RBS 2012 Annual Report Download - page 157

RBS GROUP 2012
155
Currency risk
Structural foreign currency exposures
The Group does not maintain material non-traded open currency positions other than the structural foreign currency translation exposures arising from
its investments in foreign subsidiaries and associated undertakings and their related currency funding.
The table below shows the Group’s structural foreign currency exposures.
Net assets of
overseas operations
RFS
MI
Net investments
in foreign operations
Net
investment
hedges
Structural foreign
currency exposures
pre-economic hedges
Economic
hedges (1)
Residual structural
foreign currency
exposures
2012 £m £m £m £m £m £m £m
US dollar 17,313 1 17,312 (2,476)14,836 (3,897)10,939
Euro 8,903 2 8,901 (636)8,265 (2,179)6,086
Other non-sterling 4,754 260 4,494 (3,597)897 — 897
30,970 263 30,707 (6,709)23,998 (6,076)17,922
2011
US dollar 17,570 1 17,569 (2,049)15,520 (4,071) 11,449
Euro 8,428 (3)8,431 (621) 7,810 (2,236)5,574
Other non-sterling 5,224 272 4,952 (4,100) 852 — 852
31,222 270 30,952 (6,770) 24,182 (6,307)17,875
2010
US dollar 17,137 2 17,135 (1,820) 15,315 (4,058)11,257
Euro 8,443 33 8,410 (578)7,832 (2,305)5,527
Other non-sterling 5,320 244 5,076 (4,135)941 — 941
30,900 279 30,621 (6,533)24,088 (6,363)17,725
Note:
(1) The economic hedges represent US dollar and euro preference shares in issue that are treated as equity under IFRS and do not qualify as hedges for accounting purposes.
Key points
x The Group’s structural foreign currency exposure at 31 December
2012 was £24.0 billion and £17.9 billion before and after economic
hedges respectively, broadly unchanged from the end of 2011.
x Changes in foreign currency exchange rates affect equity in
proportion to structural foreign currency exposure. A 5%
strengthening in foreign currency against sterling would result in a
gain of £1.3 billion (2011 and 2010 - £1.3 billion) in equity, while a
5% weakening would result in a loss of £1.1 billion (2011 and 2010 -
£1.2 billion) in equity.
x In 2012, the Group recorded a loss through other comprehensive
income of £0.9 billion due to the strengthening of sterling against the
US dollar and euro.