RBS 2013 Annual Report Download - page 419
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Notes on the consolidated accounts
417
The reserve movement between periods will not equate to the reported
profit or loss for own credit. The balance sheet reserves are stated by
conversion of underlying currency balances at spot rates for each period
whereas the income statement includes intra-period foreign exchange
sell-offs and excludes the impact of the methodology refinements relating
to derivative financial liabilities.
The methodology refinements also related to other valuation adjustments,
and the impact of the refinements was reported as part of the reported
profit or loss for the other valuation adjustments.
The effect of change in credit spreads could reverse in future periods
provided the liability is not repaid at a premium or a discount.
The cumulative own credit adjustment (OCA) recorded on securities held-for-trading (HFT), designated as at fair value through profit or loss (DFV) and
derivative liabilities are set out below.
Debt securities in issue (1) Subordinated
HFT DFV Total liabilities DFV Total Derivatives Total
Cumulative own credit adjustment (CR)/DR (1) £m £m £m £m £m £m £m
2013 (467) (33) (500) 256 (244) 96 (148)
2012 (648) 56 (592) 362 (230) 259 29
2011 882 2,647 3,529 679 4,208 602 4,810
Carrying values of underlying liabilities £bn £bn £bn £bn £bn
2013 8.6 15.8 24.4 0.9 25.3
2012 10.9 23.6 34.5 1.1 35.6
2011 11.5 35.7 47.2 0.9 48.1
Note:
(1) Includes wholesale and retail note issuances.
Key points
• The cumulative OCA decreased during the year due to tightening of
RBS credit spreads.
• Senior issued debt OCA is determined by reference to secondary
debt issuance spreads. The five year spread tightened to 92 basis
points (31 December 2012 - 102 basis points; 31 December 2011 -
451 basis points). As senior debt classified as DFV includes greater
proportion of longer term debt, the impact of spread tightening and
discounting is more significant, resulting in a credit balance at 31
December 2013.
• The cumulative OCA relating to derivatives decreased during the
year due to tightening of RBS CDS spreads and the net impact of
methodology refinements.