FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549

 
 
Report of Foreign Private Issuer
 
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
 
For July 30, 2015
 
Commission File Number: 001-10306

 
The Royal Bank of Scotland Group plc

 
RBS, Gogarburn, PO Box 1000
Edinburgh EH12 1HQ

 
(Address of principal executive offices)
 
 
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
 
Form 20-F X
 
Form 40-F ___
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):_________

 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):_________


Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.


Yes
  ___
No X
 
 
If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- ________

 

 
The following information was issued as a Company announcement in London, England and is furnished pursuant to General Instruction B to the General Instructions to Form 6-K:

 

 
 
 
 
 
Appendix 1
 
Capital and risk management
 

 
Appendix 1 Capital and risk management
 
 
Presentation of information
1
General overview
2
 
 
Capital management
Pillar 2A and MDA
5
Capital resources
7
Leverage exposure
8
Risk-weighted assets
9
 
 
Liquidity and funding risk
Liquidity risk
13
Funding risk
15
 
 
Credit risk
Loans and related credit metrics
17
Debt securities
22
Derivatives
23
Key loan portfolios
25
 
 
Market risk
Trading portfolios
34
Non-trading portfolios
36
 
 
Country risk
Key points
40
Country exposures
42
 
 
Presentation of information
The assets and liabilities of disposal groups are presented as single lines in the consolidated balance sheet as required by IFRS. As allowed by IFRS, exposures, measures and ratios in this Appendix include disposal groups, primarily relating to CFG and international private banking, on a line-by-line basis. A summary of this presentation is set out in Appendix 2.
 
The disclosures in this appendix supplement disclosures in Analysis of results - Balance sheet related key metrics and ratios; Impairment losses; Capital and leverage ratios. An overview by risk type is included in the General overview, supporting analyses and additional detailed commentary are included in specific risk sections.
 
Appendix 1 Capital and risk management
 
General overview*
RBS's main risks are described in Capital and risk management - Risk coverage in the 2014 Annual Report and Accounts. The table below is an overview of these risks, including any developments during H1 2015.
 
 
Risk type
Overview
Capital and leverage
·      RBS's CET1 ratio: continued to strengthen from 11.2% at the end of 2014 to 12.3% at 30 June 2015, an improvement of 110 basis points.
·      Key milestones were:
the reduction of CFG ownership interest to 40.8%; and
the continued run down of RCR and CIB assets.
·      RWAs: continued to decline with a £30 billion reduction from the 2014 year end to £326 billion, £26 billion above the year end 2015 target of £300 billion, following reductions in CIB (£19.1 billion) and RCR (£7.6 billion).
·      Leverage ratio (under the revised 2014 Basel III leverage ratio framework and the 2015 CRR Delegated Act): 4.6% compared with 4.2% at the end of 2014 reflecting capital strength and leverage exposure reduction, from £940 billion to £875 billion, principally in CIB.
·      RBS plans to issue £4-5 billion of end-point CRR compliant Additional Tier 1, of which £2 billion is planned to be issued in 2015.
Liquidity and funding
·      Liquidity position continues to be robust: the liquidity portfolio of £161 billion at 30 June 2015 covered short-term wholesale funding by more than six times. Excluding CFG, the liquidity portfolio was £148 billion. Short-term wholesale funding reduced to £25 billion, due to term debt maturities.
·      Liquidity portfolio increased by £10.8 billion in the six months to 30 June 2015 mainly driven by CIB and RCR run-down, Citizens share disposals and continuation of sales from RBS N.V. treasury portfolio.
·      Liquidity coverage ratio (LCR) improved by five percentage points to 117% since the year end; excluding Citizens the LCR was 118%. From 1 October 2015, RBS will be required by the PRA to have a LCR of at least 80%.
·      Net stable funding ratio (NSFR) at 30 June 2015 was 115% in total and 112%  excluding Citizens, broadly unchanged from 2014 year end.
·      The loan:deposit ratio fell to 92% at 30 June 2015, primarily reflecting asset reductions and a stable deposit base.
·      Based on its current assessment of the Financial Stability Board's proposals, RBS may issue £3-£5 billion of qualifying debt per annum between 2015 and 2019 to meet future total loss absorbing capacity requirements.
Conduct and legal
RBS continued to remediate historical conduct issues. RBS co-operated with global regulators on investigations into the foreign exchange market and the more significant penalties were settled. Litigation and conduct costs were £1.3 billion in H1 2015 compared with £0.25 billion in H1 2014. The conduct risk framework was further embedded in Conduct and Regulatory Affairs' new operating model, focussing assurance coverage and testing towards customer outcomes.
 
 
 
*Not within the scope of Deloitte LLP's review report

Appendix 1 Capital and risk management
 
General overview* (continued)
 
 
Risk type
Overview
Credit
·      RBS's credit risk exposures continued to fall overall, with an improvement in credit quality and a net release of impairment provisions in H1 2015. RCR disposals - particularly in the commercial real estate sector in Ireland - contributed significantly to the reductions in exposure and to the provision release. These results also reflect benign economic and market conditions in the UK and Ireland, better liquidity and increased collateral values. Lower sector and asset/product class limits were implemented following the new CIB strategy.
·      The growth in UK PBB gross mortgage lending was within credit risk appetite and against a backdrop of sustained house price growth in 2015 that has outstripped earnings growth. Economic fundamentals continue to look strong, helping to underpin mild improvements in the UK housing and mortgage market.
·      From a low of US$45 per barrel in January 2015, oil prices recovered to US$61 per barrel by the end of June 2015. However, the market is still considered to be oversupplied and the outlook is uncertain. Risk appetite to the oil and gas sector was further reduced during H1 2015 following a review in March 2015, with continued focus on ensuring that the portfolio remains high investment grade.
·      Overall credit metrics strengthened in the first half of 2015 principally reflecting RCR disposals but also improvements in economic conditions: 
Credit risk RWAs fell by £23 billion or 8% to £273 billion at 30 June 2015 from
     £295 billion at the 2014 year end primarily reflecting CIB portfolio sales and
     risk reduction and RCR disposal strategy. 
Impairment provisions of £11.3 billion (2014 - £18.0 billion) covered risk      elements in lending (REIL) of £18.7 billion (2014 - £28.2 billion) by 60% (2014      - 64%).
CRE lending fell to £36.4 billion from £43.3 billion at the end of 2014, of which      £7.2 billion (2014 - £13.3 billion) was in REIL with provision coverage of 64%      (2014 - 68%).
Market
Average trading internal VaR decreased to £21.8 million (H1 2014 - £30.6 million; FY 2014 - £27.8 million), largely in credit spread VaR, reflecting the continued exit from the US asset-backed products trading business. Market risk RWAs decreased by £1.7 billion to £22.3 billion, driven by a decline in the standardised risk capital charge reflecting reduced securitisation exposures in the trading book, partly offset by a small increase in the Pillar 1 risk capital charge.
 
Non-trading interest rate VaR was lower as RBS positioned its structural interest rate closer to the neutral position prescribed by its risk management policy
 
 
*Not within the scope of Deloitte LLP's review report 

Appendix 1 Capital and risk management
 
General overview* (continued)
 
 
Risk type
Overview
Country
RBS continued to maintain a cautious stance as it becomes a UK-centred bank with a focus on Western Europe. Total eurozone net balance sheet exposure decreased by £12 billion or 12% to £85.6 billion in the first half of 2015. Eurozone periphery exposures decreased by £7.4 billion or 24%, to £24.0 billion. Most of this reduction was in Italy, driven by maturity of derivative transactions and higher short positions due to uncertainty around Greece, and in Ireland, reflecting RCR portfolio sales and currency movements. Total exposure to Greece was reduced from £0.4 billion to £110 million and £86 million after the effect of credit mitigation. Exposure to Russia remained under strict control and continued to be reviewed regularly against international sanctions.
Operational
The risks associated with RBS's transformation plan are being closely monitored. Separate to this activity, in June, there was a one or two day delay to payments applied to some customer accounts. A detailed investigation is underway into the root cause of the problem - the findings will be used to reduce the risk of recurrence.
Regulatory
The level of regulatory risk remained high, given the large volume of regulatory change still impacting the industry. Various legacy conduct issues also continued to be managed.
Reputational
The most material threats to RBS's reputation continued to be as a result of conduct and operational-related matters: RBS was the subject of investigations and review by a number of regulators, some of which resulted in fines and public censure. The failure of IT systems in June 2015 also impacted customers, with reputational damage to the bank.
Business
RBS further reduced its business risk profile by continuing to scale back CIB's business activities and by pursuing RCR's asset disposal strategy.
Strategic
2015 has seen further progress in RBS's shift towards the UK and the retail and commercial banking segments to achieve a lower risk profile. Capital ratios continued to increase further towards targets which, when attained, will provide RBS with increased strategic options
 

 
 
 
 
*Not within the scope of Deloitte LLP's review report
 
Appendix 1 Capital and risk management
 
Capital management
RBS aims to maintain an appropriate level of capital to meet its business needs and regulatory requirements, and operates within an agreed risk appetite. The appropriate level of capital is determined based on the dual aims of: (i) meeting minimum regulatory capital requirements; and (ii) ensuring RBS maintains sufficient capital to uphold customer, investor and rating agency confidence in the organisation, thereby supporting its business franchises and funding capacity. For a description of the capital management framework, governance and basis of preparation refer to Capital management in the 2014 Annual Report and Accounts.
 
Pillar 2A and MDA
RBS's current Pillar 2A requirement is 3.4% of RWAs (31 December 2014 - 3.5%). From 1 January 2015, 56% of the total Pillar 2A or 1.9% of RWAs is required to be met from CET1 capital. Pillar 2A is a point in time regulatory assessment of the amount of capital that is required to be held to meet the overall financial adequacy rules. This PRA assessment may change over time, including as a result of at least an annual assessment and supervisory review of RBS's Internal Capital Adequacy Assessment Process (ICAAP); the latest ICAAP based on the end of 2014 data was completed in May 2015.
 
RBS's capital risk appetite framework, which informs its capital targets, includes consideration of the maximum distributable amount (MDA) requirements. These requirements are expected to be phased in from 2016, with full implementation by 2019.
 
Based on current capital requirements, on the illustrative assumption that current estimates of Pillar 2A remain constant, RBS estimates that its 'fully phased' CET1 MDA requirement would be 10.4% in 2019, assuming RBS's current risk profile is unchanged. It should be noted that this estimate does not reflect the anticipated impact of RBS's planned restructuring and balance sheet risk reduction programmes, changes in the regulatory framework or other factors that could impact target CET1 ratios. This estimated 2019 MDA requirement comprises:
 
4.5% Pillar 1 minimum CET1 ratio;
2.5% Capital conservation buffer;
1.9% Pillar 2A CET1 ratio; and
1.5% Global Systemically Important Institution buffer.
 
Based on the assumptions above, assuming a 13% steady state CET1 capital ratio is achieved, RBS currently estimates that it would have headroom of 2.6% to fully phased MDA trigger in 2019. This headroom will be subject to ongoing review to accommodate regulatory and other changes.

Appendix 1 Capital and risk management
 
Developments in prudential regulation
The European Union Capital Requirements Regulation (CRR) is in transition until 2019. Recent developments are set out below.
 
Capital
The Basel Committee on Banking Supervision (BCBS) has consulted on implementing capital floors, and the expectation is that the framework design will be based on a standardised methodology that is currently being revised.
 
Systemic capital buffers - Global Systemically Important Banks (G-SIB) are assessed according to methodology set out by BCBS, and an additional loss absorbency requirement has been set according to the size. An annual assessment of size is undertaken and RBS is currently required to hold a 1.5% buffer. Additional requirements are being set for domestic (D-SIB) by the EBA (up to 2%) and for ring-fenced banks by the Financial Policy Committee of the Bank of England (up to 3%).
 
BCBS is still considering its proposals on the possible inclusion of interest rate risk in the banking book within Pillar 1 capital rather than the existing Pillar 2 treatment. Similarly, there is a possibility that operational risk charges will be moved from Pillar 2 to Pillar 1 capital.
 
A comprehensive review by BCBS into the market risk framework (Fundamental Review of the Trading Book) is likely to result in changes to the banking book/trading book boundary, replacing VaR with an expected shortfall model and new, more risk sensitive standardised methodologies which will need to be calculated for the entire book, regardless of whether a firm has permission to use a modelled approach.
 
BCBS has finalised rules for the capital requirements of securitisation positions. There is a new hierarchy of methods, as well as changes to the methodologies. The new rules, effective from 1 January 2018, aim to reduce reliance on credit rating agencies, although their use will still be permitted subject to local approval, reduce cliff effects seen in the current rules, and enhance risk sensitivity.
 
PRA has published a new approach to setting Pillar 2 capital requirements, replacing the capital planning buffer with a 'PRA buffer'. Broadly this follows the consultation paper of January 2015.
 
Disclosure requirements required by regulators will be more frequent, more extensive and much more standardised (Pillar 3). BCBS requirements will be introduced from the end of 2016 and the more detailed EU requirements are being phased in during late 2015.
 
Leverage ratio
The PRA is consulting on implementation of a UK leverage ratio framework, expected to come into force from 2016, which will incorporate a systemic capital buffer and a countercyclical buffer when establishing the minimum leverage ratio for banks. There will also be disclosures and related measurement bases for exposures.
 
Recovery & resolution planning
The Financial Stability Board is continuing impact studies on Total Loss Absorbency Capacity (TLAC) for G-SIBs with an expectation of final proposals to be issued in late 2015 for implementation in 2019. Minimum requirement for eligible liabilities (MREL) is the EU equivalent of TLAC but is not restricted to G-SIBs. The required amount will be set on a case by case basis by resolution authorities, with the Bank of England proposing that MREL be aligned to TLAC.

Appendix 1 Capital and risk management
 
 
Capital resources
             
 
End-point CRR basis (1)
 
PRA transitional basis (1)
 
30 June
31 March
31 December
 
30 June
31 March
31 December
2015 
2015 
2014 
 
2015 
2015 
2014 
 
£m 
£m 
£m 
 
£m 
£m 
£m 
               
Shareholders' equity (excluding
             
  non-controlling interests)
             
 Shareholders' equity
56,064 
56,808 
57,246 
 
56,064 
56,808 
57,246 
 Preference shares - equity
(4,313)
(4,313)
(4,313)
 
(4,313)
(4,313)
(4,313)
 Other equity instruments
(634)
(634)
(784)
 
(634)
(634)
(784)
 
51,117 
51,861 
52,149 
 
51,117 
51,861 
52,149 
               
Regulatory adjustments and deductions
             
 Own credit
345 
609 
500 
 
345 
609 
500 
 Defined benefit pension fund
             
   adjustment
(250)
(245)
(238)
 
(250)
(245)
(238)
 Cash flow hedging reserve
(435)
(1,109)
(1,029)
 
(435)
(1,109)
(1,029)
 Deferred tax assets
(1,206)
(1,140)
(1,222)
 
(1,206)
(1,140)
(1,222)
 Prudential valuation adjustments
(366)
(393)
(384)
 
(366)
(393)
(384)
 Goodwill and other intangible assets
(7,198)
(7,619)
(7,781)
 
(7,198)
(7,619)
(7,781)
 Expected losses less impairments
(1,319)
(1,512)
(1,491)
 
(1,319)
(1,512)
(1,491)
 Other regulatory adjustments
(635)
(327)
(585)
 
(612)
(305)
(855)
               
 
(11,064)
(11,736)
(12,230)
 
(11,041)
(11,714)
(12,500)
               
CET1 capital
40,053 
40,125 
39,919 
 
40,076 
40,147 
39,649 
               
Additional Tier 1 (AT1) capital
             
 Qualifying instruments and related
             
   share premium subject to phase out
 
6,709 
5,092 
5,820 
 Qualifying instruments issued by
             
   subsidiaries and held by third parties
 
1,114 
1,648 
               
AT1 capital
 
6,709 
6,206 
7,648 
               
Tier 1 capital
40,053 
40,125 
39,919 
 
46,785 
46,353 
47,117 
               
Qualifying Tier 2 capital
             
 Qualifying instruments and related
             
   share premium
5,433 
5,734 
5,542 
 
10,141 
6,254 
6,136 
 Qualifying instruments issued by
             
   subsidiaries and held by third parties
2,748 
2,955 
3,175 
 
3,432 
6,716 
7,490 
               
Tier 2 capital
8,181 
8,689 
8,717 
 
13,573 
12,970 
13,626 
               
Total regulatory capital
48,234 
48,814 
48,636 
 
60,358 
59,323 
60,743 
 
 
 
Note:
 
(1)
Capital Requirements Regulation (CRR) as implemented by the Prudential Regulation Authority in the UK, with effect from 1 January 2014. All regulatory adjustments and deductions to CET1 have been applied in full for the end-point CRR basis with the exception of unrealised gains on available-for-sale (AFS) securities which has been included from 2015 for the PRA transitional basis.
 
Appendix 1 Capital and risk management
 
Capital resources (continued)
 
Capital flow statement*
The table below analyses the movement in end-point CRR CET1 and Tier 2 capital for the half year ended 30 June 2015.
 
 
CET1
Tier 2
Total
 
£m
£m
£m
       
At 1 January 2015
39,919 
8,717 
48,636 
Loss for the year net of movements in fair value of own credit
(308)
(308)
Share capital and reserve movements in respect of employee share schemes
161 
161 
Ordinary shares issued
150 
150 
Foreign exchange reserve
(1,166)
(1,166)
AFS reserves
(55)
(55)
Decrease in goodwill and intangibles deduction
583 
583 
Deferred tax assets
16 
16 
Prudential valuation adjustments
18 
18 
Excess of expected loss over impairment provisions
172 
172 
Dated subordinated debt issues/(maturities)
(50)
(50)
Net dated subordinated debt/grandfathered instruments
(76)
(76)
Foreign exchange movements
(400)
(400)
Other movements
563 
(10)
553 
       
At 30 June 2015
40,053 
8,181 
48,234 
 
Leverage exposure
 
Basis of preparation*
The leverage exposure set out on page 24 of the main announcement is based on the revised 2014 Basel III leverage ratio framework and the 2015 CRR Delegated Act. Additional analysis of derivative notionals and undrawn commitments, two of the major components contributing to the leverage exposure is set out below.
 
The table below analyses the derivative notionals by maturity for contracts other than credit derivatives, and credit derivatives by qualifying and non-qualifying.
 
         
Credit derivatives (2)
 
 
Derivatives other than credit derivatives (1)
   
Non-
 
 
<1 year
1-5 years
>5 years
 
Qualifying
qualifying
Total
Derivative notionals
£bn
£bn
£bn
 
£bn
£bn
£bn
30 June 2015
             
Interest rate
9,642 
6,631 
3,850 
     
20,123 
Exchange rate
3,403 
505 
288 
     
4,196 
Equity
42 
16 
     
60 
Credit
       
78 
22 
100 
               
Total
13,087 
7,152 
4,140 
 
78 
22 
24,479 
               
31 December 2014
             
               
Interest rate
11,069 
10,423 
5,839 
     
27,331 
Exchange rate
3,649 
720 
306 
     
4,675 
Equity
42 
33 
     
77 
Commodities
     
Credit
       
99 
26 
125 
               
Total
14,761 
11,176 
6,147 
 
99 
26 
32,209 
 
Notes:
 
(1)
Derivative potential future exposures (PFE) are calculated based on the notional value of the contracts and is dependent on the type of contract. For contracts other than credit derivatives the PFE is based on the type and maturity of the contract after the effect of netting arrangements.
(2)
The PFE on credit derivatives is based on add-on factors determined by the asset quality of the referenced instrument. Qualifying credit derivatives attract a PFE add-on of 5% and have reference securities issued by public sector entities, multilateral development banks or other investment grade issuers. Non-qualifying credit derivatives attract a PFE add-on of 10%.
 
*Not within the scope of Deloitte LLP's review report
 
Appendix 1 Capital and risk management

Leverage exposure (continued)
 
 
Weighted undrawn commitments*
               
   
Ulster
Commercial
Private
 
Central
     
UK PBB
Bank
Banking
Banking
CIB
items
CFG
RCR
Total
30 June 2015
£bn
£bn
£bn
£bn
£bn
£bn
£bn
£bn
£bn
                   
Unconditionally cancellable items (1)
3.2 
0.4 
1.2 
0.1 
3.6 
2.6 
1.8 
12.9 
Items with a 20% CCF
0.1 
0.4 
2.0 
0.1 
0.3 
2.9 
Items with a 50% CCF
5.4 
0.6 
15.0 
0.7 
22.5 
0.8 
7.9 
0.3 
53.2 
Items with a 100% CCF
0.1 
0.1 
2.2 
0.4 
7.7 
3.6 
1.4 
0.2 
15.7 
                   
 
8.8 
1.1 
18.8 
1.2 
35.8 
7.1 
11.4 
0.5 
84.7 
                   
31 December 2014
                 
                   
Unconditionally cancellable items (1)
3.1 
0.1 
1.0 
0.2 
2.4 
1.8 
8.6 
Items with a 20% CCF
0.4 
0.7 
0.1 
3.2 
0.4 
4.8 
Items with a 50% CCF
4.8 
1.0 
9.8 
1.4 
36.8 
1.6 
7.8 
0.5 
63.7 
Items with a 100% CCF
0.1 
0.3 
2.2 
0.8 
10.2 
3.9 
1.5 
0.3 
19.3 
                   
 
8.4 
1.4 
13.7 
2.5 
52.6 
5.5 
11.5 
0.8 
96.4 
 
Note:
 
(1)
Based on a 10% credit conversion factor.

Risk-weighted assets*
The tables below analyse the movement in RWAs on the end-point CRR basis during H1 2015, by key drivers.
 
 
Credit risk RWAs
 
Non-counterparty 
Counterparty 
Total
 
£bn 
£bn 
£bn 
       
At 1 January 2015
264.7 
30.4 
295.1 
Foreign exchange movement
(3.5)
0.1 
(3.4)
Business movements
(12.9)
(3.3)
(16.2)
Risk parameter changes
(4.1)
(4.1)
Methodology changes
(0.2)
(0.2)
Model updates
0.7 
(0.1)
0.6 
Other changes
0.3 
0.4 
0.7 
       
At 30 June 2015
245.0 
27.5 
272.5 
       
Modelled (1)
143.7 
24.2 
167.9 
Non-modelled
101.3 
3.3 
104.6 
       
 
245.0 
27.5 
272.5 
 
 
 
Market risk RWAs
Operational
 
 
CIB
Other
Total
risk RWAs
Total
 
£bn 
£bn 
£bn 
£bn 
£bn 
           
At 1 January 2015
18.9 
5.1 
24.0 
36.8 
60.8 
Business and market movements
(0.8)
(0.9)
(1.7)
(5.2)
(6.9)
           
At 30 June 2015
18.1 
4.2 
22.3 
31.6 
53.9 
           
Modelled (1)
15.4 
3.3 
18.7 
18.7 
Non-modelled
2.7 
0.9 
3.6 
31.6 
35.2 
           
 
18.1 
4.2 
22.3 
31.6 
53.9 
 
Note:
 
(1)
Modelled refers to advanced internal ratings (AIRB) basis for non-counterparty credit risk, internal model method (IMM) for counterparty credit risk, and value-at-risk and related models for market risk. These principally relate to CIB (£71.8 billion) and Commercial Banking (£50.5 billion).
 
 
 
*Not within the scope of Deloitte LLP's review report

Appendix 1 Capital and risk management
 
Risk-weighted assets* (continued)
 
The table below analyses the movement in end-point CRR RWAs by segment during the half year.
                   
   
Ulster
Commercial
Private
 
Central
     
 
UK PBB
Bank
Banking
Banking
CIB
 items
CFG
RCR
Total
Total RWAs
£bn
£bn
£bn
£bn
£bn
£bn
£bn
£bn
£bn
                   
At 1 January 2015
42.8 
23.8 
64.0 
11.5 
107.1 
16.3 
68.4 
22.0 
355.9 
Foreign exchange movement
(1.5)
(0.3)
0.1 
(1.0)
(0.3)
(0.4)
(3.4)
Business movements
(0.6)
(0.4)
1.1 
(0.8)
(18.3)
(0.6)
1.7 
(5.2)
(23.1)
Risk parameter changes (1)
(1.3)
(0.7)
(0.2)
0.3 
(0.2)
(2.0)
(4.1)
Methodology changes (2)
(0.2)
(0.2)
Model updates (3)
(0.2)
1.4 
(0.6)
0.6 
Other changes
0.3 
2.5 
(1.0)
(1.5)
0.4 
0.7 
                   
At 30 June 2015
41.0 
21.2 
66.9 
9.8 
88.0 
15.3 
69.8 
14.4 
326.4 
                   
Credit risk
                 
  - non-counterparty
32.0 
19.6 
60.7 
8.2 
38.6 
14.1 
64.0 
7.8 
245.0 
  - counterparty
0.1 
22.9 
0.6 
0.9 
3.0 
27.5 
Market risk
0.1 
18.1 
0.1 
4.0 
22.3 
Operational risk
9.0 
1.5 
6.2 
1.5 
8.4 
0.5 
4.9 
(0.4)
31.6 
                   
Total RWAs
41.0 
21.2 
66.9 
9.8 
88.0 
15.3 
69.8 
14.4 
326.4 
 
Key points
 
·
RWAs fell by £29.5 billion to £326.4 billion in the first half of 2015 principally in CIB and RCR.
·
CIB reduced RWAs by £19 billion to £88 billion in line with expected business run-off as it implemented the new strategy. These reductions included:
 
regional loan portfolio disposals and run-offs (£6.8 billion), including US corporate loan portfolio sales to Mizuho (£3.2 billion);
 
US asset-backed product exit (£2.3 billion);
 
other trading portfolio disposals (£2.1 billion);
 
restructuring of certain derivative transactions (£1.7 billion); and
 
run down of the trade finance in GTS in line with contractual maturities (£3.2 billion).
·
RCR disposal and run-off strategy continued to progress, resulting in RWA reductions of £7.6 billion.
·
Improvements in credit quality metrics contributed to RWA decreases in Ulster Bank and UK PBB.
·
Sterling strengthening against the euro and US dollar resulted in lower RWAs in Ulster Bank and CIB.
·
Commercial Banking RWAs at 30 June 2015 included the transfer of UK Corporate coverage from CIB (£2.3 billion) and Private Banking RBSI (£1.5 billion).
·
Annual recalculation of operational risk resulted in a £5.2 billion RWA reduction, primarily £3.4 billion in CIB and £0.4 billion in both UK PBB and Private Banking.
·
In terms of RWA density for AIRB portfolios:
 
other sovereign density decreased from 25% to 17% following the sale of term loans in RCR;
 
non-bank financial institution density increased from 38% to 45% primarily reflecting close-out of a large low risk-weighted exposure and implementation of new LGD and PD models;
 
commercial property RWA density increased overall principally due to the impact of RCR disposals, including defaulted assets; and
 
the increase in RWA density for oil and gas and mining and metal sectors reflected implementation of the new large corporate PD model for mining exposures.
 
 
 
 
*Not within the scope of Deloitte LLP's review report
 
Appendix 1 Capital and risk management
 
Risk-weighted assets* (continued)
 
EAD and RWA density  
The tables below show exposure at default (EAD) after credit risk mitigation (CRM), RWAs, and related RWA density by sector cluster.
 
                       
 
EAD post CRM (1,2)
 
RWAs (1)
 
RWA density
 
AIRB
STD
Total 
 
AIRB
STD
Total 
 
AIRB
STD
Total 
30 June 2015
£m 
£m 
£m 
 
£m 
£m 
£m 
 
%
%
%
                       
Sector cluster
                     
Sovereign
                     
Central banks
47,477 
55,729 
103,206 
 
1,868 
1,869 
 
Central government
16,564 
12,287 
28,851 
 
1,652 
162 
1,814 
 
10 
Other sovereign
3,958 
7,473 
11,431 
 
671 
327 
998 
 
17 
                       
Total sovereign
67,999 
75,489 
143,488 
 
4,191 
490 
4,681 
 
                       
Financial institutions (FI)
                     
Banks
27,831 
2,387 
30,218 
 
12,822 
569 
13,391 
 
46 
24 
44 
Other FI (2)
35,420 
20,727 
56,147 
 
15,982 
9,380 
25,362 
 
45 
45 
45 
SSPEs (3)
14,282 
2,326 
16,608 
 
5,480 
4,078 
9,558 
 
38 
175 
58 
                       
Total FI
77,533 
25,440 
102,973 
 
34,284 
14,027 
48,311 
 
44 
55 
47 
                       
Corporates
                     
Property
                     
  - UK
42,808 
3,493 
46,301 
 
21,824 
3,478 
25,302 
 
51 
100 
55 
  - Ireland
4,077 
15 
4,092 
 
912 
15 
927 
 
22 
100 
23 
  - Other Western Europe
3,526 
484 
4,010 
 
1,520 
503 
2,023 
 
43 
104 
50 
  - US
1,036 
8,024 
9,060 
 
519 
8,059 
8,578 
 
50 
100 
95 
  - RoW
1,639 
361 
2,000 
 
1,115 
335 
1,450 
 
68 
93 
73 
                       
Total property
53,086 
12,377 
65,463 
 
25,890 
12,390 
38,280 
 
49 
100 
58 
Natural resources
                     
  - Oil and gas
11,145 
2,043 
13,188 
 
5,401 
1,856 
7,257 
 
48 
91 
55 
  - Mining and metals
2,438 
613 
3,051 
 
2,058 
641 
2,699 
 
84 
105 
88 
  - Other
13,793 
974 
14,767 
 
5,227 
759 
5,986 
 
38 
78 
41 
Transport
                     
  - Shipping
6,322 
2,731 
9,053 
 
4,186 
2,745 
6,931 
 
66 
101 
77 
  - Other
19,794 
3,091 
22,885 
 
8,310 
2,734 
11,044 
 
42 
88 
48 
Manufacturing
25,070 
8,408 
33,478 
 
10,801 
8,219 
19,020 
 
43 
98 
57 
Retail and leisure
21,388 
8,095 
29,483 
 
12,786 
7,981 
20,767 
 
60 
99 
70 
Services
21,919 
7,973 
29,892 
 
12,901 
8,028 
20,929 
 
59 
101 
70 
TMT (4)
10,131 
2,785 
12,916 
 
5,513 
2,671 
8,184 
 
54 
96 
63 
                       
Total corporates
185,086 
49,090 
234,176 
 
93,073 
48,024 
141,097 
 
50 
98 
60 
                       
Personal
                     
Mortgages
                     
  - UK
117,153 
7,803 
124,956 
 
10,123 
3,188 
13,311 
 
41 
11 
  - Ireland
13,992 
35 
14,027 
 
11,416 
16 
11,432 
 
82 
46 
81 
  - Other Western Europe
198 
324 
522 
 
16 
136 
152 
 
42 
29 
  - US
132 
20,629 
20,761 
 
10 
10,061 
10,071 
 
49 
49 
  - RoW
422 
724 
1,146 
 
37 
284 
321 
 
39 
28 
                       
Total mortgages
131,897 
29,515 
161,412 
 
21,602 
13,685 
35,287 
 
16 
46 
22 
Other personal
30,446 
17,239 
47,685 
 
12,366 
12,801 
25,167 
 
41 
74 
53 
                       
Total personal
162,343 
46,754 
209,097 
 
33,968 
26,486 
60,454 
 
21 
57 
29 
Other items
4,118 
17,885 
22,003 
 
2,364 
15,543 
17,907 
 
57 
87 
81 
                       
Total
497,079 
214,658 
711,737 
 
167,880 
104,570 
272,450 
 
34 
49 
38 
                       
For the notes to this table refer to the following page.
           
                       
*Not within the scope of Deloitte LLP's review report
         
 
Appendix 1 Capital and risk management
 
Risk-weighted assets*: EAD and RWA density (continued)
 
 
 
EAD post CRM (1,2)
 
RWAs (1)
 
RWA density
 
AIRB
STD
Total 
 
AIRB
STD
Total 
 
AIRB
STD
Total 
31 December 2014
£m 
£m 
£m 
 
£m 
£m 
£m 
 
%
%
%
                       
Sector cluster
                     
Sovereign
                     
Central banks
44,007 
50,539 
94,546 
 
1,632 
78 
1,710 
 
Central government
16,373 
9,944 
26,317 
 
1,775 
61 
1,836 
 
11 
Other sovereign
4,936 
6,548 
11,484 
 
1,250 
386 
1,636 
 
25 
14 
                       
Total sovereign
65,316 
67,031 
132,347 
 
4,657 
525 
5,182 
 
                       
Financial institutions (FI)
                     
Banks
32,777 
2,081 
34,858 
 
15,089 
488 
15,577 
 
46 
23 
45 
Other FI (2)
41,420 
22,535 
63,955 
 
15,585 
9,960 
25,545 
 
38 
44 
40 
SSPEs (3)
17,504 
2,634 
20,138 
 
6,216 
4,410 
10,626 
 
36 
167 
53 
                       
Total FI
91,701 
27,250 
118,951 
 
36,890 
14,858 
51,748 
 
40 
55 
44 
                       
Corporates
                     
Property
                     
  - UK
48,081 
3,463 
51,544 
 
23,736 
3,390 
27,126 
 
49 
98 
53 
  - Ireland
7,541 
31 
7,572 
 
1,283 
33 
1,316 
 
17 
106 
17 
  - Other Western Europe
4,625 
431 
5,056 
 
2,321 
445 
2,766 
 
50 
103 
55 
  - US
1,334 
7,481 
8,815 
 
722 
7,551 
8,273 
 
54 
101 
94 
  - RoW
2,048 
284 
2,332 
 
1,296 
249 
1,545 
 
63 
88 
66 
                       
Total property
63,629 
11,690 
75,319 
 
29,358 
11,668 
41,026 
 
46 
100 
54 
Natural resources
                     
  - Oil and gas
15,704 
1,876 
17,580 
 
6,864 
1,665 
8,529 
 
44 
89 
49 
  - Mining and metals
3,744 
635 
4,379 
 
2,602 
660 
3,262 
 
69 
104 
74 
  - Other
16,173 
1,070 
17,243 
 
6,367 
861 
7,228 
 
39 
80 
42 
Transport
                     
  - Shipping
8,332 
2,571 
10,903 
 
5,790 
2,575 
8,365 
 
69 
100 
77 
  - Other
21,268 
3,297 
24,565 
 
9,176 
2,865 
12,041 
 
43 
87 
49 
Manufacturing
29,450 
8,430 
37,880 
 
12,673 
8,257 
20,930 
 
43 
98 
55 
Retail and leisure
24,564 
8,262 
32,826 
 
14,940 
8,027 
22,967 
 
61 
97 
70 
Services
23,489 
8,426 
31,915 
 
13,327 
8,350 
21,677 
 
57 
99 
68 
TMT (4)
13,555 
2,790 
16,345 
 
7,079 
2,806 
9,885 
 
52 
101 
60 
                       
Total corporates
219,908 
49,047 
268,955 
 
108,176 
47,734 
155,910 
 
49 
97 
58 
                       
Personal
                     
Mortgages
                     
  - UK
113,884 
7,794 
121,678 
 
10,651 
3,121 
13,772 
 
40 
11 
  - Ireland
15,544 
37 
15,581 
 
13,137 
18 
13,155 
 
85 
49 
84 
  - Other Western Europe
193 
311 
504 
 
16 
124 
140 
 
40 
28 
  - US
131 
21,088 
21,219 
 
10 
10,352 
10,362 
 
49 
49 
  - RoW
407 
589 
996 
 
39 
232 
271 
 
10 
39 
27 
                       
Total mortgages
130,159 
29,819 
159,978 
 
23,853 
13,847 
37,700 
 
18 
46 
24 
Other personal
31,628 
15,971 
47,599 
 
13,233 
11,805 
25,038 
 
42 
74 
53 
                       
Total personal
161,787 
45,790 
207,577 
 
37,086 
25,652 
62,738 
 
23 
56 
30 
Other items
4,465 
18,363 
22,828 
 
3,012 
16,580 
19,592 
 
67 
90 
86 
                       
Total
543,177 
207,481 
750,658 
 
189,821 
105,349 
295,170 
 
35 
51 
39 
 
Notes:
 
(1)
Regulatory permissions to model counterparty credit risk exposure is independent from the scope of applying AIRB methodology. As such, standardised EAD and RWA will incorporate an element of modelled counterparty credit risk exposure.
(2)
Exposure at default post credit risk mitigation reflects an estimate of the extent to which a bank will be exposed under a specific facility, in the event of the default of a counterparty; AIRB: advanced internal ratings based; STD: standardised.
(3)
Non-bank financial institutions, such as US agencies, insurance companies, pension funds, hedge and leverage funds, broker-dealers and non-bank subsidiaries of banks.
(4)
Securitisation structured purpose entities primarily relate to securitisation related vehicles.
(5)
Telecommunications, media and technology.
 
*Not within the scope of Deloitte LLP's review report
 
Appendix 1 Capital and risk management
 
Liquidity and funding risk
Liquidity and funding risk is the risk that RBS is unable to meet its financial obligations, including financing wholesale maturities or customer deposit withdrawals, as and when they fall due. The risk arises through the maturity transformation role that banks perform. It is dependent on RBS specific factors such as maturity profile, composition of sources and uses of funding, the quality and size of the liquidity portfolio as well as broader market factors, such as wholesale market conditions alongside depositor and investor behaviour. For a description of the liquidity and funding risk framework, governance and basis of preparation refer to Capital and risk management - Liquidity and funding risk in the 2014 Annual Report and Accounts.
 
Liquidity and related metrics*
The table below sets out the key liquidity and related metrics monitored by RBS.
 
 
 
30 June 2015
   
   
RBS
31 March
31 December
RBS
 excluding CFG
2015 
2014 
         
Liquidity portfolio
£161bn
£148bn
£157bn
£151bn
Stressed outflow coverage (SCR) (1)
215%
235%
187%
186%
LCR (2)
117%
118%
112%
112%
NSFR (3)
115%
112%
110%
112%
Loan:deposit ratio
92%
91%
95%
95%
 
Notes:
 
(1)
RBS's liquidity risk appetite is measured by reference to the liquidity portfolio as a percentage of stressed contractual and behavioural outflows under the worst of three internal severe stress scenarios (a market-wide stress, an idiosyncratic stress and a combination of both) in accordance with PRA guidance on Individual Liquidity Adequacy Assessment.
(2)
Within the EU, the LCR is due to come into effect from 1 October 2015 on a phased basis, and replace the current PRA regime from this date. RBS monitors the LCR based on its internal interpretations of the EU Delegated Act rules for the implementation of the LCR. Consequently, RBS's ratio may change over time and may not be comparable with those of other financial institutions.
(3)
Pending further guidelines from the EU and the PRA, RBS uses its own interpretation of the proposals from the BCBS recommendations to calculate the NSFR. Consequently RBS's ratio may change over time and may not be comparable with those of other financial institutions. The ratio is due to come into effect from 1 January 2018.
 
Liquidity portfolio
The table below shows RBS's liquidity portfolio by product, liquidity value and carrying value. Liquidity value is lower than carrying value as it is stated after discounts applied by the Bank of England and other central banks to instruments, within the secondary liquidity portfolio, eligible for discounting.
 
 
 
Liquidity value
 
Period end
 
Average 
 
UK DLG (1)
CFG 
Other 
Total 
 
Quarter
H1 2015
30 June 2015
£m 
£m 
£m 
£m 
 
£m 
£m 
               
Cash and balances at central banks
73,218 
1,183 
1,406 
75,807 
 
71,113 
66,392 
Central and local government bonds
             
  AAA rated governments
3,932 
12 
1,033 
4,977 
 
5,609 
6,529 
  AA- to AA+ rated governments and US agencies
10,202 
9,845 
2,852 
22,899 
 
21,154 
20,285 
  Below AA rated governments
 
80 
91 
  Local government
 
24 
               
 
14,134 
9,857 
3,885 
27,876 
 
26,843 
26,929 
               
Primary liquidity
87,352 
11,040 
5,291 
103,683 
 
97,956 
93,321 
Secondary liquidity (2)
54,667 
2,085 
1,022 
57,774 
 
57,586 
57,024 
               
Total liquidity value
142,019 
13,125 
6,313 
161,457 
 
155,542 
150,345 
               
Total carrying value
177,485 
14,199 
7,262 
198,946 
     
 
For the notes to this table refer to the following page.
 
*Not within the scope of Deloitte LLP's review report

Appendix 1 Capital and risk management
 
Liquidity portfolio (continued)
 
 
Liquidity value
 
Period end
 
Average 
 
UK DLG (1)
CFG
Other
Total
 
Quarter
Year
31 December 2014
£m
£m
£m
£m
 
£m
£m
               
Cash and balances at central banks
66,409 
1,368 
633 
68,410 
 
61,777 
61,956 
Central and local government bonds
             
  AAA rated governments and US agencies
5,609 
2,289 
7,898 
 
8,729 
5,935 
  AA- to AA+ rated governments
6,902 
9,281 
1,448 
17,631 
 
16,589 
12,792 
  Below AA rated governments
100 
100 
 
  Local government
82 
82 
 
79 
21 
               
 
12,511 
9,281 
3,919 
25,711 
 
25,397 
18,748 
               
Primary liquidity
78,920 
10,649 
4,552 
94,121 
 
87,174 
80,704 
Secondary liquidity (2)
53,055 
2,290 
1,189 
56,534 
 
57,582 
56,017 
               
Total liquidity value
131,975 
12,939 
5,741 
150,655 
 
144,756 
136,721 
               
Total carrying value
167,016 
13,914 
6,055 
186,985 
     
 
Notes:
 
(1)
The PRA regulated UK Defined Liquidity Group (UK DLG) comprises the RBS's five licensed deposit-taking UK banks: The Royal Bank of Scotland plc, National Westminster Bank Plc, Ulster Bank Limited, Coutts & Company and Adam & Company. In addition, certain of RBS's significant operating subsidiaries - RBS N.V., Citizens Financial Group Inc. and Ulster Bank Ireland Limited - hold liquidity portfolios of liquid assets that comply with local regulations that may differ from PRA rules.
(2)
Comprises assets eligible for discounting at the Bank of England and other central banks.
 

Appendix 1 Capital and risk management
 
Funding risk
The composition of RBS's balance sheet is a function of the broad array of product offerings and diverse markets served by its businesses. Active management of both asset and liability portfolios is designed to optimise the liquidity profile, while ensuring adequate coverage of all cash requirements under extreme stress conditions.
 
The table below summarises the key funding metrics.
 
                   
 
Short-term wholesale
 
Total wholesale
 
Net inter-bank
funding (1)
funding
funding (2)
 
Excluding
Including
 
Excluding
Including
 
Deposits
Loans (3)
Net
 derivative
 derivative
 derivative
 derivative
 inter-bank
collateral
 collateral
collateral
 collateral
 funding
 
£bn
£bn
 
£bn
£bn
 
£bn
£bn
£bn
                   
30 June 2015
25.0 
47.0 
 
76.4 
98.4 
 
13.5 
(12.3)
1.2 
31 March 2015
27.2 
55.3 
 
84.0 
112.1 
 
14.3 
(14.8)
(0.5)
31 December 2014
27.8 
53.3 
 
90.5 
116.0 
 
15.4 
(13.3)
2.1 
30 September 2014
31.4 
53.9 
 
94.4 
116.9 
 
16.5 
(18.2)
(1.7)
30 June 2014
33.6 
55.1 
 
101.6 
123.1 
 
17.7 
(19.3)
(1.6)
 
Notes:
 
(1)
Short-term wholesale funding is funding with a residual maturity of less than one year.
 
(2)
Excludes derivative cash collateral.
 
(3)
Principally short-term balances.
 
               
The table below shows RBS's principal funding sources excluding repurchase agreements (repos).
               
 
30 June 2015
 
31 December 2014
 
Short-term 
Long-term 
   
Short-term 
Long-term 
 
 
less than 
more than 
Total 
 
less than 
more than 
Total 
1 year 
1 year 
1 year 
1 year 
 
£m 
£m 
£m 
 
£m 
£m 
£m 
               
Deposits by banks
             
 derivative cash collateral
21,993 
21,993 
 
25,503 
25,503 
 other deposits
11,938 
1,521 
13,459 
 
13,137 
2,294 
15,431 
               
 
33,931 
1,521 
35,452 
 
38,640 
2,294 
40,934 
Debt securities in issue
             
 commercial paper
154 
154 
 
625 
625 
 certificates of deposit
1,413 
196 
1,609 
 
1,695 
149 
1,844 
 medium-term notes
7,842 
22,199 
30,041 
 
7,741 
29,007 
36,748 
 covered bonds
2,625 
3,861 
6,486 
 
1,284 
5,830 
7,114 
 securitisations
4,699 
4,707 
 
10 
5,564 
5,574 
               
 
12,042 
30,955 
42,997 
 
11,355 
40,550 
51,905 
Subordinated liabilities
1,057 
18,852 
19,909 
 
3,274 
19,857 
23,131 
               
Notes issued
13,099 
49,807 
62,906 
 
14,629 
60,407 
75,036 
               
Wholesale funding
47,030 
51,328 
98,358 
 
53,269 
62,701 
115,970 
               
Customer deposits
             
 derivative cash collateral (1)
11,133 
11,133 
 
13,003 
13,003 
 financial institution deposits
47,274 
1,547 
48,821 
 
46,359 
1,422 
47,781 
 personal deposits
188,191 
5,337 
193,528 
 
185,781 
6,121 
191,902 
 corporate deposits
157,200 
1,832 
159,032 
 
159,782 
2,403 
162,185 
               
Total customer deposits
403,798 
8,716 
412,514 
 
404,925 
9,946 
414,871 
               
Total funding excluding repos
450,828 
60,044 
510,872 
 
458,194 
72,647 
530,841 
               
Of which CFG:
             
Wholesale funding
4,529 
1,332 
5,861 
       
Total customer deposits
62,064 
1,727 
63,791 
       
Total funding excluding repos
66,593 
3,059 
69,652 
       
                   
 
Note:
 
(1)
Cash collateral includes £10,220 million (31 December 2014 - £12,036 million) from financial institutions.
 
 
Appendix 1 Capital and risk management
 
Funding risk (continued)
Repos totalled £68.8 billion at 30 June 2015, of which £2.4 billion related to CFG compared with £64.6 billion and £2.4 billion respectively at 31 December 2014.
 
Customer deposits insured through deposit guarantee schemes totalled £163 billion (2014 - £160 billion), the more material of them being UK Financial Services Compensation Scheme (FSCS), £113 billion (2014 - £112 billion); US Federal Insurance Corporation relating to CFG, £40 billion (2014 - £37 billion) and Republic of Ireland's Deposit Guarantee Scheme, £6 billion (2014 - £7 billion). FSCS deposit protection will decrease from the current limit of £85,000 to £75,000 with effect from 1 January 2016.
 
RBS is currently subject to the UK bank levy on its consolidated liabilities and equity after taking account of certain exemptions such as regulatory Tier 1 capital, insured deposits and liabilities subject to legally enforceable netting arrangements. The July 2015 Budget Statement, proposed a phased reduction of the bank levy rate from the existing rate of 0.21% to 0.18% from 1 January 2016 and subsequent annual reductions to 0.1% from January 2021. There will also be a change in the bank levy's scope from 1 January 2021, such that UK headquartered banks will be subject to bank levy only on their UK balance sheet liabilities. Total liabilities at 30 June 2015 excluding CFG were £829 billion (2014 - £919 billion) of which 82% (2014 - 81%) related to transactions recorded in UK offices.
 
Appendix 1 Capital and risk management
 
Credit risk
Credit risk is the risk of financial loss due to the failure of a customer or counterparty to meet its obligation to settle outstanding amounts. For a description of the bank's credit risk framework, governance, policies and methodologies refer to Capital and risk management - Credit risk in the 2014 Annual Report and Accounts.
 

Loans and related credit metrics
The tables below show gross loans and advances (excluding reverse repos) and related credit metrics by segment.Risk elements in lending (REIL) comprise impaired loans and accruing loans past due 90 days or more as to principal or interest. Impaired loans are all loans (including loans subject to forbearance) for which an impairment provision has been established. For collectively-assessed loans, impairment loss provisions are not allocated to individual loans and the entire portfolio is included in impaired loans. Accruing loans past due 90 days or more comprise loans past due 90 days where no impairment loss is expected.
 
       
Credit metrics
   
 
Gross loans to
REIL
Provisions
REIL as a %
 
Provisions
YTD
 
of gross
Provisions
as a % of
Impairment
YTD
loans to
as a %
gross loans
losses/
Amounts
Banks
Customers
customers
of REIL
to customers
(releases)
written-off
30 June 2015
£m
£m
£m
£m
%
%
%
£m
£m
                   
UK PBB
1,023 
130,688 
3,232 
2,131 
2.5 
66 
1.6 
(17)
439 
Ulster Bank
2,495 
22,603 
4,190 
2,410 
18.5 
58 
10.7 
(52)
46 
                   
PBB
3,518 
153,291 
7,422 
4,541 
4.8 
61 
3.0 
(69)
485 
                   
Commercial Banking
510 
91,009 
2,284 
898 
2.5 
39 
1.0 
27 
120 
Private Banking
1,176 
13,520 
150 
47 
1.1 
31 
0.3 
(3)
                   
CPB
1,686 
104,529 
2,434 
945 
2.3 
39 
0.9 
24 
121 
                   
CIB
13,717 
57,956 
221 
143 
0.4 
65 
0.2 
(29)
28 
Central items
2,385 
2,039 
100 
(2)
CFG
1,438 
61,960 
1,240 
532 
2.0 
43 
0.9 
89 
156 
RCR
567 
11,006 
7,396 
5,141 
67.2 
69 
46.7 
(355)
4,981 
                   
 
23,311 
390,781 
18,714 
11,303 
4.8 
60 
2.9 
(342)
5,771 
                   
31 December 2014
                 
                   
UK PBB
641 
129,848 
3,778 
2,604 
2.9 
69 
2.0 
268 
728 
Ulster Bank
1,381 
24,719 
4,775 
2,711 
19.3 
57 
11.0 
(365)
131 
                   
PBB
2,022 
154,567 
8,553 
5,315 
5.5 
62 
3.4 
(97)
859 
                   
Commercial Banking
486 
86,008 
2,506 
955 
2.9 
38 
1.1 
77 
436 
Private Banking
972 
16,599 
226 
76 
1.4 
34 
0.5 
(5)
37 
                   
CPB
1,458 
102,607 
2,732 
1,031 
2.7 
38 
1.0 
72 
473 
                   
CIB
16,910 
72,957 
197 
206 
0.3 
105 
0.3 
(7)
Central items
2,178 
619 
1.1 
86 
1.0 
(12)
55 
CFG
1,728 
60,142 
1,330 
536 
2.2 
40 
0.9 
194 
300 
RCR
516 
21,909 
15,400 
10,946 
70.3 
71 
50.0 
(1,320)
3,591 
                   
 
24,812 
412,801 
28,219 
18,040 
6.8 
64 
4.4 
(1,170)
5,278 
 
Appendix 1 Capital and risk management
 
Loans and related credit metrics (continued)
 
Key points
 
·
Loans to banks decreased by £1.5 billion with a strategy-driven reduction of £3.2 billion in CIB, which was partially offset by some increases in other segments. Liquidity management saw an increase in Ulster Bank of £1.1 billion and £0.4 billion in UK PBB.
   
·
Customer loans fell by £22.0 billion: CIB decreased by £15.0 billion and RCR by £10.9 billion;  Commercial Banking and UK PBB saw net growth of £5.0 billion and £0.8 billion respectively.
   
·
Risk elements in lending (REIL) at £18.7 billion was 4.8% of gross customer loans, a significant improvement on the £28.2 billion (or 6.8%) six months ago. This reflects the success of RCR's disposal strategy, particularly in relation to Irish assets. REIL is now covered 60% by impairment provisions, lower than 64% as a result of the disposals.
   
·
In UK PBB, gross customer loans increased by £0.8 billion to £130.7 billion. Mortgage lending was up by £2.2 billion, £1.8 billion in Q2 2015, reflecting targeted growth partially offset by decreases in unsecured lending. Impairments and credit metrics continued to improve. REIL as a percentage of gross loans fell from 2.9% to 2.5% due to repayments of £494 million, reflecting improved asset quality and write-offs of £439 million. Impairment release reflected recoveries on the back of improved economic conditions.
   
·
Ulster Bank: gross customers lending was £2.1 billion lower primarily driven by the weakening euro. Significant growth in new lending volumes was more than offset by continued customer deleveraging including a reduction in the tracker mortgage portfolio. Improved economic conditions and lower observable defaults have resulted in recoveries contributing to an impairment release of £52 million.
   
·
In Commercial Banking, gross customer lending increased by £5.0 billion, of which £2.4 billion related to transfers from Private Banking and £2.1 billion to transfers from CIB, partially offset by a £0.5 billion decrease in legacy portfolios. REIL as a percentage of gross loans continued to decrease falling from 2.9% to 2.5%. The overall reduction in REIL reflects a low number of new individual cases.
   
·
CIB: gross loans fell by £15.0 billion largely through asset disposals throughout the regions, repayments and exit of non-strategic clients in GTS and included sectors such as oil and gas and shipping. There were also transfers to Commercial Banking (£2.1 billion). REIL increases were seen in shipping, electric and gas sectors.
   
·
CFG gross loans to customers increased by £1.8 billion or 3.0% to £62.0 billion, reflecting growth in the retail and wholesale portfolio. Impairments and REIL were broadly unchanged.
   
·
RCR saw a significant reduction in gross customer loans - £6.5 billion in commercial real estate, £3.3 billion in other corporate and £1.1 billion in asset finance - as the execution of its disposal and run-down strategy continued. REIL fell by £8.0 billion to £7.4 billion and provisions decreased by £5.8 billion to £5.1 billion as a consequence. This contributed to the significant improvements in credit metrics in both RCR and RBS overall.
 
 
Appendix 1 Capital and risk management
 
Loans and related credit metrics: Risk elements in lending
 
               
RBS
   
 
UK
Ulster
Commercial
Private
 
Central
 
excluding
   
 
PBB
Bank
Banking
Banking
CIB
items
CFG
RCR
RCR
Total
 
£m 
£m 
£m 
£m 
£m 
£m 
£m 
£m 
£m 
£m 
                     
At 1 January 2015
3,778 
4,775 
2,506 
226 
197 
1,330 
12,819 
15,400 
28,219 
Currency translation
                   
  and other adjustments
(17)
(384)
91 
(80)
(18)
(6)
(5)
(419)
(784)
(1,203)
Additions
687 
294 
397 
10 
90 
140 
1,618 
692 
2,310 
Transfers (1)
(121)
(116)
(5)
(121)
Transfers to
                   
  performing book
(162)
(41)
(93)
(296)
(28)
(324)
Repayments
                   
  and disposals
(494)
(408)
(501)
(6)
(20)
(69)
(1,498)
(2,898)
(4,396)
Amounts written-off
(439)
(46)
(120)
(1)
(28)
(156)
(790)
(4,981)
(5,771)
                     
At 30 June 2015
3,232 
4,190 
2,284 
150 
221 
1,240 
11,318 
7,396 
18,714 
 
Note:
 
(1)
Represents transfers between REIL and potential problem loans.
 
Impairment provisions
The movement in loan impairment provisions by segment is shown in the table below.
 
</
               
RBS
   
 
UK
Ulster
Commercial
Private
 
Central 
 
excluding 
   
 
PBB
Bank
 Banking
Banking
CIB
items 
CFG
RCR
RCR
Total
 
£m 
£m 
£m 
£m 
£m 
£m 
£m 
£m 
£m 
£m