured note is automatically prepaid when
an equity index exceeds a certain level, the cash outflow will
be included in the less than three months period whatever the
level of the index at the year end. The settlement date of debt
securities in issue issued by certain securitisation vehicles
consolidated by the Group depends on when cash flows are
received from the securitised assets. Where these assets are
prepayable, the timing of the cash outflow relating to securities
assumes that each asset will be prepaid at the earliest
possible date.
Liabilities with a contractual maturity of greater than 20 years –
the principal amounts of financial liabilities that are repayable
after 20 years or where the counterparty has no right to
repayment of the principal are excluded from the table as are
interest payments after 20 years.
Held-for-trading liabilities – held-for-trading liabilities amounting
to £538.4 billion (2006 – £267.5 billion) have been excluded
from the table in view of their short term nature.
Investment contracts – investment contracts issued by the
Group’s life assurance businesses with a carrying value of
£5.6 billion (2006 – £2.2 billion) are excluded from this analysis
as their repayment is linked directly to the financial assets
backing these contracts.
Financial assets held by the Group to meet these cash
outflows include cash, balances at central banks and treasury
bills of £36.1 billion (2006 – £11.6 billion), loans to banks and
customers of £1,048.7 billion (2006 – £549.5 billion) including
£452.4 billion (2006 – £288.9 billion) repayable within three
months. The Group also held debt securities with a market
value of £276.4 billion (2006 – £127.3 billion) of which £130.3
billion (2006 – £67.4 billion) were pledged to secure liabilities.
Funds can be raised in the short-term from highly liquid
securities held by the Group by sale or by disposal or by sale
and repurchase transactions regardless of their stated maturity.
As explained above the table is prepared on the basis that
prepayable liabilities are called at the earliest possible date. In
practice, the average maturity of these liabilities significantly
exceeds that shown in the table. In addition, although many
customer accounts are contractually repayable on demand or
at short notice, the Group’s short-term deposit base is stable
over the long term as deposit rollovers and new deposits offset
cash outflows.
The following table shows the expected maturity of insurance liabilities up to 20 years excluding those linked directly to the financial
assets backing these contracts (2007 – £4,398 million; 2006 – £1,713 million).
Group
0-3 months 3-12 months 1-3 years 3-5 years 5-10 years 10-20 years
£m £m £m £m £m £m
2007 710 1,796 1,961 882 395 33
2006 644 1,688 1,997 885 517 68