RBS 2009 Annual Report Download - page 363

Additional information
361RBS Group Annual Report and Accounts 2009
Supervision
United Kingdom
The UK Financial Services Authority (FSA) is the consolidated
supervisor of the Group. As at 31 December 2009, 30 companies in the
Group (excluding subsidiaries of ABN AMRO), spanning a range of
financial services sectors (banking, insurance and investment business),
were authorised to conduct financial activities regulated by the FSA.
The UK authorised banks in the Group include the Royal Bank, NatWest,
Coutts & Co and Ulster Bank Limited. Wholesale activities, other than
Group Treasury activities, are concentrated in the Group’s Global
Banking & Markets and Corporate Banking divisions, and are
undertaken under the names of the Royal Bank and NatWest. UK retail
banking activities are managed by the UK Retail division. The exception
is Ulster Bank Limited, which is run as a separate division within the
Group. Ulster Bank Group will move to a single brand in the Republic of
Ireland, with First Active merging with Ulster Bank. Ulster Bank Limited
provides banking services in Northern Ireland while the banking service
in the Republic of Ireland is provided by Ulster Bank Ireland Limited
and (for the time being) First Active plc, which are primarily supervised
by the Irish Financial Regulator.
Investment management business is principally undertaken by
companies in the Wealth Management division, including Coutts & Co,
Adam & Company Investment Management Limited, and in the Global
Banking & Markets division, through RBS Asset Management Limited.
General insurance business is principally undertaken by Direct Line
Insurance plc and Churchill Insurance Company Limited. Life assurance
business is principally undertaken by Royal Scottish Assurance plc and
National Westminster Life Assurance Limited (in partnership with Aviva
plc).
The Group is subject to extensive regulations that impose obligations on
financial institutions to maintain appropriate policies, procedures and
controls to ensure compliance with the rules and regulations to which
they are subject.
United States
The Group is both a bank holding company and a 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 the Federal Reserve System (the “Federal
Reserve”). Among other things, the Group’s direct and indirect activities
and investments in the United States are limited to those that are
‘financial in nature’ or ‘incidental’ or ‘complementary’ to a financial
activity, as determined by the Federal Reserve. The Group is also
required to obtain the prior approval of the Federal Reserve before
acquiring directly or indirectly, the ownership or control of more than 5%
of any class of the voting shares of any US bank or holding company.
Under current Federal Reserve policy, the Group is required to act as a
source of financial strength for its US bank subsidiaries. Among other
things, this source of strength obligation could require the Group to
inject capital into any of its US bank subsidiaries if any of them became
undercapitalised.
Anti-money laundering, anti-terrorism and economic sanctions
regulations are a major focus of the US government for financial
institutions and are rigorously enforced by US government agencies.
The Group’s US bank and non-bank subsidiaries and the Royal Bank’s
US branches are also subject to supervision and regulation by a variety
of other US regulatory agencies. RBS Citizens NA is supervised by the
Office of the Comptroller of the Currency, which is charged with the
regulation and supervision of nationally chartered banks. Citizens Bank
of Pennsylvania is subject to the regulation and supervision of the US
Federal Deposit Insurance Corporation and the Pennsylvania
Department of Banking and Insurance. These banks represents
approximately 80 percent and 20 percent of the assets of Citizens
Financial Group, respectively. Citizens Financial Group is under the
supervision of the Federal Reserve as a bank holding company. The
Royal Bank’s New York branch is supervised by the New York State
Banking Department, and its Connecticut branch is supervised by the
Connecticut Department of Banking. Both branches are also subject to
supervisory oversight by the Federal Reserve, through the Federal
Reserve Bank of Boston.
The Group’s US broker dealer, RBS Securities Inc. (RBSSI), formerly
known as Greenwich Capital Markets, Inc., is subject to regulation and
supervision by the US Securities and Exchange Commission (SEC) and
the Financial Industry Regulatory Authority (FINRA) with respect to its
securities activities. The futures activities of RBSSI are subject to
regulation and oversight by the US Commodity Futures Trading
Commission (CFTC) and the Chicago Board of Trade (CBOT). The
Group's US commodities business, RBS Sempra Commodities, has as
its primary regulator the Federal Reserve Bank of Boston, with
additional supervision provided by the Federal Energy Regulatory
Commission (FERC) and the Commodity Futures Trading Commission
(CFTC).
Netherlands
The consolidated supervisor of ABN AMRO is the Dutch Central Bank,
De Nederlandsche Bank (DNB). The DNB operates as prudential
supervisor of banks, insurance companies and pension funds, and also
as part of the European System of Central Banks.
Other jurisdictions
The Group operates in over 50 countries through a network of branches,
local banks and non-bank subsidiaries and these activities are subject
to supervision in most cases by a local regulator or central bank.
Regulatory developments and reviews
The Group works with domestic and international trade associations and
proactively engages with regulators and other authorities such as the
Basel Committee, the Committee of European Banking Supervisors and
the EU Commission in order to understand the implications of proposed
regulatory change and to contribute to the development of regulatory
policy.
The Group and its subsidiaries have co-operated fully with various
regulatory reviews and developments in the UK and internationally,
including enquiries or investigations into alleged or possible breaches of
regulations.
United Kingdom
In the UK, the Group has actively engaged with a large number of
legislative and regulatory consultations. Reflecting global developments,
financial stability – notably bank prudential requirements and depositor
protection – has been a key focus for the UK regulatory authorities.