bank-r-and-a

Recommendations

Info

Overview Strategic report Corporate governance Risk management Financial statements Other information Notes to the Company financial statements continued For the year ended 31 December 2013 All amounts are stated in £m unless otherwise indicated 27. Fair values of financial assets and liabilities continued Equity shares Equity shares primarily relate to investments held in Vocalink Limited which are unquoted shares. The valuation of these shares is based on the Company’s percentage shareholding and the net asset value of the Company according to its most recently published financial statements. Amounts owed to Co-operative Bank undertakings Amounts owed to Co-operative Bank undertakings are to the Silk Road Finance Number One plc (Silk Rd 1) subsidiary, relating to the legal transfer of loans and advances on securitisation. The amounts are fair valued to eliminate an accounting mismatch of the swap derivative discussed below. Revaluation of the £1,466.4m (2012: £1,764.4m) mortgage pool from carrying to fair value is based on assumed timing of future mortgage capital and revenue receipts, discounted to present value using a credit adjusted discount rate. The amortisation profile is based on a redemption profile, assuming some annual prepayment, which is extended to the earlier of the mortgage maturity date or the step-up date, the earliest contractual maturity of the debt securities in issue when the balance outstanding on the notes may be repaid, this falls on 21 March 2015. Similarly, the revenue receipts are calculated based on the redemption profile, but extended until the earlier of the mortgage maturity date or the step-up date. For fixed rate mortgages, revenue receipts are based on fixed customer rates within the assumed amortisation profile. For tracker, SVR and discount products, revenue receipts are assumed to be based on forward Bank of England base rates plus the product margins. Fixed and tracker mortgages are assumed to revert to SVR at the end of any offer period. All mortgages in the mortgage pool were originated pre 31 December 2007. Derivative financial instruments Derivative financial instruments in the form of interest rate swaps have been entered into between the Bank and its subsidiaries, and external counterparties. The purpose of the swaps is to convert the fixed and base rate linked revenue receipts of the pool of mortgage assets to the same LIBOR linked basis as the intercompany loan. Under this swap arrangement the Bank’s subsidiaries pay to the swap counterparty, the monthly mortgage revenue receipts of the pool of assets and receives from the swap counterparty LIBOR plus a contractual spread on the same notional balance; the spread being sufficient to cover the intercompany loan and any expenses. The Bank has a ‘back to back’ swap that is the mirror image of the subsidiaries’ swaps. The swaps are valued based on an assumed amortisation profile of the pool of assets to the bond maturity date (assuming some annual prepayment), an assumed profile of customer receipts over this period, and LIBOR prediction using forward rates. Swap cash flows are discounted to present value using mid-yield curve zero coupon rates, ie no adjustment is made for credit losses, nor for transaction or any other costs. In addition derivative liabilities include a credit default swap. The credit default swap balance has arisen, as on 28 January 2013, the Company entered into a transaction to transfer a mezzanine portion of the risk in a portfolio of residential mortgage loans to third party investors, via a special purpose vehicle, Calico Finance Number One Limited. The valuation takes on market MBS spreads, less the original traded spread multiplied by the notional, and the duration, then discounted. These spreads include the probability of default. Investment properties Investment properties are carried at fair value. Fair value is calculated by using recent valuations of individual assets within the portfolio, index linked to the balance sheet date using the relevant regional house price index, where appropriate. The Co-operative Bank plc Annual report and accounts 2013 257
Overview Strategic report Corporate governance Risk management Financial statements Other information Notes to the Company financial statements continued For the year ended 31 December 2013 All amounts are stated in £m unless otherwise indicated 27. Fair values of financial assets and liabilities continued Movements in fair values of instruments with significant unobservable inputs (level 3) were: Fair value at the beginning of the year Purchases and transfers in Sales and transfers out Income or expense including impairment Fair value at the end of the year 2013 Loans and advances to customers 11.2 – (1.7) (0.8) 8.7 Derivative assets 10.9 – (0.6) 0.3 10.6 Derivative liabilities (12.9) (58.2) – (5.0) (76.1) Amounts owed to Co-operative Bank undertakings (1,764.4) – 299.7 (1.7) (1,466.4) Investment properties 1.8 – – 0.1 1.9 (1,753.4) (58.2) 297.4 (7.1) (1,521.3) 2012 Loans and advances to customers 12.4 – – (1.2) 11.2 Derivative assets 9.5 – – 1.4 10.9 Derivative liabilities (9.9) – – (3.0) (12.9) Amounts owed to Co-operative Bank undertakings (2,130.6) – 361.8 4.4 (1,764.4) Investment properties – 0.9 – 0.9 1.8 (2,118.6) 0.9 361.8 2.5 (1,753.4) c) Fair values of financial assets and liabilities not carried at fair value The carrying values of financial assets and liabilities measured at amortised cost are determined in compliance with the accounting policies in note 1 to the Bank financial statement. The table below sets out a summary of the carrying and fair values of: • financial assets classified as loans and receivables; and • financial liabilities classified as held at amortised cost, unless there is no significant difference between carrying and fair values. Carrying value Fair value 2013 Financial assets Loans and receivables Loans and advances to banks 579.9 579.9 Loans and advances to customers 20,184.0 18,726.8 Fair value adjustments for hedged risk 107.6 107.6 Investment securities 83.1 93.3 Amounts owed by Co-operative Bank undertakings 11,886.8 11,445.8 Other assets 470.0 470.0 Financial liabilities Financial liabilities at amortised cost Deposits by banks 2,863.3 2,863.1 Customer accounts 31,185.9 31,210.9 Debt securities in issue 1,504.2 1,523.4 Other borrowed funds 196.3 234.2 Amounts owed to Co-operative Bank undertakings 4,487.9 4,486.7 258 The Co-operative Bank plc Annual report and accounts 2013
Page 1 and 2:
The Co-operative Bank plc Annual re
Page 3 and 4:
Overview Strategic report Corporate
Page 5 and 6:
Page 7 and 8:
Page 9 and 10:
Page 11 and 12:
Page 13 and 14:
Page 15 and 16:
Page 17 and 18:
Page 19 and 20:
Page 21 and 22:
Page 23 and 24:
Page 25 and 26:
Page 27 and 28:
Page 29 and 30:
Page 31 and 32:
Page 33 and 34:
Page 35 and 36:
Page 37 and 38:
Page 39 and 40:
Page 41 and 42:
Page 43 and 44:
Page 45 and 46:
Page 47 and 48:
Page 49 and 50:
Page 51 and 52:
Page 53 and 54:
Page 55 and 56:
Page 57 and 58:
Page 59 and 60:
Page 61 and 62:
Page 63 and 64:
Page 65 and 66:
Page 67 and 68:
Page 69 and 70:
Page 71 and 72:
Page 73 and 74:
Page 75 and 76:
Page 77 and 78:
Page 79 and 80:
Page 81 and 82:
Page 83 and 84:
Page 85 and 86:
Page 87 and 88:
Page 89 and 90:
Page 91 and 92:
Page 93 and 94:
Page 95 and 96:
Page 97 and 98:
Page 99 and 100:
Page 101 and 102:
Page 103 and 104:
Page 105 and 106:
Page 107 and 108:
Page 109 and 110:
Page 111 and 112:
Page 113 and 114:
Page 115 and 116:
Page 117 and 118:
Page 119 and 120:
Page 121 and 122:
Page 123 and 124:
Page 125 and 126:
Page 127 and 128:
Page 129 and 130:
Page 131 and 132:
Page 133 and 134:
Page 135 and 136:
Page 137 and 138:
Page 139 and 140:
Page 141 and 142:
Page 143 and 144:
Page 145 and 146:
Page 147 and 148:
Page 149 and 150:
Page 151 and 152:
Page 153 and 154:
Page 155 and 156:
Page 157 and 158:
Page 159 and 160:
Page 161 and 162:
Page 163 and 164:
Page 165 and 166:
Page 167 and 168:
Page 169 and 170:
Page 171 and 172:
Page 173 and 174:
Page 175 and 176:
Page 177 and 178:
Page 179 and 180:
Page 181 and 182:
Page 183 and 184:
Page 185 and 186:
Page 187 and 188:
Page 189 and 190:
Page 191 and 192:
Page 193 and 194:
Page 195 and 196:
Page 197 and 198:
Page 199 and 200:
Page 201 and 202:
Page 203 and 204:
Page 205 and 206:
Page 207 and 208: Overview Strategic report Corporate
Page 257: Overview Strategic report Corporate
Page 277: The Co-operative Bank plc Registere
show all

bank-r-and-a

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?