RBS 2012 Annual Report Download - page 269

RBS GROUP 2012
267
Key points*
x The Group maintains good relationships with Italian government
entities, banks, other financial institutions and large corporate clients.
Since the start of 2011, the Group has taken steps to reduce and
mitigate its risk through strategic exits where appropriate and
through increased collateral requirements, in line with its evolving
appetite for Italian risk. Lending exposure to Italian counterparties
was reduced by a further £1.2 billion during 2012, to £1.9 billion.
Government and central bank
x The Group is an active market-maker in Italian government bonds
and has an active CDS portfolio, resulting in large and fluctuating
gross long and short positions in HFT debt securities.
Financial institutions
x The majority of the Group’s exposure relates to the top five banks.
The Group’s product offering consists largely of collateralised
trading products and to a lesser extent, short-term uncommitted
lending lines for liquidity purposes. During 2012, derivative exposure
decreased by £0.2 billion due to market movements. Risk is
mitigated since most facilities are fully collateralised. Lending
declined by £0.1 billion to £0.4 billion.
x The AFS bond exposure was reduced by £0.3 billion due to sales.
Corporate
x Lending declined by £1.1 billion, particularly to industrials.
Non-Core (included above)
x Non-Core lending exposure was £0.9 billion at 31 December 2012, a
£0.3 billion or 22% reduction since 31 December 2011, primarily due
to a fall in exposure to investment funds and industrials. The
remaining lending exposure was mainly to the commercial real
estate (29%), leisure (25%) and electricity (16%) sectors.
*unaudited