RBS 2011 Annual Report Download - page 230

228 RBS Group 2011
Risk management: Country risk continued
Eurozone non-periphery
Key points*
xDue to credit risk and capital considerations, the Group increased
exposure to central banks (particularly in Germany and the
Netherlands) by depositing with them higher levels of surplus
liquidity on a short-term basis, given the limited alternative
investment opportunities.
xDuring 2011, in anticipation of widening credit spreads and for
reasons of general risk management, the Group reduced its
holdings in French and Dutch AFS sovereign bonds. The Group
concurrently increased its holdings of German AFS sovereign debt
in line with internal liquidity and risk management strategies.
Financial institutions
xFrance - approximately half of the lending to banks is to the top
three banks.
xLuxembourg - lending to non-bank financial institutions increased by
£1.0 billion during 2011 reflecting collateral relating to derivatives
and repos.
Corporate
xNetherlands - corporate lending fell £1.3 billion over 2011, driven by
the manufacturing, natural resources and services sectors. The
relatively large contingent liabilities and commitments declined £7.9
billion.
Non-Core
Refer to tables on pages 211 and 212 for details.
xNon-Core lending exposure has been generally reduced in line with
the Group’s Strategic Plan. Lending exposure in France was £2.3
billion at 31 December 2011, having declined £0.5 billion during
2011. The lending portfolio mainly comprises property (45%) and
sovereign and quasi-sovereign (20%) exposures.
xNon-Core lending exposure in Germany was £5.4 billion at 31
December 2011, down £1.1 billion since 31 December 2010. The
lending portfolio is mostly in the property (44%) and transport (35%)
sectors.
xNon-Core lending exposure in the Netherlands was £2.5 billion at 31
December 2011, down £0.7 billion. The portfolio mainly comprises
exposures to the property (66%) and technology, media and
telecommunications (19%) sectors.
*unaudited
Business review Risk and balance sheet management continued