RBS 2007 Annual Report Download - page 201

RBS Group • Annual Report and Accounts 2007 199
Financial statements
32 Capital resources
The Group’s regulatory capital resources at 31 December in accordance with Financial Services Authority (‘FSA’) definitions were as
follows:
2007 2006
Composition of regulatory capital £m £m
Tier 1 capital:
Owners' equity and minority interests 88,311 41,700
Innovative tier 1 securities and preference shares transferred from subordinated liabilities 6,919 4,900
Goodwill capitalised and other intangible assets (48,492) (18,904)
Regulatory and other adjustments (2,374) 2,345
Total qualifying tier 1 capital 44,364 30,041
Tier 2 capital:
Unrealised gains on available-for-sale equities 3,115 3,790
Collective impairment allowances, net of taxes 2,582 2,267
Qualifying subordinated debt 27,681 21,024
Minority and other interests in tier 2 capital 315 410
Total qualifying tier 2 capital 33,693 27,491
Total qualifying tier 3 capital 200 —
Supervisory deductions:
Unconsolidated investments 4,297 3,870
Investments in other banks 463 5,203
Other deductions 5,523 1,510
Total regulatory capital 67,974 46,949
It is the Group’s policy to maintain a strong capital base, to
expand it as appropriate and to utilise it efficiently throughout
its activities to optimise the return to shareholders while
maintaining a prudent relationship between the capital base
and the underlying risks of the business. In carrying out this
policy, the Group has regard to the supervisory requirements
of the FSA. The FSA uses Risk Asset Ratio (“RAR”) as a
measure of capital adequacy in the UK banking sector,
comparing a bank’s capital resources with its risk-weighted
assets (the assets and off-balance sheet exposures are
‘weighted’ to reflect the inherent credit and other risks); by
international agreement, the RAR should be not less than 8%
with a tier 1 component of not less than 4%. The Group has
complied with the FSA’s capital requirements throughout
the year.
A number of subsidiaries and sub-groups within the Group,
principally banking and insurance entities, are subject to
various individual regulatory capital requirements in the UK
and overseas.