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Risk management continued
For the year ended 31 December 2013
All amounts are stated in £m unless otherwise indicated
1. Credit risk continued
Audited
31 December 2013 31 December 2012
Exposure Collateral
Impairment
provision Exposure Collateral
Impairment
provision
Corporate CoAM
Non-default loans with ≤1 year until refinancing
and all defaulted exposures regardless of term
Less than 50% 53.9 51.7 2.2 46.5 46.3 0.1
50% to 60% 90.9 69.1 21.7 74.9 74.5 0.4
60% to 70% 107.8 107.0 0.8 136.4 133.8 2.6
70% to 80% 135.0 130.6 4.5 112.5 112.5 –
80% to 90% 104.1 85.6 18.4 69.9 68.1 1.8
90% to 100% 48.2 34.8 13.4 102.7 78.0 24.7
Greater than 100% 1,155.0 687.4 452.9 1,336.8 909.8 337.5
Unsecured 73.6 – 60.5 212.7 – 67.4
1,768.5 1,166.2 574.4 2,092.4 1,423.0 434.5
Non-default loans with > 1 year until refinancing
and all non–loan non-defaulted exposures
regardless of term
Less than 50% 115.0 115.0 – 142.9 142.9 –
50% to 60% 283.7 283.7 – 253.2 253.2 –
60% to 70% 372.7 372.7 – 502.3 502.3 –
70% to 80% 137.9 137.9 – 324.4 324.4 –
80% to 90% 47.9 47.9 – 148.5 148.5 –
90% to 100% 22.0 22.0 – 96.4 96.4 –
Greater than 100% 55.2 19.9 – 227.5 169.9 –
Unsecured 30.7 – – 81.4 – –
1,065.1 999.1 – 1,776.6 1,637.6 –
2,833.6 2,165.3 574.4 3,869.0 3,060.6 434.5
In the table, collateral is constrained to a maximum of 100% of the exposure to each customer to correctly reflect the maximum protection available to the Bank.
There are two cases in the 50-60% LTV band which have had significant impairment provisions applied against them. In one case the provision represents the
loss of key rental income combined with swap break costs, in the other the anticipated final losses on completion of the sale of the property.
As at 31 December 2013, £59.3m (2012: £50.0m) of the above are not held as first charge.
Impairment
Corporate customers are placed on a watchlist and treated as impaired when they show signs of unsatisfactory performance and require close monitoring.
Strong indicators that a customer should be placed on watchlist include but are not limited to:
• unsatisfactory account operation – both lending facility and current accounts;
• considerable reduction in value of collateral;
• deteriorating balance sheet position and/or material losses/cashflow pressures;
• breach of covenants;
• refinance risk at maturity;
• application of forbearance strategies; and
• business performance is assessed to have deteriorated to the extent that there is a real risk of loss of principal, interest or fees.
After a period of satisfactory performance, and dependent on the Bank’s agreement that the triggers which led to inclusion on the watchlist no longer apply,
customers may be removed from the watchlist.
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The Co-operative Bank plc Annual report and accounts 2013