REG - CYBG PLCClydesdale Bank PLC - Final Results <Origin Href="QuoteRef">CYBGC.L</Origin> - Part 7
22/11/2016 07:08
- Part 7: For the preceding part double click ID:nRSV7721Pf
Opening balance 18 24
Charge to the income statement 39 17
Utilised (31) (23)
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Closing balance 26 18
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Total provisions for liabilities and charges 852 1,006
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(1) Restructuring provision includes surplus lease space provision.
A provision is recognised when there is a present obligation as a result of a past event, it is probable that the
obligation will be settled and it can be reliably estimated. The most significant of the provisions held at 30 September
2016 are in relation to conduct risk related liabilities. The Group's economic exposure to the impact of historic conduct
related liabilities is mitigated by the Capped Indemnity from NAB (see below).
The Group has provided its best estimate of conduct risk related liabilities at 30 September 2016 which have arisen as a
result of its historical products and past sales practices.
To arrive at best estimates, management have exercised significant judgement around the key assumptions that underpin the
estimates and used estimation techniques to quantify them. Ongoing regulatory review and input, as well as rulings from
the Financial Ombudsman Service (FOS) over time, and the Group's internal reviews and assessments of customer complaints
will continue to impact upon the nature and extent of conduct related customer redress and associated costs for which the
Group may ultimately become liable in future periods. Accordingly the total cost associated with such conduct related
matters remains inherently uncertain.
PPI redress
In common with the wider UK retail banking sector, the Group continues to deal with complaints and redress issues arising
out of historic sales of PPI. In the first half of the year the Group reassessed the level of provision that was
considered appropriate to meet current and future expectations in relation to the mis-selling of PPI policies and concluded
that a further charge of £450m was required incorporating the Group's estimate of the impact of CP 15/39 and a proposed
time bar for complaints in summer 2018. It also incorporated a reassessment of the costs of processing cases and the
impact of experience adjustments. Only 9.7% of the charge impacts the Group's income statement (£44m) as a result of the
Capped Indemnity. Following the FCA's updated proposal in respect of the time bar and Plevin in CP 16/20 issued on 26 July
2016, the provision was reassessed in the light of these proposals and recent experience. No further change was made. The
total provision raised to date in respect of PPI is £1,646m (2015: £1,196m), with £725m of this remaining (2015: £774m)
comprising £299m for customer initiated complaints and proactive customer contact (2015: £301m); £257m for the remediation
of complaints closed prior to August 2014 (2015: £270m); and £169m for costs of administering the redress programme (2015:
£203m).
To 30 September 2016, the Group has received 282,000 complaints and has allowed for 59,000 further walk in complaints.
CYBG PLC
Notes to the consolidated financial statements (continued)
27. Provision for liabilities and charges (continued)
PPI redress (continued)
The Group implemented a comprehensive new PPI complaint handling process from August 2014 which involved making a number of
significant changes to the PPI operations, which resulted in an increase in operational and administrative costs, in
addition to committing to undertake a full review of PPI complaints that were closed prior to August 2014 (approximately
180,000). The Group has begun to reopen these complaints and review the original decisions reached in light of the new PPI
complaint handling processes. The provision at 30 September 2016 includes a redress provision of £257m for this review.
In addition to the remediation activity described above, the Group is undertaking a past business review (PBR) of certain
PPI sales to determine if there was actual or potential customer detriment in the sales process leading to a risk of
mis-sale and the potential for proactive redress. The provision increase booked in March incorporated a revised estimate
of the cost of contacting and redressing, where appropriate, customers who have faced actual detriment or may have
experienced potential detriment but who have not actually raised a claim. Proactive customer mailings commenced in March
2016 and will be complete by the end of the calendar year. Key inputs to the calculation of the costs estimate, such as
the level of customer response to mailings, are not currently known but have been based on relevant historical experience
and related industry data. Actual experience to date has been below the assumptions used but further customer responses
will be received.
The increase in provision, recorded at 31 March 2016, took into account all of the above factors as well as a revision in
the Group's expectation of new customer initiated complaints in light of current experience with the overall provision
based on a number of assumptions derived from a combination of past experience, estimated future experience, industry
comparison and the exercise of judgement in the key areas identified. There remain risks and uncertainties in relation to
these assumptions and consequently in relation to the ultimate costs of redress and related costs, including: (i) the
number of PPI claims (and the extent to which this is influenced by the activity of claims management companies, the
proposed but delayed application of a time bar, Plevin, and FCA advertising); (ii) the number of those claims that
ultimately will be upheld; (iii) the amount that will be paid in respect of those claims; (iv) any additional amounts that
may need to be paid in respect of previously handled claims; (v) the response rates to the proactive customer contact; and
(vi) the costs of administering the remediation programme.
As such, the factors discussed above mean there is a risk that existing provisions for PPI customer redress may not cover
all potential costs. In light of this, the eventual costs of PPI redress and complaint handling may therefore differ
materially from that estimated and further provision could be required. Accordingly, the final amount required to settle
the Group's potential PPI liabilities remains uncertain.
The table below sets out the key assumptions and the effect on the provision at 30 September 2016 of future, potential,
changes in key assumptions:
Assumptions Change in Sensitivity (1)
assumption
Number of expected future customer initiated complaints +/-10% £16m
Uphold rates:
Future complaints +/-1% £3m
Pre August 2014 complaints review +/-1% £6m
Customer contact response rate
PBR customer contact response rate (2) +/-1% £4m
Average redress costs (3) +/-1% £5m
(1) There are inter-dependencies between several of the key assumptions which add to the complexity of the judgements the Group has to make. This means that no single factor is likely to move independently of others, however, the sensitivities disclosed above assume all other assumptions remain unchanged. The sensitivities disclosed do not incorporate the impact, if any, on the administrative cost element of the provision.
(2) The Group's current estimate includes an expected customer response rate of 40%. Approximately 85,000 proactive customer mailings will be sent.
(3) Sensitivity to a change in average redress across customer initiated complaints, pre August 2014 complaints review and PBR customer populations.
CYBG PLC
Notes to the consolidated financial statements (continued)
27. Provision for liabilities and charges (continued)
PPI redress (continued)
The number of complaints received is monitored against past experience and future expectations and the Group will continue
to reassess the adequacy of the provision for this matter and the assumptions underlying the provision calculation based
upon experience and other relevant factors as matters develop.
Customer redress and other provisions
In addition to PPI redress set out above, provision for customer redress is held in those instances where the Group expects
to make payments to customers whether on an ex-gratia or compensatory basis. Provisions can arise as a result of legal or
regulatory action and can incorporate the costs of skilled persons, independent reviewers, and where appropriate other
elements of administration. The most significant of these relates to the Group's IRHPs.
In 2012 the FSA announced that it had reached agreement with a number of UK banks, including the Group, in relation to a
review and redress exercise on sales of certain interest rate hedging products to small and medium sized businesses. The
Group implemented a programme to identify small and medium sized customers that may have been affected and where due, pay
financial redress. On 31 March 2015 the FCA confirmed the closure of the formal industry wide redress programme to new
entrants.
The Group also undertook a secondary review of all past FRTBL complaints which were not in the scope of the formal review.
Where the secondary complaint assessment identified a different outcome, the customer has been contacted and, if
appropriate, redress offered. The Group is also dealing with a number of new complaints from customers in relation to
FRTBLs.
The Group has reassessed the level of provision considered necessary in light of the current and future expected claims for
all of these matters and concluded that no changes to the level of provision held are required, reflecting the continued
wind down of the formal programmes, which are expected to have completed within the next six months, and the current level
of complaints received.
Other provisions also include amounts in respect of a number of individually less significant conduct related matters,
legal proceedings, and claims arising in the ordinary course of the Group's business. Over the course of the year the
Group has raised further provisions of £34m for these matters, the majority of which were offset by the Conduct Indemnity.
The ultimate cost to the Group of other customer redress matters is driven by a number of factors relating to offers of
redress, compensation, offers of alternative products, consequential loss claims and administrative costs. The matters are
at varying stages of their lifecycle and in certain circumstances, usually early in the life of a potential issue, elements
of the potential exposure are contingent (note 33). These factors could result in the total cost of review and redress
varying materially from the Group's current estimate. The final amount required to settle the Group's potential
liabilities in these matters is therefore uncertain and further provision could be required. During the year £1m (2015:
£1m) was also recognised for provisions not related to customer redress / conduct risk.
Conduct Indemnity Deed
The Company and NAB have entered into an agreement under which NAB has provided the Company with a Capped Indemnity to meet
the costs of dealing with conduct matters related to products sold in the period prior to the demerger date (the Conduct
Indemnity Deed). The legacy conduct matters covered by the Capped Indemnity are referred to as Relevant Conduct Matters.
The Capped Indemnity provides the Group with economic protection against certain costs and liabilities (including financial
penalties imposed by a regulator) resulting from conduct issues relating to:
a) PPI, standalone interest rate hedging products, voluntary scope tailored business loans and fixed rate tailored
business loans; and
b) Other conduct matters, subject to certain limitations and minimum financial thresholds.
Amounts payable under the Capped Indemnity include, subject to certain limitations, payments to customers to satisfy,
settle or discharge a Relevant Conduct Matter and the direct costs and expenses of satisfying, settling, discharging or
administering such Relevant Conduct Matter.
It has been agreed that NAB will meet 90.3% of Qualifying Conduct Costs claimed by the Company, up to the amount of the
Capped Indemnity.
CYBG PLC
Notes to the consolidated financial statements (continued)
27. Provision for liabilities and charges (continued)
Conduct Indemnity (continued)
Claims under the Capped Indemnity are recognised in the consolidated income statement simultaneously with the charge for
Relevant Conduct Matters. The conduct expense and associated reimbursement income are presented net within Other operating
and administrative expenses. A reimbursement receivable is recognised on the consolidated balance sheet within Due from
Other Banks; this receivable is periodically settled by NAB. The reimbursement receivable is not offset against the
provision amount on the Group's consolidated balance sheet. The provision expense and reimbursement income are disclosed
above.
No reimbursement income or receivable is recognised on the consolidated balance sheet in relation to contingent liabilities
for Relevant Conduct Matters. Any possible future reimbursement income linked to contingent liabilities in respect of
Relevant Conduct Matters is not disclosed as a contingent asset as the amounts cannot be reliably estimated and are not
virtually certain to be received.
To the extent that it is no longer probable that provisions for a Relevant Conduct Matter previously raised will be
required to settle conduct obligations and a provision for a Relevant Conduct Matter is released as unutilised, the related
Capped Indemnity amounts received will become repayable to NAB.
To the extent that tax relief is expected in relation to provisions for which reimbursement income is applicable, amounts
may become repayable to NAB. In the consolidated financial statements, deferred tax assets are only recognised in respect
of the Loss share proportion (9.7%) of unused tax losses on Relevant Conduct Matters, on the basis that the Group does not
obtain the economic benefit of the future tax relief which is repayable to NAB.
The utilisation and undrawn balance of the Capped Indemnity is set out below:
Conductprotection
£m
Conduct protection provided by NAB 1,700
Capital injected into CYBI prior to demerger (1) (120)
Drawn in period to 30 September 2015(2) (465)
────────
Undrawn Conduct Indemnity as at 30 September 2015 1,115
Drawn in the period to 30 September 2016 (433)
────────
Undrawn balance as at 30 September 2016 682
────────
(1) £120m of the £670m of capital injected in CYBI on 24 September 2015 was related to the Conduct Indemnity Deed.
(2) £465m represents the Pre-Covered provision amount.
Restructuring provision
Restructuring of the business is currently ongoing and a provision is held to cover redundancy payments, property vacation
costs and associated enablement costs. In the year £45m (2015: £17m) was charged to the income statement of which £6m
(2015: £Nil) was charged directly to the income statement and £39m (2015: £17m) was provided for with £31m (2015: £23m) of
the total provision being utilised in the period.
Included within the restructuring provision is an amount for committed rental expense on surplus lease space consistent
with the expected years' exposure on individual leases where the property is unoccupied. This element of the provision
will be utilised over the remaining life of the leases or until the leases are assigned and is measured at present values
by discounting anticipated future cash flows.
CYBG PLC
Notes to the consolidated financial statements (continued)
28. Debt securities in issue
2016 2015
Subordinated debt Securitisation Covered bonds Total Total
£m £m
Carrying value 477 3,208 698 4,383 3,714(1)
Fair value hedge adjustments - - 99 99 38
──────── ──────── ──────── ──────── ────────
Total debt securities 477 3,208 797 4,482 3,752
Accrued interest payable 3 6 10 19 14
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480 3,214 807 4,501 3,766
════════ ════════ ════════ ════════ ════════
(1) £3,017m related to securitisation and £697m related to covered bonds.
There were no new issuances of covered bonds during the year. The following new issuance of securitised debt occurred:
· 4 August 2016 - GBP 750m Lanark 2016-1 1A.
The following securitised debt redemptions occurred during the year in line with the scheduled programme terms:
· 22 February 2016 - USD 800m Lanark 2012-2 1A note;
· 22 August 2016 - USD 300m Lanark 2013-1 1A1 note;
· 22 August 2016 - GBP 350m Lanark 2013-1 1A2 note.
On 8 February 2016, the Group repurchased £475m of subordinated debt from NAB at a market value of £474m, resulting in a
gain on debt restructure of £1m included within other income (note 6). On the same day the Group issued £475m of 10 year,
non-call five years, fixed 5% subordinated debt with a final maturity date of 9 February 2026 to NAB.
Following the demerger from NAB on 8 February 2016, subordinated debt and securitised debt issued to NAB, previously
included within amounts due to related entities (note 12), were included within debt securities in issue. Comparative
financial information has not been restated. In September 2016 the subordinated debt was remarketed and sold by NAB.
Accordingly at 30 September 2016 the debt was no longer held by NAB.
2016 2015
£m £m
10-year, non-call five years with a final maturity of 9 February 2026 - Fixed 5% 477 -
Accrued interest payable 3 -
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Total subordinated debt 480 -
════════ ════════
Details of the terms and conditions of the notes issued by Clydesdale Bank PLC as at 30 September 2016 were as follows:
Issue date Currency Carrying value Coupon rate Call date
£m
Class A RMBS
27 July 2012 GBP 440 3M GBP LIBOR + 1.63% 22 November 2017
19 March 2014 EUR 214 3M EURIBOR + 0.40% 22 August 2017
19 March 2014 GBP 311 3M GBP LIBOR + 0.50% 22 November 2018
11 December 2014 EUR 389 3M EURIBOR + 0.40% 22 August 2018
11 December 2014 GBP 274 3M GBP LIBOR + 0.60% 22 February 2020
6 August 2015 GBP 239 3M GBP LIBOR + 0.50% 22 August 2018
6 August 2015 EUR 241 3M EURIBOR + 0.45% 22May 2021
4 August 2016 GBP 748 3M GBP LIBOR + 1.00% 22 February 2019
Class A BTL RMBS
30 September 2011 GBP 352 3M GBP LIBOR + 2.20% 19 November 2017
────────
3,208
Covered bonds
31 May 2012 GBP 797 4.63% 8 June 2026
────────
Total securitised notes and covered bonds (note 18) 4,005
════════
CYBG PLC
Notes to the consolidated financial statements (continued)
29. Retirement benefit obligations
The Group operates both defined benefit and defined contribution arrangements. The Group is the sponsoring employer in one
funded defined benefit pension scheme, the Yorkshire and Clydesdale Bank Pension Scheme (the Scheme). The Scheme was
established under trust on 30 September 2009 as a result of the merger of the Clydesdale Bank Pension Scheme and the
Yorkshire Bank Pension Fund. The assets of the Scheme are held in a trustee administered fund, with the trustee
responsible for the operation and governance of the Scheme, including making decisions regarding the Scheme's funding and
investment strategy.
The Scheme is subject to the funding legislation outlined in the Pensions Act 2004 which came into force on 30 December
2005. This, together with documents issued by the Pensions Regulator, sets out the framework for funding defined benefit
occupational pension plans in the UK.
The Group also provides post-retirement health care under a defined benefit scheme for pensioners and their dependent
relatives for which provision has been made. This is a closed scheme and the provision will be utilised over the life of
the remaining scheme members.
The following table provides a summary of the present value of the defined benefit obligation and fair value of plan assets
for the Scheme:
2016 2015
£m £m
Active members' defined benefit obligation (1,264) (891)
Deferred members' defined benefit obligation (1,776) (1,299)
Pensioner and dependent members' defined benefit obligation (1,497) (1,323)
──────── ────────
Total defined benefit obligation (4,537) (3,513)
Fair value of scheme assets 4,462 3,565
──────── ────────
Net defined benefit pension (liability)/asset (75) 52
════════ ════════
Post-retirement medical benefits obligations (4) (4)
════════ ════════
IAS 19 allows the recognition of an asset, which reflects the Group's ability to recover a surplus either through reduced
contributions in the future or through refunds from the Scheme following the settlement of plan assets once all members
have left the Scheme.
The Group has implemented a number of reforms to the Scheme to manage the liability. It closed the Scheme to new members
in 2004 and has determined benefits accruing after April 2006 on a career average revalued earnings basis. The principal
pension available to new employees since the closure of the Scheme is a defined contribution scheme, Total Pension. The
Total Pension income statement charge for the year is shown in note 7.
The last scheme funding valuation was at 30 September 2013 with a calculated deficit of £450m. In the recovery plan dated
7 May 2014 the Group agreed to make the following contributions to eliminate the deficit: £65m on 1 October 2013; £150m by
30 June 2014; £50m on 1 October 2017; thereafter £50m annually until 1 October 2021; and £55m on 1 October 2022. Work in
relation to the 30 September 2016 scheme funding valuation is presently under way.
CYBG PLC
Notes to the consolidated financial statements (continued)
29. Retirement benefit obligations (continued)
Reconciliation of the net defined benefit pension (liability)/asset 2016 2015
£m £m
Opening net defined benefit pension scheme asset 52 49
Service cost (31) (11)
Interest on net defined benefit (liability)/asset 3 3
Remeasurement effects recognised in SOCI (179) (36)
Employer contributions 84 51
Administrative expenses (4) (4)
──────── ────────
Closing fair value of net defined benefit pension scheme (liability)/asset (75) 52
════════ ════════
Reconciliation of the defined benefit pension scheme assets 2016 2015
£m £m
Opening fair value of defined benefit pension scheme assets 3,565 3,269
Interest income on scheme assets at discount rate 135 133
Return on scheme assets greater than discount rate 791 206
Employer contributions (note 12) 84 51
Benefits paid (90) (84)
Transfer payments (19) (6)
Administrative costs paid (4) (4)
──────── ────────
Closing fair value of defined benefit pension scheme assets 4,462 3,565
════════ ════════
Reconciliation of the defined benefit pension scheme obligations 2016 2015
£m £m
Opening defined benefit pension scheme obligations (3,513) (3,220)
Current service cost (27) (27)
Past service (cost)/credit (4) 16
Interest expense on the defined benefit obligation (132) (130)
Actuarial gain - experience adjustments 51 40
Actuarial loss - financial assumptions (1,021) (282)
Benefits paid from scheme assets 90 84
Transfer payments 19 6
──────── ────────
Closing defined benefit pension scheme obligations (4,537) (3,513)
════════ ════════
CYBG PLC
Notes to the consolidated financial statements (continued)
29. Retirement benefit obligations (continued)
The major categories of plan assets for the Scheme, stated at fair value, are as follows:
2016 2015
£m £m
Quoted
Equities 784 645
Government bonds 1,640 1,382
Global sovereign bonds 38 49
Corporate bonds 968 767
Infrastructure 254 217
Secure income alternatives 124 67
Derivatives (1) 440 229
Other 6 45
Cash 93 32
Unquoted
Property 115 132
──────── ────────
Fair value of defined benefit pension scheme assets 4,462 3,565
════════ ════════
(1) Derivative financial instruments are used to modify the profile of the assets of the Scheme to better match the Scheme's liabilities. Derivative holdings may lead to increased or decreased exposures to the physical asset categories disclosed above.
The Scheme is not invested in any of the Group's own financial instruments.
Through its defined benefit pension plan and post-employment medical plan, the Group is exposed to a number of risks. The
main risk to the Group is that additional contributions are required if the Scheme's assets are not sufficient to pay for
the benefits (which will be influenced mainly by inflation and the longevity of members). The level of equity returns will
be a key factor in the overall investment return. The investment portfolio is also subject to a range of other risks
typical of the assets held, in particular credit risk on bonds and exposure to the property market.
The Trustee has implemented an investment structure (including physical assets and derivatives) that seeks to reduce the
Scheme's exposure to inflation and interest rate risks. The current hedge ratio is 50% of liabilities when measured on a
self-sufficiency basis. This strategy reflects the Scheme's liability profile and the Trustee's and the Group's attitude
to risk. The Trustee monitors the investment objectives and asset allocation policy on a regular basis.
Amounts recognised in the income statement 2016 2015
£m £m
Current service cost 27 27
Past service cost/(credit) 4 (16)
Net interest on net defined benefit (liability)/asset (3) (3)
──────── ────────
Defined benefit expense for the year 28 8
Administration costs incurred 4 4
──────── ────────
Cost recognised in the income statement (note 7) 32 12
════════ ════════
During the year ended 30 September 2015 the Group's defined benefit pension plan arrangements were amended to offer certain
members the option to participate in a pension increase exchange upon retirement. After the taking of independent
financial advice the member can elect to take a higher rate of pension upon retirement in exchange for waiving their right
to future inflation based increases. Accounting for this change resulted in a one-off credit to the income statement of
£18m in the prior year (shown within past service costs).
CYBG PLC
Notes to the consolidated financial statements (continued)
29. Retirement benefit obligations (continued)
In the current and prior year past service cost of £4m (2015: £2m) relates to pension enhancements, which were agreed as
part of redundancy and early retirement entitlements and in both years these were fully offset in the income statement by a
corresponding release from the restructure provision.
Amounts recognised in the statement of comprehensive income 2016 2015
£m £m
Opening cumulative actuarial losses (670) (634)
Actuarial gain due to liability experience adjustments 51 40
Actuarial loss due to liability assumption changes (1,021) (282)
Return on scheme assets greater than discount rate 791 206
──────── ────────
Cumulative actuarial losses recognised in the statement of comprehensive income (849) (670)
════════ ════════
Actuarial assumptions 2016 2015
% p.a. % p.a.
Financial assumptions
Discount rate 2.38 3.80
Inflation (RPI) 3.02 3.25
Inflation (CPI) 2.02 2.25
Career average revalued earnings (CARE) revaluations:
Pre 31 March 2012 benefits (RPI) 3.02 3.25
Post 31 March 2012 benefits (CPI capped at 5% per annum) 2.02 2.25
Pension increases (capped at 2.5% per annum) 2.05 2.10
Pension increases (capped at 5% per annum) 2.94 3.15
Rate of increase for pensions in deferment 2.02 2.25
Demographic assumptions 2016 2015
Post retirement mortality: Years Years
Current pensioners at 60 - male 27.7 27.6
Current pensioners at 60 - female 29.6 29.5
Future pensioners at 60 - male 29.2 29.1
Future pensioners at 60 - female 31.1 31.0
The table below sets out the sensitivity of the defined benefit obligation and pension cost to realistic changes in the key
actuarial assumptions:
Assumption change Impact ondefinedbenefitobligation Impact onpensioncost
£m £m
Discount rate
+0.25% (234) (8)
-0.25% 253 7
Inflation
+0.25% 170 5
-0.25% (167) (5)
Life expectancy
+1 year 159 5
- 1 year (152) (4)
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In
practice, changes in some of the assumptions may be correlated.
The discounted mean term of the defined benefit obligation at 30 September 2016 is 22 years. The expected contributions
for the year ending 30 September 2017 are £Nil and expected benefit payments for the year ending 30 September 2017 are
£85m.
CYBG PLC
Notes to the consolidated financial statements (continued)
30. Other liabilities
2016 2015
£m £m
Notes in circulation 1,912 1,791
Accruals and deferred income 152 136
Other 146 146
──────── ────────
2,210 2,073
════════ ════════
31. Called up share capital
As a consequence of the insertion of the new holding company, share capital in the current period reflects CYBG PLC. The comparative reflects CYBI.
Allotted, called up and fully paid 2016 2015
Number of Number of 2016 2015
shares shares rged through the income statement and adjusted for
deferred tax.
In comparative periods the equity based compensation reserve represents the outstanding fair value amount in respect of
share based payment expense recharged by the Group's former ultimate parent, NAB, which has been charged through the income
statement and adjusted for deferred tax.
Asset revaluation reserve
The asset revaluation reserve includes the gross revaluation increments and decrements arising from the revaluation of land
and buildings.
Available for sale reserve
The available for sale investments reserve records the gains and losses arising from changes in the fair value of available
for sale financial assets.
Cash flow hedge reserve
The cash flow hedge reserve records fair value revaluations of derivatives designated as cash flow hedging instruments to
the extent that they are effective.
As at 30 September 2016, the cash flow hedge reserve comprised crystallised fair value losses arising from de-designated
and matured cash flow hedges of £7.1m (2015: £2.2m loss) offset by deferred gains on derivatives in ongoing cash flow
hedges of £94.2m (2015: £15.2m loss). The balance on the cash flow hedge reserve within the consolidated statement of
changes in equity is net of tax.
A £2m gain (2015: £17m gain) was recycled into the income statement in relation to de-designated and matured hedges in the
period. A £1m loss (2015: £1m gain) was transferred to the income statement due to ineffectiveness arising from cash flow
hedges.
CYBG PLC
Notes to the consolidated financial statements (continued)
33. Contingent liabilities and commitments
The table below sets out the amounts of contingent liabilities and commitments which are not recorded on the balance sheet.
Contingent liabilities and commitments are credit-related instruments which include acceptances, letters of credit,
guarantees and commitments to extend credit. The amounts do not represent the amounts at risk at the balance sheet date
but the amounts that would be at risk should the contracts be fully drawn upon and the client default. Since a significant
portion of guarantees and commitments is expected to expire without being drawn upon, the total of the contract amounts is
not representative of future liquidity requirements.
Contingent liabilities 2016 2015
£m £m
Guarantees and assets pledged as collateral security:
Due in less than 3 months 19 25
Due between 3 months and 1 year 44 13
Due between 1 year and 3 years 9 9
Due between 3 years and 5 years 3 2
Due after 5 years 48 52
No specified maturity - 8
──────── ────────
123 109
════════ ════════
Other credit commitments
Undrawn formal standby facilities, credit lines and other commitments to lend at call 7,690 7,801
════════ ════════
Capital commitments
The Group had future capital expenditure which had been contracted for but not provided for in the financial statements at
30 September 2016 of £2m (2015: £2m).
Operating lease commitments
2016 2015
Leases as lessor £m £m
Future minimum lease payments under non-cancellable operating leases are:
Within 1 year 2 2
Between 1 year and 5 years 4 6
Over 5 years 1 2
──────── ────────
7 10
════════ ════════
Leases as lessee
Future minimum lease payments under non-cancellable operating leases are:
Within 1 year 29 31
Between 1 year and 5 years 94 95
Over 5 years 117 122
──────── ────────
240 248
════════ ════════
CYBG PLC
Notes to the consolidated financial statements (continued)
33. Contingent liabilities and commitments (continued)
Other contingent liabilities
Financial Services Compensation Scheme (FSCS)
The FSCS provides compensation to depositors in the event that a financial institution is unable to repay amounts due.
Following the failure of a number of financial institutions, claims were triggered against the FSCS, initially to pay
interest on borrowings which the FSCS has raised from the UK Government to support the protected deposits. During 2015,
the FSCS levy was also invoiced to institutions for the third of three annual levies to cover capital repayments to the UK
Government. The principal of these borrowings, which remains after the three annual levies have been paid, is anticipated
to be repaid from the realisation of the assets of the defaulted institutions. The FSCS has however confirmed that the
size of the future levies will
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AnnouncementREG - CYBG PLC Clydesdale Bank PLC - Total Voting Rights <Origin Href="QuoteRef">CYBGC.L</Origin>
AnnouncementREG - CYBG PLC Clydesdale Bank PLC - Director/PDMR Shareholding <Origin Href="QuoteRef">CYBGC.L</Origin>
AnnouncementREG - CYBG PLC Clydesdale Bank PLC - Director/PDMR Shareholding <Origin Href="QuoteRef">CYBGC.L</Origin>
AnnouncementREG - CYBG PLC Clydesdale Bank PLC - Pillar 3 Disclosures <Origin Href="QuoteRef">CYBGC.L</Origin>
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