rbs201108056k12.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 August 5, 2011
 
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 4
 
Asset Protection Scheme
 
 
 

 


 
Appendix 4 Asset Protection Scheme
Covered assets roll forward
The table below shows the movement in covered assets.
 
Covered 
 amount
 
£bn 
   
Covered assets at 31 December 2010
194.7 
Disposals
(1.4)
Maturities, amortisation and early repayments
(10.6)
Effect of foreign currency movements and other adjustments
(0.9)
   
Covered assets at 31 March 2011
181.8 
Disposals
(1.5)
Maturities, amortisation and early repayments
(13.7)
Effect of foreign currency movements and other adjustments
1.1 
   
Covered assets at 30 June 2011
167.7 
 
Key points
·
Covered amount has reduced by £114 billion since scheme inception (December 2008) from £282 billion to £168 billion.
   
·
The Group continues to take advantage of market conditions and execute sales from a number of its portfolios.
 
Credit impairments and write downs
The table below analyses the cumulative credit impairment losses and adjustments to par value (including available-for-sale reserves) relating to the covered assets.
 
 
30 June 
2011 
31 March 
2011 
31 December 
2010 
 
£m 
£m 
£m 
       
Loans and advances
19,777 
18,799 
18,033 
Debt securities
10,785 
11,085 
11,747 
Derivatives
2,125 
1,826 
2,043 
       
 
32,687 
31,710 
31,823 
       
By division:
      
UK Retail
3,124 
3,053 
2,964 
UK Corporate
1,838 
1,703 
1,382 
Ulster Bank
1,190 
1,040 
804 
       
Retail & Commercial
6,152 
5,796 
5,150 
Global Banking & Markets
1,420 
1,445 
1,496 
       
Core
7,572 
7,241 
6,646 
Non-Core
25,115 
24,469 
25,177 
       
 
32,687 
31,710 
31,823 
 
Key point
·
Cumulative credit impairments and write-downs increased by £1.0 billion in the quarter, reflecting further impairments and write-downs (£1.0 billion) and exchange rate movements (£0.1 billion) partially offset by Non-Core disposals (£0.1 billion).


 
Appendix 4 Asset Protection Scheme (continued)
 
First loss utilisation
The Group has agreed with HM Treasury modifications to the Scheme rules, which affect most APS portfolios in Global Banking & Markets and an APS portfolio in UK Corporate that relates to larger clients. All other APS portfolios in the Group are unaffected. The overall economic aspects of the Scheme are unchanged, including value and term of cover, credit derivative valuation and capital effects. 
 
The modified rules for recognition of triggered assets align more closely to the Group's normal accounting and risk management procedures and will reduce the administrative burden of operating the Scheme. For the portfolios subject to these changes, the calculation of loss now takes into account expected recoveries in addition to those already received. This has resulted in a reduction in first loss utilisation. A comparison of losses arising under the original Scheme rules with those arising under the modified Scheme rules is set out below. This covers the period from Scheme inception to 31 March 2011 (the last point at which the original rules applied for the affected assets).
 
 
£m 
   
Original First Loss Utilisation
38,961 
Assets not triggered under modified rules (1)
(4,126)
Assets triggered under modified rules (2)
997 
Expected recoveries (3)
(6,272)
   
Revised First Loss Utilisation
29,560 
 
Notes:
(1)
Assets that had triggered under the original Scheme rules but were not impaired or defaulted are not triggered under the modified rules. 
(2)
Assets that had not yet triggered under the original Scheme rules but had impaired or defaulted are triggered under the modified rules.
(3)
For assets which have triggered under both original and modified rules, this amount represents the excess of expected recoveries over cash recoveries received to date.
 


 
Appendix 4 Asset Protection Scheme (continued)
First loss utilisation (continued)
The table below shows the first loss utilisation under the original and modified rules.
 
 
Original Scheme rules
  
Modified
Scheme rules
  
 
Gross loss 
amount 
Cash 
recoveries 
to date 
  
Net triggered 
 loss 
Total 
net triggered 
amount 
30 June 2011
£m 
£m 
  
£m 
£m 
           
UK Retail
3,895 
(608)
  
- 
3,287 
UK Corporate
1,914 
(622)
  
806 
2,098 
Ulster Bank
1,918 
(202)
  
- 
1,716 
           
Retail & Commercial
7,727 
(1,432)
  
806 
7,101 
Global Banking & Markets
- 
- 
  
962 
962 
           
Core
7,727 
(1,432)
  
1,768 
8,063 
Non-Core
14,676 
(2,190)
  
7,753 
20,239 
           
 
22,403 
(3,622)
  
9,521 
28,302 
           
Loss credits
        
1,632 
           
         
29,934 
           
31 March 2011
          
           
UK Retail
3,789 
(514)
  
- 
3,275 
UK Corporate
1,930 
(559)
  
768 
2,139 
Ulster Bank
1,659 
(216)
  
- 
1,443 
           
Retail & Commercial
7,378 
(1,289)
  
768 
6,857 
Global Banking & Markets
- 
- 
  
994 
994 
           
Core
7,378 
(1,289)
  
1,762 
7,851 
Non-Core
14,852 
(2,007)
  
7,396 
20,241 
           
 
22,230 
(3,296)
  
9,158 
28,092 
           
Loss credits
        
1,468 
           
         
29,560 
           
31 December 2010
          
           
UK Retail
3,675 
(455)
  
- 
3,220 
UK Corporate
1,690 
(427)
  
597 
1,860 
Ulster Bank
1,500 
(160)
  
- 
1,340 
           
Retail & Commercial
6,865 
(1,042)
  
597 
6,420 
Global Banking & Markets
- 
- 
  
962 
962 
           
Core
6,865 
(1,042)
  
1,559 
7,382 
Non-Core
13,946 
(1,876)
  
6,923 
18,993 
           
 
20,811 
(2,918)
  
8,482 
26,375 
           
Loss credits
        
1,241 
           
         
27,616 
 
 


 
Appendix 4 Asset Protection Scheme (continued)
 
First loss utilisation (continued)
 
Key points
·
In Q2 2011 the Group received loss credits of £0.2 billion in relation to disposals. The Group and the Asset Protection Agency remain in discussion with regard to loss credits in relation to the withdrawal of £0.5 billion of derivative assets during Q2 2010.
   
·
As previously disclosed the Group expects an average recovery rate of approximately 45% across all portfolios.
 
Risk-weighted assets
The table below analyses by division, risk-weighted assets (RWAs) covered by APS.
 
 
30 June 
2011 
31 March 
2011 
31 December 
2010 
 
£bn 
£bn 
£bn 
       
UK Retail
10.7 
11.4 
12.4 
UK Corporate
19.3 
21.5 
22.9 
Ulster Bank
7.6 
7.4 
7.9 
       
Retail & Commercial
37.6 
40.3 
43.2 
Global Banking & Markets
10.3 
11.1 
11.5 
       
Core
47.9 
51.4 
54.7 
Non-Core
47.3 
47.0 
50.9 
       
APS RWAs
95.2 
98.4 
105.6 
 
Key point
·
The decrease of £3.2 billion in RWAs reflects pool movements, partially offset by changes in risk parameters principally in Non-Core and Ulster Bank.
 


 
 
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 August 2011
 
 
THE ROYAL BANK OF SCOTLAND GROUP plc (Registrant)
 
 
 
By:
/s/ Jan Cargill
 
 
Name:
Title:
Jan Cargill
Deputy Secretary