RBS 2011 Annual Report Download - page 221

RBS Group 2011 219
Italy
Credit default protection (reference entity)
HFT
debt securities Notional Fair value
Lending REIL Provisions
AFS and
LAR debt
securities
AFS
reserves Long Short
Total debt
securities
Derivatives
(gross of
collateral)
and repos
Balance
sheet
exposures Bought Sold Bought Sold
2011 £m £m £m £m £m £m £m £m £m £m £m £m £m £m
Central and
local government — — — 704 (220) 4,336 4,725 315 90 405 12,125 12,218 1,750 (1,708)
Central banks 73 — — — — — — — — 73 — — — —
Other banks 233 — — 119 (14) 67 88 98 1,064 1,395 6,078 5,938 1,215 (1,187)
Other financial
institutions 299 — — 685 (15) 40 13 712 686 1,697 872 762 60 (51)
Corporate 2,444 361 113 75 — 58 — 133 474 3,051 4,742 4,299 350 (281)
Personal 23 — — — — — — — — 23 — — — —
3,072 361 113 1,583 (249) 4,501 4,826 1,258 2,314 6,644 23,817 23,217 3,375 (3,227)
2010
Central and local
government 45 — — 906 (99) 5,113 3,175 2,844 71 2,960 8,998 8,519 641 (552)
Central banks 78 — — — — — — — — 78 — — — —
Other banks 668 — — 198 (11) 67 16 249 782 1,699 4,417 4,458 421 (414)
Other financial
institutions 418 — — 646 (5) 49 — 695 759 1,872 723 697 21 (13)
Corporate 2,483 314 141 20 — 36 8 48 420 2,951 4,506 3,966 150 (88)
Personal 27 — — — — — — — — 27 — — — —
3,719 314 141 1,770 (115) 5,265 3,199 3,836 2,032 9,587 18,644 17,640 1,233 (1,067)
CDS bought protection: counterparty analysis by internal asset quality band
AQ1 AQ2-AQ3 AQ4-AQ9 AQ10 Total
Notional Fair value Notional Fair value Notional Fair value Notional Fair value Notional Fair value
2011 £m £m £m £m £m £m £m £m £m £m
Banks 12,904 1,676 487 94 61 10 — — 13,452 1,780
Other financial institutions 10,138 1,550 8 2 219 43 — — 10,365 1,595
Total 23,042 3,226 495 96 280 53 — — 23,817 3,375
Key points*
xThe Group maintains strong relationships with Italian government
entities, banks, other financial institutions and large corporate clients.
Since the start of 2011, the Group has taken steps to reduce its risks
through strategic exits where appropriate, or to mitigate these risks
through increased collateral requirements, in line with its evolving
appetite for Italian risk. As a result, the Group reduced lending
exposure to Italian counterparties by £0.6 billion over 2011 to £3.1
billion.
Central and local government and central bank
xThe Group is an active market-maker in Italian government bonds,
resulting in large gross long and short positions in held-for-trading
securities. Given this role, the Group left itself in a relatively modest
long position at 31 December 2011 to avoid being temporarily over
exposed as a result of its expected participation in the purchase of
new government bonds being issued in January 2012.
xOver 2011, the total government debt securities position declined by
£2.5 billion to £0.3 billion, reflecting a rebalancing of the trading
portfolio.
Financial institutions
xThe majority of the Group’s exposure to Italian financial institutions
relates to the top five banks. The Group’s product offering consists
largely of collateralised trading products and, to a lesser extent,
short-term uncommitted lending lines for liquidity purposes.
Corporate
xLending exposure fell slightly during 2011, with reductions in lending
to the property industry offset by increased lending to manufacturing
companies, particularly in the fourth quarter.
Non-Core (included above)
Refer to tables on pages 211 and 212 for details.
xNon-Core lending exposure was £1.2 billion at 31 December 2011, a
£0.7 billion (39%) reduction since 31 December 2010. The
remaining lending exposure comprises mainly commercial real
estate finance (22%), leisure (20%), unleveraged funds (16%),
electricity (15%) and industrials (10%).