REG - NatWest Group plc - Annual Financial Report - NWG plc

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16/02/2024 07:15

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RNS Number : 4131D  NatWest Group plc  16 February 2024

 

 

 

 

 

 

NatWest Group plc 16 February 2024

Annual Report and Accounts 2023

Pillar 3 Report 2023

 

A copy of the Annual Report and Accounts 2023 for Group 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)

 

A printed version will be mailed to shareholders who have opted for a hard
copy ahead of the Annual General Meeting for which formal Notice will be given
in due course.

 

We have also published the 2023 Pillar 3 report, available on our website. For
further information, please contact:

Media Relations

+44 (0) 131 523 4205

 

NatWest Group Investor Relations:

Claire Kane

Director, Investor Relations

+44 (0) 20 7672 1758

 

For the purpose of compliance with the Disclosure Guidance and Transparency
Rules, this announcement also contains risk factors and details of related
party transactions extracted from the Annual Report and Accounts 2023 in full
unedited text. Page references in the text refer to page numbers in the Annual
Report and Accounts 2023.

 

Principal Risks and Uncertainties

Set out below are certain risk factors that could have a material adverse
effect on NatWest 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
NatWest Group.

 

Economic and political risk

NatWest 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.

As a principally UK-focused banking group, NatWest Group is affected by global
economic and market conditions and is, particularly exposed to those
conditions in the UK. Uncertain and volatile economic conditions can create a
challenging operating environment for financial services companies such as
NatWest Group. The outlook for the UK and the global economy is affected by
many factors including: GDP growth, inflation and changing interest rates,
changing asset prices (including residential and commercial property), energy
prices, supply chain disruption, and changes to monetary and fiscal policy.

These 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, economic volatility in the UK or globally, volatility in
commodity prices, political uncertainty or instability (for example the
upcoming US presidential election and the UK general election to take place
before February 2025), or concerns regarding sovereign debt or sovereign
credit ratings, changing demographics in the markets that NatWest Group and
its customers serve, increasing social and other inequalities, rapid changes
to the economic environment due to the adoption of technology, automation,
artificial intelligence, or due to climate change and/or other
sustainability-related risks. Refer to 'Changes in interest rates will
continue to affect NatWest Group's business and results' and 'Fluctuations in
currency exchange rates may adversely affect NatWest Group's results and
financial condition'.

 

NatWest Group is also exposed to risks arising out of geopolitical events or
political developments that may hinder economic or financial activity levels.
Political, military or diplomatic events, geopolitical tensions, armed
conflict (for example the Russia-Ukraine and Israel-Hamas conflicts),
terrorist acts or threats, protectionist policies or trade barriers,
widespread public health crises, related potential adverse effects on supply
chains and the responses to any of the above scenarios by various governments
and markets, could negatively affect the business and performance of NatWest
Group, including as a result of the direct or indirect impact on UK, regional
or global trade and/or NatWest Group's customers and counterparties.

In recent years, the UK has experienced significant political uncertainty and
a general election will take place before February 2025. Heightened political
uncertainty could lead to a loss of confidence in the UK that could, in turn,
negatively impact the economy and companies operating in the UK. NatWest Group
also faces political uncertainty in Scotland as a result of a possible
Scottish independence referendum. Scottish independence may adversely affect
NatWest 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,
independently or in conjunction with other mandatory or strategic structural
and organisational changes, any of which could adversely affect NatWest Group.
Refer to 'Continuing uncertainty regarding the effects and extent of the UK's
post Brexit divergence from EU laws and regulation, and NatWest Group's post
Brexit EU operating model may adversely affect NatWest Group and its operating
environment'.

The value of NatWest Group's own and other securities may be materially
affected by economic and market conditions. Market volatility, illiquid market
conditions and disruptions in the financial markets may make it very difficult
to value certain of NatWest Group's own and other securities, particularly
during periods of market displacement. This could cause a decline in the value
of NatWest Group's own and other securities, or inaccurate carrying values for
certain financial instruments.

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 NatWest Group's counterparty risk. NatWest
Group's risk management and monitoring processes seek to quantify and mitigate
NatWest Group's exposure to extreme market moves.

However, market events have historically been difficult to predict, and
NatWest Group, its customers and its counterparties could realise significant
losses if extreme market events were to occur.

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

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

NatWest Group's performance is affected by changes in interest rates.
Benchmark overnight interest rates, such as the UK base rate, increased in
2023, although forward rates at 31 December 2023 suggested interest rates may
begin to fall in 2024.

 

Stable interest rates support predictable income flow and less volatility in
asset and liability valuations, although persistently low and negative
interest rates may adversely affect NatWest Group. Further, volatility in
interest rates may result in unexpected outcomes both for interest income and
asset and liability valuations which may adversely affect NatWest Group. For
example, 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.

 

Furthermore, customer and investor responses to rapid changes in interest
rates can have an adverse effect on NatWest Group. For example, customers may
make deposit choices that provide them with higher returns than those then
being offered by NatWest Group, and NatWest Group may not respond with
competitive products as rapidly, for example following an interest rate
change, which may in turn decrease NatWest 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 NatWest Group's hedging strategy)
and other indicators that may indirectly affect NatWest Group.

 

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

 

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

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

 

Although NatWest Group is principally a UK-focused banking group, it is
subject to structural foreign exchange risk from capital deployed in NatWest
Group's foreign subsidiaries, branches and other strategic equity
shareholdings. NatWest Group also relies on issuing securities in non-sterling
currencies, such as US dollars and euros, that assist in meeting NatWest
Group's MREL requirements. In addition, NatWest Group conducts banking
activities in non-sterling currencies (for example, loans, deposits and
dealing activity) which affect its revenue. NatWest Group also uses service
providers based outside of the United Kingdom for certain services and as a
result certain operating results are subject to fluctuations in currency
exchange rates.

NatWest 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 MREL-eligible instruments), foreign exchange
dealing activity, income and expenses, RWAs and hence the reported earnings
and financial condition of NatWest Group.

Any of the above may have a material adverse effect on NatWest Group's future
results, financial condition, prospects, reputation, and/or its ability to
meet regulatory capital adequacy requirements.

Continuing uncertainty regarding the effects and extent of the UK's post
Brexit divergence from EU laws and regulation, and NatWest Group's post Brexit
EU operating model may adversely affect NatWest Group and its operating
environment.

As a result of the UK's withdrawal from the EU, certain aspects of the
services provided by NatWest Group require local licences or individual
equivalence decisions (temporary or otherwise) by relevant regulators. In late
2021 the European Commission proposed legislation that would require non-EU
firms to establish a branch or subsidiary in the EU before providing 'banking
services' in the EU. When these proposals become law all 'banking services'
provided by NatWest Group in the EU may be licensable activities in each EU
member state in which it provides such services and member states may not be
permitted to offer bilateral permissions to financial institutions outside the
EU allowing them to provide such 'banking services', except in limited
circumstances.

NatWest Group continues to evaluate its EU operating model, making adaptations
as necessary. Changes to NatWest Group's EU operating model have been, and may
continue to be, costly and failure to receive regulatory permissions and/or
further changes to its business operations, product offering, customer
engagement, and regulatory requirements could result in further costs and/or
regulatory sanction.

The long-term effects of Brexit and the uncertainty regarding NatWest Group's
EU operating model may adversely affect NatWest Group and its customers and
counterparties who are themselves dependent on trading with the EU or
personnel from the EU. The long-term effects of Brexit may also be exacerbated
by wider UK and global macroeconomic trends and events.

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 Law
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 NatWest Group, including its business, non-UK operations,
group structure, compliance costs, intragroup arrangements and capital
requirements.

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

HM Treasury (or UKGI on its behalf) could exercise a significant degree of
influence over NatWest Group and further offers or sales of NatWest Group's
shares held by HM Treasury may affect the price of NatWest Group securities.

In its Autumn Statement 2023 (presented on 22 November 2023), the UK
Government confirmed its commitment to exiting its shareholding in NatWest
Group plc, subject to market conditions. It also stated that it "intends to
fully exit by 2025-26 utilising a range of disposal methods" and "will explore
options to launch a share sale to retail investors in the next twelve months,
subject to supportive market conditions".

NatWest Group plc has most recently: (i) carried out a directed buyback of
NatWest Group plc ordinary shares from HM Treasury in May 2023, and (ii) made
purchases under NatWest Group plc's on-market buyback programmes announced in
July 2023 and February 2024. NatWest Group plc may participate in similar
directed or on-market buybacks in the near- and medium-term future. As at 8
January 2024, HM Treasury held 36.94% of the ordinary share capital with
voting rights of NatWest Group plc. Achievement of the UK Government's Autumn
Statement 2023 objective is likely to entail it selling a significant number
of NatWest Group plc's shares. The precise timing, method and extent of
further HM Treasury's disposal of NatWest Group plc's shares may be driven by
economic as well as other considerations and is uncertain, which could result
in a prolonged period of price volatility for NatWest Group plc's ordinary
shares and its (and NatWest Group's) other securities.

Any offers or sales of a substantial number of ordinary shares in NatWest
Group plc by HM Treasury (including at a discount or with other incentives),
market expectations about these offers or sales, or perceptions about the
success or failure of any offers or sales (including for example, media or
public attention on any such offering or post-offer share price performance),
and any directed, on- or off-market buyback activity by NatWest Group plc,
could affect the prevailing market price for the outstanding ordinary shares
of NatWest Group plc and, in the case of a directed, on- or off-market
buyback, could reduce NatWest Group plc's capital and liquidity, which may
have an adverse effect on NatWest Group.

HM Treasury has indicated that it intends to respect the commercial decisions
of NatWest Group and that NatWest Group will continue to have its own
independent board of directors and management team determining its 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 a
significant degree of influence over NatWest Group including: the election or
removal of directors, the appointment or removal of senior management, NatWest
Group's capital strategy, dividend policy, remuneration policy or the conduct
of NatWest Group's operations. HM Treasury or UKGI's approach largely depends
on government policy, which could change.

The manner in which HM Treasury or UKGI exercises HM Treasury's rights as
NatWest Group'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.

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

Strategic risk

NatWest Group continues to implement its strategy, which carries significant
execution and operational risks and it may not achieve its stated aims and
targeted outcomes.

NatWest Group continues to implement its strategy, which is intended to
reflect the rapidly shifting environment and backdrop of significant
disruption in society driven by technology and changing customer expectations.
Further, shifting trends include digitalisation, decarbonisation, automation,
artificial intelligence, e-commerce and hybrid working, each of which has
resulted in significant market volatility and change. There is also increasing
investor, employee, stakeholder, regulatory and customer scrutiny regarding
how businesses address these changes and related environmental challenges,
including climate change, biodiversity and other sustainability issues,
including how NatWest Group supports its customers' transition to net zero, is
tackling inequality, working conditions, workplace health, safety and
wellbeing, diversity and inclusion, data protection and management, workforce
management, human rights and supply chain management.

In recent years, as part of its strategy, NatWest Group has refocused its
NatWest Markets business, and has also created the Commercial &
Institutional business segment. This business segment combines the previously
separately reporting Commercial, NatWest Markets and RBS International
businesses to form a single business segment, which focuses on serving
Commercial & Institutional customers. It was created to promote closer
operational and strategic alignment to support 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.

Many factors may adversely impact the successful implementation of NatWest
Group's strategy and the delivery of its intended benefits, including:

 

-    macroeconomic challenges including GDP growth, inflation, changing
interest rates, changing asset prices (including residential and commercial
property), energy prices, supply chain disruption, changes to monetary and
fiscal policy, and the impact of armed conflict, which may adversely affect
NatWest Group's customers, and which could in turn impact adversely certain
strategic initiatives and new venture opportunities for NatWest Group;

-    changing customer expectations and behaviour in response to
macroeconomic conditions or developments, technology and other factors which
could reduce the profitability, competitiveness, or volume of the services
NatWest Group offers;

-    the rapid emergence and rapid deployment of new technologies (such as
artificial intelligence, quantum computing, blockchain and digital currencies)
resulting in a potential shift across the market towards products and services
that are not part of NatWest Group's core offering today;

-    increased competitive threats from incumbent banks, fintech companies,
large technology conglomerates and other new market entrants (including those
that emerge from mergers and consolidations) who may have competitive
advantages in terms of scale, technology and customer engagement;

-    uncertainties regarding, or changes by, the senior leadership of
NatWest Group; and

-    changes to the regulatory environment and associated requirements
which could lead to shifts in operating cost and regulatory capital
requirements, that impact NatWest Group's product offerings and business
models (refer to 'NatWest Group's businesses are subject to substantial
regulation and oversight, which are constantly evolving and may adversely
affect NatWest Group; and NatWest Group could incur losses or be required to
maintain higher levels of capital as a result of limitations or failure of
various models.')

 

Delivery of NatWest Group's strategy will require:

 

-    maintaining effective governance, procedures, systems and controls
giving effect to NatWest Group's strategy;

-    managing a broad range of risks and opportunities related to changes
in the macroeconomic environment, customer expectations and behaviour,
technology, regulation and competition alongside the emerging risks and
opportunities associated with climate and other sustainability-related areas;

-    achieving a number of financial, capital and operational targets and
expectations within the relevant timeframe, or at all; and

-    continued cost-controlling measures, which may result in provisions in
connection to a lower NatWest Group's cost base, may divert investment from
other areas, and may vary considerably from year to year.

 

In pursuing its strategy, NatWest Group may not be able to successfully: (i)
implement some or all aspects of its strategy; (ii) meet any or all of the
related targets or expectations of its strategy; and otherwise realise the
anticipated benefits of its strategy, in a timely manner, or at all; or (iii)
realise the intended strategic objectives of any other future strategic or
growth initiative. The scale and scope of its strategy and the intended
changes continue to present material business, operational and regulatory
(including compliance with the UK ring-fencing regime), conflicts, legal,
execution, IT system, cybersecurity, internal culture, conduct and people
risks to NatWest Group. Implementing changes and strategic actions, including
in respect of any growth initiatives, requires the effective application of
robust governance and controls frameworks and robust IT systems and there is a
risk that NatWest Group may not be successful in all these respects. The
ongoing implementation of NatWest Group's strategy could result in materially
higher costs than initially contemplated (including due to material
uncertainties and factors outside of NatWest Group's control) and may not be
completed as planned (both in terms of substantive targets and timing), or at
all. This could lead to additional management actions by NatWest Group.

Each of these risks, and others identified in these Principal Risks and
Uncertainties, individually or collectively could jeopardise the
implementation and delivery of NatWest Group's strategy, impact NatWest
Group's products and services offering, its reputation with customers or
business model and adversely affect NatWest Group's ability to deliver its
strategy and meet its targets and guidance.

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

 

Acquisitions, divestments, other strategic transactions and/or the withdrawal
from the Republic of Ireland by NatWest Group may not be successful, and
consolidation or fragmentation of the financial services industry may
adversely affect NatWest Group.

The financial services industry is experiencing continued competitive pressure
resulting from technological advancement that disrupts traditional business
models and from incumbent banks, fintech companies, large technology
conglomerates and other new market entrants. To compete effectively, NatWest
Group may decide, as part of its strategy, to undertake acquisitions,
investments, the purchase of assets and liabilities, divestments,
restructurings, reorganisations, joint ventures and other strategic
partnerships, as well as other transactions and initiatives.

In addition, NatWest Group may decide to grow its business through these
transactions and initiatives to, amongst others: (i) enhance capabilities that
may lead to better productivity or cost efficiencies; (ii) acquire talent;
(iii) pursue new products or expand existing products; and/or (iv) enter new
markets or enhance its presence in existing markets.

 

In pursuing its strategy, NatWest Group may not fully realise the expected
benefits and value from the above-mentioned transactions and initiatives in
the time, or to the degree, anticipated, or at all. In particular, NatWest
Group may: (i) fail to realise the business rationale for the transaction or
initiative, or rely on assumptions underlying the business plans supporting
the valuation of a target transaction or initiative that may prove inaccurate,
for example, regarding synergies and expected commercial demand; (ii) fail to
successfully integrate any acquired businesses, investment, joint-venture or
assets (including in respect of technologies, existing strategies, products,
governance, systems and controls, and human capital) or to successfully divest
or restructure a business; (iii) fail to retain key employees, customers and
suppliers of any acquired or restructured business; (iv) be required or wish
to terminate pre-existing contractual relationships, which could prove costly
and/or be executed at unfavourable terms and conditions; (v) fail to discover
certain contingent or undisclosed liabilities in businesses that it acquires,
or its due diligence to discover any such liabilities may be inadequate; (vi)
not obtain necessary regulatory and other approvals or onerous conditions may
be attached to such approvals; and (vii) compete with existing larger banks or
financial institutions (and those that emerge from mergers and consolidations)
or other larger entities offering financial services products that may have
more bargaining power in negotiations than NatWest Group. Accordingly, NatWest
Group may not be successful in changing its business and any particular
transaction may not succeed, may be limited in scope or scale (including due
to NatWest Group's current ownership structure) and may not conclude on the
terms contemplated, or at all.

For example, in the context of divestments, the remaining phases of NatWest
Group's phased withdrawal from ROI entails commercial, operational,
reputational, legal and execution risks, as it will require transfers of
business, assets and liabilities. These risks include: (i) inability to return
capital from Ulster Bank Ireland DAC to its parent or additional costs for its
parent; (ii) higher than anticipated recognition of disposal losses as part of
the orderly run-down of certain loan portfolios; (iii) execution risks and
additional operational expense and resource to facilitate exit; (iv) the
inability to obtain necessary approvals and/or support from governmental
authorities, regulators and/or other stakeholders; (v) potential loss of
colleagues; (vi) regulatory risk, including in relation to prudential, conduct
and other regulatory requirements; (vii) brand and/or reputational risks and
stakeholder scrutiny about the phased withdrawal from ROI. These risks and
uncertainties may result in the withdrawal costing more, taking more time,
being more complex or harder to mitigate than currently estimated. These risks
and other divestment risks may have a material adverse effect on NatWest
Group's future results, financial condition, prospects, reputation, or its
ability to complete its phased withdrawal from ROI.

Continued competitive pressure in the financial services industry from both
established and new market entrants such as technology companies, may have a
negative impact on NatWest Group's business. Existing larger banks or
financial institutions (and those that emerge from mergers and consolidations)
or other larger entities offering financial services products may have more
bargaining power in negotiations than NatWest Group and therefore may be in a
position to extract more advantageous terms than NatWest Group. Refer to
'NatWest Group operates in markets that are highly competitive, with
competitive pressures and technology disruption'.

Any of the above may have a material adverse effect on NatWest 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 Brexit, NatWest
Group expects that certain of its assets, liabilities, transactions and
activities (including NatWest Group's Western European corporate portfolio
principally consisting of term funding and revolving credit facilities), may
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 NatWest Group's future
results, financial condition, prospects, and/or reputation.

 

Financial resilience risk

NatWest Group may not achieve its ambitions, targets, guidance it communicates
or be in a position to continue to make discretionary capital distributions
(including dividends to shareholders).

As part of NatWest Group's strategy, it has set a number of financial, capital
and operational targets including in respect of its: CET1 ratio target, MREL
targets, return on tangible equity (ROTE), funding plans and requirements,
employee engagement, diversity and inclusion as well as climate-related
targets (including its climate and sustainable funding and financing targets)
and customer satisfaction targets and discretionary capital distributions
(including dividends to shareholders). Refer to 'NatWest Group continues to
implement its strategy, which carries significant execution and operational
risks and may not achieve its stated aims and targeted outcomes.'

NatWest Group's ability to meet its ambitions, targets and 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, operational risks and risks relating to NatWest Group's
business model and strategy (including risks associated with climate and other
sustainability-related issues), competitive pressures, and litigation,
governmental actions, investigations and regulatory matters. If assumptions,
judgements and estimates (for example about future economic conditions) prove
to be incorrect NatWest Group may not achieve any or all or its ambitions,
targets, or guidance.

In addition, as NatWest Group plc is a non-operating holding company, its
source of income is from its operating subsidiaries that hold the principal
assets and operations of NatWest Group and its ability to continue to make
capital distributions (including dividends to shareholders) is therefore
subject to such subsidiaries' financial performance, and their respective
ability to make capital distributions directly or indirectly to NatWest Group
plc which, in certain cases, could also be restricted by applicable laws,
regulations and other requirements.

Refer to 'NatWest 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 failure of NatWest Group to achieve ambitions, targets or guidance, or
make discretionary capital distributions may have a material adverse effect on
NatWest Group's future results, financial condition, prospects, and/or
reputation.

 

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

The markets within which NatWest Group operates are highly competitive.
NatWest Group expects competition to continue and intensify in response to
various changes including: evolving customer behaviour, technological changes
(including digital currencies and other instruments, stablecoins and the
growth of digital banking, such as from fintech entrants), competitor
behaviour, new entrants to the market (including non-traditional financial
services providers such as retail or technology conglomerates, who may have
competitive advantages in scale, technology and customer engagement),
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 and other factors. In particular, developments in the
financial sector resulting from new (or more competitive) banking, lending and
payment products and services offered by rapidly evolving incumbents,
challengers (including shadow banks and alternative lenders, i.e. entities
which carry out activities of a similar nature to banks but without the same
regulatory oversight) and new entrants such as technology companies (which may
result in a shift in customer behaviour) and the introduction of disruptive
technology, may impede NatWest Group's ability to grow or retain its market
share and impact its revenues and profitability, particularly in its key UK
retail and commercial and institutional banking segments. Moreover,
innovations such as biometrics, artificial intelligence (including generative
artificial intelligence), automation, the cloud, blockchain, cryptocurrencies
and quantum computing may rapidly facilitate industry transformation.

Some of these trends have been catalysed by various regulatory and competition
policy interventions, including the UK initiative on Open Banking, 'Open
Finance' and other remedies imposed by the Competition and Markets Authority
('CMA'), which are designed to further promote competition within the
financial sector (including banking). The competition enhancing measures under
NatWest Group's independently administered Alternative Remedies Package (ARP)
benefit grant recipients and eligible competitors. The ARP may be more costly
than anticipated and may adversely affect NatWest Group's competitive position
and/or reputation. Failure to comply with the terms of the ARP scheme could
result in the imposition of additional measures or limitations on NatWest
Group's operations, additional supervision by NatWest Group's regulators, and
loss of investor confidence.

Increasingly, many of the products and services offered by NatWest Group are,
and will become, more technology intensive, including through digitalisation
and the use of artificial intelligence. For example, NatWest Group has
invested in a number of fintech ventures, including Mettle, FreeAgent, Tyl,
Rapid Cash, Rooster Money, Vodeno and Cushon. NatWest Group's ability to
develop or acquire such digital solutions (which also need to comply with
applicable and evolving regulations) and their integration in NatWest Group's
systems and controls has become increasingly important to retaining and
growing NatWest Group's competitiveness, market share and customer-facing
businesses in the UK or elsewhere. There is a risk that NatWest Group's
innovation strategy, which includes investment in its IT capability intended
to address the material increase in customer and merchant use of online and
mobile technology for banking as well as selective acquisitions, which carry
associated risks will be successful or that it will allow NatWest Group to
successfully offer innovative products and services in the future. For
example, NatWest Group's current or future competitors may be more successful
than NatWest Group in implementing technologies for delivering products or
services to their customers, which may adversely affect its competitive
position. NatWest Group may also fail to identify future opportunities or fail
to derive benefits from technologies in a context of technological innovation,
changing customer behaviour and changing regulatory demands, resulting in
increased competition from traditional banking businesses as well as new
providers of financial services, including technology conglomerates with
strong brand recognition, that may be able to develop financial services at a
lower cost base.

NatWest Group's competitors may also be better able to attract and retain
customers and key employees, may have more effective IT systems, and may have
access to lower cost funding and/or be able to attract deposits on more
favourable terms than NatWest Group. Although NatWest Group invests in new
technologies and participates in industry and research-led initiatives aimed
at developing new technologies, such investments may be insufficient or
ineffective, especially given NatWest Group's focus on cost efficiencies. This
could affect NatWest Group's ability to offer innovative products or
technologies for delivering products or services to customers and its
competitive position.

Furthermore, the development of innovative products depends on NatWest Group's
ability to effectively produce, acquire, or manage underlying high-quality
data, failing which its ability to offer innovative products may be
compromised.

If NatWest Group is unable to offer competitive, attractive and innovative
products that are also profitable and rolled out in a timely manner; it will
lose market share, incur losses on some or all of its initiatives and lose
opportunities for growth. In this context, NatWest Group is investing in the
automation of certain solutions and interactions within its customer-facing
businesses, including through automated processes and artificial intelligence.
Such initiatives may result in operational, reputational and conduct risks if
the technology used is not used appropriately, is defective, inadequate or is
not fully integrated into NatWest Group's current solutions, systems and
controls. There can be no certainty that such initiatives will deliver the
expected cost savings and investment in technology (including automated
processes and artificial intelligence) will likely also result in increased
costs for NatWest Group.

In addition, the implementation of NatWest Group's strategy (including in
relation to acquisitions, divestments, reorganisations and/or partnerships),
delivery on its climate ambition, cost-controlling measures, as well as
employee remuneration constraints, may also have an impact on its ability to
compete effectively. Intensified competition from incumbents, challengers and
new entrants as well as disintermediation by large technology companies could
affect NatWest Group's ability to maintain satisfactory returns. Moreover,
activist investors have increasingly become engaged and interventionist in
recent years, which may pose a threat to NatWest Group's strategic
initiatives. Furthermore, continued consolidation or technological or other
developments in the financial services industry could result in NatWest
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, or the emergence of new
competitors.

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

NatWest Group has significant exposure to counterparty and borrower risk
including credit losses, which may have an adverse effect on NatWest Group.

NatWest 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 NatWest Group's businesses.
NatWest Group's lending strategy and associated processes and systems may fail
to identify, anticipate or quickly react to weaknesses or risks in a
particular sector, market, borrower or counterparty, or NatWest Group's credit
risk appetite relative to competitors, or fail to appropriately value physical
or financial collateral. This may result in increased default rates or a
higher loss given default for loans, which may, in turn, impact NatWest
Group's profitability. Refer to 'Risk and capital management - Credit Risk'.

The credit quality of NatWest Group's borrowers and other counterparties may
be affected by UK and global macroeconomic and political uncertainties,
prevailing economic and market conditions. These include factors relating to
interest rates and inflation, changing asset prices (including residential and
commercial property), energy prices, supply chain disruption, changes to
monetary and fiscal policy, the impact of armed conflict, and the legal and
regulatory landscape in the UK and countries where NatWest Group is exposed to
credit risk. 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.

Any increase in drawings upon credit facilities may also increase NatWest
Group's RWAs. In addition, the level of household indebtedness (on a per
capita basis) in the UK remains high. The ability of households and businesses
to service their debts could be worsened by a period of high unemployment, or
high interest rates or inflation, particularly if prolonged.

NatWest Group may be affected by volatility in property prices (including as a
result of UK political or economic conditions) given that NatWest Group's
mortgage loan and wholesale property loan portfolios as at 31 December 2023
amounted to £239.5 billion, representing 61% of NatWest Group's total loan
exposure. If property prices in the UK were to weaken this could lead to
higher impairment charges, particularly if default rates also increase. In
addition, NatWest Group's credit risk may be exacerbated if the collateral
that it holds cannot be realised as a result of market conditions, regulatory
intervention, or other applicable laws, or if it is liquidated at prices not
sufficient to recover the net amount outstanding to NatWest Group after
accounting for any IFRS 9 provisions already made. This is most likely to
occur during periods of illiquidity or depressed asset valuations.

NatWest 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 and 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 NatWest
Group. This systemic risk may also adversely affect financial intermediaries,
such as clearing agencies, clearing houses, banks, securities firms and
exchanges with which NatWest Group interacts on a regular basis. Refer to
'NatWest 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 NatWest Group and
an inability to engage in routine funding transactions. If NatWest Group
experiences losses and a reduction in profitability, this is likely to affect
the recoverable value of fixed assets, including goodwill and deferred taxes,
which may lead to write-downs.

NatWest 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, NatWest 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.

Refer to  '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 2023 may not prove to be
adequate resulting in incremental ECL provisions for NatWest Group.

Due to NatWest Group's exposure to the financial industry, it also has
exposure to shadow banking entities. NatWest Group is required to identify and
monitor its exposure to shadow banking 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 NatWest
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
NatWest Group.

In line with certain mandated COVID-19 pandemic support schemes, NatWest Group
assisted customers with a number of initiatives including NatWest Group's
participation in BBLS, CBILS and CLBILS products. NatWest Group sought to
manage the risks of fraud and money laundering against the need for the fast
and efficient release of funds to customers and businesses. NatWest Group may
be exposed to fraud, conduct and litigation risks arising from inappropriate
approval (or denial) of BBLS, CBILS or CLBILS or the enforcing or pursuing
repayment of BBLS, CBILS and CLBILS (or a failure to exercise forbearance),
which may have an adverse effect on NatWest Group's reputation and results of
operations. The implementation of the initiatives and efforts mentioned above
may result in litigation, regulatory and government actions and proceedings.
These actions may result in judgements, settlements, penalties, fines, or
removal of recourse to the government guarantee provided under those schemes
for impacted loans.

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

NatWest 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 NatWest Group and the industry as a whole. NatWest Group is required by
regulators in the UK, the EU and other jurisdictions in which it undertakes
regulated activities to maintain adequate liquidity and funding resources. To
satisfy its liquidity and funding requirements, NatWest Group may therefore
access sources of liquidity and funding through retail and wholesale deposits,
as well as through the debt capital markets. As at 31 December 2023, NatWest
Group plc subsidiaries held £453.6 billion in deposits from banks and
customers.

The level of deposits may fluctuate due to factors outside NatWest Group's
control, such as a loss of customers, loss of customer and/or investor
confidence (including in individual NatWest Group entities and as a result of
volatility in the financial industry), changes in customer behaviour, changes
in interest rates, government support, increasing competitive pressures for
retail and corporate customer deposits or the reduction or cessation of
deposits by wholesale depositors, which could result in a significant outflow
of deposits within a short period of time. An inability to grow or any
material decrease in NatWest Group's deposits could, particularly if
accompanied by one or more of the other factors mentioned above, adversely
affect NatWest Group's ability to satisfy its liquidity or funding needs, or
comply with its related regulatory requirements. In turn, this could require
NatWest Group to adapt its funding plans or change its operations.

Macroeconomic developments, political uncertainty, changes in interest rates,
and market volatility could affect NatWest 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, NatWest Group and its subsidiaries
could be required to change their funding plans. This could exacerbate funding
and liquidity risk, which may adversely affect NatWest Group.

As at 31 December 2023, NatWest Group plc's liquidity coverage ratio was 144%
and net stable funding ratio was 133%. If its liquidity position and/or
funding were to come under stress, and if NatWest Group were unable to raise
funds through deposits, in the debt capital markets or through other reliable
funding sources, on acceptable terms, or at all, its liquidity position would
likely be adversely affected and it might be unable to meet deposit
withdrawals on demand or at their contractual maturity, to repay borrowings as
they mature, to meet its obligations under committed financing facilities, to
comply with regulatory funding requirements, to undertake certain capital
and/or debt management activities, and/or to fund new loans, investments and
businesses or make capital distributions to its shareholders.

If, under a stress scenario, the level of liquidity falls outside of NatWest
Group's risk appetite, there are a range of recovery management actions that
NatWest 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 NatWest Group's operations.
Under the EU Bank Recovery and Resolution Directives I and II (BRRD), as
implemented in the UK, NatWest Group must maintain a recovery plan acceptable
to its regulator, such that a breach of NatWest Group's applicable liquidity
requirements may trigger the application of NatWest Group's recovery plan to
attempt to remediate a deficient liquidity position.

NatWest Group may need to liquidate assets to meet its liabilities, including
disposals of assets not previously identified for disposal to reduce its
funding commitments or trigger the execution of certain management actions or
recovery options. In a time of reduced liquidity, NatWest Group may be unable
to sell its assets, at attractive prices, or at all, which may adversely
affect NatWest Group's liquidity.

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

NatWest Group may not meet the prudential regulatory requirements for
regulatory capital and MREL, or manage its capital effectively, which could
trigger the execution of certain management actions or recovery options.

NatWest 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 levels of capital provide NatWest Group with
financial flexibility specifically in its core UK operations in the face of
turbulence and uncertainty in the UK and the global economy. Adequate levels
of capital also enable NatWest Group plc to make discretionary capital
distributions (including dividends to shareholders) and undertake buybacks of
its shares.

As at 31 December 2023, NatWest Group plc's CET1 ratio was 13.4% and is
targeting a CET1 ratio of 13-14%. NatWest Group plc's target CET1 ratio is
based on a combination of its views on the appropriate level of capital and
its actual and expected regulatory requirements and internal modelling,
including stress scenarios and management's and/or the Prudential Regulation
Authority's (PRA) views on appropriate buffers above minimum required
operating levels. NatWest Group plc's current capital strategy is based on the
expected accumulation of additional capital through the accrual of retained
earnings over time, planned capital actions (including issuances, redemptions,
and discretionary capital distributions), RWA growth in the form of regulatory
uplifts and lending growth and other capital management initiatives which
focus on improving capital efficiency and ensuring NatWest Group meets its
medium-to-long term targets. NatWest Group intends to make capital
distributions to its equity investors of certain amounts surplus to its
publicly stated CET1 target, subject to macroeconomic conditions, via a
combination of dividends and buybacks. In making dividends distribution and
buyback decisions, consideration is given to previously guided ordinary
dividend pay-out ratios, an intention to continue to help reduce the
government's stake in the Group, and maximising shareholder value.

A number of factors may impact NatWest Group plc's ability to maintain its
CET1 ratio target and achieve its capital strategy. These include:

-    a depletion of its capital resources through increased costs or
liabilities or reduced profits (for example, due to an increase in provisions
due to a deterioration in UK economic conditions);

-    an increase in the quantum of RWAs/Leverage Exposure in excess of that
expected, including due to regulatory changes (including their interpretation
or application), or a failure in internal controls or procedures to accurately
measure and report RWAs/ Leverage Exposure;

-    changes in prudential regulatory requirements including NatWest Group
plc's Total Capital Requirement/Leverage Requirement set by the PRA, including
Pillar 2 requirements, as applicable, and regulatory buffers as well as any
applicable scalars; and

-    reduced upstreaming of dividends from NatWest Group plc's subsidiaries
because of changes in their financial performance and/or the extent to which
local capital requirements exceed NatWest Group plc's target ratio; and
limitations on the use of double leverage (i.e., NatWest Group plc's use of
debt to invest in the equity of its subsidiaries, as a result of the Bank of
England's and/or NatWest Group's evolving views on distribution of capital
within groups).

 

A shortage or reduction of capital could in turn affect NatWest Group plc's
capital ratio, and/or its ability to make capital distributions and in turn
NatWest Group may not remain a viable, competitive or profitable banking
business.

A minimum level of capital is required to be met by NatWest Group plc for it
to be entitled to make certain discretionary payments, and institutions such
as NatWest Group plc which fail to meet the regulatory combined buffer
requirement are subject to restricted discretionary payments. The resulting
restrictions are scaled according to the extent of the breach of the combined
buffer requirement and calculated as a percentage of the profits of the
institution since the last distribution of profits or discretionary payment
which gives rise to a maximum distributable amount (MDA) (if any) that the
financial institution can distribute through discretionary payments. Any
breach of the combined buffer requirement may necessitate for NatWest Group
plc reducing or ceasing discretionary payments to shareholders (including
payments of dividends) and buybacks depending on the extent of the breach.

NatWest Group plc is required to maintain a set quantum of MREL set as the
higher of its RWAs or the applicable leverage-based minimum capital
requirement. The Bank of England has identified single point-of-entry at
NatWest Group plc, as the preferred resolution strategy for NatWest Group. As
a result, NatWest Group plc is the only entity within NatWest Group that can
externally issue securities that count towards its MREL, the proceeds of which
can then be downstreamed to meet the internal MREL of its operating entities
and intermediate holding companies.

If NatWest Group plc is unable to raise or retain the requisite amount of
regulatory capital or MREL, downstream the proceeds of MREL to subsidiaries as
required, or to otherwise meet its regulatory capital, MREL and leverage
requirements, it may be exposed to increased regulatory supervision or
sanctions, loss of customer and/or investor confidence, constrained or more
expensive funding and be unable to make discretionary payments on capital
instruments.

If, under a stress scenario, the level of regulatory capital or MREL falls
outside of NatWest Group's risk appetite, there are a range of recovery
management actions (focused on risk reduction and mitigation) that NatWest
Group could seek to take to manage its capital levels, but any such actions
may not be sufficient to restore adequate capital levels. Under the BRRD, as
implemented in the UK, NatWest Group must maintain a recovery plan acceptable
to its regulator, such that a breach of NatWest Group's applicable capital or
leverage requirements may trigger the application of NatWest Group's recovery
plan to remediate a deficient capital position.

NatWest Group's regulator may request that NatWest Group carry out certain
capital management actions or, if NatWest Group plc's CET1 ratio falls below
7%, certain regulatory capital instruments issued by NatWest Group plc will be
written-down or converted into equity and there may be an issue of additional
equity by NatWest Group plc, which could result in the reduction in value of
the holdings of NatWest Group plc's existing shareholders.

The success of such issuances will also be dependent on favourable market
conditions and NatWest Group may not be able to raise the amount of capital
required on acceptable terms, or at all. Separately, NatWest Group may address
a shortage of capital by taking action to reduce leverage exposure and/or RWAs
via asset or business disposals. These actions may, in turn, affect: NatWest
Group's product offering, credit ratings, ability to operate its businesses,
pursue its strategy and strategic opportunities, any of which may adversely
affect NatWest Group. Refer to 'NatWest Group may become subject to the
application of UK statutory stabilisation or resolution powers which may
result in, for example, the cancellation, transfer or dilution of ordinary
shares, or the write-down or conversion of certain other of NatWest Group's
securities.'; and 'NatWest Group may be adversely affected if it fails to meet
the requirements of regulatory stress tests.'

Any of the above may have a material adverse effect on NatWest 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 or any of their respective debt securities could
adversely affect the availability of funding for NatWest Group, reduce NatWest
Group's liquidity and funding position and increase the cost of funding.

Rating agencies regularly review NatWest Group plc and other NatWest Group
entities' credit ratings and outlooks. NatWest 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 NatWest 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 NatWest Group operates; the implementation of structural
reform; the legal and regulatory frameworks applicable to NatWest 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 NatWest Group's key markets
(including inflation and interest rates), supply chain disruptions and the
outcome of any further Scottish independence referendum, any reduction of the
UK's sovereign credit ratings and market uncertainty. In addition, credit
ratings agencies are increasingly taking into account sustainability-related
factors, including climate, environmental, social and governance related risk,
as part of the credit ratings analysis, as are investors in their investment
decisions. Refer to 'A reduction in the ESG ratings of NatWest Group could
have a negative impact on NatWest Group's reputation and on investors' risk
appetite and customers' willingness to deal with NatWest Group.'

Any reductions in the credit ratings of NatWest Group plc or of certain other
NatWest Group entities, including, in particular, any downgrade below
investment grade, or a deterioration in the capital markets' perception of
NatWest Group's financial resilience could significantly affect NatWest
Group's access to capital markets, reduce 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 NatWest Group's (and, in particular, NatWest Group plc's) liquidity and
funding position, cost of funding and its access to capital markets and could
limit the range of counterparties willing to enter into transactions, on
favourable terms, or at all, with NatWest Group (and, in particular, with
NatWest Group plc). This may in turn adversely affect NatWest Group's
competitive position and threaten its prospects.

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

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

NatWest Group entities are subject to annual and other stress tests by their
respective regulators in the UK and EU. Stress tests are designed to assess
the resilience of banks such as NatWest 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 may need to take action to strengthen its
capital position.

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

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

NatWest 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 NatWest Group's business, strategy and capital
requirements, NatWest Group relies on analytical and other 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, NatWest Group utilises models for valuations, credit
approvals, calculation of loan impairment charges on an IFRS 9 basis,
financial reporting and for 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)). NatWest Group's models, and the parameters and assumptions on which
they are based, are periodically reviewed.

As model outputs are imperfect representations of real-world phenomena or
simplifications of complex real-world systems and processes, and are based on
a limited set of observations, model outputs therefore remain uncertain.
NatWest Group may face adverse consequences as a result of actions or
decisions based on models that are poorly developed, incorrectly implemented,
outdated 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 NatWest Group
operates) or as a result of the modelled outcome being misunderstood, or by
such information being used for purposes for which it was not designed. This
could result in findings of deficiencies by NatWest Group's regulators
(including as part of NatWest Group's mandated stress testing) and increased
capital requirements, may render some business lines uneconomic, may require
management action or may subject NatWest Group to regulatory sanction, any of
which in turn may also have an adverse effect on NatWest Group and its
customers.

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

NatWest 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 NatWest 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 NatWest 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 2023, these include loan impairments, fair value, deferred tax
and conduct and litigation provisions. These are set out in 'Critical
accounting policies and sources of estimation uncertainty'.

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

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

NatWest 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 NatWest
Group having to recognise additional liabilities on its balance sheet, or in
further write-downs or impairments to its assets and could also have a
material adverse effect on NatWest Group.

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

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

The value or effectiveness of any credit protection that NatWest Group has
purchased depends on the value of the underlying assets and the financial
condition of the insurers and counterparties.

NatWest Group has credit exposure arising from over-the-counter derivative
contracts, mainly credit default swaps (CDSs), and other credit derivatives,
each of which are carried at fair value. The fair value of these CDSs, as well
as NatWest Group's exposure to the risk of default by the underlying
counterparties, depends on the valuation and the perceived credit risk of the
instrument against which protection has been bought. Many market
counterparties have been adversely affected by their exposure to residential
mortgage-linked and corporate credit products, whether synthetic or otherwise,
and their actual and perceived creditworthiness may deteriorate rapidly. If
the financial condition of these counterparties or their actual or perceived
creditworthiness deteriorates, NatWest Group may record further credit
valuation adjustments on the credit protection bought from these
counterparties under the CDSs. NatWest Group also recognises any fluctuations
in the fair value of other credit derivatives. Any such adjustments or fair
value changes may have a material adverse effect on NatWest Group's future
results, financial condition, prospects, and/or reputation.

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

NatWest Group is subject to regulatory oversight by the Bank of England 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 June 2022 the Bank of England communicated its assessment of NatWest
Group's preparations and did not identify any shortcomings, deficiencies or
substantive impediments although two areas were highlighted as requiring
further enhancements. NatWest Group could be adversely affected should future
Bank of England assessments deem NatWest Group's preparations to be
inadequate.

If future Bank of England assessments identify a significant gap in NatWest
Group's ability to achieve the resolvability outcomes or reveals 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 as, depending on the Bank of
England'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, a requirement not to make discretionary distributions or undertake
NatWest Group's shares buybacks, and/or a requirement to maintain a specified
amount of MREL.

This may also impact NatWest Group's strategic plans and may have a material
adverse effect on NatWest Group's future results, financial condition,
prospects, and/or reputation, or lead to a loss of investor confidence.

NatWest Group may become subject to the application of UK statutory
stabilisation or resolution powers which may result in, for example, the
cancellation, transfer or dilution of ordinary shares, or the write-down or
conversion of certain other of NatWest Group's securities.

HM Treasury, the Bank of England, the PRA and the FCA (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-owned by the
Bank of England; (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 any 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.

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. 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 resolution action is
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
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 undertaken in relation to the ordinary
shares and other securities issued by NatWest Group, which may depend on
factors outside of NatWest Group's control. Moreover, the UK Banking Act
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, any exercise of the resolution regime powers by the
Authorities may adversely affect holders of NatWest Group plc's ordinary
shares or other NatWest Group securities. This may result in various actions
being undertaken in relation to NatWest Group and any securities of NatWest
Group, including cancellation, transfer, dilution, write-down or conversion
(as applicable). There may also be a corresponding adverse effect on the
market price of such ordinary shares and other NatWest Group securities.

Each of these actions may also have a material adverse effect on NatWest
Group's future results, financial condition, prospects, and/or reputation.

Climate and sustainability-related risks

NatWest Group and its value chain face climate-related and
sustainability-related risk that may adversely affect NatWest Group.

NatWest Group and its value chain (including its investors, customers,
counterparties (including its suppliers) and employees) may face financial and
non-financial risks arising from sustainability-related risks, including
climate-related risks.

Climate and sustainability-related risks may:

-    adversely affect asset pricing and valuations of NatWest 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,
activists, the public, customers, counterparties (including suppliers) and/or
investors associating NatWest Group or its customers with adverse climate and
sustainability-related issues;

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

-    exacerbate other risk categories to which NatWest 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; and

-    may have a material adverse effect on NatWest Group's reputation,
future results, financial condition, and/or prospects (including cash flows,
access to finance or cost of capital over the short, medium or long term).

 

Climate and sustainability matters are becoming increasingly political and
polarised. Some customers, counterparties (including suppliers) and investors
may decide not to do business with NatWest Group because, according to their
own assessment, NatWest Group's strategy, ambitions and targets related to
climate and sustainability do not meet their expectations, whereas others may
decide not to do business with NatWest Group for failing to progress its
climate and sustainability-related strategy, ambitions and targets or if they
are of the view that they lack credibility.

If NatWest Group fails to identify, assess, prioritise, monitor and react
appropriately to climate and sustainability-related risks, in a timely manner
or at all, climate and sustainability-related physical, transition and
liability risks and opportunities, changing regulatory and market expectations
and societal preferences that NatWest Group, its customers, counterparties
(including suppliers) face, this may have a material adverse effect on NatWest
Group's business, future results, financial condition, prospects, reputation
or the price of its securities.

Climate-related risks may adversely affect the global financial system,
NatWest Group or its value chain.

Climate-related risks represent a source of systemic risk in the global
financial system. The financial impacts of climate-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 NatWest
Group.

There are significant uncertainties as to the location, extent and timing of
the manifestation of the physical impacts of climate change, such as more
severe and frequent extreme weather events (storms, flooding, subsidence, heat
waves, droughts and wildfires), rising average global temperatures and sea
levels, nature loss, declining food yields, destruction of critical
infrastructure, supply chain disruption and resource scarcity. Damage to
NatWest Group customers' and counterparties'(including suppliers') properties
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
NatWest Group's portfolios. In addition, NatWest Group's premises and
operations, or those of its critical outsourced functions may experience
damage or disruption leading to increased costs. Any of these may have a
material adverse effect on NatWest Group's future results, financial
condition, prospects, and/or reputation.

To meet the goals of the UK's Net Zero Strategy will require a net-zero
transition across all sectors of the UK economy. The impacts of the extensive
social, commercial, technological, policy and regulatory changes required to
achieve this transition remain uncertain but are expected to be significant,
subject to continuous changes and developments and may be disruptive across
the global economy and markets, especially if these changes do not occur in an
orderly or timely manner or are not effective in reducing emissions
sufficiently in a timely manner, or at all. NatWest Group's business and
customers in some sectors, including but not limited to, residential
mortgages, commercial real estate, agriculture (primary farming), automotive
manufacturing, aviation, shipping, land transport and logistics (freight road,
passenger rail and road), electricity generation and oil and gas are expected
to be particularly impacted. The timing and pace of the net-zero transition is
also uncertain, 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.

Climate-related risks may exacerbate the impact of financial and non-financial
risks and they may have a material adverse effect on NatWest Group's future
results, financial condition, prospects, and/or reputation, including as a
result of financial losses caused directly or indirectly by climate-related
litigation and conduct matters (referred to as 'liability risk'). Refer to
'NatWest Group may be subject to potential climate and other
sustainability-related litigation, enforcement proceedings, investigations and
conduct risk.'

NatWest Group and its value chain may, face other sustainability-related risks
that may adversely affect NatWest Group.

NatWest Group and its value chain (including its investors, customers,
counterparties (including its suppliers) and employees) may face financial and
non-financial risks arising from broader (i.e. non-climate-related)
sustainability issues. These include: (i) 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); (ii) risks related to societal (including human
rights) matters, for example, climate change and environmental degradation
negatively impacting people's standard of living and health, geopolitical
tensions and conflict endangering people's lives and security, the
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, financial crime,
data privacy breaches and lack of support for the vulnerable; and (iii)
governance-related risks (including board diversity, ethics, executive
compensation and management structure).

 

NatWest Group is directly and indirectly exposed to multiple types of
nature-related risks through the breadth of its activities, products and
services offering, including through the risk of default by customers whose
businesses are exposed to nature-related risks. In 2021, NatWest Group first
classified 'Biodiversity and Nature Loss' as an emerging risk for NatWest
Group within its Risk Management Framework. From January 2024, NatWest Group
has expanded its key risk definition from climate risk to climate and nature
risk and updated its climate risk policy to reflect emerging nature-related
risks and to capture requirements that go beyond climate risk.

NatWest Group supports the aims of the Task Force on Nature Related Financial
Disclosure and continues to enhance its reporting and measurement
capabilities, acknowledging challenges associated with data availability,
while continuing to review evolving disclosure standards and framework.
NatWest Group's approach is to integrate nature its existing strategy on
climate, recognising there is still, much to do in understanding its impacts
and dependencies on nature as well as our nature-related risks and
opportunities. There is also increased scrutiny from NatWest Group's
investors, customers, counterparties (including its suppliers), employees,
communities, regulators, the media and other stakeholders on how NatWest Group
addresses societal and governance related matters, including unjust working
conditions and labour rights breaches, resilience in the workplace, safety and
wellbeing, data protection and management, workforce management, human rights
and value chain management. For example, NatWest Group's ambition is to
support decarbonisation while promoting energy security, may lead to continued
exposure to carbon-intensive activities and sectors regarded as posing high
climate and nature-related and societal (including human rights) risks, (such
as the textiles, agriculture and mining sectors) each of which may impact
NatWest Group's employees, customers, counterparties (including suppliers) and
stakeholders and their business activities and/or the communities in which
they operate and, in turn, result in reputational risk for NatWest Group.

There is also growing expectation of the need for a 'just transition' and
'energy justice' - 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 continues to evaluate and assess how it
integrates 'just transition' considerations into its climate and
sustainability strategy, a failure (or perception of failure) by NatWest Group
to sufficiently factor these considerations into existing products and service
offerings may adversely affect NatWest Group, including NatWest Group's
reputation.

In 2023, NatWest Group published its initial assessment of its 'salient human
rights issues'. Human rights saliency assessments are high-level scoping
exercises based on internal and external stakeholder engagement and involve
subjective materiality and other judgements including as to severity and
likelihood of human rights impacts. Failure by NatWest Group to identify,
assess, prioritise and monitor any actual or potential adverse human rights
issues that NatWest Group, contributes to, or is directly linked to, may
adversely impact people and communities, which in turn may have a material
adverse effect on NatWest Group's future results, financial condition,
prospects and/or reputation.

Sustainability-related risks may have the potential to cause or stress other
financial and non-financial risks, including climate-related risks, and they
may have a material adverse effect on NatWest Group's future results,
financial condition, prospects, and/or reputation, including as a result of
financial losses caused directly or indirectly by sustainability-related
litigation and conduct matters (referred to as 'liability risk'). Refer to
'NatWest Group may be subject to potential climate and other
sustainability-related litigation, enforcement proceedings, investigations and
conduct risk'.

NatWest Group's climate change related strategy, 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.

NatWest Group has an ambition to become a leading bank in the UK, helping to
address the climate challenge. 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. Further, in December 2022,
NatWest Group published its science-based targets validated by Science Based
Target Initiative for 79% of its lending book as at 31 December 2019 and 57%
of debt securities and equity shares, excluding sovereign debt securities.

NatWest Group has also announced and in the future it may also announce other
climate ambitions, targets and initiatives which support its aim to help
addressing the climate challenge.

Making the changes necessary to achieve NatWest Group's strategic direction on
climate change, including its 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 NatWest Group's business,
operating model, its existing exposures and the products and services NatWest
Group provides to its customers (potentially on accelerated timescales).
NatWest Group may be required to (i) 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 not making the necessary changes in a timely
manner, or at all) may have a material adverse effect on NatWest Group's
business and operations, financial condition, prospects and competitive
position 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.

NatWest Group's ability to achieve its strategy, including its climate
ambitions and targets, will significantly depend on many factors and
uncertainties beyond NatWest 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, investors, customers, suppliers 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 roll-out 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 NatWest Group to meet its
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.

 

NatWest Group's ability to achieve its climate ambitions and targets depends
to a significant extent on the timely implementation and integration of
appropriate government policies. The UK CCC June 2023 Progress Report to the
UK Parliament states that the rate of emissions reduction will need to
significantly increase for the UK to meet its 2030 commitments and continued
delays in policy development and implementation mean achievement is
increasingly challenging. On 20 September 2023, the UK Government announced
its revised plans on reducing emissions to reach net zero, including (i)
delaying the proposed ban on the sale of petrol and diesel cars to 2035; (ii)
not proceeding with new policies forcing landlords to upgrade the energy
efficiency of their properties; and (iii) delaying the ban on new fossil fuel
boilers for certain households. Accordingly, NatWest Group considers
achievement of the following ambitions increasingly challenging (i) 50% of
NatWest Group's mortgage portfolio to have an EPC rating of C or above by
2030; and (ii) to at least halve the climate impact of NatWest Group's
financing activity by 2030, against a 2019 baseline.

 

NatWest Group has also stated that it plans to phase-out coal for UK and
non-UK customers who have UK coal production, coal fired generation and coal
related infrastructure by 1 October 2024, with a full global phase-out by 1
January 2030. Data challenges, particularly the lack of granular customer
information, creates challenges in identifying customers with 'coal related
infrastructure' (e.g. transportation and storage) and other customers with
'coal- related operations' within NatWest Group's large and diversified
customer portfolios. Therefore, there is a risk that some customers with
UK-based coal activities may not have been identified and that NatWest Group
will not be able to identify all relevant activities to achieve these coal
phase-out plans.

 

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

Meaningful reporting of climate and sustainability-related risks and
opportunities and their potential impacts and related metrics depends on
access to accurate, reliable, verifiable, auditable, consistent and comparable
climate and sustainability-related data from counterparties (including
suppliers) or customers. Data may not be generally available or, if available,
may not be accurate, reliable, verifiable, auditable, consistent, or
comparable. Any failure of NatWest Group to  proportionately collect or
develop accurate, reliable, verifiable, auditable, consistent and comparable
counterparty (including supplier) and customer data, may adversely affect
NatWest Group's ability to prepare meaningful reporting which is relevant,
represented in an accurate, verifiable, comparable and understandable way of
the climate and sustainability-related risks and opportunities which may
adversely affect NatWest Group's ability to meet external disclosure
obligations and its reputation, business and its competitive position.

In the absence of other sources, reporting of financed emissions and other
sustainability data by financial institutions, including NatWest Group, is
necessarily based on aggregated information developed by third parties that
may be prepared in an inconsistent way using different methodologies,
interpretations, or assumptions. NatWest Group's climate and
sustainability-related disclosures use a greater number and level of
assumptions, judgements and estimates than many of its financial disclosures.
These assumptions, judgements and estimates are highly likely to change
materially over time, and, when coupled with the longer timeframes used in
these climate and sustainability-related disclosures, make any assessment of
materiality inherently uncertain.

In particular, in the absence of actual emissions monitoring and measurement,
emissions estimates are based on sector and other assumptions that may not be
accurate for a given counterparty (including supplier) or customer. There may
also be data gaps that are filled using 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 NatWest Group's historical and current strategic, financial,
resilience and investment planning horizons.

As a result, NatWest Group's climate and sustainability-related disclosures
may be amended, updated or restated in the future as the quality and
completeness of NatWest Group's data and methodologies continue to improve.
These data quality challenges, gaps and limitations may have a material impact
on NatWest Group's ability to make effective business decisions about climate
and sustainability-related risks and opportunities, including risk management
decisions, to comply with disclosure requirements and to monitor and report
progress in meeting ambitions, targets and pathways.

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 largely depend on the choice
of climate scenario modelling methodology and the assumptions made which
involves a number of risks and uncertainties, for example:

-    climate scenarios are not predictions of what is likely to happen or
what NatWest Group would like to happen, rather they explore the possible
implications of different judgements and assumptions by considering a series
of scenarios;

-    climate scenarios do not provide a comprehensive description of all
possible future outcomes;

-    lack of specialist expertise in NatWest Group that needs to rely on
third party advice, modelling, and data which is also subject to many
limitations and uncertainties;

-    immaturity of modelling of and data on climate-related risks on
financial assets which will presumably evolve rapidly in the coming years;

-    the number of variables and the forward-looking nature of climate
scenarios which makes them challenging to back test and benchmark;

-    the significant uncertainty as to how the climate will evolve over
time, how and when governments, regulators, businesses, investors and
customers respond and how those responses impact the economy, asset
valuations, land systems, energy systems, technology, policy and wider
society;

-    the assumptions will continue to evolve with more data/information
which may affect the baselines for comparability across reporting periods and
impact internal and external verification processes; and

-    the pace of the development of the methodologies across different
sectors may be different and therefore it may be challenging to report on the
whole balance sheet with regard to financed emissions.

 

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.

 

Furthermore, there is a lack of scientific, industry and regulatory consensus
regarding the appropriate metrics, methodologies, modelling and standardised
reporting to enable the assessment of the location, acuteness, and severity of
climate-related risks and the monitoring and mitigation of these risks in the
economy and financial system.

 

There is increasing industry concern (acknowledged by the Network for Greening
the Financial System) that model scenarios, including those provided by
central banks and supervisory bodies and are too benign and may not adequately
capture: (i) the financial implications of increasing frequency and severity
of acute physical risks as global temperatures increase; (ii) second and third
order impacts such as disruptions to supply chains and increased geo-political
risks; nor (iii) possible 'tipping points' that could lead to large,
irreversible changes in the climate system (for example the melting of
permafrost or the Greenland and Antarctic ice sheets).

Capabilities within NatWest Group to appropriately assess, model, report and
manage climate-related risks and impacts and the suitability of the
assumptions required to model and manage climate-related risks appropriately
continue to develop. But such development is still in its early stages. 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, all of which
may have a material adverse effect on NatWest Group's business, future
results, financial condition, prospects, reputation and the price of its
securities.

Failure to implement effective governance, procedures, systems and controls in
compliance with legal, regulatory requirements and societal expectations to
manage climate and sustainability-related risks and opportunities could
adversely affect NatWest Group.

The UK's prudential regulation of climate-related risk management is an
important driver in how NatWest Group develops its associated risk framework
for financing activities or engaging with counterparties (including
suppliers). Legislative and regulatory authorities are publishing expectations
as to how banks should prudently manage and transparently disclose climate and
sustainability-related risks. In the UK this includes the Bank of England's
Supervisory Statement 3/19 on the management of climate-related financial
risks, covering governance, risk management, scenario analysis and disclosure
which sets out expectations that firms, such as NatWest Group, take a
strategic approach to managing climate-related financial risks, identifying
current risks and those that can plausibly arise in the future, and
appropriate actions to mitigate those risks.

In March 2023 the Bank of England published a report setting out its latest
thinking on climate-related risks and regulatory capital frameworks. It found
there to be uncertainty over whether banks are sufficiently capitalised for
future climate-related losses and it stated that it will undertake further
analysis to explore whether changes to the regulatory capital frameworks may
be required.

Any failure of NatWest 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 the various
climate-related physical and transition risks and other sustainability-related
risks and apply the appropriate product governance process in line with
applicable legal and regulatory requirements and expectations, may adversely
affect NatWest Group's regulatory compliance, prudential capital requirements,
liquidity position and this may have a material adverse effect on NatWest
Group's business, future results, financial condition, prospects, reputation
or the price of its securities.

Increasing levels of climate and other sustainability-related laws, regulation
and oversight may adversely affect NatWest Group.

NatWest Group as well as its subsidiaries in the UK, EU and elsewhere are
increasingly becoming subject to more extensive climate and
sustainability-related legal and regulatory requirements. In the UK, these
include mandatory requirements by the FCA and under the Companies Act 2006 to
make climate-related disclosures consistent with the recommendations of the
Task Force on Climate-related Financial Disclosures.

In addition, in August 2023 the FCA set out its intention to consult in 2024
on rules and guidance for listed companies to disclose in line with the
UK-endorsed ISSB standards and the Transition Plan Taskforce Disclosure
Framework published in October 2023 as a complementary package. Further
regulatory requirements may emerge as part of the developing UK
sustainability-related disclosure requirements. In the EU, these climate and
sustainability-related legal and regulatory requirements include the EU
Taxonomy, the EU Corporate Sustainability Reporting Directive ('CSRD'), the EU
Green Bond Standard and proposed EU Corporate Sustainability Due Diligence
Directive ('CSDDD').

Certain non-UK subsidiaries of NatWest 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. For example, NatWest Group's Dutch
subsidiary, NWM N.V., is subject to the EU Taxonomy, CSRD, the proposed CSDDD,
and other legal, regulatory and supervisory expectations relating to
climate-related and environmental risk management and disclosure. A failure of
NatWest Group or any of its subsidiaries, including NWM N.V., to comply with
these regulations (if applicable), whether through insufficient resources,
expertise, support, customer and counterparty data challenges or otherwise may
have an adverse effect on NatWest Group's reputation and the successful
implementation of NatWest Group's strategy.

In some jurisdictions, particularly the United States, regulatory and
enforcement activity around climate and sustainability initiatives is becoming
increasingly politicised. This has resulted in a polarisation between
promoting more extensive climate and sustainability-related requirements, such
as the proposed SEC climate disclosure rules, and challenging climate and
sustainability-related initiatives on the basis of allegations that they could
breach applicable laws.

Divergence between UK, EU, US and other climate and sustainability-related
legal and regulatory requirements and their interpretation may increase the
cost of doing business (including increased operating costs), may result in
contentious regulatory and litigation risk, may require changes to NatWest
Group's business and may restrict NatWest Group's access to the EU/EEA and US
capital markets. Failure to comply with these divergent legal and regulatory
requirements which are applicable to NatWest Group may result in NatWest Group
and/or its subsidiaries not meeting applicable regulatory requirements or
investors' expectations. Compliance with these complex and evolving climate
and sustainability-related legal and regulatory requirements and voluntary
standards and initiatives is likely to require NatWest Group to implement
significant changes to its business models, IT systems, products, governance,
internal controls over 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.

Failure to implement and comply with these requirements, standards and
initiatives may also result in investigations and/or regulatory sanctions,
reputational damage and investor disapproval each of which may have a material
adverse effect on NatWest Group's future results, financial condition,
prospects, and/or reputation.

Increasing regulation of "greenwashing" is likely to increase the risk of
regulatory enforcement and investigation and litigation.

Misrepresenting or over-emphasising the extent to which an investment or other
type of product takes into account 'green', 'environmentally friendly',
'sustainable' or 'ethical' features and concerns, using misleading labels and
language in relation to such products and/or omitting material information
about NatWest Group's contribution to the climate crisis (including its direct
or indirect contribution to greenhouse gas emissions), or other
sustainability-related issues, could potentially result in complaints,
regulatory investigation and/or sanction, claims and/or litigation and/or
reputational damage.

This risk is likely to increase as the UK and other jurisdictions implement
and enforce new anti-greenwashing regulations. For example, the FCA's
Sustainability Disclosure Requirements and investment labels policy statement
(PS 23/16) published in November 2023 includes a general anti-greenwashing
rule that requires regulated firms (such as certain subsidiaries of NatWest
Group) to ensure that sustainability claims in financial promotions of their
products and services are consistent with the sustainability characteristics
of the product or service and are fair, clear and not misleading.

The FCA has stated that it would publish guidance as to how regulated firms
should comply with its anti-greenwashing rule including the requirements for
sustainability claims that will become effective on 31 May 2024 (currently the
subject of FCA consultation paper (GC23/3)). In the EU the European Commission
has proposed a Green Claims Directive which will address false environmental
claims and the proliferation of environmental labels by requiring certain
claims to be substantiated with scientific evidence and independently
verified.

Natwest Group plans to invest in voluntary carbon credits to mitigate
emissions beyond its own value chain whilst transitioning towards a state of
net zero emissions by 2050. NatWest Group may also be involved in trading
voluntary carbon credits with its clients, or facilitating clients to trade
these credits. Financial market and platform regulators are increasingly
taking an interest in the voluntary carbon market and voluntary carbon credits
retired, sold or traded by financial institutions or used by them as part of
their own emissions reduction plans. NatWest Group could potentially be
exposed to financial, litigation, regulatory enforcement and reputational risk
where it retires, facilitates or is otherwise associated with voluntary carbon
credit transactions or use (including use to offset own emissions). This
includes where voluntary carbon credits are not of sufficient quality,
potential issues or risks with respect to such carbon credits (or projects
through which they are generated) are not adequately disclosed or stated
benefits are exaggerated or misleading and/or such carbon credits are used
either by NatWest Group or by a third party organisation (such as a customer)
as a substitute for achieving appropriate emissions reductions in their own
operations.

Any failure of NatWest Group to implement robust and effective climate and
sustainability-related disclosure, communications and product governance
policies, procedures and controls to make accurate public statements and
claims about how environmentally friendly, sustainable or ethical NatWest
Group's products and services are and to apply these in line with applicable
legal and regulatory requirements and expectations, may adversely affect
NatWest Group's regulatory compliance and/or reputation and could give rise to
increased regulatory enforcement, investigation and litigation.

NatWest Group may be subject to potential climate and other
sustainability-related litigation, enforcement proceedings, investigations and
conduct risk.

Due to increasing new climate and sustainability-related jurisprudence, laws
and regulations in the UK and other jurisdictions, growing demand from
investors and customers for environmentally sustainable products and services,
and regulatory scrutiny, financial institutions, including NatWest Group, may
through their business activities, 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.

These risks may arise, for example, from claims pertaining to:

-    failure to meet obligations, targets or commitments relating to, or to
disclose accurately, or provide updates on material climate and/or
sustainability-related risks, or otherwise provide appropriate, balanced,
clear, complete, correct, fair, meaningful, understandable, disclosure (which
is capable of being substantiated) to investors, customers, counterparties
(including suppliers) and other stakeholders;

-    conduct, mis-selling and customer protection claims, including claims
which may relate to alleged insufficient product understanding, unsuitable
product offering and /or reliance upon information provided by NatWest Group
or claims alleging unfair pricing of climate-related products, for example in
relation to products where limited liquidity or reliable market data exists
for benchmarking purposes or which may be impacted by future climate policy
uncertainty or other factors;

-    marketing that portrays products, securities, activities or policies
as having positive climate, nature-related or sustainable outcomes to an
extent that may not be the case, or may not adequately be qualified and/or
omits material information about NatWest Group's contribution to the climate
crisis and/or its direct / indirect contribution to greenhouse gas emissions
or other sustainability-related issues;

-    damages claims under various tort theories, including common law
public nuisance claims, or negligent mismanagement of physical and/or
transition risks;

-    alleged violations of officers', directors' and other fiduciaries'
duties, for example by financing various carbon-intensive, environmentally
harmful or otherwise highly exposed assets, companies, and industries;

-    changes in the understanding of what constitutes positive climate,
nature-related or sustainable outcomes as a result of developing climate
science, leading to discrepancy between current product offerings and investor
and/or market and/or broader stakeholder expectations;

-    any weaknesses or failures in specific systems or processes associated
particularly with climate, nature-related or sustainability linked products,
and/or human rights due diligence, including any failure in the timely
implementation, onboarding and/or updating of such systems or processes;

-    counterparties, collaborators, customers to whom NatWest Group
provides services and third parties in NatWest Group's value chain who act, or
fail to act, or undertake due diligence, or apply appropriate risk management
and product governance in a manner that may adversely affect NatWest Group's
reputation or sustainability credentials; or

-    NatWest Group's or its customers', counterparties' (including
suppliers') involvement in, or decision not to participate in, certain
industries or projects associated with causing or exacerbating climate change
and nature-related degradation.

 

Furthermore, there is a risk that shareholders, campaign groups, customers and
activist groups could seek to take legal action against NatWest Group for
financing or contributing to 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).

There is an increase in the number of legal, conduct and regulatory claims as
well as an increase in the variety of legal bases being alleged, remedies
sought and amount of damages awarded in legal, conduct and regulatory
proceedings, investigations, administrative actions and other adversarial
proceedings against financial institutions for climate and sustainability
matters. There is a risk that as climate, nature-related and environmental
science develop and societal understanding of these issues increases and
deepens, courts, regulators and enforcement authorities may apply the then
current understandings of climate and the broader sustainability-related
matters retrospectively when assessing claims about historical conduct or
dealings of financial institutions, including NatWest Group. There is also an
increase in enforcement and litigation focusing on challenging public and
private sector sustainability policies and initiatives intended to address
climate change and nature-related degradation. Refer to 'NatWest Group is
exposed to the risk 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 NatWest Group'. In addition, supervisors and regulators are
increasing their enforcement focus on climate and sustainability-related
matters. For example, the ECB has stated that enforcement measures in the form
of periodic penalty payments may be imposed on banks that do not fully align
with ECB supervisory expectations of sound practices for managing climate and
environmental risks.

These potential litigation, conduct, enforcement and contract liability risks
may have a material adverse effect on NatWest Group's ability to achieve its
strategy, including its climate ambitions and targets, and this may have a
material adverse effect on NatWest Group's future results, financial
condition, prospects, and/or reputation.

A reduction in the ESG ratings of NatWest Group could have a negative impact
on NatWest Group's reputation and on investors' risk appetite and customers'
willingness to deal with NatWest Group.

ESG ratings from agencies and data providers which rate how NatWest Group
manages environmental, social and governance risks are increasingly
influencing investment decisions pertaining to NatWest Group's and/or its
subsidiaries' securities or being used as a basis to label financial products
and services as environmentally friendly or sustainable. ESG ratings are often
(i) unsolicited; (ii) subject to the assessment and interpretation by the ESG
rating agencies; (iii) provided without warranty; (iv) not a sponsorship,
endorsement, or promotion of NatWest Group by the relevant rating agency; and
(v) may depend on many factors some of which are beyond NatWest Group's
control (e.g. any change in rating methodology). In addition, certain NatWest
Group entities offer and sell products and services to customers and
counterparties based exclusively or largely on a rating by an unregulated ESG
rating agency or data providers. ESG rating agencies, at this stage, are not
subject to any specific regulatory or other regime or oversight (although
there are proposals by regulators in different jurisdictions to regulate
rating agencies and data providers). Regulators have expressed concern that
harm may arise from potential conflicts of interest within ESG rating and
review or second party opinion providers and there is a lack of transparency
in methodologies and data points, which renders ratings and reviews
incomparable between agencies or providers. Any material reduction in the ESG
ratings of NatWest Group may have a negative impact on NatWest Group's
reputation, could influence investors' risk appetite for NatWest Group's
and/or its subsidiaries' securities, particularly ESG securities, could
potentially affect the pricing of securities issued by NatWest Group and/or
its subsidiaries and could affect a customer's willingness to deal with
NatWest Group..

A regulatory sanction or enforcement action involving an ESG rating agency
used by a NatWest Group entity could also have a negative impact on NatWest
Group's reputation.

Operational and IT resilience risk

Operational risks (including reliance on third party suppliers and outsourcing
of certain activities) are inherent in NatWest 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. NatWest Group operates in a number of
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 of NatWest Group's
compliance with financial crime requirements; refer to, 'NatWest 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 NatWest Group.' These risks are also present when NatWest
Group relies on critical service providers (suppliers) or vendors to provide
services to it or its customers, as is increasingly the case as NatWest Group
outsources certain activities, including with respect to the implementation of
technologies, innovation and responding to regulatory and market changes.

Operational risks continue to be heightened as a result of the implementation
of NatWest Group's strategy, and the organisational and operational changes
involved, including: NatWest Group's phased withdrawal from ROI; NatWest
Group's current cost-controlling measures; the progression towards working as
One Bank across NatWest Group to serve customers; the implementation of the
recommendations from the recent independent reviews by the law firm Travers
Smith LLP of customer account closures, as well as the outcome of ongoing FCA
and internal reviews with respect to certain governance processes, policies,
systems and controls of NatWest Group entities including with respect to
customer account closures; 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. It is unclear as to how the future ways of working may
evolve, including in respect of how working practices may further evolve, or
how NatWest Group will evolve to best serve its customers. Any of the above
may place significant pressure on NatWest Group's ability to maintain
effective internal controls and governance frameworks.

The effective management of operational risks is critical to meeting customer
service expectations and retaining and attracting customer business. Although
NatWest 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 NatWest Group.

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

NatWest Group is subject to sophisticated and frequent cyberattacks.

NatWest Group experiences a constant threat from cyberattacks across the
entire NatWest Group and against NatWest Group's supply chain, reinforcing the
importance of due diligence of and close working relationship with the third
parties on which NatWest Group relies. NatWest 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, NatWest Group is required
to continue to invest in additional capability designed to defend against
emerging threats. In 2023, NatWest Group and its supply chain were subjected
to a small number of Distributed Denial of Service ('DDOS') and ransomware
attacks, which are a pervasive threat to the financial services industry. The
focus is to manage the impact of the attacks and sustain availability of
services for NatWest Group's customers. Consequently, NatWest Group continues
to invest significant resources in developing and evolving of cybersecurity
controls that are designed to minimise the potential effect of such attacks.

Third parties continue to make hostile attempts to gain access to, introduce
malware (including ransomware) into and exploit potential vulnerabilities of,
NatWest Group's IT systems. NatWest Group has information and cybersecurity
controls that seek to minimise the impact of any such attacks, which are
subject to review on a regular basis but given the nature of the threat, there
can be no assurance that such measures will prevent the potential adverse
effect of an attack from occurring. Refer to 'NatWest Group's operations are
highly dependent on its complex IT systems and any IT failure could adversely
affect NatWest Group.'

Any failure in NatWest 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, credit monitoring or card reissuance),
result in regulatory investigations or sanctions being imposed or may affect
NatWest 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 new SEC cybersecurity requirements). Furthermore, cyberattacks on
NatWest Group's counterparties and suppliers may also have an adverse effect
on NatWest Group's operations.

Additionally, third parties may induce employees, customers, third-party
providers or other users with access to NatWest Group's systems to wrongfully
disclose sensitive information to gain access to NatWest Group's data or
systems or that of NatWest 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 NatWest Group's employees or third parties, including third party
providers, or may result from technological failure.

NatWest 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 a material adverse effect on NatWest Group. Due
to NatWest Group's reliance on technology and the increasing sophistication,
frequency and impact of cyberattacks, such attacks may have an adverse effect
on NatWest Group.

In accordance with the Data Protection Act 2018 and the European Union
Withdrawal Act 2018, the Data Protection, Privacy and Electronic
Communications (Amendments Etc.) (EU Exit) Regulations 2019, as amended by the
Data Protection, Privacy and Electronic Communications (Amendments Etc.) (EU
Exit) Regulations 2020 ('UK Data Protection Framework') and European Banking
Authority ('EBA') Guidelines on ICT and Security Risk Management, NatWest
Group is required to ensure it implements timely, appropriate and effective
organisational and technological safeguards against unauthorised or unlawful
access to the data of NatWest Group, its customers and its employees. In order
to meet this requirement, NatWest 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 NatWest Group interacts. A
failure to monitor and manage data in accordance with the UK Data Protection
Framework and EBA requirements of the applicable legislation may result in
financial losses, regulatory fines and investigations and associated
reputational damage.

 

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

 

NatWest Group operations and strategy are highly dependent on the accuracy and
effective use of data.

NatWest Group relies on the effective use of accurate 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 NatWest 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 result in a
failure to deliver NatWest Group's strategy and could place NatWest 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,
which could result in a failure to deliver NatWest 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 NatWest Group's future
results, financial condition, prospects, and/or reputation.

 

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

NatWest 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 transactional and payment systems, financial crime, fraud systems and
controls, risk management, credit analysis and reporting, accounting, customer
service and other IT systems (some of which are owned and operated by other
entities in NatWest Group or third parties), as well as the communication
networks between its branches and main data processing centres, is critical to
NatWest Group's operations.

 

Individually or collectively, any system failure, loss of service availability
or breach of data security could potentially cause significant damage to: (i)
important business services across NatWest Group and (ii) NatWest 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 NatWest Group's regulatory approvals,
competitive position, business and brands, which could undermine its ability
to attract and retain customers and talent. NatWest Group outsources certain
functions as it innovates and offers new digital solutions to its customers to
meet the demand for online and mobile banking. Outsourcing alongside remote
working heighten the above risks.

 

NatWest Group uses IT systems that enable remote working interface with
third-party systems, and NatWest Group could experience service denials or
disruptions if such systems exceed capacity or if NatWest 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 2023, NatWest Group made considerable investments to further simplify,
upgrade and improve its IT and technology capabilities (including migration of
certain services to cloud platforms). NatWest Group also 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 or otherwise, may adversely affect NatWest
Group's operations, its reputation and ability to retain or grow its customer
business or adversely affect its competitive position.

 

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

 

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

NatWest 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 technology and data focused roles), in a highly competitive market
and under internal cost efficiency pressures.

NatWest Group's ability to attract, retain and develop highly skilled and
qualified diverse senior management (this may include a new permanent CEO in
2024) and skilled personnel may be more difficult due to the cost-controlling
measures, a failure to pay employees competitive compensation, heightened
regulatory oversight of banks and the increasing scrutiny of, and (in some
cases) restrictions placed upon, employee compensation arrangements (in
particular those of banks that have been in receipt of government support such
as NatWest Group). 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 NatWest Group's employee engagement
and the formulation and execution of its strategy and could also have an
adverse effect on its reputation with employees, customers, investors and
regulators.

Many of NatWest Group's employees in the UK, the ROI and continental Europe
are represented by employee representative bodies, including trade unions and
works councils. Engagement with its employees and such bodies is important to
NatWest Group in maintaining good employee relations. Any failure to do so may
adversely affect NatWest Group's ability to operate its business effectively.

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

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

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

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 NatWest 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
NatWest Group continues to innovate its product offering and increasingly
offers digital solutions to its customers. NatWest 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. As part of its ongoing programme of investment, there is
current and future investment planned to further strengthen financial crime
controls over the coming years, including investment in new technologies and
capabilities to further enhance customer due diligence, transaction
monitoring, sanctions and anti-bribery and corruption systems.

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 and
management or 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 NatWest
Group's reputation or its relationship with its regulators, customers,
shareholders or other stakeholders.

NatWest 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 NatWest Group's regulatory obligations,
customers' needs or do not reflect NatWest 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.

NatWest 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 NatWest Group. Hybrid working arrangements
for NatWest Group employees place heavy reliance on the IT systems that enable
remote working and may place additional pressure on NatWest Group's ability to
maintain effective internal controls and governance frameworks and increase
operational risk.

Hybrid 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.

NatWest 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 risk
management strategy in line with regulatory expectations. However, such
efforts may not insulate NatWest Group from instances of misconduct and no
assurance can be given that NatWest Group's strategy and control framework
will be effective. Any failure in NatWest Group's risk management framework
may result in the inability to achieve its strategic objectives for its
customers, employees and wider stakeholders.

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

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

Reputational risk relates to stakeholder and public perceptions of NatWest
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, the progression towards working as One Bank across NatWest
Group to serve customers or due to any events, behaviour, action or inaction
by NatWest Group, its employees or those with whom NatWest Group is
associated. Refer to 'NatWest Group's businesses are subject to substantial
regulation and oversight, which are constantly evolving and may adversely
affect NatWest Group.' This includes harm to its brand, which may be
detrimental to NatWest 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, compliance, customer or operating efficiency, or regulatory or
press scrutiny, and may adversely affect NatWest Group's ability to attract
and retain customers. For example, NatWest Group's reputational risks were
elevated during 2023 as a result of the departure of its CEO in connection
with account closures and related use of customer data that attracted
significant public and media attention.

In particular, NatWest Group's ability to attract and retain customers
(particularly, corporate/institutional and retail depositors), 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
NatWest Group conducts or modifies its business activities and operations,
media coverage (whether accurate or otherwise), employee misconduct, NatWest
Group's financial performance, IT systems failures or cyberattacks, data
breaches, financial crime and fraud, the level of direct and indirect
government support, 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 NatWest Group has implemented a Reputational Risk Policy to identify,
measure and manage material reputational risk exposures, NatWest Group cannot
be certain that it will be successful in avoiding damage to its business from
reputational risk.

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

Legal, regulatory and conduct risk

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

NatWest 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 have been introduced or amended
recently and are subject to further material changes, which may increase
compliance and conduct risks, particularly as EU/EEA and UK laws diverge as a
result of Brexit. NatWest 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 (including in respect of MiFID II and
the FSM Act 2023), LIBOR transition, corporate governance requirements, rules
relating to the compensation of senior management and other employees,
enhanced data protection and IT resilience requirements, financial market
infrastructure reforms, enhanced regulations in respect of the provision of
'investment services and activities', and increased regulatory focus in
certain areas, including conduct, consumer protection (such as the FCA's
Consumer Duty) 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 NatWest 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 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. Future competition investigations,
market reviews, or the regulation of mergers may lead to the imposition of
financial penalties or market remedies that may adversely affect NatWest
Group's competitive or financial position.

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.

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 NatWest Group include,
but are not limited to, the following:

-    General changes in government, central bank, regulatory or competition
policy, or changes in regulatory regimes that may influence investor decisions
in the jurisdictions in which NatWest Group operates;

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

-    Increased scrutiny including from the CMA, FCA and Payment Systems
Regulator ('PSR') for the protection and resilience of, and competition and
innovation in, digital and other markets, UK payment systems (with the
development of the government's National Payments Vision and Strategy) and
retail banking developments relating to the UK initiative on Open Banking,
Open Finance and the European directive on payment services;

-    The ongoing compliance by NatWest Group with CMA's Market Orders
including the Retail Banking Market Order 2017 (the 'Order') and SME
Undertakings as well as legislation being drafted to introduce penalties for
breaches of such requirements (in addition to the current customer remediation
requirements);

-    Ongoing competition litigation in the English courts around payment
card interchange fees, combined with increased regulatory scrutiny (from the
PSR) of the Visa and Mastercard card schemes;

-    Increased risk of new class action claims being brought against
NatWest Group in the Competition Appeal Tribunal for breaches of competition
law;

-    New or increased regulations relating to customer data protection as
well as IT controls and resilience, such as the proposed UK Data Protection
and Digital Information Bill (No 2) and in India, the Digital Personal Data
Protection Bill 2022;

-    The introduction of, and changes to, taxes, levies or fees applicable
to NatWest Group's operations, such as the introduction of global minimum tax
rules, 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 Bank of England of a Central Bank
Digital Currency which could result in deposit outflows, higher funding costs,
and/or other implications for UK banks including NatWest Group;

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

-    'Dear CEO' letters issued by the Bank of England from time to time;

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

-    New or increased regulations relating to financial crime (including
the new criminal offence of failure to prevent fraud), 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 new rules and
regulations) could also have an adverse effect on NatWest Group's
authorisations and licences, the products and services that NatWest Group may
offer, its reputation and the value of its assets, NatWest Group's operations
or legal entity structure, and the manner in which NatWest Group conducts its
business. Material consequences could arise should NatWest 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 NatWest 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 NatWest
Group to comply with such laws, rules and regulations, may adversely affect
NatWest 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
NatWest Group's ability to engage in effective business, capital and risk
management planning.

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

 

NatWest 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 NatWest Group.

NatWest 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. NatWest 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, Europe, Asia and other jurisdictions.

NatWest Group is, has recently 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 and various other
issues. There is also an increasing risk of new class action claims being
brought against NatWest Group in the Competition Appeal Tribunal for breaches
of competition law.

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. NatWest 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 include: NWM Plc's December 2021
spoofing-related guilty plea in the United States that was agreed with the US
Department of Justice, and involves a three-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. Ongoing matters include the
implementation of recommendations made by the law firm Travers Smith LLP
following independent reviews into issues that had arisen from treatment of a
customer in connection with an account closure decision that attracted
significant public attention and related interactions with the media, and
certain account closures more generally. NatWest Group plc has received
reports in connection with the Travers Smith reviews, and published summaries
of the key findings and recommendations in October and December 2023. In
addition, NatWest Group plc is conducting internal reviews with respect to
certain governance processes, policies, systems and controls of NatWest Group
entities, including with respect to customer account closures and the FCA is
conducting supervisory work into how the governance, systems and controls of
NatWest Group and Coutts & Company are working, to identify and address
any significant shortcomings. For additional information relating to legal,
regulatory proceedings and matters to which NatWest Group is exposed, refer to
'Litigation and regulatory matters' at Note 26 to the consolidated accounts.

Recently resolved matters or adverse outcomes or resolution of current or
future legal, regulatory or other matters, including conduct-related reviews,
redress projects or the subject matter and outcomes of any of the independent
or internal reviews described above, 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 NatWest Group's business and result in
restrictions or limitations on NatWest 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 NatWest 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 NatWest Group's
business, in particular in the US. This in turn and/or any fines, settlement
payments or penalties may have a material adverse effect on NatWest Group's
future results, financial condition, prospects, and/or reputation.

Failure to comply with undertakings made by NatWest 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
NatWest 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 NatWest Group's operations, additional
supervision by NatWest Group's regulators, and loss of investor confidence.

Any of the above may have a material adverse effect on NatWest Group's future
results, financial condition, prospects, capital position, reputation or its
ability to meet regulatory capital adequacy requirements.

 

Changes in tax legislation or failure to generate future taxable profits may
impact the recoverability of certain deferred tax assets recognised by NatWest
Group.

In accordance with the accounting policies set out in 'Critical accounting
policies and sources of estimation uncertainty', NatWest 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 (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 £1.019 billion as at 31 December 2023.
Changes to the treatment of certain deferred tax assets may impact NatWest
Group's capital position. In addition, NatWest 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 NatWest Group's future
results, financial condition, prospects, and/or reputation

 

 

Legal Entity Identifier: 2138005O9XJIJN4JPN90

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