RBS 2011 Annual Report Download - page 192

190 RBS Group 2011
Risk management: Credit risk continued
Balance sheet analysis continued
The Group also has indirect exposures to monoline insurers through wrapped securities and other assets with credit enhancement from monoline
insurers. These securities are traded with the benefit of this credit enhancement. Any deterioration in the credit rating of the monoline is reflected in the
fair value of these assets.
Credit derivative product companies (CDPCs)
Asummary of the Group's exposure to CDPCs, all of which are in Non-Core, is detailed below.
2011
£m
2010
£m
2009
£m
Gross exposure to CDPCs 1,896 1,244 1,275
Credit valuation adjustment (1,034) (490) (499)
Net exposure to CDPCs 862 754 776
Credit valuation adjustment as a % of gross exposure 55% 39% 39%
Counterparty and credit risk RWAs* £8.4bn £7.2bn £7.5bn
Capital deductions £245m £280m £347m
The table below details CDPC exposures by rating.
2011
Notional:
protected
assets
£m
Fair value:
reference
protected
assets
£m
Gross
exposure
£m
Credit
valuation
adjustment
£m
Net
exposure
£m
AAA 213 212 1 — 1
Ato AA- 646 632 14 3 11
Non-investment grade 19,671 18,151 1,520 788 732
Unrated 3,974 3,613 361 243 118
24,504 22,608 1,896 1,034 862
2010
AAA 213 212 1 — 1
Ato AA- 644 629 15 4 11
Non-investment grade 20,066 19,050 1,016 401 615
Unrated 4,165 3,953 212 85 127
25,088 23,844 1,244 490 754
2009
AAA 1,658 1,637 21 5 16
BBB- to A- 1,070 1,043 27 9 18
Non-investment grade 17,696 16,742 954 377 577
Unrated 3,926 3,653 273 108 165
24,350 23,075 1,275 499 776
The table below details the net income statement effect arising from CDPC exposures.
2011 2010 2009
£m £m £m
Credit valuation adjustment at 1 January (490) (499) (1,311)
Credit valuation adjustment at 31 December (1,034) (490) (499)
(Increase)/decrease in credit valuation adjustment (544) 9 812
Net credit/(debit) relating to realisations, hedges, foreign exchange and other movements 459 (150) (1,769)
Loss from trading activities (85) (141) (957)
Key points
xThe exposure to CDPCs has increased during the year. This was
primarily driven by wider credit spreads of the underlying reference
loans and bonds.
*unaudited
xThe CVA increased in line with the increase in exposure.
xCounterparty and credit RWAs increased in line with the increase in
the exposure.*
Business review Risk and balance sheet management continued