RBS 2012 Annual Report Download - page 402

400
Notes on the consolidated accounts continued
11 Financial instruments - valuation continued
2012 2011 2010
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
£bn £bn £bn £bn £bn £bn £bn £bn £bn £bn £bn £bn
Of which AFS ABS
RMBS — 23.3 0.2 23.5 — 30.9 0.2 31.1 — 29.9 0.2 30.1
CMBS — 2.3 — 2.3 — 0.7 — 0.7 — 1.2 0.1 1.3
CDO — 0.1 0.5 0.6 — 0.2 1.4 1.6 — 0.6 1.4 2.0
CLO — 0.4 1.9 2.3 — 1.0 3.3 4.3 — 3.5 1.5 5.0
Other — 1.3 0.2 1.5 — 2.3 0.7 3.0 — 3.0 1.1 4.1
Equity shares 0.3 0.7 0.4 1.4 0.3 1.3 0.4 2.0 0.3 1.4 0.3 2.0
Total AFS assets 35.0 36.7 3.4 75.1 53.6 49.6 6.1 109.3 53.4 55.0 4.7 113.1
Of which
Core 34.9 35.7 0.6 71.2 53.6 46.9 0.6 101.1 52.8 49.2 1.0 103.0
Non-Core 0.1 1.0 2.8 3.9 — 2.7 5.5 8.2 0.6 5.8 3.7 10.1
35.0 36.7 3.4 75.1 53.6 49.6 6.1 109.3 53.4 55.0 4.7 113.1
Liabilities
Deposits by banks
Repos — 36.4 — 36.4 — 23.3 — 23.3— 20.6 — 20.6
Derivative collateral — 28.6 — 28.6 — 31.8 — 31.8 — 26.6 — 26.6
Other — 1.9 0.1 2.0 — 2.4 — 2.4 — 1.6 — 1.6
— 66.9 0.1 67.0 — 57.5 — 57.5 — 48.8 — 48.8
Customer accounts
Repos — 82.2 — 82.2 — 65.5 — 65.5 — 53.0 — 53.0
Derivative collateral — 8.0 — 8.0 — 9.2 — 9.2 — 10.4 — 10.4
Other — 10.3 0.1 10.4 — 10.8 — 10.8 — 8.7 0.1 8.8
— 100.5 0.1 100.6 — 85.5 — 85.5 — 72.1 0.1 72.2
Debt securities in issue — 33.1 1.4 34.5 — 45.0 2.2 47.2 — 49.0 2.2 51.2
Short positions 23.6 4.0 — 27.6 34.4 6.3 0.3 41.0 35.0 7.3 0.8 43.1
Derivatives
Foreign exchange — 69.3 1.2 70.5 — 80.6 0.4 81.0 0.1 89.3 — 89.4
Interest rate 0.1 345.0 0.4 345.5 0.4 405.2 1.1 406.7 0.2 298.0 1.0 299.2
Credit — 9.6 0.8 10.4 — 24.9 1.8 26.7 — 25.0 0.3 25.3
Equities and commodities — 7.0 0.9 7.9 — 9.1 0.5 9.6 0.1 9.6 0.4 10.1
0.1 430.9 3.3 434.3 0.4 519.8 3.8 524.0 0.4 421.9 1.7 424.0
Subordinated liabilities — 1.1 — 1.1 — 0.9 — 0.9 — 1.1 — 1.1
23.7 636.5 4.9 665.1 34.8 715.0 6.3 756.1 35.4 600.2 4.8 640.4
Of which
Core 23.7 634.4 4.7 662.8 34.8 708.9 5.7 749.4 35.4 586.9 3.8 626.1
Non-Core — 2.1 0.2 2.3 — 6.1 0.6 6.7 — 13.3 1.0 14.3
23.7 636.5 4.9
665.1 34.8 715.0 6.3 756.1 35.4 600.2 4.8 640.4
Proportion 3.6% 95.7% 0.7% 100.0% 4.6% 94.6% 0.8% 100.0% 5.5% 93.7% 0.8% 100.0%
Note:
(1) Level 1: valued using unadjusted quoted prices in active markets, for identical financial instruments. Examples include G10 government securities, listed equity shares, certain exchange-traded
derivatives and certain US agency securities.
Level 2: valued using techniques based significantly on observable market data. Instruments in this category are valued using:
(a) quoted prices for similar instruments or identical instruments in markets which are not considered to be active; or
(b) valuation techniques where all the inputs that have a significant effect on the valuations are directly or indirectly based on observable market data.
The type of instruments that trade in markets that are not considered to be active, but are based on quoted market prices, banker dealer quotations, or alternative pricing sources with reasonable
levels of price transparency and those instruments valued using techniques include non-G10 government securities, most government agency securities, investment-grade corporate bonds, certain
mortgage products, including CLOs, most bank loans, repos and reverse repos, less liquid listed equities, state and municipal obligations, most notes issued, and certain money market securities and
loan commitments and most OTC derivatives.
Level 3: instruments in this category have been valued using a valuation technique where at least one input which could have a significant effect on the instrument’s valuation, is not based on
observable market data. Where inputs can be observed from market data without undue cost and effort, the observed input is used. Otherwise, the Group determines a reasonable level for the input.
Financial instruments primarily include cash instruments which trade infrequently, certain syndicated and commercial mortgage loans, certain emerging markets instruments, unlisted equity shares,
certain residual interests in securitisations, majority of CDOs, other mortgage-backed products and less liquid debt securities, certain structured debt securities in issue, and OTC derivatives where
valuation depends upon unobservable inputs such as certain credit and exotic derivatives. No gain or loss is recognised on the initial recognition of a financial instrument valued using a technique
incorporating significant unobservable data.