RBS 2011 Annual Report Download - page 451

RBS Group 2011 449
HM Treasury has the right to appoint one or more step-in managers to
exercise extensive step-in rights in relation to all or some of the Covered
Assets upon the occurrence of certain specified trigger events.
Certain Scheme Conditions are subject to modification at any time with
retrospective effect at the discretion of HM Treasury without the
company's consent. The modification rights arise broadly and subject to
certain conditions where the operation, interpretation or application of
such Scheme Conditions conflicts with any of the overriding general
principles set out in the Scheme Conditions.
There are material restrictions on the form and substance of
announcements or public statements (including any required by law or
the rules of any securities exchange) made by the Group in relation to the
APS or to HM Treasury in connection with the APS without HM
Treasury's consent.
In connection with its participation in the APS, the company has agreed
to a number of behavioural commitments in respect of lending for
businesses in the UK, personal current accounts in the UK as well as to
develop and implement a capital optimisation exercise designed to
increase the Group’s Core Tier 1 capital.
The Tax Loss Waiver
On 26 November 2009, the company entered into three agreements
(together comprising the Tax Loss Waiver) which provide the right, at the
company’s option, subject to HM Treasury consent, to satisfy all or part of
the annual fee in respect of the APS or the Contingent Subscription
arrangement, and the exit fee payable in connection with any termination
of the Group’s participation in the APS (but not the refund of the net
payments it has received from HM Treasury under the APS), by waiving
the entitlement to certain UK tax reliefs that are treated as deferred tax
assets. The Tax Loss Waiver contains undertakings designed to prevent
the Group from engaging in arrangements which have a main purpose of
reducing the net cost to the Group of any waiver of tax reliefs pursuant to
the Tax Loss Waiver.
State Aid Commitment Deed
As a result of the State Aid granted to the company, it was required to
work with HM Treasury to submit a State Aid restructuring plan to the
European Commission, which has now been approved under the State
Aid rules. The company has agreed a series of measures to be
implemented over a four year period, which supplement the measures in
the company's strategic plan.
The Group entered into a State Aid Commitment Deed with HM Treasury
which provides that the Group will comply or procure compliance with
these measures and behavioural commitments. The Group agreed to do
all acts and things necessary to ensure HM Treasury's compliance with
its obligations under any European Commission decision approving State
Aid to the Group.
The State Aid Commitment Deed also provides that if the European
Commission adopts a decision that the UK Government must recover any
State Aid (a "Repayment Decision") and the recovery order of the
Repayment Decision has not been annulled or suspended by the Court of
First Instance (now the General Court) or the European Court of Justice,
then the Group must repay HM Treasury any aid ordered to be recovered
under the Repayment Decision.
The State Aid Commitment Deed also provides for the Group's
undertakings in respect of State Aid to be modified in certain limited
circumstances. However, HM Treasury has undertaken that it will not,
without the consent of the Group, agree modifications to the Group's
undertakings with respect to State Aid which are significantly more
onerous to the Group than those granted in order to obtain the State Aid
approval.
State Aid Costs Reimbursement Deed
Under the State Aid Costs Reimbursement Deed, the Group has agreed
to reimburse HM Treasury for fees, costs and expenses associated with
the State Aid and State Aid approval.
Sale of RBS England and Wales and NatWest Scotland branch based
business to Santander UK plc
On 4 August 2010, the Royal Bank, NatWest Plc and National
Westminster Home Loans Limited entered into a Sale and Purchase
Agreement with Santander UK plc pursuant to which the Royal Bank,
NatWest Plc and National Westminster Home Loans Limited agreed to
sell 311 Royal Bank of Scotland branded branches in England and
Wales, seven NatWest branded branches in Scotland, the retail and SME
customer accounts attached to these branches, the Direct SME business,
and certain mid-corporate businesses and associated assets and
liabilities to Santander UK plc for a premium of £350 million to net assets
at closing. The parties agreed certain amendments to the Sale and
Purchase Agreement on 30 August 2011. The consideration will be paid
in cash and is subject to certain closing adjustments, including those
relating to the performance of the business. The transaction is subject to
regulatory, anti-trust and other conditions.