rbs201011056k11.htm
 
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 November 5, 2010
 
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 2

The Asset Protection Scheme




 
RBS Group – Q3 2010 Results
 
 
 


Appendix 2 The Asset Protection Scheme
 
Covered assets: roll forward to 30 September 2010

The movements in covered assets during the quarter are detailed below.

 
Covered 
 amount 
 
£bn 
   
Covered assets at 30 June 2010
215.5 
Disposals
(3.5)
Maturities, amortisation and early repayments
(7.3)
Effect of foreign currency movements and other adjustments
0.7 
   
Covered assets at 30 September 2010
205.4 
   
Covered assets at 31 December 2009
230.5 

Note:
(1)
The Asset Protection Agency (APA) and the Group have now reached agreement on substantially all eligibility issues.

Key points
·
The reduction in covered assets was due to disposals, early repayments and maturing loans.
   
·
As part of the Group’s risk reduction strategy significant disposals were made from the structured credit portfolio (£1.8 billion); additionally the Group took advantage of market conditions and executed sales from its derivative, loan and leveraged finance portfolios (£1.7 billion).


 
RBS Group – Q3 2010 Results 

 
 
 


Appendix 2 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 September 
2010 
30 June 
2010 
31 December 
2009 
 
£m 
£m 
£m 
       
Loans and advances
17,360 
16,702 
14,240 
Debt securities
12,113 
13,980 
7,816 
Derivatives
2,341 
1,828 
6,834 
       
 
31,814 
32,510 
28,890 
       
By division:
      
UK Retail
2,880 
2,765 
2,431 
UK Corporate
1,026 
927 
1,007 
Ulster Bank
697 
730 
486 
       
Retail & Commercial
4,603 
4,422 
3,924 
Global Banking & Markets
1,769 
1,528 
1,628 
       
Core
6,372 
5,950 
5,552 
Non-Core
25,442 
26,560 
23,338 
       
 
31,814 
32,510 
28,890 

Key points
·
Cumulative credit impairments and write downs decreased by £0.7 billion in the quarter, primarily due to disposals of debt securities in the Non-Core division of £1.2 billion and movements in exchange rates of £0.5 billion, partially offset by impairments and write downs of £0.7 billion.
   
·
The APA and the Group have reached agreement on the classification for the purposes of the Scheme of some structured credit assets which has resulted in adjustments to credit impairments and write downs mainly between debt securities and derivatives.

 
RBS Group – Q3 2010 Results 

 
 
 


Appendix 2 The Asset Protection Scheme (continued)
 
First loss utilisation

For definitions of triggered amounts and other related aspects, refer to page 174 of the Group’s 2009 Annual Report and Accounts - Business review - Asset Protection Scheme.

The table below summarises the triggered amount and related cash recoveries by division.

 
30 September 2010
  
30 June 2010
  
31 December 2009
 
Triggered 
 amount 
Cash 
recoveries 
 to date 
Net 
triggered 
 amount 
  
 
Triggered 
 amount 
Cash 
recoveries 
 to date 
Net 
triggered 
 amount 
  
 
Triggered 
 amount 
Cash 
recoveries 
 to date 
Net 
triggered 
 amount 
 
£m 
£m 
£m 
  
£m 
£m 
£m 
  
£m 
£m 
£m 
                       
UK Retail
3,613 
371 
3,242 
  
3,503 
232 
3,271 
  
3,340 
129 
3,211 
UK Corporate
4,027 
1,032 
2,995 
  
3,431 
777 
2,654 
  
3,570 
604 
2,966 
Ulster Bank
1,387 
109 
1,278 
  
917 
78 
839 
  
704 
47 
657 
                       
Retail & Commercial
9,027 
1,512 
7,515 
  
7,851 
1,087 
6,764 
  
7,614 
780 
6,834 
Global Banking &
  Markets
3,057 
464 
2,593 
  
2,579 
289 
2,290 
  
1,748 
108 
1,640 
                       
Core
12,084 
1,976 
10,108 
  
10,430 
1,376 
9,054 
  
9,362 
888 
8,474 
Non-Core
29,502 
2,888 
26,614 
  
26,590 
1,792 
24,798 
  
18,905 
777 
18,128 
 
41,586 
4,864 
36,722 
  
37,020 
3,168 
33,852 
  
28,267 
1,665 
26,602 
                       
Loss credits
    
732 
      
- 
      
- 
                       
     
37,454 
      
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 or restructuring with an impairment) and is the lower of the covered amount and the outstanding amount for each covered asset. The Group expects additional assets to trigger upon expiry of relevant grace periods based on the current risk rating and level of impairments on covered assets.
(2)
Following the reclassification of some structured credit assets from derivatives to debt securities the APA and the Group also reached agreement regarding changes to triggers in respect of these assets. An additional criterion – implied write down – was agreed. This occurs if (a) on two successive relevant payment dates, the covered asset has a rating of Caa2 or below by Moody’s, CCC or below by Standard & Poor’s or Fitch or a comparable rating from an internationally recognised credit rating agency or (b) on any two successive relevant payment dates, the mark-to-market value of the covered asset is equal to or less than 40 per cent of the par value of the covered asset, in each case as at such relevant payment date.
(3)
Under the Scheme rules, the Group may apply to the APA for loss credits in respect of the disposal of non-triggered assets. A loss credit counts towards the first loss threshold and is typically determined by the APA based on the expected loss of the relevant asset.
(4)
The Group and the APA are currently in discussion with regard to loss credits in relation to the withdrawal of £2.9 billion of derivative assets during Q2 2010 and the disposal of approximately £1.5 billion of structured finance and leveraged finance assets in Q3 2010.
(5)
Under the rules of the Scheme the data in the table above at the quarterly reporting date may be revised over a rolling twelve month period.

Key point
·
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 September 2010 is approximately £23 billion (38%) of the £60 billion first loss threshold under the APS.



 
RBS Group – Q3 2010 Results 

 
 
 


Appendix 2 The Asset Protection Scheme
 
Risk-weighted assets

The table below analyses the divisional risk-weighted assets (RWAs) covered by the APS.

 
30 September 
2010 
30 June 
2010 
31 December 
 2009 
 
£bn 
£bn 
£bn 
       
UK Retail
13.4 
13.5 
16.3 
UK Corporate
24.0 
25.7 
31.0 
Ulster Bank
8.3 
8.3 
8.9 
       
Retail & Commercial
45.7 
47.5 
56.2 
Global Banking & Markets
13.2 
15.5 
19.9 
       
Core
58.9 
63.0 
76.1 
Non-Core
58.0 
60.4 
51.5 
       
APS RWAs
116.9 
123.4 
127.6 

Key point
·
APS RWAs decreased by £6.5 billion, reflecting disposals and early repayments as well as changes in risk parameters.




 
RBS Group – Q3 2010 Results 

 
 
 



 
 
Signatures


 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.







 
 
Date: 5 November 2010
 
 
THE ROYAL BANK OF SCOTLAND GROUP plc (Registrant)
 
 
 
By:
/s/ Jan Cargill
 
 
Name:     
Title:
 Jan Cargill
 Deputy Secretary