RBS 2013 Annual Report Download - page 522
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Additional information
520
Supervision
United Kingdom
In April 2013, the Financial Services Authority (FSA) was replaced by two
new regulators: the Prudential Regulation Authority (PRA) and the
Financial Conduct Authority (FCA). At that point, the PRA became the
consolidated supervisor of the Group. The PRA, an operationally
independent subsidiary of the Bank of England, is responsible for
promoting the safety and soundness of systemically important financial
institutions in the UK. The FCA's overall objective is to ensure financial
markets function well. This is supported by its operational objectives of:
securing an appropriate degree of protection for consumers; protecting
and enhancing the integrity of the UK financial system; and promoting
effective competition in the interests of consumers.
As at 31 December 2013, 16 companies in the Group, spanning a range
of financial services sectors (banking, insurance and investment
business), were authorised to conduct financial activities in the UK. The
UK authorised banks in the Group include The Royal Bank of Scotland
plc, National Westminster Bank Plc, Coutts & Co and Ulster Bank
Limited. Wholesale activities, other than Group Treasury activities, are
concentrated in the Group's Markets, International Banking and UK
Corporate Banking divisions, and are undertaken under the names of The
Royal Bank of Scotland plc and National Westminster Bank Plc. UK retail
banking activities are managed by the UK Retail division and by Ulster
Bank Limited in Northern Ireland. The banking service in the Republic of
Ireland is provided by Ulster Bank Ireland Limited, which is supervised by
the Central Bank of Ireland.
Investment management business is principally undertaken by
companies in the Wealth division, including Coutts & Co, Adam &
Company Investment Management Limited, and in the Markets and
International Banking divisions, through RBS Asset Management Limited
and The Royal Bank of Scotland plc.
The Group is subject to extensive regulations that impose obligations on
financial institutions to maintain appropriate policies, procedures and
controls to ensure compliance with the rules and regulations to which
they are subject.
United States
The Royal Bank of Scotland Group plc (RBSG) is both a bank holding
company and a financial holding company within the meaning of the US
Bank Holding Company Act of 1956. As such, it is subject to the
regulation and supervision of the Board of Governors of the Federal
Reserve System (the “Federal Reserve”). Among other things, the
Group's direct and indirect activities and investments in the United States
are limited to those that are 'financial in nature' or 'incidental' or
'complementary' to a financial activity, as determined by the Federal
Reserve. The Group is also required to obtain the prior approval of the
Federal Reserve before acquiring directly or indirectly, the ownership or
control of more than 5% of any class of the voting shares of any US bank
or holding company. Under current Federal Reserve policy, the Group is
required to act as a source of financial strength for its US bank
subsidiaries. Among other things, this source of strength obligation could
require the Group to inject capital into any of its US bank subsidiaries if
any of them became undercapitalised.
Anti-money laundering, anti-terrorism and economic sanctions
regulations are a major focus of the US government for financial
institutions and are rigorously enforced by the US government agencies.
The Group's US bank and non-bank subsidiaries and the Royal Bank's
US branches are also subject to supervision and regulation by a variety
of other US regulatory agencies. RBS Citizens N.A. is supervised by the
Office of the Comptroller of the Currency, which is charged with the
regulation and supervision of nationally chartered banks. RBS
Citizens N.A. owns CCO Investments Services Corp., a US broker dealer
subject to regulation and supervision by the US Securities and Exchange
Commission (SEC) and the Financial Industry Regulatory Authority
(FINRA) with respect to its securities activities. Citizens Bank of
Pennsylvania is subject to the regulation and supervision of the US
Federal Deposit Insurance Corporation and the Pennsylvania Department
of Banking. Both banks are subject to supervision and regulation by the
Consumer Financial Protection Bureau (CFPB).
RBS Citizens Financial Group, Inc. is under the supervision of the
Federal Reserve as a bank holding company. The Royal Bank's New
York branch is supervised by the New York State Department of
Financial Services and the Federal Reserve Bank of New York, and its
Connecticut branch is supervised by the Connecticut Department of
Banking. Both branches are also subject to supervisory oversight by the
Federal Reserve Bank of Boston.
The Group's primary US broker dealer, RBS Securities Inc. (RBSSI),
formerly known as Greenwich Capital Markets, Inc., is also subject to
regulation and supervision by the SEC and FINRA with respect to its
securities activities. The futures activities of RBSSI are subject to
regulation and oversight by the US Commodity Futures Trading
Commission and the Chicago Mercantile Exchange Group-owned
exchanges.
Other jurisdictions
The Group operates in over 45 countries through a network of branches,
local banks and non-bank subsidiaries and these activities are subject to
supervision in most cases by a local regulator or central bank.
Description of property and equipment
The Group operates from a number of locations worldwide, principally in
the UK. At 31 December 2013, the Royal Bank and NatWest had 608 and
1,392 retail branches, respectively, in the UK. Ulster Bank has a footprint
of 214 branches and an extensive network of business banking offices
across Northern Ireland and the Republic of Ireland. US Retail &
Commercial had 1,366 retail banking offices (including in-store branches)
covering Connecticut, Delaware, Illinois, Massachusetts, Michigan, New
Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island
and Vermont. A substantial majority of the UK branches are owned by the
Royal Bank, NatWest and their subsidiaries or are held under leases with
unexpired terms of over 50 years. The Group's principal properties
include its headquarters at Gogarburn, Edinburgh, its principal offices in
London at 135 and 280 Bishopsgate and the Drummond House
administration centre located at South Gyle, Edinburgh.
Total capital expenditure on premises (excluding investment properties),
computers and other equipment in the year ended 31 December 2013
was £571 million (2012 - £801 million; 2011 - £820 million).