A structured entity (SE) is an entity that has been designed such that voting or similar rights are not the dominant factor in deciding who controls the entity, for example when any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements. SEs are usually established for a specific, limited purpose, they do not carry out a business or trade and typically have no employees. They take a variety of legal forms - trusts, partnerships and companies - and fulfil many different functions. As well as being a key element of securitisations, SEs are also used in fund management activities to segregate custodial duties from the fund management advice.
Consolidated structured entities
Securitisations
In a securitisation, assets, or interests in a pool of assets, are transferred generally to a SE which then issues liabilities to third party investors. The majority of securitisations are supported through liquidity facilities or other credit enhancements. The Group arranges securitisations to facilitate client transactions and undertakes own asset securitisations to sell or to fund portfolios of financial assets.
The Group also acts as an underwriter and depositor in securitisation transactions in both client and proprietary transactions.
The Group’s involvement in client securitisations takes a number of forms. It may: sponsor or administer a securitisation programme; provide liquidity facilities or programme-wide credit enhancement; and purchase securities issued by the vehicle.
Own asset securitisations
In own-asset securitisations, the pool of assets held by the SE is either originated by the RBS Group, or (in the case of whole loan programmes) purchased from third parties.
The table below analyses the asset categories for those own-asset securitisations where the transferred assets continue to be recorded on the Group’s balance sheet.
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Group |
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2017 |
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2016 |
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Debt securities in issue |
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Debt securities in issue |
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Held by third |
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Held by the |
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Held by third |
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Held by the |
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Asset type |
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Assets |
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parties |
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Group (1) |
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Total |
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Assets |
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parties |
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Group (1) |
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Total |
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£m |
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£m |
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£m |
|
£m |
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£m |
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£m |
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£m |
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£m |
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|
Mortgages |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- UK (2) |
|
— |
|
— |
|
— |
|
— |
|
1,255 |
|
— |
|
— |
|
— |
|
- Irish |
|
— |
|
— |
|
— |
|
— |
|
7,054 |
|
1,180 |
|
6,621 |
|
7,801 |
|
- US |
|
— |
|
— |
|
— |
|
— |
|
301 |
|
301 |
|
— |
|
301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
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— |
|
— |
|
— |
|
8,610 |
|
1,481 |
|
6,621 |
|
8,102 |
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Cash deposit |
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— |
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|
|
|
|
|
|
785 |
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|
|
|
|
|
|
|
|
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|
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|
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Total |
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— |
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|
|
|
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9,395 |
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|
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|
|
|
|
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Notes:
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(1) |
Debt securities retained by the Group may be pledged with central banks. |
|
(2) |
These assets have been transferred to SEs that are consolidated by RBS plc. |
Covered bond programme
Certain loans and advances to customers have been assigned to bankruptcy remote limited liability partnerships to provide security for issues of debt securities by the RBS Group. The Group retains all of the risks and rewards of these loans. The partnerships are consolidated by the RBS Group, the loans retained on the RBS Group’s balance sheet and the related covered bonds included within debt securities in issue of the RBS Group. At 31 December 2017, £8,915 million of mortgages have been assigned to bankruptcy remote limited liability partnerships to provide security for issues of debt securities by the RBS Group (2016 - £7,624 million).
Unconsolidated structured entities
The Group’s interests in unconsolidated structured entities are analysed below.
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Asset backed |
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Securitisation |
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Investment |
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vehicles |
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funds and other |
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Total |
|
2017 |
|
£m |
|
£m |
|
£m |
|
Loans and advances to customers |
|
— |
|
29 |
|
29 |
|
Debt securities |
|
1,059 |
|
— |
|
1,059 |
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|
|
|
|
|
|
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Total |
|
1,059 |
|
29 |
|
1,088 |
|
|
|
|
|
|
|
|
|
Liquidity facilities/loan commitments |
|
— |
|
55 |
|
55 |
|
|
|
|
|
|
|
|
|
Total exposure |
|
1059 |
|
84 |
|
1143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 |
|
|
|
|
|
|
|
Loans and advances to customers |
|
35 |
|
— |
|
35 |
|
Derivative assets |
|
8 |
|
— |
|
8 |
|
Derivatives liabilities |
|
(9) |
|
(1) |
|
(10) |
|
Total |
|
34 |
|
(1) |
|
33 |
|
|
|
|
|
|
|
|
|
Guarantees |
|
— |
|
7 |
|
7 |
|
Total exposure |
|
34 |
|
6 |
|
40 |
Notes:
|
(1) |
Income from interests in unconsolidated structured entities includes interest receivable, changes in fair value and other income less impairments. |
|
(2) |
A sponsored entity is a structured entity established by the Group where the Group provides liquidity and/or credit enhancements or provides ongoing services to the entity. The Group can act as sponsor for its own or for customers’ transactions. |
|
(3) |
In 2017 no assets were transferred into sponsored structured entities (2016 - nil) which are not consolidated by the Group and for which the Group held no interest at 31 December 2017. The income arising from sponsored entitles where the Group holds no interest at year end was nil (2016 - nil). |