RBS 2011 Annual Report Download - page 462

460 RBS Group 2011
Risk factors continued
In addition, certain of the Group’s employees in the UK, continental
Europe and other jurisdictions in which the Group operates are
represented by employee representative bodies, including trade unions.
Engagement with its employees and such bodies is important to the
Group and a breakdown of these relationships could adversely affect the
Group’s business, reputation and results. As the Group implements cost
saving initiatives and disposes of, or runs-down, certain assets or
businesses (including as part of its restructuring plans), it faces increased
risk in this regard and there can be no assurance that the Group will be
able to maintain good relations with its employees or employee
representative bodies in respect of all matters. As a result, the Group
may experience strikes or other industrial action from time to time, which
could have an adverse effect on its business and results of operations
and could cause damage to its reputation.
Each of the Group’s businesses is subject to substantial regulation and
oversight. Significant regulatory developments, including changes in tax
law, could have an adverse effect on how the Group conducts its
business and on its results of operations and financial condition
The Group is subject to extensive financial services laws, regulations,
corporate governance requirements, administrative actions and policies
in each jurisdiction in which it operates. All of these are subject to
change, particularly in the current regulatory and market environment,
where there have been unprecedented levels of government intervention
(including nationalisations and injections of government capital), changes
to the regulations governing financial institutions and reviews of the
industry, in the UK, the US and many European countries. In recent
years, there has also been increasing focus in the UK, US and other
jurisdictions in which the Group operates on compliance with anti-bribery,
anti-money laundering, anti-terrorism and other similar sanctions
regimes.
As a result of the environment in which the Group operates, increasing
regulatory focus in certain areas and ongoing and possible future
changes in the financial services regulatory landscape (including
requirements imposed by virtue of the Group’s participation in
government or regulator-led initiatives), the Group is facing greater
regulation and scrutiny in the UK, the US and other countries in which it
operates.
Although it is difficult to predict with certainty the effect that recent
regulatory developments and heightened levels of public and regulatory
scrutiny will have on the Group, the enactment of legislation and
regulations in the UK, the other parts of Europe in which the Group
operates and the US (such as the bank levy in the UK or the Dodd-Frank
Wall Street Reform and Consumer Protection Act in the US) is likely to
result in increased capital and liquidity requirements and changes in
regulatory requirements relating to the calculation of capital and liquidity
metrics or other prudential rules relating to capital adequacy frameworks,
and may result in an increased number of regulatory investigations and
actions. Any of these developments could have an adverse impact on
how the Group conducts its business, applicable authorisations and
licences, the products and services it offers, its reputation, the value of its
assets, its funding costs and its results of operations and financial
condition or result in a loss of value in its securities.
Areas in which, and examples of where, governmental policies,
regulatory changes and increased public and regulatory scrutiny could
have an adverse impact on the Group include those set out above as well
as the following:
xthe transition in the UK of regulatory and supervisory powers from
the FSA to the new Financial Conduct Authority for conduct of
business supervision and the Prudential Regulatory Authority for
capital and liquidity supervision in 2013;
xthe monetary, fiscal, interest rate and other policies of central banks
and other governmental or regulatory bodies;
xrequirements to separate retail banking from investment banking,
and restrictions on proprietary trading and similar activities within a
commercial bank and/or a group which contains a commercial bank;
xthe design and potential implementation of government mandated
resolution or insolvency regimes;
xthe imposition of government imposed requirements with respect to
lending to the UK SME market and larger commercial and corporate
entities and residential mortgage lending;
xrequirements to operate in a way that prioritises objectives other
than shareholder value creation;
xchanges to financial reporting standards (including accounting
standards), corporate governance requirements, corporate
structures and conduct of business rules;
xthe imposition of restrictions on the Group’s ability to compensate its
senior management and other employees;
xregulations relating to, and enforcement of, anti-bribery, anti-money
laundering, anti-terrorism or other similar sanctions regimes;
xrules relating to foreign ownership, expropriation, nationalisation and
confiscation of assets;
xother requirements or policies affecting the Group’s profitability,
such as the imposition of onerous compliance obligations, further
restrictions on business growth or pricing;
xthe introduction of, and changes to, taxes, levies or fees applicable
to the Group’s operations (such as the imposition of financial
activities taxes and changes in tax rates that reduce the value of
deferred tax assets); and
xthe regulation or endorsement of credit ratings used in the EU
(whether issued by agencies in EU member states or in other
countries, such as the US).
Additional information continued