RBS 2007 Annual Report Download - page 82

RBS Group • Annual Report and Accounts 2007
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Business review continued
Business review
Including ABN AMRO Excluding ABN AMRO
2007 2007 2006 2005
Sources of funding £m % £m % £m % £m %
Customer accounts (excluding repos)
Repayable on demand 346,074 24 225,908 26 197,771 28 172,853 27
Time deposits 201,375 14 140,630 17 122,467 17 121,260 19
Total customer accounts (excluding repos) 547,449 38 366,538 43 320,238 45 294,113 46
Debt securities in issue over one year
remaining maturity 117,873 8 55,448 7 44,006 6 22,293 3
Subordinated liabilities 37,979 3 27,665 3 27,654 4 28,274 4
Owners’ equity 53,038 4 53,177 6 40,227 6 35,435 6
Total customer accounts and long term funds 756,339 53 502,828 59 432,125 61 380,115 59
Repo agreements with customers 134,916 10 75,029 9 63,984 9 48,754 7
Repo agreements with banks 163,038 11 75,155 9 76,376 11 47,905 7
Total customer accounts, long term funds
and collateralised borrowing 1,054,293 74 653,012 77 572,485 81 476,774 73
Debt securities in issue up to one year
remaining maturity 155,742 11 89,189 10 41,957 5 68,127 11
Deposits by banks (excluding repos) 149,595 10 67,301 8 55,767 8 62,502 10
Short positions 73,501 5 47,058 5 43,809 6 37,427 6
Total 1,433,131 100 856,560 100 714,018 100 644,830 100
Customer accounts (excluding repos) and long term funds (term
debt securities in issue of over one year remaining maturity and
capital) continue to represent the core of the Group’s funding.
Excluding ABN AMRO, these core funds in total increased by
£70.7 billion (16%) over the course of 2007 to represent 59% of
total funding at 31 December 2007. The inclusion of ABN AMRO
has added £253.5 billion to that total at 31 December 2007 to
represent 53% of total funding in the enlarged balance sheet.
Customer accounts comprise a well diversified and stable
source of funds from a wide range of retail, corporate and non-
bank institutional customers. Excluding ABN AMRO, customer
accounts grew by £46.3 billion (14%) to represent 43% of total
funding at 31 December 2007. The inclusion of ABN AMRO has
added £180.9 billion to that total at 31 December 2007, to
represent 38% of total funding in the enlarged balance sheet.
Term debt securities in issue with an outstanding term of over
one year increased £11.4 billion (26%) to represent 7% of the
Group’s funding at 31 December 2007 excluding ABN AMRO,
reflecting the activity of the Group in raising term funds through
its securitisation and Euro and US Medium Term Note
programmes.
Including ABN AMRO, term debt issuance through its similar
programmes has added £62.4 billion to that figure, to
represent 8% of total funding in the enlarged balance sheet.
Capital (owners’ equity and subordinated debt) increased
by £13.0 billion (19%) to provide 9% of total funding at
31 December 2007.
Repo borrowing collateralised by a range of debt securities
and other assets is undertaken with a range of corporate and
institutional customers and banks. Excluding ABN AMRO,
collateralised borrowing by repo increased by £9.8 billion (7%)
to represent 18% of the Group’s funding at 31 December
2007. Including ABN AMRO collateralised borrowing by repo
has added £147.8 billion to that figure, to represent 21% of
total funding in the enlarged balance sheet.
Short term wholesale funds (with up to one year residual
maturity) are taken on an uncollateralised basis from a wide
range of counterparties and debt investors, with the largest
single depositor continuing to represent less than 1% of the
Group’s total funding.
Liquidity risk
The Group’s liquidity policy is designed to ensure that it can at
all times meet its obligations as they fall due.
Liquidity management within the Group focuses on overall
balance sheet structure and the control, within prudent limits,
of risk arising from the mismatch of maturities across the
balance sheet and from exposure to undrawn commitments
and other contingent obligations. The management of liquidity
risk within the Group is undertaken within limits and other
policy parameters set by GALCO. Compliance is monitored
and coordinated by Group Treasury both in respect of internal
policy and the regulatory requirements of the Financial
Services Authority. In addition, all subsidiaries and branches
outside the UK ensure compliance with any local regulatory
liquidity requirements and are subject to Group Treasury
oversight.
Diversification of funding sources
The structure of the Group’s balance sheet is managed to
maintain substantial diversification, to minimise concentration
across its various deposit sources, and to limit the reliance on
total short-term wholesale sources of funds (gross and net of
repos) within prudent levels.
During 2007, the Group’s funding sources remained well
diversified by counterparty, instrument and maturity, both
before and after the acquisition of ABN AMRO in October 2007.