RBS 2012 Annual Report Download - page 249

RBS GROUP 2012
247
Independent price verification
Independent price verification is a key additional control over front office
marking of positions.
Key elements of the independent price verification framework include:
x Appropriate financial controls - business unit controllers are
responsible for ensuring that independent price verification
processes are in place covering all trading book positions held by
their business. The independent pricing verification policy requires
that daily independent price verification is performed for positions
where prices/model inputs are readily available on a daily basis. For
positions where prices/model inputs are available on a less regular
basis, verification may occur on a frequency that is less than daily.
Where practical, verification is performed to a frequency that
matches the availability of this independent price information.
x Compliance statements - business unit control is required to prepare
and maintain compliance statements that benchmark price
verification procedures against the independent pricing policy. Each
compliance statement requires review and sign-off from the relevant
financial controller, market risk manager and front office
management every six months at least.
For more information on independent price verification, refer to Valuation
of financial instruments carried at fair value on page 393.
Market risk analyses
Trading revenues*
The graph below shows the daily distribution of trading and related revenues for Markets for the years ended 31 December 2012 and 31 December
2011.
7
18
24
19 19
23
26
31
15
11
5
22
29
36
27
35
30
24
12 11 10
1
23
21
5
3
1111
8
3
22 11
4
6
11
0
3
6
9
12
15
18
21
24
27
30
33
36
39
< -35
-35 > < -30
-30 > < -25
-25 > < -20
-20 > < -15
-15 > < -10
-10 > < -5
-5 > < 0
0 > < 5
5 > < 10
10 > < 15
15 > < 20
20 > < 25
25 > < 30
30 > < 35
35 > < 40
40 > < 45
45 > < 50 50 > < 55
55 > < 60
60 > < 65
65 > < 70
70 > < 75
< 75
GBP £m
Number of trading days
2011 2012
Note:
(1) The effect of any month end adjustments, not attributable to a specific daily market move, is spread evenly over the trading days in that specific month.
Key points
x Both 2011 and 2012 benefited from market rallies, albeit weaker but
more sustained during 2012 than 2011, primarily due to the
supportive actions of the Federal Reserve and European Central
Bank in the third quarter of 2012. By way of contrast, in the third
quarter of 2011, heightened uncertainty in the Eurozone saw a
sudden deterioration in credit markets. Hence a wider range of
results in 2011 than 2012.
x The average daily revenue earned by Markets’ trading activities in
2012 was £16 million, compared with £18 million in 2011. The
standard deviation of the daily revenues decreased from £20 million
to £15 million. The number of days with negative revenue decreased
to 34 from 45. The most frequent daily revenue was between £5
million and £10 million, which occurred 36 times. In 2011, the most
frequent daily revenue was between £25 million and £30 million,
which occurred 31 times.
RBS GROUP 2012
247
*unaudited
0
18
21
24
27
30
33
36
39
2011 2012
< -35
-35 > < -30
-30> < -25
-25> < -20
-20 > < -15
-15 > < -10
-10 > < -5
-5 > < 0
0 > < 5
5 > < 10
10 > < 15
15 > < 20
20 > < 25
25 > < 30
30 > < 35
35 > < 40
40 > < 45
45 > < 50
50 > < 55
55 > < 60
60 > < 65
65 > < 70
70 > < 75
< 75
15
12
9
6
3
2
36
3
2 2 1 1
76
8
4
18
22
24
29
19 19
27
23
35
26
30 31
24
21
12
15
11 11 10
55
3
1
1
1
1
1
1 1
3
Number of trading days
GBP £m