The Royal Bank of Scotland Group plc ("RBSG", together with its subsidiaries, the "Group") is the holding company of a large global banking and financial services group. Headquartered in Edinburgh, the Group operates in the United Kingdom, the United States and internationally through its two principal subsidiaries, The Royal Bank of Scotland plc ("RBS") and National Westminster Bank Plc ("NatWest").
Both RBS and NatWest are major UK clearing banks whose origins go back over 275 years. In the United States, the Group's subsidiary Citizens was ranked the tenth-largest commercial banking organisation by deposits at 30 June 2008. The Group has a large and diversified customer base and provides a wide range of products and services to personal, commercial and large corporate and institutional customers in over 50 countries.
The Group had total assets of £1,948.7 billion and owners' equity of £61.6 billion at 30 June 2008. The Group's capital ratios, which included the equity minority interest of Fortis Bank Nederland and Santander in ABN AMRO, were a total capital ratio of 13.2 per cent., a core Tier 1 capital ratio of 6.7 per cent. and a Tier 1 capital ratio of 9.1 per cent., as at 30 June 2008.
On 17 October 2007, RFS Holdings B.V. ("RFS Holdings"), a company jointly owned by RBSG, Fortis Bank Nederland (Holding) N.V. and Banco Santander S.A. (the "Consortium Banks") and controlled by RBSG, completed the acquisition of ABN AMRO Holding N.V. ("ABN AMRO"). RFS Holdings is in the process of implementing an orderly separation of the business units of ABN AMRO, with RBSG principally retaining ABN AMRO's global wholesale businesses and international retail businesses in Asia and the Middle East. Certain other assets will continue to be shared by the Consortium Banks.
On 3 October 2008, the Dutch government acquired Fortis Bank Nederland (Holding) N.V. including Fortis’ participation in RFS Holdings that represents the acquired activities of ABN AMRO.
Regional Markets
Regional Markets is organised around the provision of retail and commercial banking to customers in four regions: the United Kingdom, the United States, Europe and the Middle East and Asia. This includes the provision of wealth management services both in the United Kingdom and internationally.
UK Retail & Commercial Banking
This comprises retail, commercial and corporate banking, and wealth management services in the United Kingdom. It supplies financial services through both the RBS and NatWest brands.
UK Retail Banking offers a full range of banking products and related financial services to the personal market. It serves customers through the largest network of branches and ATMs in the United Kingdom, and also through telephone and internet channels. Together, RBS and NatWest hold the joint number one position in personal current accounts. The division also issues credit and charge cards, including through other brands such as MINT.
UK Business & Commercial Banking is the largest provider of banking, finance, and risk management services to the SME sector in the United Kingdom. It offers a full range of banking products and related financial services through a nationwide network of relationship managers, and also through telephone and internet channels. The product range includes asset finance, in which it is the market leader through the Lombard brand.
UK Corporate Banking holds the largest market share in the United Kingdom of relationships with larger companies, offering a full range of banking, finance, and risk management services.
UK Wealth Management provides private banking and investment services through Coutts, Adam & Co., RBS International and NatWest Offshore.
US Retail & Commercial Banking
Citizens Financial Group provides financial services through the Citizens and Charter One brands as well as through Kroger Personal Finance, its credit card joint venture with the second-largest US supermarket group.
Citizens is engaged in retail and corporate banking activities through its branch network in 13 states in the United States and through non-branch offices in other states. Citizens was ranked the tenth-largest commercial banking organisation in the United States based on deposits as at 30 June 2008.
Europe & Middle East Retail & Commercial Banking
This comprises Ulster Bank and the Group's combined retail and commercial businesses in Europe and the Middle East.
Ulster Bank, including First Active, provides a comprehensive range of financial services across the island of Ireland. Its retail banking arm has a network of branches and operates in the personal, commercial and wealth management sectors, while its corporate markets operations provide services in the corporate and institutional markets.
The retail and commercial businesses in Europe and the Middle East offer services in Romania, Kazakhstan and the United Arab Emirates.
Asia Retail & Commercial Banking
Asia Retail & Commercial Banking holds prominent market positions in India, Pakistan, China and Taiwan, as well as presences in Hong Kong, Indonesia, Malaysia and Singapore. It provides financial services across four segments: affluent banking, cards and consumer finance, business banking and international wealth management, which offers private banking and investment services to clients in selected markets through the RBS Coutts brand.
Global Markets
Global Markets is focused on the provision of debt and equity financing, risk management and transaction banking services to large businesses and financial institutions in the United Kingdom and around the world. Its activities have been organised into two divisions, Global Banking & Markets ("GBM") and Global Transaction Services, in order best to serve RBSG's customers whose financial needs are global.
GBM is a leading banking partner to major corporations and financial institutions around the world, providing an extensive range of debt and equity financing, risk management and investment services to its customers. The expanded division is organised along the following four principal business lines:
• Rate, Currencies and Commodities provides risk management, sales and trading activities in G11 and non-G11 (Local Markets) currencies/jurisdictions across this broad set of asset classes. Key product offerings include spot FX, local markets trading, short-term markets and financing, inflation products, swaps and bonds (G11) and covered bonds, interest rate and currency options and hybrids and prime brokerage and futures. This business line also includes RBS Sempra Commodities LLP, the commodities-marketing joint venture between RBS and Sempra Energy formed on 1 April 2008. Under the joint venture, RBS Sempra Commodities LLP purchased Sempra Commodities. RBSG's initial equity investment in the joint venture was US$1.7 billion and RBSG will continue to provide any additional funding required for the ongoing operating expenses of the businesses.
• Equities provides a full range of origination, trading and distribution of cash and derivative products. The business provides a multi-product approach operating through a wide range of channels with an emphasis on revenue diversification. Key product offerings include equity origination, corporate broking, core equities sales and trading, equity derivatives sales and trading, equity financing and collateral trading.
• Credit Markets offers a full range of origination, trading and distribution activities on a global basis for clients across all sectors. Key product offerings include corporate and structured debt capital markets, financial institutions debt capital markets, leveraged finance, real estate finance, project finance, financial structuring and credit trading.
• Asset and Portfolio Management manages the lending portfolio and other assets of GBM and some third parties, ensuring efficient management of capital, credit and liquidity via portfolio management and global markets treasury. Key fund product offerings include fund of funds
structures, multimanager strategies, private equity and credit funds, other core products are equity finance and asset finance (covering shipping and aviation).
Global Transaction Services ranks among the top five global transaction services providers, offering global payments, cash and liquidity management, as well as trade finance, UK and international merchant acquiring and commercial card products and services. It includes the Group's corporate money transmission activities in the United Kingdom and the United States.
RBS Insurance
RBS Insurance sells and underwrites retail and SME insurance over the telephone and internet, as well as through brokers and partnerships. Its brands include Direct Line, Churchill, Privilege, Green Flag and NIG. Direct Line, Churchill and Privilege sell general insurance products direct to the customer.
Through its international division, RBS Insurance sells general insurance, mainly motor, in Spain, Germany and Italy. The Intermediary and Broker division sells general insurance products through independent brokers.
Group Manufacturing
Group Manufacturing comprises the Group's worldwide manufacturing operations. It supports the Group's customer-facing businesses and provides operational technology, customer support in telephony, account management, lending and money transmission, global purchasing, property and other services.
Global Manufacturing drives efficiencies and supports income growth across multiple brands and channels by using a single, scalable platform and common processes wherever possible. It also leverages the Group's purchasing power and has become the centre of excellence for managing large-scale and complex change.
The Centre
The Centre comprises group and corporate functions, such as capital raising, finance, risk management, legal, communications and human resources. The Centre manages the Group's capital resources and Group-wide regulatory projects and provides services to the Group's operating divisions.
Tesco Personal Finance
On 28 July 2008, RBSG announced that it had agreed to sell its 50% shareholding in Tesco Personal Finance ("TPF") to its joint venture partner, Tesco plc for a cash consideration of £950 million, subject to transaction adjustments. As part of this transaction, RBSG will continue to provide certain commercial services to TPF post completion. The sale is subject to regulatory approvals and completion is expected to take place before the end of December 2008.
Board changes
On 1 October 2008, Stephen Hester, John McFarlane and Arthur Ryan were appointed non-executive directors of RBSG. Johnny Cameron stepped down from the RBSG Board on 13 October 2008 and Mark Fisher stepped down as a director on 21 November. Sir Fred Goodwin stepped down from the Board on 21 November 2008 and was replaced as Group Chief Executive by Stephen Hester, who also became an executive director. Lawrence Fish will retire as a non-executive director on 31 December 2008 and Sir Tom McKillop will retire as Chairman and Charles Koch will retire as a non-executive director at the Annual General Meeting of RBSG to be held in April 2009.
Madoff Investment Securities
The Group has announced that it has exposure through trading and collateralised lending to funds of hedge funds invested with Bernard L Madoff Investment Securities LLC. If as a result of the alleged fraud the value of the assets of these hedge funds is nil, RBS's potential loss could amount to approximately £400 million.
Recent Events
On 8 October 2008, the UK government announced measures intended, inter alia, to provide sufficient
Credit Guarantee Scheme
Following its announcement on 8 October 2008 referred to above, on 13 October 2008 the UK government announced a credit guarantee scheme for bank and building society debt issuance (the
"Scheme"). RBS applied to take part in the Scheme and was named as an initial eligible institution in the Rules of the 2008 Credit Guarantee Scheme issued by the treasury on 13 October 2008. Under the Scheme, the treasury, at the request of RBS, will provide an unconditional and irrevocable direct guarantee which ensures timely payment of non-complex, senior and unsecured debt instruments issued by RBS of a term of not more than three years.
Capital Raising
On 4 November 2008, RBSG announced a placing and open offer of £15 billion at a fixed price of 65.5p per ordinary share. As a result, the treasury now owns approximately 57.9 per cent. of the enlarged issued ordinary share capital of RBSG.
In addition, the treasury subscribed for £5 billion of non-cumulative preference shares in RBSG.
RBS
RBS will perform the following roles in connection with the issuance of the notes:
• sponsor;
• originator;
• servicer;
• trust cash manager;
• originator beneficiary;
• lender under the expenses loan agreement and loan note issuing entity expenses loan agreement;
• swap counterparty (unless specified otherwise in the relevant final terms); and
• dealer and arranger.
The short-term unsecured and unguaranteed debt obligations of RBS are currently rated A–1+ by Standard & Poor's, P–1 by Moody's and F1+ by Fitch Ratings and the long-term unsecured and unguaranteed debt obligations of RBS are currently rated AA– by Standard & Poor's, Aa1 by Moody's and AA– by Fitch Ratings.
NatWest
NatWest will perform the following roles in connection with the issuance of the notes:
• originator; and
• originator beneficiary.
Use of Securitisation as a Source of Funding
RBS has been securitising its own credit card receivables since 2000 when Arran One Limited and Arran Two Limited were established. The securities issued by Arran One Limited and Arran Two Limited have been redeemed in full.
The Arran Funding Limited US$7.5 billion medium term note programme was established on 10 November 2005. Two series of notes (series 2005-A and series 2005-B) were issued pursuant to the medium term programme on 15 December 2005 and one series of notes (series 2007-A) was issued pursuant to the medium term note programme on 1 February 2007. Series 2005-A was redeemed on 15 December 2008. As at the date of this base prospectus, series 2005-B and series 2007-A remain
outstanding. In total, RBS has completed five securitisation transactions in which an aggregate initial principal amount in excess of US$7 billion (equivalent) have been issued.
NatWest acceded to the receivables trust on 27 October 2005, having not previously sponsored any securitisation of its credit card receivables.
The notes will not be obligations of the group, RBS, NatWest or any of their affiliates.
AFFILIATIONS AND CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS