Capital resources

The following table analyses the Group's regulatory capital resources at 31 December:

2007
£m		 2006
£m		 2005
£m		 2004
£m		 2003
£m
Capital base
Tier 1 capital 44,364 30,041 28,218 22,694 19,399
Tier 2 capital 33,693 27,491 22,437 20,229 16,439
Tier 3 capital 200 – – – –
78,257 57,532 50,655 42,923 35,838
Less: investments in insurance subsidiaries, associated
undertakings and other supervisory deductions (10,283) (10,583) (7,282) (5,165) (4,618)
Total capital 67,974 46,949 43,373 37,758 31,220
         
Risk-weighted assets
Banking book:
On-balance sheet 480,200 318,600 303,300 261,800 214,400
Off-balance sheet 84,600 59,400 51,500 44,900 36,400
Trading book 44,200 22,300 16,200 17,100 12,900
609,000 400,300 371,000 323,800 263,700
         
Risk asset ratios % % % % %
Tier 1 7.3 7.5 7.6 7.0 7.4
Total 11.2 11.7 11.7 11.7 11.8

Note: The comparative data for 2003 and 2004 in the table above are under UK GAAP as previously published and regulated. As from 1 January 2005, the Group is 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 2007, the Group's total RAR was 11.2% (2006 – 11.7%) and the tier 1 RAR was 7.3% (2006 – 7.5%).