rbs201308026k4.htm
 
FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549

 
 
Report of Foreign Private Issuer
 
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
 
For August 2, 2013
 
Commission File Number: 001-10306

 
The Royal Bank of Scotland Group plc

 
RBS, Gogarburn, PO Box 1000
Edinburgh EH12 1HQ

 
(Address of principal executive offices)
 
 
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
 
Form 20-F X
  
Form 40-F ___
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):_________

 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):_________


Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.


Yes
   ___
No X
 
 
If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- ________

 
 
The following information was issued as a Company announcement in London, England and is furnished pursuant to General Instruction B to the General Instructions to Form 6-K:

 
 
 



 
 
 
 
Risk and balance sheet management
 
 
Presentation of information
127 
General overview
127 
 
Capital management
Introduction
130 
Capital ratios
130 
  Current rules
130 
  Fully loaded CRR estimate
130 
Capital resources
131 
  Components of capital (Basel 2.5)
131 
  Flow statement (Basel 2.5)
132 
Risk-weighted assets: Flow statement
133 
 
Liquidity, funding and related risks
Overview
134 
Funding sources
135 
Liquidity portfolio
136 
Basel III liquidity ratios and other metrics
137 
 
Credit risk
Introduction
138 
Loans and related credit metrics
138 
Debt securities
139 
Derivatives
141 
 
Market risk
Value-at-risk (VaR)
142 
VaR non-trading portfolios
144 
 
Country risk
Introduction
145 
External environment
145 
Country risk exposure
146 
Summary tables
149 
 
 
 
Risk and balance sheet management (continued)
 
Presentation of information
In the balance sheet, all assets of disposal groups are presented as a single line as required by IFRS. In the risk and balance sheet management section, balances and exposures relating to disposal groups are included within risk measures for all periods presented as permitted by IFRS.
 
General overview*
The Group's main risks are described on pages 122 to 126 of the Group's 2012 Annual Report and Accounts. The following table defines and presents a summary of the key developments for each risk during the first half of 2013.
 
 
Risk type
Definition
H1 2013 summary
Capital adequacy risk
The risk that the Group has insufficient capital.
The Group continued to improve its capital position in 2013 with a Core Tier 1 ratio of 11.1%, an 80 basis point improvement during the first half of 2013. The Group remains on track to achieve a fully loaded CRR Core Tier 1 ratio of over 9% by the end of 2013.
 
Refer to pages 130 to 133 and Appendix 1.
Liquidity and funding risk
The risk that the Group is unable to meet its financial liabilities as they fall due.
Liquidity and funding metrics strengthened even further during the first half of 2013 with short-term wholesale funding reducing by £4.9 billion to £36.7 billion, being covered more than four times by the liquidity portfolio of £157.6 billion. Liquidity coverage ratio and net stable funding ratio also improved.
 
Refer to pages 134 to 137 and Appendix 2.
Credit risk (including counterparty credit risk)
The risk that the Group will incur losses owing to the failure of a customer or counterparty to meet its obligation to settle outstanding amounts.
Loan impairment charges were 20% lower than H1 2012 despite continuing challenges in Ulster Bank Group (Core and Non-Core) and the commercial real estate portfolios. Credit risk associated with legacy exposures continued to be reduced, with a further 16% decline in Non-Core loans. The Group also continued to make progress in reducing key credit concentration risk, with exposure to commercial real estate declining 6%. The shipping sector continues to be an area of focus for the Group.
 
Refer to pages 138 to 141 and Appendix 3.
 
 
 
 
*Not within the scope of Deloitte LLP's review report
 
Risk and balance sheet management (continued)
 
General overview* (continued)
 
Risk type
Definition
H1 2013 summary
Market risk
The risk arising from fluctuations in interest rates, foreign currency, credit spreads, equity prices, commodity prices and risk related factors such as market volatilities.
The Group continued to reduce its risk exposures. While the average trading VaR for H1 2013 remained stable at £96 million compared with the 2012 full year average, the Group's average interest rate VaR decreased to £40 million, 36% lower than the 2012 full year average, reflecting continued de-risking by a number of Markets businesses.
 
Refer to pages 142 to 144 and Appendix 4.
Country risk
The risk of material losses arising from significant country-specific events.
The pace of sovereign downgrades gradually slowed in the first half of 2013. Balance sheet exposures to eurozone periphery countries at mid-2013 were approximately £58.6 billion (£18.9 billion of this outside Ireland), a modest 1% decline, as reduced exposures offset appreciation of the euro versus sterling. The funding mismatch was reduced to approximately £8.5 billion in Ireland, remained at £4 billion in Spain, and at modest levels in other periphery eurozone countries.
 
Refer to pages 145 to 150 and Appendix 5.
Operational risk
The risk of loss resulting from inadequate or failed processes, people, systems or from external events.
Operational risk losses (including fraud losses) in H1 2013 were significantly lower than in H1 2012.
 
However, exposure to operational risk remains high due to the scale of change occurring across the Group (both structural and regulatory), macroeconomic stresses (e.g. eurozone distress) and other external threats such as e-crime.
 
 
 
 
*Not within the scope of Deloitte LLP's review report

Risk and balance sheet management (continued)
 
General overview* (continued)
 
Risk type
Definition
H1 2013 summary
Regulatory risk
The risk arising from non-compliance with regulatory requirements, regulatory change or regulator expectations.
During H1 2013, the Group, along with the rest of the banking industry, continued to experience unprecedented levels of prospective changes to laws and regulations from national and supranational regulators. Particular areas of focus were: conduct regulation; prudential regulation (capital, liquidity, governance and risk management); treatment of systemically important entities (systemic capital surcharges and recovery and resolution planning); and structural reforms, with the UK's Independent Commission on Banking proposals, the European Union's Liikanen Group recommendations and the Dodd-Frank Act's "Volcker Rule" in the US. In response to these changes, the Group has further developed its operating model for the management of upstream risk and is reviewing its approach to change implementation.
Conduct risk
The risk that the conduct of the Group and its staff towards its customers, or within the markets in which it operates, leads to reputational damage and/or financial loss.
A management framework to enable the consistent identification, assessment and mitigation of conduct risk continues to be embedded in 2013. Awareness initiatives and targeted conduct risk training continues to be delivered to help drive understanding. These actions are designed to facilitate effective conduct risk management, and address any conduct shortcomings identified.
Reputational risk
The risk of brand damage and/or financial loss due to the failure to meet stakeholders' expectations of the Group.
The Group has aligned its strategic ambition to serve customers well and to build a really good bank with the key expectations of its stakeholders, and strengthened the process to identify and manage the reputational concerns associated with the Group's activities. There are still some legacy reputational issues to work through, but dealing with them in an open and direct manner is a necessary prerequisite to rebuilding the Group's reputation.
Pension risk
The risk arising from the Group's contractual liabilities to or with respect to its defined benefit pension schemes, as well as the risk that it will have to make additional contributions to such schemes.
The Group continued to focus on enhancing its pension risk management and modelling systems.
 
 
 
 
*Not within the scope of Deloitte LLP's review report

Risk and balance sheet management (continued)
 
Capital management
Introduction*
The Group aims to maintain an appropriate level of capital to meet its business needs and regulatory requirements, and operates within an agreed risk appetite. The appropriate level of capital is determined based on the dual aims of: (i) meeting minimum regulatory capital requirements; and (ii) ensuring the Group maintains sufficient capital to uphold customer, investor and rating agency confidence in the organisation, thereby supporting the business franchise and funding capacity.
 
Capital ratios*
The Group's capital, risk-weighted assets (RWAs) and risk asset ratios, calculated in accordance with Prudential Regulation Authority (PRA) definitions, are set out below.
 
Current rules
30 June 
2013 
31 March 
2013 
31 December 
2012 
Capital
£bn 
£bn 
£bn 
       
Core Tier 1
48.4 
48.2 
47.3 
Tier 1
57.8 
57.5 
57.1 
Total
68.8 
69.0 
66.8 
 
 
RWAs by risk
      
       
Credit risk
      
  - non-counterparty
315.7 
320.8 
323.2 
  - counterparty
40.2 
44.4 
48.0 
Market risk
38.3 
38.8 
42.6 
Operational risk
41.8 
41.8 
45.8 
       
 
436.0 
445.8 
459.6 
 
 
Risk asset ratios
% 
% 
% 
       
Core Tier 1
11.1 
10.8 
10.3 
Tier 1
13.3 
12.9 
12.4 
Total
15.8 
15.5 
14.5 
 
 
Fully loaded CRR estimate (1)
30 June 
2013 
31 March 
2013 
31 December 
2012 
       
Common Equity Tier 1 capital
£41.2bn 
£39.9bn 
£38.1bn 
RWAs
£471.0bn 
£487.2bn 
£494.6bn 
Common Equity Tier 1 capital ratio
8.7% 
8.2% 
7.7% 
 
Note:
 
(1)
See Appendix 1 for basis of preparation, detailed capital reconciliation and leverage ratios.
 
Key points
 
·
Core Tier 1 capital ratios, under current rules and fully loaded CRR basis, improved by 80 basis points and 100 basis points respectively from 31 December 2012. This reflected attributable profit, the favourable impact of currency movements on the capital base as well as a reduction in RWAs, the latter despite the impact of model changes which added £11 billion.
·
The RWA decreases were primarily in Non-Core (£14.1 billion) driven by disposals and run-off, and in Markets (£14.5 billion) as a result of lower operational, and market risk following focus on balance sheet and risk reduction.
 
*Not within the scope of Deloitte LLP's review report

 
Risk and balance sheet management (continued)
 
Capital management (continued)
 
Capital resources
 
Components of capital (Basel 2.5)
The Group's regulatory capital resources in accordance with PRA definitions were as follows:
 
 
 
30 June 
2013 
31 March 
2013 
31 December 
2012 
 
£m 
£m 
£m 
       
Shareholders' equity (excluding non-controlling interests)
      
 Shareholders' equity per balance sheet
69,183 
70,633 
68,678 
 Preference shares - equity
(4,313)
(4,313)
(4,313)
 Other equity instruments
(979)
(979)
(979)
 
63,891 
65,341 
63,386 
       
Non-controlling interests
      
 Non-controlling interests per balance sheet
475 
532 
1,770 
 Other adjustments to non-controlling interests for regulatory purposes
- 
- 
(1,367)
 
475 
532 
403 
       
Regulatory adjustments and deductions
      
 Own credit
447 
541 
691 
 Defined benefit pension fund adjustment (1)
628 
592 
913 
 Unrealised losses on available-for-sale (AFS) debt securities
800 
92 
410 
 Unrealised gains on AFS equity shares
(86)
(82)
(63)
 Cash flow hedging reserve
(491)
(1,635)
(1,666)
 Other adjustments for regulatory purposes
(140)
(202)
(198)
 Goodwill and other intangible assets
(13,997)
(13,928)
(13,545)
 50% excess of expected losses over impairment provisions (net of tax)
(2,032)
(1,847)
(1,904)
 50% of securitisation positions
(1,051)
(1,159)
(1,107)
 
(15,922)
(17,628)
(16,469)
       
Core Tier 1 capital
48,444 
48,245 
47,320 
       
Other Tier 1 capital
      
 Preference shares - equity
4,313 
4,313 
4,313 
 Preference shares - debt
1,112 
1,113 
1,054 
 Innovative/hybrid Tier 1 securities
4,427 
4,410 
4,125 
 
9,852 
9,836 
9,492 
       
Tier 1 deductions
      
 50% of material holdings (2)
(1,124)
(1,182)
(295)
 Tax on excess of expected losses over impairment provisions
616 
560 
618 
 
(508)
(622)
323 
       
Total Tier 1 capital
57,788 
57,459 
57,135 
 
For the notes to this table refer to the following page.
 
 
 
 
 
Risk and balance sheet management (continued)
 
Capital management: Capital resources: Components of capital (Basel 2.5) (continued)
 
 
 
30 June 
2013 
31 March 
2013 
31 December 
2012 
 
£m 
£m 
£m 
       
Qualifying Tier 2 capital
      
 Undated subordinated debt
2,136 
2,197 
2,194 
 Dated subordinated debt - net of amortisation
13,530 
13,907 
13,420 
 Unrealised gains on AFS equity shares
86 
82 
63 
 Collectively assessed impairment provisions
415 
417 
399 
 
16,167 
16,603 
16,076 
       
Tier 2 deductions
      
 50% of securitisation positions
(1,051)
(1,159)
(1,107)
 50% excess of expected losses over impairment provisions
(2,648)
(2,407)
(2,522)
 50% of material holdings (2)
(1,124)
(1,182)
(295)
 
(4,823)
(4,748)
(3,924)
       
Total Tier 2 capital
11,344 
11,855 
12,152 
       
Supervisory deductions
      
 Unconsolidated investments
      
  - Direct Line Group (2)
- 
- 
(2,081)
  - Other investments
(39)
(39)
(162)
 Other deductions
(271)
(232)
(244)
       
 
(310)
(271)
(2,487)
       
Total regulatory capital
68,822 
69,043 
66,800 
 
Flow statement (Basel 2.5)
The table below analyses the movement in Core Tier 1, Other Tier 1 and Tier 2 capital during the first half of the year.
 
 
Core Tier 1 
Other Tier 1 
Tier 2 
Supervisory 
deductions 
Total 
 
£m 
£m 
£m 
£m 
£m 
           
At 1 January 2013
47,320 
9,815 
12,152 
(2,487)
66,800 
Attributable profit net of movements in fair value of own credit
291 
- 
- 
- 
291 
Share capital and reserve movements in respect of employee share schemes
220 
- 
- 
- 
220 
Foreign exchange reserve
1,293 
- 
- 
- 
1,293 
Foreign exchange movements
- 
263 
794 
- 
1,057 
Increase in non-controlling interests
72 
- 
- 
- 
72 
(Increase)/decrease in capital deductions (1)
(72)
(831)
(899)
2,177 
375 
Increase in goodwill and intangibles
(452)
- 
- 
- 
(452)
Defined benefit pension fund (2)
(285)
- 
- 
- 
(285)
Dated subordinated debt issues
- 
- 
652 
- 
652 
Dated subordinated debt maturities and redemptions
- 
- 
(1,421)
- 
(1,421)
Other movements
57 
97 
66 
- 
220 
           
At 30 June 2013
48,444 
9,344 
11,344 
(310)
68,822 
 
Notes:
 
(1)
From 1 January 2013 material holdings in insurance companies are deducted 50% from Tier 1 and 50% from Tier 2.
(2)
The movement in defined benefit pension fund reflects a net contribution to the Main Scheme in the period.
 
 
 
 
Risk and balance sheet management (continued)
 
Capital management (continued)
 
Risk-weighted assets: Flow statement*
The table below analyses movement in credit risk, market risk and operational risk RWAs by key drivers during the first half of the year.
 
 
                                                                          Credit risk
Market risk 
Operational 
risk 
Gross 
RWAs 
Non-counterparty 
Counterparty 
£bn 
£bn 
£bn 
£bn 
£bn 
           
At 1 January 2013
323.2 
48.0 
42.6 
45.8 
459.6 
Business and market movements (1)
(15.1)
(7.8)
(4.1)
(4.0)
(31.0)
Disposals
(4.0)
- 
- 
- 
(4.0)
Model changes (2)
11.6 
- 
(0.2)
- 
11.4 
           
At 30 June 2013
315.7 
40.2 
38.3 
41.8 
436.0 
 
Notes:
 
(1)
Represents changes in book size, composition, position changes and market movements including foreign exchange impacts.
(2)
Refers to implementation of a new model or modification of an existing model after approval from the PRA and changes in model scope.
 
Key points
 
·
Credit risk model changes in 2013 included exposure at default treatment, continuation of commercial real estate slotting and loss given default changes to shipping portfolio.
   
·
Changes in market risk models related to incremental risk charge.
 
 
  
 
*Not within the scope of Deloitte LLP's review report

Risk and balance sheet management (continued)
 
Liquidity, funding and related risks
Liquidity risk is highly dependent on characteristics such as the maturity profile and composition of the Group's assets and liabilities, the quality and marketable value of its liquidity buffer and broader market factors, such as wholesale market conditions alongside depositor and investor behaviour.
 
Overview*
 
●
Short-term wholesale funding excluding derivative collateral (STWF) fell by £4.9 billion to £36.7 billion, was maintained at 4% of the funded balance sheet and remained stable at 29% (31 December 2012 - 28%) of total wholesale funding. Net inter-bank funding at £6.0 billion was less than half the level of a year ago (30 June 2012 - £13.3 billion).
   
●
The Group's liquidity portfolio increased in Q1 but was subsequently held flat at £157.6 billion in Q2. The liquidity portfolio continues to cover STWF by considerably more than the Group's medium-term target of 1.5 times.
   
●
The Group's loan:deposit ratio improved to 96% with the funding surplus increasing to £17.6 billion from £2.0 billion at the year end, with UK Retail and UK Corporate driving the improvement. Deposit growth in the Retail & Commercial businesses was £4.9 billion and loan reduction in Non-Core was £9.4 billion.
   
●
The Group repaid €5.0 billion of the European Central Bank Long Term Refinancing Operation funding in the half year, principally in Q2.
   
●
Liquidity metrics improved in the half year to 30 June 2013 reflecting ongoing balance sheet improvement. Stressed outflow coverage improved marginally to 136%. The liquidity coverage ratio, based on the Group's interpretation of draft guidance, was maintained at above 100%; while the net stable funding ratio improved slightly to 120%.
   
●
During the first half of 2013 the Group successfully completed a number of public liability management exercises as part of its ongoing balance sheet management. In Q1 £2 billion of senior unsecured debt was bought back, with a further €1.5 billion secured debt in Q2. An additional $2.5 billion of Lower Tier 2 capital debt was bought back in July 2013.
   
●
The Group issued $1.0 billion Tier 2 capital debt in Q2 2013.
 
 
 
 
*Not within the scope of Deloitte LLP's review report
 
Risk and balance sheet management (continued)
 
Liquidity, funding and related risks (continued)
 
Funding sources
The table below shows the Group's principal funding sources excluding repurchase agreements.
 
 
30 June 2013
  
31 December 2012
 
Less than 
1 year 
More than 
1 year 
Total 
  
Less than 
1 year 
More than 
1 year 
Total 
 
£m 
£m 
£m 
  
£m 
£m 
£m 
               
Deposits by banks
              
 derivative cash collateral
22,176 
- 
22,176 
  
28,585 
- 
28,585 
 other deposits
18,084 
5,027 
23,111 
  
18,938 
9,551 
28,489 
               
 
40,260 
5,027 
45,287 
  
47,523 
9,551 
57,074 
               
Debt securities in issue
              
 commercial paper
2,526 
- 
2,526 
  
2,873 
- 
2,873 
 certificates of deposit
2,264 
336 
2,600 
  
2,605 
391 
2,996 
 medium-term notes
12,013 
43,129 
55,142 
  
13,019 
53,584 
66,603 
 covered bonds
185 
9,140 
9,325 
  
1,038 
9,101 
10,139 
 securitisations
807 
9,321 
10,128 
  
761 
11,220 
11,981 
               
 
17,795 
61,926 
79,721 
  
20,296 
74,296 
94,592 
Subordinated liabilities
857 
25,681 
26,538 
  
2,351 
24,951 
27,302 
               
Notes issued
18,652 
87,607 
106,259 
  
22,647 
99,247 
121,894 
               
Wholesale funding
58,912 
92,634 
151,546 
  
70,170 
108,798 
178,968 
               
Customer deposits
              
 derivative cash collateral
8,179 
- 
8,179 
  
7,949 
- 
7,949 
 other deposits
409,521 
19,506 
429,027 
  
400,012 
26,031 
426,043 
               
Total customer deposits
417,700 
19,506 
437,206 
  
407,961 
26,031 
433,992 
               
Total funding
476,612 
112,140 
588,752 
  
478,131 
134,829 
612,960 
 
The table below shows the Group's wholesale funding by source.
 
 
 
Short-term wholesale
funding (1)
  
Total wholesale
funding
  
Net inter-bank
funding (2)
 
Excluding 
 derivative 
collateral 
Including 
 derivative 
 collateral 
  
Excluding 
 derivative 
collateral 
Including 
 derivative 
 collateral 
  
Deposits 
Loans (3)
Net 
 inter-bank 
 funding 
 
£bn 
£bn 
  
£bn 
£bn 
  
£bn 
£bn 
£bn 
                   
30 June 2013
36.7 
58.9 
  
129.4 
151.5 
  
23.1 
(17.1)
6.0 
31 March 2013
43.0 
70.9 
  
147.2 
175.1 
  
26.6 
(18.7)
7.9 
31 December 2012
41.6 
70.2 
  
150.4 
179.0 
  
28.5 
(18.6)
9.9 
30 September 2012
48.5 
77.2 
  
158.9 
187.6 
  
29.4 
(20.2)
9.2 
30 June 2012
62.3 
94.3 
  
181.1 
213.1 
  
35.6 
(22.3)
13.3 
 
Notes:
 
(1)
Short-term wholesale balances denote those with a residual maturity of less than one year and include longer-term issuances.
(2)
Excludes derivative cash collateral.
(3)
Primarily short-term balances.
 
For analysis of deposits and repos and divisional analysis of loan deposit ratios refer to Appendix 2.


 
Risk and balance sheet management (continued)
 
Liquidity, funding and related risks (continued)
 
Liquidity portfolio
The table below analyses the Group's liquidity portfolio by product and by liquidity value. Liquidity value is lower than carrying value principally as it is stated after the discounts applied by the Bank of England and other central banks to loans, within secondary liquidity portfolio, eligible for discounting.
 
 
 
Liquidity value
 
Period end
  
Average 
 
UK DLG (1)
CFG 
Other 
Total 
  
Q2 2013 
H1 2013 
30 June 2013
£m 
£m 
£m 
£m 
  
£m 
£m 
               
Cash and balances at central banks
77,101 
2,237 
2,399 
81,737 
  
85,751 
82,389 
Central and local government bonds
              
  AAA rated governments and US agencies
4,260 
6,008 
706 
10,974 
  
11,995 
12,697 
  AA- to AA+ rated governments (2)
6,808 
- 
276 
7,084 
  
6,844 
5,799 
  Below AA rated governments
- 
- 
248 
248 
  
252 
236 
  Local government
- 
- 
79 
79 
  
159 
312 
               
 
11,068 
6,008 
1,309 
18,385 
  
19,250 
19,044 
Treasury bills
650 
- 
- 
650 
  
665 
704 
               
Primary liquidity
88,819 
8,245 
3,708 
100,772 
  
105,666 
102,137 
               
Secondary liquidity
48,063 
6,935 
1,843 
56,841 
  
56,486 
56,347 
               
Total liquidity value
136,882 
15,180 
5,551 
157,613 
  
162,152 
158,484 
               
               
Total carrying value
168,006 
22,223 
7,988 
198,217 
      
 
 
31 December 2012
          
Q4 2012 
FY 2012 
               
Cash and balances at central banks
64,822 
891 
4,396 
70,109 
  
74,794 
81,768 
Central and local government bonds
              
  AAA rated governments and US agencies
3,984 
5,354 
547 
9,885 
  
14,959 
18,832 
  AA- to AA+ rated governments (2)
9,189 
- 
432 
9,621 
  
8,232 
9,300 
  Below AA rated governments
- 
- 
206 
206 
  
438 
596 
  Local government
- 
- 
979 
979 
  
989 
2,244 
               
 
13,173 
5,354 
2,164 
20,691 
  
24,618 
30,972 
Treasury bills
750 
- 
- 
750 
  
750 
202 
               
Primary liquidity
78,745 
6,245 
6,560 
91,550 
  
100,162 
112,942 
               
Secondary liquidity
47,486 
7,373 
760 
55,619 
  
50,901 
41,978 
               
Total liquidity value
126,231 
13,618 
7,320 
147,169 
  
151,063 
154,920 
               
               
Total carrying value
157,574 
20,524 
9,844 
187,942 
      
 
Notes:
 
(1)
The PRA regulated UK Defined Liquidity Group (UK DLG) comprises the Group's five UK banks: The Royal Bank of Scotland plc, National Westminster Bank Plc, Ulster Bank Limited, Coutts & Co and Adam & Co.  In addition, certain of the Group's significant operating subsidiaries - RBS N.V., RBS Citizens Financial Group Inc. and Ulster Bank Ireland Limited - hold locally managed portfolios of liquid assets that comply with local regulations that may differ from PRA rules.
(2)
Includes US government guaranteed and US government sponsored agencies.
(3)
Includes assets eligible for discounting at the Bank of England and other central banks.

 
 
 
Risk and balance sheet management (continued)
 
Liquidity, funding and related risks (continued)
 
Basel III liquidity ratios and other metrics*
The table below sets out some of the key liquidity and related metrics monitored by the Group.
 
 
 
30 June 
2013 
31 March 
2013 
31 December 
2012 
 
% 
% 
% 
       
Stressed outflow coverage (1)
136 
134 
128 
Liquidity coverage ratio (LCR) (2)
>100 
>100 
>100 
Net stable funding ratio (NSFR) (2)
120 
119 
117 
 
Notes:
 
(1)
The Group's liquidity risk appetite is measured by reference to the liquidity buffer as a percentage of stressed contractual and behavioural outflows under the worst of three severe stress scenarios of a market-wide stress, an idiosyncratic stress and a combination of both in the Group's Individual Liquidity Adequacy Assessment. Liquidity risk adequacy is determined by surplus of liquid assets over three months' stressed outflows under the worst case stresses. This assessment is performed in accordance with PRA guidance.
(2)
The Group monitors the LCR and the NSFR in its internal reporting framework based on its current interpretation of the final rules. At present there is a broad range of interpretations on how to calculate these ratios due to the lack of a commonly agreed market standard and the ratios are subject to future issuances of technical standards from the European Banking Authority. This makes meaningful comparisons of the LCR and NSFR between institutions difficult.
 
Disclosures on the following aspects are included in Appendix 2:
 
●
Analysis of net stable funding ratio;
   
●
Retail & Commercial deposit maturity analysis;
   
●
Non-traded interest rate risk VaR;
   
●
Sensitivity of net interest income; and
   
●
Structural foreign currency exposures.
 
 
 
 
*Not within the scope of Deloitte LLP's review report

Risk and balance sheet management (continued)
 
Credit risk
 
Introduction
Credit risk is the risk of financial loss due to the failure of a customer or counterparty to meet its obligation to settle outstanding amounts. The quantum and nature of credit risk assumed across the Group's different businesses vary considerably, while the overall credit risk outcome usually exhibits a high degree of correlation with the macroeconomic environment.
 
Loans and related credit metrics
The tables below analyse gross loans and advances (excluding reverse repos) and the related credit metrics by division.
 
 
 
  
  
  
  
Credit metrics
Year to date
  
 
Gross loans to
REIL 
Provisions 
REIL as a % 
of gross 
loans to 
customers 
Provisions 
as a % 
of REIL 
  
Impairment 
charge 
Amounts 
written-off 
  
Banks 
Customers 
  
30 June 2013
£m 
£m 
£m 
£m 
% 
% 
£m 
£m 
  
  
  
  
  
  
  
  
  
  
  
UK Retail
870 
112,192 
4,289 
2,481 
3.8 
58 
169 
300 
  
UK Corporate
762 
104,639 
6,156 
2,395 
5.9 
39 
379 
412 
  
Wealth
1,412 
17,117 
276 
107 
1.6 
39 
7 
8 
  
International Banking
5,565 
40,619 
528 
395 
1.3 
75 
153 
156 
  
Ulster Bank
685 
32,955 
8,578 
4,430 
26.0 
52 
503 
109 
  
US Retail & Commercial
185 
53,325 
1,133 
266 
2.1 
23 
51 
138 
  
  
  
  
  
  
  
  
  
  
  
Retail & Commercial
9,479 
360,847 
20,960 
10,074 
5.8 
48 
1,262 
1,123 
  
Markets
16,135 
28,236 
365 
283 
1.3 
78 
(3)
32 
  
Other
4,191 
5,026 
1 
1 
- 
100 
(1)
- 
  
  
  
  
  
  
  
  
  
  
  
Core
29,805 
394,109 
21,326 
10,358 
5.4 
49 
1,258 
1,155 
  
Non-Core
610 
47,179 
20,857 
11,395 
44.2 
55 
903 
968 
  
  
  
  
  
  
  
  
  
  
  
Group
30,415 
441,288 
42,183 
21,753 
9.6 
52 
2,161 
2,123 
  
  
  
  
  
  
  
  
  
  
  
31 December 2012
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
UK Retail
695 
113,599 
4,569 
2,629 
4.0 
58 
529 
599 
  
UK Corporate
746 
107,025 
5,452 
2,432 
5.1 
45 
836 
514 
  
Wealth
1,545 
17,074 
248 
109 
1.5 
44 
46 
15 
  
International Banking
4,827 
42,342 
422 
391 
1.0 
93 
111 
445 
  
Ulster Bank
632 
32,652 
7,533 
3,910 
23.1 
52 
1,364 
72 
  
US Retail & Commercial
435 
51,271 
1,146 
285 
2.2 
25 
83 
391 
  
  
  
  
  
  
  
  
  
  
  
Retail & Commercial
8,880 
363,963 
19,370 
9,756 
5.3 
50 
2,969 
2,036 
  
Markets
16,805 
29,787 
396 
305 
1.3 
77 
25 
109 
  
Other
3,196 
2,125 
- 
1 
- 
nm 
1 
- 
  
  
  
  
  
  
  
  
  
  
  
Core
28,881 
395,875 
19,766 
10,062 
5.0 
51 
2,995 
2,145 
  
Non-Core
477 
56,343 
21,374 
11,200 
37.9 
52 
2,320 
2,121 
  
Direct Line Group
2,036 
881 
- 
- 
- 
- 
- 
- 
  
  
  
  
  
  
  
  
  
  
  
Group
31,394 
453,099 
41,140 
21,262 
9.1 
52 
5,315 
4,266 
  
 
 
nm = not meaningful
 
See Appendix 3 for additional analysis of gross loans, REIL, provisions and impairment charge.

 
 
 
Risk and balance sheet management (continued)
 
Credit risk: Loans and related credit metrics (continued)
 
Key points
 
·
In the half year to 30 June 2013, REIL increased by £1.0 billion to £42.2 billion or 9.6% of total customer loans (31 December 2012 - £41.1 billion, 9.1%), due primarily to exchange rate movements. Increases of £1.0 billion in UIster Bank and £0.7 billion in UK Corporate were partly offset by decreases of £0.5 billion in Non-Core and £0.3 billion in Retail.
   
·
The annualised impairment charge for the period decreased by 19%, with most of this in the retail and commercial business.
   
·
UK Corporate REIL increased £0.7 billion or 13% mainly as a result of individual cases in the commercial real estate and shipping portfolios as credit conditions remain difficult in these sectors. Impairment charge on an annualised basis was down 9%, largely driven by lower collective provisions in the SME businesses.
   
·
The economic outlook in Ireland appears to be stabilising with key economic indicators suggesting a modest decline in the level of uncertainty. Ulster Bank Group credit metrics remain elevated with REIL increasing by £771 million excluding the impact of foreign exchange (including foreign exchange £1.6 billion). The increase is largely due to a technical classification adjustment on corporate loans, which will reverse as loan documentation is brought up to date. Impairments continue to outpace write-offs but showed a 26% decline on an annualised basis in Core and a 12% decline in Non-Core. 
 
 
Debt securities: IFRS measurement classification by issuer
The table below analyses debt securities by issuer and IFRS measurement classifications. US central and local government includes US federal agencies; financial institutions includes US government sponsored agencies and securitisation entities, latter principally relating to asset-backed securities (ABS).
 
 
Central and local government
Banks 
Other 
financial 
institutions 
Corporate 
Total 
UK 
US 
Other 
30 June 2013
£m 
£m 
£m 
£m 
£m 
£m 
£m 
               
Held-for-trading (HFT)
8,222 
11,881 
25,159 
1,774 
21,499 
2,014 
70,549 
Designated as at fair value
- 
- 
122 
- 
487 
1 
610 
Available-for-sale (AFS)
6,671 
16,573 
12,554 
6,071 
21,225 
147 
63,241 
Loans and receivables
4 
- 
7 
326 
3,276 
218 
3,831 
               
Long positions
14,897 
28,454 
37,842 
8,171 
46,487 
2,380 
138,231 
               
Of which US agencies
- 
5,896 
- 
- 
19,291 
- 
25,187 
               
Short positions (HFT)
(2,019)
(8,557)
(12,718)
(979)
(2,010)
(635)
(26,918)
               
Available-for-sale (AFS)
              
Gross unrealised gains
433 
606 
675 
58 
592 
8 
2,372 
Gross unrealised losses
- 
(91)
(8)
(288)
(1,204)
(1)
(1,592)

 
 
 
Risk and balance sheet management (continued)
 
Credit risk: Debt securities: IFRS measurement classification by issuer (continued)
 
 
 
Central and local government
Banks 
Other 
financial 
institutions 
Corporate 
Total 
UK 
US 
Other 
31 December 2012
£m 
£m 
£m 
£m 
£m 
£m 
£m 
               
Held-for-trading (HFT)
7,692 
17,349 
27,195 
2,243 
21,876 
2,015 
78,370 
Designated as at fair value
- 
- 
123 
86 
610 
54 
873 
Available-for-sale (AFS)
9,774 
19,046 
16,155 
8,861 
23,890 
3,167 
80,893 
Loans and receivables
5 
- 
- 
365 
3,728 
390 
4,488 
               
Long positions
17,471 
36,395 
43,473 
11,555 
50,104 
5,626 
164,624 
               
Of which US agencies
- 
5,380 
- 
- 
21,566 
- 
26,946 
               
Short positions (HFT)
(1,538)
(10,658)
(11,355)
(1,036)
(1,595)
(798)
(26,980)
               
Available-for-sale
              
Gross unrealised gains
1,007 
1,092 
1,187 
110 
660 
120 
4,176 
Gross unrealised losses
- 
(1)
(14)
(509)
(1,319)
(4)
(1,847)
 
Key points
 
·
HFT: The decrease in US government bonds reflects sales following increase in yields.  The decrease in other government bonds comprise reductions primarily in Japanese, French and Canadian bonds due to sales and maturities, partially offset by increased holding in Markets of German bonds (£2.2 billion).
   
·
AFS: A reduction of £7.2 billion relates to Direct Line Group, not included at 30 June 2013 as the Group ceded control in the first quarter. Other reductions include - Government securities £7.2 billion, primarily US, UK and Germany following sales as part of Group Treasury's liquidity portfolio management. Reductions were also seen in banks (£1.2 billion) due to maturities and amortisations and other financial institutions (£2.1 billion), primarily US agency RMBS (£1.4 billion).
   
·
AFS gross unrealised gains and losses: £0.2 billion of the decrease relates to Direct Line Group. The remaining UK government decrease of £0.6 billion reflects exposure reduction and impact of rating downgrade. US government decrease of £0.6 billion also reflects exposure reduction as well as the impact of concerns over tapering of quantitative easing. A significant proportion of banks and financial institutions as well as ABS gross unrealised losses of £1.6 billion at 30 June 2013 relates to Group Treasury's holding of Spanish covered bonds.
 
 
 
 
Risk and balance sheet management (continued)
 
Credit risk (continued)
 
Derivatives
The table below analyses the fair value of the Group's derivatives by type of contract. Master netting arrangements in respect of mark-to-market (mtm) positions and collateral shown below do not result in a net presentation in the Group's balance sheet under IFRS.
 
 
 
30 June 2013
  
31 December 2012
 
Notional (1)
        
 
GBP 
USD 
Euro 
Other 
Total 
Assets 
Liabilities 
  
Notional (1) 
Assets 
Liabilities 
 
£bn 
£bn 
£bn 
£bn 
£bn 
£m 
£m 
  
£bn 
£m 
£m 
                       
Interest rate (2)
5,757 
11,797 
14,117 
7,242 
38,913 
284,051 
270,873 
  
33,483 
363,454 
345,565 
Exchange rate
416 
2,558 
936 
1,932 
5,842 
76,633 
83,446 
  
4,698 
63,067 
70,481 
Credit
3 
328 
97 
26 
454 
9,215 
8,583 
  
553 
11,005 
10,353 
Other (3)
12 
42 
30 
17 
101 
3,795 
7,147 
  
111 
4,392 
7,941 
                       
           
373,694 
370,049 
    
441,918 
434,340 
Counterparty mtm netting
      
(316,148)
(316,148)
    
(373,906)
(373,906)
                       
           
57,546 
53,901 
    
68,012 
60,434 
Cash collateral
          
(27,664)
(22,396)
    
(34,099)
(24,633)
Securities collateral
        
(5,300)
(5,319)
    
(5,616)
(8,264)
                       
           
24,582 
26,186 
    
28,297 
27,537 
 
Notes:
 
(1)
Includes exchange traded contracts of £2,317 billion (31 December 2012 - £2,497 billion), principally interest rate. Trades are generally closed out daily hence carrying values are insignificant (assets - £29 million (31 December 2012 - £41 million); liabilities - £235 million (31 December 2012 - £255 million).
(2)
Interest rate notional includes £22,206 billion (31 December 2012 - £15,864 billion) in respect of contracts with central clearing counterparties to the extent related assets and liabilities are offset.
(3)
Comprises equity and commodity derivatives.
 
Key points
 
·
Net exposure after taking into account position and collateral netting arrangements, decreased by 13% (liabilities decreased by 5%) due to lower derivative fair values, driven by upward shifts in interest rate yields and continued use of trade compression cycles. Sterling weakened against the US Dollar and Euro and resulted in increases in notionals and fair values.
   
·
Interest rate contracts decreased in the first half of 2013 due to significant upward shifts in major yield curves as fears of US Federal Reserve tapering of quantitative easing programme heightened. In addition, continued participation in trade compression cycles and offset relating to transactions with central counterparties reduced exposures. This was partially offset by higher trade volumes and exchange rate movements.
·
The increase in notional and fair value of exchange rate contracts reflected exchange rate movements, particularly on US Dollar denominated contracts. Trade volumes were also up.
   
·
The downward trend in credit derivatives notional and fair values primarily reflected increased use of trade compression cycles and novation of certain trades in Markets in line with the Group's risk reduction strategy.  This was complemented by tightening of credit spreads in the US as optimism in the economy improved, partially offset by widening of credit spreads in Europe. The decrease was partially offset by exchange rate movements and increased trade volumes.
   
·
Reduction in equity contracts reflected market volatilities, sales and reduction in trade volumes.
 
For additional analysis of credit derivatives, refer to Appendix 3, page 17.
 

 
 
Risk and balance sheet management (continued)
 
Market risk
 
Value-at-risk (VaR)
For a description of the Group's basis of measurement and methodologies, refer to pages 243 to 247 of the Group's 2012 Annual Report and Accounts.
 
 
 
Half year ended
  
Year ended
 
30 June 2013
  
30 June 2012
  
31 December 2012
 
Average 
Period end 
Maximum 
Minimum 
  
Average 
Period end 
Maximum 
Minimum 
  
Average 
Period end 
Maximum 
Minimum 
Trading VaR
£m 
£m 
£m 
£m 
  
£m 
£m 
£m 
£m 
  
£m 
£m 
£m 
£m 
                             
Interest rate
40.3 
30.3 
78.2 
24.6 
  
66.3 
58.7 
95.7 
43.6 
  
62.6 
75.6 
95.7 
40.8 
Credit spread
72.9 
57.9 
86.8 
55.8 
  
75.7 
50.2 
94.9 
44.9 
  
69.2 
74.1 
94.9 
44.9 
Currency
11.2 
9.3 
20.6 
4.6 
  
12.6 
10.9 
21.3 
8.2 
  
10.3 
7.6 
21.3 
2.6 
Equity
6.8 
4.8 
12.8 
4.2 
  
6.3 
6.2 
12.5 
3.3 
  
6.0 
3.9 
12.5 
1.7 
Commodity
1.3 
0.9 
3.7 
0.5 
  
1.9 
1.3 
6.0 
0.9 
  
2.0 
1.5 
6.0 
0.9 
Diversification (1)
  
(23.4)
        
(45.3)
        
(55.4)
    
                             
Total
96.4 
79.8 
118.8 
69.5 
  
103.4 
82.0 
137.0 
66.5 
  
97.3 
107.3 
137.0 
66.5 
                             
Core
80.1 
64.1 
104.6 
57.6 
  
75.3 
67.2 
118.0 
47.4 
  
74.6 
88.1 
118.0 
47.4 
Non-Core
21.1 
19.2 
24.9 
18.1 
  
35.8 
24.3 
41.9 
22.1 
  
30.1 
22.8 
41.9 
22.0 
                             
CEM (2)
68.9 
57.4 
85.4 
55.1 
  
78.2 
75.8 
84.2 
73.3 
  
78.5 
84.9 
86.0 
71.7 
                             
Total (excluding CEM)
47.3 
34.1 
60.4 
33.8 
  
50.4 
43.0 
76.4 
37.5 
  
47.1 
57.6 
76.4 
32.2 
 
Notes:
 
(1)
The Group benefits from diversification, as it reduces risk by allocating positions across various financial instrument types, currencies and markets. The extent of diversification benefit depends on the correlation between the assets and risk factors in the portfolio at a particular time.
(2)
For a description of counterparty exposure management (CEM) activities, refer to page 248 of the Group's 2012 Annual Report and Accounts.
 
 
 
 
Risk and balance sheet management (continued)
 
Market risk: Value-at-risk (VaR) (continued)
 
Key points
 
·
The Group's average and period end total and interest rate VaR were lower than for the same period last year reflecting de-risking by a number of Markets businesses and an extension in March 2013 by CEM of the scope of valuation adjustments captured in VaR. The decrease in interest rate VaR during H1 2013 also resulted in reduced diversification in the Group's total VaR. The CEM VaR was also lower in H1 2013 as a result of these changes, while impact on the Group's total, Core and Non-Core was less significant.
   
·
The period end credit spread VaR was lower than 31 December 2012. Towards the end of H1 2013 the credit spread VaR fell, as a number of Markets businesses reduced and repositioned their exposures following comments by the US Federal Reserve chairman which indicated a tapering of the Federal Reserve bond-buying programme this year.
 
 
 
 
Risk and balance sheet management (continued)
 
Market risk (continued)
 
VaR non-trading portfolios
The table below details VaR for the Group's non-trading portfolios, which predominantly comprise available-for-sale portfolios in Markets, Non-Core and International Banking.
 
 
Half year ended
  
Year ended
 
30 June 2013
  
30 June 2012
  
31 December 2012
 
Average 
Period end 
Maximum 
Minimum 
  
Average 
Period end 
Maximum 
Minimum 
  
Average 
Period end 
Maximum 
Minimum 
£m 
£m 
£m 
£m 
  
£m 
£m 
£m 
£m 
  
£m 
£m 
£m 
£m 
                             
Interest rate
2.8 
2.4 
4.8 
1.9 
  
8.4 
6.0 
10.7 
6.0 
  
6.9 
4.5 
10.7 
4.1 
Credit spread
10.0 
11.0 
13.3 
6.7 
  
12.6 
9.1 
15.4 
9.1 
  
10.5 
8.8 
15.4 
7.3 
Currency
1.4 
1.3 
2.8 
1.2 
  
3.5 
3.5 
4.5 
3.2 
  
3.0 
1.3 
4.5 
1.3 
Equity
0.2 
0.2 
0.3 
0.1 
  
1.8 
1.6 
1.9 
1.6 
  
1.7 
0.3 
1.9 
0.3 
Diversification (1)
  
(2.6)
        
(11.2)
        
(5.4)
    
                             
Total
10.7 
12.3 
13.6 
6.6 
  
14.3 
9.0 
18.3 
9.0 
  
11.8 
9.5 
18.3 
8.5 
                             
Core
9.5 
11.3 
12.7 
5.7 
  
14.0 
9.0 
19.0 
8.9 
  
11.3 
7.5 
19.0 
7.1 
Non-Core
2.9 
2.2 
3.4 
2.1 
  
2.2 
1.7 
2.6 
1.6 
  
2.5 
3.4 
3.6 
1.6 
                             
CEM (2)
1.0 
1.1 
1.1 
1.0 
  
1.0 
1.0 
1.0 
0.9 
  
1.0 
1.0 
1.1 
0.9 
                             
Total (excluding CEM)
10.3 
12.2 
13.3 
6.3 
  
14.1 
9.0 
17.8 
9.0 
  
11.5 
9.4 
17.8 
8.2 
 
Notes:
 
(1)
The Group benefits from diversification, as it reduces risk by allocating investments across various financial instrument types, currencies and markets. The extent of diversification benefit depends on the correlation between the assets and risk factors in the portfolio at a particular time.
(2)
For a description of counterparty exposure management (CEM) activities, refer to page 248 of the Group's 2012 Annual Report and Accounts.
(3)
The table above excludes the structured credit portfolio and loans and receivables.
 
Key point
 
·
The Group's total period end VaR was higher than 2012, as a result of changes in the call assumptions on certain Dutch residential mortgage-backed securities, which extended their weighted average life.
 
 

 
Risk and balance sheet management (continued)
 
Country risk
 
Introduction*
Country risk is the risk of material losses arising from significant country-specific events such as sovereign events (default or restructuring); economic events (contagion of sovereign default to other parts of the economy, cyclical economic shock); political events (transfer or convertibility restrictions, expropriation or nationalisation); and conflict. Such events have the potential to affect elements of the Group's credit portfolio that are directly or indirectly linked to the country in question and can also give rise to market, liquidity, operational and franchise risk-related losses.
 
External environment*
Country risk trends presented a mixed picture in the first half of the year. The systemic crisis in the eurozone was contained despite risks crystallising in Cyprus, but emerging economies experienced growing headwinds linked to slowing growth, political pressures and global risk re-pricing. Taking account of these problems, the International Monetary Fund downgraded its forecast for global GDP growth in 2013 by 0.25% to approximately 3%.
 
The pause in the eurozone crisis generally held, though some of the smaller countries witnessed problems. The European Commission eased fiscal targets for a number of the most vulnerable economies, and rules on future lending to banks were agreed by the European Stability Mechanism. Financial sector risks eased as deposit growth returned and Spain continued its banking sector restructuring. Most periphery economies showed clear signs of rebalancing, with Ireland leading but Italy lagging.
 
In Cyprus, the bail-in of bank depositors with deposits over €100,000 underlined the increased risks to creditors in the event of new official loan programmes with similar bail-in terms elsewhere. Market worries over Portugal grew, reflecting a number of key resignations from the government as well as expectations of worsening recession and public debt problems.
 
The Japanese government and central bank undertook significant policy loosening in a major effort to boost growth and inflation. While early signs indicated improving confidence and increasing consumer spending, and the large depreciation of the yen is expected to help exports, the public debt stock continued to rise rapidly, posing substantial long-term risks.
 
 
 
 
*Not within the scope of Deloitte LLP's review report
 
Risk and balance sheet management (continued)
 
Country risk(continued)
Comments from the US Federal Reserve chairman regarding the timing of any reduction in quantitative easing resulted in a correction in global risk appetite in H1, with sovereign bond spreads for many emerging economies widening from May. Emerging markets equities as a whole saw significant net outflows for the period, while their currencies generally weakened against sterling.
 
Growth continued to slow in China, despite rapid credit expansion, reflecting the challenges of reducing the direct role the State plays in driving economic growth. Risks in the banking sector remained. A number of countries, including Turkey and Brazil, saw large demonstrations over infrastructure issues broaden into wider expressions of dissatisfaction, though these did not lead to country risk losses.
 
Country risk exposure
The tables that follow show the Group's exposure by country of incorporation at 30 June 2013. Countries shown are those where the Group's balance sheet exposure (as defined in this section) to counterparties incorporated in the country exceeded £1 billion and the country had an external rating of A+ or below from Standard and Poor's, Moody's or Fitch at 30 June 2013, as well as selected eurozone countries. The exposures are stated before taking into account mitigants, such as collateral (with the exception of reverse repos), insurance or guarantees, which may have been put in place to reduce or eliminate exposure to country risk events. Exposures relating to ocean-going vessels are not included as they cannot be meaningfully assigned to specific countries from a country risk perspective.
 
For a description of the governance, monitoring and management of the Group's country risk framework and definitions, refer to pages 254 and 255 of the Group's 2012 Annual Report and Accounts.

 
 
 
Risk and balance sheet management (continued)
 
Country risk(continued)
 
Developments during H1 2013*:
 
·
Sterling depreciated by 6.0% against the US dollar and by 4.7% against the euro. This resulted in exposures denominated in these currencies (and in other currencies linked to them) increasing in sterling terms.
   
·
Balance sheet and off-balance sheet exposure to most countries shown in the table on page 149 declined despite the depreciation of sterling, as the Group maintained a cautious stance and many clients reduced debt levels. Reductions were seen across all broad product categories. Non-Core lending exposure declined further in most countries as the Group continued to execute its disposals strategy, although adverse market conditions hampered the sale of certain asset classes in some countries.
   
·
Most of the Group's country risk exposure is in International Banking (primarily trade facilities, other lending and off-balance sheet exposure to corporates and financial institutions), Markets (mostly derivatives and repos with financial institutions, and HFT debt securities), Ulster Bank (mostly lending exposure to corporates and consumers in Ireland) and Group Treasury (largely cash balances at central banks and AFS debt securities.
   
·
Total eurozone - Balance sheet exposure declined by £17.1 billion or 10% to £148.7 billion, caused by significant reductions in liquidity held with the Bundesbank, and in derivatives exposure to banks (notably in Germany, France and the Netherlands, and largely related to the sale of a part of the Group's CDS positions - refer to below). These reductions reflected continued active exposure management by the Group and debt reduction efforts by bank clients. On a constant currency basis, the reductions were higher.
   
·
Eurozone periphery - Balance sheet exposure decreased slightly to a combined £58.6 billion, a reduction of £0.5 billion or 1%, with small reductions in most countries, despite the appreciation of the euro against sterling.
   
 
○
Group Treasury's liquidity portfolio includes a portfolio of covered bonds or 'cedulas' issued by Spanish banks and other financial institutions.
 
○
Balance sheet exposure to Cyprus was broadly stable at £0.3 billion, comprising mainly lending exposure to special purpose vehicles incorporated in Cyprus, but with assets and cash flows largely elsewhere.
   
·
Japan - Exposure decreased by £5.8 billion (net HFT government bonds £3.1 billion, AFS government bonds £1.2 billion and derivatives to banks £1.6 billion), reflecting depreciation of the yen, lower trading flows and a reduction in the bond portfolio used as collateral.
   
·
India - Group exposure decreased by £0.6 billion during H1 2013, driven largely by reductions in exposure to banks and to the oil & gas and communications sectors.
   
·
China - Lending to banks increased by £0.7 billion, reflects increased customer demand in Q2 2013. Derivatives exposure to public sector entities increased by £0.2 billion, due to fluctuations in short-term hedging by bank clients.
 
 
 
 
*Not within the scope of Deloitte LLP's review report

Risk and balance sheet management (continued)
 
Country risk: Developments during H1 2013* (continued)
 
·
The Group holds net bought CDS protection on most of the countries shown in the table. Markets sold a significant part of its European CDS trading positions during Q2 to reduce risks and capital requirements in line with strategic plans. This resulted in major reductions in gross notional value of CDS bought and sold protection referencing corporates and other entities in eurozone countries. Net bought protection in terms of CDS notional less fair value, was also  reduced by £1.2 billion to £5.7 billion, with reductions particularly in France, the Netherlands and Germany.
   
·
The average credit quality of CDS bought protection counterparties deteriorated with the share of AQ1 counterparties falling by around 7%, largely the result of the sale of CDS positions during this period.
   
·
The Group's focus continues to be on reducing its asset exposures and funding mismatches in the eurozone periphery countries. The estimated funding mismatch at risk of redenomination at 30 June 2013 was £1.0 billion lower at £8.0 billion for Ireland and was unchanged at £4.5 billion  and £1.0 billion for Spain and Italy respectively. The net positions for Portugal, Greece and Cyprus were all minimal. These mismatches can fluctuate owing to volatility in trading book positions and changes in bond prices. For more information on redenomination risk considerations, refer to page 254 of the Group's 2012 Annual Report and Accounts.
 
For additional analysis and commentary, refer to Appendix 5.
 
 
 
 
*Not within the scope of Deloitte LLP's review report
 
 

Risk and balance sheet management (continued)
 
Country risk: Summary tables
 
 
30 June 2013
 
Lending
  
Of which 
Non-Core 
  
Debt 
securities 
        
Balance 
sheet 
  
Off- 
balance 
sheet 
  
Total 
exposure 
  
CDS 
notional 
less fair 
value 
      
Govt 
Central 
Banks 
Other 
Banks 
Other 
FI 
Corporate 
Personal 
Total 
Lending 
Net
Gross
Derivatives 
Repos 
Derivatives 
Repos 
 
£m 
£m 
£m 
£m 
£m 
£m 
£m 
  
£m 
  
£m 
  
£m 
£m 
  
£m 
  
£m 
  
£m 
  
£m 
  
£m 
£m 
                                                   
Eurozone
                                                  
Ireland
42 
116 
88 
519 
18,062 
18,452 
37,279 
  
9,586 
  
642 
  
1,531 
225 
  
39,677 
  
2,997 
  
42,674 
  
(166)
  
13,957 
8,190 
Spain
- 
- 
15 
6 
3,918 
341 
4,280 
  
2,723 
  
5,942 
  
1,426 
- 
  
11,648 
  
 1,782 
  
13,430 
  
(381)
  
4,709 
3,627 
Italy
- 
22 
148 
256 
1,298 
24 
1,748 
  
858 
  
1,622 
  
2,133 
- 
  
5,503 
  
2,141 
  
7,644 
  
(728)
  
8,470 
431 
Portugal
- 
- 
- 
- 
261 
6 
267 
  
258 
  
 235 
  
437 
- 
  
939 
  
225 
  
1,164 
  
(231)
  
526 
694 
Greece
- 
- 
- 
1 
199 
13 
213 
  
61 
  
- 
  
325 
- 
  
538 
  
28 
  
566 
  
2 
  
544 
- 
Cyprus
- 
- 
- 
- 
270 
13 
283 
  
122 
  
1 
  
30 
- 
  
314 
  
54 
  
368 
  
- 
  
60 
36 
                                                   
Germany
- 
10,643 
633 
167 
3,395 
81 
14,919 
  
2,674 
  
12,295 
  
8,505 
678 
  
36,397 
  
7,176 
  
43,573 
  
(958)
  
45,426 
11,963 
Netherlands
18 
2,488 
789 
1,360 
4,229 
21 
8,905 
  
1,893 
  
7,978 
  
7,474 
180 
  
24,537 
  
11,133 
  
35,670 
  
(1,020)
  
18,658 
6,829 
France
496 
- 
3,037 
112 
2,260 
75 
5,980 
  
1,392 
  
3,676 
  
6,132 
496 
  
16,284 
  
9,629 
  
25,913 
  
(1,642)
  
37,816 
19,541 
Luxembourg
- 
17 
95 
973 
1,717 
3 
2,805 
  
930 
  
111 
  
1,512 
542 
  
4,970 
  
2,717 
  
7,687 
  
(125)
  
2,960 
6,145 
Belgium
- 
- 
98 
220 
635 
19 
972 
  
306 
  
928 
  
2,757 
57 
  
4,714 
  
1,316 
  
6,030 
  
(228)
  
4,084 
1,768 
Other
105 
- 
27 
46 
739 
17 
934 
  
 88 
  
865 
  
1,323 
28 
  
3,150 
  
1,177 
  
4,327 
  
(178)
  
4,844 
1,658 
                                                   
Other countries
                                                
Japan
- 
767 
350 
148 
508 
16 
1,789 
  
67 
  
2,052 
  
1,346 
257 
  
5,444 
  
601 
  
6,045 
  
(97)
  
9,851 
17,703 
India
- 
98 
859 
42 
2,263 
82 
3,344 
  
146 
  
1,081 
  
114 
- 
  
4,539 
  
776 
  
5,315 
  
(49)
  
227 
185 
China
- 
153 
1,572 
90 
645 
34 
2,494 
  
29 
  
192 
  
1,121 
65 
  
3,872 
  
682 
  
4,554 
  
24 
  
1,121 
3,653 
South Korea
- 
1 
510 
44 
612 
1 
1,168 
  
- 
  
390 
  
376 
178 
  
2,112 
  
663 
  
2,775 
  
137 
  
671 
1,506 
Brazil
- 
- 
1,025 
- 
121 
4 
1,150 
  
61 
  
338 
  
69 
- 
  
1,557 
  
188 
  
1,745 
  
61 
  
80 
- 
Turkey
102 
80 
78 
97 
927 
26 
1,310 
  
190 
  
144 
  
99 
- 
  
1,553 
  
340 
  
1,893 
  
(71)
  
130 
662 
Russia
- 
34 
725 
3 
368 
34 
1,164 
  
48 
  
157 
  
29 
- 
  
1,350 
  
329 
  
1,679 
  
(119)
  
29 
13 
Poland
- 
96 
4 
17 
624 
6 
747 
  
29 
  
324 
  
37 
- 
  
1,108 
  
603 
  
1,711 
  
(63)
  
55 
- 
Romania
19 
175 
11 
- 
312 
320 
837 
  
832 
  
197 
  
3 
- 
  
1,037 
  
98 
  
1,135 
  
(21)
  
3 
- 

 

 
Risk and balance sheet management (continued)
 
Country risk: Summary tables (continued)
 
 
 
31 December 2012
 
Lending
  
Of which 
Non-Core 
  
Debt 
securities 
        
Balance 
sheet 
  
Off- 
balance 
sheet 
  
Total 
exposure 
  
CDS 
notional 
less fair 
value 
      
Govt 
Central 
Banks 
Other 
Banks 
Other 
FI 
Corporate 
Personal 
Total 
Lending 
Net
Gross
Derivatives 
Repos 
Derivatives 
Repos 
 
£m 
£m 
£m 
£m 
£m 
£m 
£m 
  
£m 
  
£m 
  
£m 
£m 
  
£m 
  
£m 
  
£m 
  
£m 
  
£m 
£m 
                                                   
Eurozone
                                                  
Ireland
42 
73 
98 
532 
17,921 
17,893 
36,559 
  
9,506 
  
787 
  
1,692 
579 
  
39,617 
  
2,958 
  
42,575 
  
(137)
  
17,066 
7,994 
Spain
- 
6 
1 
59 
4,260 
340 
4,666 
  
2,759 
  
5,374 
  
1,754 
- 
  
11,794 
  
1,624 
  
13,418 
  
(375)
  
5,694 
610 
Italy
9 
21 
200 
218 
1,392 
23 
1,863 
  
900 
  
1,607 
  
2,297 
- 
  
5,767 
  
2,616 
  
8,383 
  
(492)
  
9,597 
3 
Portugal
- 
- 
- 
- 
336 
7 
343 
  
251 
  
215 
  
514 
- 
  
1,072 
  
258 
  
1,330 
  
(94)
  
618 
26 
Greece
- 
7 
- 
1 
179 
14 
201 
  
68 
  
1 
  
360 
- 
  
562 
  
27 
  
589 
  
(4)
  
623 
- 
Cyprus
- 
- 
- 
2 
274 
15 
291 
  
121 
  
4 
  
35 
- 
  
330 
  
47 
  
377 
  
- 
  
54 
15 
                                                   
Germany
- 
20,018 
660 
460 
3,756 
83 
24,977 
  
2,817 
  
12,763 
  
9,476 
323 
  
47,539 
  
7,294 
  
54,833 
  
(1,333)
  
57,202 
8,407 
Netherlands
7 
1,822 
496 
1,785 
3,720 
26 
7,856 
  
2,002 
  
8,447 
  
9,089 
354 
  
25,746 
  
11,473 
  
37,219 
  
(1,470)
  
23,957 
10,057 
France
494 
9 
2,498 
124 
2,426 
71 
5,622 
  
1,621 
  
5,823 
  
7,422 
450 
  
19,317 
  
9,460 
  
28,777 
  
(2,197)
  
44,920 
14,324 
Luxembourg
- 
13 
99 
717 
1,817 
4 
2,650 
  
973 
  
251 
  
1,462 
145 
  
4,508 
  
2,190 
  
6,698 
  
(306)
  
3,157 
5,166 
Belgium
- 
- 
186 
249 
414 
22 
871 
  
368 
  
1,408 
  
3,140 
50 
  
5,469 
  
1,308 
  
6,777 
  
(233)
  
4,961 
1,256 
Other
126 
- 
19 
90 
856 
14 
1,105 
  
88 
  
1,242 
  
1,737 
11 
  
4,095 
  
1,269 
  
5,364 
  
(194)
  
6,029 
2,325 
                                                   
Other countries
                                                
Japan
- 
832 
315 
193 
319 
15 
1,674 
  
123 
  
6,438 
  
2,883 
199 
  
11,194 
  
622 
  
11,816 
  
(70)
  
13,269 
16,350 
India
- 
100 
1,021 
48 
2,628 
106 
3,903 
  
170 
  
1,074 
  
64 
- 
  
5,041 
  
914 
  
5,955 
  
(43)
  
167 
108 
China
2 
183 
829 
48 
585 
29 
1,676 
  
33 
  
262 
  
903 
94 
  
2,935 
  
739 
  
3,674 
  
50 
  
903 
3,833 
South Korea
- 
22 
771 
71 
289 
2 
1,155 
  
2 
  
307 
  
221 
30 
  
1,713 
  
704 
  
2,417 
  
(60)
  
616 
449 
Brazil
- 
- 
950 
- 
125 
3 
1,078 
  
60 
  
596 
  
73 
- 
  
1,747 
  
189 
  
1,936 
  
393 
  
85 
- 
Turkey
115 
163 
82 
94 
928 
12 
1,394 
  
258 
  
181 
  
93 
- 
  
1,668 
  
481 
  
2,149 
  
(36)
  
114 
449 
Russia
- 
53 
848 
14 
494 
55 
1,464 
  
56 
  
409 
  
23 
- 
  
1,896 
  
391 
  
2,287 
  
(254)
  
23 
- 
Poland
- 
164 
- 
16 
536 
6 
722 
  
26 
  
289 
  
36 
- 
  
1,047 
  
802 
  
1,849 
  
(84)
  
54 
29 
Romania
20 
65 
9 
2 
347 
331 
774 
  
773 
  
315 
  
3 
- 
  
1,092 
  
80 
  
1,172 
  
(12)
  
3 
- 
 
 
 

 
Independent review report to The Royal Bank of Scotland Group plc
 
We have been engaged by The Royal Bank of Scotland Group plc ("the Company") to review the condensed financial statements in the half-yearly financial report for the six months ended 30 June 2013 which comprise the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity, the condensed consolidated cash flow statement, related Notes 1 to 18, the divisional results on pages 25 to 65, and the Risk and balance sheet management disclosures set out on pages 127 to 150 and in Appendices 2 to 5 except for those indicated as not reviewed (together "the condensed financial statements"). We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed financial statements.
 
This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.
 
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
 
As disclosed in Note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed financial statements included in this half-yearly financial report have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.
 
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed financial statements in the half-yearly financial report based on our review.
 
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
 
 

 
Independent review report to The Royal Bank of Scotland Group plc (continued)
 
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed financial statements in the half-yearly financial report for the six months ended 30 June 2013 are not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
 
 
 
Deloitte LLP
Chartered Accountants and Statutory Auditor
London, United Kingdom
1 August 2013

 

 
Risk factors
 
The principal risks and uncertainties facing the Group are unchanged from those disclosed on pages 503 to 515 of the 2012 Annual Report & Accounts (the 2012 R&A), however the operational, legal and regulatory landscape in which the Group operates has continued to evolve since the 2012 R&A was approved. In particular, set out in further detail below in the Summary of our Principal Risks and Uncertainties, the Group has identified a new risk, namely arising from the on-going review with HM Treasury into separating the Group into "good" and "bad" banks.
 
Summary of our Principal Risks and Uncertainties
Set out below is a summary of certain risks which could adversely affect the Group. These should not be regarded as a complete and comprehensive statement of all potential risks and uncertainties. The summary should be read in conjunction with the Risk and balance sheet management section on pages 107 to 293 of the 2012 R&A, which also includes a fuller description of these and other risk factors.
 
 
●
The Group's businesses, earnings and financial condition have been and will continue to be negatively affected by global economic conditions, the instability in the global financial markets and increased competition and political risks including proposed referenda on Scottish independence and UK membership of the EU. Together with a perceived increased risk of default on the sovereign debt of certain European countries and unprecedented stresses on the financial system within the Eurozone, these factors have resulted in significant changes in market conditions including interest rates, foreign exchange rates, credit spreads, and other market factors and consequent changes in asset valuations.
   
●
The actual or perceived failure or worsening credit of the Group's counterparties or borrowers and depressed asset valuations resulting from poor market conditions have adversely affected and could continue to adversely affect the Group.
   
●
The Group's ability to meet its obligations including its funding commitments depends on the Group's ability to access sources of liquidity and funding. The inability to access liquidity and funding due to market conditions or otherwise could adversely affect the Group's financial condition. Furthermore, the Group's borrowing costs and its access to the debt capital markets and other sources of liquidity depend significantly on its and the UK Government's credit ratings.
   
●
The Group is subject to a number of regulatory initiatives which may adversely affect its business, including the UK Government's implementation of the final recommendations of the Independent Commission on Banking's final report on competition and structural reforms in the UK banking industry the US Federal Reserve's proposal for applying US capital, liquidity and enhanced prudential standards to certain of the Group's US operations.
   
●
The Group's business performance, financial condition and capital and liquidity ratios could be adversely affected if its capital is not managed effectively or as a result of changes to capital adequacy and liquidity requirements, including those arising out of Basel III implementation (globally or by European or UK authorities), or if the Group is unable to issue Contingent B Shares to HM Treasury under certain circumstances.

 

 
Risk factors (continued)
 
 
●
As a result of the UK Government's majority shareholding in the Group it can, and in the future may decide to, exercise a significant degree of influence over the Group including on dividend policy, modifying or cancelling contracts or limiting the Group's operations. The offer or sale by the UK Government of all or a portion of its shareholding in the company could affect the market price of the equity shares and other securities and acquisitions of ordinary shares by the UK Government (including through conversions of other securities or further purchases of shares) may result in the delisting of the Group from the Official List.
   
●
The Group or any of its UK bank subsidiaries may face the risk of full nationalisation or other resolution procedures and various actions could be taken by or on behalf of the UK Government, including actions in relation to any securities issued, new or existing contractual arrangements and transfers of part or all of the Group's businesses.
   
●
The Group is subject to substantial regulation and oversight, and any significant regulatory or legal developments could have an adverse effect on how the Group conducts its business and on its results of operations and financial condition. In addition, the Group is, and may be, subject to litigation and regulatory investigations that may impact its business, results of operations and financial condition.
   
●
The Group's ability to implement its Strategic Plan depends on the success of its efforts to refocus on its core strengths and its balance sheet reduction programme. As part of the Group's Strategic Plan and implementation of the State Aid restructuring plan agreed with the European Commission and HM Treasury, the Group is undertaking an extensive restructuring which may adversely affect the Group's business, results of operations and financial condition and give rise to increased operational risk.
   
●
The Group could fail to attract or retain senior management, which may include members of the Group Board, or other key employees, and it may suffer if it does not maintain good employee relations.
   
●
Operational and reputational risks are inherent in the Group's businesses.
   
●
The value of certain financial instruments recorded at fair value is determined using financial models incorporating assumptions, judgements and estimates that may change over time or may ultimately not turn out to be accurate.
   
●
Any significant developments in regulatory or tax legislation could have an effect on how the Group conducts its business and on its results of operations and financial condition, and the recoverability of certain deferred tax assets recognised by the Group is subject to uncertainty.
   
●
The Group may be required to make contributions to its pension schemes and government compensation schemes, either of which may have an adverse impact on the Group's results of operations, cash flow and financial condition.
 
 
 
 
Risk factors (continued)
 
The Group is also subject to the following new risk factor.
 
Options to accelerate the potential divestment by HM Treasury of its stake in the Group, including separation of the Group into "good" and "bad" banks, are currently under review and uncertainty remains as to the Group's future structure and organisation
In June 2013, responding to a recommendation by the UK Parliamentary Commission on Standards in Banking, the Chancellor of the Exchequer announced that the Government would be reviewing the case for splitting the Group into a 'good bank' and a 'bad bank'. This review is being conducted by HM Treasury with external professional support and will look at a broad range of the Group's assets. HM Treasury's advisors are expected to report by the end of September and a decision on the creation of a 'bad bank' is expected in the autumn of 2013. The outcome of the review is far from certain and if a 'good bank/bad bank' strategy were to be adopted, then depending on the nature and scope of the exercise, several hurdles might have to be met before such a separation could take place. These may or may not include the need for shareholder approval and further consultation with the European Commission. Any such restructuring would be complex and lengthy and require significant management time and resources.  Until the outcome of the review is known, the Group's future structure and organisation remains uncertain. Such uncertainty could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.
 
The risk factor entitled, "The Group's borrowing costs, its access to the debt capital markets and its liquidity depend significantly on its and the UK Government's credit ratings" is also revised to reflect that at 30 June 2013, a simultaneous one notch long-term and associated short term downgrade in the credit ratings of RBSG and The Royal Bank of Scotland plc by the three main ratings agencies would have required the Group to post estimated additional collateral of £13 billion, without taking account of mitigating action by management.


 
 
Statement of directors' responsibilities
 
We, the directors listed below, confirm that to the best of our knowledge:
 
 
·
the condensed financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting';
   
·
the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and
   
·
the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).
 
 
 
By order of the Board
 
 
Philip Hampton
Stephen Hester
Bruce Van Saun
Chairman
Group Chief Executive
Group Finance Director
 
1 August 2013
 
 
Board of directors
 
 
Chairman
Executive directors
Non-executive directors
Philip Hampton
Stephen Hester
Bruce Van Saun
Sandy Crombie
Alison Davis
Tony Di lorio
Penny Hughes
Brendan Nelson
Baroness Noakes
Arthur 'Art' Ryan
Philip Scott


 
 
Additional information
 
Share information
 
 
30 June 
2013 
31 March 
2013 
31 December 
2012 
       
Ordinary share price
273.5p 
275.5p 
324.5p 
       
Number of ordinary shares in issue
6,121m 
6,108m 
6,071m 
 
 
Statutory results
Financial information contained in this document does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006 ('the Act'). The statutory accounts for the year ended 31 December 2012 have been filed with the Registrar of Companies. The report of the auditor on those statutory accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Act.
 
Financial calendar
 
   
2013 third quarter interim management statement
Friday 1 November 2013
   
2013 annual results
Thursday 27 February 2014
 
 
 

 

 
 
Signatures


 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.







 
 
Date: 2 August 2013
 
 
THE ROYAL BANK OF SCOTLAND GROUP plc (Registrant)
 
 
 
By:
/s/ Jan Cargill
 
 
Name:
Title:
Jan Cargill
Deputy Secretary