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16/02/2024 07:15

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RNS Number : 3707D  NatWest Group plc  16 February 2024

 

 

 

 

 

 

 

NatWest Group plc 16 February 2024

NatWest Markets N.V. 2023 ARA

 

NatWest Markets N.V. today announces the publication of its 2023 Annual Report
and Accounts. This company is a wholly-owned subsidiary of NatWest Markets
Plc. The 2023 Annual Report and Accounts for NatWest Markets N.V. is available
on NatWest Group plc's website at
https://investors.natwestgroup.com/reports-archive
(https://investors.natwestgroup.com/reports-archive)

 

For further information, please contact

 

Investor Relations

Investor.relations@rbs.com

+44 207 672 1758

 

Media Relations

+44 131 523 4205(UK)

+31 20 464 1150 (NL)

16 February 2024

 

For the purpose of compliance with the Disclosure Guidance and Transparency
Rules, this announcement also contains risk factors extracted from the Annual
Report and Accounts 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 NWM N.V. 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 top and emerging risk section, and the risk and capital
management section. They should not be regarded as a complete and
comprehensive statement of all potential risks and uncertainties facing NWM
N.V. Group.

Economic and political risk

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

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

In addition, financial markets are susceptible to severe events evidenced by,
or resulting in, rapid depreciation in asset values, which may be accompanied
by a reduction in asset liquidity. Under these conditions, hedging and other
risk management strategies may not be as effective at mitigating losses as
they would be under more normal market conditions. Moreover, under these
conditions, market participants are particularly exposed to trading strategies
employed by many market participants simultaneously (and often automatically)
and on a large scale, increasing NWM N.V. Group's counterparty risk. NWM N.V.
Group's risk management and monitoring processes seek to quantify and mitigate
NWM N.V.

Group's exposure to extreme market moves. However, market events have
historically been difficult to predict and NWM N.V. Group, its customers and
its counterparties could realise significant losses if extreme market events
were to occur.

NWM N.V. Group is affected by global economic and market conditions. Uncertain
and volatile economic conditions can create a challenging operating
environment for financial services companies such as NWM N.V. Group. The
outlook for the global economy remains uncertain including due to: GDP growth,
inflation and changing interest rates, changing asset prices (including
residential and commercial property), elevated energy, 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 or global financial systems, market volatility and
change, fluctuations in the value of the pound sterling and euro, new or
extended economic sanctions, economic volatility in the UK or globally,
volatility in commodity prices, political uncertainty or instability (for
example the upcoming European Parliament and US presidential elections, 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 NWM N.V. Group serves, increasing social and other
inequalities, or rapid changes to the economic environment due to the adoption
of technology, automation and artificial intelligence, or due to climate
change, and/or other sustainability-related risks. See also 'Changes in
interest rates will continue to affect NWM N.V. Group's business and
results''. Any of the above developments could have a material adverse effect
on NWM N.V. Group directly (for example, as a result of credit losses) or
indirectly (for example, by impacting global economic growth and financial
markets and NWM N.V. Group's clients and their banking needs).

NWM N.V. 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 (for example the Russia-Ukraine and
Israel-Hamas conflicts), terrorist acts or threats, protectionist policies or
trade barriers, tax changes, 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, may have a material
adverse effect on the business and performance of NWM N.V. Group, including as
a result of the direct or indirect impact on UK, regional or global trade
and/or NWM N.V. 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, which may further
change the UK political landscape. Heightened political uncertainty could lead
to a loss of confidence in the UK, which 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 both in
relation to entities incorporated in Scotland and in other jurisdictions. Any
changes to Scotland's relationship with the UK or the EU would adversely
affect the environment in which NatWest Group plc and its subsidiaries operate
and may require further changes to NatWest Group (including NWM Group's and
NWM N.V. Group's structure), independently or in conjunction with other
mandatory or strategic structural and organisational changes, any of which
could adversely affect NWM N.V. Group. See 'Continuing uncertainty regarding
the effects and extent of the UK's post Brexit divergence from EU laws and
regulation, and NWM N.V.'s post Brexit EU operating model may continue to
adversely affect NWM Plc (NWM N.V.'s parent company) and its operating
environment and NatWest Group plc (NWM N.V.'s ultimate parent company) and may
have an indirect effect on NWM N.V. Group'.

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

Continuing uncertainty regarding the effects and extent of the UK's post
Brexit divergence from EU laws and regulation, and NWM N.V.'s post Brexit EU
operating model may continue to adversely affect NWM Plc (NWM N.V.'s parent
company) and its operating environment and NatWest Group plc (NWM N.V.'s
ultimate parent company) and may have an indirect effect on NWM N.V. Group.

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 (of which NWM N.V. Group forms part) 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. Furthermore, failure to
extend existing equivalence determinations, exemptions and derogations in
relation to regulations such as margin and clearing regulations or capital
regulations, may adversely affect customer engagement and/or may significantly
negatively impact the operating model and business operations of NWM Group (of
which NWM N.V. Group forms part).

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

Transfers in relation to NatWest Group's Western European corporate portfolio
(principally consisting of term funding and revolving credit facilities) may
also affect NWM Group of which NWM N.V. Group is a part of. See also, 'The
transfer of NatWest Group's Western European corporate portfolio involves
certain risks.'

The long-term effects of Brexit and the uncertainty regarding NatWest Group's
EU operating model may adversely affect NWM Group and NWM N.V. Group's
business. These may be exacerbated by wider UK and global macroeconomic trends
and events which may significantly impact NWM N.V. 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. Significant uncertainties remain as to whether and what
equivalence determinations will be made by the various regulators, whether the
proposed EEA licenced subsidiary is granted a banking licence, whether banking
services will be harmonised across the EEA and, therefore, what the respective
legal and regulatory arrangements will be, under which NWM Group and its
subsidiaries (including NWM N.V. Group) will operate.

This divergence could lead to further market fragmentation. These risks and
uncertainties may require costly changes to NWM N.V. Group's EU operating
model. NWM N.V. Group may not be able to respond to these changes effectively,
in a timely manner, or at all.

The actions taken by regulators in response to any new or revised bank
regulation and other rules affecting financial services, may adversely affect
NWM Group, including its business, non-UK operations, group structure,
compliance costs, intragroup arrangements and capital requirements. The legal
and political uncertainty, and any actions taken as a result of this
uncertainty, as well as the approach taken by regulators and new or amended
rules, could have a significant adverse impact on NWM N.V. Group's businesses,
non-UK operations and/or legal entity structure, including NWM N.V. Group,
including attendant operating, compliance and restructuring costs, level of
impairments, capital requirements, changes to intragroup arrangements,
increased complexity of the regulatory environment and tax implications and as
a result may adversely affect the profitability, competitive position,
business model and product offering of NWM Group and NWM N.V. Group.

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

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

NWM N.V. Group's performance is affected by changes in interest rates.
Benchmark overnight interest rates increased in 2023, although forward rates
at 31 December 2023 suggested interest rates may begin to fall in 2024.

On the one hand, 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 NWM N.V. Group.

On the other hand, volatility in interest rates may result in unexpected
outcomes both for interest income and asset and liability valuations which may
adversely affect NWM N.V. 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 an adverse effect on some asset and derivative valuations,
for example. Furthermore, customer and investor responses to rapid changes in
interest rates can have an adverse impact on NWM N.V. Group. For example,
customers may make deposit choices that provide them with higher returns than
those then being offered by NWM N.V. Group, and NWM N.V. Group may not respond
with competitive products as rapidly, for example following an interest rate
change which may in turn decrease NWM N.V. 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, and
other indicators that may indirectly affect NWM N.V. Group and may adversely
affect its 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 NWM N.V. Group is ultimately controlled by
NatWest Group.

NatWest Group plc is the ultimate parent company of NWM N.V. 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 NatWest Group's (including NWM
N.V. Group) 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 NWM N.V. Group.

HM Treasury has indicated that it intends to respect the commercial decisions
of NatWest Group and that NatWest Group entities (including NWM N.V. Group)
will continue to have their own independent board of directors and management
team determining their own strategy. However, for as long as HM Treasury
remains NatWest Group plc's largest single shareholder, HM Treasury and UK
Government Investments Limited ('UKGI') (as manager of HM Treasury's
shareholding) could exercise a significant degree of influence over NatWest
Group (including NWM N.V. Group) including: the election or removal of
directors, the appointment or removal of senior management, NatWest Group's
(including NWM N.V. Group's) capital strategy, dividend policy, remuneration
policy or the conduct of NatWest Group's (including NWM N.V. Group's)
operations. HM Treasury or UKGI's approach largely depends on government
policy and other considerations, which could change. The manner in which HM
Treasury or UKGI exercises HM Treasury's rights as NatWest Group plc's largest
single shareholder could give rise to conflicts between the interests of HM
Treasury and the interests of other shareholders, including as a result of a
change in government policy, which may in turn adversely affect NatWest Group
(including NWM N.V. Group). The exertion of such influence over NatWest Group
could in turn adversely affect the governance or business strategy of NWM N.V.
Group.

In addition, as a wholly owned subsidiary of NWM Plc (and ultimately NatWest
Group plc), NWM plc and NatWest Group plc directly and indirectly control NWM
N.V. Group's corporate policies and strategic direction. The interests of
NatWest Group plc as an equity holder of NWM N.V. Group and as its ultimate
parent and the interests of the C&I business segment may differ from the
interests of NWM N.V. Group or of potential investors in NWM N.V. Group's
securities.

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

 

Strategic risk

NWM Group (including NWM N.V Group) has been in a period of significant
structural and other change, including as a result of NatWest Group's strategy
and NatWest Group's creation of its C&I business segment (of which NWM
Group forms part) and may continue to be subject to significant structural and
other change.

As part of NatWest Group's strategy, NWM Group's own strategy has evolved to
focus on serving NatWest Group's corporate and institutional customer base,
via the creation of NatWest Group's C&I business segment (which combines
the previously separately reporting NatWest Group's Commercial, NatWest
Markets and RBS International businesses). Since the quarter ending 30 March
2022, NatWest Group plc has been reporting its results under the C&I
operating segment structure, although NWM Plc continues to also report on a
standalone legal entity basis. The C&I business segment was created to
promote closer operational and strategic alignment to support NatWest Group
growth, with more integrated services to customers across NatWest Group
entities, within and outside the ring-fenced banks, with the potential
increased risk of breach of the UK ring-fencing regime requiring effective
conflicts of interest policies. As a result of further focusing on NatWest
Group's core C&I customers, NWM Group's prospects have become further
dependent on the success and strategy of NatWest Group.

NWM Group's ability to serve its customers may be adversely affected by its
changing business strategy and customer reactions to the changing nature of
NWM Group's business model may be more adverse than expected. Previously
anticipated revenue and profitability levels may not be achieved (including in
relation to: the ability to support customer transactions whilst meeting NWM
Group capital targets, and changes to the availability of risk capital, in the
timescales envisaged, or at all. An adverse macroeconomic environment,
political and regulatory uncertainty, market volatility and change,
uncertainties regarding the senior leadership of NatWest Group, and/or strong
market competition may require NWM Group to adjust aspects of its strategy or
the timeframe for its implementation. It is anticipated that NWM Plc will
continue to generate operating losses in the short term and as a result its
capital levels may decline.

NWM Group's strategy requires it to meet cost-reduction targets. A significant
proportion of the cost savings are dependent on simplification of the IT
systems and therefore may not be realised if IT capabilities are not delivered
in line with assumptions. In addition, the scale of changes that have been
concurrently implemented require the implementation and application of robust
governance and controls frameworks and robust IT systems. There is a risk that
NWM Group (including NWM N.V. Group) may not be successful in maintaining such
governance and control frameworks and IT systems.

As part of NWM Group's strategy, NWM Group has set a number of financial,
capital and operational targets and expectations, which are expected to
require further reductions to its wider cost base. The financial, operational
and capital targets and expectations envisaged by NWM's strategy may not be
met or maintained in the timeframes expected or at all. In addition, targets
and expectations for NWM Group are based on management plans, projections and
models, and are subject to a number of key assumptions and judgments, any of
which may prove to be inaccurate.

NWM Group has implemented a shared services model and transfer pricing
arrangements with some entities within NatWest Group's ring-fenced sub- group
(including NatWest Bank Plc and The Royal Bank of Scotland Plc). NWM Group
therefore relies directly or indirectly on NatWest Group entities to provide
services to itself and its clients. This reliance has increased as a result of
NWM Group joining NatWest Group's C&I business segment.

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

NWM's strategy entails legal, execution, operational and regulatory (including
compliance with the UK ring fencing regime), conflicts, IT system,
cybersecurity, culture, people, conduct, business and financial risks to NWM
Group (including NWM N.V. Group). As a result, NWM Group may not be able to
successfully implement some or all aspects of its strategy or may not meet any
or all of the related strategic targets or expectations. Each of the risks
identified above, individually or collectively, could adversely affect NWM
Group's (including NWM N.V. Group's) products and services offering or office
locations, competitive position, ability to meet targets and commitments,
reputation with customers or business model and may result in higher-than-
expected costs, all of which could adversely affect NWM Group (including NWM
N.V. Group) and its ability to deliver its strategy. There is a risk that the
intended benefits of NatWest Group's and NWM Group's strategies may not be
realised in the timelines or in the manner contemplated, or at all. Various
aspects of NWM Group's strategy may not be successful, may not be completed as
planned, or at all, or could be phased or could progress in a manner other
than as expected. This could lead to additional management actions by NWM
Group (or NWM N.V. Group), regulatory action or reduced liquidity and/or
funding opportunities.

Any of the above may lead to NWM Group (and NWM N.V. Group) not being viable,
competitive or profitable, and may have a material adverse effect on NWM N.V.
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, NWM Group
expects that certain assets, liabilities, transactions and activities of
NatWest Group (including NatWest Group's Western European corporate portfolio
principally consisting of term funding and revolving credit facilities) (the
'Transfer Business'), 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 could have a material adverse effect on NWM Group's
(including NWM N.V. Group) future results, financial condition, prospects,
and/or reputation.

Financial resilience risk

NWM N.V. is NatWest Group's banking and trading entity located in the
Netherlands. NWM N.V. has repurposed its banking licence, and NWM N.V. Group
may be subject to further changes.

As part of NatWest Group's strategy, NWM N.V. is NatWest Group's banking and
trading entity located in the Netherlands, serves EEA customers, and became a
NWM Plc subsidiary in November 2019. In addition, although the head office for
NWM N.V. is located in Amsterdam, NWM N.V. Group also operates branches in
France, Germany, Italy, and Sweden. On 13 November 2023, the European Central
Bank ('ECB') confirmed that RBS Holdings N.V. and its subsidiary NWM N.V. were
classified as a "significant supervised group". As a result, the ECB assumed
direct supervision of NWM N.V. on 1 January 2024. Direct supervision could
have an adverse impact on NWM N.V. Group's business strategy, operating model
(including any compliance cost) and prudential and regulatory requirements.

As a subsidiary of NWM Plc (and ultimately NatWest Group plc), NWM N.V.
utilises a number of NWM Group and NatWest Group systems, policies and
frameworks (via a shared services model) including in relation to: technology
(including innovation) and network infrastructure, marketing, risk frameworks,
financial accounting systems, reporting, on-boarding processes, model
development and validation, certain administrative and legal services and
governance. In addition, the products that NWM N.V. offers are based on those
offered by NWM Plc. See also, 'Operational risks (including reliance on third
party suppliers and outsourcing of certain activities) are inherent in NWM
N.V. Group's businesses'. As such, any changes made to systems, policies,
frameworks or products of NatWest Group or NWM Group may have a corresponding
adverse effect on NWM N.V.

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

NWM Group, including NWM N.V. Group, may not achieve its ambitions, targets
and guidance it communicates, generate returns or implement its strategy
effectively.

NWM N.V. Group is subject to transfer pricing arrangements with NWM Plc (NWM
N.V.'s parent company). Arm's length transfer pricing legislation in both the
Netherlands and UK requires that, for transactions between related parties,
each entity is rewarded on the same basis as two independent parties
negotiating a contract covering the same activities. The transfer pricing
arrangements between NWM N.V. and NWM Plc require approval by both
counterparties and are subject to audit and/or assessment by Dutch and UK tax
authorities. A portion of NWM N.V. Group's income derives from transfer
pricing income received from NatWest Group entities. Should the level of such
income change as a result of regulatory intervention or otherwise, this may
have a material and adverse effect on NWM N.V. Group's profitability. As part
of NatWest Group's strategy, NWM N.V. Group has set a number of financial,
capital and operational targets including in respect of: balance sheet and
cost-reduction measures, CET1 ratio targets (for NWM Plc and NWM N.V.), MREL
targets, leverage ratio targets (for NWM Plc and NWM N.V.), targets in
relation to local regulation, funding plans and requirements, employee
engagement, diversity and inclusion as well as climate strategy (including its
climate and sustainable funding and financing targets) and customer
satisfaction targets.

NWM N.V. Group's ability to meet its ambitions, targets and guidance
(including its CET1 ratio target), and make discretionary capital
distributions and to successfully fulfil its strategy is subject to various
internal and external factors, risks and uncertainties. These include but are
not limited to: global macroeconomic, political, market and regulatory
uncertainties, operational risks and risks relating to NWM N.V. Group's
business model and strategy (including risks associated with climate and other
sustainability-related issues).

See also, 'NWM Group (including NWM N.V. Group) has been in a period of
significant structural and other change, including as a result of NatWest
Group's strategy and NatWest Group's creation of its C&I business segment
(of which NWM Group forms part) and may continue to be subject to significant
structural and other change'.

A number of factors may impact NWM Plc and NWM N.V.'s abilities to maintain
their respective CET1 ratio targets, including impairments, the macroeconomic
environment, the extent of organic capital generation or the reduction of RWA
and the receipt and payment of dividends. NWM N.V. may incur disposal losses
as part of the process of exiting positions to reduce RWAs. Some of these
losses may be recognised ahead of the actual disposals and the losses overall
may be higher than anticipated.

NWM N.V. Group's ability to meet its planned reductions in annual costs may
vary considerably from year to year. Furthermore, the focus on maintaining
balance sheet and cost- reduction targets may result in limited investment in
other areas which could affect NWM N.V. Group's long-term product offering or
competitive position and its ability to meet its other targets, including
those related to customer satisfaction.

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

Any of the above may lead NWM N.V. Group to not meet its ambitions, target,
guidance and expectations, to not be viable, competitive or profitable, and
may have a material adverse effect on NWM N.V. Group's future results,
financial condition, prospects, and/or reputation.

NWM N.V. may not meet the prudential regulatory requirements for capital.

NWM N.V. Group is required by the ECB to maintain adequate financial
resources. Adequate capital provides NWM N.V. Group with financial flexibility
in the face of turbulence and uncertainty in the global economy and
specifically in its core European operations.

NWM Plc's and NWM N.V.'s target CET1 ratios (see the targets set forth in each
respective entity's Outlook section) are based on regulatory requirements,
internal modelling and risk appetite (including under stress). As at 31
December 2023, NWM N.V. Group's CET1 ratio (on a consolidated basis) was
19.0%. NWM N.V.'s current capital strategy is based on the management of RWAs
and other capital management initiatives.

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

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

 

-      a change in the quantum of NWM N.V.'s RWAs, stemming from
exceeding target RWA levels, regulatory adjustments (for example, from
additional market risk back testing exceptions), foreign exchange movements or
a failure in internal controls or procedures to accurately measure and report
RWAs. An increase in RWAs would lead to a reduction in the CET1 ratio (and
increase the amount of internal MREL required for NWM N.V.);

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

-      further developments of prudential regulation (for example,
finalisation of Basel 3 standards), which will impact various areas including
the approach to calculating credit risk, market risk, leverage ratio, capital
floors and operational risk RWAs, as well as continued regulatory uncertainty
on the details thereto;

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

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

See also, 'NWM Group (including NWM N.V. Group) has been in a period of
significant structural and other change, including as a result of NatWest
Group's strategy and NatWest Group's recent creation of its C&I business
segment (of which NWM Group forms part) and may continue to be subject to
significant structural and other change.'

Management actions taken under a stress scenario may affect, among other
things, NWM N.V. Group's product offering, its credit ratings, its ability to
operate its businesses and pursue its current strategies and strategic
opportunities, any of which may negatively impact investor confidence and the
value of NWM N.V. Group's securities. See also, NWM N.V. may not manage its
capital, liquidity or funding effectively which could trigger the execution of
certain management actions or recovery options', and 'NatWest Group (including
NWM N.V.) may become subject to the application of statutory stabilisation or
resolution powers which may result in, among other actions, the write-down or
conversion of certain Eligible Liabilities (including NWM N.V.'s Eligible
Liabilities).'

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

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

Liquidity and the ability to raise funds continues to be a key area of focus
for NWM N.V. Group and the industry as a whole. NatWest Group and NWM N.V are
required by regulators in the UK, the EU and other jurisdictions in which they
undertake regulated activities to maintain adequate liquidity and funding
resources. To satisfy its liquidity and funding requirements, NWM N.V. Group
may therefore access sources of liquidity and funding through deposits and
wholesale funding, including debt capital markets and trading liabilities such
as repurchase agreements. As at 31 December 2023, NWM N.V. Group held €4.97
billion in deposits from banks and customers. The level of deposits and
wholesale funding may fluctuate due to factors outside NWM N.V. Group's
control.

These factors include: loss of clients, changes in customer behaviour, loss of
client and/or investor confidence (including in individual NWM N.V. Group
entities or the European banking sector or the banking sector as a whole),
changes in interest rates, government support, increasing competitive
pressures for bank funding or the reduction or cessation of deposits and other
funding by counterparties, any of which could result in a significant outflow
of deposits or reduction in wholesale funding within a short period of time.
See also, '- NWM N.V. Group has significant exposure to counterparty and
borrower risk'.

An inability to grow, roll-over, or any material decrease in, NWM N.V. Group's
deposits, short-term wholesale funding and short-term liability financing
could, particularly if accompanied by one of the other factors described
above, materially affect NWM N.V. Group's ability to satisfy its liquidity
needs.

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

Macroeconomic developments and political uncertainty, changes in interest
rates, and market volatility could affect NWM N.V. Group's ability to access
sources of liquidity and funding on satisfactory terms, or at all. This may
result in higher funding costs and failure to comply with regulatory capital,
funding and leverage requirements. As a result, NWM N.V. Group and its
subsidiaries could be required to change their funding plans and/or their
operations. This could exacerbate funding and liquidity risk, which could have
a negative effect on NWM N.V. Group.

As at 31 December 2023, NWM N.V. Group reported a liquidity coverage ratio of
144% on a solo basis. If its liquidity position were to come under stress and
if NWM N.V. Group is unable to raise funds through deposits, wholesale funding
sources, or other reliable funding sources, on acceptable terms or at all, its
liquidity position would likely be adversely affected. This would mean that
NWM N.V. Group might be unable to: meet deposit withdrawals on demand or
satisfy buy back requests, repay borrowings as they mature, meet its
obligations under committed financing facilities, comply with regulatory
funding requirements, undertake certain capital and/or debt management
activities, or fund new loans, investments and businesses.

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

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

NWM N.V. Group independently manages liquidity risk on a stand-alone basis,
including through holding its own liquidity portfolio. It has restricted
access to liquidity or funding from other NatWest Group entities. As a result,
NWM N.V.'s liquidity position could be adversely affected, which may also
require assets to be liquidated or may result in higher funding costs which
may adversely affect NWM N.V. Group's margins and profitability. NWM N.V.'s
management of its own liquidity portfolio and the structure of capital support
are subject to operational and execution risk, as NWM N.V. is required to meet
its own liquidity and capital requirements.

Continuing market volatility may have a negative effect on NWM N.V. Group's
access to liquidity and funding, which could mean that NWM N.V. Group is
required to adapt its funding plan or change its operations and could
adversely affect NWM N.V. Group. Market volatility may also result in
increases to leverage exposure.

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

NWM N.V. Group is reliant on access to the capital markets to meet its funding
requirements. The inability to do so may adversely affect NWM N.V. Group.

NWM N.V. Group has funding requirements based on its current and anticipated
business activities and is reliant on frequent access to the capital markets
for funding, at a cost that can be passed through to its customers.

This access entails execution risk, regulatory risk, risk of reduced
commercial activity, risk of loss of market confidence in NWM N.V. Group if it
cannot finance its activities and risk of a ratings downgrade, which could be
influenced by a number of internal or external factors, including, those
summarised in 'NWM N.V. Group, its customers and its counterparties face
continued economic and political risks and uncertainty in the UK, European and
global markets, including as a result of inflation and interest rates, supply
chain disruption and geopolitical developments,' and 'Continuing uncertainty
regarding the effects and extent of the UK's post Brexit divergence from EU
laws and regulation, and NWM N.V.'s post Brexit EU operating model may
continue to adversely affect NWM Plc (NWM N.V.'s parent company) and its
operating environment and NatWest Group plc (NWM N.V.'s ultimate parent
company) and may have an indirect effect on NWM N.V. Group'.

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

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

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

NWM N.V. may not manage its capital, liquidity or funding effectively which
could trigger the execution of certain management actions or recovery options.

Under the EU Bank Recovery and Resolution Directives I and II ('BRRD'), as
implemented in the Netherlands, NatWest N.V. Group must maintain a recovery
plan acceptable to its regulator, such that a breach of NWM N.V.'s applicable
capital or leverage, liquidity or funding requirements would trigger
consideration of NWM N.V.'s recovery plan, and in turn may prompt
consideration of NatWest Group's recovery plan. If, under stressed conditions,
the liquidity, capital or leverage ratio were to decline, there are a range of
recovery management actions (focused on risk reduction and mitigation) that
NWM N.V. could undertake that may or may not be sufficient to restore adequate
liquidity, capital and leverage ratios. Additional management options relating
to existing capital issuances, asset or business disposals, capital payments
and dividends from NWM Plc to its parent, could also be undertaken to support
NWM N.V.'s capital and leverage requirements.

NatWest Group may also address a shortage of capital in NWM N.V. by providing
parental support to NWM N.V., subject to evidence that the conditions set out
in Article 23 of the BRRD, as implemented into Dutch law article 3:301 and
3:305 of the Dutch Financial Markets Supervision Act ('FMSA') have been met.
NatWest Group's and/or NWM N.V.'s regulator may also request that NWM N.V.
Group carry out additional capital management actions. The Bank of England has
identified single point-of- entry at NatWest Group plc, as the preferred
resolution strategy for NatWest Group.

However, under certain conditions set forth in the BRRD, as implemented by the
FMSA, DNB or the SRB, also have the power to execute the 'bail-in' of certain
securities of NWM N.V. without further action at NatWest Group level.

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

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

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

Rating agencies regularly review NatWest Group plc, NWM Plc, NWM N.V. and
other NatWest Group entities' credit ratings and outlooks. NWM N.V. 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 limitations: credit rating agencies' assessment of NWM N.V. Group's
strategy and management's capability; its financial condition including in
respect of profitability, asset quality, capital, funding and liquidity, and
risk management practices; the level of political support for the sectors and
regions in which NWM N.V. Group operates; the implementation of structural
reform; the legal and regulatory frameworks applicable to NWM N.V. Group's
legal structure; business activities and the rights of its creditors; changes
in rating methodologies; changes in the relative size of the loss-absorbing
buffers protecting bondholders and depositors; the competitive environment,
political, geopolitical and economic conditions in NWM N.V. Group's key
markets (including interest rates and inflation, supply chain disruptions and
the outcome of any further Scottish independence referendum); any reduction of
the UK's sovereign credit rating 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. See also 'A reduction in the ESG
ratings of NatWest Group or NWM Group (including NWM N.V. Group) could have a
negative impact on NatWest Group's or NWM Group (including NWM N.V. Group)'s
reputation and on investors' risk appetite and customers' willingness to deal
with NatWest Group, NWM Group or NWM N.V. Group.'

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

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

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

The markets within which NWM N.V. Group operates are highly competitive, and
NWM N.V. Group expects such 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 who may have competitive advantages in scale, technology
and consumer engagement), competitive foreign exchange offerings, industry
trends resulting in increased disaggregation or unbundling of financial
services, or conversely the reintermediation 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 and lending 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 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 NWM N.V. Group's ability to grow or retain
its market share and impact its revenues and profitability. Moreover,
innovations such as biometrics, artificial intelligence (including generative
artificial intelligence), automation, the cloud, blockchain, cryptocurrencies
and quantum computing may rapidly facilitate industry transformation.

Increasingly, many of the products and services offered by NWM N.V. Group are,
and will become, more technology intensive, including through digitalisation,
automation and the use of artificial intelligence. NWM N.V. Group's ability to
develop or acquire such services (which also comply with applicable and
evolving regulations) and their integration in NWM N.V. Group's systems and
controls has become increasingly important to retaining and growing NWM N.V.
Group's competitiveness, market share and client businesses across its
geographical footprint. There is a risk that NWM N.V. Group's innovation
strategy which includes investment in its IT capability intended to improve
its core infrastructure and client interface capabilities as well as
investments and strategic partnerships with third party technology providers
will be successful or that it will allow NWM N.V. Group to successfully offer
innovative products and services in the future.

Certain of NWM N.V. Group's current or future competitors may be more
successful in implementing technologies than NWM N.V. Group for delivering
products or services to their clients, which may adversely affect its
competitive position. NWM N.V. 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). NWM N.V. Group's competitors
may also be better able to attract and retain clients and key employees, may
have more effective IT systems, and may have access to lower cost funding
and/or be able to attract deposits or provide investment-banking services on
more favourable terms than NWM N.V. Group. As mentioned above, NWM N.V.
operates a shared services model in relation to technology and innovation.
Although NWM N.V. 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 NWM N.V.
Group's focus on its cost efficiencies. This may limit additional investment
in areas such as financial innovation and could affect NWM N.V. Group's
offering of innovative products or technologies for delivering products or
services to clients, and in turn affecting its competitive position. NWM Group
and NWM N.V. 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. Any of the above
may limit additional investment in areas such as innovation and could affect
NWM Group's offering of innovative products or technologies for delivering
products or services to customers and its competitive position. Furthermore,
the development of innovative products depends on NWM Group and NWM N.V.
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 NWM N.V. 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, NWM N.V. Group is investing in the
automation of certain solutions and interactions within its customer-facing
businesses, including through automation 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 NWM N.V. Group's current solutions, systems, and
controls. There is a risk 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 NWM
N.V. Group.

In addition, NatWest Group's strategy, as well as employee remuneration
constraints may also have an impact on NWM N.V. Group's ability to compete
effectively. Intensified competition from incumbents, challengers and new
entrants as well as disintermediation by large technology companies could
affect NWM Group and NWM N.V. Group's ability to provide 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 NWM N.V. 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 NWM N.V. Group's future
results, financial condition, prospects, and/or reputation.

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

NatWest Group is subject to annual and other stress tests by its regulator in
the UK and NWM N.V Group is subject to stress testing by the ECB. Stress tests
are designed to assess the resilience of banks to potential adverse economic
or financial developments and ensure that they have robust, forward- looking
capital planning processes that account for the risks associated with their
business profile. If the stress tests reveal that a bank's existing regulatory
capital buffers are not sufficient to absorb the impact of the stress, then it
is possible that NatWest Group and/or NWM Group may need to take action to
strengthen their capital positions.

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

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

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

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

Furthermore, these risks are likely to increase due to the expected transfer
of NatWest Group's Transfer Business. See 'The transfer of NatWest Group's
Western European corporate portfolio involves certain risks'.

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

The credit quality of NWM N.V. Group's borrowers and other counterparties may
be affected by global macroeconomic and political uncertainties and a further
deterioration in prevailing economic and market conditions. These include
factors relating to interest rates and inflation, changing asset prices,
energy prices, supply chain disruption, changes to monetary and fiscal policy,
armed conflicts, and changes in the legal and regulatory landscape in
countries where NWM N.V. Group is exposed to credit risk (including the extent
of the UK's post-Brexit divergence from EU laws and regulation). Any further
deterioration in these conditions or changes to legal or regulatory landscapes
could worsen borrower and counterparty credit quality or impact the
enforcement of contractual rights, increasing credit risk.

NWM N.V. 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, 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 NWM N.V.
Group. In addition, the value of collateral may be correlated with the
probability of default by the relevant counterparty ('wrong way risk'), which
would increase NWM N.V. Group's potential loss. This systemic risk may also
adversely affect financial intermediaries, such as clearing agencies, clearing
houses, banks, securities firms and exchanges with which NWM N.V. Group
interacts on a regular basis. See also, '- NWM N.V. Group is reliant on access
to the capital markets to meet its funding requirements. The inability to do
so may adversely affect NWM N.V. Group', and 'NWM N.V. Group may not meet the
prudential regulatory requirements for liquidity and funding or may not be
able to adequately access sources of liquidity and funding, which could
trigger the execution of certain management actions or recovery options'. As a
result, adverse changes in borrower and counterparty credit risk may cause
additional impairment charges under IFRS 9, increased repurchase demands,
higher costs, additional write-downs and losses for NWM N.V. Group and an
inability to engage in routine funding transactions.

NWM N.V. 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 judgment and estimation.
This includes the formulation and incorporation of multiple forward-looking
economic scenarios into ECL to meet the measurement objective of IFRS 9. The
ECL provision is sensitive to the model inputs and economic assumptions
underlying the estimate.

Going forward, NWM N.V. Group anticipates observable credit deterioration of a
proportion of assets resulting in a systematic uplift in defaults, which is
mitigated by those economic assumption scenarios being reflected in the Stage
2 ECL across portfolios, along with a combination of post model overlays in
both wholesale and retail portfolios reflecting the uncertainty of credit
outcomes. See also, 'Risk and Capital Management - Credit Risk'. A credit
deterioration would also lead to RWA increases. Furthermore, the assumptions
and judgments used in the MES and ECL assessment at 31 December 2023 may not
prove to be adequate resulting in incremental ECL provisions for NWM N.V.
Group.

Due to NWM N.V. Group's exposure to the financial industry, it also has
exposure to shadow banking entities (i.e., entities which carry out activities
of a similar nature to banks without the same regulatory oversight). NWM N.V.
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/or ensure effective reporting and governance in
respect of such exposure. If NWM N.V. Group is unable to properly identify and
monitor its shadow banking exposure, maintain an adequate framework, or ensure
effective reporting and governance in respect of shadow banking exposure.

Any of the above may adversely affect NWM N.V. Group's future results,
financial condition, prospects, and/or reputation.

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

Given the complexity of NWM N.V. Group's business, strategy and capital
requirements, NWM N.V. 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, NWM N.V. 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')). NWM N.V. 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. NWM
N.V. 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 NWM N.V. 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 (and in particular, NWM Group's or
NWM N.V. 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 NWM N.V. Group
to regulatory sanction, any of which in turn may also have an adverse effect
on NWM N.V. Group and its customers. Any of the above may have a material
adverse effect on NWM Group's future results, financial condition, prospects,
and/or reputation.

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

The preparation of financial statements requires management to make judgments,
estimates and assumptions that affect the reported amounts of assets,
liabilities, income, expenses, exposures and RWAs. While estimates, judgments
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, judgments and assumptions
(particularly those involving the use of complex models). Further, accounting
policy and financial statement reporting requirements increasingly require
management to adjust existing judgments, estimates and assumptions for the
effects of climate-related, sustainability and other matters that are
inherently uncertain and for which there is little historical experience which
may affect the comparability of NWM N.V. 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, judgments
and assumptions.

Accounting policies deemed critical to NWM N.V. Group's results and financial
position, based upon materiality and significant judgments 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 the section
'Critical accounting policies'.

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

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

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

NWM N.V. Group's trading assets amounted to €4,693million as at 31 December
2023. The valuation of financial instruments, including derivatives, measured
at fair value can be subjective, in particular where models are used which
include unobservable inputs. Generally, to establish the fair value of these
instruments, NWM N.V. Group relies on quoted market prices or, where the
market for a financial instrument is not sufficiently credible, internal
valuation models that utilise observable market data. In certain
circumstances, the data for individual financial instruments or classes of
financial instruments utilised by such valuation models may not be available
or may become unavailable due to prevailing market conditions. In these
circumstances, NWM N.V. Group's internal valuation models require NWM N.V.
Group to make assumptions, judgments and estimates to establish fair value,
which are complex and often relate to matters that are inherently uncertain.

Any of these factors could require NWM N.V. Group to recognise fair value
losses which may adversely affect NWM N.V. Group's income generation and
financial position.

From time to time, the International Accounting Standards Board may issue new
accounting standards or interpretations that could materially impact how NWM
N.V. Group calculates, reports and discloses its financial results and
financial condition, and which may affect NWM N.V. 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 NWM N.V. Group are discussed in 'Future
accounting developments'.

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

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

The BRRD establishes a common approach within the EU for the recovery and
resolution of banks. In the UK and the Netherlands, the BRRD has been
implemented via national legislation which grants powers to a national
resolution authority (the 'NRA'). The UK implementation of the BRRD remains in
force now that the Brexit transition has ended.

In Europe (which for the avoidance of doubt excludes the UK) the BRRD is also
(partly) implemented by a directly binding regulation which established a
Single Resolution Mechanism ('SRM') and a single EU Resolution Board ('SRB')
with powers which exceed the powers of the EU NRAs.

United Kingdom - NatWest Group plc and its UK subsidiaries

HM Treasury, the Bank of England, the Prudential Regulation Authority ('PRA')
and the FCA (together, the 'UK 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 NWM
Group, as a subsidiary, where certain conditions are met (such as, whether the
firm is failing or likely to fail, or whether it is reasonably likely that
action will be taken (outside of resolution) that will result in the firm no
longer failing or being likely to fail). Moreover, there are modified
insolvency and administration procedures for relevant entities within NatWest
Group, and the Authorities have the power to modify or override certain
contractual arrangements in certain circumstances and amend the law for the
purpose of enabling their powers to be used effectively and may promulgate
provisions with retrospective applicability. Similar powers may also be
exercised with respect to NWM N.V. in the Netherlands by the relevant Dutch
regulatory authorities.

Under the UK Banking Act 2009, the Authorities are generally required to have
regard to specified objectives in exercising the powers provided for by the UK
Banking Act. 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 under
the UK Banking Act, 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 (including NWM Group),
which may depend on factors outside of NWM 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.

The Netherlands - NWM N.V.

The BRRD and the SRM provide the SRB and DNB (the 'N.V. Authorities', and
together with the UK Authorities, the 'Authorities') with substantial powers
to resolve and stabilise financial institutions incorporated in the
Netherlands. The N.V. Authorities are responsible for resolution in relation
to RBS Holdings N.V. and its subsidiaries (including NWM N.V.). As a result,
the SRB assumes direct resolution responsibility for NWM N.V. Group, while DNB
participates in the planning and execution of resolution measures in
coordination with the SRB within the SRM framework. The N.V. Authorities have
broad powers to implement resolution measures with respect to financial
institutions incorporated in the Netherlands which meet the conditions for
resolution, which may include (without limitation) measures analogous to the
Resolution Stabilisation Tools (options set out at points (i) to (iv) above
under the UK Banking Act). These powers and tools are designed to be used
prior to the point at which any insolvency proceedings with respect to NWM
N.V. could have been initiated.

In addition to the resolution powers of the N.V. Authorities described above,
the Dutch Minister of Finance may, with immediate effect, take measures or
expropriate assets and liabilities of, claims against or securities issued by
or with the consent of NWM N.V., if in the Minister of Finance's opinion, the
stability of the financial systems is in serious and immediate danger as a
result of the situation in which the firm finds itself (the 'Minister of
Finance Powers').

There remains uncertainty regarding the ultimate nature and scope of these
powers, and any exercise of the resolution regime powers by the N.V.
Authorities or the Minister of Finance Powers may adversely affect holders of
NWM N.V.'s Eligible Liabilities that fall within the scope of such powers.

If NatWest Group is at or is approaching the point such that regulatory
intervention is required, there may correspondingly be a material adverse
effect on NWM N.V. 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 NWM N.V. 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. In June 2022 the Bank of England's
assessment of NatWest Group's preparations did not identify any shortcomings,
deficiencies or substantive impediments but did highlight two areas 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 any future Bank of England assessment identifies 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 cost and the dedication of additional resources. These
actions may have an impact on NatWest Group (and NWM N.V. Group) as, depending
on the Bank of England's assessment, potential action may include, but is not
limited to, resulting in restrictions on maximum individual and aggregate
exposures, a requirement to dispose of specified assets, a requirement to
change legal or operational structure, a requirement to cease carrying out
certain activities and/or to maintain a specified amount of MREL. This may
also impact NatWest Group's (and NWM N.V. Group's) strategic plans and may
lead to a loss of investor confidence. Additionally, DNB and the SRB may
exercise similar powers if the recovery and resolution plans of NWM N.V. Group
are not satisfactory.

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

Climate and sustainability-related risks

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

NWM N.V. 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 NWM N.V. 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 NWM N.V. Group or its customers with
adverse climate and sustainability-related issues;

-      adversely affect NWM N.V. Group's ability to contribute to deliver
on NatWest Group's strategy, including contributing to achieve NatWest Group's
climate ambitions and targets;

-      exacerbate other risk categories to which NWM N.V. 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 NWM N.V. 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 NWM N.V. Group because, according to their
own assessment, NatWest Group's (including NWM N.V. Group) strategy, ambitions
and targets related to climate and sustainability do not meet their
expectations, whereas others may decide not to do business with NWM N.V. Group
for failing to progress to contribute to NatWest Group's climate and
sustainability-related strategy, ambitions and targets or if they are of the
view that they lack credibility.

If NWM N.V. 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 NWM N.V. Group, its customers, counterparties
(including suppliers) face, this may have a material adverse effect on NWM
N.V. 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, NWM
N.V. 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 NWM N.V.
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 NWM
N.V. 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
NWM N.V. Group's portfolios. In addition, NWM N.V. 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 NWM N.V. Group's future results, financial
condition, prospects and/or reputation.

To meet the goals of the 2015 Paris Agreement, the EU's and the Netherlands'
climate policy and the UK's Net Zero Strategy will require a net-zero
transition across all sectors of the economy and markets in which NWM N.V.
Group operates. 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. NWM N.V. 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 NWM N.V. 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'). See also,
'NWM N.V.   Group may be subject to potential climate and other
sustainability-related litigation, enforcement proceedings, investigations and
conduct risk.'

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

NWM N.V. 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).

NWM N.V. 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
(including NWM N.V. Group) first classified 'Biodiversity and Nature Loss' as
an emerging risk for NatWest Group (including NWM N.V. Group) within its Risk
Management Framework. From January 2024, NatWest Group (including NWM N.V.
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 (including NWM N.V. 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 (including NWM N.V. Group) 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 NWM N.V. Group's investors, customers,
counterparties (including its suppliers), employees, communities, regulators,
the media and other stakeholders on how NWM N.V. 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 (including NWM N.V. Group) 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 NWM N.V. 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 NWM N.V. Group.

There is also growing expectation of the need for '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 (including NWM N.V. 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 (including NWM N.V. Group) to sufficiently factor these
considerations into existing products and service offerings may adversely
affect. NatWest Group, including NWM N.V. Group's reputation.

In 2023, NatWest Group (including NWM N.V. 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 (including NWM N.V. Group) to identify, assess, prioritise and
monitor any actual or potential adverse human rights issues that NatWest Group
(including NWM N.V. Group) contributes to, or is directly linked to, may
adversely impact people and communities, which in turn may have a material
adverse effect on NWM N.V. 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 NWM N.V. 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'). See also,
'NWM N.V. 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 contribute to achieving NatWest Group's
strategic direction on climate change, including contributing to achieve
NatWest Group's climate ambitions and targets and contributing to execute
NatWest Group's transition plan, together with the active management of
climate and sustainability-related risks and other regulatory, policy and
market changes, is likely to necessitate material changes to NWM N.V. Group's
business, operating model, its existing exposures and the products and
services NWM N.V. Group provides to its customers (potentially on accelerated
timescales). NWM N.V. 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 NWM N.V. Group's
business and operations, financial condition, prospects and competitive
position and NWM N.V. Group's ability to contribute to achieving NatWest
Group's climate and financial ambitions and targets, take advantage of climate
change-related opportunities and generate sustainable returns.

NWM N.V. Group's ability to contribute to achieving NatWest Group's strategy,
including contributing to achieve NatWest Group's climate ambitions and
targets, will significantly depend on many factors and uncertainties beyond
NWM N.V. 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 and underwriting 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 NWM N.V. Group to
contribute to achieving NatWest Group's climate ambitions and targets and
there is a significant risk that all or some of these ambitions and targets
will not be achieved or not achieved within the intended timescales.

NWM N.V. Group's ability to contribute to achieving NatWest Group's climate
ambitions and targets depends to a significant extent on the timely
implementation and integration of appropriate government policies. The UK 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
(including NWM N.V. 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 (including NWM N.V. 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 (including NWM N.V. Group) 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 (including NWM
N.V. Group) will not be able to identify all relevant activities to achieve
these coal phase-out plans.

Any delay or failure by NWM N.V Group in contributing to set, make progress
against or meet NatWest Group's climate-related ambitions, targets and plans
may have a material adverse effect on NWM N.V. Group's future results,
financial condition, prospects, and/or reputation and may increase the climate
and sustainability-related risks NWM N.V. 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 NWM N.V. Group to proportionately collect or develop accurate,
reliable, verifiable, auditable, consistent and comparable counterparty
(including supplier) and customer data, may adversely affect NWM N.V. 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 NWM
N.V. 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, facilitated
emissions and other sustainability data by financial institutions, including
NWM N.V. 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. NWM N.V. 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 NWM N.V. Group's historical and current
strategic, financial, resilience and investment planning horizons.

As a result, NWM N.V. Group's climate and sustainability-related disclosures
may be amended, updated or restated in the future as the quality and
completeness of NWM N.V. Group's data and methodologies continue to improve.
These data quality challenges, gaps and limitations may have a material impact
on NWM N.V. 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 NWM N.V. 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 NWM N.V. 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.

The calculation method for facilitated emissions in respect of capital markets
activities is still in the process of developing and to date there is no
unified industry approach. Therefore, measuring, monitoring and reporting on
facilitated emissions will present similar data and modelling challenges as
described above for on balance sheet 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 NWM N.V. 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 NWM N.V. 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 NWM N.V. Group.

The UK's prudential regulation of climate-related risk management is an
important driver in how NatWest Group (including NWM N.V. 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.

European Union and the Netherlands

NWM N.V. Group is subject to regulatory developments in the EU and the
Netherlands.

In November 2020, the ECB published its 'Guide on climate-related and
environmental risks' ('ECB Guide') which laid down the ECB's expectations for
each supervised entity in relation to climate-related and environmental risks.
In November 2022, the ECB published its 'Good practices for climate-related
and environmental risk management' which shared observations and good
practices illustrating the different ways that significant institutions could
align their practices with the supervisory expectations set out in the ECB
Guide.

In April 2023, the ECB published 'The importance of being transparent - A
review of climate-related and environmental risks disclosures practices and
trends', in which it assessed the state of adherence to the ECB Guide by
institutions and shared best practices. On 23 January 2024, the ECB published
the report 'Risks from misalignment of banks' financing with the EU climate
objectives' focusing on the transition risks stemming from banks' credit
portfolios.

The ECB expects institutions to have met its supervisory expectations for
climate and environmental risks in governance, strategy and risk management
(including on capital adequacy and stress testing by the end of 2024 and has
set various intervening deadlines before the end of 2024. The ECB has
expressed its readiness to enforce the abovementioned deadline with all the
instruments at its disposal, including imposing periodic penalty payments or
bank-specific capital add-ons.

In June 2021, the European Banking Authority ('EBA') published its 'Report on
Environmental, Social and Governance risk management and supervision' in which
it highlighted the prudential view and expectations regarding financial
institutions' management of ESG risks as part of their strategy, governance,
risk management and reporting practices.

In January 2022, the EBA published its final draft implementing technical
standards on Pillar 3 disclosures on ESG risks which from 28 June 2022 apply
to large institutions that have securities traded on a regulated market of an
EU member state (including NWM N.V. Group) and require them to disclose
information on their exposure to ESG-related risks and the actions they take
to mitigate those risks, as well as metrics including their Green Asset Ratio
(to be disclosed for the financial year ending 2023) and the Banking Book
Taxonomy Alignment Ratio (to be disclosed for the financial year ending 2024).
On 18 January 2024, the EBA launched a public consultation open until 18 April
2024 on draft guidelines on the management of ESG risks, which set out
requirements for institutions for the identification, measurement, management
and monitoring of ESG risks, including through plans aimed at addressing the
risks arising from the transition towards an EU climate-neutral economy.

In March 2023, DNB, the Netherlands' central bank, published its 'Guide to
managing climate and environmental risks' which provided financial
undertakings with focal points and best practices for managing climate-related
and environmental risks, including considerations for integrated risk
management in areas such as business models, strategies, governance, risk
management and information dissemination.

In June 2020, the Dutch Authority for the Financial Markets in the Netherlands
(Stichting Autoriteit Financiële Markten ('AFM')) published its position
paper on sustainability. In this position paper the AFM described what it
expected from market parties when it comes to sustainability and how the AFM
would be supervising this. The AFM confirmed, amongst others, that:

- a sustainable economy and society is a supervisory priority of the AFM and
is increasingly becoming an integral part of its supervision strategy; and

- it expects market participants to integrate sustainability aspects in a
responsible and careful manner in their financial products and services.

The UK

In the UK, 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 (including NWM N.V. 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 (including NWM N.V. 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 NWM N.V. Group's regulatory compliance,
prudential capital requirements, liquidity position and this may have a
material adverse effect on NWM N.V. 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 NWM N.V. 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.

NWM N.V. Group may be subject to EU and Dutch climate and sustainability laws
and regulations, such as the EU Taxonomy, the EU Corporate Sustainability
Reporting Directive, the EU Green Bond Standard, the proposed EU Corporate
Sustainability Due Diligence Directive and other legal, regulatory and
supervisory expectations relating to climate-related and environmental risk
management and disclosure. The ECB, AFM, and DNB are also increasingly focused
on climate change and sustainability and have announced good practices and
supervisory expectations relating to these topics. As a result, an increasing
number of laws, regulations and legislative actions, including proposals,
guidance, policy and regulatory initiatives many of which have been introduced
or amended recently and are subject to further changes, is likely to affect
the financial sector and the wider economy. A failure of NWM N.V. Group to
comply with these regulations, whether through insufficient resources,
expertise, support, customer and counterparty data challenges or otherwise may
have an adverse effect on NWM N.V. Group's reputation and the successful
contribution to the 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 , Dutch 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 NWM N.V. Group's business and may restrict NWM N.V.
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 NWM
N.V. Group may result in NWM N.V. Group and 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 NWM N.V. 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 NWM N.V. 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 NWM N.V. 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
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 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. In June
2023, the European Supervisory Authorities (the EBA, the European Insurance
and Occupational Pensions Authority and the European Securities and Markets
Authority) published their Progress Reports on Greenwashing in the financial
sector, in which they set out a common high-level understanding of
greenwashing applicable to market participants across their respective remits
(banking, insurance and pensions and financial markets). In the Netherlands,
in October 2023 the AFM published its Guidelines on Sustainability Claims in
which it provided tools to financial institutions and pension providers on how
to make correct, clear and non-misleading sustainability claims.

NatWest Group (including NWM N.V. 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 (including NWM
N.V. 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. NWM N.V. 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 NWM N.V. 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 NWM N.V. 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 NWM N.V.
Group's products and services are and to apply these in line with applicable
legal and regulatory requirements and expectations, may adversely affect NWM
N.V. Group's regulatory compliance and/or reputation and could give rise to
increased regulatory enforcement, investigation and litigation.

NWM N.V. 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 NWM N.V. 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 NWM
N.V. 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 NWM N.V. 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 NWM N.V. Group
provides services and third parties in NWM N.V. 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 NWM
N.V. Group's reputation or sustainability credentials; or

-      NWM N.V. 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 NWM N.V. 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 NWM N.V. 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. See also,
'NWM N.V. 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 NWM N.V. Group.' In addition,
supervisors and regulators are increasing their enforcement focus on climate
and environmental 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 NWM N.V. Group's ability to contribute
to achieving NatWest Group's strategy, including NatWest Group's climate
ambitions and targets, and this may have a material adverse effect on NWM N.V.
Group's future results, financial condition, prospects, and/or reputation.

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

ESG ratings from agencies and data providers which rate how NatWest Group
(including NWM N.V. Group) or NWM N.V. 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 (including NWM N.V. Group) or NWM N.V. Group by the relevant rating
agency; and (v) may depend on many factors some of which are beyond NatWest
Group's and NWM N.V. Group's control (e.g. any change in rating methodology).
In addition, NWM N.V. Group and certain of its subsidiaries 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 (including NWM N.V.
Group) or NWM N.V. Group may have a negative impact on NWM N.V. Group's
reputation, could influence investors' risk appetite for NWM N.V. Group's
and/or its subsidiaries' securities, particularly ESG securities, could
potentially affect the pricing of securities issued by NWM N.V. Group and/or
its subsidiaries and could affect a customer's willingness to deal with NWM
N.V. Group. A regulatory sanction or enforcement action involving an ESG
rating agency used by a NWM N.V. Group entity could also have a negative
impact on NWM N.V. Group's reputation.

Operational and IT resilience risk

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

Operational risk is the risk of loss or disruption resulting from inadequate
or failed internal processes, procedures, people or systems, or from external
events, including legal and regulatory risks, third party processes,
procedures, people or systems. NWM N.V. 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 on NWM Group's compliance
with financial crime requirements; see 'NWM N.V. Group and NWM Plc are 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 NWM
N.V. Group').

These risks are also present when NWM N.V. Group relies on NatWest Group, NWM
Group, critical service providers (suppliers) or vendors to provide services
to it or its clients, as is increasingly the case as NWM N.V. Group outsources
certain activities, including with respect to the implementation of
technologies, innovation and responding to regulatory and market changes.
Furthermore, NWM N.V. is subject to the EBA guidelines on outsourcing
arrangements. If the systems and services provided by NatWest Group, NWM Group
or any third party do not comply with such EBA requirements, there is a risk
of increase in operational and compliance costs, which may negatively affect
NWM N.V. Group's business continuity and reputation.

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 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 further evolve, including in respect of how working practices may
develop, or how NWM N.V. Group will evolve to best serve its customers. Any of
the above may place significant pressure on NWM N.V. Group's ability to
maintain effective internal controls and governance frameworks.

In recent years, NWM Group (including NWM N.V. Group) has materially increased
its dependence on NatWest Bank Plc for numerous critical services and
operations, including without limitation, property, finance, accounting,
treasury, legal, risk, regulatory compliance and reporting, financial crime,
human resources, and certain other support and administrative functions. In
addition, NWM N.V. Group has materially increased its dependence on NWM Plc
for numerous critical services similar to those outlined above and for certain
sales activities, which due to their complexities could potentially trigger
regulatory, tax, reputational, financial crime and conduct risks. A failure by
NatWest Bank Plc or NWM Plc to adequately supply these services may expose NWM
N.V. Group to critical business failure risk, increased costs and other
liabilities. These and any increases in the cost of these services may
adversely affect NWM N.V. Group.

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

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

NWM N.V. Group is subject to sophisticated and frequent cyberattacks.

NWM N.V. Group experiences a constant threat from cyberattacks across the
entire NatWest Group (including NWM N.V. Group) and against NatWest Group and
NWM N.V. Group's supply chain, reinforcing the importance of due diligence of
close working relationship with, the third parties on which NWM N.V. Group
relies. NWM N.V. Group is reliant on technology, against which there is a
constantly evolving series of attacks, that are increasing in terms of
frequency, sophistication, impact and severity. As cyberattacks evolve and
become more sophisticated, NWM N.V. 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 and ransomware attacks, which are a pervasive
threat to the financial services industry (including NWM N.V. Group). The
focus is to manage the impact of the attacks and sustain availability of
services for NWM N.V. Group's customers. Consequently, NWM N.V. 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
NWM N.V. Group's IT systems. NWM N.V. 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 any attack from occurring. See also, '- 'NWM N.V. Group's
operations are highly dependent on its complex IT systems, and any IT failure
could adversely affect NWM N.V. Group'.

Any failure in NWM Group's (and therefore NWM N.V. Group's) or third-party
providers' 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 clients and credit monitoring), result in regulatory investigations or
sanctions being imposed or may affect NWM N.V. Group's ability to retain and
attract clients. 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. Furthermore, cyberattacks on NWM N.V. Group's counterparties may
also have an adverse effect on NWM N.V. Group's operations.

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

NWM N.V. 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 adversely affect NWM N.V. Group. Due to NWM N.V.
Group's reliance on technology and the increasing sophistication, frequency
and impact of cyberattacks, such attacks may adversely affect NWM N.V. 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 the EU General
Data Protection Regulation ('EU GDPR'), NWM N.V. Group is required to ensure
it implements timely appropriate and effective organisational and
technological safeguards against unauthorised or unlawful access to the data
of NWM N.V. Group, its clients and its employees. In order to meet this
requirement, NWM N.V. Group relies on the effectiveness of its internal
policies, controls and procedures to protect the confidentiality, integrity
and availability of information held on its IT systems, networks and devices
as well as with third parties with whom NWM N.V. Group interacts.

A failure to monitor and manage data in accordance with the UK Data Protection
Framework, the EU GDPR 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 NWM N.V. Group's future
results, financial condition, prospects, and/or reputation.

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

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

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

NWM N.V. Group relies on attracting, retaining, developing and remunerating
diverse senior management and skilled personnel (such as market trading
specialists), and is required to maintain good employee relations.

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

The inability to compensate employees competitively and/or any reduction of
compensation, the perception that NWM Group (of which NWM N.V. Group forms
part) may not be a viable or competitive business, heightened regulatory
oversight of banks and the increasing scrutiny of, and (in some cases)
restrictions placed upon, employee compensation arrangements (in particular
those of banks in receipt of government support such as NatWest Group),
negative economic developments or other factors, may adversely affect NWM N.V.
Group's ability to hire, retain and engage well qualified employees,
especially at a senior level, which could adversely affect NWM N.V. Group.

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

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

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

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

NWM N.V. Group's operations are highly dependent on the ability to process a
very large number of transactions efficiently and accurately while complying
with applicable laws and regulations. The proper functioning of NatWest
Group's (including NWM N.V. 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), is critical to NWM N.V. 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 NWM N.V. Group and (ii) NWM N.V. Group's
ability to provide services to its clients, which could result in reputational
damage, significant compensation costs and regulatory sanctions (including
fines resulting from regulatory investigations) or a breach of applicable
regulations and could affect NWM N.V. Group's regulatory approvals,
competitive position, business and brands, which could undermine its ability
to attract and retain customers and talent. NWM N.V. Group outsources certain
functions as it innovates and offers new digital solutions to its clients to
meet the demand for online and mobile banking. Outsourcing, alongside hybrid
working patterns of NWM N.V. Group employees heighten the above risks.

NWM N.V. Group uses IT systems that enable remote working interface with
third-party systems, and NWM N.V. Group could experience service denials or
disruptions if such systems exceed capacity or if 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, NWM N.V. Group made considerable investments to further simplify,
upgrade and improve its IT and technology capabilities (including migration of
certain services to cloud platforms). As part of NWM's strategy, NWM Group,
including NWM N.V. 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 cyber security.

Any failure of these investment and rationalisation initiatives to achieve the
expected results, due to cost challenges or otherwise, may adversely affect
NWM Group's operations, its reputation and ability to retain or grow its
client business or adversely affect its competitive position, thereby
negatively impacting NWM N.V. Group. See also, '- NWM Group (including NWM
N.V. Group) has been in a period of significant structural and other change,
including as a result of NatWest Group's strategy and NatWest Group's recent
creation of its C&I business segment (of which NWM Group forms part) and
may continue to be subject to significant structural and other change'.

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

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

Risk management is an integral part of all of NWM N.V. Group's activities and
integral to the delivery of its long-term strategy. NatWest Group's
Enterprise- Wide Risk Management Framework sets out NWM Group's (including NWM
N.V. Group) approach for managing risk within NWM N.V. 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, may adversely affect NWM N.V. Group's financial
condition and strategic delivery including in relation to operating within
agreed risk appetite statements and accurate reporting on risk exposures.

Financial risk management is highly dependent on the use and effectiveness of
internal stress tests and models and ineffective risk management may arise
from a wide variety of factors, including lack of transparency or incomplete
risk reporting, manual processes and controls, inaccurate data, inadequate IT
systems, unidentified conflicts or misaligned incentives, lack of
accountability control and governance, incomplete risk monitoring (including
trade surveillance) and failures of systems to properly process all relevant
data, risks related to unanticipated behaviour or performance in algorithmic
trading and management 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 NWM N.V. Group's reputation or its relationship with its regulators,
clients, shareholders or other stakeholders.

In addition, financial crime risk management is dependent on the use and
effectiveness of financial crime assessment, systems and controls. Weak or
ineffective financial crime processes and controls may risk NatWest Group
inadvertently facilitating financial crime which may result in regulatory
investigation, sanction, litigation, fines and reputational damage. Financial
crime continues to evolve, whether through fraud, scams, cyber-attacks or
other criminal activity. These risks are exacerbated as NWM N.V. Group
continues to innovate its product offering and increasingly offers digital
solutions to its customers. NatWest Group (including NWM N.V. 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. A number of NWM
N.V. Group's financial crime controls are operated by NatWest Group on behalf
of NWM N.V. Group.

NWM N.V. Group's operations are inherently exposed to conduct risks, which
include business decisions, actions or reward mechanisms that are not
responsive to or aligned with NWM N.V. Group's regulatory obligations, client
needs or do not reflect NWM N.V. Group's customer-focused strategy,
ineffective product management, unethical or inappropriate use of data,
information asymmetry, implementation and utilisation of new technologies,
outsourcing of customer service and product delivery, inappropriate behaviour
towards customers, customer outcomes, the possibility of mis-selling of
financial products and mishandling of customer complaints. Some of these risks
have materialised in the past and ineffective management and oversight of
conduct risks may lead to further remediation and regulatory intervention or
enforcement.

NWM N.V. Group's businesses are also exposed to risks from employee,
contractor or services provider misconduct including non-compliance with
policies and regulations, negligence or fraud (including financial crimes and
fraud), any of which could result in regulatory fines or sanctions and serious
reputational or financial harm to NWM N.V. Group. Hybrid working arrangements
for NWM N.V. Group employees place heavy reliance on the IT systems that
enable remote working and may place additional pressure on NWM N.V. Group's
ability to maintain effective internal controls, 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.

NWM N.V. Group seeks to embed a risk awareness culture across the organisation
and has implemented policies and allocated new resources across all levels of
the organisation to manage and mitigate conduct risk and expects to continue
to invest in risk management, including the ongoing development of a NatWest
Group risk management strategy in line with regulatory expectations. However,
such efforts may not insulate NWM N.V. Group from instances of misconduct and
no assurance can be given that NWM N.V. Group's strategy and control framework
will be effective. See also, '- NWM Group (including NWM N.V. Group) has been
in a period of significant structural and other change, including as a result
of NatWest Group's strategy and NatWest Group's recent creation of its C&I
business segment (of which NWM Group forms part) and may continue to be
subject to significant structural and other change'. Any failure in NWM N.V.
Group's risk management framework may adversely affect NWM N.V. Group and its
financial condition through reputational and financial harm and may result in
the inability to achieve its strategic objectives for its clients, employees
and wider stakeholders.

There is also the risk that the risk management frameworks, as developed by
NatWest Group and NWM Group, may not be properly adapted for NMW N.V.'s
specific circumstances. Ahead of a regulatory audit a self-identified
governance shortfall has been identified related to regulatory reporting
process management. Furthermore, NWM N.V. has policies and controls in place
to prevent and detect financial crime and has invested in technology and
capability to enhance financial crime controls. Although NWM N.V. head office
is located in Amsterdam (where NWM N.V. risk management function is based), it
also operates branches in France, Germany, Italy, and Sweden. Should such risk
policies and controls be inadequate to combat financial crime, particularly in
NWM N.V., branches (where there is less direct supervision) there could be an
adverse impact on NWM N.V.

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

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

Reputational risk relates to stakeholder and public perceptions of NWM N.V.
Group arising from an actual or perceived failure to meet stakeholder or the
public's expectations, including with respect to NatWest Group's strategy and
related targets, NWM Group's strategy, the progression towards working as One
Bank across the NatWest Group to serve customers, or due to any events,
behaviour, action or inaction by NWM N.V. Group, its employees or those with
whom NWM N.V. Group is associated. See also, 'NWM N.V. Group's businesses are
subject to substantial regulation and oversight, which are constantly evolving
and may adversely affect NWM N.V. Group.'This includes harm to its brand,
which may be detrimental to NWM N.V. Group's business, including its ability
to build or sustain business relationships with clients, 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 and may adversely affect NWM N.V. Group's ability to attract and
retain clients. In particular, NWM N.V. Group's ability to attract and retain
clients and talent, and engage with counterparties may be adversely affected
by factors including: negative public opinion resulting from the actual or
perceived manner in which NWM N.V. Group or any other member of NatWest Group
conducts or modifies its business activities and operations, media coverage
(whether accurate or otherwise), employee misconduct, NWM N.V. Group's
financial performance, IT systems failures or cyberattacks, data breaches,
financial crime and fraud, the level of direct and indirect government support
for NatWest Group plc, or the actual or perceived practices in the banking and
financial industry in general, or a wide variety of other factors.

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

Although NWM N.V. Group has implemented a Reputational Risk Policy identify,
measure and manage material reputational risk exposures, NWM N.V. 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 NWM N.V. Group's future results, financial condition, prospects,
and/or reputation.

Legal, regulatory and conduct risk

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

NWM N.V. 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. NWM Group (NWM N.V. Group's parent)
expects government and regulatory intervention in the financial services
industry to remain high for the foreseeable future.

In particular, NWM N.V. Group is subject to (i) direct prudential supervision
by DNB and the ECB; (ii) direct market conduct supervision by the AFM and
indirect market conduct supervision by the ESMA; and (iii) supervision by DNB,
as home state supervisor, in respect of NWM N.V. Group's branch offices in
France, Germany, Italy, and Sweden, and to supervision by local regulators in
these jurisdictions, as host state supervisors, in respect of certain
regulatory aspects of NWM N.V. Group's branch offices' operations that are
subject to host state supervision (e.g. anti-money laundering laws). NWM N.V.
Group expects government and regulatory intervention in the financial services
industry to remain high for the foreseeable future.

Prudential regulatory requirements: 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 Netherlands, the EU
proposed reform of bank crisis management and deposit insurance framework, 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. This has resulted in NWM N.V. Group facing greater
regulation and scrutiny in the Netherlands and the other countries in which it
operates.

In addition, there is significant oversight by competition authorities of the
jurisdictions in which NWM N.V. Group operates. The competitive landscape for
banks and other financial institutions in Europe, the UK 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.

Recent regulatory changes and heightened levels of public and regulatory
scrutiny in Europe, the UK, Asia 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.

Regulatory requirements:

Recent regulatory changes and heightened levels of public and regulatory
scrutiny in the EU 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 offering and business models. For example,
NWM N.V. Group is required to ensure operational continuity in resolution; the
steps required to ensure such compliance entail significant costs, and also
impose significant operational, legal and execution risk. Material
consequences could arise should NWM N.V. Group be found to be non-compliant
with these regulatory requirements.

On 1 January 2024 the ECB replaced DNB as the regulator of NWM N.V. due to NWM
N.V. becoming a 'significant institution' as defined by the ECB and more
oversight from the ECB is anticipated going forward. This may result in
changes to supervision and regulations applicable to NWM N.V. Should NWM N.V.
not meet certain supervisory criteria, remedial action or changes to the
business may be required. Any such actions or changes may harm the reputation
of NWM N.V. Group and may also require additional resources and funds which
may need to be diverted from other parts of the business which may, in turn,
adversely affect NWM N.V. Group.

Such changes may also result in an increased number of regulatory
investigations and proceedings and have increased the risks relating to NWM
N.V. Group's ability to comply with the applicable body of rules and
regulations in the manner and within the timeframes required.

Other areas in which, and examples of where, governmental policies, regulatory
and accounting changes and increased public and regulatory scrutiny may
adversely affect (some of which could be material) on NWM N.V. 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 NWM N.V. Group operates;

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

-      new or increased regulations relating to customer data protection
as well as IT controls and resilience, such as the 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 NWM N.V. Group's operations, which may require increased
payments of tax, such as the Dutch Withholding Tax Act 2021 (Wet bronbelasting
2021), the introduction of global minimum tax rules, changes in the scope and
administration of the Dutch Bank Levy (bankenbelasting), changes in tax rates,
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 may reduce the value of deferred
tax for certain years;

-      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 banks including NatWest Group (including
impact on NWM N.V. Group);

-      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 a significant impact on NWM N.V. Group's
authorisations and licences, the products and services that NWM N.V. Group may
offer, its reputation and the value of its assets, NWM N.V. Group's operations
or legal entity structure, and the manner in which NWM N.V. Group conducts its
business. Material consequences could arise should NWM N.V. Group be found to
be non-compliant with these regulatory requirements.

Regulatory developments may also result in an increased number of regulatory
investigations and proceedings and have increased the risks relating to NWM
N.V. Group's ability to comply with the applicable body of rules and
regulations in the manner and within the timeframes required.

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

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

NWM N.V. Group and NWM Plc are 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 NWM N.V. Group.

-      NWM N.V. Group's operations are diverse and complex and it
operates in legal and regulatory environments that expose it to potentially
significant civil actions (including those following on from regulatory
sanction), as well as criminal, regulatory and governmental proceedings. NWM
N.V. Group and NWM Plc have 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 and other jurisdictions

-      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 banks including NatWest Group (including
impact on NWM N.V. Group);

 

 

-      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 a significant impact on NWM N.V. Group's
authorisations and licences, the products and services that NWM N.V. Group may
offer, its reputation and the value of its assets, NWM N.V. Group's operations
or legal entity structure, and the manner in which NWM N.V. Group conducts its
business. Material consequences could arise should NWM N.V. Group be found to
be non-compliant with these regulatory requirements.

Regulatory developments may also result in an increased number of regulatory
investigations and proceedings and have increased the risks relating to NWM
N.V. Group's ability to comply with the applicable body of rules and
regulations in the manner and within the timeframes required.

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

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

NWM N.V. Group and NWM Plc are 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 NWM N.V. Group.

NWM N.V. Group's operations are diverse and complex and it operates in legal
and regulatory environments that expose it to potentially significant civil
actions (including those following on from regulatory sanction), as well as
criminal, regulatory and governmental proceedings. NWM N.V. Group and NWM Plc
have 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 and other jurisdictions.

 

NWM N.V. Group and/or NWM Plc are, have recently been and 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 NWM 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. NWM
N.V. 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, which involves a three-year
period of probation, an independent corporate monitor, and commitments to
compliance programme reviews and improvements and reporting obligations.
Significant ongoing matters include the implementation of recommendations made
by the independent corporate monitor aforementioned. For additional
information relating to this and other legal and regulatory proceedings and
matters to which NWM Group is exposed, see 'Litigation and regulatory matters'
at Note 25 to the NWM Group consolidated accounts.

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

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

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

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

 

 

LEI: X3CZP3CK64YBHON1LE12 - NatWest Markets N.V.

2138005O9XJIJN4JPN90 - NatWest Group plc

RR3QWICWWIPCS8A4S074 - NatWest Markets Plc

 

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