RBS 2011 Annual Report Download - page 130

128 RBS Group 2011
Balance sheet management: Liquidity and funding risk continued
Assets and liabilities by contractual cash flow maturity
The tables below show the contractual undiscounted cash flows
receivable and payable, up to a period of twenty years, including future
receipts and payments of interest of on-balance sheet assets by
contractual maturity. The balances in the table below do not agree
directly with the consolidated balance sheet, as the table includes all
cash flows relating to principal and future coupon payments, presented
on an undiscounted basis. The tables have been prepared on the
following basis:
The contractual maturity of on-balance sheet assets and liabilities
highlights the maturity transformation which underpins the role of banks
to lend long-term, but to fund themselves predominantly by short-term
liabilities such as customer deposits. This is achieved through the
diversified funding franchise of the Group across an extensive retail,
wealth and SME customer base, and across a wide geographic network.
In practice, the behavioural profiles of many assets and liabilities exhibit
greater stability and longer maturity than the contractual maturity.
Financial assets have been reflected in the time band of the latest date
on which they could be repaid, unless earlier repayment can be
demanded by the Group. Financial liabilities are included at the earliest
date on which the counterparty can require repayment, regardless of
whether or not such early repayment results in a penalty. If the
repayment of a financial instrument is triggered by, or is subject to,
specific criteria such as market price hurdles being reached, the asset is
included in the time band that contains the latest date on which it can be
repaid, regardless of early repayment. The liability is included in the time
band that contains the earliest possible date on which the conditions
could be fulfilled, without considering the probability of the conditions
being met.
For example, if a structured note is automatically prepaid when an equity
index exceeds a certain level, the cash outflow will be included in the less
than three months period, whatever the level of the index at the year end.
The settlement date of debt securities in issue, issued by certain
securitisation vehicles consolidated by the Group, depends on when cash
flows are received from the securitised assets. Where these assets are
prepayable, the timing of the cash outflow relating to securities assumes
that each asset will be prepaid at the earliest possible date. As the
repayments of assets and liabilities are linked, the repayment of assets in
securitisations is shown on the earliest date that the asset can be prepaid,
as this is the basis used for liabilities.
The principal amounts of financial assets and liabilities that are repayable
after twenty years or where the counterparty has no right to repayment of
the principal are excluded from the table, as are interest payments after
twenty years.
0-3 months 3-12 months 1-3 years 3-5 years 5-10 years 10-20 years
2011 £m £m £m £m £m £m
Assets by contractual maturity
Cash and balances at central banks 79,269 — — — — —
Loans and advances to banks 26,326 1,294 544 121 114 —
Debt securities 7,237 9,569 23,137 21,003 39,148 15,869
Settlement balances 7,759 8 — 1 — —
Other financial assets 397 158 — 16 738 —
Total maturing assets 120,988 11,029 23,681 21,141 40,000 15,869
Loans and advances to customers 97,318 90,894 108,331 55,785 62,085 56,259
Derivatives held for hedging 519 1,556 3,438 1,695 596 138
218,825 103,479 135,450 78,621 102,681 72,266
Liabilities by contractual maturity
Deposits by banks 39,139 5,104 5,513 461 1,121 364
Debt securities in issue 66,253 15,756 25,099 17,627 18,833 4,190
Subordinated liabilities 133 1,116 4,392 7,872 8,654 3,488
Settlement balances and other liabilities 9,015 37 36 62 16 15
Total maturing liabilities 114,540 22,013 35,040 26,022 28,624 8,057
Customer accounts 379,692 23,068 12,643 5,389 1,483 779
Derivatives held for hedging 525 788 1,981 1,186 1,101 821
494,757 45,869 49,664 32,597 31,208 9,657
Maturity gap 6,448 (10,984) (11,359) (4,881) 11,376 7,812
Cumulative maturity gap 6,448 (4,536) (15,895) (20,776) (9,400) (1,588)
Guarantees and commitments notional amount
Guarantees (1) 24,886 — — — — —
Commitments (2) 239,963 — — — — —
For notes relating to this table refer to page 130.
Business review Risk and balance sheet management continued