RBS 2014 Annual Report Download - page 137

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RBS – Interim Results 2015
Appendix 1 Capital and risk management
General overview*
RBS’s main risks are described in Capital and risk management - Risk coverage in the 2014 Annual Report
and Accounts. The table below is an overview of these risks, including any developments during H1 2015.
Risk type Overview
Capital and leverage • RBS’s CET1 ratio: continued to strengthen from 11.2% at the end of 2014 to
12.3% at 30 June 2015, an improvement of 110 basis points.
• Key milestones were:
o the reduction of CFG ownership interest to 40.8%; and
o the continued run down of RCR and CIB assets.
• RWAs: continued to decline with a £30 billion reduction from the 2014 year end to
£326 billion, £26 billion above the year end 2015 target of £300 billion, following
reductions in CIB (£19.1 billion) and RCR (£7.6 billion).
• Leverage ratio (under the revised 2014 Basel III leverage ratio framework and the
2015 CRR Delegated Act): 4.6% compared with 4.2% at the end of 2014
reflecting capital strength and leverage exposure reduction, from £940 billion to
£875 billion, principally in CIB.
• RBS plans to issue £4-5 billion of end-point CRR compliant Additional Tier 1, of
which £2 billion is planned to be issued in 2015.
Liquidity and
funding
• Liquidity position continues to be robust: the liquidity portfolio of £161 billion at 30
June 2015 covered short-term wholesale funding by more than six times.
Excluding CFG, the liquidity portfolio was £148 billion. Short-term wholesale
funding reduced to £25 billion, due to term debt maturities.
• Liquidity portfolio increased by £10.8 billion in the six months to 30 June 2015
mainly driven by CIB and RCR run-down, Citizens share disposals and
continuation of sales from RBS N.V. treasury portfolio.
• Liquidity coverage ratio (LCR) improved by five percentage points to 117% since
the year end; excluding Citizens the LCR was 118%. From 1 October 2015, RBS
will be required by the PRA to have a LCR of at least 80%.
• Net stable funding ratio (NSFR) at 30 June 2015 was 115% in total and 112%
excluding Citizens, broadly unchanged from 2014 year end.
• The loan:deposit ratio fell to 92% at 30 June 2015, primarily reflecting asset
reductions and a stable deposit base.
• Based on its current assessment of the Financial Stability Board’s proposals,
RBS may issue £3-£5 billion of qualifying debt per annum between 2015 and
2019 to meet future total loss absorbing capacity requirements.
Conduct and legal RBS continued to remediate historical conduct issues. RBS co-operated with global
regulators on investigations into the foreign exchange market and the more significant
penalties were settled. Litigation and conduct costs were £1.3 billion in H1 2015
compared with £0.25 billion in H1 2014. The conduct risk framework was further
embedded in Conduct and Regulatory Affairs’ new operating model, focussing
assurance coverage and testing towards customer outcomes.
*Not within the scope of Deloitte LLP’s review report