REG - Royal Bk Scot.Grp. - Half-year Report <Origin Href="QuoteRef">RBS.L</Origin> - Part 9
04/08/2017 07:08
- Part 9: For the preceding part double click ID:nRSD0890Nh
the Consultation Paper on 26 February 2016.
The proposals in the Consultation Paper included an FCA-led communications campaign to raise awareness of the deadline and
to prompt those who intend to complain to act ahead of the deadline.
Following feedback received on its Consultation Paper, on 2 August 2016, the FCA issued a further Consultation Paper (CP
16/20) on certain aspects of the proposed rules and guidance. As a result of this second Consultation Paper, it was
expected that the complaint deadline would be end of June 2019 rather than 2018 as proposed in the initial Consultation
Paper. The BBA and RBS submitted responses to the Consultation Paper on 11 October 2016.
Following feedback received on its second Consultation Paper (CP16/20), on 9 December 2016, the FCA issued a statement
explaining that it was carefully considering the issues raised and would make a further announcement before 31 March 2017.
Notes
12. Litigation, investigations and reviews (continued)
On 2 March 2017, the FCA published Policy Statement 17/3, its final rules and guidance on PPI complaint handling. The
Policy Statement made clear the FCA's intention to implement a two year PPI complaints deadline with effect from 29 August
2017, bringing an end to new PPI complaints in August 2019. New rules for the handling of Plevin complaints will also come
into force on 29 August 2017. The proposals in the Policy Statement are largely as previously anticipated.
In June 2017, the claims management company 'We Fight Any Claim' issued judicial review proceedings challenging elements of
the FCA's Policy Statement, including the proposed 2019 deadline.
RBS has made provisions totalling £4.9 billion to date for PPI claims, including an additional provision of £601 million in
2016, in response to the anticipated further delay in guidance. Of the £4.9 billion cumulative provision, £3.8 billion had
been utilised by 30 June 2017. RBS does not currently anticipate that an additional provision for PPI will be required.
UK retail banking
In November 2014, the CMA announced its decision to proceed with a market investigation reference (MIR) into retail
banking, which would cover PCA and SME banking. On 9 August 2016, the CMA published its final report. The CMA concluded
that there are a number of competition concerns in the provision of PCAs, business current accounts and SME lending,
particularly around low levels of customers searching and switching, resulting in banks not being put under enough
competitive pressure, and new products and new banks not attracting customers quickly enough. The final report sets out
remedies to address these concerns. These include remedies making it easier for customers to compare products, ensure
customers benefit from technological advantages around open banking, improve the current account switching service and
provide PCA overdraft customers with greater control over their charges along with additional measures targeted at SME
customers.
On 2 February 2017 the CMA published the Retail Banking Market Investigation Order 2017 which is the primary legal
framework setting out the obligations for the implementation of the majority of remedies, including an implementation
deadline for each. Other remedies are to be delivered via undertakings signed by Bacs and recommendations to be taken
forward by other regulators (including the FCA).
At this stage there remains uncertainty around the financial impact of the remedies once implemented, and so it is not
practicable to estimate the potential impact on RBS, which may be material.
FCA Wholesale Sector Competition Review
In February 2015, the FCA launched a market study into investment and corporate banking. In October 2016 the FCA published
its final report. It found that whilst many clients feel well served by primary capital market services there were some
areas where improvements could be made to encourage competition, particularly for smaller clients. It set out a package of
remedies, including prohibiting the use of restrictive contractual clauses and ending league table misrepresentation by
asking league table providers to review their recognition criteria. The FCA has announced that the prohibition on
restrictive contractual clauses is to take effect from 3 January 2018.
In November 2015, the FCA also announced that a market study would be undertaken into asset management. In November 2016,
the FCA published the interim report which indicated that price competition is weak and expressed concerns around the lack
of transparency on the objectives, and appropriate benchmarks, for reporting fund performance. On 28 June 2017, the FCA
published the final report which was broadly in line with the interim report and sets out an extensive package of remedies
which include providing further protection to investors and driving competitive pressure on asset managers.
Some uncertainty remains around the financial impact of the remedies once implemented and so it is not practicable reliably
to estimate the potential impact on RBS. However, at this stage, this impact is not expected to be material.
FCA Mortgages Market Study
In December 2016, the FCA launched a market study into the provision of mortgages. The FCA has announced that it intends to
publish an interim report in summer 2017 with the final report expected in Q1 2018.
Notes
12. Litigation, investigations and reviews (continued)
At this stage, as there is considerable uncertainty around the outcome of this market study, it is not practicable reliably
to estimate the aggregate impact, if any, on RBS which may be material.
FCA Strategic Review of Retail Banking Models
On 11 May 2017 the FCA announced a two phase strategic review of retail banking models, The FCA will use the review to
understand how these models operate, including how 'free if in credit' banking is paid for and the impact of changes such
as increased use of digital channels and reduced branch usage.
Phase 1 will allow the FCA to enhance its understanding of existing models and how these impact competition and conduct.
Phase 2 will evaluate the impacts of economic, technological, social and regulatory factors on these models. A project
update is expected in Q2 2018 outlining the FCA's preliminary conclusions from Phase 1.
At this early stage, as there is considerable uncertainty around the outcome of this review, it is not practicable reliably
to estimate the aggregate impact, if any, on RBS, which in due course may be material.
Governance and risk management consent order
In July 2011, RBS agreed with the Board of Governors of the Federal Reserve System, the New York State Banking Department,
the Connecticut Department of Banking, and the Illinois Department of Financial and Professional Regulation to enter into a
consent Cease and Desist Order (Governance Order) (which is publicly available) to address deficiencies related to
governance, risk management and compliance systems and controls in the US branches of RBS plc and RBS N.V. branches (the US
Branches).
In the Governance Order, RBS agreed to create the following written plans or programmes:
Key points
● a plan to strengthen board and senior management oversight of the corporate governance, management, risk management, and operations of RBS's US operations on an enterprise-wide and business line basis;
● an enterprise-wide risk management programme for RBS's US operations;
● a plan to oversee compliance by RBS's US operations with all applicable US laws, rules, regulations, and supervisory guidance;
● a Bank Secrecy Act/anti-money laundering compliance programme for the US Branches on a consolidated basis;
● a plan to improve the US Branches' compliance with all applicable provisions of the Bank Secrecy Act and its rules and regulations as well as the requirements of Regulation K of the Federal Reserve;
● a customer due diligence programme designed to ensure reasonably the identification and timely, accurate, and complete reporting by the US Branches of all known or suspected violations of law or suspicious transactions to law enforcement and supervisory authorities, as required by applicable suspicious activity reporting laws and regulations; and
● a plan designed to enhance the US Branches' compliance with Office of Foreign Assets Control (OFAC) requirements.
The Governance Order identified specific items to be addressed, considered, and included in each proposed plan or
programme. RBS also agreed in the Governance Order to adopt and implement the plans and programmes after approval by the
regulators, to comply fully with the plans and programmes thereafter, and to submit to the regulators periodic written
progress reports regarding compliance with the Governance Order.
RBS has created, submitted, and adopted plans and/or programmes to address each of the areas identified above. In
connection with RBS's efforts to implement these plans and programmes, it has, among other things, made investments in
technology, hired and trained additional personnel, and revised compliance, risk management, and other policies and
procedures for RBS's US operations. RBS continues to test the effectiveness of the remediation efforts it has undertaken to
ensure they are sustainable and meet regulators' expectations. Furthermore, RBS continues to work closely with the
regulators in its efforts to fulfil its obligations under the Governance Order, which will remain in effect until
terminated by the regulators.
Notes
12. Litigation, investigations and reviews (continued)
RBS may be subject to formal and informal supervisory actions and may be required by its US banking supervisors to take
further actions and implement additional remedial measures with respect to these and additional matters. RBS's activities
in the US may be subject to significant limitations and/or conditions.
US dollar processing consent order
In December 2013 RBS and RBS plc agreed a settlement with the Federal Reserve, the New York State Department of Financial
Services (DFS), and the Office of Foreign Assets Control (OFAC) with respect to RBS plc's historical compliance with US
economic sanction regulations outside the US. As part of the settlement, RBS and RBS plc entered into a consent Cease and
Desist Order with the Federal Reserve (US Dollar Processing Order), which remains in effect until terminated by the Federal
Reserve. The US Dollar Processing Order (which is publicly available) indicated, among other things, that RBS and RBS plc
lacked adequate risk management and legal review policies and procedures to ensure that activities conducted outside the US
comply with applicable OFAC regulations.
RBS agreed to create an OFAC compliance programme to ensure compliance with OFAC regulations by RBS's global business lines
outside the US, and to adopt, implement, and comply with the programme. Prior to and in connection with the US Dollar
Processing Order, RBS has made investments in technology, hired and trained personnel, and revised compliance, risk
management, and other policies and procedures.
Under the US Dollar Processing Order (as part of the OFAC compliance programme) RBS was required to appoint an independent
consultant to conduct an annual review of OFAC compliance policies and procedures and their implementation and an
appropriate risk-focused sampling of US dollar payments. RBS appointed the independent consultant and their reports were
submitted to the authorities on 14 June 2015. The independent consultant review examined a significant number of sanctions
alerts and no reportable issues were identified.
Pursuant to the US Dollar Processing Order, the authorities requested a second annual review to be conducted by an
independent consultant. The second review was conducted by the independent consultant and reports were submitted to the
authorities on 30 September 2016. In line with the first review, and following examination of a significant number of
sanctions alerts, the independent consultant did not identify any reportable issues. The authorities have requested a third
annual review to be conducted and independent consultant reports are expected to be issued during Q4 2017. In addition,
pursuant to requirements of the US Dollar Processing Order, RBS has provided the required written submissions, including
quarterly updates, in a timely manner, and RBS continues to participate in a constructive dialogue with the authorities.
US/Swiss tax programme
In August 2013, the DOJ announced a programme for Swiss banks (the Programme) which provides Swiss banks with an
opportunity to obtain resolution, through non-prosecution agreements or non-target letters, of the DOJ's investigations of
the role that Swiss banks played in concealing the assets of US tax payers in offshore accounts (US related accounts). In
December 2013, Coutts & Co Ltd., a member of the Group incorporated in Switzerland, notified the DOJ that it intended to
participate in the Programme.
As required by the Programme, Coutts & Co Ltd. subsequently conducted a review of its US related accounts and presented the
results of the review to the DOJ. On 23 December 2015, Coutts & Co Ltd. entered into a non-prosecution agreement (the NPA)
in which Coutts & Co Ltd. paid a US$78.5 million penalty and acknowledged responsibility for certain conduct set forth in a
statement of facts accompanying the agreement. Under the NPA, which has a term of four years, Coutts & Co Ltd. is
required, among other things, to provide certain information, cooperate with DOJ's investigations, and commit no U.S.
federal offences. If Coutts & Co Ltd. abides by the NPA, the DOJ will not prosecute it for certain tax-related and
monetary transaction offenses in connection with US related accounts.
Notes
12. Litigation, investigations and reviews (continued)
Enforcement proceedings and investigations in relation to Coutts & Co Ltd
The Swiss Financial Market Supervisory Authority (FINMA) has been taking enforcement proceedings against Coutts & Co Ltd, a
member of RBS incorporated in Switzerland, with regard to certain client accounts held with Coutts & Co Ltd relating to
allegations in connection with the Malaysian sovereign wealth fund 1MDB. On 2 February 2017, FINMA announced that Coutts &
Co Ltd had breached money laundering regulations by failing to carry out adequate background checks into business
relationships and transactions associated with 1MDB. FINMA accordingly required Coutts & Co Ltd to disgorge profits of CHF
6.5 million.
Coutts & Co Ltd is also cooperating with investigations and enquiries from authorities in other jurisdictions in relation
to the same subject matter. In this context, the Monetary Authority of Singapore (MAS)'s supervisory examination of Coutts
& Co Ltd's Singapore branch revealed breaches of anti-money laundering requirements. MAS imposed on Coutts & Co Ltd
financial penalties amounting to SGD 2.4 million in December 2016. The outcomes of other proceedings, investigations and
enquiries are uncertain but may include financial consequences and/or regulatory sanctions.
Regulator requests concerning certain historic Russian transactions
Recent media coverage has highlighted an alleged money laundering scheme involving Russian entities between 2010 and 2014.
Allegedly certain European banks, including RBS and 16 other UK based financial institutions, and certain US banks, were
involved in processing certain transactions associated with this scheme. In common with other banks, RBS is responding to
requests for information from the FCA, PRA and regulators in other jurisdictions.
Review and investigation of treatment of tracker mortgage customers in Ulster Bank Ireland DAC (formerly Ulster Bank
Ireland Limited)
On 22 December 2015, the Central Bank of Ireland (CBI) announced that it had written to a number of lenders requiring them
to put in place a robust plan and framework to review the treatment of customers who have been sold mortgages with a
tracker interest rate or with a tracker interest rate entitlement. The CBI stated that the intended purpose of the review
was to identify any cases where customers' contractual rights under the terms of their mortgage agreements were not fully
honoured, or where lenders did not fully comply with various regulatory requirements and standards regarding disclosure and
transparency for customers. The CBI has required Ulster Bank Ireland DAC (UBI DAC), a member of RBS, incorporated in the
Republic of Ireland, to participate in this review and UBI DAC is co-operating with the CBI in this regard. RBS made a
provision totalling EUR 211 million in 2016 for this matter.
Separately, on 15 April 2016, the CBI notified UBI DAC that it was also commencing an investigation under its
Administrative Sanctions Procedure into suspected breaches of the Consumer Protection Code 2006 during the period 4 August
2006 to 30 June 2008 in relation to certain customers who switched from tracker mortgages to fixed rate mortgages.
Notes
13. Related party transactions
UK Government
The UK Government and bodies controlled or jointly controlled by the UK Government and bodies over which it has significant
influence are related parties of the Group. The Group enters into transactions with many of these bodies on an arm's length
basis.
Bank of England facilities
In the ordinary course of business, the Group may from time to time access market-wide facilities provided by the Bank of
England.
The Group's other transactions with the UK Government include the payment of taxes, principally UK corporation tax and
value added tax; national insurance contributions; local authority rates; and regulatory fees and levies (including the
bank levy and FSCS levies).
Other related parties
(a) In their roles as providers of finance, Group companies provide development and other types of capital support to
businesses. These investments are made in the normal course of business and on arm's length terms. In some instances, the
investment may extend to ownership or control over 20% or more of the voting rights of the investee company. However, these
investments are not considered to give rise to transactions of a materiality requiring disclosure under IAS 24.
(b) The Group recharges The Royal Bank of Scotland Group Pension Fund with the cost of administration services incurred by
it. The amounts involved are not material to the Group.
Full details of the Group's related party transactions for the year ended 31 December 2016 are included in the 2016 Annual
Report and Accounts.
Notes
14. Rating agencies
In January 2017 Standard and Poor's revised their assessment of Ulster Bank Ltd's group status from 'highly strategic' to
'core' and as a result. The long term rating of Ulster Bank Ltd was upgraded to BBB+ from BBB.
In June 2017, Moody's Investors Service (Moody's) updated RBS's standalone ratings (Baseline Credit Assessment) and changed
the outlook for RBSG plc and all subsidiaries to 'Stable' from 'Positive'.
The resulting changes in ratings for The Royal Bank of Scotland Group plc (RBSG plc) and its subsidiaries are set out in
the table below.
Moody's (1) (4) Standard and Poor's Fitch
Current rating Previous rating Current rating Previous rating Current rating Previous rating
Longterm Shortterm Longterm Shortterm Longterm Shortterm Longterm Shortterm Longterm Shortterm Longterm Shortterm
The Royal Bank of Scotland Group plc (1) Baa3 P-3 Ba1 NP BBB- A-3 BBB- A-3 BBB+ F2 BBB+ F2
The Royal Bank of Scotland plc A3 P-2 A3 P-2 BBB+ A-2 BBB+ A-2 BBB+ F2 BBB+ F2
National Westminster Bank Plc (3) A3 - A3 - BBB+ A-2 BBB+ A-2 BBB+ F2 BBB+ F2
Royal Bank of Scotland N.V. A3 P-2 A3 P-2 BBB+ A-2 BBB+ A-2 BBB+ F2 BBB+ F2
RBS Securities Inc. - - - - BBB+ A-2 BBB+ A-2 BBB+ F2 BBB+ F2
Ulster Bank Ltd (3) - - - - BBB+ A-2 BBB A-2 BBB+ F2 BBB+ F2
Ulster Bank Ireland DAC (3) - - - - BBB A-2 BBB A-2 BBB F2 BBB F2
Notes:
(1) The table shows Moody's short-term and long-term debt ratings.
(2) All ratings for The Royal Bank of Scotland Group plc are now considered to be investment grade.
(3) National Westminster Bank Plc only has a long-term debt rating from Moody's, Ulster Bank Ltd and Ulster Bank Ireland DAC do not have long or short-term debt ratings from Moody's
(4) Moody's also assigns long-term and short term deposits ratings to the operating companies. These are A2 and P-1 for The Royal Bank of Scotland plc, National Westminster Bank Plc, Royal Bank of Scotland N.V. and Ulster Bank Ltd, and Baa2 and P-2 for Ulster Bank Ireland DAC.
15. Post balance sheet events
Other than matters disclosed, there have been no further significant events between 30 June 2017 and the date of approval
of this announcement.
16. Date of approval
This announcement was approved by the Board of Directors on 3 August 2017.
Independent review report to The Royal Bank of Scotland Group plc
We have been engaged by The Royal Bank of Scotland Group plc ("the Company" or "the Group") to review the condensed
consolidated financial statements in the half-yearly financial report for the six months ended 30 June 2017 which comprise
the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed
consolidated balance sheet, the condensed consolidated statement of changes in equity, the condensed consolidated cash flow
statement, related Notes 1 to 16, the financial information in the segment results on pages 20 to 52, and the Capital and
risk management disclosures set out in Appendix 1 except for those indicated as not reviewed (together "the condensed
consolidated financial statements"). We have read the other information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed
financial statements.
This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland)
2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are
responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
As disclosed in Note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by
the European Union. The condensed consolidated financial statements included in this half-yearly financial report have been
prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European
Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed consolidated financial statements in the
half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of
Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board
for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland)
and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated financial
statements in the half-yearly financial report for the six months ended 30 June 2017 are not prepared, in all material
respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
Statutory Auditor
London, United Kingdom
3 August 2017
Summary risk factors
Summary of our principal risks and uncertainties (Not within the scope of EY's review report)
Set out below is a summary of certain risks which could adversely affect the Group; it should be read in conjunction with
the Capital and risk management section of the 2016 Annual Report and Accounts. This summary should not be regarded as a
complete and comprehensive statement of all potential risks and uncertainties. A fuller description of these and other risk
factors is included on pages 432 to 463 of the 2016 Annual Report and Accounts and on pages 509 to 578 of the Group's Form
20-F which should be read together with the Group's other public disclosures.
● The Group is subject to a number of legal, regulatory and governmental actions and investigations. Unfavourable outcomes in such actions and investigations could have a material adverse effect on the Group's operations, operating results, reputation,
financial position and future prospects.
● The Group is subject to political risks, including economic, regulatory and political uncertainty arising from the vote to leave in the referendum on the UK's membership of the European Union (EU Referendum and more generally arising from the outcome of
general elections in the UK and changes in government policies, including as a shareholder, which could adversely impact the Group's business, results of operations, financial condition and prospects.
● Changes to the prudential regulatory framework for banks and investment banks within the EU may require additional structural changes to the Group's operations, including for example, as a result of potential changes in the prudential regulatory framework
for banks and investment banks within the EU or if the Group is no longer able to rely on the passporting framework for financial services applicable in the EU, which may affect current restructuring plans and have a material adverse effect on the Group.
● The Group is in the process of seeking to satisfy its commitments arising as a result of the receipt of State Aid in December 2008. The process to amend the Group's State Aid obligations in respect of Williams & Glyn may not ultimately amend such
obligations or the revised obligations may be more onerous than those currently being discussed.
● Implementation of the ring-fencing regime in the UK which began in 2015 and must be completed before 1 January 2019 will result in material structural changes to the Group's business. The steps required to implement the UK ring-fencing regime are
extraordinarily complex and entail significant costs and operational, legal and execution risks, which risks may be exacerbated by the Group's other ongoing restructuring efforts. There is no certainty that the Group will be able to complete the legal
restructuring and migration of customers by the 1 January 2019 deadline or in accordance with future rules and the consequences of non-compliance are currently uncertain.
● The Group has been, and will remain, in a period of major restructuring through to 2019, which carries significant execution and operational risks, and the Group may not be a viable, competitive, customer-focused and profitable bank as a result. The
Group's ability to meet the targets and expectations which accompany the Group's transformation programme, including with respect to its return to profitability and the timing thereof, are subject to various internal and external risks and are based on a
number of key assumptions and judgments any of which may prove to be inaccurate.
● Operational risks are inherent in the Group's businesses and these risks are heightened as the Group implements its transformation programme, including significant cost reductions, the UK ring-fencing regime and compliance with its State Aid obligations,
against the backdrop of legal and regulatory changes.
● The Group is exposed to cyberattacks and a failure to prevent or defend against such attacks could have a material adverse effect on the Group's operations, results of operations or reputation.
● The Group's business performance and financial position could be adversely affected if its capital is not managed effectively or if it is unable to meet its capital targets. Effective management of the Group's capital is critical to its ability to operate
its businesses, comply with its regulatory obligations, pursue its strategy of returning to stand-alone strength, resume dividend payments on its ordinary shares and maintain discretionary payments.
● Failure by the Group to comply with regulatory capital and leverage requirements may result in intervention by its regulators and loss of investor confidence, and may have a material adverse effect on its results of operations, financial condition and
reputation and may result in distribution restrictions and adversely impact existing shareholders.
Summary risk factors
● Failure by the Group to comply with its capital requirements or to maintain sufficient distributable reserves may result in the application of restrictions on its ability to make discretionary distributions, including the payment of dividends to its ordinary shareholders and coupons on certain capital instruments.
● The Group is subject to stress tests mandated by its regulators in the UK and in Europe which may result in additional capital requirements or management actions which, in turn, may impact the Group's financial condition, results of operations and investor confidence or result in restrictions on distributions.
● As a result of extensive reforms being implemented relating to the resolution of financial institutions within the UK, the EU and globally, material additional requirements will arise to ensure that financial institutions maintain sufficient loss-absorbing capacity. Such changes to the funding and regulatory capital framework may require the Group to meet higher capital levels than the Group anticipated within its strategic plans and affect the Group's funding costs.
● The Group's borrowing costs, its access to the debt capital markets and its liquidity depend significantly on its credit ratings and, to a lesser extent, on the rating of the UK Government.
● The Group's ability to meet its obligations including its funding commitments depends on the Group's ability to access sources of liquidity and funding. If the Group is unable to raise funds through deposits and/or in the capital markets, its liquidity position could be adversely affected or it may result in higher funding costs which may impact the Group's margins and profitability.
● The Group's businesses and performance can be negatively affected by actual or perceived economic conditions in the UK and globally and other global risks, including risks arising out of geopolitical events and political developments and the Group will be increasingly impacted by developments in the UK as its operations become increasingly concentrated in the UK.
● Changes in interest rates or foreign exchange rates have significantly affected and will continue to affect the Group's business and results of operations. A continued period of low interest rates and yield curves and spreads may affect the interest rate margin realised between lending and borrowing costs, the effect of which may be heightened during periods of liquidity stress.
● The Group's earnings and financial condition have been, and its future earnings and financial condition may continue to be, materially affected by depressed asset valuations resulting from poor market conditions.
● The financial performance of the Group has been, and may continue to be, materially affected by customer and counterparty credit quality and deterioration in credit quality could arise due to prevailing economic and market conditions and legal and regulatory developments.
● The Group's operations are highly dependent on its IT systems. A failure of the Group's IT systems, including as a result of the lack of, or untimely investments, could adversely affect its operations, competitive position and investor and customer confidence and expose the Group to regulatory sanctions.
● The Group's businesses are subject to substantial regulation and oversight. Significant regulatory developments and increased scrutiny by the Group's key regulators has had and is likely to continue to increase compliance and conduct risks and could have a material adverse effect on how the Group conducts its business and on its results of operations and financial condition.
● The Group is subject to pension risks and may be required to make additional contributions to cover pension funding deficits as a result of degraded economic conditions or as a result of the restructuring of its pension schemes in relation to the implementation of the UK ring-fencing regime.
● Pension risk and changes to the Group's funding of its pension schemes may have a significant impact on the Group's capital position.
● The Group relies on valuation, capital and stress test models to conduct its business, assess its risk exposure and anticipate capital and funding requirements. Failure of these models to provide accurate results or accurately reflect changes in the micro- and macroeconomic environment in which the Group operates or findings of deficiencies by the Group's regulators resulting in increased regulatory capital requirements could have a material adverse effect on the Group's business, capital and results.
● The reported results of the Group are sensitive to the accounting policies, assumptions and estimates that underlie the preparation of its financial statements. Its results in future periods may be affected by changes to applicable accounting rules and standards.
● The Group's operations entail inherent reputational risk, i.e., the risk of brand damage and/or financial loss due to a failure to meet stakeholders' expectations of the Group's conduct, performance and business profile.
Summary risk factors
● The Group is exposed to conduct risk which may adversely impact the Group or its employees and may result in conduct having a detrimental impact on the Group's customers or counterparties.
● The Group may be adversely impacted if its risk management is not effective and there may be significant challenges in maintaining the effectiveness of the Group's risk management framework as a result of the number of strategic and restructuring initiatives being carried out by the RBS Group simultaneously.
● A failure by the Group to embed a strong risk culture across the organisation could adversely affect the Group's ability to achieve its strategic objective.
● The Group's business and results of operations may be adversely affected by increasing competitive pressures and technology disruption in the markets in which it operates.
● The Group operates in markets that are subject to intense scrutiny by the competition authorities and its business and results of operations could be materially affected by competition rulings and other government measures.
● As a result of the commercial and regulatory environment in which it operates, the Group may be unable to attract or retain senior management (including members of the board) and other skilled personnel of the appropriate qualification and competence. The Group may also suffer if it does not maintain good employee relations.
● HM Treasury (or UKFI on its behalf) may be able to exercise a significant degree of influence over the Group and any further offer or sale of its interests may affect the price of securities issued by the Group.
● The Group is committed to executing the run-down and sale of certain businesses, portfolios and assets forming part of the businesses and activities being exited by the Group. Failure by the Group to do so on commercially favourable terms could have a material adverse effect on the Group's operations, operating results, financial position and reputation.
● The value or effectiveness of any credit protection that the Group has purchased depends on the value of the underlying assets and the financial condition of the insurers and counterparties.
● The Group and its subsidiaries are subject to a new and evolving framework on recovery and resolution, the impact of which remains uncertain, and which may result in additional compliance challenges and costs.
● The Group may become subject to the application of stabilisation or resolution powers in certain significant stress situations, which may result in various actions being taken in relation to the Group and any securities of the Group, including the write-off, write-down or conversion of the Group's securities.
● In the UK and in other jurisdictions, the Group is responsible for contributing to compensation schemes in respect of banks and other authorised financial services firms that are unable to meet their obligations to customers.
● The Group's results could be adversely affected in the event of goodwill impairment.
● Recent and anticipated changes in the tax legislation in the UK are likely to result in increased tax payments by the Group and may impact the recoverability of certain deferred tax assets recognised by the Group.
Forward-looking statements
Cautionary statement regarding forward-looking statements
Certain sections in this document contain 'forward-looking statements' as that term is defined in the United States Private
Securities Litigation Reform Act of 1995, such as statements that include the words 'expect', 'estimate', 'project',
'anticipate', 'commit', 'believe', 'should', 'intend', 'plan', 'could', 'probability', 'risk', 'Value-at-Risk (VaR)',
'target', 'goal', 'objective', 'may', 'endeavour', 'outlook', 'optimistic', 'prospects' and similar expressions or
variations on these expressions.
In particular, this document includes forward-looking statements relating, but not limited to: future profitability and
performance, including financial performance targets such as return on tangible equity; cost savings and targets, including
cost:income ratios; litigation and government and regulatory investigations, including the timing and financial and other
impacts thereof; structural reform and the implementation of the UK ring-fencing regime; the implementation of RBS's
transformation programme, including the further restructuring of the NatWest Markets business; the satisfaction of the
Group's residual EU State Aid obligations; the continuation of RBS's balance sheet reduction programme, including the
reduction of risk-weighted assets (RWAs) and the timing thereof; capital and strategic plans and targets; capital,
liquidity and leverage ratios and requirements, including CET1 Ratio, RWA equivalents (RWAe), Pillar 2 and other regulatory
buffer requirements, minimum requirement for own funds and eligible liabilities, and other funding plans; funding and
credit risk profile; capitalisation; portfolios; net interest margin; customer loan and income growth; the level and extent
of future impairments and write-downs, including with respect to goodwill; restructuring and remediation costs and charges;
future pension contributions; RBS's exposure to political risks, operational risk, conduct risk, cyber and IT risk and
credit rating risk and to various types of market risks, including as interest rate risk, foreign exchange rate risk and
commodity and equity price risk; customer experience including our Net Promotor Score (NPS); employee engagement and gender
balance in leadership positions.
Limitations inherent to forward-looking statements
These statements are based on current plans, estimates, targets and projections, and are subject to significant inherent
risks, uncertainties and other factors, both external and relating to the Group's strategy or operations, which may result
in the Group being unable to achieve the current targets, predictions, expectations and other anticipated outcomes
expressed or implied by such forward-looking statements. In addition certain of these disclosures are dependent on choices
relying on key model characteristics and assumptions and are subject to various limitations, including assumptions and
estimates made by management. By their nature, certain of these disclosures are only estimates and, as a result, actual
future gains and losses could differ materially from those that have been estimated. Accordingly, undue reliance should not
be placed on these statements. Forward-looking statements speak only as of the date we make them and we expressly disclaim
any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained
herein to reflect any change in the Group's expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
Important factors that could affect the actual outcome of the forward-looking statements
We caution you that a large number of important factors could adversely affect our results or our ability to implement our
strategy, cause us to fail to meet our targets, predictions, expectations and other anticipated outcomes or affect the
accuracy of forward-looking statements we describe in this document, including in the risk factors and other uncertainties
set out in the Group's 2016 Annual Report on Form 20-F and other materials filed with, or furnished to, the US Securities
and Exchange Commission, and other risk factors and uncertainties discussed in this document. These include the significant
risks for RBS presented by the outcomes of the legal, regulatory and governmental actions and investigations that RBS is or
may be subject to (including active civil and criminal investigations) and any resulting material adverse effect on RBS of
unfavourable outcomes and the timing thereof (including where resolved by settlement); economic, regulatory and political
risks, including as may result from the uncertainty arising from the vote to leave in the EU Referendum and from the
outcome of general elections in the UK and changes in government policies; RBS's ability to satisfy its residual EU State
Aid obligations and the timing thereof; RBS's ability to successfully implement the significant and complex restructuring
required to be undertaken in order to implement the UK ring-fencing regime and related costs; RBS's ability to successfully
implement the various initiatives that are comprised in its transformation programme, particularly the proposed further
restructuring of the NatWest Markets business, the balance sheet reduction programme and its significant cost-saving
initiatives and whether RBS will be a viable, competitive, customer focused and profitable bank especially after its
restructuring and the implementation of the UK ring-fencing regime; the exposure of RBS to cyber-attacks and its ability to
defend against such attacks; RBS's ability to achieve its capital and leverage requirements or targets which will depend in
part on RBS's success in reducing the size of its business and future profitability as well as developments which may
impact its CET1 capital including additional litigation or conduct costs, additional pension contributions, further
impairments or accounting changes; ineffective management of capital or changes to regulatory requirements relating to
capital adequacy and liquidity or failure to pass mandatory stress tests; RBS's ability to access sufficient sources of
capital, liquidity and funding when required; changes in the credit ratings of RBS, RBS entities or the UK government;
declining revenues resulting from lower customer retention and revenue generation in light of RBS's strategic refocus on
the UK; as well as increasing competition from new incumbents and disruptive technologies.
Forward-looking statements
In addition, there are other risks and uncertainties that could adversely affect our results, ability to implement our
strategy, cause us to fail to meet our targets or the accuracy of forward-looking statements in this document. These
include operational risks that are inherent to RBS's business and will increase as a result of RBS's significant
restructuring initiatives being concurrently implemented; the potential negative impact on RBS's business of global
economic and financial market conditions and other global risks, including risks arising out of geopolitical events and
political developments; the impact of a prolonged period of low interest rates or unanticipated turbulence in interest
rates, yield curves, foreign currency exchange rates, credit spreads, bond prices, commodity prices, equity prices; basis,
volatility and correlation risks; the extent of future write-downs and impairment charges caused by depressed asset
valuations; deteriorations in borrower and counterparty credit quality; heightened regulatory and governmental scrutiny and
the increasingly regulated environment in which RBS operates as well as divergences in regulatory requirements in the
jurisdictions in which RBS operates; the risks relating to RBS's IT systems or a failure to protect itself and its
customers against cyber threats, reputational risks; risks relating to increased pension liabilities and the impact of
pension risk on RBS's capital position; risks relating to the failure to embed and maintain a robust conduct and risk
culture across the organisation or if its risk management framework is ineffective; RBS's ability to attract and retain
qualified personnel; limitations on, or additional requirements imposed on, RBS's activities as a result of HM Treasury's
investment in RBS; the value and effectiveness of any credit protection purchased by RBS; risks relating to the reliance on
valuation, capital and stress test models and any inaccuracies resulting therefrom or failure to accurately reflect changes
in the micro and macroeconomic environment in which RBS operates, risks relating to changes in applicable accounting
policies or rules which may impact the preparation of RBS's financial statements or adversely impact its capital position;
the impact of the recovery and resolution framework and other prudential rules to which RBS is subject; the recoverability
of deferred tax assets by the Group; and the success of RBS in managing the risks involved in the foregoing.
The forward-looking statements contained in this document speak only as at the date hereof, and RBS does not assume or
undertake any obligation or responsibility to update any forward-looking statement to reflect events or circumstances after
the date hereof or to reflect the occurrence of unanticipated events.
The information, statements and opinions contained in this document do not constitute a public offer under any applicable
legislation or an offer to sell or solicit of any offer to buy any securities or financial instruments or any advice or
recommendation with respect to such securities or other financial instruments.
Statement of directors' responsibilities
We, the directors listed below, confirm that to the best of our knowledge:
· the condensed financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting';
· the interim management report includes a fair review
- More to follow, for following part double click ID:nRSD0890NjRecent news on Natwest
See all newsREG - NatWest Group plc - Transaction in Own Shares
AnnouncementREG - Stock Exch Notice - Admission to Trading - 18/12/2025
AnnouncementREG - NatWest Group plc - Transaction in Own Shares
AnnouncementREG - NatWest Group plc - Transaction in Own Shares
AnnouncementREG - Natwest Markets PLC - Publication of Final Terms
Announcement