RBS 2010 Annual Report Download - page 368

34 Memorandum items
Contingent liabilities and commitments
The amounts shown in the table below are intended only to provide an indication of the volume of business outstanding at 31 December. Although the
Group is exposed to credit risk in the event of non-performance of the obligations undertaken by customers, the amounts shown do not, and are not
intended to, provide any indication of the Group's expectation of future losses.
Group
Less than
1year
More than
1year but
less than
3years
More than
3years but
less than
5years
Over
5years 2010 2009 2008
£m £m £m £m £m £m £m
Contingent liabilities
Guarantees and assets pledged as collateral security 20,044 5,220 2,178 3,659 31,101
40,008 49,262
Other contingent liabilities 6,058 2,877 1,235 2,084 12,254
14,012 22,275
26,102 8,097 3,413 5,743 43,355
54,020 71,537
Commitments
Undrawn formal standby facilities, credit lines and other
commitments to lend
-less than one year 117,581 — — — 117,581
127,423 166,572
- one year and over 22,258 80,267 26,931 19,785 149,241
164,211 185,826
Other commitments 1,623 161 2,366 4 4,154
6,007 9,326
141,462 80,428 29,297 19,789 270,976
297,641 361,724
Banking commitments and contingent obligations, which have been
entered into on behalf of customers and for which there are
corresponding obligations from customers, are not included in assets and
liabilities. The Group's maximum exposure to credit loss, in the event of
non-performance by the other party and where all counterclaims,
collateral or security proves valueless, is represented by the contractual
nominal amount of these instruments included in the table above. These
commitments and contingent obligations are subject to the Group's
normal credit approval processes.
Contingent liabilities
Guarantees - the Group gives guarantees on behalf of customers. A
financial guarantee represents an irrevocable undertaking that the Group
will meet a customer's obligations to third parties if the customer fails to
do so. The maximum amount that the Group could be required to pay
under a guarantee is its principal amount as disclosed in the table above.
The Group expects most guarantees it provides to expire unused.
Other contingent liabilities - these include standby letters of credit,
supporting customer debt issues and contingent liabilities relating to
customer trading activities such as those arising from performance and
customs bonds, warranties and indemnities.
Commitments
Commitments to lend - under a loan commitment the Group agrees to
make funds available to a customer in the future. Loan commitments,
which are usually for a specified term may be unconditionally cancellable
or may persist, provided all conditions in the loan facility are satisfied or
waived. Commitments to lend include commercial standby facilities and
credit lines, liquidity facilities to commercial paper conduits and unutilised
overdraft facilities.
Other commitments - these include documentary credits, which are
commercial letters of credit providing for payment by the Group to a
named beneficiary against presentation of specified documents, forward
asset purchases, forward deposits placed and undrawn note issuance
and revolving underwriting facilities, and other short-term trade related
transactions.
RBS Group 2010366
Notes on the accounts continued