RBS 2011 Annual Report Download - page 127

RBS Group 2011 125
Conduits
The Group sponsors and administers a number of asset-backed
commercial paper (ABCP) conduits. A conduit is a SPE that issues
commercial paper and uses the proceeds to purchase or fund a pool of
assets. The commercial paper is secured on the assets and is redeemed
by further commercial paper issuance, repayment of assets or funding
from liquidity facilities. Commercial paper is typically short-dated, usually
up to three months.
Group-sponsored conduits can be divided into multi-seller conduits and
own-asset conduits. In determining whether or not to consolidate a
conduit the Group applies the same criteria as to SPEs. Liquidity
commitments from the Group to the conduit exceed the nominal amount
of assets funded by the conduit as liquidity commitments are sized to
cover the funding cost of the related assets.
The ways the Group may be involved with conduits and other special
purpose entities are described on page 124.
The Group’s involvement in conduits takes a number of forms. It may:
xSponsor an ABCP programme i.e. establish the programme and
approve the sellers permitted to participate in the programme and
the asset pools to be purchased by the programme;
xAdminister an ABCP programme;
xProvide the ABCP conduit with liquidity facilities;
xProvide the ABCP conduit with a programme-wide credit
enhancement facility; or
xPurchase commercial paper from an ABCP conduit.
Total assets and other aspects relating to the Group’s consolidated
accounts are set out below.
2011 2010 2009
Core
£m
Non-Core
£m
Total
£m
Core
£m
Non-Core
£m
Total
£m
Core
£m
Non-Core
£m
Total
£m
Total assets held by the conduits 11,208 1,893 13,101 16,390 3,624 20,014 23,409 3,957 27,366
Commercial paper issued (1) 10,590 859 11,449 15,522 2,540 18,062 22,644 2,939 25,583
Liquidity and credit enhancements
Deal specific liquidity
-drawn 321 1,051 1,372 868 1,109 1,977 738 1,059 1,797
- undrawn 15,324 1,144 16,468 21,935 2,980 24,915 28,628 3,852 32,480
PWCE (2) 795 193 988
1,025 257 1,282 1,167 341 1,508
16,440 2,388 18,828 23,828 4,346 28,174 30,533 5,252 35,785
Maximum exposure to loss (3) 15,646 2,194 17,840 22,803 4,089 26,892 29,365 4,911 34,276
Notes:
(1) Includes £0.3 billion of ABCP issued to RBS plc at 31 December 2011 (2010 - £0.7 billion).
(2) Programme-wide credit enhancement (PWCE) is an additional programme-wide credit support which would absorb first loss on transactions where liquidity support is provided by a third party.
(3) Maximum exposure to loss quantifies the Group’s exposure to its sponsored conduits. It is determined as the Group’s liquidity commitment to its sponsored conduits and additional PWCE which
would absorb first loss on transactions where liquidity support is provided by third parties. Historically, PWCE has been greater than third party liquidity. Therefore the maximum exposure to loss is
total deal specific liquidity.
(4) Liquidity commitments from the Group to the conduit exceed the nominal amount of assets funded by the conduit given that liquidity commitments are sized to cover the accrued funding cost of the
related assets.
Key points
xDuring 2011, both multi-seller and own-asset conduit assets
decreased, as deals terminated and Non-Core assets were sold.
The total assets held by Group-sponsored conduits were £13.1
billion at 31 December 2011 (2010 - £20.0 billion; 2009 - £27.4
billion).
xThe average maturity of ABCP issued by the Group’s conduits at 31
December 2011 was 42.6 days (2010 - 69.4 days; 2009 - 58.4 days).
xThe maturity of the commercial paper issued by the Group’s
conduits is managed to mitigate the short-term contingent liquidity
risk of providing back-up facilities. The Group’s limits sanctioned for
such liquidity facilities in 2011 totalled approximately £16.8 billion for
multi-seller conduits (2010 - £22.6 billion; 2009 - £25.0 billion).
xThe weighted average life of the funded assets was 1.9 years at 31
December 2011 (2010 - 2.3 years; 2009 - 1.9 years).
xThe Group’s maximum exposure to loss on its multi-seller conduits
is £16.7 billion (2010 - £22.8 billion; 2009 - £25.2 billion), being the
total amount of the Group’s liquidity commitments plus the extent of
the programme-wide credit enhancement of conduit assets for which
facilities were not provided by third parties.
xThe Group holds a single own-asset conduit, which has assets
funded by the Group. The Group’s maximum exposure to loss on
own-asset conduits was £1.1 billion in 2011 (2010 - £4.1 billion;
2009 - £9.1 billion), with no ABCP outstanding at that date (2010 -
£2.2 billion; 2009 - £7.7 billion).
xMulti-seller conduits accounted for 93% of the total liquidity and
credit enhancements committed by the Group at 31 December 2011
(2010 - 84%; 2009 - 73%). The Group’s multi-seller conduits have
continued to fund the vast majority of their assets solely through
ABCP issuance.