RBS 2007 Annual Report Download - page 202

Financial statements
RBS Group • Annual Report and Accounts 2007
200
Notes on the accounts continued
Banking commitments and contingent obligations, which have
been entered into on behalf of customers and for which there
are corresponding obligations from customers, are not
included in assets and liabilities. The Group’s maximum
exposure to credit loss, in the event of non-performance by the
other party and where all counterclaims, collateral or security
proves valueless, is represented by the contractual nominal
amount of these instruments included in the table. These
commitments and contingent obligations are subject to the
Group’s normal credit approval processes.
Contingent liabilities
Guarantees – 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 as disclosed in the table
above. The Group expects most guarantees it provides to
expire unused.
Other contingent liabilities – these include standby letters of
credit, supporting customer debt issues and contingent
liabilities relating to customer trading activities such as those
arising from performance and customs bonds, warranties and
indemnities.
Commitments
Commitments to lend – 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 – these 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, and other short-term trade related
transactions.
33 Memorandum items
Contingent liabilities and commitments
The amounts shown in the table below are intended only to provide an indication of the volume of business outstanding at
31 December. Although the Group is exposed to credit risk in the event of non-performance of the obligations undertaken by
customers, the amounts shown do not, and are not intended to, provide any indication of the Group’s expectation of future losses.
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 2007 2006
Group £m £m £m £m £m £m
Contingent liabilities:
Guarantees and assets pledged as collateral security 27,943 5,626 2,226 10,646 46,441 10,725
Other contingent liabilities 7,954 2,073 1,456 3,996 15,479 9,121
35,897 7,699 3,682 14,642 61,920 19,846
Commitments:
Undrawn formal standby facilities, credit lines and
other commitments to lend
– less than one year 184,791———184,791 140,742
– one year and over 16,456 38,966 58,405 37,070 150,897 101,913
Other commitments 2,001 324 165 1 2,491 2,402
203,248 39,290 58,570 37,071 338,179 245,057