RBS 2012 Annual Report Download - page 180

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Business review Risk and balance sheet management continued
Early problem identification and problem debt management: Retail customers continued
Key points
UK Retail
x The reported numbers for forbearance in UK Retail capture all
instances where a change has been made to the contractual
payment terms including those where the customer is up-to-date on
payments and there is no obvious evidence of financial stress. The
reported figures include stock dating back to 1 January 2008.
x At 31 December 2012, stock levels of £4.8 billion represent 4.9% of
the total mortgage assets; this represents a 9.2% increase in
forbearance stock since 31 December 2011. Of these,
approximately 83% were up-to-date with payments (compared with
approximately 97% of the mortgage population not subject to
forbearance activity). The flow of forbearance arrangements has
remained stable year on year.
x The most frequently occurring forbearance types were term
extensions (47% of assets subject to forbearance at 31 December
2012), interest only conversions (25%) and capitalisations of arrears
(19%). The stock of cases subject to interest only conversions
reflects legacy policy. In 2009, UK Retail ceased providing this type
of forbearance treatment for customers in financial difficulty and no
longer permits interest only conversions on residential mortgages
where the customer is current on payments.
x The provision cover on performing assets subject to forbearance
was about five times that on assets not subject to forbearance.
Ulster Bank
x The reported numbers for forbearance in Ulster Bank Group capture
all instances where a change has been made to the contractual
payment terms including those where the customer is up-to-date on
payments and there is no obvious evidence of financial stress. The
reported figures include stock dating back to early 2009.
x Ulster Bank Group continues to assist customers in the difficult
economic environment. Mortgage forbearance treatments have
been in place since 2009 and are aimed at assisting customers in
financial difficulty. At 31 December 2012, 10.4% of total mortgage
assets (£1.9 billion) were subject to a forbearance arrangement, an
increase from 9.1% (£1.8 billion) at 31 December 2011. The majority
of these forbearance arrangements were in the performing book
(73%).
x The majority of forbearance arrangements offered by Ulster Bank
currently are temporary concessions, accounting for 85% of assets
subject to forbearance at 31 December 2012. These are offered for
periods of one to three years and incorporate different levels of
repayment based on the customer’s ability to pay. The additional
treatment options developed by Ulster Retail will lead to a shift to
more long term arrangements over time.
x Of these temporary forbearance types, the largest category at 31
December 2012 was interest only conversions, which accounted for
46% of total assets subject to forbearance. The other categories of
temporary forbearance were payment concessions: reduced
repayments (36%); and payment holidays (3%).
x The flow by forbearance type remained stable when compared with
2011 and there was a modest reduction, 3%, in customers seeking
assistance for the first time year on year.
x The provision cover on performing assets subject to forbearance is
approximately eight times higher than that on performing assets not
subject to forbearance.