RBS 2013 Annual Report Download - page 471
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Notes on the consolidated accounts
469
30 Asset transfers
Under IAS 39 a financial asset is transferred if the Group either (a)
transfers the contractual rights to receive the asset's cash flows; or (b)
retains the right to the asset's cash flows but assumes a contractual
obligation to pay those cash flows to a third party. Following a transfer
the financial asset will be derecognised; not derecognised and retained in
full on the Group’s balance sheet; or continue to be recognised on the
balance sheet to the extent of the Group’s continuing involvement.
Transfers that do not qualify for derecognition
Securities repurchase agreements and lending transactions
The Group enters into securities repurchase agreements and securities
lending transactions under which it transfers securities in accordance with
normal market practice.
Generally, the agreements require additional collateral to be provided if
the value of the securities falls below a predetermined level. Under
standard terms for repurchase transactions in the UK and US markets,
the recipient of collateral has an unrestricted right to sell or repledge it,
subject to returning equivalent securities on settlement of the transaction.
Securities sold under repurchase transactions are not derecognised if the
Group retains substantially all the risks and rewards of ownership. The
fair value (and carrying value) of securities transferred under such
repurchase transactions included on the balance sheet, are set out
below. All of these securities could be sold or repledged by the holder.
2013 2012 2011
A
ssets subject to securities repurchase agreements or security lending transactions £m £m £m
Debt securities 55,554 91,173 79,480
Equity shares 5,310 6,772 6,534
Transfers that continue to be recognised to the extent of the
Group’s continuing involvement (IAS 39)
In certain securitisations of US residential mortgages, substantially all the
risks and rewards have been neither transferred nor retained, but the
Group has retained control of the assets and continues to recognise the
assets to the extent of its continuing involvement, as defined by IAS 39,
which takes the form of retaining certain subordinated bonds issued by
the securitisation vehicles.
These interests relate predominantly to mortgage-backed securities
which were re-securitised. Retained interests are generally not held to
maturity and are typically sold after settlement of the securitisation.
Retained interests may be subordinated to other investors' interests.
Third party investors and securitisation trusts have no recourse to the
Group's other assets for failure of debtors to perform on the securitised
loans or securities, effectively transferring the risk of future credit losses
to the purchasers of the securities issued by the trust. The value of the
retained interest varies and is subject to credit, interest rate, prepayment,
and other risks of the transferred assets. In the ordinary course of
business, the Group does not provide any other financial support to the
securitisation trusts other than holding these retained interests.
At 31 December 2013, securitised assets were £0.3 billion (2012 - £0.4
billion; 2011 - £0.6 billion); retained interest at fair value £59 million (2012
- £61 million; 2011 - £72 million); subordinated assets £35 million (2012 -
£1 million; 2011 - £3 million); and related liabilities £35 million (2012 - £1
million; 2011 - £3 million).
Transfers that qualify for derecognition but in which the Group has
continuing involvement (IFRS 7)
The Group has transferred and derecognised certain assets but it has
continuing involvement, as defined in IFRS 7, through holdings of debt
securities with a carrying value at 31 December 2013 of £389 million and
fair value of £345 million (31 December 2012: carrying value - £398
million; fair value - £339 million). Income for 2013 was £11 million (2012
- £13 million).
Assets pledged as collateral
The Group pledges collateral with its counterparties in respect of derivative liabilities and bank and other borrowings.
2013 2012 2011
A
ssets pledged against liabilities £m £m £m
Loans and advances to banks 10,342 12,784 19,691
Loans and advances to customers 23,594 25,186 52,225
Securities 8,673 24,236 3,713
42,609 62,206 75,629
Liabilities secured by assets
Deposits by banks 3,254 12,309 6,369
Customer accounts 2,766 3,000 2,663
Derivatives 42,691 60,434 82,356
48,711 75,743 91,388