bank-r-and-a

Overview Strategic report Corporate governance Risk management Financial statements Other information
Capital management continued
For the year ended 31 December 2013
All the amounts are stated in £m unless otherwise indicated
Capital ratios and risk-weighted assets Unaudited
31 December
2013
Restated
31 December
2012
Capital ratios
Core Tier 1 ratio 9.2% 7.4%
Tier 1 ratio 9.3% 8.1%
Total capital ratio 10.1% 12.8%
Risk-weighted assets
Credit risk 12,734.6 15,974.8
Market risk 2.4 492.6
Operational risk 1,255.2 1,441.3
Total risk-weighted assets 13,992.2 17,908.7
Segmental analysis of credit risk risk-weighted assets
Core
Retail 2,268.1 2,410.1
BaCB 988.4 1,274.1
Treasury/other 1,141.0 1,342.4
4,397.5 5,026.6
Non-core
Corporate CoAM 4,524.2 6,587.0
Optimum 3,661.6 4,188.2
Illius 151.3 173.0
8,337.1 10,948.2
Total credit risk risk-weighted assets 12,734.6 15,974.8
Core Tier 1 ratio has increased to 9.2% from 7.4% as at 31 December 2012. This is primarily due to a £3,916m (22%) decrease in risk-weighted assets.
The increase in Core Tier 1 reflects:
• £738.2m regulatory loss after tax, including £688.3m profit arising from the Liability Management Exercise;
• £400.2m reduction in permanent share capital, due to cancellation of shares and issuance of new share capital;
• £1,040.7m increase in share premium arising from the issuance of new share capital;
• £151.8m reduction in intangibles deduction, primarily due to £148.4m write-off; and
• £112.2m reduction in excess of expected loss over impairments.
Additional Tier 1 has reduced from £60.0m to zero following The Co-operative Group acquiring the Bank’s preference shares and waiving any rights to income
and capital in respect of the preference shares as part of the LME. All Tier 2 subordinated notes and perpetual subordinated bonds as at 31 December 2012
have also been redeemed. £206.0m (£196.3m after costs) of new Tier 2 capital was issued as part of the LME.
The reduction in risk-weighted assets is primarily due to a 30% (£2.3bn) reduction in corporate Non-core and BaCB risk-weighted assets. The change is driven
by asset sales and the reassessment of the carrying value of corporate real estate exposures. Slotting models are used to analyse and monitor specialised
lending exposures to property which are assigned to PRA supervisory categories with predefined risk weights. A significant proportion of loans have been
downgraded with many moving into default. Loans in default have a zero risk-weight (but a 50% expected loss).
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The Co-operative Bank plc Annual report and accounts 2013