REG - Royal Bk Scot.Grp. - Half-year Report <Origin Href="QuoteRef">RBS.L</Origin> - Part 10
04/08/2017 07:08
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of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and
· the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).
By order of the Board
Howard Davies Ross McEwan Ewen Stevenson
Chairman Chief Executive Chief Financial Officer
3 August 2017
Board of directors
Chairman Executive directors Non-executive directors
Howard Davies Ross McEwanEwen Stevenson Sandy Crombie Frank Dangeard Alison Davis Morten Friis Robert Gillespie John HughesPenny Hughes Yasmin JethaBrendan Nelson Sheila Noakes Mike Rogers Mark Seligman
Additional information
Share information
30 June 2017 31 March 2017 31 December 2016
Ordinary share price 247.2p 242.1p 224.6p
Number of ordinary shares in issue 11,876m 11,842m 11,823m
Financial calendar
2017 third quarter interim management statement 27 October 2017
Appendix 1
Capital and risk management
Appendix 1 Capital and risk management
Page
Presentation of information 1
Capital, liquidity and funding risk
Key developments 2
Management of legacy securities 3
Minimum capital requirements 3
Capital flow statement and resources 4
Loss absorbing capital 6
Risk-weighted assets 7
Key liquidity metrics 8
Liquidity portfolio 8
Funding sources 9
Credit risk
Management basis:
Portfolio summary 10
Personal portfolios 12
Mortgage lending 13
Commercial real estate 15
Shipping 17
Balance sheet analysis:
Loans, provisions and related credit metrics: segmental analysis 18
REIL and provisions: segmental analysis 19
Loans, provisions and related credit metrics: sector analysis 20
Debt securities and AFS reserves 22
Derivatives and valuation reserves 23
Market risk
Key developments 24
Non-trading portfolios 24
Value-at-risk 24
Sensitivity of projected net interest earnings 25
Structural hedging 26
Foreign exchange risk 27
Trading portfolios 28
Other risks
Operational risk 29
Conduct & regulatory risk 29
Presentation of information
Except as otherwise indicated, information in the Capital and risk management appendix is within the scope of the
independent review report by Ernst & Young LLP. Unless otherwise indicated, disclosures in this section include disposal
groups in the relevant exposures.
For a description of framework, governance, methodology and basis of preparation for each of the risks presented in the
appendix, refer to the 2016 Annual Report and Accounts - Capital and risk management.
Appendix 1 Capital and risk management
Capital, liquidity and funding risk
Capital risk is the risk that the Group has insufficient capital and other loss absorbing debt instruments to operate
effectively including meeting minimum regulatory requirements, operating within Board approved risk appetite and supporting
its strategic goals. Liquidity risk is the risk that RBS cannot meet its actual or potential obligations when they fall
due. Funding risk is the risk that RBS cannot maintain a diversified, stable and cost effective funding base.
Key developments (Not within the scope of EY's review report)
· RBS continued to align its capital and funding structure towards meeting future regulatory requirements during the
first half of 2017, while supporting the lending growth of its core franchises.
· The CET1 ratio remains ahead of the 13% target at 14.8%, a 140 basis point increase on the 2016 year end driven by
£939 million attributable profit and planned RWA reductions in Capital Resolution, NatWest Markets and Commercial Banking.
· The securities to be called in Q3 2017 (see Management of legacy securities) reduced the transitional Tier 1 and
Total capital ratios by 60 and 90 basis points respectively. The end-point Tier 1 and Total ratios were unaffected by the
calls as these securities are not CRR eligible.
· CRR leverage ratio was unchanged at 5.1%. UK leverage ratio improved from 5.6% to 5.8% reflecting higher central
bank balances which are excluded from the UK framework.
· In the first half of 2017, RBS issued £7.1 billion of new securities:
o RBSG plc issued £3.6 billion (E1.5 billion and $3.0 billion) of MREL-eligible senior debt, bringing the total issuance
in 2016 and 2017 to date to £7.8 billion;
o RBS plc issued £1.25 billion and E1.25 billion covered bonds, the first such issuance for RBS since 2012. The covered
bonds help diversify the funding profile of the bank; and
o RBS plc issued £1.1 billion of senior unsecured notes to support the future standalone operations of NatWest Markets
plc.
· RBS continued to participate in the Bank of England's Term Funding Scheme (TFS), with £9 billion drawn during Q1
2017. Total participation under the scheme was £14 billion.
· Funding activity was supported by tightening of spreads for issuances, reflecting improving markets and recognition
of RBS's strategic progress in de-risking. RBS also benefitted from Moody's upgrading RBSG plc's senior debt rating to
investment grade.
· The first half of 2017 included £4.1 billion of redemptions and maturities of capital securities. This included £3.1
billion of legacy Tier 1 and 2 securities, and £0.3 billion from the tender of certain Tier 2 securities of RBS N.V.
· Additionally, senior unsecured debt securities of £2.6 billion were redeemed or matured in H1 2017, reflecting the
continued run-off of legacy funding.
· In May 2017, the Bank of England published indicative data on the minimum amount of loss-absorbing resources for the
larger UK banks comprising MREL plus buffers. RBS is expected to require loss-absorbing resources of 24.0% of RWAs by 1
January 2020, rising to 27.8% by 1 January 2022. Total loss absorbing capital, including the benefit of legacy securities,
was 25.5% of RWAs at 30 June 2017.
· The current estimated headroom over the fully phased maximum distributable amount trigger in 2019 is 2.4%, based on
the target CET1 ratio of 13.0% and minimum capital requirements of 10.6% (see below). This remains subject to change.
· The liquidity portfolio increased by £14 billion in H1 2017 to £178 billion, mainly within primary liquidity which
increased by £16 billion to £111 billion. This build up in liquidity is driven by TFS participation, increased deposits in
the franchises, and Treasury issuance, offset by lending growth, funding maturities and calls of securities.
· The rise in primary liquidity resulted in higher liquidity coverage ratio (LCR) and stressed outflow coverage (SOC)
of 145%1 and 180% respectively. The increase in LCR reflected preparations for the settlement of litigation and conduct
costs, including FHFA, and the rise in regulatory requirements from 90% to 100% by 1 January 2018.
· The net stable funding ratio rose to 123%, above the minimum target of 100%. This primarily reflected growth in the
customer deposit base, partially offset by lending growth.
(1) The LCR and the SOC ratio above exclude the impact of the FHFA litigation settlement announced on 12 July 2017.
The estimated impact of the settlement on both the LCR and SOC ratio is a 6% reduction to 139% and 174% respectively. The
settlement will also reduce the liquidity portfolio by approximately £3.65 billion. There is minimal impact on the NSFR as
the settlement was broadly in line with provision.
Appendix 1 Capital and risk management
Capital, liquidity and funding risk (Not within the scope of EY's review report)
Management of legacy securities
RBS continues to manage its capital stack for value, including considerations of regulatory value, relative funding cost
and rating agency considerations.
RBS has decided not to exercise the current call option on the non-cumulative US dollar preference share series U and euro
preference shares series 3. These equity accounted 'non-step' securities with combined nominal value of £0.8 billion(1)
can provide transitional Tier 1 and Tier 2 benefit through to the end of the CRR grandfathering period in 2021. The CET1
impact from foreign currency translation of approximately £370 million(2) that would be realised upon redemption is not
considered to be economical compared with the securities' ongoing regulatory value and relative coupon cost. RBS has
instead decided to prioritise calling other legacy Tier 1 instruments which provide higher economic benefit.
RBS intends to redeem Canadian dollar and US dollar fixed/floating rate Tier 1 securities with combined nominal value of
£0.4 billion(3) in October 2017, with formal notice in line with the call period which opens 6 August 2017. As these equity
accounted securities contain an incentive to redeem, they are not expected to provide transitional Tier 1 or MREL value
following their 'step-up' in October 2017. This redemption will lead to a CET1 reduction of approximately £260 million(2)
from foreign currency translation and deferred coupon payments in Q3 2017(4).
RBS also intend to redeem seven debt accounted Tier 1 securities with nominal value of £1.5 billion(5) over the next few
months in line with their relevant terms. Redemption of these securities does not involve a CET1 impact from foreign
currency translation and provides coupon savings ranging up to approximately 9%.
Notes:
(1) US780097AU54, XS0323734961 note nominal value reflects balance sheet notional, based on exchange rate at time of issue.
(2) Based on exchange rates as at 30 June 2017.
(3) CA780097AT83, US780097AS09, note nominal value reflects balance sheet notional, based on exchange rate at time of issue.
(4) Reflects satisfaction of forgone coupon payments during the two year EC imposed moratorium, specific to these cumulative instruments.
(5) US780097AE13, US6385398820, US7800978790, XS0121856859, US7800977883, US7800978048 and XS0159056208.
Minimum capital requirements
The Group is subject to minimum requirements in relation to the amount of capital it must hold in relation to its RWAs. The
table below summarises the minimum ratios of capital to RWAs that the Group is expected to have to meet once all currently
adopted regulation is fully implemented by 1 January 2019.
Minimum requirements Type CET1 Total Tier 1 Total capital
System wide Pillar 1 minimum requirements 4.5% 6.0% 8.0%
Capital conservation buffer 2.5% 2.5% 2.5%
UK countercyclical capital buffer 0.5% 0.5% 0.5%
G-SIB buffer 1.0% 1.0% 1.0%
Bank specific Pillar 2A 2.1% 2.9% 3.8%
Total (excluding PRA buffer) 10.6% 12.9% 15.8%
Capital ratios at 30 June 2017 14.8% 16.7% 20.0%
Notes: Refer to page 173 of the 2016 Annual Report and Accounts, updated for UK countercyclical buffer change in June
2017:
(1) The Bank of England's Financial Policy Committee (FPC) increased the UK countercyclical capital buffer rate from
0.0% to 0.5%, with effect from June 2018; the rate may increase to 1.0% with effect from November 2018. The estimated own
funds requirement impact for the Group, based on the countercyclical buffer rate of 0.5% and 30 June 2017 exposures, was
£708 million.
(2) The FPC and PRA launched a joint consultation, to exclude claims on central banks from the UK leverage ratio
framework so as not to restrict the ability to draw on central bank liquidity facilities. The proposal also increases the
minimum UK leverage ratio requirement from 3.0% to 3.25%. The CRR leverage ratio requirements, which include central bank
claims, are not impacted by the proposal.
Appendix 1 Capital and risk management
Capital, liquidity and funding risk: Capital flow statement (Not within the scope of EY's review report)
Refer to Analysis of results - Capital and leverage for information on Capital, RWAs and leverage and the Pillar 3
supplement for capital and leverage relating to significant subsidiaries and also CRR templates. The table below analyses
the movement in end-point CRR CET1, AT1 and Tier 2 capital for the half year ended 30 June 2017.
CET1 AT1 Tier 2 Total
Capital flow statement £m £m £m £m
At 1 January 2017 30,623 4,041 9,161 43,825
Profit for the period 939 - - 939
Own credit 162 - - 162
Share capital and reserve movements in respect of employee share schemes 117 - - 117
Ordinary shares issued 80 - - 80
Foreign exchange reserve 96 - - 96
Available-for-sale reserves 21 - - 21
Goodwill and intangibles deduction 13 - - 13
Deferred tax assets 29 - - 29
Prudential valuation adjustments (322) - - (322)
Expected loss over impairment provisions 145 - - 145
Net dated subordinated debt/grandfathered instruments - - (1,820) (1,820)
Foreign exchange movements - - (234) (234)
Other movements (29) - - (29)
At 30 June 2017 31,874 4,041 7,107 43,022
Appendix 1 Capital and risk management
Capital, liquidity and funding risk: Capital resources
End-point CRR basis (1) PRA transitional basis (1)
30 June 31 December 30 June 31 December
2017 2016 2017 2016
£m £m £m £m
Shareholders' equity (excluding
non-controlling interests)
Shareholders' equity 49,205 48,609 49,205 48,609
Preference shares - equity (2,565) (2,565) (2,565) (2,565)
Other equity instruments (4,491) (4,582) (4,491) (4,582)
42,149 41,462 42,149 41,462
Regulatory adjustments and deductions
Own credit (142) (304) (142) (304)
Defined benefit pension fund adjustment (186) (208) (186) (208)
Cash flow hedging reserve (575) (1,030) (575) (1,030)
Deferred tax assets (877) (906) (877) (906)
Prudential valuation adjustments (854) (532) (854) (532)
Goodwill and other intangible assets (6,467) (6,480) (6,467) (6,480)
Expected losses less impairments (1,226) (1,371) (1,226) (1,371)
Other regulatory adjustments 52 (8) 52 (8)
(10,275) (10,839) (10,275) (10,839)
CET1 capital 31,874 30,623 31,874 30,623
Additional Tier 1 (AT1) capital
Eligible AT1 4,041 4,041 4,041 4,041
Qualifying instruments and related
share premium subject to phase out - - 3,450 5,416
Qualifying instruments issued by
subsidiaries and held by third parties - - 140 339
AT1 capital 4,041 4,041 7,631 9,796
Tier 1 capital 35,915 34,664 39,505 40,419
Qualifying Tier 2 capital
Qualifying instruments and related
share premium 6,608 6,893 6,745 7,066
Qualifying instruments issued by
subsidiaries and held by third parties 499 2,268 2,101 4,818
Tier 2 capital 7,107 9,161 8,846 11,884
Total regulatory capital 43,022 43,825 48,351 52,303
Capital metrics (Not within the scope of EY's review report)
Total risk-weighted assets (£m) 215,400 228,200 215,400 228,200
Risk asset ratios
CET1(%) 14.8 13.4 14.8 13.4
Tier 1 (%) 16.7 15.2 18.3 17.7
Total (%) 20.0 19.2 22.4 22.9
Note:
(1) Capital Requirements Regulation (CRR) as implemented by the Prudential Regulation Authority in the UK, with effect from 1 January 2014. All regulatory adjustments and deductions to CET1 have been applied in full for the end-point CRR basis with the exception of unrealised gains on AFS securities which has been included from 2015 for the PRA transitional basis.
Appendix 1 Capital and risk management
Capital, liquidity and funding risk: Loss absorbing capital (Not within the scope of EY's review report)
The following table illustrates the components of estimated loss absorbing capital (LAC) in RBSG plc and operating
subsidiaries and includes external issuances only. The table is prepared on a transitional basis, including the benefit of
regulatory capital instruments issued from operating companies, to the extent they meet the MREL criteria. Regulatory and
LAC values exclude instruments intended to be redeemed (see Management of legacy securities) as at 30 June 2017. These
securities will be derecognised from the balance sheet on the date of redemption.
30 June 2017 31 December 2016
Balance Balance
Par sheet Regulatory LAC Par sheet Regulatory LAC
value (1) value value (2) value (3) value (1) value value (2) value (3)
£bn £bn £bn £bn £bn £bn £bn £bn
CET1 capital (4) 31.9 31.9 31.9 31.9 30.6 30.6 30.6 30.6
Tier 1 capital: end-point
CRR compliant AT1
of which: RBSG (holdco) 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0
of which: RBSG operating
subsidiaries (opcos) - - - - - - - -
4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0
Tier 1 capital: non end-point
CRR compliant
of which: holdco 5.3 5.4 3.5 2.7 5.5 5.6 5.5 4.0
of which: opcos 0.3 0.3 0.1 0.1 0.3 0.3 0.3 0.3
5.6 5.7 3.6 2.8 5.8 5.9 5.8 4.3
Tier 2 capital: end-point
CRR compliant
of which: holdco 6.7 6.8 6.6 5.1 6.9 7.0 6.9 5.3
of which: opcos 2.3 2.4 0.7 0.5 6.0 6.4 4.0 5.6
9.0 9.2 7.3 5.6 12.9 13.4 10.9 10.9
Tier 2 capital: non end-point
CRR compliant
of which: holdco 0.4 0.4 0.1 0.1 0.4 0.4 0.2 0.1
of which: opcos 2.1 2.4 1.8 2.0 2.5 2.7 2.1 2.1
2.5 2.8 1.9 2.1 2.9 3.1 2.3 2.2
Senior unsecured debt
securities issued by:
RBSG holdco 9.9 9.9 - 8.5 6.9 6.8 - 5.0
RBSG opcos 15.6 15.8 - - 14.8 15.0 - -
25.5 25.7 - 8.5 21.7 21.8 - 5.0
Total 78.5 79.3 48.7 54.9 77.9 78.8 53.6 57.0
RWAs 215.4 228.2
Leverage exposure 701.8 683.3
LAC as a ratio of RWAs (4) 25.5% 24.9%
LAC as a ratio of leverage
exposure 7.8% 8.3%
Notes:
(1) Par value reflects the nominal value of securities issued.
(2) Regulatory capital instruments issued from operating companies are included in the transitional LAC calculation, to the extent they meet the MREL criteria.
(3) LAC value reflects RBS's interpretation of the Bank of England's policy statement on the minimum requirements for own funds and eligible liabilities (MREL), published in November 2016. MREL policy and requirements remain subject to further potential
development, as such RBS estimated position remains subject to potential change. Liabilities excluded from LAC include instruments with less than one year remaining to maturity, structured debt, operating company senior debt, and other instruments that do
not meet the MREL criteria. Includes Tier 1 and Tier 2 securities prior to incentive to redeem.
(4) Corresponding shareholders' equity was £49.2 billion (31 December 2016 - £48.6 billion).
(5) Regulatory amounts reported for AT1, Tier 1 and Tier 2 instruments are before grandfathering and other restrictions imposed by CRR.
● Major movements in the first half of the year included the issue of £3.6 billion equivalent senior securities from RBSG plc and the redemption of approximately £3.1 billion equivalent Tier 2 securities, primarily within RBS plc.
Appendix 1 Capital and risk management
Capital, liquidity and funding risk: Risk-weighted assets (Not within the scope of EY's review report)
The tables below analyse the movement in RWAs on the end-point CRR basis during the half year, by key drivers.
Non-counterparty Counterparty Operational
credit risk credit risk Market risk risk Total
£bn £bn £bn £bn £bn
At 1 January 2017 162.2 22.9 17.4 25.7 228.2
Foreign exchange movement (0.5) (0.2) - - (0.7)
Business movements (2.6) (4.9) (0.9) (1.9) (10.3)
Risk parameter changes (1.8) - - - (1.8)
At 30 June 2017 157.3 17.8 16.5 23.8 215.4
The table below analyses segmental RWAs.
Ulster Central
Bank Commercial Private Capital items
UK PBB RoI Banking Banking RBSI NWM Resolution W&G & other Total
£bn £bn £bn £bn £bn £bn £bn £bn £bn £bn
At 1 January 2017 32.7 18.1 78.5 8.6 9.5 35.2 34.5 9.6 1.5 228.2
Foreign exchange movement - 0.4 (0.2) - - (0.3) (0.5) - (0.1) (0.7)
Business movements 0.8 - (1.0) 0.4 (0.1) (3.2) (7.8) (0.2) 0.8 (10.3)
Risk parameter changes (1) (0.6) (0.5) (1.1) - - - 0.4 - - (1.8)
At 30 June 2017 32.9 18.0 76.2 9.0 9.4 31.7 26.6 9.4 2.2 215.4
Credit risk
- non-counterparty 25.0 17.0 69.8 8.0 8.7 5.8 15.0 8.0 - 157.3
- counterparty - 0.1 - - - 11.0 6.7 - - 17.8
Market risk - - - - - 11.4 3.1 - 2.0 16.5
Operational risk 7.9 0.9 6.4 1.0 0.7 3.5 1.8 1.4 0.2 23.8
At 30 June 2017 32.9 18.0 76.2 9.0 9.4 31.7 26.6 9.4 2.2 215.4
Note:
(1) Risk parameter changes relate to charges in credit quality metrics of customers and counterparties
such as probability of default (PD) and loss given default (LGD).
● RWAs decreased by £12.8 billion in H1 2017, of which £7.9 billion was in Capital Resolution.
● The reduction in Capital Resolution reflected continuing exit strategy with the main changes in Markets (£4.2 billion) and Shipping (£1.2 billion) portfolios.
● Risk metric improvements in Commercial Banking and planned reduction of exposures with weak returns reduced RWAs by £2.3 billion. Increased lending has led to higher RWAs in Private Banking.
● In both UK PBB and Ulster Bank RoI, the RWA decrease resulting from recalibration improvements in mortgage risk parameter models and improved credit quality, were offset by the impact of lending growth and foreign currency movements respectively.
● NatWest Markets RWAs decreased by £3.5 billion driven by business optimisations, maturities and lower exposures.
● The increase in Central items is driven by higher foreign currency forward positions held in Treasury in anticipation of conduct settlement and calling of equity instruments in Q3 2017.
● The operational risk recalculation resulted in a £1.9 billion RWA decrease.
Appendix 1 Capital and risk management
Capital, liquidity and funding risk: Key liquidity metrics (Not within the scope of EY's review report)
The table below sets out the key liquidity and related metrics monitored by RBS.
30 June 31 March 31 December
2017 2017 2016
Liquidity portfolio £178bn £160bn £164bn
Liquidity coverage ratio (LCR) (1) 145% 129% 123%
Stressed outflow coverage (SOC) (1) 180% 146% 139%
Net stable funding ratio (NSFR) (1) 123% 120% 121%
Loan:deposit ratio 91% 93% 91%
Note: Refer to page 189 of the 2016 Annual Report and Accounts.
(1) The metrics stated exclude the impact of the litigation settlement with FHFA, as announced on 12 July 2017. The estimated impact of the settlement on both the LCR and SOC ratio is a 6% reduction to 139% and 174% respectively. The settlement will also reduce the liquidity portfolio by approximately £3.65 billion. There is minimal impact on the NSFR as the settlement was broadly in line with provision.
Liquidity portfolio
The table below shows the liquidity portfolio by product, liquidity value and by carrying value. Liquidity value is lower
than carrying value as it is stated after discounts applied by the Bank of England and other central banks to instruments,
within the secondary liquidity portfolio, eligible for discounting.
Liquidity value
Period end Average - H1 2017
UK DoLSub (1) Other Total UK DoLSub Total
30 June 2017 £m £m £m £m £m
Cash and balances at central banks 79,909 2,724 82,633 71,144 74,072
Government and US agency bonds
AAA rated 3,994 1,251 5,245 4,236 5,988
AA- to AA+ 21,822 1,533 23,355 19,652 20,533
25,816 2,784 28,600 23,888 26,521
Primary liquidity 105,725 5,508 111,233 95,032 100,593
Secondary liquidity (2) 66,112 574 66,686 58,804 59,417
Total liquidity value 171,837 6,082 177,919 153,836 160,010
Total carrying value 196,786 6,243 203,029
31 December 2016 Average - FY 2016
Cash and balances at central banks 66,598 2,542 69,140 56,772 59,489
Government and US agency bonds
AAA rated 3,936 1,331 5,267 3,692 4,539
AA- to AA+ 19,348 1,244 20,592 18,757 21,106
Below AA - 237 237 - -
23,284 2,812 26,096 22,449 25,645
Primary liquidity 89,882 5,354 95,236 79,221 85,134
Secondary liquidity (2) 68,007 683 68,690 65,588 66,774
Total liquidity value 157,889 6,037 163,926 144,809 151,908
Total carrying value 184,136 6,209 190,345
Notes:
(1) The PRA regulated UK DoLSub comprising RBS's five licensed deposit-taking UK banks: The Royal Bank of Scotland plc, National Westminster Bank Plc, Ulster Bank Limited, Coutts & Company and Adam & Company PLC. In addition, certain of RBS's significant operating subsidiaries - Ulster Bank Ireland DAC and RBS N.V. - hold managed portfolios that comply with local regulations that may differ from PRA rules.
(2) Comprises assets eligible for discounting at the Bank of England and other central banks.
Appendix 1 Capital and risk management
Capital, liquidity and funding risk: Funding sources
The composition of RBS's balance sheet is a function of the broad array of product offerings and diverse markets served by
its core businesses. The structural composition of the balance sheet is augmented as needed through active management of
both asset and liability portfolios. The objective of these activities is to optimise the liquidity profile, while ensuring
adequate coverage of all cash requirements under extreme stress conditions.
The table below shows the carrying values of the principal funding sources, based on contractual maturity.
30 June 2017 31 December 2016
Short-term Long-term Short-term Long-term
less than more than Total less than more than Total
1 year 1 year 1 year 1 year
£m £m £m £m £m £m
Deposits by banks
Derivative cash collateral 16,016 - 16,016 20,674 - 20,674
Other deposits (1) 7,045 15,904 22,949 6,130 6,513 12,643
23,061 15,904 38,965 26,804 6,513 33,317
Debt securities in issue
Certificates of deposit 4,884 - 4,884 3,205 3 3,208
Medium-term notes 2,635 18,189 20,824 3,388 15,233 18,621
Covered bonds 975 5,314 6,289 96 3,839 3,935
Securitisations - - - - 1,481 1,481
8,494 23,503 31,997 6,689 20,556 27,245
Subordinated liabilities 2,140 12,584 14,724 1,062 18,357 19,419
Notes issued 10,634 36,087 46,721 7,751 38,913 46,664
Wholesale funding 33,695 51,991 85,686 34,555 45,426 79,981
Customer deposits
Derivative cash collateral (2) 10,480 - 10,480 11,487 - 11,487
Financial institution deposits 51,130 533 51,663 52,292 668 52,960
Personal deposits 166,759 1,696 168,455 162,958 1,877 164,835
Corporate deposits 128,320 964 129,284 123,495 1,095 124,590
Total customer deposits 356,689 3,193 359,882 350,232 3,640 353,872
Total funding excluding repos 390,384 55,184 445,568 384,787 49,066 433,853
Total repos 43,038 - 43,038 32,335 - 32,335
Total funding including repos 433,422 55,184 488,606 417,122 49,066 466,188
Notes:
(1) Includes £14.0 billion (31 December 2016 - £5.0 billion) relating to TFS participation and £1.8 billion (31 December 2016 - £1.3 billion) relating to RBS's participation in central bank financing operations under the European Central Bank's Targeted Long Term Refinancing Operations.
(2) Cash collateral includes £8,995 million (31 December 2016 - £10,002 million) from financial institutions.
Appendix 1 Capital and risk management
Credit risk
Credit risk is the risk of financial loss due to the failure of a customer or counterparty to meet its obligation to settle
outstanding amounts.
Credit risk: Management basis: Portfolio summary(Not within the scope of EY's review report)
The table below summarises current and potential exposure, net of provisions and after risk transfer, by sector and asset
quality.
Portfolio and asset quality as a percentage
Exposure (£m) of total current exposure
Wholesale (1) Wholesale(1)
30 June 2017 Banks and Banks and
Personal other FIs Sovereign (2) Other Total Personal other FIs Sovereign (2) Other Total
AQ1-AQ4 119,079 41,270 135,677 45,727 341,753 25% 9% 28% 10% 72%
AQ5-AQ8 47,883 3,381 107 70,913 122,284 10% 1% - 14% 25%
AQ9 2,437 509 2 594 3,542 1% - - - 1%
AQ10 3,644 65 - 2,851 6,560 1% - - 1% 2%
Total current exposure 173,043 45,225 135,786 120,085 474,139 37% 10% 28% 25% 100%
Total potential exposure 179,350 78,604 136,694 180,910 575,558
Risk of Credit Loss (3) - 1 2 456 459
Flow into forbearance (4) 367 12 - 1,165 1,544
Of which: Performing 172 12 - 763 947
Non-performing 195 - - 402 597
Provisions 2,124 54 - 1,767 3,945
31 December 2016
AQ1-AQ4 111,899 42,903 118,049 49,121 321,972 24% 9% 26% 11% 70%
AQ5-AQ8 47,992 4,392 135 72,340 124,859 10% 1% - 16% 27%
AQ9 2,622 32 4 591 3,249 1% - - - 1%
AQ10 3,693 355 - 3,465 7,513 1% - - 1% 2%
Total current exposure 166,206 47,682 118,188
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AnnouncementREG - NatWest Group plc - Transaction in Own Shares
AnnouncementREG - NatWest Group plc - Transaction in Own Shares
AnnouncementREG - Natwest Markets PLC - Publication of Final Terms
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