RBS 2011 Annual Report Download - page 445

RBS Group 2011 443
Supervision
United Kingdom
The UK Financial Services Authority (FSA) is the consolidated supervisor
of the Group. As at 31 December 2011, 26 companies in the Group
(excluding subsidiaries of RBS NV), spanning a range of financial
services sectors (banking, insurance and investment business), were
authorised to conduct financial activities regulated by the FSA.
The UK authorised banks in the Group include the Royal Bank, NatWest,
Coutts & Co and Ulster Bank Limited. Wholesale activities, other than
Group Treasury activities, are concentrated in the Group's Global
Banking & Markets and UK Corporate divisions, and are undertaken
under the names of the Royal Bank and NatWest. UK retail banking
activities are managed by the UK Retail division. The exception is Ulster
Bank Limited, which is run as a separate division within the Group. Ulster
Bank Limited provides banking services in Northern Ireland while the
banking service in the Republic of Ireland is provided by Ulster Bank
Ireland Limited, which is primarily supervised by the Central Bank of
Ireland.
Investment management business is principally undertaken by
companies in the Wealth division, including Coutts & Co, Adam &
Company Investment Management Limited, and in the Global Banking &
Markets division, through RBS Asset Management Limited.
General insurance business was principally undertaken by Direct Line
Insurance plc and Churchill Insurance Company Limited. On 10
December 2011, the assets and liabilities of these companies were
transferred under Part VII of the Financial Services and Markets Act 2000
to UK Insurance Limited, who now undertake general insurance
business.
The Group is subject to extensive regulations that impose obligations on
financial institutions to maintain appropriate policies, procedures and
controls to ensure compliance with the rules and regulations to which
they are subject.
United States
The Group is both a bank holding company and a financial holding
company within the meaning of the US Bank Holding Company Act of
1956. As such, it is subject to the regulation and supervision of the Board
of Governors of the Federal Reserve System (“the Federal Reserve”).
Among other things, the Group's direct and indirect activities and
investments in the United States are limited to those that are 'financial in
nature' or 'incidental' or 'complementary' to a financial activity, as
determined by the Federal Reserve. The Group is also required to obtain
the prior approval of the Federal Reserve before acquiring directly or
indirectly, the ownership or control of more than 5% of any class of the
voting shares of any US bank or holding company. Under current Federal
Reserve policy, the Group is required to act as a source of financial
strength for its US bank subsidiaries. Among other things, this source of
strength obligation could require the Group to inject capital into any of its
US bank subsidiaries if any of them became undercapitalised.
Anti-money laundering, anti-terrorism and economic sanctions
regulations are a major focus of the US government for financial
institutions and are rigorously enforced by US government agencies.
The Group's US bank and non-bank subsidiaries and the Royal Bank's
US branches are also subject to supervision and regulation by a variety
of other US regulatory agencies. RBS Citizens NA is supervised by the
Office of the Comptroller of the Currency, which is charged with the
regulation and supervision of nationally chartered banks. Citizens Bank of
Pennsylvania is subject to the regulation and supervision of the US
Federal Deposit Insurance Corporation and the Pennsylvania Department
of Banking and Insurance. Citizens Financial Group is under the
supervision of the Federal Reserve as a bank holding company. The
Royal Bank's New York branch is supervised by the New York State
Banking Department, and its Connecticut branch is supervised by the
Connecticut Department of Banking. Both branches are also subject to
supervisory oversight by the Federal Reserve, through the Federal
Reserve Bank of Boston.
The Group's US broker dealer, RBS Securities Inc. (RBSSI), formerly
known as Greenwich Capital Markets, Inc., is subject to regulation and
supervision by the US Securities and Exchange Commission (SEC) and
the Financial Industry Regulatory Authority (FINRA) with respect to its
securities activities. The futures activities of RBSSI are subject to
regulation and oversight by the US Commodity Futures Trading
Commission (CFTC) and the Chicago Mercantile Exchange (CME)
Group-owned exchanges. The Group's US commodities business, RBS
Sempra Commodities LLP and its subsidiaries, which was largely sold in
2010, are primarily regulated by the Federal Reserve Bank of Boston, the
Federal Energy Regulatory Commission (FERC), the Commodity Futures
Trading Commission (CFTC), the CME Group-owned exchanges, and
The Intercontinental Exchange.
Netherlands
The consolidated supervisor of RBS N.V. is the Dutch Central Bank, De
Nederlandsche Bank (DNB). The DNB operates as prudential supervisor
of banks, insurance companies, pension funds and securities firms, and
also as part of the European System of Central Banks.
Other jurisdictions
The Group operates in over 30 countries through a network of branches,
local banks and non-bank subsidiaries and these activities are subject to
supervision in most cases by a local regulator or central bank.