REG - Natwest Markets PLC - NWM Plc 2024 Annual Report

NatwestAnnouncement

14/02/2025 08:15

For best results when printing this announcement, please click on link below:
https://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20250214:nRSN1149Xa&default-theme=true

RNS Number : 1651X  Natwest Markets PLC  14 February 2025

 

 

 

 

 

NatWest Markets Plc 14 February 2025

Annual Report and Accounts 2024

Pillar 3 Report 2024

 

A copy of the Annual Report and Accounts 2024 for NatWest Markets Plc will
shortly be submitted to the National Storage Mechanism and will be available
for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) . The document will
be available on NatWest Group plc's website at
https://investors.natwestgroup.com/reports-archive
(https://investors.natwestgroup.com/reports-archive)

We have also published the 2024 Pillar 3 report, available on our website.

 

For further information, please contact:

 

Media Relations

+44 (0) 131 523 4205

 

Investor relations Paul Pybus NatWest Markets Plc Investor Relations

+44 (0) 207 085 6448

 

For the purpose of compliance with the Disclosure Guidance and Transparency
Rules, this announcement also contains risk factors extracted from the Annual
Report and Accounts 2024 in full unedited text. Page references in the text
refer to page numbers in the Annual Report and Accounts 2024.

 

Principal Risks and Uncertainties

Set out below are certain risk factors that could have a material adverse
effect on NWM Group's future results, its financial condition, and/or
prospects, and cause them to be materially different from what is forecast or
expected, and directly or indirectly impact the value of its securities. These
risk factors are broadly categorised and should be read in conjunction with
other risk factors in this section and other parts of this annual report,
including the forward-looking statements section, the strategic report and the
risk and capital management section. They should not be regarded as a complete
and comprehensive statement of all potential risks and uncertainties facing
NWM Group.

Economic and political risk

NWM Group, its customers and its counterparties face continued economic and
political risks and uncertainties in the UK and global markets, including as a
result of inflation and interest rates, supply chain disruption, and
geopolitical developments.

NWM Group is affected by global economic and market conditions, particularly
those in the UK. Uncertain and volatile economic conditions in the UK or
globally can create a challenging operating environment for financial services
companies such as NWM Group. The outlook for the UK and the global economy is
affected by many dynamic factors including: GDP, unemployment, inflation and
interest rates, asset prices (including residential and commercial property),
energy prices, monetary and fiscal policy (such as increases in bank levies),
supply chain disruption, protectionist policies or trade barriers (including
tariffs).

Economic and market conditions could be exacerbated by a number of factors
including: instability in the UK and/or global financial systems, market
volatility and change, fluctuations in the value of the pound sterling, new or
extended economic sanctions, volatility in commodity prices, political
uncertainty, concerns regarding sovereign debt (including sovereign credit
ratings), any lack or perceived lack of creditworthiness of a counterparty or
borrower that may trigger market-wide liquidity problems, changing
demographics in the markets that NWM Group and its customers serve, rapid
changes to the economic environment due to the adoption of technology,
automation, artificial intelligence, or due to the consequences of climate
change, biodiversity loss, nature degradation and/or increasing social and
other inequalities.

NWM Group is also exposed to risks arising out of geopolitical events or
political developments that may hinder economic or financial activity levels
and may, directly or indirectly, impact UK, regional or global trade and/or
NWM Group's customers and counterparties. NWM Group's business and performance
could be negatively affected by political, military or diplomatic events,
geopolitical tensions, armed conflict (for example, the Russia-Ukraine
conflict and Middle East conflicts), terrorist acts or threats, more severe
and frequent extreme weather events, widespread public health crises, and the
responses to any of the above scenarios by various governments and markets.

In recent years, the UK has experienced significant political uncertainty. NWM
Group may also face political uncertainty in Scotland if there is another
Scottish independence referendum. Scottish independence may adversely affect
NWM Group plc both in relation to its entities incorporated in Scotland and in
other jurisdictions. Any changes to Scotland's relationship with the UK or the
EU may adversely affect the environment in which NatWest Group plc and its
subsidiaries operate and may require further changes to NatWest Group
(including NWM Group's structure), independently or in conjunction with other
mandatory or strategic structural and organisational changes, any of which
could adversely affect NWM Group.

The value of NWM Group's own and other securities may be materially affected
by market risk (including as a result of market fluctuations). Market
volatility, illiquid market conditions and disruptions in the financial
markets may make it very difficult to value certain of NWM Group's own and
other securities, particularly during periods of market displacement. This
could cause a decline in the value of NWM Group's own and other securities, or
inaccurate carrying values for certain financial instruments. Similarly, NWM
Group trades a considerable amount of financial instruments (including
derivatives) and volatile market conditions could result in a significant
decline in NWM Group's net trading income or result in a trading loss.

In addition, financial markets are susceptible to severe events evidenced by,
or resulting in, rapid depreciation in asset values, which may be accompanied
by a reduction in asset liquidity. Under these conditions, hedging and other
risk management strategies may not be as effective at mitigating losses as
they would be under more normal market conditions. Moreover, under these
conditions, market participants are particularly exposed to trading strategies
employed by many market participants simultaneously (and often automatically)
and on a large scale, increasing NWM Group's counterparty risk. NWM Group's
risk management and monitoring processes seek to quantify and mitigate NWM
Group's exposure to extreme market moves. However, market events have
historically been difficult to predict, and NWM Group, its customers and its
counterparties could experience significant losses if severe market events
were to occur.

Any of the above may have a material adverse effect on NWM Group's future
results, financial condition, prospects, and/or reputation.

Fluctuations in currency exchange rates may adversely affect NWM Group's
results and financial condition.

Decisions of central banks (including the BoE, the ECB, and the US Federal
Reserve) and political or market events which are outside NWM Group's control,
may lead to sharp and sudden fluctuations in currency exchange rates.

Although NWM Group is principally a UK-focused banking group, it is subject to
structural foreign exchange risk from capital deployed in NWM Group and its
foreign subsidiaries and branches. NWM Group also issues instruments in
non-sterling currencies, such as USD, that assist in meeting NWM Group's
regulatory requirements. In addition, NWM Group conducts banking activity in
non-sterling currencies (for example, loans, deposits and dealing activity)
which affect its revenue. NWM Group also uses service providers based outside
the UK for certain services and as a result certain operating expenses are
subject to fluctuations in currency exchange rate. NWM Group maintains
policies and procedures designed to manage the impact of its exposure to
fluctuations in currency exchange rates. Nevertheless, changes in currency
exchange rates, particularly in the sterling-US dollar and sterling-euro
rates, may adversely affect various accounting and financial metrics including
the value of assets, liabilities (including the total amount of instruments
eligible to contribute towards the minimum requirement for own funds and
eligible liabilities ('MREL')), income and expenses, RWAs and hence the
reported earnings and financial condition of NWM Group.

Any of the above may have a material adverse effect on NWM Group's future
results, financial condition, prospects, and/or reputation.

Changes in interest rates will continue to affect NWM Group's business and
results.

NWM Group's performance is affected by changes in interest rates. Benchmark
overnight interest rates, such as the UK base rate, decreased in 2024, and
forward rates suggest that interest rates will continue to decline in 2025.
Stable interest rates support more predictable income flow and less volatility
in asset and liability valuations, although persistently low and negative
interest rates may adversely affect NWM Group. Further, volatility in interest
rates may result in unexpected outcomes both for interest income and asset and
liability valuations which may adversely affect NWM Group. For example,
decreases in key benchmark rates such as the UK base rate may adversely affect
NWM Group's income, and unexpected movements in spreads between key benchmark
rates such as sovereign and swap rates may, in turn, affect liquidity
portfolio valuations. In addition, unexpected sharp rises in rates may also
have negative impacts on some asset and derivative valuations.

Moreover, customer and investor responses to rapid changes in interest rates
can have an adverse effect on NWM Group. For example, customers may make
deposit choices that provide them with higher returns than those being offered
by NWM Group. Alternatively, NWM Group may not respond with competitive
products as rapidly, for example following an interest rate change which may
in turn decrease NWM Group's net interest income.

Movements in interest rates also influence and reflect the macroeconomic
situation more broadly, affecting factors such as business and consumer
confidence, property prices, default rates on loans, customer behaviour (which
may adversely impact the effectiveness of NWM Group's hedging strategy), and
other indicators that may indirectly affect NWM Group.

Any of the above may have a material adverse effect on NWM Group's future
results, financial condition, prospects, and/or reputation.

HM Treasury (or UKGI on its behalf) could exercise, or be perceived as being
capable of exercising, influence over NatWest Group and NWM Group is
controlled by NatWest Group.

In its Autumn Budget 2024, the UK Government confirmed its commitment to exit
its shareholding in NatWest Group plc by 2025-2026 subject to market
conditions and sales representing value for money for taxpayers. Accordingly,
following various prior sell-downs of parts of its shareholding in NatWest
Group plc, HM Treasury is no longer a "controlling shareholder" of NatWest
Group plc. As at 13 January 2025, HM Treasury held 8.90% of the ordinary share
capital with voting rights of NatWest Group plc.

HM Treasury has indicated that it intends to respect the commercial decisions
of NatWest Group and that NatWest Group entities (including NWM Group) will
continue to have their own independent board of directors and management team
determining their own strategy. However, for as long as HM Treasury remains
NatWest Group plc's largest single shareholder, HM Treasury and UK Government
Investments Limited ('UKGI') (as manager of HM Treasury's shareholding) could
exercise, or be perceived as being capable of exercising, influence over
NatWest Group (including NWM Group), on matters such as changes to NatWest
Group's (including NWM Group's) directors and senior management, NatWest
Group's (including NWM Group's) capital strategy, dividend policy,
remuneration policy or how NatWest Group conducts its operations. HM Treasury
or UKGI's approach largely depends on government policy, which could change.
Any exercise of such influence, or the perception that such influence may be
exercised, may have an adverse effect on NatWest Group's (including NWM
Group's) reputation, the price of NatWest Group's (including NWM Group's)
securities, or the governance or business strategy of NWM Group.

The way in which HM Treasury or UKGI exercises HM Treasury's rights as NatWest
Group plc's largest single shareholder could give rise to conflicts between
the interests of HM Treasury and the interests of other shareholders,
including as a result of a change in government policy, which may in turn
adversely affect NatWest Group (including NWM Group).

In addition, NWM Plc is a wholly owned subsidiary of NatWest Group plc, and
NatWest Group plc therefore controls NWM Plc's board of directors and NWM
Group's corporate policies and strategic direction. The interests of NatWest
Group plc (as an equity holder and as NWM Group's parent) and the interests of
the C&I business segment may differ from, and conflict with, the interests
of NWM Group or of potential investors in its securities. See also, 'NWM Group
has been in a period of, and may continue to be subject to, significant
structural and other change.'

Any of the above may have a material adverse effect on NWM Group's future
results, financial condition, prospects, reputation, and/or the price of its
securities.

Business change and execution risk

NWM Group has been in a period of, and may continue to be subject to,
significant structural and other change.
As part of NatWest Group's strategy (including the strategic priorities of
disciplined growth, bank-wide simplification and active balance sheet and risk
management), NWM Group's own strategy has evolved to mostly focus on serving
NatWest Group's corporate and institutional customer base via the creation of
NatWest Group's C&I business segment. NatWest Group plc reports NWM
Group's results under the C&I operating segment structure, although NWM
Plc continues to also report on a standalone legal entity basis.

The C&I business segment was created to promote closer operational and
strategic alignment to support NatWest Group growth, with more integrated
services to customers across NatWest Group entities, within and outside the
ring-fenced banks with the potential increased risk of breach of the UK
ring-fencing regime requiring effective conflicts of interest policies. As a
result of further focusing on NatWest Group's core C&I customers, NWM
Group's prospects have become further dependent on the success and strategy of
NatWest Group and its C&I business segment in particular.

NWM Group's ability to serve its customers may be adversely affected by the
execution of NatWest Group's strategy in respect of its C&I business
segment and customer reactions to the changing nature of NWM Group's business
model may be more adverse than expected. Previously anticipated revenue and
profitability levels may not be achieved (including in relation to: the
ability to support customer transactions whilst meeting NWM Group capital
targets, and changes to the availability of risk capital), in the timescales
envisaged or at all.

An adverse macroeconomic environment, political and regulatory uncertainty,
market volatility and change, and/or strong market competition may require NWM
Group to adjust aspects of its strategy or the timeframe for its
implementation. It is anticipated that NWM Plc will continue to generate
operating losses in the short-term and as a result its capital levels may
decline.

NWM Group's strategy requires it to focus on bank-wide simplification, a
significant proportion of which is dependent on simplification of its IT
systems and therefore may not be realised if IT capabilities are not delivered
in line with assumptions. In addition, the scale of changes that have been
concurrently implemented require the implementation and application of robust
governance and controls frameworks and robust IT systems. There is a risk that
NWM Group may not be successful in maintaining such governance and control
frameworks and IT systems.

As part of NWM Group's strategy, NWM Group has set a number of financial,
capital and operational targets and expectations, which are expected to
require further reductions to its wider cost base. The financial, operational
and capital targets and expectations envisaged by NWM's strategy may not be
met or maintained in the timeframes expected or at all. In addition, targets
and expectations for NWM Group are based on management plans, projections and
models, and are subject to a number of key assumptions and judgements, any of
which may prove to be inaccurate. NWM Group has implemented a shared services
model and transfer pricing arrangements with some entities within NatWest
Group's ring-fenced sub-group (including NatWest Bank Plc and The Royal Bank
of Scotland Plc). NWM Group therefore relies directly or indirectly on NatWest
Group entities to provide services to itself and its customers. This reliance
has increased as a result of NWM Group joining NatWest Group's C&I
business segment.

A failure of NWM Group to receive these services may result in operational
risk. See, 'Operational risks (including reliance on third party suppliers and
outsourcing of certain activities) are inherent in NWM Group's businesses.' In
addition, any change to the cost and/or scope of services provided by NatWest
Group may impact NWM Group's competitive position and its ability to meet its
other targets.

NWM's strategy entails legal, execution, operational and regulatory (including
compliance with the UK ring-fencing regime), conflicts, IT system,
cybersecurity, culture, people, conduct, business and financial risks to NWM
Group. As a result, NWM Group may not be able to successfully implement some
or all aspects of its strategy or may not meet any or all of the related
strategic targets or expectations.

Additionally, as a result of the UK's withdrawal from the EU, certain aspects
of the services provided by NWM Group require local licences or individual
equivalence decisions (temporary or otherwise) by relevant regulators. In
April 2024, the European Parliament approved the Banking Package (CRR III/CRD
VI). From 10 January 2027, non-EU firms providing 'banking services' will be
required to apply for and obtain authorisation to operate as third country
branches in each relevant EU member state where they provide these services,
unless an exemption applies.  NatWest Group continues to evaluate its EU
operating model, making adaptations as necessary. In December 2024, NatWest
Group decided to simplify the operating model in Europe. NWM N.V. will become
the primary European corporate and institutional customer-facing entity,
subject to regulatory approval. Changes to, or uncertainty regarding, NWM
Group's EU operating model have been, and may continue to be, costly and may:
(i) adversely affect customers and counterparties who are dependent on trading
with the EU or personnel from the EU; (ii) result in further costs and/or
regulatory sanction due to a failure to receive the required regulatory
permissions and/or further changes to NWM Group's business operations, product
offering, customer engagement, and regulatory requirements; and/or (iii)
impact NWM Plc's direct access to euro ECB liquidity facilities and euro
central bank reserves.

Furthermore, transferring business to an EEA based subsidiary, including in
connection with NatWest Group's Western European corporate portfolio, is a
complex exercise and involves legal, regulatory and execution risks, and could
result in a loss of business and/or customers or higher than anticipated costs
(see also, 'The transfer of NatWest Group's Western European corporate
portfolio involves certain risks.'). Any of the above could, in turn,
adversely affect NWM Group.

As a result of RBS Holdings N.V. and its subsidiary NatWest Markets N.V. (both
subsidiaries of NWM Group) being classified as a "significant supervised
group", ECB direct supervision of both subsidiaries began on 1 January 2024,
which could have an adverse effect on NWM Group's business strategy, operating
model and prudential requirements in the short and medium term.

Each of the risks identified above, individually or collectively, could
adversely affect NWM Group's products and services offering or office
locations, competitive position, ability to meet targets and commitments,
reputation with customers or business model and may result in
higher-than-expected costs, all of which could adversely affect NWM Group and
its ability to deliver its strategy. There is a risk that the intended
benefits of NatWest Group's and NWM Group's strategies may not be realised in
the timelines or in the manner contemplated, or at all. Various aspects of NWM
Group's strategy may not be successful, may not be completed as planned, or at
all, or could be phased or could progress in a manner other than as expected.
This could lead to additional management actions by NatWest Group (or NWM
Group), regulatory action or reduced liquidity and/or funding opportunities.

Any of the above may lead to NWM Group not being viable, competitive, or
profitable, and may have a material adverse effect on NWM Group's future
results, financial condition, prospects, and/or reputation.

The transfer of NatWest Group's Western European corporate portfolio involves
certain risks.

To improve efficiencies and best serve customers following the UK's withdrawal
from the EU, certain assets, liabilities, transactions and activities of
NatWest Group (including its Western European corporate portfolio principally
consisting of term funding and revolving credit facilities) (the 'Transfer
Business'), are expected to be: (i) transferred from the ring-fenced subgroup
of NatWest Group to NWM Group, and/or (ii) transferred to the ring-fenced
subgroup of NatWest Group from NWM Group, subject to regulatory and customer
requirements. The timing, success and quantum of any of these transfers remain
uncertain as is the impact of these transactions on its results of operations.
As a result, this may have a material adverse effect on NWM Group's future
results, financial condition, prospects, and/or reputation.

Financial resilience risk

NWM Group may not achieve its ambitions or targets, meet its guidance,
generate returns, or implement its strategy effectively.

NWM Group has set a number of financial, capital and operational targets and
provided guidance including in respect of: CET1 ratio and leverage ratio
targets (for NWM Plc and NWM N.V.), MREL targets, targets in relation to local
regulation, funding plans and requirements, employee engagement, diversity and
inclusion as well as climate strategy (including its climate and sustainable
funding and financing targets).

NWM Group's ability to meet its ambitions, targets, guidance, and make
discretionary capital distributions is subject to various internal and
external factors, risks and uncertainties. These include but are not limited
to: UK and global macroeconomic, political, market and regulatory
uncertainties, customer behaviour, operational risks and risks relating to NWM
Group's business model and strategy (including risks associated with climate
and other sustainability-related issues). See also, 'NWM Group, its customers
and its counterparties face continued economic and political risks and
uncertainties in the UK and global markets, including as a result of inflation
and interest rates, supply chain disruption, and geopolitical developments.'

A number of factors may impact NWM Plc and NWM N.V.'s abilities to maintain
their respective CET1 ratio targets, including the macroeconomic environment,
impairments, the extent of organic capital generation and the receipt and
payment of dividends. Furthermore, the focus on maintaining a disciplined cost
base may result in limited investment in other areas which could affect NWM
Group's long-term product offering or competitive position and its ability to
meet its other targets, including those related to customer satisfaction.

In addition, challenging trading conditions may adversely affect NWM Group's
business and its ability to achieve its targets, meet its guidance, and
execute its strategy. Furthermore, NWM Group's strategy may not be
successfully executed or it may not meet its ambitions, targets, guidance and
expectations.

Any of the above may lead to NWM Group not being a viable, competitive or
profitable banking business and may have a material adverse effect on NWM
Group's future results, financial condition, prospects, and/or reputation.

NWM Plc and/or its regulated subsidiaries may not meet the prudential
regulatory requirements for regulatory capital.

NWM Group is required by regulators in the UK, the EU and other jurisdictions
in which it undertakes regulated activities to maintain adequate financial
resources. Adequate capital provides NWM Group with financial flexibility in
the face of turbulence and uncertainty in the global economy and specifically
in its core UK operations.

NWM Plc's and NWM N.V.'s target CET1 ratios are based on regulatory
requirements and management actions (see the targets set forth in each
respective entity's Outlook section) that rely on internal modelling and risk
appetite (including under stress). As at 31 December 2024, NWM Plc's solo CET1
ratio was 18% and its CET1 target ratio for the medium term is around 14%. NWM
Plc's current capital strategy is based on the management of RWAs and other
capital management initiatives (including the reduction of RWAs and the
periodic payment of dividends to NatWest Group plc, NWM Plc's parent company).

Other factors that could influence NWM Plc and NWM N.V.'s CET1 ratios include:

-    a depletion of NWM Plc or NWM N.V.'s capital resources through reduced
profits (which would in turn impact retained earnings) and may result from
revenue attrition or increased liabilities, sustained periods of low interest
rates, reduced asset values resulting in write-downs or reserve adjustments,
impairments, changes in accounting policy, accounting charges or foreign
exchange movements;

-    a change in the quantum of NWM Plc's or NWM N.V.'s RWAs, stemming from
exceeding target RWA levels, regulatory changes (including their
interpretation or application), foreign exchange movements or a failure in
internal controls or procedures to accurately measure and report RWAs/leverage
exposure. An increase in RWAs would lead to a reduction in the CET1 ratio (and
increase the amount of internal MREL required for NWM Plc);

-    changes in prudential regulatory requirements including the Total
Capital Requirement for NWM Plc (as regulated by the PRA) or NWM N.V. (as
regulated by the ECB), including Pillar 2 requirements and regulatory buffers
as well as any applicable scalars;

-    further losses (including as a result of extreme one-off incidents
such as cyberattack, fraud or conduct issues) would deplete capital resources
and place downward pressure on the CET1 ratio; or

-    the timing of planned liquidation, disposal and/or capital releases of
capital including on activity or legacy entities owned by NWM Plc and NWM N.V.

 

See also 'NWM Group has been in a period of, and may continue to be subject
to, significant structural and other change.'

Management actions taken under a stress scenario may affect, among other
things, NWM Group's product offering, its credit ratings, its ability to
operate its businesses and pursue its strategy, any of which may negatively
impact investor confidence, and the value of NWM Group's securities. See also,
'NWM Plc and/or its regulated subsidiaries may not manage their capital,
liquidity or funding effectively which could trigger the execution of certain
management actions or recovery options,' 'NatWest Group (including NWM Group)
may become subject to the application of UK statutory stabilisation or
resolution powers which may result in, for example, the write-down or
conversion of NWM Group entities' Eligible Liabilities', and NWM Group may be
adversely affected if NatWest Group fails to meet the requirements of
regulatory stress tests.'

Any of the above may have a material adverse effect on NWM Group's future
results, financial condition, prospects, and/or reputation.

NWM Group is reliant on access to the capital markets to meet its funding
requirements, both directly through wholesale markets, and indirectly through
its parent (NatWest Group plc) for the subscription to its internal capital
and MREL. The inability to do so may adversely affect NWM Group.

NWM Plc's funding plan anticipates that in 2025, it will issue £4-5 billion
of public benchmark issuance, based on its current and anticipated business
activities. NWM Group (which includes NatWest Markets N.V.) therefore has
significant anticipated funding requirements, which may increase in the future
(including as a result of changes to NatWest Group's and NWM Group's EU
operating model), and is reliant on frequent access to the capital markets for
funding, at a cost that can be passed through to its customers. This access
entails execution risk, regulatory risk, risk of reduced commercial activity,
risk of loss of market confidence in NWM Group if it cannot finance its
activities and risk of a ratings downgrade, which could be influenced by a
number of internal or external factors, including, those summarised in these
risk factors.

In addition, NWM Plc receives capital and funding from NatWest Group plc. NWM
Plc has set target levels for different tiers of capital and for the internal
MREL, as percentages of its RWAs. The level of capital and funding required
for NWM Plc to meet its internal targets is therefore a function of the level
of RWAs and its leverage exposure in NWM Plc and this may vary over time.

NWM Plc's internal MREL comprises the regulatory value of capital instruments
and loss-absorbing senior funding issued by NWM Plc to its parent, NatWest
Group plc, in all cases with a residual maturity of at least one year. The BoE
has identified that the preferred resolution strategy for NatWest Group is as
a single point-of-entry.

As a result, NatWest Group plc is the only entity able to issue Group MREL
eligible liabilities to third-party investors, using the proceeds to fund the
internal capital and MREL targets and/or requirements of its operating
entities, including NWM Plc. NWM Plc is therefore dependent not only on
NatWest Group plc to fund its internal capital targets, but also on NatWest
Group plc's ability to source appropriate funding. NWM Plc is also dependent
on NatWest Group plc to continue to fund NWM Plc's internal MREL targets over
time and its ability to issue and maintain sufficient amounts of external MREL
liabilities to support this. In turn, NWM Plc is required to fund the internal
capital requirements and MREL of its subsidiaries.

Any inability of NWM Group to adequately access the capital markets, to manage
its balance sheet in line with assumptions in its funding plans, or to issue
internal capital and MREL may adversely affect NWM Group, such that NWM Group
may not constitute a viable banking business and/or NWM Plc or NWM N.V. may
fail to meet their respective regulatory capital and/or MREL (at present, NWM
N.V. does not have its own MREL).

Any of the above may have a material adverse effect on NWM Group's future
results, financial condition, prospects, and/or reputation.

NWM Group may not meet the prudential regulatory requirements for liquidity
and funding or may not be able to adequately access sources of liquidity and
funding, which could trigger the execution of certain management actions or
recovery options.

Liquidity and the ability to raise funds continues to be a key area of focus
for NWM Group and the industry as a whole. NatWest Group and NWM Plc (on a
standalone basis) are required by regulators in the UK, the EU and other
jurisdictions in which they undertake regulated activities to maintain
adequate liquidity and funding resources. To satisfy its liquidity and funding
requirements, NWM Group may therefore access sources of liquidity and funding
through deposits and wholesale funding, including debt capital markets and
trading liabilities such as repurchase agreements. As at 31 December 2024, NWM
Group held £9.4 billion in deposits from banks and customers.

The level of deposits and wholesale funding may fluctuate due to factors
outside NWM Group's control. These factors include: loss of customers, changes
in customer behaviour, loss of customer and/or investor confidence (including
in individual NWM Group entities or the UK banking sector or the banking
sector as a whole), changes in interest rates, government support, increasing
competitive pressures for bank funding or the reduction or cessation of
deposits and other funding by counterparties, any of which could result in a
significant outflow of deposits or reduction in wholesale funding within a
short period of time. See also, 'NWM Group has significant exposure to
counterparty and borrower risk including credit losses, which may have an
adverse effect on NWM Group'. An inability to grow, roll-over, or any material
decrease in, NWM Group's deposits, short-term wholesale funding and short-term
liability financing could, particularly if accompanied by one of the other
factors described above, adversely affect NWM Group.

NWM Group engages from time to time in 'fee based borrow' transactions whereby
collateral (such as government bonds) is borrowed from counterparties on an
unsecured basis in return for a fee. This borrowed collateral may be used by
NWM Group to finance parts of its balance sheet, either in its repo financing
business, derivatives portfolio or more generally across its balance sheet. If
such 'fee based borrow' transactions are unwound whilst used to support the
financing of parts of NWM Group balance sheet, then unsecured funding from
other sources would be required to replace such financing. There is a risk
that NWM Group would be unable to replace such financing on acceptable terms
or at all, which could adversely affect its liquidity position and have an
adverse effect on NWM Group. In addition, because 'fee base borrow'
transactions are conducted off-balance sheet (due to the collateral being
borrowed) investors may find it more difficult to gauge NWM Group's
creditworthiness, which may be affected if these transactions were to be
unwound in a stress scenario. Any lack of or perceived lack of
creditworthiness may adversely affect NWM Group.

Macroeconomic developments, political uncertainty, changes in interest rates,
and market volatility, could affect NWM Group's ability to access sources of
liquidity and funding on satisfactory terms, or at all. This may result in
higher funding costs and failure to comply with regulatory capital, funding
and leverage requirements. As a result, NWM Plc and its subsidiaries could be
required to change their funding plans and/or their funding operations. For
example, impairments or other losses as well as increases to capital
deductions may result in a decrease to NWM Plc's capital base, and/or that of
its subsidiaries.

If NatWest Group plc is unable to issue securities externally as planned, this
may have a negative impact on NWM Plc's current and forecasted MREL position,
particularly if NatWest Group plc is unable to downstream capital and/or
funding to NWM Plc. This could exacerbate funding and liquidity risk, which
may adversely affect NWM Group.

As at 31 December 2024, NWM Group reported a liquidity coverage ratio of 195%.
If its liquidity position and/or funding were to come under stress and if NWM
Group is unable to raise funds through deposits, wholesale funding sources or
other reliable funding sources, on acceptable terms, or at all, its liquidity
position would likely be adversely affected. This would mean that NWM Group
might be unable to: meet deposit withdrawals on demand or satisfy buyback
requests, repay borrowings as they mature, meet its obligations under
committed financing facilities, comply with regulatory funding requirements,
undertake certain capital and/or debt management activities, or fund new
loans, investments and businesses.

If, under a stress scenario, the level of liquidity falls outside of NWM
Group's risk appetite, there are a range of recovery management actions that
NWM Group could take to manage its liquidity levels, but any such actions may
not be sufficient to restore adequate liquidity levels, and the related
implementation may have adverse consequences for NWM Group. Under the PRA
Rulebook, NatWest Group must maintain a recovery plan acceptable to its
regulator, such that a breach of NWM Group's applicable liquidity requirements
would trigger consideration of NWM Plc's recovery actions, and in turn may
prompt consideration and execution of NatWest Group's recovery plan, to
attempt to remediate a deficient liquidity position.

NWM Group may need to liquidate assets to meet its liabilities, including
disposals of assets not previously identified for disposal to reduce its
funding or payment commitments or trigger the execution of certain management
actions or recovery options. This could also lead to higher funding costs
and/or changes to NWM Group's funding plans or its operations. In a time of
reduced liquidity or market stress, NWM Group may be unable to sell some of
its assets or may need to sell assets at depressed prices, which in either
case may adversely affect NWM Group.

NWM Group entities independently manage liquidity risk on a stand-alone basis,
including through holding their own liquidity portfolios. They have restricted
access to liquidity or funding from other NatWest Group entities. NWM Group
entities' management of their own liquidity portfolios and the structure of
capital support are subject to operational and execution risk.

Continuing market volatility may impact capital and RWAs and NWM Group and its
subsidiaries may be required to adapt their funding plans or change their
operations in order to satisfy their respective capital and funding
requirements, which may have a negative impact on NWM Group. Market volatility
may also result in increases to leverage exposure.

Any of the above may have a material adverse effect on NWM Group's future
results, financial condition, prospects, and/or reputation.

NWM Plc and/or its regulated subsidiaries may not manage their capital,
liquidity or funding effectively which could trigger the execution of certain
management actions or recovery options.

Under the PRA Rulebook, NatWest Group must maintain a recovery plan acceptable
to its regulator, such that a breach of NWM Plc's applicable capital or
leverage, liquidity or funding requirements would trigger consideration of NWM
Plc's recovery actions, and in turn may prompt consideration and execution of
NatWest Group's recovery actions. If, under stressed conditions, the
liquidity, capital or leverage ratio were to decline, there are a range of
recovery management actions (focused on risk reduction and mitigation) that
NWM Plc could undertake that may or may not be sufficient to restore adequate
liquidity, capital and leverage ratios. Additional management options relating
to existing capital issuances, asset or business disposals, capital payments
and dividends from NWM Plc to its parent, could also be undertaken to support
NWM Plc's capital and leverage requirements. NatWest Group may also address a
shortage of capital in NWM Plc by providing parental support to NWM Plc.
NatWest Group's (and NWM Plc's) regulator may also request that NWM Group
carry out additional capital management actions. The BoE has identified single
point-of-entry at NatWest Group plc, as the preferred resolution strategy for
NatWest Group. However, under certain conditions set forth in the BRRD, as the
UK resolution authority, the BoE also has the power to execute the 'bail-in'
of certain securities of NWM Group without further action at NatWest Group
level.

Any capital management actions taken under a stress scenario may, in turn,
affect: NWM Group's product offering, credit ratings, ability to operate its
businesses and pursue its strategy as well as negatively impacting investor
confidence and the value of NWM Group's securities. See also, 'NatWest Group
(including NWM Group) may become subject to the application of UK statutory
stabilisation or resolution powers which may result in, for example, the
write-down or conversion of NWM Group entities' Eligible Liabilities.' In
addition, if NWM Plc or NWM N.V.'s liquidity position were to be adversely
affected, this may require assets to be liquidated or may result in higher
funding costs, which may adversely affect NWM Group's operating performance.

Any of the above may have a material adverse effect on NWM Group's future
results, financial condition, prospects, and/or reputation.

Any reduction in the credit rating and/or outlooks assigned to NatWest Group
plc, any of its subsidiaries (including NWM Plc or NWM Group subsidiaries) or
any of their respective debt securities could adversely affect the
availability of funding for NWM Group, reduce NWM Group's liquidity and
funding position and increase the cost of funding.

Rating agencies regularly review NatWest Group plc, NWM Plc and other NatWest
Group entities' credit ratings and outlooks. NWM Group entities' credit
ratings and outlooks, could be negatively affected (directly and indirectly)
by a number of factors that can change over time, including, without
limitation: credit rating agencies' assessment of NWM Group's strategy and
management's capability; its financial condition including in respect of
profitability, asset quality, capital, funding and liquidity, and risk
management practices; the level of political support for the sectors and
regions in which NWM Group operates; the legal and regulatory frameworks
applicable to NWM Group's legal structure; business activities and the rights
of its creditors; changes in rating methodologies; changes in the relative
size of the loss-absorbing buffers protecting bondholders and depositors; the
competitive environment; political, geopolitical and economic conditions in
NWM Group's key markets (including inflation and interest rates, supply chain
disruptions and geopolitical developments); any reduction of the UK's
sovereign credit rating and market uncertainty. In addition, credit rating
agencies are increasingly taking into account sustainability-related factors,
including climate, environmental, social and governance-related risk, as part
of the credit rating analysis, as are investors in their investment decisions.

Any reductions in the credit rating of NatWest Group plc, NWM Plc or of
certain other NatWest Group entities could significantly affect NWM Group.
Adverse consequences for NWM Group from downgrades could include, without
limitation, a reduction in the access to capital markets or in the size of its
deposit base, and trigger additional collateral or other requirements in its
funding arrangements or the need to amend such arrangements, which could
adversely affect NWM Group's liquidity and funding position, cost of funding,
and could limit the range of counterparties willing to enter into transactions
with NWM Group on favourable terms, or at all. This may in turn adversely
affect NWM Group's competitive position and threaten its prospects.

Any of the above may have a material adverse effect on NWM Group's future
results, financial condition, prospects, and/or reputation.

NWM Group operates in markets that are highly competitive, with competitive
pressures and technology disruption.

NatWest Group (including NWM Group) faces increasing competitive pressures and
technology disruption from incumbent traditional UK banks, challenger banks
and building societies (including those resulting from mergers between these
entities), fintech companies, large technology conglomerates and new market
entrants who could look to scale technology and/or other competitive
advantages to compete with NatWest Group for customer engagement. "BigTech"
companies are seen as threats to incumbent banking providers because of their
customer innovation and global reach. In addition, digital-first banks (often
referred to as "neobanks") and fintechs are aiming to compete with incumbent
banking providers on the basis that customers increasingly use a constellation
of providers to support their complex and evolving needs (e.g., personal
financial management and paying for goods and services in foreign currency).

NWM Group expects competition to continue and intensify in response to various
trends including: evolving customer behaviour, technological changes
(including digital currencies, stablecoins and the growth of digital banking),
competitor behaviour, new market entrants, competitive foreign exchange
offerings, industry trends resulting in increased disaggregation or unbundling
of financial services or, conversely, the re-intermediation of traditional
banking services, and the impact of regulatory actions, among others. In
particular, NWM Group may be unable to grow or retain its market share due to
new (or more competitive) banking, lending and payment products and services
that are offered by rapidly evolving incumbents and challengers (including
shadow banks, alternative or direct lenders and new entrants). These
competitive pressures and the introduction of disruptive technology may result
in a shift in customer behaviour and impact NWM Group's revenues and
profitability.

Moreover, innovations in biometrics, artificial intelligence, automation,
cloud services, blockchain, cryptocurrencies and quantum computing may rapidly
facilitate industry transformation.

Increasingly, many of NWM Group's products and services are, and will become,
more technology intensive, including through digitalisation, automation and
the use of artificial intelligence while needing to continue complying with
applicable and evolving regulations. NWM Group's ability to develop or acquire
digital solutions and their integration into NWM Group's structures, systems
and controls has become increasingly important for retaining and growing NWM
Group's market share and customer-facing businesses.

NWM Group's innovation strategy (which includes investments in its IT
capability intended to improve its core infrastructure and customer interface
capabilities as well as investments and strategic partnerships with third
party technology providers) may not be successful or may not result in NWM
Group offering innovative products and services in the future. Furthermore,
current or future competitors may be more successful than NWM Group in
implementing technologies for delivering products or services to their
customers, which may adversely affect its competitive position. In addition,
continued consolidation and/or technological developments in the financial
services industry could result in the emergence of new competitors or NWM
Group's competitors gaining greater capital and other resources, including the
ability to offer a broader and more attractive or better value range of
products and services and geographic diversity. For example, new market
entrants, including non-traditional financial services providers, such as
technology conglomerates, may have competitive advantages in scale, and
technology and may be able to develop and deliver financial services at a
lower cost base.

NWM Group may also fail to identify future opportunities or fail to derive
benefits from technological innovation, changing customer behaviour and
changing regulatory demands. Competitors may be better able to attract and
retain customers and key employees, have more effective IT systems, and have
access to lower cost funding and/or be able to attract deposits or provide
investment-banking services on more favourable terms than NWM Group. Although
NWM Group invests in new technologies and participates in industry and
research-led technology development initiatives, such investments may be
insufficient or ineffective, especially given NWM Group's focus on business
simplification and cost efficiencies. This could affect NWM Group's ability to
offer innovative products or technologies to customers.

If NWM Group is unable to offer competitive, attractive and innovative
products that are also profitable and released in a timely manner, it will
lose market share, incur losses on some or all of its initiatives and possibly
lose growth opportunities. For example, NWM Group is investing in the
automation of certain solutions and interactions within its customer-facing
businesses, including through artificial intelligence. There can be no
certainty that such initiatives will allow NWM Group to compete effectively or
will deliver the expected cost savings for NWM Group. In addition, the
implementation of NatWest Group's strategy, delivery on its climate ambition
and cost-controlling measures, may also have an impact on NWM Group's ability
to compete effectively and provide satisfactory returns. Moreover, activist
investors have increasingly become engaged and interventionist in recent
years, which may pose a threat to NatWest Group's (and NWM Group's) strategic
initiatives.

Any of the above may have a material adverse effect on NWM Group's future
results, financial condition, prospects, and/or reputation.

NWM Group may be adversely affected if NatWest Group fails to meet the
requirements of regulatory stress tests.

NatWest Group is subject to annual and other stress tests by its regulator in
the UK. Stress tests are designed to assess the resilience of banks such as
NWM Group to potential adverse economic or financial developments and ensure
that they have robust, forward-looking capital planning processes that account
for the risks associated with their business profile.

If the stress tests reveal that a bank's existing regulatory capital buffers
are not sufficient to absorb the impact of the stress, then it is possible
that NatWest Group and/or NWM Group may need to take action to strengthen
their capital positions.

Failure by NatWest Group to meet its quantitative and qualitative requirements
of the stress tests set forth by its UK regulators may result in: NatWest
Group's regulators requiring NatWest Group to generate additional capital,
reputational damage, increased supervision and/or regulatory sanctions and/or
loss of investor confidence.

Any of the above may have a material adverse effect on NatWest Group's (and
NWM Group's) future results, financial condition, prospects, and/or
reputation.

NWM Group has significant exposure to counterparty and borrower risk including
credit losses, which may have an adverse effect on NWM Group.
Credit risk may arise from a variety of business activities, including, but
not limited to: extending credit to customers through various lending
commitments; entering into swap or other derivative contracts under which
counterparties have obligations to make payments to NWM Group (including
un-collateralised derivatives); providing short or long-term funding that is
secured by physical or financial collateral whose value may at times be
insufficient to fully cover the loan repayment amount; posting margin and/or
collateral and other commitments to clearing houses, clearing agencies,
exchanges, banks, securities firms and other financial counterparties; and
investing and trading in securities and loan pools, whereby the value of these
assets may fluctuate based on realised or expected defaults on the underlying
obligations or loans. See also, 'Risk and capital management - Credit Risk'.
Any negative developments in the activities listed above may negatively impact
NWM Group's customers and credit exposures, which may, in turn, adversely
affect NWM Group's profitability.

NWM N.V., a subsidiary of NWM Plc, has a portfolio of loans and loan
commitments to Western European corporate customers. As a result, through the
NWM N.V. business and NWM Group's other activities, NWM Group has exposure to
many different sectors, customers and counterparties, and risks arising from
actual or perceived changes in credit quality and the recoverability of monies
due from borrowers and other counterparties are inherent in a wide range of
NWM Group's businesses. These risks may be concentrated for those businesses
for which customer income is heavily weighted towards a specific geographic
region, industry or customer base. Furthermore, these risks are likely to
increase due to a potential transfer of NatWest Group's Transfer Business (see
'The transfer of NatWest Group's Western European corporate portfolio involves
certain risks').

The credit quality of NWM Group's borrowers and other counterparties may be
affected by UK and global macroeconomic and political uncertainties, as well
as prevailing economic and market conditions. Refer to 'NWM Group, its
customers and its counterparties face continued economic and political risks
and uncertainties in the UK and global markets, including as a result of
inflation and interest rates, supply chain disruption, and geopolitical
developments'.

Any further deterioration in these conditions or changes to legal or
regulatory landscapes could worsen borrower and counterparty credit quality or
impact the enforcement of contractual rights, increasing credit risk.

NWM Group is exposed to the financial sector, including sovereign debt
securities, financial institutions, financial intermediation providers
(including providing facilities to financial sponsors and funds, backed by
assets or investor commitments) and securitised products (typically senior
lending to special purpose vehicles backed by pools of financial assets).
Concerns about, or a default by, a financial institution or intermediary could
lead to significant liquidity problems and losses or defaults by other
financial institutions or intermediaries, since the commercial & financial
soundness of many financial institutions and intermediaries is closely related
and interdependent as a result of credit, trading, clearing and other
relationships. Any perceived lack of creditworthiness of a counterparty or
borrower may lead to market-wide liquidity problems and losses for NWM Group.
In addition, the value of collateral may be correlated with the probability of
default by the relevant counterparty ('wrong way risk'), which would increase
NWM Group's potential loss. Any of the above risks may also adversely affect
financial intermediaries, such as clearing agencies, clearing houses, banks,
securities firms and exchanges with which NWM Group interacts on a regular
basis. See also, 'NWM Group is reliant on access to the capital markets to
meet its funding requirements, both directly through wholesale markets, and
indirectly through its parent (NatWest Group plc) for the subscription to its
internal capital and MREL. The inability to do so may adversely affect NWM
Group.' and 'NWM Group may not meet the prudential regulatory requirements for
liquidity and funding or may not be able to adequately access sources of
liquidity and funding, which could trigger the execution of certain management
actions or recovery options.' As a result, adverse changes in borrower and
counterparty credit risk may cause additional impairment charges under IFRS 9,
increased repurchase demands, higher costs, additional write-downs and losses
for NWM Group and an inability to engage in routine funding transactions.

NWM Group has applied an internal analysis of multiple economic scenarios
(MES) together with the determination of specific overlay adjustments to
inform its IFRS 9 ECL (Expected Credit Loss). The recognition and measurement
of ECL is complex and involves the use of significant judgement and
estimation. This includes the formulation and incorporation of multiple
forward-looking economic scenarios into ECL to meet the measurement objective
of IFRS 9. The ECL provision is sensitive to the model inputs and economic
assumptions underlying the estimate. Going forward, NWM Group anticipates
observable credit deterioration of a proportion of assets resulting in a
systematic uplift in defaults, which is mitigated by those economic assumption
scenarios being reflected in the Stage 2 ECL across portfolios, along with a
combination of post model overlays in both wholesale and retail portfolios
reflecting the uncertainty of credit outcomes. See also, 'Risk and capital
management - Credit risk'. A credit deterioration would also lead to RWA
increases. Furthermore, the assumptions and judgements used in the MES and ECL
assessment at 31 December 2024 may not prove to be adequate resulting in
incremental ECL provisions for NWM Group.

NWM Group has exposure to shadow banking entities (i.e. entities which carry
out activities of a similar nature to banks but without the same regulatory
oversight), and is, as result, required to identify and monitor its exposure
to these entities, implement and maintain an internal framework for the
identification, management, control and mitigation of the risks associated
with exposure to shadow banking entities, and ensure effective reporting and
governance in respect of such exposure.

If NWM Group is unable to properly identify and monitor its shadow banking
exposure, maintain an adequate framework, and/or ensure effective reporting
and governance in respect of shadow banking exposure, this may adversely
affect NWM Group.

Any of the above may have a material adverse effect on NWM Group's future
results, financial condition, prospects, and/or reputation.

NWM Group could incur losses or be required to maintain higher levels of
capital as a result of limitations or failure of various models.

Given the complexity of NWM Group's business, strategy and capital
requirements, NWM Group relies on models for a wide range of purposes,
including to manage its business, assess the value of its assets and its risk
exposure, as well as to anticipate capital and funding requirements (including
to facilitate NatWest Group's mandated stress testing). In addition, NWM Group
utilises models for valuations, credit approvals, calculation of loan
impairment charges on an IFRS 9 basis, financial reporting and to help address
financial crime (criminal activities in the form of money laundering,
terrorist financing, bribery and corruption, tax evasion and sanctions as well
as external or internal fraud (collectively, 'financial crime')). NWM Group's
models, and the parameters and assumptions on which they are based, are
periodically reviewed.

Model outputs are inherently uncertain, because they are imperfect
representations of real-world phenomena, are simplifications of complex
real-world systems and processes, and are based on a limited set of
observations. NWM Group may face adverse consequences as a result of actions
or decisions based on models that are poorly developed, incorrectly
implemented, outdated, non-compliant, or used inappropriately. This includes
models that are based on inaccurate or non-representative data (for example,
where there have been changes in the micro or macroeconomic environment in
which NWM Group operates) or as a result of the modelled outcome being
misunderstood, or used for purposes for which it was not designed. This could
result in findings of deficiencies by NatWest Group's (and in particular, NWM
Group's) regulators (including as part of NatWest Group's mandated stress
testing), increased capital requirements, may render some business lines
uneconomical, may require management action or may subject NWM Group to
regulatory sanction, any of which in turn may also have an adverse effect on
NWM Group and its customers.

Any of the above may have a material adverse effect on NWM Group's future
results, financial condition, prospects, and/or reputation.

NWM Group's financial statements are sensitive to underlying accounting
policies, judgements, estimates and assumptions.

The preparation of financial statements requires management to make
judgements, estimates and assumptions that affect the reported amounts of
assets, liabilities, income, expenses, exposures and RWAs. While estimates,
judgements and assumptions take into account historical experience and other
factors (including market practice and expectations of future events that are
believed to be reasonable under the circumstances), actual results may differ
due to the inherent uncertainty in making estimates, judgements and
assumptions (particularly those involving the use of complex models).

Further, accounting policy and financial statement reporting requirements
increasingly require management to adjust existing judgements, estimates and
assumptions for the effects of climate-related, sustainability and other
matters that are inherently uncertain and for which there is little historical
experience which may affect the comparability of NWM Group's future financial
results with its historical results. Actual results may differ due to the
inherent uncertainty in making climate-related and sustainability estimates,
judgements and assumptions.

Accounting policies deemed critical to NWM Group's results and financial
position, based upon materiality and significant judgements and estimates,
involve a high degree of uncertainty and may have a material impact on its
results. For 2024, these include fair value, deferred tax and conduct and
litigation provisions. These are set out in the section 'Critical accounting
policies'.

Any of the above may have a material adverse effect on NWM Group's future
results, financial condition, prospects, and/or reputation.

Changes in accounting standards may materially impact NWM Group's financial
results.

NWM Group prepares its consolidated financial statements in conformity with
the requirements of the Companies Act 2006 and in accordance with IFRS as
issued by the International Accounting Standards Board. Changes in accounting
standards or guidance by accounting bodies or in the timing of their
implementation, whether immediate or foreseeable, could result in NWM Group
having to recognise additional liabilities on its balance sheet, or in further
write-downs or impairments to its assets.

NWM Group's trading assets amounted to £48.9 billion as at 31 December 2024.
The valuation of financial instruments, including derivatives, measured at
fair value can be subjective, in particular where models are used which
include unobservable inputs. Generally, to establish the fair value of these
instruments, NWM Group relies on quoted market prices or, where the market for
a financial instrument is not sufficiently credible, internal valuation models
that utilise observable market data. In certain circumstances, the data for
individual financial instruments or classes of financial instruments utilised
by such valuation models may not be available or may become unavailable due to
prevailing market conditions. In these circumstances, NWM Group's internal
valuation models require NWM Group to make assumptions, judgements and
estimates to establish fair value, which are complex and often relate to
matters that are inherently uncertain. Any of these factors could require NWM
Group to recognise fair value losses which may have an adverse effect on NWM
Group's income generation and financial position.

From time to time, the International Accounting Standards Board may issue new
accounting standards or interpretations that could materially impact how NWM
Group calculates, reports and discloses its financial results and financial
condition, and which may affect NWM Group capital ratios, including the CET1
ratio and the required levels of regulatory capital. New accounting standards
and interpretations that have been issued by the International Accounting
Standards Board but which have not yet been adopted by NWM Group are discussed
in 'Future accounting developments'.

NatWest Group is subject to regulatory oversight in respect of resolution, and
NatWest Group could be adversely affected should the BoE in the future deem
NatWest Group's preparations to be inadequate.

NatWest Group is subject to regulatory oversight by the BoE and the PRA and is
required (under the PRA rulebook) to carry out an assessment of its
preparations for resolution, submit a report of the assessment to the PRA, and
disclose a summary of this report. NatWest Group has dedicated significant
resources towards the preparation of NatWest Group for a potential resolution
scenario. In August 2024, the BoE communicated its assessment of NatWest
Group's preparations and did not identify any areas for further enhancement,
shortcomings, deficiencies or substantive impediments. NatWest Group (and NWM
Group) could be adversely affected should future BoE assessments deem NatWest
Group's preparations to be inadequate.

If future BoE assessments identify any areas for further enhancement,
shortcomings, deficiencies or substantive impediments in NatWest Group's
ability to achieve the resolvability outcomes or reveal that NatWest Group is
not adequately prepared to be resolved, or does not have adequate plans in
place to meet resolvability requirements, NatWest Group may be required to
take action to enhance its preparations to be resolvable, resulting in
additional costs and the dedication of additional resources. Such a scenario
may have an impact on NatWest Group (and NWM Group) as, depending on the BoE's
assessment, potential action may include, but is not limited to, restrictions
on NatWest Group's maximum individual and aggregate exposures, a requirement
to dispose of specified assets, a requirement to change its legal or
operational structure, a requirement to cease carrying out certain activities
and/or to maintain a specified amount of MREL.

Any of the above may have a material adverse effect on NWM Group's future
results, financial condition, prospects, and/or reputation.

NatWest Group (including NWM Group) may become subject to the application of
UK statutory stabilisation or resolution powers which may result in, for
example, the write-down or conversion of NWM Group entities' Eligible
Liabilities.

The BoE, the PRA, the FCA, and HM Treasury (together, the 'Authorities') are
granted substantial powers to resolve and stabilise UK-incorporated financial
institutions. Five stabilisation options exist: (i) transfer of all of the
business of a relevant entity or the shares of the relevant entity to a
private sector purchaser; (ii) transfer of all or part of the business of the
relevant entity to a 'bridge bank' wholly or partially-owned by the BoE; (iii)
transfer of part of the assets, rights or liabilities of the relevant entity
to one or more asset management vehicles for management of the transferor's
assets, rights or liabilities; (iv) the write-down, conversion, transfer,
modification, or suspension of the relevant entity's equity, capital
instruments and liabilities; and (v) temporary public ownership of the
relevant entity. These options may be applied to NatWest Group plc as the
parent company or to NWM Group, as a subsidiary, where certain conditions are
met (such as, whether the firm is failing or likely to fail, or whether it is
reasonably likely that action will be taken (outside of resolution) that will
result in the firm no longer failing or being likely to fail). Moreover, there
are modified insolvency and administration procedures for relevant entities
within NatWest Group, and the Authorities have the power to modify or override
certain contractual arrangements in certain circumstances and amend the law
for the purpose of enabling their powers to be used effectively and may
promulgate provisions with retrospective applicability. Similar powers may
also be exercised with respect to NWM N.V., in the Netherlands by the relevant
Dutch and European regulatory authorities. Under the UK Banking Act 2009, the
Authorities are generally required to have regard to specified objectives in
exercising the powers provided for by the UK Banking Act 2009. One of the
objectives (which is required to be balanced as appropriate with the other
specified objectives) refers to the protection and enhancement of the
stability of the financial system of the UK.

Moreover, the 'no creditor worse off' safeguard provides that where certain
resolution actions are taken, the Authorities are required to ensure that no
creditor is in a worse position than if the bank had entered into normal
insolvency proceedings. Although, this safeguard may not apply in relation to
an application of the separate write-down and conversion power relating to
capital instruments in circumstances where a stabilisation power is not also
used, the UK Banking Act 2009 still requires the Authorities to respect the
hierarchy on insolvency when using the write-down and conversion power.
Further, holders of debt instruments which are subject to the power may,
however, have ordinary shares transferred to or issued to them by way of
compensation.

Uncertainty exists as to how the Authorities may exercise their powers
including the determination of actions to be undertaken in relation to the
ordinary shares and other securities issued by NatWest Group (including NWM
Group), which may depend on factors outside of NWM Group's control. Moreover,
the UK Banking Act 2009 provisions remain largely untested in practice,
particularly in respect of resolutions of large financial institutions and
groups.

If NatWest Group is at or is approaching the point such that regulatory
intervention is required, there may correspondingly be a material adverse
effect on NWM Group's future results, financial condition, prospects, and/or
reputation.

Operational and IT resilience risk

Operational risks (including reliance on third party suppliers and outsourcing
of certain activities) are inherent in NWM Group's businesses.

Operational risk is the risk of loss or disruption resulting from inadequate
or failed internal processes, procedures, people or systems, or from external
events, including legal and regulatory risks, third party processes,
procedures, people or systems. NWM Group operates in several countries,
offering a diverse range of products and services supported directly or
indirectly by third party suppliers. As a result, operational risks or losses
can arise from a number of internal or external factors (including for
example, payment errors or financial crime and fraud), for which there is
continued scrutiny by third parties on NWM Group's compliance with financial
crime requirements; see 'NWM Group is exposed to the risks of various
litigation matters, regulatory and governmental actions and investigations as
well as remedial undertakings, the outcomes of which are inherently difficult
to predict, and which could have an adverse effect on NWM Group.' These risks
are also present when NWM Group relies on critical service providers
(suppliers) or vendors to provide services to it or its customers, as is
increasingly the case as NWM Group outsources certain activities, including
with respect to the implementation of technologies, innovation (such as cloud
services and artificial intelligence) and responding to regulatory and market
changes.

Operational risks also exist due to the implementation of NatWest Group's
strategy, and the organisational and operational changes involved, including:
NatWest Group's cost-controlling and simplification measures; continued
digitalisation and the integration of artificial intelligence in the business;
acquisition, divestments and other transactions; the implementation of
recommendations from internal and external reviews with respect to certain
governance processes, policies, systems and controls of NatWest Group
entities; and conditions affecting the financial services industry generally
(including macroeconomic and other geopolitical developments) as well as the
legal and regulatory uncertainty resulting from these conditions. Any of the
above may place significant pressure on NWM Group's ability to maintain
effective internal controls and governance frameworks. In recent years, NWM
Group has materially increased its dependence on NatWest Bank Plc and other
NatWest Group entities for numerous critical services and operations,
including, without limitation, property, technology, finance, accounting,
treasury, legal, risk, regulatory compliance and reporting, financial crime,
human resources, and certain other support and administrative functions. A
failure by NatWest Bank Plc or other NatWest Group entities to adequately
supply these services may expose NWM Group to critical business failure risk,
increased costs, regulatory sanctions, and other liabilities. These and any
increases in the cost of these services may adversely affect NWM Group.

NWM Group also faces operational risks as it continues to invest in the
automation of certain solutions and customer interactions, including through
artificial intelligence. Such initiatives may result in operational,
reputational and conduct risks if the technology is not used appropriately, is
defective or inadequate, or is not fully integrated into NWM Group's current
solutions, systems and controls.

The effective management of operational risks is critical to meeting customer
service expectations and retaining and attracting customer business. Although
NWM Group has implemented risk controls and mitigation actions, with resources
and planning having been devoted to mitigate operational risk, such measures
may not be effective in controlling each of the operational risks faced by NWM
Group.

Ineffective management of such risks may have a material adverse effect on NWM
Group's future results, financial condition, prospects, and/or reputation.

NWM Group is subject to sophisticated and frequent cyberattacks, and
compliance with cybersecurity and data protection regulations is becoming
increasingly complex.

NWM Group experiences a constant threat from cyberattacks across the entire
NatWest Group (including NWM Group) and against NatWest Group and NWM Group's
supply chain networks, reinforcing the importance of the due diligence of,
ongoing risk management of and close working relationship with, the third
parties on which NWM Group relies. NWM Group is reliant on technology, against
which there is a constantly evolving series of attacks, that are increasing in
terms of frequency, sophistication, impact and severity. As cyberattacks
evolve and become more sophisticated, NWM Group is required to continue to
invest significant resources in additional capability designed to defend
against emerging threats.

Third parties continue to make hostile attempts to gain access to, introduce
malware (including ransomware) into, and exploit potential vulnerabilities of,
financial services institutions' IT systems, including those of NWM Group. For
example, in 2024, NatWest Group and its supply chain were subjected to a small
number of attempted Distributed Denial of Service and ransomware attacks.
These hostile attempts were addressed without material impact on NWM Group or
its customers by deploying cybersecurity capabilities and controls that seek
to manage the impact of any such attacks, and sustain availability of services
for NWM Group's customers. Consequently, NWM Group continues to invest
significant resources in developing and evolving cybersecurity capabilities
and controls that are designed to mitigate the potential effect of such
attacks. However, given the nature of the threat, there can be no assurance
that these capabilities and controls will prevent the potential adverse effect
of an attack from occurring. See also, 'NWM Group's operations are highly
dependent on its complex IT systems and any IT failure could adversely affect
NWM Group.'

Any failure in NWM Group's information and cybersecurity policies, procedures
or controls, may result in significant financial losses, major business
disruption, inability to deliver customer services, or loss of, or ability to
access, data or systems or other sensitive information (including as a result
of an outage) and may cause associated reputational damage. Any of these
factors could increase costs (including costs relating to notification of, or
compensation for customers and credit monitoring), result in regulatory
investigations or sanctions being imposed or may affect NWM Group's ability to
retain and attract customers. Regulators in the UK, US, Europe and Asia
continue to recognise cybersecurity as an important systemic risk to the
financial sector and have highlighted the need for financial institutions to
improve their monitoring and control of, and resilience (particularly of
critical services) to cyberattacks, and to provide timely reporting or
notification of them, as appropriate (including for example, the SEC
cybersecurity requirements and the EU Digital Operational Resilience Act
('DORA')). Furthermore, cyberattacks on NWM Group's counterparties and
suppliers may also have an adverse effect on NWM Group's operations.

Additionally, malicious third parties may induce employees, customers, third
party providers or other users with access to NWM Group's systems to
wrongfully disclose sensitive information to gain access to NWM Group's data
or systems or that of NWM Group's customers or employees. Cybersecurity and
information security events can derive from groups or factors such as:
internal or external threat actors, human error, fraud or malice on the part
of NWM Group's employees or third parties, including third party providers, or
may result from technological failure (including defective, inadequate or
inappropriately used artificial intelligence based solutions).

NWM Group expects greater regulatory engagement, supervision and enforcement
to continue in relation to its overall resilience to withstand IT and
IT-related disruption, either through a cyberattack or some other disruptive
event. Such increased regulatory engagement, supervision and enforcement is
uncertain in relation to the scope, cost, consequence and the pace of change,
which may have an adverse effect on NWM Group. Due to NWM Group's reliance on
technology, the adoption of innovative solutions, the integration of automated
processes and artificial intelligence in its business, and the increasing
sophistication, frequency and impact of cyberattacks, such attacks may have an
adverse effect on NWM Group.

In accordance with applicable UK and EU data protection, and cybersecurity
laws and regulations, NWM Group is required to ensure it implements timely
appropriate and effective organisational and technological safeguards against
unauthorised or unlawful access to the data of NWM Group, its customers and
its employees. In order to meet this requirement, NWM Group relies on the
effectiveness of its internal policies, controls and procedures to protect the
confidentiality, integrity and availability of information held on its IT
systems, networks and devices as well as with third parties with whom NWM
Group interacts. A failure to monitor and manage data in accordance with
applicable requirements may result in financial losses, regulatory fines and
investigations and associated reputational damage.

Any of the above may have a material adverse effect on NWM Group's future
results, financial condition, prospects, and/or reputation.

NWM Group's operations and strategy are highly dependent on the accuracy and
effective use of data.

NWM Group relies on the availability, sourcing, and effective use of accurate
and high quality data to support, monitor, evaluate, manage and enhance its
operations, innovate its products offering, meet its regulatory obligations,
and deliver its strategy. Investment is being made in data tools and
analytics, including raising awareness around ethical data usage (for example,
in relation to the use of artificial intelligence) and privacy across NWM
Group. The availability and accessibility of current, complete, detailed,
accurate and, wherever possible, machine-readable customer segment and
sub-sector data, together with appropriate governance and accountability for
data, is fast becoming a critical strategic asset, which is subject to
increased regulatory focus.

Failure to have or be able to access that data or the ineffective use or
governance of that data could result in a failure to manage and report
important risks and opportunities or satisfy customers' expectations including
the inability to deliver products and services. This could also place NWM
Group at a competitive disadvantage by increasing its costs, inhibiting its
efforts to reduce costs or its ability to improve its systems, controls and
processes. Any of the above could result in a failure to deliver NWM Group's
strategy.

These data weaknesses and limitations, or the unethical or inappropriate use
of data, and/or non-compliance with data protection laws could give rise to
conduct and litigation risks and may increase the risk of operational
challenges, losses, reputational damage or other adverse consequences due to
inappropriate models, systems, processes, decisions or other actions.

Any of the above may have a material adverse effect on NWM Group's future
results, financial condition, prospects, and/or reputation.

NWM Group relies on attracting, retaining, developing and remunerating diverse
senior management and skilled personnel, and is required to maintain good
employee relations.

NWM Group's success depends on its ability to attract, retain (through
creating an inclusive environment), and develop highly skilled and qualified
diverse personnel, including senior management, directors, and key employees
(including for technology and data focused roles), in a highly competitive
market and under internal cost efficiency pressures.

The inability to compensate employees competitively and/or any reduction of
compensation, the perception that NWM Group may not be a viable or competitive
business, heightened regulatory oversight of banks and the increasing scrutiny
of, and (in some cases) restrictions placed upon, employee compensation
arrangements, negative economic developments or other factors, may have an
adverse effect on NWM Group's ability to hire, retain and engage well
qualified employees, especially at a senior level, which could adversely
affect NWM Group.

This increases the cost of hiring, training and retaining diverse skilled
personnel. In addition, certain economic, market and regulatory conditions and
political developments may reduce the pool of candidates for key management
and non-executive roles, including non-executive directors with the right
skills, knowledge and experience, or may increase the number of departures of
existing employees. Moreover, a failure to foster a diverse and inclusive
workforce may adversely affect NWM Group's employee engagement and the
formulation and execution of its strategy, and could also have a negative
effect on its reputation with customers, investors and regulators.

Some of NWM Group's employees are represented by employee representative
bodies, including trade unions and works councils. Engagement with its
employees and such bodies is important to NWM Group in maintaining good
employee relations. Any breakdown of these relationships may adversely affect
NWM Group.

Any of the above may have a material adverse effect on NWM Group's future
results, financial condition, prospects, and/or reputation.

NWM Group's operations are highly dependent on its complex IT systems and any
IT failure could adversely affect NWM Group.

NWM Group's operations are highly dependent on the ability to process a very
large number of transactions efficiently and accurately while complying with
applicable laws and regulations. The proper functioning of NatWest Group's
(including NWM Group's) transactional and payment systems, financial crime and
fraud detection systems and controls, risk management, credit analysis and
reporting, accounting, customer service and other IT systems, including cloud
services providers (some of which are owned and operated by other entities in
NatWest Group or third parties), is critical to NWM Group's operations.

Individually or collectively, any system failure, loss of service availability
(including defective or inadequate automated processes or artificial
intelligence based solutions), or breach of data security could potentially
cause significant damage to: (i) important business services across NWM Group;
and (ii) NWM Group's ability to provide services to its customers, which could
result in reputational damage, significant compensation costs and regulatory
sanctions (including fines resulting from regulatory investigations) or a
breach of applicable regulations and could affect NWM Group's regulatory
approvals, competitive position, business and brands, which could undermine
its ability to attract and retain customers and talent.

NWM Group outsources certain functions as it innovates and offers new digital
solutions to its customers. Outsourcing, alongside remote working, heighten
the above risks. NWM Group uses IT systems that enable remote working
interface with third-party systems, and NWM Group could experience service
denials or disruptions if such systems exceed capacity or if NWM Group or a
third-party system fails or experiences any interruptions, all of which could
result in business and customer interruption and related reputational damage,
significant compensation costs, regulatory sanctions and/or a breach of
applicable regulations.

In 2024, NWM Group continued to make considerable investments to further
simplify, upgrade and improve its IT and technology capabilities (including
migration of certain services to cloud platforms). NWM Group continues to
develop and enhance digital services for its customers and seeks to improve
its competitive position through enhancing controls and procedures and
strengthening the resilience of services including cybersecurity. Any failure
of these investment and rationalisation initiatives to achieve the expected
results, due to cost challenges, poor implementation, defects, or otherwise,
may adversely affect NWM Group's operations, its reputation and ability to
retain or grow its customer business or adversely affect its competitive
position, thereby negatively impacting NWM Group. See also, 'NWM Group has
been in a period of, and may continue to be subject to, significant structural
and other change'.

Any of the above may have a material adverse effect on NWM Group's future
results, financial condition, prospects, and/or reputation.

 failure in NWM Group's risk management framework could adversely affect NWM
Group, including its ability to achieve its strategic objectives.

A failure in design, or adherence to, NatWest Group's risk management
framework could adversely affect NWM Group, including its ability to achieve
its strategic objectives. Risk management is an integral part of all of NWM
Group's activities and delivery of its long-term strategy. NatWest Group's
Enterprise-Wide Risk Management Framework sets out NWM Group's approach for
managing risk within NWM Group including in relation to risk governance and
risk appetite. A failure to adhere to this framework and to agreed risk
appetite statements, or any material weaknesses or deficiencies in the
framework's controls and procedures, could adversely affect NWM Group's
financial condition and strategic delivery, as well as accurate reporting of
risk exposures.

Financial risk management is highly dependent on the use and effectiveness of
internal stress tests and models and ineffective risk management may arise
from a wide variety of factors, including lack of transparency or incomplete
risk reporting, manual processes and controls, inaccurate data, inadequate IT
systems, unidentified conflicts or misaligned incentives, lack of
accountability control and governance, incomplete risk monitoring (including
trade surveillance) and failures of systems to properly process all relevant
data, risks related to unanticipated behaviour or performance in algorithmic
trading and management, insufficient challenges or assurance processes, or a
failure to commence or timely complete risk remediation projects. Failure to
manage risks effectively, or within regulatory expectations, could adversely
affect NWM Group's reputation or its relationship with its regulators,
customers, shareholders or other stakeholders.

In addition, financial crime risk management is dependent on the use and
effectiveness of financial crime assessment, systems and controls. Weak or
ineffective financial crime processes and controls may risk NWM Group
inadvertently facilitating financial crime which may result in regulatory
investigation, sanction, litigation, fines and/or reputational damage.
Financial crime continues to evolve, whether through fraud, scams,
cyberattacks or other criminal activity. These risks are exacerbated as NWM
Group continues to innovate its product offering and increasingly offers
digital solutions to its customers. NatWest Group (including NWM Group) has
made and continues to make significant, multi-year investments to strengthen
and improve its overall financial crime control framework with prevention
systems and capabilities, including investment in new technologies and
capabilities to further enhance customer due diligence, transaction
monitoring, sanctions and anti-bribery and corruption systems. A number of NWM
Group's financial crime controls are operated by NatWest Group on behalf of
NWM Group.

NWM Group's operations are inherently exposed to conduct risks, which include
business decisions, actions or reward mechanisms that are not responsive to or
aligned with NWM Group's regulatory obligations, customer needs or do not
reflect NWM Group's strategy, ineffective product management, unethical or
inappropriate use of data, information asymmetry, implementation and
utilisation of new technologies, outsourcing of customer service and product
delivery, inappropriate behaviour towards customers, customer outcomes, the
possibility of mis-selling of financial products and mishandling of customer
complaints. Some of these risks have materialised in the past and ineffective
management and oversight of conduct risks may lead to further remediation and
regulatory intervention or enforcement. NWM Group's businesses are also
exposed to risks from employee, contractor, or service providers misconduct
including non-compliance with policies and regulations, negligence or fraud
(including financial crimes and fraud), any of which could result in
regulatory fines or sanctions and serious reputational or financial harm to
NWM Group.

Remote working arrangements for NWM Group employees place heavy reliance on
the IT systems that enable remote working and may place additional pressure on
NWM Group's ability to maintain effective internal controls and governance
frameworks and increase operational risk. Remote working arrangements are also
subject to regulatory scrutiny to ensure adequate recording, surveillance and
supervision of regulated activities and compliance with regulatory
requirements and expectations, including requirements to: meet threshold
conditions for regulated activities; ensure the ability to oversee functions
(including any outsourced functions); ensure no detriment is caused to
customers; and ensure no increased risk of financial crime.

In addition, the UK's Net Zero Strategy and NatWest Group's (including NWM
Group) strategy relating to climate and sustainability are important drivers
as to how NWM Group integrates climate (including physical and transition
risks) and other sustainability related risks into its risk management
framework and practices (including for financing activities or engaging with
counterparties (including suppliers)). Furthermore, legislative and regulatory
authorities are publishing expectations as to how banks should prudently
manage and transparently disclose climate and other sustainability-related
risks. Any failure of NWM Group to fully and timely embed climate and other
sustainability-related risks into its risk management practices and framework
to appropriately identify, assess, prioritise and monitor such risks may have
an adverse effect on NWM Group. Similarly, if NWM Group is unable to apply the
appropriate product governance processes in line with NatWest Group's
(including NWM Group) strategy and applicable legal and regulatory
requirements and expectations, it may have an adverse effect on NWM Group.

NWM Group seeks to embed a risk awareness culture across the organisation and
has implemented policies and allocated new resources across all levels of the
organisation to manage and mitigate conduct risk and expects to continue to
invest in risk management, including the ongoing development of a NatWest
Group risk management strategy in line with regulatory expectations. However,
such efforts may not insulate NWM Group from instances of misconduct and no
assurance can be given that NWM Group's strategy and control framework will be
effective. See also, 'NWM Group has been in a period of, and may continue to
be subject to, significant structural and other change.'

Any failure in NWM Group's risk management framework may have a material
adverse effect on NWM Group's future results, financial condition, prospects,
and/or reputation and may result in the inability to achieve its strategic
objectives for its customers, employees and wider stakeholders.

NWM Group's operations are subject to inherent reputational risk.

Reputational risk relates to stakeholder and public perceptions of NWM Group
arising from an actual or perceived failure to meet stakeholder or the
public's expectations, including with respect to NatWest Group's strategy and
related targets, NWM Group's strategy, or due to any events, behaviour, action
or inaction by NWM Group, its employees or those with whom NWM Group is
associated.

See also, 'NWM Group's businesses are subject to substantial regulation and
oversight, which are constantly evolving and may adversely affect NWM Group.'
This includes harm to its brand, which may be detrimental to NWM Group's
business, including its ability to build or sustain business relationships
with customers, stakeholders and regulators, and may cause low employee
morale, regulatory censure or reduced access to, or an increase in the cost
of, funding. Reputational risk may arise whenever there is, or there is
perceived to be, a material lapse in standards of integrity, controls,
compliance, customer or operating efficiency, or regulatory or press scrutiny,
and may adversely affect NWM Group's ability to attract and retain customers.

In particular, NWM Group's ability to attract and retain customers, and
talent, and engage with counterparties may be adversely affected by factors
including: negative public opinion resulting from the actual or perceived
manner in which NWM Group or any other member of NatWest Group conducts or
modifies its business activities and operations, media coverage (whether
accurate or otherwise), employee misconduct, NWM Group's financial
performance, IT systems failures or cyberattacks, data breaches, financial
crime and fraud, the level of direct and indirect government support for
NatWest Group plc, or the actual or perceived practices in the banking and
financial industry in general, or a wide variety of other factors.

Technologies, in particular online social networks and other broadcast tools
that facilitate communication with large audiences in short timeframes and
with minimal costs, may also significantly increase and accelerate the impact
of damaging information and allegations.

Although NWM Group has a Reputational Risk Policy and framework to identify,
measure and manage material reputational risk exposures, there is a risk that
it may not be successful in avoiding or mitigating damage to its business or
its various brands from reputational risk.

Any of the above aspects of reputational risk may have a material adverse
effect on NWM Group's future results, financial condition, prospects, and/or
reputation.

Legal and regulatory risk

NWM Group's businesses are subject to substantial regulation and oversight,
which are constantly evolving and may adversely affect NWM Group.

NWM Group is subject to extensive laws, regulations, guidelines, corporate
governance practice and disclosure requirements, administrative actions and
policies in each jurisdiction in which it operates, which represents ongoing
compliance and conduct risks. Many of these are constantly evolving and are
subject to further material changes, which may increase compliance and conduct
risks, particularly as the laws of different jurisdictions (including those of
the EU/EEA and UK) diverge. NWM Group expects government and regulatory
intervention in the financial services industry to remain high for the
foreseeable future.

Regulators and governments continue to focus on reforming the prudential
regulation of the financial services industry and the manner in which the
business of financial services is conducted. Measures have included: enhanced
capital, liquidity and funding requirements, through initiatives such as the
Basel 3.1 standards implementation (and any resulting effect on RWAs and
models), the UK ring-fencing regime, the strengthening of the recovery and
resolution framework applicable to financial institutions in the UK, the EU
and the US, financial industry reforms (such as the FSMA 2023), corporate
governance requirements, rules relating to the compensation of senior
management and other employees, enhanced data protection and IT resilience
requirements (such as DORA), financial market infrastructure reforms, enhanced
regulations in respect of the provision of 'investment services and
activities'.

There is also increased regulatory focus in certain areas, including conduct,
model risk governance, consumer protection in retail or other financial
markets, competition and disputes regimes, anti-money laundering,
anti-corruption, anti-bribery, anti-tax evasion, payment systems, sanctions
and anti-terrorism laws and regulations.

In addition, there is significant oversight by competition authorities of the
jurisdictions in which NWM Group operates. The competitive landscape for banks
and other financial institutions in the UK, EU/EEA, Asia and the US is rapidly
changing. Recent regulatory and legal changes have resulted and may continue
to result in new market participants and changed competitive dynamics in
certain key areas. Regulatory and competition authorities, including the CMA,
are also looking at and focusing more on how they can support competition and
innovation in digital and other markets. Recent regulatory changes and
heightened levels of public and regulatory scrutiny in the UK, the EU and the
US have resulted in increased capital, funding and liquidity requirements,
changes in the competitive landscape, changes in other regulatory requirements
and increased operating costs, and have impacted, and will continue to impact,
product offerings and business models.

Moreover, uncertainties remain as to the extent to which EU/EEA laws will
diverge from UK law. For example, bank regulation in the UK may diverge from
European bank regulation following the enactment of the Financial Services and
Markets Act 2023 ('FSMA 2023') and the Retained EU Law (Revocation and Reform)
Act 2023. In particular, FSMA 2023 provides for the revocation of retained EU
laws relating to financial services regulation, but sets out that this process
will likely take a number of years and that the intention is that specific
retained EU laws will not be revoked until such time as replacement regulatory
rules are in place. The actions taken by regulators in response to any new or
revised bank regulation and other rules affecting financial services, may
adversely affect NWM Group, including its business, non-UK operations, group
structure, compliance costs, intragroup arrangements and capital requirements.

Other areas in which, and examples of where, governmental policies, regulatory
and accounting changes and increased public and regulatory scrutiny may have
an adverse effect (some of which could be material) on NWM Group include, but
are not limited to, the following:

-    general changes in government, regulatory, competition or central bank
policy (such as changes to the BoE Levy (including as a result of the proposed
Bank Resolution (Recapitalisation) Bill), or changes in regulatory regimes
that may influence investor decisions in the jurisdictions in which NWM Group
operates;

-    rules relating to foreign ownership, expropriation, nationalisation
and confiscation or appropriation of assets;

-    new or increased regulations relating to customer data protection as
well as IT controls and resilience, such as the India Digital Personal Data
Protection Act 2023;

-    the introduction of, and changes to, taxes, levies or fees applicable
to NWM Group's operations, such as changes in tax rates, changes in the scope
and administration of the Bank Levy, increases in the bank corporation tax
surcharge in the UK, restrictions on the tax deductibility of interest
payments or further restrictions imposed on the treatment of carry-forward tax
losses that reduce the value of deferred tax assets and require increased
payments of tax;

-    the potential introduction by the BoE of a Central Bank Digital
Currency which could result in deposit outflows, higher funding costs, and/or
other implications for UK banks including NWM Group;

-    regulatory enforcement in the form of PRA imposed financial penalties
for failings in banks' regulatory reporting governance and controls, and
ongoing regulatory scrutiny; the PRA's thematic reviews of the governance,
controls and processes for preparing regulatory returns of selected UK banks,
including NatWest Group (of which NWM Group is a part of);

-    changes in policy and practice regarding enforcement, investigations
and sanctions, supervisory activities and reviews;

-    'Dear CEO' and similar letters issued by supervisors and regulators
from time to time ;

-    recent or proposed US regulations around cybersecurity incidents,
climate disclosures, and other climate and sustainability-related rules;

-    increased risk of legal action against NWM Group for financing or
contributing to climate change and nature-related degradation, or
greenwashing;

-    new or increased regulations relating to financial crime; and

-    any regulatory requirements relating to the use of artificial
intelligence and large language models across the financial services industry
(such as the European Union Artificial Intelligence Act).

 

Any of these developments (including any failure to comply with or correctly
interpret new rules and regulations) could also have an adverse effect on NWM
Group's authorisations and licences, the products and services that NWM Group
may offer, its reputation and the value of its assets, NWM Group's operations
or legal entity structure, and the manner in which NWM Group conducts its
business.

Material consequences could arise should NWM Group be found to be
non-compliant with these regulatory requirements. Regulatory developments may
also result in an increased number of regulatory investigations and
proceedings and have increased the risks relating to NWM Group's ability to
comply with the applicable body of rules and regulations in the manner and
within the timeframes required.

Changes in laws, rules or regulations, or in their interpretation or
enforcement, or the implementation of new laws, rules or regulations,
including contradictory or conflicting laws, rules or regulations by key
regulators or policymakers in different jurisdictions, or failure by NWM Group
to comply with such laws, rules and regulations, may adversely affect NWM
Group's business, results of operations and outlook. In addition, uncertainty
and insufficient international regulatory coordination as enhanced supervisory
standards are developed and implemented may adversely affect NWM Group's
reputation, ability to engage in effective business, capital and risk
management planning.

Any of the above may have a material adverse effect on NWM Group's future
results, financial condition, prospects, and/or reputation.

NWM Group is exposed to the risks of various litigation matters, regulatory
and governmental actions and investigations as well as remedial undertakings,
the outcomes of which are inherently difficult to predict, and which could
have an adverse effect on NWM Group.

NWM Group's operations are diverse and complex and it operates in legal and
regulatory environments that expose it to potentially significant civil
actions (including those following on from regulatory sanction), as well as
criminal, regulatory and governmental proceedings. NWM Group has resolved a
number of legal and regulatory actions over the past several years but
continues to be, and may in the future be, involved in such actions in the US,
the UK, Asia, Europe and other jurisdictions.

NWM Group is, has been or will likely be involved in a number of significant
legal and regulatory actions, including investigations, proceedings and
ongoing reviews (both formal and informal) by governmental law enforcement and
other agencies and litigation proceedings, including in relation to the
offering of securities, conduct in the foreign exchange market, the setting of
benchmark rates such as LIBOR and related derivatives trading, the issuance,
underwriting, and sales and trading of fixed-income securities (including
government securities), product mis-selling, customer mistreatment, anti-money
laundering, antitrust, VAT recovery, record keeping, reporting, and various
other issues. There is also an increasing risk of new class action claims
being brought against NWM Group in the Competition Appeal Tribunal for
breaches of competition law, as well as a risk of activist actions,
particularly relating to climate change and sustainability-related matters.
Legal and regulatory actions are subject to many uncertainties, and their
outcomes, including the timing, amount of fines, damages or settlements or the
form of any settlements, which may be material and in excess of any related
provisions, are often difficult to predict, particularly in the early stages
of a case or investigation. NWM Group's expectation for resolution may change
and substantial additional provisions and costs may be recognised in respect
of any matter.

The resolution of significant investigations includes NWM Plc's December 2021
spoofing-related guilty plea in the United States that was agreed with the US
Department of Justice ('DOJ'), and involves a multi-year period of probation,
an independent corporate monitor and the ongoing implementation of
recommendations made by it, and commitments to compliance programme reviews
and improvements, and reporting obligations. In the event that NWM Plc does
not meet its obligations to the DOJ, this may lead to adverse consequences
such as findings that NWM Plc violated its probation term and possible
re-sentencing, increased costs from any extension of monitorship and/or the
period of the probation, amongst other consequences. For additional
information relating to this and other legal and regulatory proceedings and
matters to which NWM Group is currently exposed, see 'Litigation and
regulatory matters' at Note 25 to the consolidated accounts.

Recently resolved matters or adverse outcomes or resolution of current or
future legal or regulatory matters, could increase the risk of greater
regulatory and third-party scrutiny and/or result in future legal or
regulatory actions, and could have material financial, reputational, or
collateral consequences for NWM Group's business and result in restrictions or
limitations on NWM Group's operations.

These may include the effective or actual disqualification from carrying on
certain regulated activities and consequences resulting from the need to
reapply for various important licences or obtain waivers to conduct certain
existing activities of NWM Group, particularly but not solely in the US, which
may take a significant period of time and the results and implications of
which are uncertain. Disqualification from carrying on any activities, whether
automatically as a result of the resolution of a particular matter or as a
result of the failure to obtain such licences or waivers could adversely
affect NWM Group's business, in particular in the US. This in turn and/or any
fines, settlement payments or penalties may have an adverse effect on NWM
Group. Similar consequences could result from legal or regulatory actions
relating to other parts of NatWest Group.

Failure to comply with undertakings made by NWM Group to its regulators, or
the conditions of probation resulting from the spoofing-related guilty plea,
may result in additional measures or penalties being taken against NWM Group.
In addition, any failure to administer conduct redress processes adequately,
or to handle individual complaints fairly or appropriately, could result in
further claims as well as the imposition of additional measures or limitations
on NWM Group's operations, additional supervision by NWM Group's regulators,
and loss of investor confidence.

Any of the above may have a material adverse effect on NWM Group's future
results, financial condition, prospects, and/or reputation.

Changes in tax legislation (or application thereof) failure to generate future
taxable profits may impact the recoverability of certain deferred tax assets
recognised by NWM Group.

In accordance with the accounting policies set out in the section 'Critical
accounting policies', NWM Group has recognised deferred tax assets on losses
available to relieve future profits from tax only to the extent it is probable
that they will be recovered. The deferred tax assets are quantified on the
basis of current tax legislation and accounting standards and are subject to
change in respect of the future rates of tax or the rules for computing
taxable profits and offsetting allowable losses.

Failure to generate sufficient future taxable profits or further changes in
tax legislation or the application thereof (including with respect to rates of
tax) or accounting standards may reduce the recoverable amount of the
recognised tax loss deferred tax assets, amounting to £83 million as at 31
December 2024. Changes to the treatment of certain deferred tax assets may
impact NWM Group's capital position. In addition, NWM Group's interpretation
or application of relevant tax laws may differ from those of the relevant tax
authorities and provisions are made for potential tax liabilities that may
arise on the basis of the amounts expected to be paid to tax authorities. The
amounts ultimately paid may differ materially from the amounts provided
depending on the ultimate resolution of such matters.

Any of the above may have a material adverse effect on NWM Group's future
results, financial condition, prospects, and/or reputation.

Climate and sustainability-related risks

NWM Group and its Value Chain face climate and sustainability-related risks
that may adversely affect NWM Group.

Climate change has been identified as a source of systemic risk, with
potentially severe consequences for financial institutions. The financial
impacts of climate and sustainability-related risks are expected to be
widespread and may disrupt the orderly functioning of financial markets and
have an adverse effect on financial institutions, including NWM Group.

Financial and non-financial risks from climate change can arise through
physical and transition risks. In addition, physical and transition risks can
trigger further losses, stemming directly or indirectly from legal claims,
litigation and conduct liability (referred to as 'liability risk').

Whilst there are significant uncertainties relating to the location, magnitude
and timing of climate-related physical risks, scientific research suggests
physical risks may occur in increasing frequency and severity. Climate-related
events like flood, wildfires and climatic changes can damage assets and
disrupt operations, leading to increased costs, changes in asset values and
loan defaults.

Damage or disruption to NWM Group customers' and counterparties' (including
suppliers') properties, premises and operations could disrupt business, result
in the deterioration of the value of collateral or insurance shortfalls,
impair asset values and negatively impact the creditworthiness of customers
and their ability and/or willingness to pay fees, afford new products or repay
their debts, leading to increased default rates, delinquencies, write-offs and
impairment charges in NWM Group's portfolios. In addition, NWM Group's
premises and operations, or those of its critical outsourced functions may
experience damage or disruption leading to increased costs for NWM Group.

To meet the goals of the UK's Net Zero Strategy by 2050 will require a
net-zero transition across all sectors of the UK economy. The timing and pace
of the transition to a net-zero economy will depend on many factors and
uncertainties and may be near-term, gradual and orderly, or delayed, rapid and
disorderly, or a combination of these. A transition to a net-zero economy
requires significant and timely policy and regulatory changes, immediate
actions from national and regional governments, new technological innovations
and changes to supply and demand systems within industries. The transition to
a net-zero economy may also trigger changes in consumer behaviour and market
sentiment. In addition, there is significant uncertainty about how climate
change and the world's transition to a net-zero economy will unfold over time
and how and when climate and other sustainability-related risks will manifest.
These timeframes are considerably longer than NWM Group's historical and
current strategic, financial, resilience and investment planning horizons.

NWM Group and its value chain (including its investors, customers,
counterparties (including its suppliers), business partners and employees)
('NWM Group's Value Chain') may face financial and non-financial risks arising
from broader (i.e. non-climate-related) sustainability issues such as risks
relating to nature loss (such as the loss and/or decline of the state of
nature including but not limited to, the reduction of any aspect of biological
diversity and other forms of environmental degradation such as air, water and
land pollution, soil quality degradation and water stress). NatWest Group
recognises that climate and nature-related risks are interlinked and therefore
NatWest Group aims to work towards enhancing processes and capabilities to
include assessments of nature-related risks and opportunities within
governance, risk management and stakeholder engagement practices.

Climate and nature-related risks may:

-      adversely affect the broader economy, influencing interest rates,
inflation and growth, impacting profitability and stability;

-      adversely affect asset pricing and valuations of NWM Group's own
and other securities and, in turn, the wider financial system;

-      adversely affect economic activities directly (for example through
lower corporate profitability or the devaluation of assets) or indirectly (for
example through macro-financial changes);

-      adversely affect the viability or resilience of business models
over the medium to longer term, particularly those business models most
vulnerable to climate and sustainability-related risks;

-      trigger losses stemming directly or indirectly from liability
risks and/or reputational damage, including as a result of adverse media
coverage or activists, the public or NWM Group's Value Chain associating NWM
Group or its customers with adverse climate and sustainability-related issues;

-      adversely affect NWM Group's ability to contribute to deliver on
NatWest Group's strategy, including achieving its climate ambitions and
targets; and

-      exacerbate other risk categories to which NWM Group is exposed,
including credit risk, operational risk (including business continuity),
market risk (both traded and non-traded), liquidity and funding risk (for
example, net cash outflows or depletion of liquidity buffers), reputational
risk, pension risk, regulatory compliance risk and conduct risk.

 

In addition to nature-related risks, NWM Group and NWM Group's Value Chain may
face financial and non-financial risks arising from other
sustainability-related issues such as (i) risks related to social issues
(including human rights), for example, negative impact on people's standard of
living and health, political and geopolitical tensions and conflict
endangering people's lives and security, displacement of communities, the
violation of indigenous people's rights, unjust working conditions and labour
rights breaches (including discrimination, lack of diversity and inclusion,
inequality, gender/ethnicity pay gap and payments under the minimum wage),
modern slavery, accessible banking and financial inclusion, financial crime,
data privacy breaches, innovation, digitalisation and AI, and lack of support
for the vulnerable; and (ii) governance-related risks (including board
diversity, ethical corporate culture, executive compensation and management
structure).

There is also growing expectation from customers, investors, policymakers,
regulators and society of the need for a "just transition" - in recognition
that the transition to net zero should happen in a way that is as fair and
inclusive as possible to everyone concerned. Although NatWest Group (including
NWM Group) continues to evaluate and assess whether and, if so, how it
integrates 'just transition' considerations into its strategy and
decision-making, a failure (or perception of failure) by NatWest Group
(including NWM Group) to sufficiently factor these considerations into
existing products and service offerings may adversely affect NatWest Group
(including NWM Group), including NatWest Group's (including NWM Group)
reputation.

If NWM Group fails to identify, assess, prioritise, monitor, react to and
prevent appropriately: (i) climate and sustainability-related impacts, risks
and opportunities; and (ii) changing regulatory and market expectations and
societal preferences that NWM Group and NWM Group's Value Chain face, in a
timely manner or at all, this may have a material adverse effect on NWM
Group's business, future results, financial condition, prospects (including
cash flows, access to finance or cost of capital over the short, medium or
long term), reputation or the price of its securities.

NatWest Group's strategy relating to climate change, ambitions, targets and
transition plan entail significant execution and/or reputational risks and are
unlikely to be achieved without significant and timely government policy,
technology and customer behavioural changes.

At NatWest Group's Annual General Meeting in April 2022, ordinary shareholders
passed an advisory 'Say on Climate' resolution endorsing NatWest Group's
previously announced strategic direction on climate change, including its
ambitions to at least halve the climate impact of its financing activity by
2030, achieve alignment with the 2015 Paris Agreement and reach net zero
across its financed emissions, assets under management and operational value
chain by 2050. NatWest Group may also announce other climate and
sustainability-related ambitions, targets and initiatives and/or retire or
change existing ones.

Making the changes necessary by NWM Group to contribute to achieve NatWest
Group's climate ambitions and targets and executing its transition plan,
together with the active management of climate and sustainability-related
risks and other regulatory, policy and market changes, is likely to
necessitate material changes to NWM Group's business, operating model, its
existing exposures and the products and services NWM Group provides to its
customers (potentially on accelerated timescales). NWM Group may be required
to: (i) in the medium and long term significantly reduce its financed
emissions and its exposure to customers that do not align with a transition to
net zero or do not have a credible transition plan in place, and (ii) divest
or discontinue certain activities for regulatory or legal reasons or in
response to the transition to a less carbon-dependent economy. Increases in
lending and financing activities may wholly or partially offset some or all
these reductions, which may increase the extent of changes and reductions
necessary.

Making the necessary changes, or failing to make the necessary changes in a
timely manner, or at all to achieve NatWest Group's climate ambitions and
targets and executing its transition plan, together with the active management
of climate and sustainability-related risks and other regulatory, policy and
market changes may have an adverse effect on NatWest Group and NatWest Group's
ability to achieve its climate and financial ambitions and targets, take
advantage of climate change-related opportunities and generate sustainable
returns.

NWM Group's ability to contribute to achieving NatWest Group's strategy,
including contributing to achieve NatWest Group's climate ambitions and
targets, will significantly depend on many factors and uncertainties beyond
NWM Group's control. These include: (i) the extent and pace of climate change,
including the timing and manifestation of physical and transition risks; (ii)
the macroeconomic environment; (iii) the effectiveness of actions of
governments, legislators, regulators and businesses; (iv) the response of the
wider society, NWM Group's Value Chain and other stakeholders to mitigate the
impact of climate and sustainability-related risks; (v) changes in customer
behaviour and demand; (vi) appetite for new markets, credit appetite,
concentration risk appetite, lending opportunities; (vii) developments in the
available technology; (viii) the rollout of low carbon infrastructure; and
(ix) the availability of accurate, verifiable, reliable, auditable, consistent
and comparable data.

These external factors and other uncertainties will make it challenging for
NWM Group to contribute to achieving NatWest Group's climate ambitions and
targets and there is a significant risk that all or some of these ambitions
and targets will not be achieved or not achieved within the intended
timescales.

NWM Group's ability to contribute to achieving NatWest Group's climate
ambitions and targets depends to a significant extent on the timely
implementation and integration of appropriate government policies. The UK
Climate Change Committee ('UK CCC') 2024 Progress Report to the UK Parliament
states that the UK is not on track to hit its legislated target to reduce
emissions in 2030 by 68% compared to 1990 levels and only a third of the
emission reductions required to achieve the UK's 2030 target are currently
covered by credible plans, with action needed across all sectors of the
economy. NatWest Group's climate ambitions are unlikely to be achieved without
timely and appropriate government policy and technology developments, as well
as supplier, customer and societal response required to support the
transition.

The UK CCC is expected to publish its Seventh Carbon Budget on 26 February
2025. NatWest Group expects this to take into account new UK policy
initiatives announced by the UK government in November 2024 and NatWest Group
plans to review its climate ambitions in the context of the of the UK's
Seventh Carbon Budget, once released.Climate and sustainability matters are
also becoming increasingly politicised and polarised. Some of NWM Group's
customers, investors or other stakeholders may decide not to do business with
NWM Group because, according to their own assessment, NatWest Group's
(including NWM Group) strategy, ambitions and targets related to climate and
sustainability do not meet their expectations, either for lacking the
necessary ambition or progress, or for being perceived as overly concerned
about sustainability.

Any delay or failure by NWM Group in putting into effect, making progress
against or meeting NatWest Group's climate and sustainability-related
ambitions, targets and plans may have a material adverse effect on NWM Group's
future results, financial condition, prospects, and/or reputation and may
increase the climate and sustainability-related risks NWM Group faces.

There are significant limitations related to accessing accurate, reliable,
verifiable, auditable, consistent and comparable climate and other
sustainability-related data that contribute to substantial uncertainties in
accurately modelling and reporting on climate and sustainability information,
as well as making appropriate important internal decisions.

Accurate assessment and reporting of climate and sustainability-related
impacts, risks, opportunities and other climate and sustainability-related
matters, and related metrics depends on access to accurate, reliable,
verifiable, auditable, consistent and comparable data from counterparties
(including suppliers), customers, or other third parties. Data of adequate
quality may not be generally available or, if available, may not be accurate,
reliable, verifiable, auditable, consistent, or comparable. In the absence of
other sources, reporting on climate and sustainability-related matters
(including reporting on NatWest Group's (including NWM Group) financed and
facilitated emissions) may be based on estimated or aggregated information
developed by third parties (including customers) that may be prepared in an
inconsistent way using different methodologies, interpretations, or
assumptions that may not be accurate for a given counterparty (including
supplier) or customer. There may also be data gaps and limitations that are
addressed using estimates based on assumptions about matters that are
inherently uncertain or proxy data, such as sectoral averages or use of
emissions estimated by a third party, again developed in a variety of ways and
in some cases not in a timely manner causing data to be potentially outdated
at the time when they are used.

Significant risks, uncertainties and variables are inherent in the assessment,
measurement and mitigation of climate and sustainability-related risks. These
include data quality gaps and limitations mentioned above, as well as the pace
at which climate science, greenhouse gas accounting standards and various
emissions reduction solutions develop. In addition, there is significant
uncertainty about how climate change and the world's transition to a net-zero
economy will unfold over time and how and when climate and
sustainability-related risks will manifest. These timeframes are considerably
longer than NWM Group's historical and current strategic, financial,
resilience and investment planning horizons.

As a result, NWM Group's assessment of climate and sustainability impacts,
risks, opportunities and other climate and sustainability-related matters is
likely to evolve and its climate and sustainability-related disclosures may be
amended, updated or restated in the future as the quality and completeness of
NWM Group's data and methodologies continue to improve.

These data quality challenges, gaps and limitations may also have a material
impact on NWM Group's ability to make effective business decisions about
climate and sustainability-related impacts, risks, opportunities and other
climate and sustainability-related matters, including risk management
decisions, to comply with disclosure requirements and to monitor and report
progress in meeting ambitions, targets and pathways all of which may have an
adverse effect on NWM Group.

Climate-related risks are challenging to model due to their forward-looking
nature, the lack of and/or quality of historical testing capabilities, lack of
accuracy, standardisation and incompleteness of emissions and other climate
and sub-sector related data and the immature nature of risk measurement and
modelling methodologies. As a result, it is very difficult to predict and
model the impact of climate-related risks into precise financial and economic
outcomes. The evaluation of climate-related risk exposure and the development
of associated potential risk mitigation techniques also largely depend on the
choice of climate scenario modelling methodology and the assumptions made
which involves a number of risks and uncertainties.

 

Accordingly, these risks and uncertainties coupled with significantly long
timeframes make the outputs of climate-related risk modelling, climate-related
targets (including emission reduction targets) and pathways, inherently more
uncertain than outputs modelled for traditional financial planning cycles
based on historical financial information.

 

Capabilities within NWM Group to appropriately assess, model, report and
manage climate and sustainability-related impacts and risks and the
suitability of the assumptions required to model and manage climate and
sustainability-related risks appropriately continue to develop and mature.
Even when those capabilities are appropriately developed, the high level of
uncertainty regarding any assumptions modelled, the highly subjective nature
of risk measurement and mitigation techniques, incorrect or inadequate
assumptions and judgements and data quality gaps and limitations may lead to
inadequate risk management information and frameworks, or ineffective business
adaptation or mitigation strategies or regulatory non-compliance.

Any of the above may have a material adverse effect on NWM Group's business,
future results, financial condition, prospects, reputation and the price of
its securities.

NWM Group is becoming subject to more extensive, and sophisticated climate and
other sustainability-related laws, regulation and oversight and there is an
increasing risk of regulatory enforcement, investigation and litigation.

NWM Group and its subsidiaries are increasingly becoming subject to more
extensive, and sophisticated sustainability-related laws and regulations in
the UK, EU and the US, including in relation to mandatory climate and other
sustainability reporting and due diligence, climate transition plan, product
labelling and combatting "greenwashing".

Compliance with these complex, evolving and often diverging legal, regulatory
and supervisory requirements and voluntary standards and initiatives is likely
to require NWM Group to implement significant changes to its business models,
IT systems, products, governance, internal controls over financial and
non-financial reporting, disclosure controls and procedures, modelling
capability and risk management systems, which may increase the cost of doing
business, result in higher capital requirements, and entail additional change
risk and increased compliance, regulatory sanctions, conduct and litigation
(including settlements) costs. A failure by NWM Group or any of its
subsidiaries to comply with these climate and sustainability-related legal,
regulatory and supervisory requirements and standards and meet expectations of
NWM Group's Value Chain in this respect may result in investigations and
regulatory sanction each of which may have an adverse effect on NWM Group and
the successful implementation of NatWest Group's (including NWM Group)
strategy relating to climate and sustainability.

Certain non-UK subsidiaries of NWM Group in the EU and elsewhere may also be
subject to EU, national and other climate and sustainability laws and
regulations which in some cases may differ. Divergence between UK, EU, US and
other climate and sustainability-related legal, regulatory and supervisory
requirements and their interpretation may increase the cost of doing business
(including increased operating costs) and may result in regulatory
non-compliance and litigation risk. Failure by NWM Group to comply with these
divergent legal, regulatory and supervisory requirements (if applicable to NWM
Group) may have an adverse effect on NWM Group's ability to contribute to the
successful implementation of NatWest Group's strategy relating to climate
change including when contributing to setting up NatWest Group's climate
ambitions and targets and to executing NatWest Group's transition plan and may
result in NWM Group and/or its subsidiaries not meeting investors'
expectations.

Increasing new climate and sustainability-related jurisprudence, laws and
regulations in the UK and other jurisdictions, regulatory scrutiny, expose
financial institutions, including NWM Group, to face increasing litigation,
conduct, enforcement and contract liability risks related to climate change,
nature-related degradation, human rights violations and other social,
governance and sustainability-related issues. Furthermore, regulatory and
enforcement activity around climate and sustainability initiatives that
promote more extensive sustainability-related requirements and those that
impose divestment and other sanctions against financial institutions that
implement climate and sustainability-related initiatives is becoming
increasingly divergent and conflicting between jurisdictions, in particular in
the United States. Any failure of NWM Group to develop and implement robust
and effective governance, controls and procedures over climate and
sustainability-related impact assessment, disclosure, reporting and other
communications and sustainability-related claims (including in relation to NWM
Group's products, services and strategy) and comply with them in line with
applicable legal and regulatory requirements and expectations, may give rise
to increased complaints, regulatory enforcement (including sanctions),
investigation and litigation and may adversely affect NWM Group's regulatory
compliance, investor base and reputation.

Furthermore, there is a risk that shareholders, campaign groups, customers and
activist groups could seek to take legal action against NWM Group for
financing, facilitating or contributing to actual or perceived harm to the
environment or people, climate change, nature-related degradation and human
rights violations, failure to implement or follow adequate governance
procedures and for not supporting the principles of 'just transition' (i.e.
maximising the social benefits of the transition, mitigating the social risks
of the transition, empowering those affected by the change, anticipating
future shifts to address issues up front and mobilising investments from the
public and private sectors).

Any of the above may have a material adverse effect on NWM Group's business,
future results, financial condition, prospects, reputation and the price of
its securities.

 

 

Legal Entity Identifier: RR3QWICWWIPCS8A4S074

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  ACSGRGDDLUBDGUS