Virgin Money UK : Interim Pillar 3 Disclosures

Interim Pillar 3 Disclosures

2024

Q2 2024 Pillar 3 report

Introduction	1
Annex I: Key metrics and overview of risk weighted exposure amounts
Table 1: UK KM1 - Key metrics	2
Table 2: UK KM2 - Key metrics - MREL	3
Table 3: IFRS 9/Article 468 - Impact of IFRS 9 transitional arrangements and temporary	4
treatment in accordance with CRR Article 468
Table 4: UK OV1 - Overview of Risk weighted exposure amounts	5
Annex VII: Own funds
Table 5: UK CC1 - Composition of regulatory own funds	6
Table 6: UK CC2 - Reconciliation of regulatory own funds to balance sheet in the audited	8
financial statements
Annex IX: Countercyclical capital buffers
Table 7: UK CCyB1 - Geographical distribution of credit exposures relevant for the	9
calculation of the countercyclical buffer
Table 8: UK CCyB2 - Amount of institution-specific countercyclical capital buffer	9
Annex XI: Leverage Ratio
Table 9: UK LR1 - LRSum - Summary reconciliation of accounting assets and leverage ratio	10
exposures
Table 10: UK LR2 - LRCom - Leverage ratio common disclosure	11
Table 11: UK LR3 - LRSpl - Split-up of on balance sheet exposures (excluding derivatives,	12
SFTs and exempted exposures)
Annex XIII: Liquidity requirements
Table 12: UK LIQ1 - Quantitative information on LCR	13
UK LIQB - Qualitative information on LCR	14
Table 13: UK LIQ2 - Net Stable Funding Ratio	15
Annex XV: Credit risk quality
Table 14: UK CR1 - Performing and non-performing exposures and related provisions	19
Table 15: UK CR1-A - Maturity of exposures	21
Table 16: UK CR2 - Changes in the stock of non-performing loans and advances	21
Table 17: UK CQ1 - Credit quality of forborne exposures	22
Table 18: UK CQ5 - Credit quality of loans and advances to non-financial corporations by	23
industry
Annex XVII: Credit risk mitigation (CRM) techniques
Table 19: UK CR3 - Disclosure of the use of credit risk mitigation techniques	25
Annex XIX: Standardised approach
Table 20: UK CR4 - Standardised approach: Credit risk exposure and CRM effects	26
Table 21: UK CR5 - Standardised approach	27
Annex XXI: IRB approach to credit risk
UK CR6 - IRB approach - Credit risk exposures by exposure class and PD range	28
Table 22: Clydesdale Bank PLC Retail Mortgages - (AIRB) Retail Secured by Immovable	28
Property non-SME

Table 23: Virgin Money Retail Mortgages - (AIRB) Retail Secured by Immovable Property	30
non-SME
Table 24: Clydesdale Bank PLC Business Lending - (FIRB) Corporates: Business	32
Table 25: Clydesdale Bank PLC Corporates - Other - (FIRB) Corporates: Other	34
Table 26: UK CR7-A - IRB approach: Disclosure of the extent of the use of CRM techniques	36
- AIRB
Table 27: UK CR7-A - IRB approach: Disclosure of the extent of the use of CRM techniques	37
- FIRB
Table 28: UK CR8 - RWA flow statements of credit risk exposures under the IRB approach	38
Annex XXIII: Specialised lending
Table 29: UK CR10.2 - Specialised lending and equity exposures under the simple risk	39
weighted approach - Specialised lending: Income-producing real estate and high volatility
commercial real estate (Slotting approach)
Annex XXV: Counterparty credit risk
Table 30: UK CCR1 - Analysis of CCR exposure by approach	40
Table 31: UK CCR2 - Transactions subject to own funds requirements for CVA risk	40
Table 32: UK CCR3 - Standardised approach: CCR exposures by regulatory exposure class	41
and risk weights
Table 33: UK CCR8 - Exposures to CCPs	41
Annex XXVII: Securitisation positions
Table 34: UK SEC1 - Securitisation exposures in the non-trading book	42
Table 35: UK SEC5 - Exposures securitised by the institution: Exposures in default and	42
specific credit risk adjustments
Annex XXXVII: Interest rate risk in the banking book (IRRBB)
Table 36: UK IRRBB1 - Quantitative information on IRRBB	43
Appendix 1: Disclosures for CB Group consolidated
Table 37: UK KM1 - Key metrics	44
Table 38: UK KM2 - Key metrics - MREL	45
Table 39: IFRS 9/Article 468 - Impact of IFRS 9 transitional arrangements and temporary	46
treatment in accordance with CRR Article 468
Table 40: UK OV1 - Overview of Risk weighted exposure amounts	47
Table 41: UK CC1 - Composition of regulatory own funds	48
Table 42: UK CC2 - Reconciliation of regulatory own funds to balance sheet in the audited	50
financial statements
Table 43: UK LR1 - LRSum - Summary reconciliation of accounting assets and leverage	52
ratio exposures
Table 44: UK LR2 - LRCom - Leverage ratio common disclosure	53
Table 45: UK LR3 - LRSpl - Split-up of on balance sheet exposures (excluding derivatives,	54
SFTs and exempted exposures)
Appendix 2: Glossary	55
Appendix 3: Abbreviations	59

Introduction

FORWARD-LOOKING STATEMENTS

This report and any other written or oral material discussed or distributed in connection with the Pillar 3 disclosures (the "Information") has been produced to meet the regulatory requirements of Virgin Money UK PLC ('Virgin Money' or 'the Company'), together with its subsidiary undertakings (which comprise 'the Group') and is for information only, and should not be regarded as an investment or research recommendation, or any form of investment or business advice. You should not place reliance on the Information when taking any business, legal or other types of decisions/actions.

The Information may include forward looking statements, which are based on assumptions, expectations, valuations, targets and estimates about future events. These can be identified by the use of words such as 'expects', 'aims', 'targets', 'seeks', 'anticipates', 'plans', 'intends', 'prospects' 'outlooks', 'projects', 'forecasts', 'believes', 'estimates', 'potential', 'possible', and similar words or phrases. These forward looking statements are subject to risks, uncertainties and assumptions about the Group and its securities, investments and the environment in which it operates, including, among other things, the development of its business and strategy, any acquisitions, combinations, disposals or other corporate activity undertaken by the Group, trends in its operating industry, changes to customer behaviours and covenant, macroeconomic and/or geopolitical factors, the repercussions of the outbreak of coronaviruses (including but not limited to the COVID-19 pandemic), changes to its board and/ or employee composition, exposures to terrorist activity, IT system failures, cyber- crime, fraud and pension scheme liabilities, risks relating to environmental matters such as climate change including the Group's ability along with the government and other stakeholders to measure, manage and mitigate the impacts of climate change effectively, changes to law and/or the policies and practices of the Bank of England, the Financial Conduct Authority and/or other regulatory and governmental bodies, inflation, deflation, interest rates, exchange rates, tax and national insurance rates, changes in the liquidity, capital, funding and/ or asset position and/or credit ratings of the Group, future capital expenditures and acquisitions, the repercussions

of the UK's exit from the European Union (EU) (including any change to the UK's currency and the terms of any trade agreements (or lack thereof) between the UK and the EU), Eurozone instability, Russia's invasion of

Ukraine, the conflict in the Middle East, any referendum on Scottish independence, and any UK or global cost of living crisis or recession.

These forward-looking statements involve inherent risks and uncertainties and should be viewed as hypothetical. The events they refer to may not occur as expected and other events not taken into account may occur which could significantly affect the analysis of the statements. No member of the Group or their respective directors, officers, employees, agents, advisers, or affiliates (each a "VMUK Party") gives any representation, warranty or assurance that any such events, projections or estimates will occur or be realised, or that actual returns or other results will not be materially lower than those expected.

Whilst every effort has been made to ensure the accuracy of the Information, no VMUK Party takes any responsibility for the Information or to update or revise it. They will not be liable for any loss or damages incurred through the reliance on or use of it. The Information is subject to change. No representation or warranty, express or implied, as to the truth, fullness, fairness, merchantability, accuracy, sufficiency, or completeness of the Information is given.

The Information does not constitute or form part of, and should not be construed as, any public offer under any applicable legislation or an offer to sell or solicitation of any offer to buy any securities or financial instruments or any advice or recommendation with respect to such securities or other financial instruments. The distribution of the Information in certain jurisdictions may be restricted by law. Recipients are required to inform themselves about and to observe any such restrictions. No liability is accepted in relation to the distribution or possession of the Information in any jurisdiction.

No statement in the Information is intended as a profit forecast, profit estimate or quantified benefit statement for any period and no statement in the Information should be interpreted to mean that earnings per share for the Company for the current or future financial years would necessarily match or exceed the historical published earnings or earnings per share for the Company or the Group.

BASIS OF PRESENTATION

This report presents the consolidated half-year Pillar 3 disclosures of the Group as at 31 March 2024 and should be read in conjunction with the Virgin Money UK PLC 2024 Interim Financial Report, available from: www.virginmoneyukplc.com/investor-relations/results-and-reporting/financial-results.

The Group is regulated under UK Capital Requirements Regulation (CRR) and the associated binding technical standards that were created by the European Union (Withdrawal) Act 2018. The CRR has subsequently been amended by a number of statutory instruments and is split across the Prudential Regulatory Authority (PRA) rulebook and primary legislation.

These disclosures are prepared and presented in accordance with the Disclosure (CRR) part of the PRA Rulebook, which includes revised disclosure requirements applicable from 1 January 2022, following the UK implementation of the remaining provisions of CRR II. Any references to the EU regulations and directives

should, as applicable, be read as references to the UK's version of the respective regulation, as onshored into

UK law under the European Union (Withdrawal) Act 2018.

The Group has assessed itself as a 'Large' institution and in accordance with the criteria set out within Article 433a of the PRA rulebook, reports a subset of Pillar 3 disclosures on a quarter and interim period-end basis with full disclosure on an annual basis.

The numbers presented within this report are on a consolidated basis, with Virgin Money UK PLC numbers shown in the body of the report. Consolidated numbers specifically relating to Clydesdale Bank PLC and its subsidiaries are shown in Appendix 1, which aligns with the Disclosure (CRR) part of the PRA Rulebook to report ring-fenced bodies at a sub-consolidated level.

These disclosures have been subject to internal verification and are reviewed by the Board and Disclosure Committee. The disclosures have not been, and are not required to be, subject to independent external audit.

Capital and leverage ratios reported include profits for the period that have been externally verified, less foreseeable dividends.

Certain figures contained in this report may have been subject to rounding adjustments and foreign exchange conversions. Accordingly, in certain instances, the sum or percentage change of the numbers contained in this report may not conform exactly to the total figure given.

Comparative figures are reported to give insight into movements during the period. Where disclosures are new, or have been significantly changed, we do not generally restate or provide prior period comparatives. Where specific rows and columns in the tables prescribed by the PRA are not applicable or are immaterial to our activities, we omit them and follow the same approach for comparative disclosure.

TEMPLATES NOT DISCLOSED

Specific Pillar 3 templates are required to be disclosed on a semi-annual basis and these are included within this report. A subset of the Pillar 3 templates that are required to be disclosed on a semi-annual basis were not applicable to the Group at 31 March 2024 and therefore have not been included in this report, please refer to the 2023 Pillar 3 Disclosures for further details.

Article 432 of the PRA Rulebook on non-material, proprietary or confidential information permits institutions to omit one or more disclosures if the information provided by such a disclosure is not regarded as material. No disclosures have been omitted on the basis of them being regarded as proprietary, confidential or not material.

1

Annex I: Disclosure of key metric and overview of risk weighted exposure amounts

Table 1: UK KM1 - Key metrics

The table below provides a summary of the main prudential regulation ratios and measures.

A	B	C	D	E
31 Mar 2024	31 Dec 2023	30 Sept 2023	30 June 2023	31 Mar 2023
£m	£m	£m	£m	£m

	Available own funds (amounts)
1	Common Equity Tier 1 (CET1) capital	3,731	3,522	3,711	3,637	3,627
2	Tier 1 capital	4,566	4,357	4,305	4,231	4,221
3	Total capital	5,339	5,130	5,327	5,253	5,242
	Risk-weighted exposure amounts
4	Total risk-weighted exposure amount	25,581	25,458	25,176	24,898	24,703
	Capital ratios (as a percentage of risk-weighted exposure amount) (%)
5	Common Equity Tier 1 ratio	14.6%	13.8%	14.7%	14.6%	14.7%
6	Tier 1 ratio	17.8%	17.1%	17.1%	17.0%	17.1%
7	Total capital ratio	20.9%	20.2%	21.2%	21.1%	21.2%
	Additional own funds requirements based on Supervisory Review and Evaluation Process	(SREP) (as a	percentage of risk-weighted exposure amount) (%)
UK-7a	Additional CET1 SREP requirements	1.9%	1.9%	1.7%	1.7%	1.7%
UK-7b	Additional AT1 SREP requirements	0.6%	0.6%	0.6%	0.6%	0.6%
UK-7c	Additional T2 SREP requirements	0.9%	0.9%	0.7%	0.7%	0.7%
UK-7d	Total SREP own funds requirements	11.4%	11.4%	11.0%	11.0%	11.0%
	Combined buffer requirement (as a percentage of risk-weighted exposure amount) (%)
8	Capital conservation buffer	2.5%	2.5%	2.5%	2.5%	2.5%
9	Institution specific countercyclical capital buffer	2.0%	2.0%	2.0%	1.0%	1.0%
UK-10a	Other Systemically Important Institution buffer(1)	0.0%	0.0%	0.0%	0.0%	0.0%
11	Combined buffer requirement	4.5%	4.5%	4.5%	3.5%	3.5%
UK-11a	Overall capital requirements	15.9%	15.9%	15.5%	14.5%	14.5%
12	CET1 available after meeting the total SREP own funds requirements	8.2%	7.4%	8.5%	8.4%	8.5%
	Leverage ratio(2)(4)
13	Total exposure measure excluding claims on central banks	85,720	86,624	86,554	86,052	86,464
14	Leverage ratio excluding claims on central banks (%)	5.3%	5.0%	5.0%	4.9%	4.9%
	Additional leverage ratio disclosure requirements (%)
UK-14a	Fully loaded Expected Credit Loss (ECL) accounting model leverage ratio excluding claims on	5.3%	4.9%	4.9%	4.8%	4.8%
	central banks
UK-14b	Leverage ratio including claims on central banks	4.7%	4.6%	4.5%	4.4%	4.4%
UK-14c	Average leverage ratio excluding claims on central banks	5.1%	4.9%	4.9%	4.8%	4.7%
UK-14d	Average leverage ratio including claims on central banks	4.6%	4.4%	4.4%	4.3%	4.3%
UK-14e	Countercyclical leverage ratio buffer	0.7%	0.7%	0.7%	0.4%	0.4%

2

Annex I: Disclosure of key metric and overview of risk weighted exposure amounts

Table 1: UK KM1 - Key metrics (continued)
				B	C	D	E
			A
			31 Mar 2024	31 Dec 2023	30 Sept 2023	30 June 2023	31 Mar 2023
		£m	£m	£m	£m	£m
		Liquidity Coverage Ratio(3)
15		Total high-quality liquid assets (HQLA) (Weighted value average)	14,135	13,988	13,798	13,381	12,542
UK-16a		Cash outflows - Total weighted value	9,957	9,887	9,933	9,875	9,573
UK-16b		Cash inflows - Total weighted value	570	540	509	528	553
16		Total net cash outflows (adjusted value)	9,387	9,347	9,424	9,347	9,020
17		Liquidity coverage ratio (%)	151%	150%	146%	143%	139%
		Net Stable Funding Ratio (NSFR)
18		Total available stable funding	79,175	78,895	79,218	79,096	78,035
19		Total required stable funding	58,385	58,317	58,346	58,247	57,943
20		NSFR ratio (%)	136%	135%	136%	136%	135%

1. On 29 November 2022 the Group was formally designated as an O-SII but is not currently required to hold a related capital buffer.
2. The average leverage exposure measure (excluding claims on central banks) for the period from 1 January 2024 to 31 March 2024 amounted to £86,214m.
3. Liquidity balances are calculated as the simple averages of month-end observations over the 12 months preceding the reporting date.
4. The comparative figures include a restatement to qualifying central bank claims which have been adjusted to exclude unencumbered note cover and payment system collateral balances.

Table 2: UK KM2 - Key metrics - MREL

Under the Bank Recovery and Resolution Directive the Group is required to hold additional loss-absorbing instruments to support an effective resolution. The minimum requirements for own funds and eligible liabilities (MREL) establishes a minimum amount of equity and eligible debt to recapitalise the Group. An analysis of the Group's current MREL position is provided below:

		A	B	C	D	E
		31 Mar 2024	31 Dec 2023	30 Sept 2023	30 June 2023	31 Mar 2023
		£m	£m	£m	£m	£m
1	Total capital resources(1)	5,339	5,130	5,327	5,253	5,242
2	Eligible senior unsecured securities issued by Virgin Money UK PLC	3,333	2,708	2,707	2,401	2,420
3	Total MREL resources	8,672	7,838	8,034	7,654	7,662
4	Total risk weighted assets	25,581	25,458	25,176	24,898	24,703
5	Total MREL resources available as a percentage of total risk weighted assets (%)	33.9%	30.8%	31.9%	30.7%	31.0%
6	UK leverage exposure measure(2)	85,720	86,624	86,554	86,052	86,464
7	Total MREL resources available as a percentage of UK leverage exposure measure (%)(2)	10.1%	9.0%	9.3%	8.9%	8.9%

1. The capital position reflects the application of the transitional arrangements for IFRS 9.
2. The comparative figures include a restatement to qualifying central bank claims which have been adjusted to exclude unencumbered note cover and payments system collateral balances.

3

Annex I: Disclosure of key metric and overview of risk weighted exposure amounts

Table 3: IFRS 9/Article 468 - Impact of IFRS 9 transitional arrangements and temporary treatment in accordance with CRR Article 468

The following table shows the capital, RWA and leverage positions with and without the application of transitional arrangements for IFRS 9 or analogous ECLs.

			A		B		C	D	E
			31 Mar 2024		31 Dec 2023		30 Sept 2023	30 June 2023	31 Mar 2023
			£m		£m		£m	£m	£m
	Available capital (£m)
1	Common Equity Tier 1 (CET1) capital		3,731		3,522		3,711	3,637	3,627
2	CET1 capital as if IFRS 9 or analogous ECLs transitional arrangements had not been applied		3,693		3,439		3,599	3,541	3,537
3	Tier 1 capital		4,566		4,357		4,305	4,231	4,221
4	Tier 1 capital as if IFRS 9 or analogous ECLs transitional arrangements had not been applied		4,528		4,274		4,193	4,135	4,131
5	Total capital		5,339		5,130		5,327	5,253	5,242
6	Total capital as if IFRS 9 or analogous ECLs transitional arrangements had not been applied		5,301		5,047		5,215	5,157	5,152
	Risk-weighted assets (£m)
7	Total risk-weighted assets		25,581		25,458		25,176	24,898	24,703
8	Total risk-weighted assets as if IFRS 9 or analogous ECLs transitional arrangements had not		25,551		25,393		25,087	24,822	24,632
	been applied
	Capital ratios (%)
9	CET1 (as a percentage of risk exposure amount)		14.6%		13.8%		14.7%	14.6%	14.7%
10	CET1 (as a percentage of risk exposure amount) as if IFRS 9 or analogous ECLs transitional		14.5%		13.5%		14.3%	14.3%	14.4%
	arrangements had not been applied
11	Tier 1 (as a percentage of risk exposure amount)		17.8%		17.1%		17.1%	17.0%	17.1%
12	Tier 1 (as a percentage of risk exposure amount) as if IFRS 9 or analogous ECLs transitional		17.7%		16.8%		16.7%	16.7%	16.8%
	arrangements had not been applied
13	Total capital (as a percentage of risk exposure amount)		20.9%		20.2%		21.2%	21.1%	21.2%
14	Total capital (as a percentage of risk exposure amount) as if IFRS 9 or analogous ECLs		20.7%		19.9%		20.8%	20.8%	20.9%
	transitional arrangements had not been applied
	Leverage ratio
15	Leverage ratio total exposure measure (£m)		85,720		86,624		86,554	86,052	86,464
16	Leverage ratio (%)		5.3%		5.0%		5.0%	4.9%	4.9%
17	Leverage ratio as if IFRS 9 or analogous ECLs transitional arrangements had not been		5.3%		4.9%		4.9%	4.8%	4.8%
	applied (%)

Transitional arrangements in CRR mean the regulatory capital impact of ECL is being phased in over time. Following the CRR Quick Fix amendments package, which applied from 27 June 2020, relevant provisions raised from 1 January 2020 through to 2024 have a CET1 add-back percentage of 50% in 2023, reducing to 25% in 2024. From 1 January 2025, the Group will no longer apply transitional relief in respect of IFRS 9. At 31 March 2024, £38m of IFRS 9 transitional adjustments (FY23: £112m) have been applied to the Group's capital position in accordance with CRR, which is entirely comprised of dynamic relief (FY23: £3m static and £109m dynamic).

4

Annex I: Disclosure of key metric and overview of risk weighted exposure amounts

Table 4: UK OV1 - Overview of Risk weighted exposure amounts

The table below shows RWAs and minimum capital requirement by risk type and approach(1). Total own funds requirements are calculated as 8% of RWAs.

		A	B	C
		Risk weighted exposure amounts	Total own funds
		(RWAs)		requirements
		31 Mar 2024		31 Dec 2023	31 Mar 2024
		£m		£m	£m
1	Credit risk (excluding CCR)	22,391		22,301	1,790
2	of which: the standardised approach	6,692		6,657	534
3	of which: the foundation IRB (FIRB) approach	6,774		6,494	542
4	of which: slotting approach	479		399	38
5	of which: the advanced IRB (AIRB) approach	8,446		8,751	676
6	Counterparty credit risk - CCR	357		324	29
7	of which: the standardised approach	154		159	13
UK-8a	of which: exposures to a Central Counterparty (CCP)	5		6	-
UK-8b	of which: credit valuation adjustment - CVA	198		159	16
23	Operational risk	2,833		2,833	227
UK-23b	of which: standardised approach	2,833		2,833	227
24	Amounts below the thresholds for deduction (subject to 250%	289		300	23
	risk weight) (For information)
29	Total	25,581		25,458	2,046

1. The Group's Pillar 1 capital requirement for market risk is set to zero, therefore no figures are disclosed.

RWAs stayed relatively stable in the period, increasing by £123m (0.5%) to £25,581m.

5

Annex VII: Own Funds

Table 5: UK CC1 - Composition of regulatory own funds		30 Sept 2023
		31 Mar 2024
		£m	£m	Ref(1):
	CET1 capital: instruments and reserves
1	Capital instruments and the related share premium accounts	140	143	f
	of which: ordinary shares	130	134	g
	of which: share premium	10	9	h
2	Retained earnings	3,011	3,342	o+q+s
3	Accumulated other comprehensive income (and other reserves)	1,452	1,370	j+k+l+n+u+v
UK-5a	Independently reviewed interim profits net of any foreseeable charge or dividend	178	117	p+r+t
6	CET1 capital before regulatory adjustments	4,781	4,972
	CET1 capital: regulatory adjustments
7	Additional value adjustments (negative amount)	(6)	(5)
8	Intangible assets (net of related tax liability) (negative amount)	(150)	(173)	a
10	Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of related tax liability	(245)	(261)	b
	where the conditions in Article 38 (3) CRR are met) (negative amount)
11	Fair value reserves related to gains or losses on cash flow hedges of financial instruments that are not valued at fair value	(250)	(496)	l
12	Negative amounts resulting from the calculation of expected loss amounts	(101)	(103)
15	Defined-benefit pension fund assets (negative amount)	(331)	(333)	c - e
16	Direct, indirect and synthetic holdings by an institution of own CET1 instruments (negative amount)	(5)	(2)	m
UK-27a	Other regulatory adjustments to CET1 capital (including IFRS 9 transitional adjustments when relevant)	38	112
28	Total regulatory adjustments to CET1	(1,050)	(1,261)
29	CET1 capital	3,731	3,711
	Additional Tier 1 (AT1) capital: instruments
30	Capital instruments and the related share premium accounts	835	594
31	of which: classified as equity under applicable accounting standards	835	594	i
44	AT1 capital	835	594
45	Tier 1 capital (T1 = CET1 + AT1)	4,566	4,305
	Tier 2 (T2) capital: instruments
46	Capital instruments and the related share premium accounts	773	1,022	d
58	Tier 2 (T2) capital	773	1,022
59	Total capital (TC = T1 + T2)	5,339	5,327
60	Total Risk exposure amount	25,581	25,176
	Capital ratios and buffers
61	Common Equity Tier 1 (as a percentage of total risk exposure amount)	14.6%	14.7%
62	Tier 1 (as a percentage of total risk exposure amount)	17.8%	17.1%
63	Total capital (as a percentage of total risk exposure amount)	20.9%	21.2%
64	Institution CET1 overall capital requirement (CET1 requirement in accordance with Article 92(1) CRR, plus additional CET1	10.9%	10.7%
	requirement which the institution is required to hold in accordance with point (a) of Article 104(1) Capital Requirements Directive
	(CRD), plus combined buffer requirement in accordance with Article 128(6) CRD) expressed as % risk exposure amount)
	6

Annex VII: Own Funds

Table 5: UK CC1 - Composition of regulatory own funds (continued)
			30 Sept 2023
		31 Mar 2024
		£m	£m	Ref(1):
65	of which: capital conservation buffer requirement	2.5%	2.5%
66	of which: countercyclical buffer requirement	2.0%	2.0%
67	of which: systemic risk buffer requirement	0.0%	0.0%
UK-67a	of which: Global Systemically Important Institution (G-SII) or Other Systemically Important Institution (O-SII) buffer	0.0%	0.0%
68	Common Equity Tier 1 available to meet buffers (as a percentage of risk exposure amount)(2)	8.2%	8.5%
	Amounts below the thresholds for deduction (before risk weighting)
75	Deferred tax assets arising from temporary differences (amount below 17.65% threshold, net of related tax liability where the	116	118
	conditions in Article 38 (3) CRR are met)
	Applicable caps on the inclusion of provisions in Tier 2
77	Cap on inclusion of credit risk adjustments in T2 under standardised approach	86	82
79	Cap for inclusion of credit risk adjustments in T2 under internal ratings-based approach	94	93

1. Shows cross reference to the balance sheet under regulatory scope of consolidation in Table UK CC2.
2. Represents the CET1 ratio after deducting Pillar 1 and 2A requirements.

Common Equity Tier 1

The Group's CET1 capital showed an increase of £20m during the period, with the CET1 ratio (IFRS 9 transitional basis) remaining stable at 14.6% (FY23: 14.7%).

The Group reported a profit after tax of £236m. The capital benefits of this increase were utilised to fund AT1 distributions of £26m, a foreseeable dividend of £26m and share buyback. In November 2023, a £150m share buyback programme was announced with £63m returned to shareholders before the programme was formally cancelled on 2 April due to the potential cash acquisition of the Group by Nationwide. The reduction in standardised IFRS 9 provisions recognised in the period, together with a tapering of relief, reduced the IFRS 9 transitional adjustments by £74m. Other main movements included reductions in the intangible assets balance of £23m and in the deferred tax recognised on tax losses carried forward of £16m, offset by £12m market driven movements in the reserves balance for assets held at fair value.

Total capital and minimum requirements for own funds and eligible liabilities (MREL)

The total capital ratio remained broadly stable at 20.9% (FY23: 21.2%) and the MREL ratio (IFRS 9 transitional basis) when expressed as a percentage of RWAs increased to 33.9% (FY23 31.9%)

or 10.1% when expressed as a percentage of Leverage exposures (FY23: 9.3%).

The Group's MREL position represents prudent headroom of £1.7bn or 6.6% above the binding loss-absorbing capacity (LAC) requirement of 27.3% of RWAs, or 2.0% above the binding LAC requirement of 8.2% when expressed as a percentage of Leverage exposures. Given the surplus to LAC requirements and having refinanced its redemptions in FY24, the Group is not planning any MREL or capital issuance over the remainder of the year, subject to the acquisition process.

7

Annex VII: Own Funds

Table 6: UK CC2 - Reconciliation of regulatory own funds to balance sheet in the financial statements

The following table shows the Group's consolidated accounting and regulatory balance sheets as at 31 March 2024, with references to show linkages to UK CC1.

		A	B
		Balance sheet as
		in published	Under regulatory
		financial	scope of
		statements	consolidation(1)
	As at 31 March 2024	£m	£m	Ref:
	Assets
1	Financial instruments at amortised
	cost
2	Loans and advances to customers	72,344	72,339
3	Cash and balances with central	12,930	12,930
	banks
4	Due from other banks	592	595
5	At FVOCI	5,764	5,764
6	At FVTPL
7	Loans and advances to customers	57	57
8	Derivatives	44	44
9	Other	2	2
10	Intangible assets and goodwill	150	150	a
11	Deferred tax	266	266
12	of which: tax losses carried forward	247	245	b
13	Defined benefit pensions assets	442	442	c
14	Other assets	442	438
15	Total assets	93,033	93,027
	Liabilities
16	Financial instruments at amortised
	cost
17	Customer deposits	68,663	68,658
18	Debt securities in issue	9,968	9,968
19	of which: Tier 2 instruments	773	773	d
20	Due to other banks	6,255	6,255
21	At FVTPL
22	Derivatives	210	210
23	Deferred tax	111	111
24	of which: defined pension benefit	111	111	e
	scheme surplus
25	Provision for liabilities and charges	61	61
26	Other liabilities	2,106	2,153
27	Total liabilities	87,374	87,416

		A	B
		Balance sheet as
		in published	Under regulatory
		financial	scope of
		statements	consolidation(1)
		£m	£m	Ref:
	Shareholders' Equity
28	Share capital and share premium	140	140	f
29	of which: ordinary share capital	130	130	g
30	of which: share premium	10	10	h
31	Other equity instruments	835	835	i
32	Capital reorganisation reserve	(839)	(839)	j
33	Merger reserve	2,128	2,128	k
34	Other reserves	269	269
35	of which: cash flow hedge reserve	250	250	l
36	of which: own shares held	(5)	(5)	m
37	of which: other	24	24	n
38	Retained earnings	3,126	3,078
39	of which: prior period retained	3,053	3,049	o
	earnings
40	of which: profits accrued in the year	236	236	p
	to date
41	of which: FY23 dividends paid	(26)	(26)	q
42	of which: FY24 dividends	-	(26)	r
	paid/accrued in the period
43	of which: AT1 coupons accrued for	(12)	(12)	s
	regulatory purposes in FY23
44	of which: FY24 AT1 coupons	(14)	(32)	t
45	of which: share buyback recognised	(63)	(63)	u
	for regulatory purposes in FY24
46	of which: other movements in	(48)	(48)	v
	retained earnings
47	Total shareholders' equity	5,659	5,611

1. Balance sheet after accruing for foreseeable AT1 coupons and ordinary dividends.

8