RBS 2007 Annual Report Download - page 84

RBS Group • Annual Report and Accounts 2007
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Business review continued
Business review
Including Excluding
ABN AMRO ABN AMRO
2007 2007 2006 2005
Net short-term wholesale market activity £m £m £m £m
Debt securities, listed held-for-trading equity shares, treasury and other eligible bills 328,352 174,724 135,775 129,440
Reverse repo agreements with banks and customers 318,298 146,675 117,060 90,691
Less: repos with banks and customers (297,954) (150,184) (140,360) (96,659)
Short positions (73,501) (47,058) (43,809) (37,427)
Insurance companies’ debt securities held (8,062) (6,876) (6,149) (5,724)
Debt securities charged as security for liabilities (29,709) (8,911) (8,560) (9,578)
Net marketable assets 237,424 108,370 53,957 70,743
By remaining maturity up to one month:
Deposits by banks (excluding repos) 112,181 38,470 36,089 35,153
Less: loans and advances to banks (gross, excluding reverse repos) (25,609) (21,763) (21,136) (16,381)
Debt securities in issue 66,289 28,814 19,924 20,577
Net wholesale liabilities due within one month 152,861 45,521 34,877 39,349
Net surplus of marketable assets over wholesale liabilities due within one month 84,563 62,849 19,080 31,394
Excluding ABN AMRO, the Group’s net surplus of marketable
assets over net short-term wholesale liabilities due within one
month increased by £43.8 billion, reflecting actions taken by
the Group to increase its liquidity cover in response to market
conditions. Including ABN AMRO, the net surplus of
marketable assets over net short-term wholesale liabilities due
within one month was £84.6 billion.
Sterling liquidity
Excluding ABN AMRO, over 36% of the Group’s total assets
are denominated in sterling, where the FSA requires the Group,
on a consolidated basis, to maintain daily a minimum ratio of
100% between:
•a stock of qualifying high quality liquid assets (primarily UK
and EU government securities, treasury bills and cash held
in branches); and
•the sum of: sterling wholesale net outflows contractually due
within five working days (offset up to a limit of 50%, by 85%
of sterling certificates of deposit held which mature beyond
five working days); and 5% of retail deposits with a residual
contractual maturity of five working days or less.
The FSA also sets an absolute minimum level for the stock of
qualifying liquid assets that the Group is required to maintain
each day. Internal processes ensure that the Group achieves
or exceeds these minimum requirements at all times.
Liquidity in non-sterling currencies
The Group also recognises the importance of non-sterling
liquidity, which is managed daily within various limits. This takes
into account the marketability, within a short period, of the wide
range of debt securities held, if required to meet unexpected
outflows.
The level of contingent risk from the potential drawing of
undrawn or partially drawn commitments, back-up lines,
standby lines and other similar facilities is also actively
monitored and reflected in the measures of the Group’s non-
sterling liquidity risk. Particular attention is given to the US
dollar commercial paper market and the propensity of the
Group’s bank and corporate counterparties who are active in
raising funds from that market to switch to utilising facilities
offered by the Group in the event of either counterparty
specific difficulties or a significant widening of interest spreads
generally in the commercial paper market.