Capital resources
The following table analyses the Group’s regulatory capital resources at 31 December:
| 2006 £m |
2005 £m |
2004 £m |
2003 £m |
2002 £m |
|
| Capital base | |||||
| Tier 1 capital | 30,041 | 28,218 | 22,694 | 19,399 | 17,155 |
| Tier 2 capital | 27,491 | 22,437 | 20,229 | 16,439 | 13,271 |
| 57,532 | 50,655 | 42,923 | 35,838 | 30,426 | |
| Less: investments in insurance subsidiaries, associated | |||||
| undertakings and other supervisory deductions | (10,583) | (7,282) | (5,165) | (4,618) | (3,146) |
| Total capital | 46,949 | 43,373 | 37,758 | 31,220 | 27,280 |
| Risk-weighted assets | |||||
| Banking book: | |||||
| On-balance sheet | 318,600 | 303,300 | 261,800 | 214,400 | 193,800 |
| Off-balance sheet | 59,400 | 51,500 | 44,900 | 36,400 | 28,700 |
| Trading book | 22,300 | 16,200 | 17,100 | 12,900 | 11,500 |
| 400,300 | 371,000 | 323,800 | 263,700 | 234,000 | |
| Risk asset ratios | % | % | % | % | % |
| Tier 1 | 7.5 | 7.6 | 7.0 | 7.4 | 7.3 |
| Total | 11.7 | 11.7 | 11.7 | 11.8 | 11.7 |
Note: The comparative data for 2002 to 2004 in the table above are under UK GAAP as previously published and regulated. As from 1 January 2005, the Group was regulated on an IFRS basis.
It is the Group’s policy to maintain a strong capital base, to expand it as appropriate and to utilise it efficiently throughout its activities to optimise the return to shareholders while maintaining a prudent relationship between the capital base and the underlying risks of the business. In carrying out this policy, the Group has regard to the supervisory requirements of the Financial Services Authority (“FSA”). The FSA uses Risk Asset Ratio (“RAR”) as a measure of capital adequacy in the UK banking sector, comparing a bank’s capital resources with its risk-weighted assets (the assets and off-balance sheet exposures are ‘weighted’ to reflect the inherent credit and other risks); by international agreement, the RAR should be not less than 8% with a tier 1 component of not less than 4%. At 31 December 2006, the Group’s total RAR was 11.7% (2005 – 11.7%) and the tier 1 RAR was 7.5% (2005 – 7.6%).
© 2007