6 Aug 2010 07:01
Appendix 3
The Asset Protection Scheme
Appendix 3 The Asset Protection Scheme
Covered assets: roll forward to 30 June 2010
The table below details the movement in covered assets in the six months to 30 June 2010.
|
| Covered amount |
|
| £bn |
|
|
|
| Covered assets at 31 December 2009 | 230.5 |
| Disposals | (3.2) |
| Maturities, amortisation and repayments | (13.1) |
| Re-classified assets | 3.1 |
| Withdrawn assets | (2.9) |
| Effect of foreign currency movements and other adjustments | 1.1 |
|
|
|
| Covered assets at 30 June 2010 | 215.5 |
Note:
| (1) | The Asset Protection Agency (APA) and the Group have now reached agreement in principle on all major eligibility issues. During the period, the Group initiated the withdrawal of £2.9 billion of derivative assets and these withdrawals have been agreed in principle with the APA. The eligibility issues and withdrawals remain subject to final legal documentation which is expected to be complete in Q3 2010. |
Key points
| ·; | The reduction in covered assets was due to run-off of the portfolio, disposals and early repayments. |
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| ·; | The APA and the Group have reached agreement over the classification of some structured credit assets which has resulted in adjustments to the covered amount, without affecting the underlying risk protection. |
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| ·; | The strengthening of the US Dollar against Sterling more than offset the weakening of the Euro, leading to an increase in covered assets. |
Appendix 3 The Asset Protection Scheme
Credit impairments and write downs
The table below analyses the cumulative credit impairment losses and adjustments to par value (including AFS reserves) relating to covered assets:
|
| 30 June 2010 | 31 December 2009 |
|
| £m | £m |
|
|
|
|
| Loans and advances | 16,702 | 14,240 |
| Debt securities | 13,980 | 7,816 |
| Derivatives | 1,828 | 6,834 |
|
|
|
|
|
| 32,510 | 28,890 |
|
|
|
|
| By division: |
|
|
| UK Retail | 2,765 | 2,431 |
| UK Corporate | 927 | 1,007 |
| Global Banking & Markets | 1,528 | 1,628 |
| Ulster Bank | 730 | 486 |
| Non-Core | 26,560 | 23,338 |
|
|
|
|
|
| 32,510 | 28,890 |
Key points
| ·; | Impairments in Non-Core accounted for the majority of the increase of £3,620 million in credit impairments and write-downs since the start of the year and of £1,977 million since 31 March 2010. |
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| ·; | The APA and the Group have reached agreement over the classification of some structured credit assets which has resulted in adjustments to credit impairments and write downs mainly between debt securities and derivatives. |
Appendix 3 The Asset Protection Scheme
First loss utilisation
For definitions of triggered amounts and other related aspects, refer to page 176 of the Group's 2009 Annual Report and Accounts - Business review - Asset Protection Scheme.
The table below summarises the total triggered amount and related cash recoveries by division at 30 June 2010.
|
| 30 June 2010 |
| 31 December 2009 | ||
|
| Triggered amount | Cash recoveries to date | Net triggered amount |
| Net triggered amount |
|
| £m | £m | £m |
| £m |
|
|
|
|
|
|
|
| UK Retail | 3,503 | 232 | 3,271 |
| 3,211 |
| UK Corporate | 3,431 | 777 | 2,654 |
| 2,966 |
| Global Banking & Markets | 2,579 | 289 | 2,290 |
| 1,640 |
| Ulster Bank | 917 | 78 | 839 |
| 657 |
| Non-Core | 26,590 | 1,792 | 24,798 |
| 18,128 |
|
|
|
|
|
|
|
|
| 37,020 | 3,168 | 33,852 |
| 26,602 |
Notes:
| (1) | The triggered amount on a covered asset is calculated when an asset is triggered (due to bankruptcy, failure to pay after a grace period and restructuring with an impairment) and is the lower of the covered amount and the outstanding amount for each covered asset. Given the grace period before assets trigger, the Group expects additional assets to trigger based on the current risk rating and level of impairments on covered assets. |
| (2) | Whilst the APA has agreed in principle to the withdrawal of £2.9 billion of derivative assets, it has not yet determined the amount that may be recognised in the computation of the first loss. |
| (3) | Following agreement over the classification of some structured credit assets, the APA and the Group are in discussion regarding possible changes to the trigger criteria in respect of these assets; this may result in earlier recognition of a triggered asset. |
Key points
| ·; | The Group currently expects recoveries on triggered amounts to be approximately 45% over the life of the relevant assets. On this basis, the expected loss on triggered assets at 30 June 2010 is approximately £20 billion (31 December 2009 - £15 billion), or 33% of the £60 billion first loss threshold under the APS. |
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| ·; | Triggered amounts (before cash recoveries to date) moved from £28,267 million at 31 December 2009 to £33,172 million at 31 March 2010 and £37,020 million at 30 June 2010. |
Appendix 3 The Asset Protection Scheme
Risk weighted assets
The table below analyses the divisional risk-weighted assets covered by APS.
|
| 30 June 2010 |
| 31 December 2009 |
|
| £bn |
| £bn |
|
|
|
|
|
| UK Retail | 13.5 |
| 16.3 |
| UK Corporate | 25.7 |
| 31.0 |
| Global Banking & Markets | 15.5 |
| 19.9 |
| Ulster Bank | 8.3 |
| 8.9 |
| Non-Core | 60.4 |
| 51.5 |
|
|
|
|
|
| Group before APS benefit | 123.4 |
| 127.6 |
Key point
| ·; | The decrease in RWAs for assets covered by APS results from run off of the portfolio, disposals, early repayments and withdrawals partially offset by the impact of RBS NV's transition to the advanced Basel II capital treatment. |