RBS 2008 Annual Report Download - page 282

281RBS Group Annual Report and Accounts 2008
Department of Justice investigation
As previously disclosed by ABN AMRO, the United States Department
of Justice has been conducting a criminal investigation into ABN
AMRO’s dollar clearing activities, Office of Foreign Assets Control
compliance procedures and other Bank Secrecy Act compliance
matters. ABN AMRO has cooperated and continues to cooperate fully
with the investigation. Prior to the acquisition by the Group, ABN AMRO
had reached an agreement in principle with the Department of Justice
that would resolve all presently known aspects of the ongoing
investigation by way of a Deferred Prosecution Agreement in return for a
settlement payment by ABN AMRO of US$500 million (accrued by ABN
AMRO in its interim financial statements for the six months ended 30
June 2007). Negotiations are continuing to enable a written agreement
to be concluded.
Sub-prime exposures
Certain of the Group’s subsidiaries have received requests for
information from various US governmental agencies and self-regulatory
organisations including in connection with sub-prime mortgages and
securitisations, collateralised debt obligations and synthetic products
related to sub-prime mortgages. In particular, during March 2008, the
Group was advised by the SEC that it had commenced a non-public,
formal investigation relating to the Group’s US sub-prime securities
exposures and US residential mortgage exposures. The Group and its
subsidiaries are cooperating with these various requests for information
and investigations.
The outcome of these reviews is outside the Group’s control and it is
not possible to predict the effect, if any, on the Group’s operations of
future regulatory actions or policy changes.
Other jurisdictions
The Group is active in monitoring regulatory developments in each
country in which it operates to ensure internal policies are sufficient to
ensure the effective management of regulatory risk.
Description of property and equipment
The Group operates from a number of locations worldwide, principally
in the UK. At 31 December 2008, the Royal Bank and NatWest had 651
and 1,628 retail branches, respectively, in the UK. Ulster Bank and First
Active had a network of 295 branches and business centres in Northern
Ireland and the Republic of Ireland. Citizens had 1,606 retail banking
offices (including in-store branches) covering Connecticut, Delaware,
Illinois, Indiana, Massachusetts, Michigan, New Hampshire, New Jersey,
New York, Ohio, Pennsylvania, Rhode Island and Vermont. A substantial
majority of the UK branches are owned by the Royal Bank, NatWest and
their subsidiaries or are held under leases with unexpired terms of over
50 years. The Group’s principal properties include its headquarters at
Gogarburn, Edinburgh, its principal offices in London at 135 and 280
Bishopsgate and the Drummond House administration centre located at
South Gyle, Edinburgh.
Total capital expenditure on premises (excluding investment properties),
computers and other equipment in the year ended 31 December 2008
was £1,406 million (2007 – £1,792 million; 2006 – £1,140 million).
Major shareholders
Details of major shareholders of the company’s ordinary and
preference shares are given on page 152.
In December 2008, The Solicitor for the Affairs of Her Majesty’s
Treasury acquired 22,854 million ordinary shares representing 57.92%
of the company’s issued ordinary share capital. The ordinary
shareholding of Legal & General Group plc decreased from 5.04% in
December 2007 to below 3% in December 2008.
Other than detailed above, there have been no significant changes in
the percentage ownership of major shareholders of the company’s
ordinary and preference shares during the three years ended 25
February 2009. All shareholders within a class of the company’s shares
have the same voting rights.
At 25 February 2009, the directors of the company had options to
purchase a total of 3,073,445 ordinary shares of the company.
As at 31 December 2008, almost all of the company’s US$
denominated preference shares and American Depositary Shares
representing ordinary shares were held by shareholders registered in
the US. All other shares were predominantly held by shareholders
registered outside the US.
Material contracts
The company and its subsidiaries are party to various contracts in the
ordinary course of business. Material contracts include the following:
Consortium and Shareholders Agreement (CSA)
On 28 May 2007, Fortis, the company, Santander and RFS Holdings
entered into the CSA. Fortis Bank Nederland acceded to the CSA on 26
July 2007. On 3 October 2008, the State of the Netherlands acquired
Fortis Bank Nederland. On 24 December 2008 the State of the
Netherlands acceded to the CSA following its acquisition of the shares
held by Fortis Bank Nederland in RFS Holdings pursuant to a Deed of
Accession entered into between RFS Holdings, the company, Fortis
Bank Nederland, Santander and the State of the Netherlands. The CSA
governs the relationships amongst the parties thereto in relation to the
acquisition by RFS Holdings of ABN AMRO. The CSA details, inter alia,
the funding of RFS Holdings in connection with the acquisition of ABN
AMRO, the equity interests in RFS Holdings, the governance of RFS
Holdings both before and after the acquisition of ABN AMRO, the
arrangements for the transfer of certain ABN AMRO businesses, assets
and liabilities to the State of the Netherlands (previously Fortis Bank
Nederland), the company and Santander post-acquisition of ABN
AMRO, further funding obligations of the State of the Netherlands
(previously Fortis Bank Nederland), the company and Santander after
the acquisition of ABN AMRO where funding is required by regulatory
authorities in connection with the ABN AMRO businesses, the allocation
of Core Tier 1 capital and the allocation of taxes and conduct of tax affairs.