GRG Executive Pack - Quarterly Report
H1 2012

Issued to members of GRG’s Executive Committee in August 2012

This report is based on H1 2012 data

GRG Executive Pack - Quarterly Report
Strictly Confidential – Contains Price Sensitive Information

 Executive Summary ............................................................................................................................................................................................ 3
Executive – ExCo Dashboard ............................................................................................................................................................................ 5
Contribution & Value Add Summary per Division June 2012 ......................................................................................................................... 6
Capital Management Summary as at end of June 2012 .................................................................................................................................. 6
Value Added Report ............................................................................................................................................................................................ 7
Financial Report .................................................................................................................................................................................................. 9
Business Report ............................................................................................................................................................................................... 18
Risk Appetite ..................................................................................................................................................................................................... 21
GRG Risk Summary for ExCo .......................................................................................................................................................................... 22
Risk Heat Map – Top GRG Risks ..................................................................................................................................................................... 23
Transformation Report ..................................................................................................................................................................................... 27
Appendix 1 – Glossary ..................................................................................................................................................................................... 29
Appendix 2 – Note ............................................................................................................................................................................................. 31
Appendix 3 – Value Added Explained & Breakdown ..................................................................................................................................... 32
Appendix 4 – Top 10 Value Add Cases H1 2012 ............................................................................................................................................ 33
Appendix 5 – Top 20 RWA’s ............................................................................................................................................................................ 35
Appendix 6 - Top 10 Cap Deducts ................................................................................................................................................................... 35

GRG Executive Pack - Quarterly Report – Information Classification is STRICTLY CONFIDENTIAL

2

 Executive Summary
The report provides an overview of RBS GRG business as at the end of June unless otherwise stated. The value added by GRG, as well as the key operational highlights, were as follows;

n Main Challenges:
• Focus on Capital and Non Core Run-off continue to remain the top two GRG priorities. H1 RWA reduction is equal to £19.5bn, net of new cases. Non Core portfolio reduction
equates to £4.9bn of utilised balances.

• Macro Economic Environment - GRG Risk/EMEA continue to be engaged via a number of working groups and forums in relation to a potential Eurozone event. A Eurozone Distress
Communication Plan has also been developed for GRG

• FSA – The swap miss-selling investigation is consuming a large amount of time both dealing with customer complaints/issues and also attending internal meetings on the subject.
This has impacted c.2206 customers over c.3,303 trades

• Bank Systems Major Incident - GRG are fully engaged in various incident calls around the recent systems issues. Significant impact on GRGI and they have been unable to focus on
anything else for c.3 weeks

• FSA taking a punitive view on the capital treatment of West Register and owned assets which will have an adverse effect on the business model and capital held for owned assets
n Contribution to Group Performance:
• Net of new cases Total RWA’s have decreased by £19.5bn, from £94.9bn to £75.4bn as at June.
• Additional incremental contribution, net of expenses, of £162.8m YTD June (£1.2bn December FY 2011).
• Securing an upside portfolio, with 316 equity stakes with a fair value of £0.7bn and 2,658 Property Participations as at June 2012.
• As at June 2012, the GRG Portfolio case numbers have continued to decrease to 12,062 cases (FY 2011 12,499), with assets under management increasing slightly month on
month to £61.9bn (£65.2bn FY 2011).

• We expect case volumes to continue to decline in H2 but we are unsure if we will hit £55bn expected portfolio size due to poor economic conditions.
• Cost income ratio of 19.0% as at YTD June 2012 (adjusted for market movements on SIG equities and WR property FV write-downs).
n Risk Profile
• The first CEC for GRG Risk has now been completed with a overall risk profile for the function at a level 3. The rating was driven by a number of existing control gaps, including the

implementation of the Group Policy Framework, and the continued embedding of our second line of defence Risk function and the high levels of Regulatory focus in the context of a
developing control environment.

• The top risk themes remain Data Quality/Capital, ensuring a suitable oversight model for Ireland, embedding a robust Second Line of Defence, KYC/AML remediation, and the Group
Policy Framework.

• Operational Risk Assessments have started in Real Estate Restructuring and Credit Risk. In terms of GPF implementation the DPSO's are in the process of being appointed across
GRG in order to gain line of sight on Policy Implementation in GRG.

• The volume of open addressing and past due issues has increased during the month. Of the six new addressing issues raised in June, four were raised by GRGI and two raised by

RBS Americas. Two of the four GRGI issues were raised following ROR reviews - one of the issues covers a range of CCMA compliance findings and the second
covers findings relating to compliance with security recording and linking procedures. The GRG Americas issues relate to data quality and KYC legacy deficiencies with reference to
the Brazilian portfolio. We expect the operational risk gap closing activities will influence the trend going forward.

n People:
• Gross turnover is at 11.5% June YTD (9.9% June 2011). We have had 5 senior resignations since the bonus vestings

GRG Executive Pack - Quarterly Report – Information Classification is STRICTLY CONFIDENTIAL

3

 GRG Value Add Metrics – H1 2012
Mainstream

GRG Value Added
1,483
1,483 Cases
Cases
En
tered
G
Ent
ered GR
GRG
(£6.5b
n
by
(£6.5b n b y
valu
value)
e)

Incremen tal
Co nt rib ut ion
To tal CT1 RWA
red uct ion1,2

£162.8m
£162.8m

££11.9bn
11.9bn

GRG
Value
Add

RWA R edu ctio n
( RT S/exi t)1
£9.0b
n
£9. 0bn

452
452 Cases
Cases
Ret
urn
Re tu
rned
ed to
to
Satisf
acto
ry,
Satisf acto ry,
1,2
70 cases
1,270
cases
exit
exited
ed

1
2

Expect ed L oss
Redu ctio n
( RTS/exit )1
£0.7bn
£0.7bn

Lim it
Red uct ion
( RT S/exit )1
£5.0bn
£5.0bn

Modeli ng is onl y as go od as data withi n the system. Often grading of customers is i nappropriate, and therefore m ay understate loss reducti on
Excl udes Citiz ens exit cases between January – March and Telford cases
Total RWA = RWA + (Capital Deduct*50% )/ Capital Ratio ( 10% Core, 12% Non Core)

GRG Executive Pack - Quarterly Report – Information Classification is STRICTLY CONFIDENTIAL

4

 Executive – ExCo Dashboard
Value-Added

Portfolio

Headcount

Value Added by GRG

GRG Portfolio by Value (£m) and Volume as of end of June 2012

Income
Statement

Additional
Incremental
Contribution, net of
Expenses

Estimated Expected
Loss Mitigation on
RTS/De-risked Cases
YTD

£163m (YTD June)

14,000

1,000
12,476

12,459

12,000

12,409

12,158

12,078

12,062

600

£0.7bn (YTD June)

400

8,000

200

15%
F ro nt 
  O ffic e 
  F unc tio ns

S uppo rt 
  F unc tio ns

4,000

Reduction in Exposure on RTS/De-risked cases
Balance
Sheet

Global GRG Headcount (includes secondees)

2,000
-

Limits Reduction £5.0bn (YTD June)

Jan

Feb

Mar

Apr

May

Jun

Jul

70,000

63,667

62,982

61,240

60,810

61,683

Sep

Oct

Nov

Dec

Cases - 2012 incl. SIG

61,897

60,000
50,000
40,000
30,000
20,000
10,000
Feb

Mar

Apr

May

Value - 2011

Stressed Losses

Aug

80,000

Jan

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Stressed Loss 2 years History

4,000

MIB

3,000

Ulster

1,000

Ju
A l-1
u 0
S g-1
ep 0
O - 10
c
N t-1
o 0
D v-1
ec 0
Ja -10
n
F -1
eb 1
M -1
a 1
A r-1
pr 1
M -1
ay 1
Ju -11
n
Ju -11
A l-1
u 1
S g-1
ep 1
O - 11
c
N t-1
o 1
D v-1
ec 1
Ja -11
n
F -1
eb 2
M -1
a 2
A r-1
p 2
M r-1
ay 2
Ju -12
n12

0

Stressed Loss History (Core/ Non-Core)

4,000
MIB NonCore
MIB Core

3,000

`

1,000

CBD NonCore
CBD Core
Ulster Non
Core
Ulster Core

Ju
A l-10
ug
S -10
ep
O -10
ct
N -10
ov
D -10
ec
Ja -10
n
F -11
eb
M - 11
ar
A 11
pr
M -1
ay 1
Ju -11
nJu 11
A l-11
ug
S -11
ep
O -11
ct
N -11
ov
D -11
ec
Ja -11
n
F -12
eb
M - 12
ar
A 12
pr
M -1
ay 2
Ju -12
n12

0

Stress losses within MIB and CBD have remained relatively flat. MIB includes RBS and RBS NV.

389

Property
GRGI

113
407

Europe
Americas

63
94

Asia
Rainbow

16
19

Centrals
SIG

194
34

Total

1329

n
n

GRG portfolio: £61.9bn as of June (£65.2bn FY 2011)

n

Average value of cases: £5.1m as of Q2 2012 (£5.2m
FY 2011)

GNEPs
There were no GRG-owned GNEPs in June. However, GRG has been materially impacted by the ‘major’ Business Services
IT outage which occurred at the end of June. Major delays to overnight transaction processing in NatWest, RBS, Ulster Bank
were caused by multiple failures in batch processing and the Group has been running a major recovery incident since that
time. The impact on customers including in the affected Divisions including GRG has been significant and widely reported in
the national media. The majority of batch processing is now up to date for RBS and NatWest with customer account
transaction and account balances up to date. GRG UK continues to deal with residual issues but are largely back to BAU.
However, in Ulster Bank, the batch processing is not expected to be up to date until week commencing 9th July. GRG
Ireland has been running a ‘major’ incident since the event occurred and GRG Operational Risk has been involved and
continue to provide support. The key GRGI focus is now on operational readiness preparation for when the batch update has
caught up.

Cost/income ratio: 19%* as at Q2 2012 (10% FY
2011 )

n

Average number of cases per staff: 9 as of June (10
FY 2011)

n

% of upsides to new cases: 41% as of June (26% FY
2011)

Risk issues
The volume of open addressing and past due issues has increased in June. The six new addressing issues raised this
month were self-identified by the business and risk, and relate to a number of policy standards with no concentration on any
one standard. We expect the operational risk gap closing activities to continue to influence the trend going forward. The
major addressing issue relates to non compliance with the revised Anti Money Laundering Policy in relation to Customer Due
Diligence processes and the issue is not expected to close until the end of next year. The volume of past due issues has
increased mainly due to new past dues owned by COO and regulatory risk.
Operational Risk losses.
No actual net loss recorded against GRG YTD. There is a potential loss of £29,031,453.99 relating to a legal event raised
also as a GNEP in Sept 2011. This relates to a litigation case filed against GRG in relation to a loan agreement. The claim
has been rejected by the Courts but is now subject to appeal."

GRG Executive Pack - Quarterly Report – Information Classification is STRICTLY CONFIDENTIAL

Headcount

UK

Key Ratios Q2 2012 (FY 2011
comparison)

Overall risk
The Operational Risk (OR) profile across GRG has been significantly impacted by the group wide IT incident and this has
been a key operational risk focus for the function. Other focus areas for the Operational Risk function remain Risk
Assessment, Operational Risk Appetite, Scenario Analysis although progress on these has been impacted by the incident.
Risk Assessments have commenced in RER and Credit Risk. In addition a key focus this month has also been on
progressing the H1 2012 Control Environment Certification process.

CBD
2,000

Team

Value - 2012 incl. SIG & WR

Operational Risk Highlights (incl. SOX)

5,000

2,000

85%

-­‐

6,000

Income Statement
Additional Incremental Contribution – The additional incremental contribution of £163m represents the
additional Income that GRG have earned on cases net of expenses as per GRG P&L statement for
June 2012 YTD.
Expected Loss Mitigation on RTS/De-risked cases is £0.7bn and represents the best estimate of how
much potential loss has been avoided. The Expected Loss mitigation is calculated by taking the
difference in EL on entry to and exit from GRG.
Balance Sheet
Reduction in Exposure on RTS/De-risked cases – The reduction in exposure has been calculated as
the difference in the Exposure on entry to and exit from GRG on RTS and Exit cases. The cumulative
YTD figure is £5.0bn for RTS/de-risked cases. RTS & De-risked cases do not include Telford.

(£m)

800

10,000

Cases - 2011

(£m)

Headcount June 2012
1,200

Brand
Split

Number of
Cases (Q2
2012)

% of Total
Portfolio
(Q2 2012)

NV

293

2%

RBS

6,999

58%

Citizens

2,090

17%

Ulster

2,680

22%

TOTAL

12,062

100%

adjusted for market movements on SIG equities and
WR property FV write-downs
*

5

 Contribution & Value Add Summary per Division June 2012
Jun YTD
Contribution
(£m)

Jun YTD
Cost/Income
Ratio
(unadjusted)

Limit Reduction for
RTS/Exit cases
(£m)

Utilisation
Reduction for
RTS/Exit cases (£m)

RWA Reduction for
RTS/Exit cases
(£m)

Capital Deduct*
Reduction for
RTS/Exit cases
(£m)

(4.0)

9.3

30.1%

107

112

275

13

338

65.4

(7.8)

57.6

11.9%

453

454

619

71

973

CBD

74.0

(19.6)

54.4

26.5%

792

579

726

50

976

Ulster

2.5

(0.3)

(2.2)

12.0%

14

12

22

1

26

Non Core

82.7

(43.5)

39.2

52.6%

3,655

3,025

7,327

532

9,542

Total

237.9

(75.2)

162.8

31.6%

5,020

4,183

8,969

666

11,855

Jun YTD
Income
(£m)

Jun YTD
Costs
(£m)

Citizens*

13.3

MIB

Division

Total CT1 RWA**
Reduction for
RTS/Exit cases
(£m)

Capital Management Summary as at end of June 2012
EAD (£m)

June Portfolio Value
(£m)

Expected Loss (£m)

RWA (£m)

Capital Deduct (£m)

Total CT1 RWA**
(RWA + Notional RWA)

Citizens

1,279

1,145

185

1,828

185

2,756

MIB

6,572

7,383

1,151

9,957

162

10,693

CBD

12,812

12,561

2,290

13,252

1,240

19,390

Ulster

5,695

5,086

2,055

7,160

858

11,450

Non Core

36,636

35,722

16,084

24,876

5,495

46,509

Total

62,994

61,897

21,767

57,073

7,940

90,798

Division Split

*This represents the reduction in Expected Loss and regulatory reduction (net of provisions)
**Total RWA = RWA + Notional RWA
Notional RWA = (Capital Deduct*50% )/ 10% (Core) or 12% (Non Core)
Please note, EAD does not include WR.

GRG Executive Pack - Quarterly Report – Information Classification is STRICTLY CONFIDENTIAL

6

 Value Added Report

2,100

15,000

1,800
1,500

10,000

1,200
900

5,000

600
300
-

Ja

1
2
1
1
1
1
2 12
1
1
1
2
2
1
2
1
1
11
n1 eb1 ar1 pr1 ay un1 ul1 ug1 ep1 ct 1 ov1 ec1 an1 eb1 ar1 pr1 ay un1
J
A
O N
A M
M
J
J
M
J
F
M
A
F
S
D

Cumulative number of RTS cases

Aggregate utilisations of RTS cases 2012

4,000
3,500

5,000

3,000
4,000

2,500

3,000

2,000
1,500

2,000

1,000
1,000

500

-

0

Aggregate utilisations of RTS cases 2011

Exposure

Cumulative number of cases 2011

Cumulative number UK-based SMEs
transfered to GRG

2,400

6,000

Ja
n
F e 11
b1
M 1
ar
Ap 11
M r11
ay
Ju 1 1
n1
Ju 1
Au l11
g
S e 11
p
Oc 11
N o t 11
v
D e 11
c
Ja 11
n
F e 12
b
M 12
ar
Ap 12
M r12
ay
Ju 1 2
n1
2

20,000

2,700

Exposure (£mn)

Cumulative number of RTS cases

3,000

VA2. Cumulative Number of UK-based SMEs entering into
GRG
Aggregate utilisations of RTS cases (£mn)

VA1. Cumulative Number and Exposures of Cases Returned to
Satisfactory

3,500

Number of cases

3,000

VA1. Cumulative Number of Cases
Returned to Satisfactory (“RTS”):
The number of RTS cases June YTD
totalled 452, representing £2.8bn in
total exposures (801 cases totalling
£4.8bn FY 2011).

n

VA2. Cumulative Number of UKbased Small and Medium-Sized
Businesses Restructured: From
January 2012 GRG have provided
specialist advice to an additional 902
small- to medium-sized businesses,
representing £1.0bn in total exposures,
to pinpoint problems and engineer
solutions. We have restructured c 417
SME cases resulting in an estimated job
saving of 13,007 FTEs June YTD.

n

VA3. Number of Cases with Equity or
Property Stakes: The upside portfolio
contains property participations (2,658)
including Ulster and Citizens) and equity
options/stakes (316) as of June 2012.

Cumulative number of cases 2012

Note: Determined on the basis of the UK-based small and medium-sized businesses that
GRG has started working since April 2009

VA3. Number of Cases with Equity or Property Stakes

n

It is estimated that the fair value of the
upside portfolio is £0.7bn as of June
2012 (un-audited).

2,500
2,000
1,500
1,000
500
0
2006

2007

2008

2009

Property participations

2010

2011

Q1 2012

Q2 2012

Equity options/stakes

GRG Executive Pack - Quarterly Report – Information Classification is STRICTLY CONFIDENTIAL

7

 Value Added Report H1
VA4. Loss Avoidance / Mitigation

VA5. RWA Usage and Capital Optimisation

n RTS/De-risked cases (£m): YTD June 2012 (excluding Citizens exit cases & Telford)

n RTS/De-risked cases (£m): YTD June 2012 (excluding Citizens exit cases & Telford)

Limits

Upon Entry into
GRG
8,423

Upon Exit from
GRG
3,404

Value Added /
Difference
5,020

Utilisations

6,996

2,820

4,176

Description

RWA

Upon Entry into
GRG
13,998

Upon Exit from
GRG
5,030

Value Added /
Difference
8,969

Expected Loss

710

45

666

Total RTW CT1

20,158

5,416

14,742

Description

n Cases remaining in GRG Debt Portfolio (£m): June 2012

Limits

Upon Entry into
GRG
83,448

Utilisations

74,335

Description

65,924

Value Added /
Difference
17,524

61,897

12,438

As at June 2012

VA5. Loss Avoidance/ Mitigation: YTD June 2012, 663 cases has been RTS/De-risked
YTD in GRG (excluding Telford). On a portfolio basis, this resulted in:
•
Reducing RBS’s exposure (committed lines related to GRG RTS cases) to these
cases by £5.0bn (£11.4bn FY 2011 RTS).

n Cases remaining in GRG Debt Portfolio (£m): June 2012
Description
RWA (credit)

Upon Entry into
GRG
60,480

As at June 2012
52,871

Value Added /
Difference
7,609

VA6. RWA Usage and Capital Optimisation: GRG contributed to a decrease in RWA’s for
RTS/De-risked cases of 9.0bn, expected loss mitigation of £0.7bn and a Total RWA CT1
decrease of £14.7bn YTD June 2012 (£9.3bn FY 2011).
With respect to cases still in portfolio, GRG contributed to a reduction in RWA’s of £7.6bn.

In addition, GRG had a portfolio of 12,062 cases amounting to £61.9bn at the end of June 2012.

• Stressed Losses and Provisions:
Month

Stressed Loss £m

Provision £m

December -11

7,101

13,613

March -12

7,115

13,589

June -12

7,502

14,156

Note: Stressed Losses includes MIB, CBD and Ulster. Provisions have been sourced from the Khalix
Report and include CBD, MIB and Ulster.

GRG Executive Pack - Quarterly Report – Information Classification is STRICTLY CONFIDENTIAL

8

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Financial Report
FR4. Portfolio by Business - Case Numbers

SIG
3%

GRGI
22%

n
n

FR5. Portfolio by Business - Case Values

SIG
1%

GRGI
30%

•
•
•
•
•
•
•
•
•
•
•

UK
23%

UK
53%
Citizens
2%

Citizens
17%
Asia
2%

Asia
1%

EMEA
2%

Americas Property
1%
1%

1200
162.8

800

198.3

600
28.5

n

Non-Core
(£m)

Total (£m)

APS

5,045

12,061

17,107

Non-APS

11,638

10,194

21,832

Partially

9,460

13,499

22,959

Total

26,143

35,754

61,897

104.0

Feb

Mar

Apr

May

Prior Year - 2011

Jun

Jul

Aug

Current year 2012

Sep

Oct

Nov

Dec

Recs: 1,172 cases;
Americas: 89 cases;
EMEA: 280 cases;
Asia: 79 cases;
Citizens: 2,090 cases;
GRGI: 2,680 cases;
Divestment: 1,594 cases;
Property: 176 cases;
SIG: 316 equity positions.

BRG: £4.4bn;
CRU: £5.9bn;
Recs: £1.9bn;
Americas: £3.7bn;
EMEA: £9.2bn;
Asia: £1.3bn;
Citizens: £1.4bn;
GRGI: £18.4bn;
Divestment: £1.9bn;
Property: £13.0bn;
SIG: £0.7bn.

Total GRG Value: £61.9bn

Core (£m)

211.4

CRU: 152 cases;

FR5. Portfolio by Business Case Values June 2012:

•
•
•
•
•
•
•
•
•
•
•

GRG Portfolio as at end
of June 2012

0
Jan

n

Americas
6%

179.0

400
200

EMEA
15%

BRG: 3,434 cases;

Total GRG Cases: 12,062

FR7. Core / Non-Core (APS coverage)

FR6. Cumulative Contribution

1000

Property
21%

FR4. Portfolio by Business –
Case Numbers June 2012:

FR6. Cumulative Contribution
(£m): GRG’s achieved cumulative
contribution of £163)m H1 2012.

n

FR7. Core, Non-Core (£m): GRG’s
portfolio totals £61.9bn:

•
•

Core: £26.1bn; and
Non-Core: £35.8bn.

Budgeted

GRG Executive Pack - Quarterly Report – Information Classification is STRICTLY CONFIDENTIAL

10

  

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Financial Report
FR9. Profit and Loss Summary – June 2012
June 2012 YTD

June 2012 YTD

£'000s
Income

Actual

Budget

GRG Interest

55,833

38,096

GRG Fee

71,336

Notional Fee

1,954

Other Upside
Property Participation

Variance

June 2011 YTD

Q1 2012

Q2 2012

Actual

Actual

Actual

17,737

62,653

41,815

14,018

70,265

1,071

461,188

33,157

38,179

182

1,772

690

39

0

0

0

0

1,915
-

-

6,961

2,258

4,703

3,446

1,805

5,155

SIG Realised Gain/(Loss)

139,680

0

139,680

140,482

89,182

50,498

SIG Unrealised Gain/(Loss)

(76,267)

2,414

(78,680)

266,904

2,729

(78,995)

SIG Non-Investment

1,991

203

1,788

(29)

1,692

299

(82,379)

13,125

(95,504)

6,722

(440)

(81,939)

Margin Enhancement

45,531

44,733

798

67,874

20,415

25,116

Treasury / FM Products / FX
Other

3,495
69,793

3,699
17,227

(204)
52,565

4,107
34,353

1,616
25,470

1,879
44,322

Total Income

237,929

192,201

45,727

1,048,391

217,481

20,447

(66,128)

(75,137)

9,009

(68,151)

(32,808)

(33,320)

(451)

(268)

(184)

(237)

(68)

(383)

Travel & Entertaining

(1,341)

(1,475)

134

(1,631)

(624)

(717)

Legal & Professional

(2,538)

(5,532)

2,994

(6,913)

(2,525)

(13)

(251)

(613)

361

(98)

(121)

(131)

Total Expenses

(75,157)

(87,100)

11,943

(80,316)

(38,170)

(36,987)

Contribution

162,772

105,101

57,670

968,074

179,310

(16,539)

West Register Property

Expenses
Staff
Premises & Equipment

Training

Upsides taken 2012
Direct Equity

19

23

4

0

Equity Options

8

3

4

0

PPFA

471

574

219

0

Other

111

136

42

0

Total

609

736

269

0

GRG Executive Pack - Quarterly Report – Information Classification is STRICTLY CONFIDENTIAL

12

  RBS

 

Financial Report

Glob-A Gmup -- 

Mumsmm

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   


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Financial Report
FR11. Global Restructuring Group – Stress Loss Analysis – as at end of June 2012 (excludes WR, SIG)
(£m)

MIB Stressed Loss History - 2 years (RBS NV + RBS)

5,000

n

MIB: Stressed losses in June for MIB were £2,821m,
slightly up on Q1 2012, £2,723m. MIB Non Core
stressed losses were £1,787m, a small increase from
£1,768m Q1 2012.

n

CBD: Stressed losses in June for CBD were £1,844m,
marginally up from £1,838m in Q1 2012. Non Core CBD
stressed losses were £749m, a significant decrease from
£829m in Q1 2012.

n

Ulster: Stressed losses for June £2,838m, up from
£2,555m in Q1 2012. Ulster Core increased to £883m
from £788m in Q1 2012, with Non Core moving to
1,955m from £1,767m in Q1 2012. Some of the recent
upward trajectory reflects improvements in data quality
ensuring sufficient stressed loss on cases as opposed to
significantly deteriorating conditions

4,000
3,000
2,000
1,000
0

11 11 -11 -11 11 11
10 10 10 10 -10 10 -11 11
11 11 -11 11 -12 12 12 12 -12 -12
Jul- Aug- Sep- Oct- Nov Dec- Jan F eb- Mar- Apr-May Jun Jul-Aug- Sep- Oct- Nov Dec- Jan F eb- Mar- Apr-May Jun
Total MIB

(£m)

MIB Non Core

MIB Core

CBD Stressed Loss History - 2 years (excl PD90 Overlay)

3,000
2,500
2,000
1,500
1,000
500
0

11 11 -11 -11
12 12 -12 -12
10 10
11 11 11 11 -11 11 -12 12
10 10 -10 10 -11 11
Jul- Aug- Sep- Oct- Nov Dec- Jan F eb- M ar- Apr-M ay Jun Jul- Aug- Sep- Oct- Nov Dec- Jan F eb- M ar- Apr-M ay Jun
Total CBD

(£m)

Non Core

Core

Ulster Stressed Loss History - 2 years*

4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0

11 11 -11 -11 11 11
12 12 -12 -12
10 10
10 10 -10 10 -11 11
11 11 -11 11 -12 12
Jul- Aug- Sep- Oct- Nov Dec- Jan F eb- M ar- Apr-M ay Jun Jul- Aug- Sep- Oct- Nov Dec- Jan F eb- M ar- Apr-M ay Jun
Ulster

Non-Core

Core

GRG Executive Pack - Quarterly Report – Information Classification is STRICTLY CONFIDENTIAL

14

 Portfolio Analytics
CR1. Total Committed Limits and Utilisations, incl. (i)
Defaulted and (ii) Non-defaulted (excluding WR & SIG)
£90,000

£70,000

16,000

£60,000

14,000

£50,000

12,000
RWA (£m)

18,000

£40,000
£30,000

n12

11,892

Committed limits - Non-defaulted
Utilisations - Non-defaulted

5,089

Asia

EMEA

UK

CR4. MGS Credit Migration
(excluding WR & SIG)

45,000

Property

SIG

Citizens

8,000

6,000

30,000
Utilisation (£m)

Total committed limits (£m)

35,000

5,000

CR2. Risk Weighted Assets by GRG
Area: The GRG portfolio RWA is
approximately £57.1bn as at June 2012.

n

CR3. Total Committed Limits by PDs:
Band AQ10 make up the majority (61%) of
the committed limits in Q2 2012.

n

CR4. MGS Credit Mitigation:
Significant additional RWA optimisation could
be achieved in addressing these ungraded
PDs. It is recommended that this be tackled
as a programme of work together with the
defaulted LGD issue and stale PD issues
resulting from the lack of regular re-grading.

GRGI

40,000

10,000

n
2,242

(excluding WR & SIG)

15,000

Total committed limits: Total limit is
£65.9bn as at end of June 2012.

987

745

CR3. Total Committed Limits by PD grades

20,000

•

8,415

Americas

25,000

Utilisations: Total utilisation is £61.9bn
as at end of June 2012.

-

Ju

M
ay
-1
2

r-1
2
Ap

M
ar

Fe

Ja

11
ec
D

ov
N

1
p1
Se

O
ct

1
g1
Au

l-1

-1
2

2,000
b12

£0
n12

4,000

11

£10,000

-1
1

6,000

Ju

12,662

•

8,000

£20,000

Committed limits - Defaulted
Utilisations - Defaulted

15,041

10,000

CR1. Total Committed Exposure (TCE)

and Utilisations, incl. (i) Defaulted and
(ii) Non-defaulted:

Portfolio RWA £57.1bn

£80,000

1

Committed limits & utilisations (£ m)

n

CR2. Risk Weighted Assets by Region

4,000

2,000

-

-2,000

Jul-11

Aug-11

Sep-11

Oct-11

Nov-11

Dec-11

Jan-12

Feb-12

Mar-12

Apr-12

May-12

Jun-12

0
AQ1

AQ2

AQ3

AQ4

AQ5

AQ6

AQ7

AQ8

AQ9

AQ10 Ungraded

Q3/2011 Q4/2011 Q1/2012 Q2/2012

-4,000

* AQ1-10 bands are an aggregated view of Master Grading Scale (MGS)

GRG Executive Pack - Quarterly Report – Information Classification is STRICTLY CONFIDENTIAL

down 1-5

down 6-10

down>10

up 1-5

up 6-10

up>10

15

 Portfolio Analytics – Sector and Region Analysis
CR5. Portfolio Break-down by Facility Type

CR6. Stress Loss

(excludes SIG & WR)

(excludes Citizens, WR & SIG)

Term Loan
Excluded - OTC
Treasury
Basel - OTC

EAD as at end of June 2012
(£m)
£52,891
£4,423

(£m)

£1,655

Letter of Credit

£781

SIG Equity

£599

Revolver Receivable

£306

Finance Lease

£156

On Balance

£121

Equity Private

£64

Operating Lease

£32

Retail

£17

Equity Other

£11

Excluded - Undefined

£4

Total

62,994

n

CR6. Stress Loss: Stress losses within MIB
have followed a downward trend and CBD have
stabilised. MIB includes RBS and RBS NV.

Stressed Loss History (Core/ Non-Core)

4,000
MIB NonCore
MIB Core

3,000

£1,934

Bonds

CR5. Portfolio Break-down by Facility
Type: Since the end of Q1 2012 the top EAD
facilities have seen an increase in OTC Treasury
(30%), Letter of Credit (5%) and Revolver
Receivable (13%). The top facilities decreases
are Term Loan (6%), Basel OTC 3% and Bonds
(49%). Basel 3 is likely to increase the highest
charge on the OTC derivatives.

2,000

`

1,000

CBD NonCore
CBD Core
Ulster Non
Core
Ulster Core

0
Ju
Au l-10
g
Se -10
p
O -10
c
No t-10
v
De -10
c
Ja -10
n
Fe -11
b
M - 11
ar
Ap -11
M r-11
ay
Ju -11
n
Ju -11
Au l-11
g
Se -11
p
O -11
c
No t-11
v
De -11
c
Ja -11
n
Fe -12
b
M - 12
ar
Ap -12
M r-12
ay
Ju -12
n12

Type of Facility

n

GRG Executive Pack - Quarterly Report – Information Classification is STRICTLY CONFIDENTIAL

16

 Portfolio Analytics – Sector and Region Analysis
n

CR7. Total Committed Limits for Debt Exposures (TCLs) by Sector as at end of H1 2012
TCL (Core, £m)

TCL (Non-Core, £m)

Total TCL (£m)

Percentage

Property

Sector

8,864

14,976

23,840

36%

Building and Construction

2,562

9,279

11,841

18%

Transport and Storage

3,353

1,755

5,108

8%

Financial Intermediaries

1,279

1,899

3,178

5%

Manufacturing

2,454

550

3,004

5%

Personal

1,778

890

2,668

4%

Business Services

1,555

792

2,347

4%

Tourism and Leisure

1,788

525

2,314

4%

Hotels

1,330

932

2,262

3%

Wholesale and Retail Trade.

1,486

522

2,007

3%

Technology, Media and Telecommunications

971

966

1,937

3%

Nursing homes

640

633

1,272

2%

Public Sector and Quasi Government

623

355

977

1%

Natural Resources and Nuclear

561

408

969

1%

Banks and Building Societies

403

316

719

1%

Agriculture and Fisheries

320

334

653

1%

Other business activities

319

95

413

1%

Power, Water and Waste

231

182

413

1%

30,516

35,408

65,924

100%

Grand Total

CR7. Total Committed Limits by
Sector: The primary sectors (in
terms of committed limits) are:
• Property amounting to £23.8bn;
• Building & Construction
amounting to £11.8bn;
• Transport and Storage
amounting to £5.1bn.

CR8. GRG Brand Splitting Exposures H1 2012
Brand Split

Number of Cases

% of Cases
per Region

B/S (£m)

% of Utilisation
per Region

NV

293

2%

4,175

7%

RBS

6,999

58%

37,856

62%

Citizens

2,090

17%

1,433

2%

Ulster

2,680

22%

18,433

30%

TOTAL

12,062

100%

61,897

100%

GRG Executive Pack - Quarterly Report – Information Classification is STRICTLY CONFIDENTIAL

17

 Business Report
BR1. Headcount (includes secondees)
n

GRG: Headcount Unit Level June 2012

450
400
350

Headcount June 2012

Staff No.

300
1,200

250

1,000

200

800

150

600

100

400

50

200

Am

85%

15%

-­‐

0
s
i ca
er

AC
AP

EM

EA

G
BR

CR

U

t
L
en
R&
tm
s
ve
Di

R
RE

i
eg
tR
s
e
W

r
ste

G
SI

G

I
RG

ls
ra
nt
Ce

BR1. GRG Headcount:
The headcount, including
secondees, as at
end of June 2012
is 1,329 FTE’s and is
analysed by business
area and function.

F ro nt 
  O ffic e 
  F unc tio ns

S uppo rt 
  F unc tio ns

GRG: Headcount 12 m onth trend 2011 - 2012
1600
1500
1400

Headcount No.

1300
1200
1100
1000
900
800
700

Ju
ly
,

20
Au
11
gu
st
Se
,2
pt
01
em
1
be
r,
20
O
ct
11
ob
er
N
,2
ov
01
em
1
be
r,
D
ec
20
em
11
be
r,
20
Ja
11
nu
ar
y,
Fe
20
br
12
ua
ry
,2
01
M
2
ar
ch
,2
01
2
Ap
ri l
,2
01
2
M
ay
,2
01
2
Ju
ne
,2
01
2

600

Headcount (incl. GRGI)

GRG Headcount 2011-2012

GRG Executive Pack - Quarterly Report – Information Classification is STRICTLY CONFIDENTIAL

18

 Capital Management
CM1. GRG RWA equivalence for Capital Deduct (CT1) as of end of June 2012 & GRG Total Capital (CT1) Usage

GRG Capital June 2012 CT1

RWA Equivalent June 2012 CT1
100
SIG 0.8

90

12

90.8
3.2

42.9
3.2

21.3
SIG 0.05

33.7

7

SIG 0.1

0.4

6
5

5.2

6.8

2.6

4.0

4

30

10

8

RWA (£bn)

RWA (£bn)

SIG 0.7

57.1

50

20

0.4

9

70

40

10.9

10

80

60

SIG 0.1

11

21.6

43.6

31.5

3
2

2.6

1

12.1

0

5.2

3.8
1.4

0

RWA

Notional RWA (CT1)
Core (Debt)

Non Core (Debt)

Total RWA
WR

SIG

RWA

Notional RWA (CT1)
Core (Debt)

Non Core (Debt)

Total RWA
WR

SIG

GRG manages assets representing £90.8bn total RWA’s CT1 (£10.9bn on a CT1 basis)

Total RWA = RWA + Notional RWA
Notional RWA = Capital Deduct / 10% (Core) + Capital deduct / 12% (Non Core)
Capital Deduct = Expected Loss*50% - Provisions
GRG Executive Pack - Quarterly Report – Information Classification is STRICTLY CONFIDENTIAL

19

 ?3 RBS
Capital Management

cm. c.me snug. 94 mm 2012

GRG Total RWA CT1 Bridge Dec 2011 to June 2012(?bn)

Net of Provisions

 

   

 

 

 

 

    

 

 

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Risk Appetite
Debt –GRG are currently reviewing the definition of ‘New Money’ and guidance that needs to be issued to ensure consistency of recognition and application in credit
applications. System changes may be necessary to enable us to effectively track metrics. Current year to date at £197m shows headroom against the 1% ceiling of
£643m (30.6%).
SIG (Equity) – There has been no New Money in SIG year to date against the trigger of £100m
West Register (Property) – (Property) – West Register Capex figures have increased by £10.3m as the result of a change in methodology, whereby stamp duty and
legal fees on acquisitions are now classified as new money.
SIG New Money (£100m)

700

120

600

100

500
446.1

400
300
200
100
0

23.0

12.8 11.8

18.0

Jan

Feb

Apr

Mar

73.8 57.4

Value £m

Value £m

Debt Business New Money Risk Appetite Trigger

80
60

100.0

40
20

196.8

0
May

Jun

Jul

New Money (Debt)

Aug

Sep

Oct

Nov

Dec

Agg

Jan

Apr

May

Jun

New Money

Jul

Aug

Sep

Dec

Agg

Remaining Balance

80%

Jan-12

Nov

100%

71

1

Oct

June West Register Risk Appetite Triggers (Including Disposals)

Value £m

Value £m

Mar

Remaining Balance

WR New Money Trend (Not RBS & Capex Triggers Only)
80
70
60
50
40
30
20
10
0

Feb

0

2

Feb-12

0

3

Mar-12
Not RBS(1%)

0

0

Apr-12

0

6

May-12

10
0
Jun-12

Capex (10%)

GRG Executive Pack - Quarterly Report – Information Classification is STRICTLY CONFIDENTIAL

3455.8

60%
40%

362.9
44.0
4544.2

20%
0%

1.5

91.6

Not RBS

New Cash
Utilised

Book Value

Available

21

  

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GRG Risk Summary for ExCo

 

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GRG Executive Pack - Quarterly Report – Information Classification is STRICTLY CONFIDENTIAL

23

 Key:
Stable Risk

Deteriorating Risk

Improving Risk

GRG Executive Pack - Quarterly Report – Information Classification is STRICTLY CONFIDENTIAL

Significant Risk Issues

Some Risk Issues

Under Control

24

 GRG – Operational Risk – June 2012
Overall risk
The Operational Risk (OR) profile across GRG has been significantly
impacted by the group wide IT incident and this has been a key
operational risk focus for the function. Other focus areas for the
Operational Risk function remain Risk Assessment, Operational Risk
Appetite, Scenario Analysis although progress on these has been
impacted by the incident. Risk Assessments have commenced in RER
and Credit Risk. In addition a key focus this month has also been on
progressing the H1 2012 Control Environment Certification process.

GRG Open Addressing Issues *

GRG Past Due Addressing Issues*

30

10

25

8

20

6

15

4

10

2

5

GNEPs
There were no GRG-owned GNEPs in June. However, GRG has been
materially impacted by the ‘major’ Business Services IT outage which
occurred at the end of June. Major delays to overnight transaction
processing in NatWest, RBS, Ulster Bank were caused by multiple failures
in batch processing and the Group has been running a major recovery
incident since that time. The impact on customers including in the
affected Divisions including GRG has been significant and widely reported
in the national media. The majority of batch processing is now up to date
for RBS and NatWest with customer account transaction and account
balances up to date. GRG UK continues to deal with residual issues but
are largely back to BAU. However, in Ulster Bank, the batch processing is
not expected to be up to date until week commencing 9th July. GRG
Ireland has been running a ‘major’ incident since the event occurred and
GRG Operational Risk has been involved and continue to provide s upport.
The key GRGI focus is now on operational readiness preparation f or when
the batch update has caught up.
Risk issues
The volume of open addressing and past due issues has increased in
June. The six new addressing issues raised this month were selfidentified by the business and risk, and relate to a number of policy
standards with no concentration on any one standard. We expect the
operational risk gap closing activities to continue to influence the trend
going forward. The major addressing issue relates to non compliance
with the revised Anti Money Laundering Policy in relation to Customer
Due Diligence processes and the issue is not expected to close until the
end of next year. The volume of past due issues has increased mainly
due to new past dues owned by COO and regulatory risk.
Operational Risk losses.
No actual net loss recorded against GRG YTD. There is a potential loss of
£29,031,453.99 relating to a legal event raised also as a GNEP in Sept
2011. This relates to a litigation case filed against GRG in relation to a
loan agreement. The claim has been rejected by the Courts but is now
subject to appeal."

0

0

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  2 012 M ar 
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M aj

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A p r-­‐12

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M ay-­‐12

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GRG Open (Inclusive of Addressing & Accepted) Issues by Business Unit)*
Majority of the
issues are
against Credit
Risk mostly
concentrated
in Ireland.
One major
GRG Global
risk issue

L EGA L , 
  3  
  
A MER IC A S , 
  2
EMEA , 
  2  
  
GL OB A L , 
  7  
  
FINA NC E, 
  3  
  
A S IA  
  P A C , 
  1 
  
R IS K , 
  13 
  

S TR A TEGIC  
  INVT 
  G R P , 
  1 
  

DIVES TED , 
  1
W 
  R EGIS TER , 
  4  
  

IR EL A ND, 
  2 1
UK , 
  9  
  

C OO, 
  6  
  

GRG Open (Inclusive of Addressing & Accepted) Issues By GPF*
M ajo r

Impo rtant

S ignific ant

30
25
20

15

15

6

10
5
0

4
0

Identifying
Our
C us tomers

TC F

12

11

1
1
1
1

1
2

6
01

4
2

R ecruiting 
  &
Laws  
  &
P rotecting P roces s es , Managing
rewarding R egulations our 
  as s ets  
  & s ys tems  
  and C redit 
  R is k
our 
  people
data
controls  
  

6

4
1

2

Managing A ccounting
Operational & 
  financial
R is k
reporting

2
0

1

Managing
C orporate
Our 
  C apital Governance

1

P rivacy 
  &
Data
P rotection

* Reporting period covering up to and inclusive of 30/06/12. Data as per Group Operational Risk Board reports for June.

GRG Executive Pack - Quarterly Report – Information Classification is STRICTLY CONFIDENTIAL

25

 Operational Risk Status Overview

GRG Executive Pack - Quarterly Report – Information Classification is STRICTLY CONFIDENTIAL

26

  RBS

 

Translormation Report

nu. ens n. vlry [Junl mm

cm 
h-Hv-ry Rudsz

 



 

 

m. 

mm

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ERcExemwe mm>> mm, 

21

 RBS

 

Translormation Report

nu. ens [Junl 1am can't

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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h-Hv-ry Rudsz

 

m. 

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ERcExemwe mm>> mm, 



Appendix 1 – Glossary
Value-Added
VA1
VA2
VA3
VA4
VA5

Cumulative Number and Utilisation of Cases Returned to Satisfactory – The cumulative number and utilisations of small-, medium, and large-sized
organisations restructured by GRG and returned to satisfactory, i.e. having successfully exited GRG.
Cumulative Number of UK-based Small and Medium-Sized Businesses Restructured – The cumulative number of UK-based small- to medium-sized
businesses which entered GRG in 2009 and aggregate total exposures.
Number of Cases with Equity or Property Stakes – The number of property participations and equity options/stakes in the upside portfolio.
Loss Avoidance/Mitigation – The loss mitigation impact of GRG determined on the basis of RTS cases and cases still in portfolio as at the end of the period. It is
measured in terms of decreases in utilisations, stress losses, and provisions.
RWA Usage and Capital Optimisation – The RWA and capital optimisation impact of GRG determined on the basis of RTS cases and cases still in portfolio as at
the end of the period. It is measured in terms of decreases in RWAs.

Notes
Financial Report
FR1

Global Restructuring Group Portfolio Values (£m) – The value of the GRG portfolio

FR2

FR4

Global Restructuring Group Case Numbers – The number of GRG cases.
Significant Portfolio Movements – Overview of significant portfolio movements, including (i) new connections (≥ £60m), (ii) debt repaid (≥ £30m), (iii) debt written
off (≥ £30m), and (iv) returned-to-satisfactory (≥ £30m)
Portfolio by Business - Case Numbers – The GRG portfolio split by business, shown in case numbers.

FR5

Portfolio by Business - Case Values – The GRG portfolio split by business, shown in case values.

FR6

Cumulative Contribution – The contribution of GRG in terms of income.

FR7

APS, Core, Non-Core – The analysis of GRG portfolio distinguishing between Core and Non-Core as well as APS and Non-APS.

FR8

Transactions that Generated Income ≥ £1m – The list of transactions that generated income greater or equal to £1m.

FR9

Profit & Loss Summary

FR10

Global Restructuring Group– Provisions

FR11

Global Restructuring Group- Stress Loss Analysis

FR3

Portfolio Analysis
CR1

Total Committed Limits and Utilisations, incl. (i) Defaulted and (ii) Non-defaulted – The total committed limits and utilisations as at the end of each month
distinguishing between those that are in default and those that are not.

CR2

Risk Weighted Assets by Region – The total risk weighted assets related to the GRG portfolio by region.

CR3
CR4
CR5
CR6

Total Committed Limits by PDs – The total committed limits by MGS ranges (i.e., PDs) at the end of each quarter for the GRG portfolio.
MGS Credit Migration – […]
Portfolio Break-down by Facility Type – The break-down of the GRG portfolio EAD by type of facilities.
Stress Loss

GRG Executive Pack - Quarterly Report – Information Classification is STRICTLY CONFIDENTIAL

29

 CR7
CR8

Total Committed Limits by Sector – The total committed limits by sector.
GRG Brand Splitting

Business Report
BR1
GRG Headcount – The number of GRG full-time equivalents by GRG Area, 2011 trends
Capital Management
CM1
RWA equivalence for Capital Deduct and Provisions
CM2
RWA by Industry Sector

GRG Executive Pack - Quarterly Report – Information Classification is STRICTLY CONFIDENTIAL

30

 Appendix 2 – Note
Expected Loss:
In order to calculate the Estimated Expected Loss Mitigation on RTS Cases, we look at a period within any given calendar year monthly/Quarterly depending upon report frequency for
analysis. The EL for the period is determined and summed to the preceding cumulative EL year to date. The PDs and LGDs for each period are calculated on RTS cases (From Q2 report
we moved to using the all the RTS cases for the period which can be found in the R&A file). Volatility in PDs and LGDs is natural consequence.
It should be noted and acknowledged that the period calculated ELs summed to the year end position is likely to be at variance EL calculated on an annualised basis using PDs and LGDs
on the whole years RTS cases.
Due to data quality issues, the EL on entry and exit for RTS/De-risked cases has in some cases been manually calculated using the PD, LGD and EAD on entry and exit. In some cases,
where no grading or EAD has been recorded, we have used a defaulted grade (PD 2.5%, LGD 50%) or appropriate grading as per 3 months rule and the limit.
Exposure:
The exposure calculation is carried out on a cumulative basis based on the period of time analysed in each report.
RWA:
The RWA calculation does not use PDs/LGDs or the exposure as per report. The information is now driven off the R&A data with EAD being used instead of the exposure.
During the analysis for 2010 for RTS cases the RWA seems to have changed violently, this is because:
Q1 RWA had been based on the calculations using mid point credit grade PD percentage and LGDs sourced from the GRG Watchlist and using exposure from the watchlist as the client
EAD.
April 2010 report started to use RWA data from the R&A this only took into account Parent level information as per GRG watchlist.
From Q2 report has now moved to Counterparty level data from the R&A using RWA as per Generic Extract file. RWA have been done on a cumulative periodic basis.
Due to data quality issues, RWA on entry and exit for RTS/De-risked cases has in some cases been manually calculated using the PD, LGD and EAD on entry and exit and for the RWA
the risk weight sourced from R&A. In some cases, where no grading or EAD has been recorded, we have used a defaulted grade (PD 2.5%, LGD 50%) and the limit/utilisation or
appropriate grading as per 3 months rule.
De-risked cases in GRG
De-risked cases value-add metrics on exit values has been manually amended to reflect a true picture. The utilisation, limit, RWA and Expected Los on exit has been assumed to be 0.
Cases Remaining in GRG
VA6 has been based on the whole portfolio, PDs, and LGDs are taken from the R&A and will not be the same as in the report.
PDs upon entry are only based on the mid point percentage of credit grade 24. Within the report actual PDs used to calculate the RWA will differ as they are from the R&A.
Counterparties can be lost due to matching between at entry and at exit if they do not appear with R&A set.
West Register Property Participation & Equity Investments
Information provided by Kate Wyeth and Eileen Glennon (RBS GRG Strategic Investment Group & GRG Finance). Used for VA4 “Number of Cases with Equity and Property Stakes”.

GRG Executive Pack - Quarterly Report – Information Classification is STRICTLY CONFIDENTIAL

31

 Appendix 3 – Value Added Explained & Breakdown

Value Added by GRG

Value-Added Explained
This memo articulates the GRG capital reporting methodology for calculating the value added as documented in “GRG Executive Pack Quarterly Report.
Additional Incremental
Contribution, net of Expenses

Estimated Expected Loss
Mitigation on RTS/De-risked
Cases YTD

£163m

£666 m

Income
Statement

Reduction in Exposure on RTS/De-risked cases
Balance
Sheet

Limits Reduction £5,020m

Income Statement
Additional Incremental Contribution - The additional incremental contribution has been provided by GRG Finance. This is simply the additional Income that GRG have
earned on cases net of expenses as per GRG P&L statement.
Expected Loss Mitigation on RTS & De-risked Cases - Expected Loss (EL) represents the best estimate of how much we might lose on average. Statistically EL is
determined as:EL = Probability of Default (PD) * Loss Given Default (LGD) * Exposure at Default (EAD).
The Expected Loss mitigation is calculated by taking the difference in EL on entry to and exit from GRG.
Balance Sheet
Reduction in Exposure on RTS & De-risked cases - The reduction in exposure; has been calculated as the difference in the Exposure on entry to and exit from GRG
on RTS & De-risked cases. The data is taken from QlikView.
Value Add Breakdown
RTS/Exit

Limit Mitigation (£m)

RWA Mitigation (£m)

Capital Deduct Mitigation (£m)

Total CT 1 RWA Mitigation (£m)

Exit

3,101

4,356

387

6,056

RTS

1,919

4,613

279

5,799

Total

5,020

8,969

666

11,855

GRG Executive Pack - Quarterly Report – Information Classification is STRICTLY CONFIDENTIAL

32

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