RBS 2010 Annual Report Download - page 439

Individually assessed loan impairment provisions - impairment loss
provisions for individually significant impaired loans assessed on a case-
by-case basis, taking into account the financial condition of the
counterparty and any guarantor and the realisable value of any collateral
held.
International Accounting Standards Board (IASB) - is the independent
standard-setting body of the IASC Foundation. Its members are
responsible for the development and publication of International Financial
Reporting Standards (IFRS) and for approving Interpretations of IFRS as
developed by the International Financial Reporting Interpretations
Committee (IFRIC).
Interest rate swap - a contract under which two counterparties agree to
exchange periodic interest payments on a predetermined monetary
principal, the notional amount.
Interest spread - is the difference between the gross yield and the interest
rate paid on average interest-bearing liabilities.
Investment grade - generally represents a risk profile similar to a rating of
BBB-/Baa3 or better, as defined by independent rating agencies.
Latent loss provisions - loan impairment provisions held against
impairments in the performing loan portfolio that have been incurred as a
result of events occurring before the balance sheet date but which have
not been identified as impaired at the balance sheet date. The Group has
developed methodologies to estimate latent loss provisions that reflect
historical loss experience (adjusted for current economic and credit
conditions) and the period between an impairment occurring and a loan
being identified and reported as impaired.
Leveraged loans -funding (leveraged finance) provided to a business
resulting in an overall level of debt that exceeds that which would be
considered usual for the business or for the industry in which it operates.
Leveraged finance is commonly employed to achieve a specific, often
temporary, objective: to make an acquisition, to effect a buy-out or to
repurchase shares.
Liquidity enhancements - make funds available to ensure that the issuer
of securities, usually a commercial paper conduit, can redeem the
securities at maturity. They typically take the form of a committed facility
from a third-party bank.
Loan impairment provisions -are established to recognise incurred
impairment losses on a portfolio of loans classified as loans and
receivables and carried at amortised cost. It has three components:
individually assessed loan impairment provisions, collectively assessed
loan impairment provisions and latent loss provisions.
Loan-to-value ratio - the amount of a secured loan as a percentage of the
appraised value of the security e.g. the outstanding amount of a
mortgage loan as a percentage of the property's value.
Loss given default (LGD) - the economic loss that may occur in the event
of default i.e. the actual loss - that part of the exposure that is not
expected to be recovered - plus any costs of recovery.
Master netting agreement - is an agreement between two counterparties
that have multiple derivative contracts with each other that provides for
the net settlement of all contracts through a single payment, in a single
currency, in the event of default on, or termination of, any one contract.
Medium term notes (MTNs) - are debt securities usually with a maturity of
five to ten years, but the term may be less than one year or as long as 50
years. They can be issued on a fixed or floating coupon basis or with an
exotic coupon; with a fixed maturity date (non-callable) or with embedded
call or put options or early repayment triggers. MTNs are most generally
issued as senior, unsecured debt.
Monoline insurers - are entities that specialise in providing credit
protection against the notional and interest cash flows due to the holders
of debt instruments in the event of default. This protection is typically in
the form of derivatives such as credit default swaps.
Mortgage-backed securities - are asset-backed securities for which the
underlying asset portfolios are loans secured on property. See
Residential mortgage backed securities and Commercial mortgage
backed securities.
Mortgage servicing rights - are the rights of a mortgage servicer to collect
mortgage payments and forward them, after deducting a fee, to the
mortgage lender.
Mortgage vintage - the year in which a mortgage loan was made to the
customer.
Negative equity mortgages - mortgages where the value of the property
mortgaged is less than the outstanding balance on the loan.
Net interest income - is the difference between interest receivable on
financial assets classified as loans and receivables or available-for-sale
and interest payable on financial liabilities carried at amortised cost.
Net interest margin - is net interest income as a percentage of average
interest-earning assets.
Net principal exposure - is the carrying value of a financial asset after
taking account of credit protection purchased but excluding the effect of
any counterparty credit valuation adjustment to that protection.
437RBS Group 2010
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