RBS 2013 Annual Report Download - page 198
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Business review Risk and balance sheet management
196
Capital management* continued
Capital resources continued
Current capital resources and CRR capital estimate
A reconciliation between capital as reported under the current basis
(Basel 2.5), transitional basis (PRA) and full basis (final CRR) is set out
below.
Although the CRR text has been finalised, many of the Regulatory
Technical Standards (RTS) are still draft. The finalisation of these could
have a material impact in a number of areas such as the scope of the
deduction for insignificant financial holdings. Further guidance is provided
by the European Banking Authority through published Q&A.
The ‘year 1 transitional basis’ applies the rules as if 2013 was year 1 of
the transition period. The full basis shows the same calculation based on
a complete implementation of CRR. This is based on the Group’s
interpretation of the current rules and guidance.
In the first year of transition, the regulatory adjustments will be calculated
under the new rules. The CRR deductions are determined by applying
the transitional percentage (20% in year 1)(1). The residual balance will be
deducted according to the current rules, except where the PRA has
specified a different treatment.
The Group is well advanced in its preparations to comply with the new
requirements. Given the phasing of both capital requirements and target
levels, in advance of needing to comply with the fully loaded end state
requirements, the Group will have the opportunity to continue to generate
additional capital from earnings and take management actions to mitigate
the impact of CRD IV.
The Group’s CET1 ratio on a fully loaded basis at 31 December 2013,
based on its interpretation of the rules is estimated at 8.6%(1).
The actual impact of CRD IV on capital ratios may be different as the
requirements and related technical standards have not yet been finalised
and will ultimately be subject to application by local regulators. The actual
impact will also be dependent on required regulatory approvals and the
extent to which further management action is taken prior to
implementation.
Note:
(1) The PRA issued its consultative paper on implementing CRD IV (PS7/13) in December 2013. Under the draft proposals, there would be no transition in respect of the changes to the prudential filters
and deductions from CET1. These proposals came into effect from 1 January 2014.
*unaudited