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Notes to the Bank financial statements continued
For the year ended 31 December 2013
All amounts are stated in £m unless otherwise indicated
41. Fair values of financial assets and liabilities continued
Covered Bond Limited Liability Partnerships
Moorland Covered Bonds LLP was established as a result of a £1.4bn covered bond retained issuance. Loans and advances to customers of £1.9bn were
transferred to Moorland Covered Bonds LLP. The transfer was funded by a loan of £1.4bn and capital contribution of £0.5bn. During October 2011 the £1.4bn
loan was repaid. Following additional capital contribution repayment and on achieving Regulated Covered Bond status there was a public issuance of notes in
November 2011 totalling £0.6bn. As a result of these changes, at the year end the Bank held a loan of £0.6bn (2012: £0.6bn) and a capital contribution of
£0.9bn (2012: £1.2bn) with Moorland Covered Bonds LLP.
Moorland Covered Bonds LLP does not have ordinary share capital. The Bank’s interest in Moorland Covered Bonds LLP is in substance no different from a
wholly owned subsidiary and consequently it is fully consolidated in the Bank accounts. The table below shows the carrying values and fair values of the assets
transferred to the covered bond and their associated liabilities:
Carrying amount
of transferred
loans and
advances to
customers
Carrying amount
of fixed
and floating
rate notes
Fair value of
transferred loans
and advances to
customers
Fair value
of fixed
and floating
rate notes
Net position
2013
Moorland Covered Bonds LLP 1,448.8 596.1 1,417.9 628.4 789.5
The following table provides the fair value of the transferred assets and associated liabilities recalculated on the basis of the new methodology applied in 2013.
Carrying amount
of transferred
loans and
advances to
customers
Carrying amount
of fixed
and floating
rate notes
Fair value of
transferred loans
and advances to
customers
Fair value
of fixed
and floating
rate notes
Net position
2012 – applying 2013 fair value methodology
Moorland Covered Bonds LLP 1,808.4 595.7 1,782.9 693.8 1,089.1
Carrying amount
of transferred
loans and
advances to
customers
Carrying amount
of fixed
and floating
rate notes
Fair value of
transferred loans
and advances to
customers
Fair value
of fixed
and floating
rate notes
Net position
2012 – as per published report and accounts
Moorland Covered Bonds LLP 1,808.4 595.7 1,835.8 693.8 1,142.0
Assets pledged
Assets are pledged as collateral under repurchase agreements with other banks. These deposits are not available to finance the Bank’s day to day operations.
Carrying amount
of assets not
derecognised
Carrying amount
of associated
liabilities
Fair value of
assets not
derecognised
Fair value of
associated
liabilities
Net position
2013
Investment securities sold under repurchase agreements 1,004.4 1,028.3 1,022.5 1,028.3 (5.8)
Carrying amount
of assets not
derecognised
Carrying amount
of associated
liabilities
Fair value of
assets not
derecognised
Fair value of
associated
liabilities
Net position
2012
Investment securities sold under repurchase agreements 1,907.4 1,830.9 1,907.7 1,827.5 80.2
Associated liabilities are included within deposits by banks.
The Bank has loans and advances to banks of £nil (2012: £250.0m) under reverse sale and repurchase agreements and against which gilts are held with a fair
value of £nil (2012: £250.4m). These transactions are conducted under terms that are usual and customary to standard stock lending, securities borrowing and
reverse purchase agreements. The Bank is permitted to sell or repledge the assets received as collateral in the absence of their default. The Bank is obliged to
return equivalent securities. At 31 December 2013 the fair value of collateral repledged amounted to £nil (2012: £250.4m). The Bank does not adjust for the fair
value of securities received under reverse sale and repurchase agreements.
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The Co-operative Bank plc Annual report and accounts 2013