RBS 2013 Annual Report Download - page 195
Download and view the complete annual report
Please find page 195 of the 2013 RBS annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.-
1
-
2
-
3
-
4
-
5
-
6
-
7
-
8
-
9
-
10
-
11
-
12
-
13
-
14
-
15
-
16
-
17
-
18
-
19
-
20
-
21
-
22
-
23
-
24
-
25
-
26
-
27
-
28
-
29
-
30
-
31
-
32
-
33
-
34
-
35
-
36
-
37
-
38
-
39
-
40
-
41
-
42
-
43
-
44
-
45
-
46
-
47
-
48
-
49
-
50
-
51
-
52
-
53
-
54
-
55
-
56
-
57
-
58
-
59
-
60
-
61
-
62
-
63
-
64
-
65
-
66
-
67
-
68
-
69
-
70
-
71
-
72
-
73
-
74
-
75
-
76
-
77
-
78
-
79
-
80
-
81
-
82
-
83
-
84
-
85
-
86
-
87
-
88
-
89
-
90
-
91
-
92
-
93
-
94
-
95
-
96
-
97
-
98
-
99
-
100
-
101
-
102
-
103
-
104
-
105
-
106
-
107
-
108
-
109
-
110
-
111
-
112
-
113
-
114
-
115
-
116
-
117
-
118
-
119
-
120
-
121
-
122
-
123
-
124
-
125
-
126
-
127
-
128
-
129
-
130
-
131
-
132
-
133
-
134
-
135
-
136
-
137
-
138
-
139
-
140
-
141
-
142
-
143
-
144
-
145
-
146
-
147
-
148
-
149
-
150
-
151
-
152
-
153
-
154
-
155
-
156
-
157
-
158
-
159
-
160
-
161
-
162
-
163
-
164
-
165
-
166
-
167
-
168
-
169
-
170
-
171
-
172
-
173
-
174
-
175
-
176
-
177
-
178
-
179
-
180
-
181
-
182
-
183
-
184
-
185
-
186
-
187
-
188
-
189
-
190
-
191
-
192
-
193
-
194
-
195
-
196
-
197
-
198
-
199
-
200
-
201
-
202
-
203
-
204
-
205
-
206
-
207
-
208
-
209
-
210
-
211
-
212
-
213
-
214
-
215
-
216
-
217
-
218
-
219
-
220
-
221
-
222
-
223
-
224
-
225
-
226
-
227
-
228
-
229
-
230
-
231
-
232
-
233
-
234
-
235
-
236
-
237
-
238
-
239
-
240
-
241
-
242
-
243
-
244
-
245
-
246
-
247
-
248
-
249
-
250
-
251
-
252
-
253
-
254
-
255
-
256
-
257
-
258
-
259
-
260
-
261
-
262
-
263
-
264
-
265
-
266
-
267
-
268
-
269
-
270
-
271
-
272
-
273
-
274
-
275
-
276
-
277
-
278
-
279
-
280
-
281
-
282
-
283
-
284
-
285
-
286
-
287
-
288
-
289
-
290
-
291
-
292
-
293
-
294
-
295
-
296
-
297
-
298
-
299
-
300
-
301
-
302
-
303
-
304
-
305
-
306
-
307
-
308
-
309
-
310
-
311
-
312
-
313
-
314
-
315
-
316
-
317
-
318
-
319
-
320
-
321
-
322
-
323
-
324
-
325
-
326
-
327
-
328
-
329
-
330
-
331
-
332
-
333
-
334
-
335
-
336
-
337
-
338
-
339
-
340
-
341
-
342
-
343
-
344
-
345
-
346
-
347
-
348
-
349
-
350
-
351
-
352
-
353
-
354
-
355
-
356
-
357
-
358
-
359
-
360
-
361
-
362
-
363
-
364
-
365
-
366
-
367
-
368
-
369
-
370
-
371
-
372
-
373
-
374
-
375
-
376
-
377
-
378
-
379
-
380
-
381
-
382
-
383
-
384
-
385
-
386
-
387
-
388
-
389
-
390
-
391
-
392
-
393
-
394
-
395
-
396
-
397
-
398
-
399
-
400
-
401
-
402
-
403
-
404
-
405
-
406
-
407
-
408
-
409
-
410
-
411
-
412
-
413
-
414
-
415
-
416
-
417
-
418
-
419
-
420
-
421
-
422
-
423
-
424
-
425
-
426
-
427
-
428
-
429
-
430
-
431
-
432
-
433
-
434
-
435
-
436
-
437
-
438
-
439
-
440
-
441
-
442
-
443
-
444
-
445
-
446
-
447
-
448
-
449
-
450
-
451
-
452
-
453
-
454
-
455
-
456
-
457
-
458
-
459
-
460
-
461
-
462
-
463
-
464
-
465
-
466
-
467
-
468
-
469
-
470
-
471
-
472
-
473
-
474
-
475
-
476
-
477
-
478
-
479
-
480
-
481
-
482
-
483
-
484
-
485
-
486
-
487
-
488
-
489
-
490
-
491
-
492
-
493
-
494
-
495
-
496
-
497
-
498
-
499
-
500
-
501
-
502
-
503
-
504
-
505
-
506
-
507
-
508
-
509
-
510
-
511
-
512
-
513
-
514
-
515
-
516
-
517
-
518
-
519
-
520
-
521
-
522
-
523
-
524
-
525
-
526
-
527
-
528
-
529
-
530
-
531
-
532
-
533
-
534
-
535
-
536
-
537
-
538
-
539
-
540
-
541
-
542
-
543
-
544
-
545
-
546
-
547
-
548
-
549
-
550
-
551
-
552
-
553
-
554
-
555
-
556
-
557
-
558
-
559
-
560
-
561
-
562
-
563
-
564
Business review Risk and balance sheet management
193
Capital management*
Definition
The Group aims to maintain an appropriate level of capital to meet its
business needs and regulatory requirements, and operates within an
agreed risk appetite. The appropriate level of capital is determined based
on the dual aims of: (i) meeting minimum regulatory capital requirements;
and (ii) ensuring the Group maintains sufficient capital to uphold
customer, investor and rating agency confidence in the organisation,
thereby supporting the business franchise and funding capacity.
2013 overview
The Group reported a Core Tier 1 ratio of 10.9% as at 31 December
2013. On a fully loaded Basel III basis, the Group’s equivalent Common
Equity Tier 1 (CET1) ratio was 8.6%.
The Group’s Core Tier 1 ratio is higher than at the end of 2012 despite
absorbing changes to credit model parameters and in the face of
challenging economic headwinds and continuing costs of de-risking. This
has been achieved through a continued focus on reshaping the Group’s
use of capital with the Group announcing in November 2013
management actions to accelerate the building of its capital strength. The
measures include creation of an internal 'bad bank' to accelerate the run-
down of high risk assets of £29 billion funded assets at the end of 2013.
Faster run-down of high risk assets entails accelerated and increased
impairments and other adjustments in the fourth quarter of 2013, but the
capital impact of this is significantly reduced by a commensurate
reduction in expected loss capital deductions. The management strategy
will result in a strengthening of the Group's capital ratios in the medium
term.
The Group continues to target a fully loaded Basel III CET1 ratio of c.11%
by the end of 2015 and 12% or above by the end of 2016.
The Group has announced plans to accelerate the divestment of RBS
Citizens. Preparations for a partial initial public offering in 2014 are on
track and the Group intends to fully divest the business by the end of
2016, benefiting CET1.
The Group continues to meet the minimum leverage ratio under both the
Basel III and Capital Requirements Regulation (CRR) bases.
Focus for the Group remains on active de-risking of the balance sheet to
meet strategic objectives, demonstrated in the leverage exposure
measure by Non-Core asset disposal and run-off, and the downsizing of
Markets business.
Regulatory developments
CRD IV
The European Union has implemented the Basel III proposals through
the CRR and the Capital Requirements Directive (CRD), collectively
known as CRD IV. CRD IV was implemented on 1 January 2014. The
European Banking Authority’s technical standards which will provide
clarification of the CRD IV, are still to be finalised through adoption by the
European Commission and implemented within the UK.
*unaudited
The Prudential Regulatory Authority (PRA) announced the acceleration of
the end state rules for CET1 capital, whereby from 1 January 2014 the
calculation is now closely aligned with the fully loaded definition. There
will be no transitional arrangements applied to the prudential filters or
regulatory deductions with the exception of unrealised gains on available
for sale debt and equity which will be incorporated from 1 January 2015.
CRD IV and Basel III will impose a minimum CET1 ratio of 4.5% of
RWAs. There are three buffers which will affect the Group: the capital
conservation buffer set at 2.5%; the counter-cyclical capital buffer (up to
2.5% of RWAs), to be applied when macroeconomic conditions indicate
areas of the economy are over-heating; and the Global-Systemically
Important Bank buffer currently set at 1.5% for the Group. The regulatory
target capital requirements will be phased in and are expected to apply in
full from 1 January 2019, in the meantime using national discretion the
PRA can apply a top-up. As set out in the PRA’s Supervisory Statement
SS3/13, the Group and other major UK banks and building societies are
required to meet a CET1 ratio of 7% after taking into account certain
adjustments set by the PRA.
PRA guidance indicates that from 1 January 2015, the Group must meet
at least 56% of its Pillar 2A capital requirement with CET1 capital and the
balance with Additional Tier 1 capital. The Pillar 2A capital requirement is
the additional capital that the Group must hold, in addition to meeting its
Pillar 1 requirements in order to comply with the PRA’s overall financial
adequacy rule.
Subordinated debt instruments which do not meet the new eligibility
criteria will be grandfathered on a reducing basis over ten years.
Governance
Governance and approach
The Group Asset and Liability Management Committee (GALCO) is
responsible for ensuring the Group maintains adequate capital at all
times. The Capital and Stress Testing Committee (CAST) is a cross-
functional body driving and directing integrated risk capital activities
including determination of the amount of capital the Group should hold,
how and where capital is allocated and planning for actions that would
ensure that an adequate capital position would be maintained in a
stressed environment. These activities have linkages to capital planning,
risk appetite and regulatory change. CAST reports through GALCO and
comprises senior representatives from Risk Management, Group Finance
and Group Treasury. Target capital ratios are set and monitored by the
PRA for the Group. Management of capital is achieved by supervision of
forecast capital and RWA over a five year time horizon.
Pillar 3
The Group’s Pillar 3 disclosures provide additional analysis of exposure
at default and credit risk measures such as credit risk mitigation,
counterparty credit risk and provisions and their associated RWAs under
the various Basel II approaches.