Last checked at 28 Jul 2016 16:00
Lloyds Banking Group plc
2016 Half-Year
Pillar 3 disclosures
28 July 2016
BASIS OF PRESENTATION
This report presents the condensed half-year Pillar 3 disclosures of Lloyds Banking Group plc ('the Group') as at 30 June 2016, prepared in accordance with European Banking Authority (EBA) guidelines on Pillar 3 disclosure frequency. The report should be read in conjunction with the 2016 Lloyds Banking Group Half-Year Results News Release.
The EBA guidelines on Pillar 3 disclosure frequency set out key information that institutions in the EU banking sector should consider disclosing on a more frequent than annual basis under Pillar 3. The Group's assessment of these guidelines has resulted in the disclosure of specific capital and leverage information at the interim quarter ends, with further detailed analysis provided at half-year as covered by this report. These half-year disclosures remain in addition to the full annual disclosure of the Group's Pillar 3 report. Risk-weighted assets by type of risk are included in the individual half-year Management Reports for the Group's significant subsidiaries; 'Lloyds Bank Group' and 'Bank of Scotland Group'.
A number of significant differences exist between accounting disclosures published in accordance with International Financial Reporting Standards (IFRS) and Pillar 3 disclosures published in accordance with prudential requirements which prevent direct comparison in a number of areas. Of particular note are the differences surrounding scope of consolidation, the definition of credit risk exposure and the recognition, classification and valuation of capital securities.
Unless otherwise specified, credit risk exposures are defined as the exposure at default (EAD), prior to the application of credit risk mitigation (CRM). EAD is defined as the aggregate of drawn (on balance sheet) exposures, undrawn (off balance sheet) commitments and contingent liabilities, after application of credit conversion factors (CCF), and other relevant regulatory adjustments. Notable exceptions to this definition include securitisation positions and counterparty credit risk exposures. A summary, noting the definitions applied, is provided below.
Exposure type | Exposure type |
Credit risk exposures (excluding securitisation positions) | EAD pre CRM1 |
Counterparty credit risk exposures | EAD post CRM |
Securitisation positions | The aggregate of the Group's retained or purchased positions, excluding those positions rated below BB- or that are unrated and therefore deducted from capital. |
1 | For credit risk exposures risk-weighted under the Standardised Approach the EAD pre CRM value is stated net of specific credit risk adjustments (SCRAs). SCRAs relating to credit risk exposures risk-weighted under a relevant Internal Ratings Based (IRB) Approach methodology are netted against expected losses. |
FORWARD LOOKING STATEMENTS
This document contains certain forward looking statements with respect to the business, strategy and plans of Lloyds Banking Group and its current goals and expectations relating to its future financial condition and performance. Statements that are not historical facts, including statements about Lloyds Banking Group's or its directors' and/or management's beliefs and expectations, are forward looking statements. By their nature, forward looking statements involve risk and uncertainty because they relate to events and depend upon circumstances that will or may occur in the future. Factors that could cause actual business, strategy, plans and/or results (including but not limited to the payment of dividends) to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward looking statements made by the Group or on its behalf include, but are not limited to: general economic and business conditions in the UK and internationally; market related trends and developments; fluctuations in interest rates (including low or negative rates), exchange rates, stock markets and currencies; the ability to access sufficient sources of capital, liquidity and funding when required; changes to the Group's credit ratings; the ability to derive cost savings; changing customer behaviour including consumer spending, saving and borrowing habits; changes to borrower or counterparty credit quality; instability in the global financial markets, including Eurozone instability, the exit by the UK from the European Union (EU) and the potential for one or more other countries to exit the EU or the Eurozone and the impact of any sovereign credit rating downgrade or other sovereign financial issues; technological changes and risks to cyber security; natural, pandemic and other disasters, adverse weather and similar contingencies outside the Group's control; inadequate or failed internal or external processes or systems; acts of war, other acts of hostility, terrorist acts and responses to those acts, geopolitical, pandemic or other such events; changes in laws, regulations, accounting standards or taxation, including as a result of an exit by the UK from the EU, a further possible referendum on Scottish independence; changes to regulatory capital or liquidity requirements and similar contingencies outside the Group's control; the policies, decisions and actions of governmental or regulatory authorities or courts in the UK, the EU, the US or elsewhere including the implementation and interpretation of key legislation and regulation; the ability to attract and retain senior management and other employees; requirements or limitations on the Group as a result of HM Treasury's investment in the Group; actions or omissions by the Group's directors, management or employees including industrial action; changes to the Group's post-retirement defined benefit scheme obligations; the provision of banking operations services to TSB Banking Group plc; the extent of any future impairment charges or write-downs caused by, but not limited to, depressed asset valuations, market disruptions and illiquid markets; the value and effectiveness of any credit protection purchased by the Group; the inability to hedge certain risks economically; the adequacy of loss reserves; the actions of competitors, including non-bank financial services and lending companies; and exposure to regulatory or competition scrutiny, legal, regulatory or competition proceedings, investigations or complaints. Please refer to the latest Annual Report on Form 20-F filed with the US Securities and Exchange Commission for a discussion of certain factors together with examples of forward looking statements. Except as required by any applicable law or regulation, the forward looking statements contained in this document are made as of today's date, and Lloyds Banking Group expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward looking statements. The information, statements and opinions contained in this document do not constitute a public offer under any applicable law or an offer to sell any securities or financial instruments or any advice or recommendation with respect to such securities or financial instruments.
Contents
Table 1: | Risk-weighted assets movement by key driver |
Table 2: | Capital requirements |
Table 3: | Credit risk exposures |
Table 4: | Corporate master scale |
Table 5: | Retail master scale |
Table 6: | Corporate Main exposure by PD grade |
Table 7: | Corporate SME exposure by PD grade |
Table 8: | Central governments and central bank exposures by PD grade |
Table 9: | Institution exposures by PD grade |
Table 10: | Residential mortgages (SME) exposures by PD grade |
Table 11: | Residential mortgages (non-SME) exposures by PD grade |
Table 12: | Qualifying revolving retail exposures by PD grade |
Table 13: | Other SME exposures by PD grade |
Table 14: | Other non-SME exposures by PD grade |
Table 15: | Corporate Specialised Lending exposures subject to supervisory slotting |
Table 16: | Lloyds Banking Group own funds template |
Table 17: | Lloyds Banking Group leverage ratio common disclosure |
Table 18: | Lloyds Banking Group summary reconciliation of accounting assets and leverage ratio exposures |
2016 Half-Year Pillar 3 Update
The following disclosures include information on Lloyds Banking Group's own-funds, leverage, risk-weighted assets and capital requirements by type of risk and by exposure class. Additional detail has been included in relation to the Group's exposures subject to the Internal Ratings Based (IRB) approach.
| At 30 June 2016 |
| At 31 Dec 2015 |
Key ratios and risk-weighted assets |
|
|
|
Fully loaded common equity tier 1 (CET1) capital ratio2 | 13.0% |
| 13.0% |
Fully loaded tier 1 capital ratio | 15.4% |
| 15.2% |
Fully loaded total capital ratio | 18.7% |
| 18.0% |
Fully loaded total risk-weighted assets | £222,297m |
| £222,747m |
|
|
|
|
Transitional CET1 capital ratio | 13.1% |
| 12.8% |
Transitional tier 1 capital ratio | 16.4% |
| 16.4% |
Transitional total capital ratio | 21.8% |
| 21.5% |
Transitional total risk-weighted assets | £222,778m |
| £222,845m |
|
|
|
|
Leverage ratio1,2 | 4.7% |
| 4.8% |
Average leverage ratio3 | 4.8% |
|
|
1 | Reported on a fully loaded basis. |
2 | The common equity tier 1 and leverage ratios at 31 December 2015 were reported on a pro forma basis, including the dividend paid by the Insurance business in February 2016 relating to 2015. |
3 | The average leverage ratio is based on the average of the month end tier 1 capital and exposure measures over the quarter (1 April 2016 to 30 June 2016). The average of 4.8 per cent compares to 4.7 per cent at the start and end of the quarter. |
Table 1: Risk-weighted assets movement by key driver
| Credit risk IRB | Credit risk STA | Credit risk | Counterparty credit risk3 | Market risk | Operational risk | Total |
£m | £m | £m | £m | £m | £m | £m | |
Fully loaded risk-weighted assets as at 31 December 2015 |
|
|
|
|
|
| 222,747 |
Less total threshold risk-weighted assets1, 2 |
|
|
|
|
|
| (10,690) |
Risk-weighted assets as at31 December 2015 | 151,563 | 20,443 | 172,006 | 10,153 | 3,775 | 26,123 | 212,057 |
Asset size | (1,940) | (831) | (2,771) | (1,220) | (137) | - | (4,128) |
Acquisitions and disposals | (1,686) | - | (1,686) | 38 | - | - | (1,648) |
Model updates | 3,229 | (28) | 3,201 | 99 | (418) | - | 2,882 |
Methodology and policy | (327) | 121 | (206) | - | - | - | (206) |
Asset quality | (1,931) | 143 | (1,788) | 1,203 | (64) | - | (649) |
Movement in risk levels | - | - | - | - | (215) | - | (215) |
Foreign exchange movements | 2,506 | 420 | 2,926 | 453 | (19) | - | 3,360 |
Risk-weighted assets as at 30 June 2016 | 151,414 | 20,268 | 171,682 | 10,726 | 2,922 | 26,123 | 211,453 |
Threshold risk-weighted assets1 |
|
|
|
|
|
| 11,325 |
Transitional risk-weighted assets as at 30June 2016 |
|
|
|
|
|
| 222,778 |
Movement to fully loaded risk-weighted assets2 |
|
|
|
|
|
| (481) |
Fully loaded risk-weighted assets as at 30 June 2016 |
|
|
|
|
|
| 222,297 |
1 | Threshold risk-weighted assets reflect the element of significant investments and deferred tax assets that are permitted to berisk-weighted instead of deducted from CET1 capital. Significant investments primarily arise from the investment in the Group's Insurance business. |
2 | Differences may arise between transitional and fully loaded threshold risk-weighted assets where deferred tax assets reliant on future profitability and arising from temporary timing differences and significant investments exceed the fully loaded threshold limit, resulting in an increase in amounts deducted from CET1 capital rather than being risk-weighted. |
3 | Counterparty credit risk includes movements in contributions to the default fund of central counterparties and movements in credit valuation adjustment risk. |
The risk-weighted assets movement table provides analysis of the reduction in risk-weighted assets in the period by risk type and an insight into the key drivers of the movements. The key driver analysis is compiled on a monthly basis through the identification and categorisation of risk-weighted asset movements and is subject to management judgment.
Movements in credit risk-weighted assets in the six months to 30 June 2016 were driven by the following:
· Asset size movements include risk-weighted asset movements arising from new lending and asset run-off. During the six months to 30 June, credit risk-weighted assets assessed on both Standardised and Internal Ratings Based approaches decreased by £2.8 billion primarily due to repayments and exits, partly offset by growth in targeted customer segments.
· Disposal of the Group's interest in Visa Europe and further disposals within the run-off business reduced credit risk- weighted assets by £1.7 billion.
· Model update increases of £3.2 billion were mainly driven by a change in approach for the Retail Buy-to-let mortgage portfolio and other small model refinements.
· Methodology and policy movements include changes due to refinements in the application of regulatory policy.
· Asset quality movements capture movements in the assessed quality of assets due to changes in borrower risk, including changes in the economic environment. Net reductions in credit risk-weighted assets of £1.8 billion primarily relate to model calibrations and a net change in credit quality, partially offset by increases in valuation of centrally held strategic equity investments.
· Foreign exchange movements reflect the depreciation of Sterling which has contributed to a £2.9 billion increase in credit risk-weighted assets of which £2.3 billion arose in the final week of June following the outcome of the EU referendum.
Counterparty credit risk and CVA risk increases of £0.6 billion are principally driven by yield curve and foreign exchange movements of which £0.9 billion arose in the final week of June following the outcome of the EU referendum, partially offset by increased capital relief from CVA related hedges.
Market risk-weighted assets reduced by £0.9 billion due to a reduction in the Value-at-Risk multiplier and active portfolio management.
The risk-weighted assets and Pillar 1 capital requirements, by key regulatory risk type, of the Group as at 30 June 2016 are presented in the table below.
Table 2: Capital requirements
| June-16 | June-16 | Dec-15 | Dec-15 |
Risk- weighted assets | Pillar 1 capital requirements | Risk- weighted assets | Pillar 1 capital requirements | |
CREDIT RISK | £m | £m | £m | £m |
Exposures subject to the IRB approach |
|
|
|
|
Foundation IRB approach |
|
|
|
|
Corporate - main | 43,103 | 3,448 | 43,005 | 3,441 |
Corporate - SME | 8,471 | 678 | 8,814 | 705 |
Corporate − specialised lending | 6 | 1 | 8 | 1 |
Central governments and central banks | 1,661 | 133 | 1,347 | 108 |
Institutions | 1,216 | 97 | 1,430 | 114 |
Retail IRB approach |
|
|
|
|
Retail mortgages | 39,032 | 3,122 | 38,252 | 3,060 |
of which: residential mortgages (SME) | 2,891 | 231 | 3,214 | 257 |
of which: residential mortgages (non-SME) | 36,141 | 2,891 | 35,038 | 2,803 |
Qualifying revolving retail exposures | 12,066 | 965 | 12,501 | 1,000 |
Other SME | 1,766 | 141 | 1,807 | 145 |
Other non-SME | 11,523 | 922 | 11,352 | 908 |
Other IRB approaches1 |
|
|
|
|
Corporate − specialised lending | 14,296 | 1,144 | 14,386 | 1,151 |
Equities − exchange traded | 2,484 | 199 | 2,837 | 227 |
Equities − private equity | 5,649 | 452 | 5,664 | 453 |
Equities − other | 1,321 | 106 | 1,392 | 111 |
Securitisation positions2 | 3,069 | 245 | 3,266 | 261 |
Non-credit obligation assets3 | 5,751 | 460 | 5,502 | 440 |
Total − IRB approach | 151,414 | 12,113 | 151,563 | 12,125 |
Exposures subject to the standardised approach |
|
|
|
|
Central governments and central banks | − | − | − | − |
Regional governments or local authorities | − | − | − | − |
Public sector entities | 3 | − | 2 | − |
Multilateral development banks | − | − | − | − |
Institutions | 36 | 3 | 24 | 2 |
Corporates | 11,829 | 946 | 11,921 | 954 |
Retail | 3,088 | 247 | 2,880 | 230 |
Secured by mortgages on immovable property | 2,092 | 167 | 2,109 | 168 |
of which: residential property | 2,063 | 165 | 2,078 | 166 |
of which: commercial property | 29 | 2 | 31 | 2 |
Exposures in default | 1,074 | 86 | 1,198 | 96 |
Other items3 | 2,146 | 172 | 2,309 | 185 |
Total − standardised approach | 20,268 | 1,621 | 20,443 | 1,635 |
Total credit risk | 171,682 | 13,734 | 172,006 | 13,760 |
Threshold − significant investments | 8,349 | 668 | 7,817 | 625 |
Threshold − deferred tax | 2,976 | 238 | 2,971 | 238 |
Total credit risk (transitional) | 183,007 | 14,640 | 182,794 | 14,623 |
Table 2: Capital requirements (continued)
| June-16 | June-16 | Dec-15 | Dec-15 |
Risk- weighted assets | Pillar 1 capital requirements | Risk- weighted assets | Pillar 1 capital requirements | |
| £m | £m | £m | £m |
COUNTERPARTY CREDIT RISK |
|
|
|
|
IRB approach | 8,485 | 679 | 7,328 | 586 |
Standardised approach | 531 | 43 | 509 | 41 |
Central counterparties | 143 | 11 | 144 | 12 |
Settlement risk | - | - | - | - |
Contributions to the default fund of a central counterparty | 466 | 37 | 488 | 39 |
Total counterparty credit risk | 9,625 | 770 | 8,469 | 678 |
Credit valuation adjustment (CVA) |
|
|
|
|
Standardised method | 1,101 | 88 | 1,684 | 135 |
Total credit valuation adjustment | 1,101 | 88 | 1,684 | 135 |
|
|
|
|
|
MARKET RISK |
|
|
|
|
Internal models approach | 2,466 | 197 | 3,224 | 258 |
Standardised approach |
|
|
|
|
Interest rate position risk requirement | 374 | 30 | 477 | 38 |
of which: specific interest rate risk of securitisation positions | 32 | 3 | 78 | 6 |
Equity position risk requirement | − | − | − | − |
Foreign exchange position risk requirement | 82 | 7 | 74 | 6 |
Commodity position risk requirement | − | − | − | − |
Total market risk | 2,922 | 234 | 3,775 | 302 |
|
|
|
|
|
OPERATIONAL RISK |
|
|
|
|
Standardised approach | 26,123 | 2,090 | 26,123 | 2,090 |
Total operational risk | 26,123 | 2,090 | 26,123 | 2,090 |
Total - transitional | 222,778 | 17,822 | 222,845 | 17,827 |
1 | Credit risk exposures subject to other IRB approaches include specialised lending exposures risk-weighted in accordance with supervisory slotting criteria, equity exposures risk-weighted in accordance with the Simple Risk Weight Method and securitisation positions risk-weighted in accordance with the Internal Assessment Approach (IAA) and Ratings Based Approach (RBA). |
2 | Securitisation positions exclude amounts allocated to the 1,250 per cent risk weight category. These amounts are deducted from capital after the application of specific credit risk adjustments (SCRA), rather than being risk-weighted. |
3 | Other items (Standardised Approach) and non-credit obligation assets (IRB Approach) predominantly relate to other balance sheet assets that have no associated credit risk. These comprise various non-financial assets, including fixed assets, cash, items in the course of collection, prepayments and sundry debtors. |
Table 3: Credit risk exposures
| June-16 | June-16 | June-16 | Dec-15 | Dec-15 | Dec-15 |
| Credit risk exposure | Risk- weighted assets | Average risk weight | Credit risk exposure | Risk- weighted assets | Average risk weight |
Exposure class | £m | £m | % | £m | £m | % |
Exposures subject to the IRB approach |
|
|
|
|
|
|
Foundation IRB approach |
|
|
|
|
|
|
Corporate - main | 80,887 | 43,103 | 53% | 80,629 | 43,005 | 53% |
Corporate - SME | 12,833 | 8,471 | 66% | 12,964 | 8,814 | 68% |
Corporate − specialised lending | 5 | 6 | 128% | 6 | 8 | 120% |
Central governments and central banks | 20,844 | 1,661 | 8% | 15,716 | 1,347 | 9% |
Institutions | 6,697 | 1,216 | 18% | 7,364 | 1,430 | 19% |
Retail IRB approach |
|
|
|
|
|
|
Retail mortgages | 338,264 | 39,032 | 12% | 341,807 | 38,252 | 11% |
of which: residential mortgages (SME) | 10,462 | 2,891 | 28% | 10,517 | 3,214 | 31% |
of which: residential mortgages (non-SME) | 327,802 | 36,141 | 11% | 331,290 | 35,038 | 11% |
Qualifying revolving retail exposures | 37,424 | 12,066 | 32% | 36,975 | 12,501 | 34% |
Other SME | 2,493 | 1,766 | 71% | 2,661 | 1,807 | 68% |
Other non-SME | 15,351 | 11,523 | 75% | 14,331 | 11,352 | 79% |
Other IRB approaches1 |
|
|
|
|
|
|
Corporate − specialised lending | 19,836 | 14,296 | 72% | 19,887 | 14,386 | 72% |
Equities − exchange traded | 857 | 2,484 | 290% | 978 | 2,837 | 290% |
Equities − private equity | 2,973 | 5,649 | 190% | 2,981 | 5,664 | 190% |
Equities − other | 357 | 1,321 | 370% | 376 | 1,392 | 370% |
Securitisation positions2 | 20,853 | 3,069 | 15% | 22,125 | 3,266 | 15% |
Non-credit obligation assets3 | 9,387 | 5,751 | 61% | 9,228 | 5,502 | 60% |
Total − IRB approach | 569,061 | 151,414 | 27% | 568,028 | 151,563 | 27% |
Exposures subject to the standardised approach |
|
|
|
|
|
|
Central governments and central banks | 99,949 | - | - | 88,415 | - | - |
Regional governments or local authorities | 1 | - | 20% | 1 | - | 20% |
Public sector entities | 3 | 3 | 100% | 2 | 2 | 100% |
Multilateral development banks | 1,436 | - | - | 997 | - | - |
Institutions | 195 | 36 | 18% | 170 | 24 | 14% |
Corporates | 14,185 | 11,829 | 83% | 14,463 | 11,921 | 82% |
Retail | 4,735 | 3,088 | 65% | 4,438 | 2,880 | 65% |
Secured by mortgages on immovable property | 5,783 | 2,092 | 36% | 5,840 | 2,109 | 36% |
of which: residential property | 5,754 | 2,063 | 36% | 5,809 | 2,078 | 36% |
of which: commercial property | 29 | 29 | 100% | 31 | 31 | 100% |
Exposures in default | 923 | 1,074 | 116% | 1,005 | 1,198 | 119% |
Other items3 | 3,324 | 2,146 | 65% | 3,204 | 2,309 | 72% |
Total − standardised approach | 130,534 | 20,268 | 16% | 118,535 | 20,443 | 17% |
Total credit risk | 699,595 | 171,682 | 25% | 686,563 | 172,006 | 25% |
Threshold - significant investments | 3,340 | 8,349 | 250% | 3,127 | 7,817 | 250% |
Threshold - deferred tax | 1,191 | 2,976 | 250% | 1,188 | 2,971 | 250% |
Total credit risk (transitional) | 704,126 | 183,007 | 26% | 690,878 | 182,794 | 26% |
1 | Credit risk exposures subject to other IRB approaches include corporate specialised lending exposures risk-weighted in accordance with supervisory slotting criteria, equity exposures risk-weighted in accordance with the Simple Risk Weight Method and securitisation positions risk-weighted in accordance with the IAA and the RBA. |
2 | Securitisation positions exclude amounts allocated to the 1,250 per cent risk weight category. These amounts are deducted from capital, after the application of SCRAs, rather than being risk-weighted at 1,250 per cent. |
3 | Other items (Standardised Approach) and non−credit obligation assets (IRB approach) predominantly relate to other balance sheet assets that have no associated credit risk. These comprise various non−financial assets, including fixed assets, cash, items in the course of collection, prepayments and sundry debtors. |
Exposures subject to the IRB approach - key movements
FIRB Corporate Main
· Overall Corporate Main exposures have remained relatively flat, with underlying reductions driven by active portfolio management, offset by the impact of Sterling depreciation, particularly in the last week of June.
FIRB Corporate SME
· The average risk-weight on FIRB Corporate SME lending has reduced to 66 per cent, driven by targeted new lending which has resulted in an overall improvement in credit quality. This has also led to a reduction in the average PD.
FIRB Central governments and central banks
· FIRB Central governments and central banks exposures increased by £5.1 billion driven by an increase in deposits with the Federal Reserve.
Retail IRB Residential mortgages
· Retail IRB residential mortgage exposures decreased by £3.5 billion reflecting the Group's focus on balancing margin and risk considerations with volume growth in the current competitive low growth market. The small increase in average risk weight was driven by model updates.
Retail Qualifying revolving
· Retail IRB Qualifying revolving retail exposures increased by £0.4 billion largely due to targeted growth in credit cards. The average risk weight reduced from 34 per cent to 32 per cent largely due to improved asset quality.
Retail Other non-SME
· Retail other (non-SME) exposures have increased by £1.0 billion and average risk weights have reduced from 79 per cent to 75 per cent primarily as a result of continued growth in UK Motor Finance
Equities
· There was a minimal reduction in equities compared to December 2015 as the impact of disposals of certain strategic investments (including Visa Europe) was largely offset by increases in the valuation of centrally held investments.
Securitisation positions
· Securitisation exposures decreased by £1.3 billion mainly due to net sales in the period.
Exposures subject to the Standardised Approach - key movements
Standardised Central governments and central banks
· Standardised central governments and central banks' exposures increased by £11.5 billion primarily due to management of the liquid asset portfolio, specifically placement of funds with European sovereigns, primarily Netherlands.
Internal Rating Scales
Within the Group, PD internal rating scales are used in assessing the credit quality of the Foundation IRB and Retail IRB portfolios. Two separate scales exist within the business - a Corporate Master Scale which covers all relevant corporate, central government and central bank and institution portfolios and a Retail Master Scale which covers all relevant retail portfolios.
PD master scales
Table 4: Corporate master scale
In commercial portfolios the PD models segment counterparties into a number of rating grades, with each grade representing a defined range of default probabilities and there are a number of different model rating scales. Counterparties/exposures migrate between rating grades if the assessment of the PD changes. The modelled PD 'map' through local scales to a single Corporate (non-retail) master scale comprising of 19 non-default ratings. Together with four default ratings the Corporate master scale forms the basis on which internal reporting is completed. These ratings scales can also be mapped to External Ratings as shown below.
| Range | External S&P Rating | ||
PD Grades | Lower | Mid | Upper | (Approximate Equivalent) |
1-4 | 0.000% | 0.018% | 0.035% | AAA to AA- |
5 | 0.036% | 0.043% | 0.050% | A+ |
6 | 0.051% | 0.060% | 0.080% | A |
7 | 0.081% | 0.110% | 0.140% | A- |
8 | 0.141% | 0.180% | 0.220% | BBB+ |
9 | 0.221% | 0.280% | 0.340% | BBB |
10 | 0.341% | 0.420% | 0.500% | BBB- |
11 | 0.501% | 0.630% | 0.760% | BB+ |
12 | 0.761% | 1.000% | 1.240% | BB |
13 | 1.241% | 1.620% | 2.000% | BB- |
14 | 2.001% | 2.600% | 3.200% | B+ |
15 | 3.201% | 4.200% | 5.200% | B+ |
16 | 5.201% | 6.200% | 7.200% | B |
17 | 7.201% | 8.700% | 10.200% | B- |
18 | 10.201% | 12.000% | 13.800% | B- |
19 | 13.801% | 31.000% | 99.999% | CCC to C |
20 - 23 (Default) | 100.000% | 100.000% | 100.000% | Default |
Table 5: Retail master scale
In the principal retail portfolios, EAD and loss given default models are also in use. For reporting purposes, customers are segmented into a number of rating grades, each representing a defined range of default probabilities and exposures migrate between rating grades if the assessment of the counterparty PD changes. The Retail master scale comprises 13 non-default ratings and one default rating.
|
| Range | ||||
PD Grades |
| Lower |
| Mid |
| Upper |
0 |
| 0.000% |
| 0.050% |
| 0.100% |
1 |
| 0.101% |
| 0.251% |
| 0.400% |
2 |
| 0.401% |
| 0.601% |
| 0.800% |
3 |
| 0.801% |
| 1.001% |
| 1.200% |
4 |
| 1.201% |
| 1.851% |
| 2.500% |
5 |
| 2.501% |
| 3.501% |
| 4.500% |
6 |
| 4.501% |
| 6.001% |
| 7.500% |
7 |
| 7.501% |
| 8.751% |
| 10.000% |
8 |
| 10.001% |
| 12.001% |
| 14.000% |
9 |
| 14.001% |
| 17.001% |
| 20.000% |
10 |
| 20.001% |
| 25.001% |
| 30.000% |
11 |
| 30.001% |
| 37.501% |
| 45.000% |
12 |
| 45.001% |
| 72.500% |
| 99.999% |
Default |
| 100.000% |
| 100.000% |
| 100.000% |
Analysis of credit risk exposures subject to the Foundation IRB Approach
The section that follows provides a detailed analysis, by PD Grade, of credit risk exposures subject to the Foundation IRB approach.
Disclosures provided in the tables that follow take into account PD floors and LGD floors specified by regulators in respect of the calculation of regulatory capital requirements.
Table 6: Corporate Main exposure by PD grade
| June-16 | June-16 | June-16 | Dec-15 | Dec-15 | Dec-15 |
| Credit risk exposure | Exposure weighted average PD | Average risk weight | Credit risk exposure | Exposure weighted average PD | Average risk weight |
| £m | % | % | £m | % | % |
PD Grades |
|
|
|
|
|
|
1 − 4 | 9,823 | 0.03% | 22.82% | 9,675 | 0.03% | 22.93% |
5 | 2,957 | 0.04% | 25.91% | 2,872 | 0.04% | 28.29% |
6 | 5,929 | 0.06% | 21.68% | 5,879 | 0.06% | 22.61% |
7 | 11,494 | 0.11% | 32.41% | 11,489 | 0.11% | 32.37% |
8 | 11,791 | 0.18% | 41.34% | 12,507 | 0.18% | 42.08% |
9 | 11,161 | 0.28% | 55.01% | 10,342 | 0.28% | 55.17% |
10 | 9,384 | 0.42% | 65.15% | 9,714 | 0.42% | 65.34% |
11 | 5,123 | 0.63% | 77.50% | 5,396 | 0.63% | 78.40% |
12 | 4,932 | 1.01% | 92.06% | 4,753 | 1.00% | 92.06% |
13 | 3,377 | 1.63% | 108.87% | 2,864 | 1.63% | 110.86% |
14 | 2,158 | 2.60% | 126.05% | 2,567 | 2.60% | 127.72% |
15 | 402 | 4.18% | 144.87% | 677 | 4.14% | 134.21% |
16 | 848 | 6.19% | 154.58% | 293 | 6.20% | 155.32% |
17 | 332 | 8.73% | 201.26% | 424 | 8.73% | 176.91% |
18 | 72 | 11.80% | 217.89% | 36 | 11.72% | 230.78% |
19 | 137 | 24.89% | 240.42% | 155 | 19.94% | 227.16% |
20 - 23 (Default) | 967 | 100.00% | - | 986 | 100.00% | - |
Total | 80,887 | 1.75% | 53.29% | 80,629 | 1.75% | 53.34% |
Table 7: Corporate SME exposure by PD grade
| June-16 | June-16 | June-16 | Dec-15 | Dec-15 | Dec-15 |
| Credit risk exposure | Exposure weighted average PD | Average risk weight | Credit risk exposure | Exposure weighted average PD | Average risk weight |
| £m | % | % | £m | % | % |
PD Grades |
|
|
|
|
|
|
1 − 4 | 139 | 0.03% | 20.82% | 142 | 0.03% | 20.79% |
5 | 140 | 0.04% | 25.48% | 157 | 0.04% | 26.06% |
6 | 330 | 0.06% | 25.50% | 284 | 0.06% | 22.29% |
7 | 430 | 0.11% | 24.85% | 393 | 0.11% | 26.30% |
8 | 498 | 0.18% | 38.98% | 299 | 0.18% | 36.03% |
9 | 547 | 0.28% | 47.00% | 565 | 0.28% | 46.75% |
10 | 770 | 0.43% | 49.92% | 782 | 0.43% | 49.38% |
11 | 2,522 | 0.63% | 59.05% | 2,535 | 0.63% | 59.29% |
12 | 2,151 | 1.06% | 71.30% | 2,089 | 1.06% | 70.80% |
13 | 1,363 | 1.66% | 81.67% | 1,327 | 1.66% | 81.23% |
14 | 1,589 | 2.60% | 91.92% | 1,600 | 2.60% | 95.23% |
15 | 380 | 4.23% | 95.53% | 389 | 4.23% | 96.34% |
16 | 498 | 5.88% | 110.14% | 808 | 6.02% | 124.66% |
17 | 271 | 8.66% | 122.94% | 265 | 8.61% | 127.48% |
18 | 231 | 10.80% | 130.18% | 220 | 10.73% | 129.01% |
19 | 155 | 29.01% | 152.95% | 148 | 24.88% | 157.35% |
20 - 23 (Default) | 819 | 100.00% | - | 961 | 100.00% | − |
Total | 12,833 | 8.32% | 66.01% | 12,964 | 9.39% | 67.99% |
·
Table 8: Central governments and central bank exposures by PD grade
| June-16 | June-16 | June-16 | Dec-15 | Dec-15 | Dec-15 |
| Credit risk exposure | Exposure weighted average PD | Average risk weight | Credit risk exposure | Exposure weighted average PD | Average risk weight |
| £m | % | % | £m | % | % |
PD Grades |
|
|
|
|
|
|
1 − 4 | 20,687 | 0.01% | 7.73% | 15,716 | 0.01% | 8.57% |
5 | − | − | − | − | − | − |
6 | 157 | 0.06% | 39.24% | − | − | − |
7 | − | − | − | − | − | − |
8 | − | − | − | − | − | − |
9 | − | − | − | − | − | − |
10 | − | − | − | − | − | − |
11 | − | − | − | − | − | − |
12 | − | − | − | − | − | − |
13 | − | − | − | − | − | − |
14 | − | − | − | − | − | − |
15 | − | − | − | − | − | − |
16 | − | − | − | − | − | − |
17 | − | − | − | − | − | − |
18 | − | − | − | − | − | − |
19 | − | − | − | − | − | − |
20 - 23 (Default) | − | − | − | − | − | − |
Total | 20,844 | 0.01% | 7.97% | 15,716 | 0.01% | 8.57% |
Table 9: Institution exposures by PD grade
| June-16 | June-16 | June-16 | Dec-15 | Dec-15 | Dec-15 |
| Credit risk exposure | Exposure weighted average PD | Average risk weight | Credit risk exposure | Exposure weighted average PD | Average risk weight |
| £m | % | % | £m | % | % |
PD Grades |
|
|
|
|
|
|
1 − 4 | 2,088 | 0.03% | 10.47% | 2,781 | 0.03% | 11.25% |
5 | 868 | 0.04% | 8.65% | 954 | 0.04% | 9.23% |
6 | 2,398 | 0.06% | 11.97% | 2,179 | 0.06% | 10.40% |
7 | 371 | 0.11% | 16.11% | 387 | 0.11% | 21.98% |
8 | 250 | 0.18% | 36.52% | 242 | 0.18% | 43.38% |
9 | 228 | 0.28% | 60.16% | 214 | 0.28% | 62.82% |
10 | 156 | 0.43% | 55.12% | 218 | 0.43% | 65.24% |
11 | 236 | 0.67% | 61.69% | 290 | 0.73% | 75.00% |
12 | 46 | 1.00% | 89.51% | 43 | 1.01% | 93.53% |
13 | 6 | 1.56% | 102.61% | 7 | 1.69% | 110.81% |
14 | 1 | 2.10% | 103.72% | 1 | 2.20% | 132.33% |
15 | 9 | 4.23% | 149.25% | 7 | 4.24% | 157.47% |
16 | − | − | − | − | − | − |
17 | − | − | − | − | − | − |
18 | 26 | 12.00% | 200.46% | − | − | − |
19 | 1 | 30.62% | 245.83% | 24 | 14.50% | 247.44% |
20 - 23 (Default) | 13 | 100.00% | - | 17 | 100.00% | − |
Total | 6,697 | 0.35% | 18.16% | 7,364 | 0.39% | 19.42% |
Analysis of credit risk exposures subject to the Retail IRB Approach
This section provides a detailed analysis, by PD Grade, of credit risk exposures subject to the Retail IRB Approach.
Disclosures provided in the tables below take into account PD floors and LGD floors specified by regulators in respect of the calculation of regulatory capital requirements.
Table 10: Residential mortgages (SME) exposures by PD grade
| June-16 | June-16 | June-16 | June-16 | June-16 | June-16 |
| Credit risk exposure | Exposure weighted average PD | Exposure weighted average LGD1 | Average risk weight | Undrawn commitments (gross) | Undrawn commitments (after CCF) |
| £m | % | % | % | £m | £m |
PD Grade |
|
|
|
|
|
|
0 | − | − | − | − | − | − |
1 | − | − | − | − | − | − |
2 | 4,755 | 0.62% | 16.08% | 11.94% | 501 | 491 |
3 | 2,161 | 1.12% | 17.82% | 19.80% | 147 | 143 |
4 | 1,018 | 1.67% | 18.06% | 26.00% | 53 | 52 |
5 | 894 | 2.62% | 18.58% | 35.24% | 40 | 38 |
6 | 632 | 5.67% | 18.90% | 53.42% | 24 | 23 |
7 | 92 | 8.04% | 18.77% | 66.12% | 1 | 1 |
8 | 378 | 10.61% | 19.81% | 75.50% | 14 | 13 |
9 | 175 | 18.02% | 20.01% | 90.35% | 5 | 5 |
10 | − | - | - | - | - | − |
11 | 68 | 34.10% | 19.79% | 95.14% | 1 | 1 |
12 | 17 | 78.18% | 22.21% | 47.33% | - | − |
Default | 272 | 100.00% | 8.63% | 147.58% | 3 | 3 |
Total | 10,462 | 4.94% | 17.08% | 27.63% | 789 | 770 |
| Dec-15 | Dec-15 | Dec-15 | Dec-15 | Dec-15 | Dec-15 |
| Credit risk exposure | Exposure weighted average PD | Exposure weighted average LGD1 | Average risk weight | Undrawn commitment (gross) | Undrawn commitment (after CCF) |
| £m | % | % | % | £m | £m |
PD Grade |
|
|
|
|
|
|
0 | − | − | − | − | − | − |
1 | − | − | − | − | − | − |
2 | 4,523 | 0.62% | 16.46% | 12.28% | 475 | 464 |
3 | 2,257 | 1.12% | 17.94% | 20.04% | 146 | 142 |
4 | 1,054 | 1.67% | 18.48% | 26.79% | 58 | 56 |
5 | 934 | 2.62% | 18.93% | 36.01% | 39 | 38 |
6 | 616 | 5.67% | 19.32% | 56.39% | 27 | 27 |
7 | 72 | 8.04% | 20.70% | 72.77% | 1 | 1 |
8 | 398 | 10.61% | 20.13% | 76.77% | 16 | 15 |
9 | 198 | 18.02% | 20.84% | 93.75% | 5 | 5 |
10 | − | - | - | - | - | − |
11 | 70 | 34.10% | 20.19% | 98.73% | 1 | 1 |
12 | 20 | 78.18% | 21.92% | 45.43% | − | − |
Default | 375 | 100.00% | 7.91% | 164.85% | 5 | 5 |
Total | 10,517 | 5.98% | 17.35% | 30.56% | 773 | 754 |
Table 11: Residential mortgages (non−SME) exposures by PD grade
| June-16 | June-16 | June-16 | June-16 | June-16 | June-16 |
| Credit risk exposure | Exposure weighted average PD | Exposure weighted average LGD1 | Average risk weight | Undrawn commitments (gross)2 | Undrawn commitments (after CCF) |
| £m | % | % | % | £m | £m |
PD Grade |
|
|
|
|
|
|
0 | 191,947 | 0.11% | 9.43% | 2.86% | 9,032 | 8,617 |
1 | 89,697 | 0.46% | 11.01% | 10.04% | 1,758 | 1,601 |
2 | 17,946 | 1.40% | 13.46% | 23.88% | 196 | 191 |
3 | 6,139 | 2.29% | 15.30% | 35.17% | 43 | 40 |
4 | 7,656 | 3.78% | 18.01% | 51.51% | 170 | 38 |
5 | 3,073 | 6.73% | 19.84% | 78.80% | 2 | 1 |
6 | 2,302 | 14.22% | 14.96% | 79.63% | − | − |
7 | 880 | 17.54% | 14.12% | 91.15% | − | − |
8 | 665 | 24.55% | 15.39% | 102.03% | − | − |
9 | 896 | 33.65% | 11.96% | 80.58% | − | − |
10 | 903 | 43.85% | 12.35% | 83.70% | − | − |
11 | 670 | 58.76% | 12.54% | 73.07% | 2 | 2 |
12 | 909 | 74.42% | 13.53% | 54.42% | − | − |
Default | 4,119 | 100.00% | 14.68% | 74.33% | − | − |
Total | 327,802 | 2.45% | 10.65% | 11.03% | 11,203 | 10,490 |
| Dec-15 | Dec-15 | Dec-15 | Dec-15 | Dec-15 | Dec-15 |
| Credit risk exposure | Exposure weighted average PD | Exposure weighted average LGD1 | Average risk weight | Undrawn commitments (gross)2 | Undrawn commitments (after CCF) |
| £m | % | % | % | £m | £m |
PD Grade |
|
|
|
|
|
|
0 | 187,636 | 0.10% | 9.34% | 2.50% | 8,287 | 7,759 |
1 | 94,669 | 0.47% | 10.96% | 9.49% | 2,038 | 1,931 |
2 | 17,081 | 1.39% | 13.29% | 22.32% | 155 | 150 |
3 | 7,299 | 2.27% | 14.43% | 31.55% | 106 | 106 |
4 | 8,954 | 3.85% | 16.44% | 45.81% | 181 | 43 |
5 | 3,671 | 7.27% | 18.42% | 69.99% | 6 | 5 |
6 | 2,981 | 13.49% | 14.76% | 74.82% | − | − |
7 | 455 | 19.15% | 19.34% | 109.26% | − | − |
8 | 1,066 | 25.06% | 13.68% | 84.77% | − | − |
9 | 988 | 31.89% | 12.54% | 81.54% | − | − |
10 | 938 | 43.64% | 12.84% | 78.48% | − | − |
11 | 830 | 56.80% | 12.93% | 67.77% | 2 | 2 |
12 | 703 | 73.07% | 14.07% | 51.99% | 1 | − |
Default | 4,019 | 100.00% | 14.46% | 61.54% | − | − |
Total | 331,290 | 2.46% | 10.59% | 10.58% | 10,776 | 9,996 |
1 | The 10 per cent LGD floor that applies to residential mortgage exposures is applied at portfolio level rather than at account level. This means that LGD per cent for a given grade can be less than 10 per cent but that for the relevant portfolio cannot. |
2 | Undrawn commitments predominantly relate to pipeline mortgages, offered but not drawn down by the customer. |
Table 12: Qualifying revolving retail exposures by PD grade
| June-16 | June-16 | June-16 | June-16 | June-16 | June-16 |
| Credit risk exposure | Exposure weighted average PD | Exposure weighted average LGD | Average risk weight | Undrawn commitments (gross) | Undrawn commitments (after CCF)1 |
| £m | % | % | % | £m | £m |
PD Grade |
|
|
|
|
|
|
0 | 11,237 | 0.05% | 76.09% | 2.66% | 15,407 | 10,665 |
1 | 9,861 | 0.22% | 75.66% | 9.12% | 14,180 | 8,088 |
2 | 4,601 | 0.58% | 79.41% | 21.13% | 4,541 | 2,997 |
3 | 2,269 | 1.00% | 79.48% | 32.16% | 1,820 | 1,151 |
4 | 3,544 | 1.75% | 79.74% | 48.94% | 2,142 | 1,457 |
5 | 2,229 | 3.32% | 79.84% | 77.77% | 908 | 720 |
6 | 1,882 | 6.16% | 80.70% | 118.65% | 890 | 721 |
7 | 480 | 8.55% | 80.38% | 144.84% | 108 | 119 |
8 | 354 | 11.59% | 80.63% | 172.53% | 66 | 84 |
9 | 219 | 16.56% | 80.60% | 205.94% | 35 | 51 |
10 | 134 | 24.34% | 80.51% | 239.12% | 17 | 28 |
11 | 79 | 36.08% | 80.39% | 258.76% | 9 | 15 |
12 | 96 | 66.61% | 81.23% | 195.97% | 6 | 16 |
Default | 439 | 100.00% | 35.09% | 226.57% | 40 | − |
Total | 37,424 | 2.70% | 77.07% | 32.24% | 40,169 | 26,112 |
| Dec-15 | Dec-15 | Dec-15 | Dec-15 | Dec-15 | Dec-15 |
| Credit risk exposure | Exposure weighted average PD | Exposure weighted average LGD | Average risk weight | Undrawn commitments (gross) | Undrawn commitments (after CCF)1 |
| £m | % | % | % | £m | £m |
PD Grade |
|
|
|
|
|
|
0 | 10,807 | 0.05% | 76.00% | 2.71% | 14,803 | 10,238 |
1 | 9,869 | 0.22% | 76.10% | 9.21% | 13,656 | 8,271 |
2 | 4,220 | 0.57% | 78.41% | 20.64% | 4,583 | 2,715 |
3 | 2,290 | 0.99% | 79.13% | 31.89% | 1,901 | 1,198 |
4 | 3,571 | 1.75% | 79.46% | 48.80% | 2,196 | 1,544 |
5 | 2,345 | 3.33% | 79.58% | 77.57% | 973 | 774 |
6 | 1,675 | 6.03% | 80.59% | 116.86% | 788 | 563 |
7 | 722 | 8.31% | 79.99% | 141.84% | 166 | 255 |
8 | 401 | 11.47% | 80.29% | 170.88% | 74 | 91 |
9 | 234 | 16.39% | 80.45% | 204.68% | 36 | 52 |
10 | 148 | 24.14% | 80.05% | 237.07% | 18 | 30 |
11 | 85 | 36.15% | 79.90% | 257.23% | 10 | 15 |
12 | 108 | 67.90% | 80.82% | 188.61% | 7 | 17 |
Default | 500 | 100.00% | 33.37% | 243.96% | 38 | − |
Total | 36,975 | 2.97% | 76.88% | 33.81% | 39,249 | 25,763 |
1 | Undrawn commitments post credit conversion can exceed the gross undrawn equivalents where there is an assumption that future drawings will be higher than the current limit. |
Table 13: Other SME exposures by PD grade
| June-16 | June-16 | June-16 | June-16 | June-16 | June-16 |
| Credit risk exposure | Exposure weighted average PD | Exposure weighted average LGD | Average risk weight | Undrawn commitments (gross) | Undrawn commitments (after CCF) |
| £m | % | % | % | £m | £m |
PD Grade |
|
|
|
|
|
|
0 | − | − | − | − | − | − |
1 | − | − | − | − | − | − |
2 | 929 | 0.61% | 76.11% | 58.40% | 516 | 516 |
3 | 417 | 1.12% | 76.47% | 66.47% | 142 | 142 |
4 | 228 | 1.67% | 76.87% | 76.96% | 59 | 59 |
5 | 306 | 2.62% | 75.83% | 85.01% | 46 | 46 |
6 | 147 | 5.67% | 78.38% | 95.60% | 29 | 29 |
7 | 72 | 8.04% | 70.89% | 105.65% | 5 | 5 |
8 | 91 | 10.61% | 81.32% | 113.26% | 18 | 18 |
9 | 32 | 18.02% | 79.45% | 137.79% | 4 | 4 |
10 | − | − | − | − | − | − |
11 | 12 | 34.10% | 83.64% | 178.63% | − | − |
12 | 7 | 78.18% | 85.48% | 117.98% | 1 | 1 |
Default | 252 | 100.00% | 9.65% | 46.59% | 4 | 4 |
Total | 2,493 | 12.58% | 69.76% | 70.85% | 824 | 824 |
| Dec-15 | Dec-15 | Dec-15 | Dec-15 | Dec-15 | Dec-15 |
| Credit risk exposure | Exposure weighted average PD | Exposure weighted average LGD | Average risk weight | Undrawn commitments (gross) | Undrawn commitments (after CCF) |
| £m | % | % | % | £m | £m |
PD Grade |
|
|
|
|
|
|
0 | − | − | − | − | − | − |
1 | − | − | − | − | − | − |
2 | 990 | 0.61% | 75.29% | 48.52% | 517 | 517 |
3 | 480 | 1.12% | 75.07% | 65.46% | 148 | 148 |
4 | 249 | 1.67% | 75.94% | 76.44% | 60 | 60 |
5 | 332 | 2.62% | 75.63% | 85.21% | 49 | 49 |
6 | 165 | 5.67% | 76.75% | 94.24% | 30 | 30 |
7 | 72 | 8.04% | 70.76% | 106.61% | 5 | 5 |
8 | 104 | 10.61% | 80.64% | 113.06% | 17 | 17 |
9 | 37 | 18.02% | 80.78% | 141.22% | 4 | 4 |
10 | − | − | − | − | − | − |
11 | 15 | 34.10% | 81.21% | 174.25% | 1 | 1 |
12 | 8 | 78.18% | 86.66% | 119.12% | 1 | 1 |
Default | 209 | 100.00% | 11.21% | 48.63% | 3 | 3 |
Total | 2,661 | 10.43% | 70.63% | 67.91% | 835 | 835 |
Table 14: Other non-SME exposures by PD grade
| June-16 | June-16 | June-16 | June-16 | June-16 | June-16 |
| Credit risk exposure | Exposure weighted average PD | Exposure weighted average LGD | Average risk weight | Undrawn commitments (gross) | Undrawn commitments (after CCF) |
| £m | % | % | % | £m | £m |
PD Grade |
|
|
|
|
|
|
0 | 316 | 0.08% | 34.22% | 7.65% | − | − |
1 | 3,138 | 0.36% | 40.58% | 24.83% | 7 | 1 |
2 | 2,506 | 0.68% | 57.11% | 50.01% | 12 | 2 |
3 | 1,129 | 1.00% | 86.74% | 93.40% | 9 | 2 |
4 | 4,840 | 1.68% | 64.24% | 83.50% | 16 | 3 |
5 | 1,816 | 3.29% | 74.50% | 111.21% | 11 | 2 |
6 | 688 | 5.91% | 72.96% | 116.06% | 4 | 1 |
7 | 145 | 8.86% | 81.53% | 139.53% | 1 | 1 |
8 | 131 | 11.26% | 72.87% | 136.09% | 1 | − |
9 | 93 | 18.00% | 90.77% | 204.58% | 1 | 1 |
10 | 79 | 21.95% | 52.88% | 130.65% | − | − |
11 | 106 | 34.82% | 42.84% | 119.27% | − | − |
12 | 70 | 72.97% | 78.20% | 139.39% | 1 | − |
Default | 294 | 100.00% | 31.31% | 222.57% | − | − |
Total | 15,351 | 4.34% | 60.50% | 75.06% | 63 | 13 |
| Dec-15 | Dec-15 | Dec-15 | Dec-15 | Dec-15 | Dec-15 |
| Credit risk exposure | Exposure weighted average PD | Exposure weighted average LGD | Average risk weight | Undrawn commitments (gross) | Undrawn commitments (after CCF) |
| £m | % | % | % | £m | £m |
PD Grade |
|
|
|
|
|
|
0 | 232 | 0.08% | 34.93% | 7.84% | − | − |
1 | 2,832 | 0.35% | 42.14% | 24.40% | 4 | 1 |
2 | 2,237 | 0.68% | 58.00% | 50.61% | 7 | 1 |
3 | 1,122 | 1.00% | 86.69% | 93.11% | 5 | 1 |
4 | 4,526 | 1.70% | 66.36% | 86.41% | 9 | 2 |
5 | 1,728 | 3.30% | 76.52% | 114.30% | 6 | 1 |
6 | 688 | 5.82% | 76.19% | 120.98% | 3 | 1 |
7 | 174 | 8.82% | 80.60% | 137.67% | 1 | − |
8 | 128 | 11.35% | 75.27% | 140.95% | 1 | − |
9 | 84 | 17.94% | 91.48% | 205.90% | 1 | − |
10 | 66 | 22.00% | 55.27% | 136.61% | − | − |
11 | 98 | 34.91% | 43.77% | 121.90% | − | − |
12 | 75 | 71.81% | 80.23% | 148.34% | − | − |
Default | 341 | 100.00% | 28.29% | 236.37% | − | − |
Total | 14,331 | 4.87% | 62.41% | 79.22% | 37 | 7 |
Corporate Specialised Lending Exposures Subject to Supervisory Slotting
The Group applies the Supervisory Slotting Approach to certain corporate specialised lending exposures (including the Group's commercial real estate exposures).
As at 30 June 2016 corporate specialised lending exposures subject to supervisory slotting amounted to £19.8 billion (31 December 2015: £19.9 billion). Risk-weighted assets arising from this amounted to £14.3 billion (31 December 2015: £14.4 billion) as analysed in the table below.
Table 15: Corporate specialised lending exposures subject to supervisory slotting
| Remaining maturity | Remaining maturity | Remaining maturity | Remaining maturity | ||||
>2.5 years | >2.5 years | |||||||
| June-16 | June-16 | June-16 | June-16 | Dec-15 | Dec-15 | Dec-15 | Dec-15 |
| Exposure | Risk- weighted assets | Exposure | Risk- weighted assets | Exposure | Risk- weighted assets | Exposure | Risk- weighted assets |
Grade | £m | £m | £m | £m | £m | £m | £m | £m |
1) Strong1 | 2,712 | 1,180 | 5,220 | 3,389 | 1,597 | 798 | 6,260 | 3,864 |
2) Good | 2,534 | 1,771 | 5,683 | 5,026 | 2,799 | 1,955 | 4,942 | 4,358 |
3) Satisfactory | 845 | 968 | 1,312 | 1,494 | 912 | 1,045 | 1,596 | 1,822 |
4) Weak | 20 | 48 | 169 | 420 | 5 | 13 | 214 | 531 |
5) Default2 | 930 | − | 411 | − | 1,099 | − | 463 | − |
Total | 7,041 | 3,967 | 12,795 | 10,329 | 6,412 | 3,811 | 13,475 | 10,575 |
1 | The average risk weight percentage in the Strong slotting grade is below the specified regulatory value as a result of exposures to customers which are classed as Strong, typically in the shipping industry, having facilities which have been structured such that the Group also benefits from additional financial collateral from third parties which is not ordinarily part of the security package for Slotting transactions. As a result, recognition of the collateral is applied outside the standard Slotting risk weights, in line with the IRB approach, resulting in a risk weight that is below that ordinarily used in Slotting. |
2 | Exposures categorised as 'default' do not attract a risk weighting but are instead treated as expected loss deductions at a rate of 50 per cent of the exposure value. |
Table 16: Lloyds Banking Group own funds template
| Transitional rules |
| Fully loaded rules | ||||
| At 30 June 2016 |
| At 31 Dec 2015 |
| At 30 June 2016 |
| At 31 Dec 2015 |
| £m |
| £m |
| £m |
| £m |
Common equity tier 1 (CET1) capital: instruments and reserves |
|
|
|
|
|
|
|
Capital instruments and related share premium accounts | 24,558 |
| 24,558 |
| 24,558 |
| 24,558 |
of which: called up share capital | 7,146 |
| 7,146 |
| 7,146 |
| 7,146 |
of which: share premium | 17,412 |
| 17,412 |
| 17,412 |
| 17,412 |
Retained earnings2 | 8,128 |
| 7,755 |
| 8,128 |
| 7,755 |
Accumulated other comprehensive income and other reserves (including unrealised gains and losses) | 12,264 |
| 10,182 |
| 12,264 |
| 10,182 |
Foreseeable dividend | (911) |
| (1,427) |
| (911) |
| (1,427) |
Common equity tier 1 (CET1) capital before regulatory adjustments | 44,039 |
| 41,068 |
| 44,039 |
| 41,068 |
Common equity tier 1 (CET1) capital: regulatory adjustments |
|
|
|
|
|
|
|
Additional value adjustments | (744) |
| (372) |
| (744) |
| (372) |
Intangible assets (net of related tax liability) | (1,627) |
| (1,719) |
| (1,627) |
| (1,719) |
Deferred tax assets that rely on future profitability, excluding those arising from temporary differences (net of related tax liability where the conditions in Article 38 (3) of the CRRare met) | (4,213) |
| (3,874) |
| (4,213) |
| (3,874) |
Fair value reserves related to gains or losses on cash flow hedges | (2,809) |
| (727) |
| (2,809) |
| (727) |
Negative amounts resulting from the calculation of expected loss amounts | - |
| (270) |
| - |
| (270) |
Gains or losses on liabilities valued at fair value resulting from changes in own credit standing | (120) |
| 5 |
| (120) |
| 5 |
Defined benefit pension fund assets | (818) |
| (721) |
| (818) |
| (721) |
Direct and indirect holdings by the Group of own CET1 instruments | (90) |
| (177) |
| (90) |
| (177) |
Direct, indirect and synthetic holdings by the Group of the CET1 instruments of financial sector entities where the Group has a significant investment in those entities (amount above 10% threshold and net of eligible short positions) 2 | (4,287) |
| (4,500) |
| (4,287) |
| (4,500) |
Exposure amount of the following items which qualify for a risk weight of 1,250%, where the Group has opted for the deduction alternative | (220) |
| (169) |
| (220) |
| (169) |
of which: securitisation positions | (220) |
| (169) |
| (220) |
| (169) |
Amount exceeding the 15% threshold | − |
| − |
| (193) |
| (39) |
of which: direct and indirect holdings by the institution of the CET1 instruments of financial sector entities where the institution has a significant investment in those entities | − |
| − |
| (142) |
| (29) |
of which: deferred tax assets arising from temporary differences | − |
| − |
| (51) |
| (10) |
Total regulatory adjustments applied to common equity tier 1 (CET1) | (14,928) |
| (12,524) |
| (15,121) |
| (12,563) |
Common equity tier 1 (CET1) capital 1 | 29,111 |
| 28,544 |
| 28,918 |
| 28,505 |
Table 16: Lloyds Banking Group own funds template (continued)
| Transitional rules |
| Fully loaded rules | ||||
| At 30 June 2016 |
| At 31 Dec 2015 |
| At 30 June 2016 |
| At 31 Dec 2015 |
| £m |
| £m |
| £m |
| £m |
Additional tier 1 (AT1) capital: instruments |
|
|
|
|
|
|
|
Capital instruments and related share premium accounts | 5,355 |
| 5,355 |
| 5,355 |
| 5,355 |
of which: classified as equity under applicable accounting standards | 5,355 |
| 5,355 |
| 5,355 |
| 5,355 |
Amount of qualifying items referred to in Article 484 (4) of the CRR and the related share premium accounts subject to phase out from AT1 | 791 |
| 818 |
| − |
| − |
Qualifying Tier 1 capital included in consolidated AT1 capital (including minority interests not included in CET1) issued by subsidiaries and held by third parties | 2,480 |
| 3,004 |
| − |
| − |
of which: instruments issued by subsidiaries subject tophase out | 2,480 |
| 3,004 |
| − |
| − |
Additional tier 1 (AT1) capital before regulatory adjustments | 8,626 |
| 9,177 |
| 5,355 |
| 5,355 |
|
|
|
|
|
|
|
|
Additional tier 1 (AT1) capital: regulatory adjustments |
|
|
|
|
|
|
|
Residual amounts deducted from AT1 capital with regard to deduction from Tier 2 capital during the transitional period pursuant to Article 475 of the CRR | (1,288) |
| (1,177) |
| − |
| − |
of which: significant investments in Tier 2 instruments of other financial sector entities | (1,288) |
| (1,177) |
| − |
| − |
Total regulatory adjustments applied to additional tier 1 (AT1) capital | (1,288) |
| (1,177) |
| − |
| − |
Additional tier 1 (AT1) capital | 7,338 |
| 8,000 |
| 5,355 |
| 5,355 |
Tier 1 capital | 36,449 |
| 36,544 |
| 34,273 |
| 33,860 |
|
|
|
|
|
|
|
|
Tier 2 (T2) capital: Instruments and provisions |
|
|
|
|
|
|
|
Capital instruments and related share premium accounts | 4,027 |
| 2,134 |
| 4,818 |
| 2,952 |
Amount of qualifying items referred to in Article 484 (5) of the CRR and the related share premium accounts subject to phase out from T2 | 10 |
| 10 |
| − |
| − |
Qualifying own funds instruments included in consolidated T2 capital (including minority interests and AT1 instruments not included in CET1 or AT1) issued by subsidiaries and held by third parties | 9,580 |
| 10,843 |
| 5,065 |
| 6,016 |
of which: instruments issued by subsidiaries subject to phase out | 4,450 |
| 4,763 |
| − |
| − |
Credit risk adjustments | 114 |
| 221 |
| 114 |
| 221 |
Tier 2 (T2) capital before regulatory adjustments | 13,731 |
| 13,208 |
| 9,997 |
| 9,189 |
|
|
|
|
|
|
|
|
Tier (T2) capital: regulatory adjustments |
|
|
|
|
|
|
|
Direct and indirect holdings by the Group of the T2 instruments and subordinated loans of financial sector entities where the Group has a significant investment in those entities (net of eligible short positions) | (1,509) |
| (1,756) |
| (2,797) |
| (2,933) |
Total regulatory adjustments applied to tier 2 (T2) capital | (1,509) |
| (1,756) |
| (2,797) |
| (2,933) |
Tier 2 (T2) capital | 12,222 |
| 11,452 |
| 7,200 |
| 6,256 |
Total capital | 48,671 |
| 47,996 |
| 41,473 |
| 40,116 |
Total risk-weighted assets | 222,778 |
| 222,845 |
| 222,297 |
| 222,747 |
Table 16: Lloyds Banking Group own funds template (continued)
| Transitional rules |
| Fully loaded rules | ||||
| At 30 June 2016 |
| At 31 Dec 2015 |
| At 30 June 2016 |
| At 31 Dec 2015 |
| £m |
| £m |
| £m |
| £m |
Capital ratios and buffers |
|
|
|
|
|
|
|
Common Equity Tier 1(as a percentage of risk exposure amount) | 13.1% |
| 12.8% |
| 13.0% |
| 12.8% |
Tier 1 (as a percentage of risk exposure amount) | 16.4% |
| 16.4% |
| 15.4% |
| 15.2% |
Total capital (as a percentage of risk exposure amount) | 21.8% |
| 21.5% |
| 18.7% |
| 18.0% |
Institution specific buffer requirement (CET1 requirement in accordance with article 92(1)(a) plus capital conservation and countercyclical buffer requirements, plus systemic risk buffer, plus the systemically important institution buffer (G-SII or O-SII buffer), expressed as a percentage of risk exposure amount) | 0.628% |
| 0.001% |
| 0.628% |
| 0.001% |
of which: capital conservation buffer requirement3 | 0.625% |
| − |
| 0.625% |
| − |
of which: countercyclical buffer requirement | 0.003% |
| 0.001% |
| 0.003% |
| 0.001% |
Common Equity Tier 1 available to meet buffers (as a percentage of risk exposure amount)1 | 8.6% |
| 8.3% |
| 8.5% |
| 8.3% |
|
|
|
|
|
|
|
|
Amounts below the threshold for deduction(before risk weighting) |
|
|
|
|
|
|
|
Direct and indirect holdings of the capital of financial sector entities where the Group does not have a significant investment in those entities (amount below 10% threshold and net of eligible short positions) | 1,379 |
| 1,552 |
| 1,379 |
| 1,552 |
Direct and indirect holdings by the Group of the CET1 instruments of financial sector entities where the Group has a significant investment in those entities (amount below 10% threshold and net of eligible short positions) | 3,340 |
| 3,127 |
| 3,340 |
| 3,127 |
Deferred tax assets arising from temporary differences (amount below 10% threshold, net of related tax liability where the conditions in 38 (3) are met) | 1,191 |
| 1,188 |
| 1,191 |
| 1,188 |
Applicable caps on the inclusion of provisions in Tier 2 |
|
|
|
|
|
|
|
Credit risk adjustments included in T2 in respect of exposures subject to internal ratings-based approach (prior to the application of the cap) | 114 |
| 221 |
| 114 |
| 221 |
Cap on inclusion of credit risk adjustments in T2 under internal ratings-based approach | 958 |
| 953 |
| 958 |
| 953 |
|
|
|
|
|
|
|
|
Capital instruments subject to phase−out arrangements (only applicable between 1 Jan 2013 and 1 Jan 2022) |
|
|
|
|
|
|
|
Current cap on AT1 instruments subject to phase out arrangements | 3,305 |
| 3,856 |
| − |
| − |
Amount excluded from AT1 due to cap (excess over cap after redemptions and maturities) | 1,861 |
| 671 |
| − |
| − |
Current cap on T2 instruments subject to phase out arrangements | 8,600 |
| 10,034 |
| − |
| − |
1 | Excluding CET1 required to meet Pillar 2A requirements under fully loaded. |
2 | The presentation of the deconsolidation of the Group's insurance entities has been amended at June 2016 with comparative figures restated accordingly. |
3 | The capital conservation buffer requirement is the percentage applicable at the reporting date. This will increase to 2.5 per cent by 2019. |
Table 17: Lloyds Banking Group leverage ratio common disclosure
| At 30 June 2016 |
| At 31 Dec 2015 |
| Fully loaded |
| Fully loaded |
| £m |
| £m |
On-balance sheet exposures (excluding derivatives and SFTs) |
|
|
|
On-balance sheet items (excluding derivatives, SFTs and fiduciary assets,but including collateral) | 626,734 |
| 609,110 |
Asset amounts deducted in determining Tier 1 capital | (10,627) |
| (9,112) |
Total on-balance sheet exposures (excluding derivatives, SFTs and fiduciary assets) | 616,107 |
| 599,998 |
Derivative exposures |
|
|
|
Replacement cost associated with all derivatives transactions (i.e. net of eligible cash variation margin) | 9,923 |
| 6,392 |
Add-on amounts for PFE associated with all derivatives transactions (mark-to-market method) | 13,050 |
| 12,966 |
Gross-up for derivatives collateral provided where deducted from the balance sheet assets pursuant to the applicable accounting framework | 762 |
| 2,371 |
Deductions of receivables assets for cash variation margin provided in derivatives transactions | (3,527) |
| (3,689) |
Adjusted effective notional amount of written credit derivatives | 857 |
| 813 |
Adjusted effective notional offsets and add-on deductions for written credit derivatives | (158) |
| (131) |
Total derivative exposures | 20,907 |
| 18,722 |
Securities financing transaction exposures |
|
|
|
Gross SFT assets (with no recognition of netting), after adjusting for sales accounting transactions | 38,586 |
| 39,604 |
Netted amounts of cash payables and cash receivables of gross SFT assets | (3,356) |
| (5,909) |
Counterparty credit risk exposure for SFT assets | 1,793 |
| 3,361 |
Total securities financing transaction exposures | 37,023 |
| 37,056 |
Other off-balance sheet exposures |
|
|
|
Off-balance sheet exposures at gross notional amount | 129,834 |
| 129,491 |
Adjustments for conversion to credit equivalent amounts | (69,961) |
| (73,067) |
Other off-balance sheet exposures | 59,873 |
| 56,424 |
Capital and total exposure measure |
|
|
|
Tier 1 capital | 34,273 |
| 33,860 |
Leverage ratio total exposure measure | 733,910 |
| 712,200 |
Leverage ratio |
|
|
|
Leverage ratio | 4.7% |
| 4.8% |
Table 18: Lloyds Banking Group summary reconciliation of accounting assets and leverage ratio exposures
| At 30 June 2016 |
| At 31 Dec 2015 |
| Fully loaded |
| Fully loaded |
| £m |
| £m |
Total assets as per published financial statements | 848,232 |
| 806,688 |
Adjustment for entities which are consolidated for accounting purposes but are outside the scope of regulatory consolidation | (140,421) |
| (135,926) |
Adjustments for derivative financial instruments | (23,587) |
| (9,235) |
Adjustments for securities financing transactions (SFTs) | 440 |
| 3,361 |
Adjustment for off-balance sheet items (i.e. conversion to credit equivalent amounts ofoff-balance sheet exposures) | 59,873 |
| 56,424 |
Other adjustments | (10,627) |
| (9,112) |
Leverage ratio total exposure measure | 733,910 |
| 712,200 |
CONTACTS
For further information please contact:
INVESTORS AND ANALYSTS
Douglas Radcliffe
Group Investor Relations Director
020 7356 1571
douglas.radcliffe@finance.lloydsbanking.com
Mike Butters
Director of Investor Relations
020 7356 1187
mike.butters@finance.lloydsbanking.com
Andrew Downey
Director of Investor Relations
020 7356 2334
andrew.downey@finance.lloydsbanking.com
CORPORATE AFFAIRS
Ed Petter
Group Media Relations Director
020 8936 5655
ed.petter@lloydsbanking.com
Matt Smith
Head of Corporate Media
020 7356 3522
matt.smith@lloydsbanking.com
Registered office: Lloyds Banking Group plc, The Mound, Edinburgh, EH1 1YZ
Registered in Scotland no. 95000