RBS 2007 Annual Report Download - page 234

RBS Group • Annual Report and Accounts 2007
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Additional information continued
Additional information
Investment management business is principally undertaken
by companies in the Retail Markets division, including
Adam & Company Investment Management Limited, and in
the Corporate Markets division, RBS Asset Management
Limited.
General insurance business is principally undertaken by
companies in the RBS Insurance division, including Direct
Line Insurance plc and Churchill Insurance Company
Limited. Life assurance business is undertaken by Royal
Scottish Assurance plc and National Westminster Life
Assurance Limited (with the Group’s partner, the AVIVA
Group) and Direct Line Life Insurance Company Limited.
1.2 Regulatory developments and implementation.
Basel II is the most significant change to regulation of the
banking industry for many years and will have a lasting
effect on our relationships with customers, investors and
other key stakeholders. The FSA in the UK has endorsed
the Group’s approach to managing credit risk under Basel
II. This puts us among the small number of UK financial
services organisations that are using Advanced Internal
Ratings Based approach for the calculation of credit risk
capital requirements from 1 January 2008. From 2008, the
Group will apply the Standardised Approach for
operational risk, migrating to the Advanced Measurement
Approach (AMA) in line with the US timescales. The Group
has implemented Pillar 2 and Pillar 3 in line with regulatory
requirements.
In addition, the Group successfully implemented the
Markets in Financial Instruments Directive (‘MiFID’) by the
implementation date of 1 November 2007. MiFID
established a comprehensive legislative framework at the
European level, which is now implemented in the UK, for
the establishment and conduct of investment firms,
multilateral trading facilities and regulated markets.
The FSA’s high level principles require all regulated firms to
treat their customers fairly and a specific industry wide
project on Treating Customers Fairly (‘TCF’) was launched
in 2004. The FSA emphasised that TCF will be a key area
of focus for the regulator over the coming years. In the
summer of 2007 it followed this up by setting out specific
targets that it would expect all firms to meet during 2008 in
relation to management information required to evidence
TCF embeddedness. The Group already had several
underlying principles built into the existing customer
proposition which clearly demonstrated the concept of
fairness in action. These fundamental business values
include demonstrating fairness, transparency and honesty
throughout the whole relationship with our customers,
ensuring that any representations we make are clear, fair
and not misleading, and having mechanisms in place to
avoid things going wrong and correct any deficiencies.
UK FSA authorised firms must also comply with rules
designed to reduce the scope for firms to be used for
financial crime and in particular money laundering.
Revised Joint Money Laundering Steering Group Guidance
Notes were issued on 13 November 2007 to take into
account the new Money Laundering Regulations 2007.
These Regulations came into force on 15 December 2007
and implemented the EU’s Third Money Laundering
Directive. Amongst their other provisions, the Regulations
endorse a risk based approach to combating money
laundering, while also prescribing ‘enhanced due
diligence’ for non face to face customers, ‘politically
exposed persons’ (PEPs) and correspondent banking.
Whilst for all material purposes the Group is already
compliant – these provisions having been anticipated in
industry guidance for some time – internal processes are
continually reviewed to ensure best practice standards are
met. In particular, the Group has issued new internal policy
guidelines based on the regulations and supporting
industry guidance against which all divisions have
undertaken a gap analysis as a basis for further action
plans where necessary.
1.3 Information Commissioners Office
The Information Commissioner’s Office (ICO) is the UK’s
independent public body set up to promote access to
official information and to protect personal information. The
ICO enforces the Data Protection Act 1998, the Freedom of
Information Act 2000, the Privacy and Electronic
Communications Regulations 2003 and the Environmental
Information Regulations 2004, regulating the organisations
that come within their remits. They promote awareness of
information rights and obligations and ensure compliance.
The Commissioner reports directly to Parliament and has
the power to order compliance, using enforcement and
prosecution. The Group takes data protection very
seriously and follows the guidance provided by the ICO.
The Group continues to improve its processes in line with
changing guidelines and in order to meet customers
increasing expectations in relation to information security.
2. International
2.1 ABN AMRO
The consolidated supervisor of ABN AMRO is the Dutch
central bank, De Nederlandsche Bank (DNB). It operates
partly as the Dutch central bank and prudential supervisor
of banks and insurance companies; and also as part of
the European System of Central Banks. Following the
acquisition of ABN AMRO the Group now operates in over
50 countries.
2.2 United States
The Group is both a bank holding company and financial
holding company within the meaning of the US Bank
Holding Company Act of 1956. As such, it is subject to the
regulation and supervision of the Board of Governors of