Annual Report
and Accounts 2007

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• Presentation of information
• Forward–looking statements
• Description of business
• Competition
• Risk factors
• Financial highlights
• Summary consolidated income statement
• Analysis of results
• Divisional performance
• Consolidated balance sheet
• Cash flow
• Capital resources
• Risk and capital management
  • Governance
  • Risk and capital
  • Credit risk
  • Liquidity risk
  • Market risk
  • Insurance risk
  • Operational risk
  • Regulatory risk and supervision

Risk and capital management

Governance

The Group Board of directors sets the overall risk appetite and philosophy; the risk and capital framework underpins delivery of the Board's strategy. The Board is supported by three committees:

• Group Audit Committee (“GAC”), comprising independent non-executive directors, focuses on financial reporting and application of accounting policies as part of the internal control and risk assessment framework. GAC monitors the identification, evaluation and management of all significant risks throughout the Group. This work is supported by Group Internal Audit, which provides an independent assessment of the design, adequacy and effectiveness of internal controls.
• Advances Committee (“AC”), reporting to the Board, deals with transactions that exceed the Group Credit Committee's delegated authority.
• Group Executive Management Committee (“GEMC”), an executive committee, ensures that implementation of strategy and operations are in line with the agreed risk appetite. GEMC is supported by the following:

• – Group Risk Committee (“GRC”) recommends and approves limits, processes and policies that ensure the effective management of all material non-balance sheet risks across the Group.
• – Group Credit Committee (“GCC”) approves credit proposals under authority delegated to it by the Board and/or Advances Committee.
• – Group Asset and Liability Management Committee (“GALCO”) is responsible for identifying, managing and controlling the Group balance sheet risks. These risks are managed by setting limits and controls for capital adequacy, funding and liquidity, intra-group exposures, and non-trading interest rate, equity and foreign currency risk.