Exhibit 4.36 Stephan Wilcke
	Chief Executive
	020 7877 3400
	stephan.wilcke@apa.gsi.gov.uk
Eastcheap Court, 11 Philpot Lane, London, EC3M 8UD		31 January 2011
The Royal Bank of Scotland plc
135 Bishopsgate
London
EC2M 3UR
Attention: APS Management
The Royal Bank of Scotland Group plc
135 Bishopsgate
London
EC2M 3UR
Attention: APS Management

Dear Sirs

Reporting issues relating to Post-Accession Data, Quarterly Statements and Quarterly Statement Data

1. Introduction

1.1 We refer to the Accession Agreement dated 26 November 2009 between The Commissioners of Her Majesty’s Treasury, The Royal Bank of Scotland plc and The Royal Bank of Scotland Group plc, as amended and supplemented from time to time (the “Accession Agreement”).

1.2 Any words or expressions used but not otherwise defined in this letter shall have the respective meanings given to them pursuant to the Accession Agreement.

1.3 Unless stated otherwise, references in this letter to paragraphs and sub-paragraphs are references to paragraphs and sub-paragraphs of this letter.

1.4 The Schedules and the Appendix form part of this letter.

1.5 It is noted and acknowledged that pursuant to Condition 17.13, this letter documents the agreement reached between the Treasury and the Participant as to certain matters relating to the Post-Accession Data, Quarterly Statements and the Quarterly Statement Data to be prepared and produced, and to be delivered by the Participant to the Treasury, pursuant to the Scheme Documents.

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2. Modifications to Post-Accession Data reporting and the Post-Accession Data Fields

2.1 Part I (General Rules) of the Data Field Rules for the Post-Accession Data Fields shall be modified by:

(A) the deletion in its entirety of rule 1.7(C) and the insertion of a new rule 1.7(C) as set out in Schedule 1 to this letter in its place;

(B) the replacement of the words “calendar month” in rule 1.9(B) with the word “Quarter”; and

(C) the insertion of:

(i) a new rule 1.11A (with the heading “Division or consolidation of assets or exposures”) as set out in Schedule 1 to this letter; and

(ii) a new Annex H in the form set out in Appendix 1 to this letter.

2.2 Part II (Completion Rules for Post-Accession Data Fields) of the Data Field Rules for the Post-Accession Data Fields shall be modified by the replacement of the word “month” in rule 23.1 with the word “Quarter”.

2.3 Part III (Specific Rules for Timing of Completion and Delivery) of the Data Field Rules for the Post-Accession Data Fields shall be modified by the replacement of each reference to “monthly” in the column headed “Update Frequency” with a reference to “quarterly”.

3. Modifications to the Quarterly Statement Data Fields

Part 1 (General)

3.1 Part 1 (General Rules) of the Data Field Rules for the Quarterly Statement Data Fields shall be modified by the insertion of:

(A) a new rule 1.10A (with the heading “Division or consolidation of assets or exposures”) as set out in Part A of Schedule 2 to this letter; and

(B) a new Annex 4 in the form set out in Appendix 2 to this letter.

Part 2 (Trigger)

3.2 Part 2 (Trigger) of the Data Field Rules for the Quarterly Statement Data Fields shall be modified by:

(A) the insertion of new rules 5.2 to 5.5 (inclusive) as set out in Part B of Schedule 2 to this letter; and

(B) the deletion of rule 6.2 and the insertion of new rules 6.2 to 6.4 (inclusive) as set out in Part B of Schedule 2 to this letter in its place.

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Part 4 (Loss)

3.3 Part 4 (Loss) of the Data Field Rules for the Quarterly Statement Data Fields shall be modified by:

(A) the deletion of rule 14.1 and the insertion of a new rule 14.1 in its place;

(B) the insertion of a new rule 14.4;

(C) the deletion of rules 15.1 to 15.4 (inclusive) and the insertion of new rules 15.1 to 15.3 (inclusive) in their place;

(D) the deletion of rule 16.1 and the insertion of a new rule 16.1 in its place;

(E) the insertion of a new rule 16.5;

(F) the deletion of rule 17.1 and the insertion of a new rule 17.1 in its place;

(G) the insertion of a new rule 17.5;

(H) the deletion of rule 18.1 and the insertion of a new rule 18.1 in its place;

(I) the insertion of new rules 18.1A (immediately after the new rule 18.1 inserted pursuant to paragraph ‎3.3‎(H)) and 18.5,

each such new rule being as set out in Part C of Schedule 2 to this letter.

Part 5 (Recovery or Realisation)

3.4 Part 5 (Recovery or Realisation) of the Data Field Rules for the Quarterly Statement Data Fields shall be modified by the insertion (immediately after rule 48) of new rules 48A and 48B each as set out in Part D of Schedule 2 to this letter.

4. Modifications to the Accession Agreement

The Accession Agreement shall be modified by:

(A) the insertion of new definitions in alphabetical order as set out in Part A of Schedule 3 to this letter into clause 1.1(A);

(B) the insertion of new clauses 5.24 and 5.25 (with the heading “Covered Assets that divide or are consolidated”) as set out in Part B of Schedule 3 to this letter;

(C) the deletion of clause 18.2(B) and the insertion of a new clause 18.2(B) in its place as set out in Part C of Schedule 3 to this letter; and

(D) the insertion (immediately after clause 18) of a new clause 18A as set out in Part D of Schedule 3 to this letter.

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5. General

This letter is designated as a Scheme Document.

Please confirm your agreement to the foregoing by signing and returning the enclosed copy of this letter.

Yours faithfully,

/s/ Stephan Wilcke

……………………………………………………….

For and on behalf of the Commissioners of HM Treasury

(acting through the Asset Protection Agency)

Confirmed and agreed for and on behalf of The Royal Bank of Scotland plc

Signature:

Name: /s/ John Collins    Date: 31 January 2012

Confirmed and agreed for and on behalf of The Royal Bank of Scotland Group plc

Signature:

Name: /s/ John Collins    Date: 31 January 2012

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Schedule 1

(New rules to be added to Part I (General Rules) of the Data Field Rules for the Post-Accession Data Fields)

1.7(C) 20 Business Days after the end of each Quarter following the last Phased Delivery Date (each a “Subsequent Delivery Date”).

Division or consolidation of assets or exposures

1.11A Where assets or exposures that comprise a Covered Asset are, on or prior to the Trigger Date in respect of the relevant Covered Asset, divided or consolidated, the Participant shall complete the Post-Accession Data Fields in respect of such assets or exposures (as they are divided or consolidated) in a manner consistent with Annex H.

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Schedule 2

(New rules to be added to the Data Field Rules for the Quarterly Statement Data Fields)

Part A

(New rule to be added to Part 1 (General Rules))

Division or consolidation of assets or exposures

1.10A Where assets or exposures that comprise a Covered Asset are, on or prior to the Trigger Date in respect of the relevant Covered Asset, divided or consolidated, the Participant shall complete the Quarterly Statement Data Fields in respect of such assets or exposures (as they are divided or consolidated) in a manner consistent with Annex 4.

Part B

(New rules to be added to Part 2 (Trigger))

5.2 Subject to rule 5.5, if in relation to the Covered Asset the Trigger Date (or the date to be reported in accordance with rule 5.3) occurred prior to 1 January 2009 and the Participant cannot readily determine the actual Trigger Date, this field must be completed as 31 December 2008.

5.3 Solely for the purpose of completing this field in relation to a Covered Asset allocated either to the “Consumer Finance” or the “Residential Mortgage” Covered Asset Class and in respect of which a Failure to Pay has occurred:

(A) where the Days Past Due at the end of any calendar month first equals (and has not at a previous month-end exceeded) the relevant threshold, this field shall be completed with the date of that month-end;

(B) where the Days Past Due at the end of any calendar month first exceeds the relevant threshold and the excess is equal to or less than the number of days in that month, the date to be included in this field shall be calculated by counting from the month-end back a number of days equal to the excess.  By way of example (which is illustrative only) if, in respect of a Covered Asset allocated to the “Consumer Finance” Covered Asset Class, the Days Past Due as at the end of November is 190 days, the Participant shall calculate the Trigger Date to be reported by counting back 10 days from the last day of the month, i.e. 20 November; and

(C) where the Days Past Due at the end of any calendar month first exceeds the relevant threshold and the excess is greater than the number of the days in that month, this field must be completed with the first day of that month.  By way of example (which is illustrative only) if, in respect of a Covered Asset allocated to the “Residential Mortgage” Covered Asset Class, the Days Past Due as at the end of November is 400 days, the excess (being 35 days) is greater than the number of days in November and the field would be completed as 1 November.

5.4           In rule 5.3 “relevant threshold” means:

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(A) in respect of Covered Assets allocated to the “Consumer Finance” Covered Asset Class, 180 Days Past Due; and

(B) in respect of Covered Assets allocated to the “Residential Mortgage” Covered Asset Class, 365 Days Past Due.

5.5 For the purpose of completing this field with respect to a Covered Asset in relation to which the Participant completes Quarterly Statement Data Fields set out in Part 6 (Realisation Expense) in respect of any Realisation Expense that falls within Condition 7.21(E), this field must be completed with the actual Trigger Date of that Covered Asset (or the date calculated in accordance with rule 5.3).

6.2 Subject to rule 6.4, if in relation to the Covered Asset the Initial Event Date (or the date to be reported in accordance with rule 6.3) occurred prior to 1 January 2009 and the Participant cannot readily determine the actual Initial Event Date, this field must be completed as 31 December 2008.

6.3 Solely for the purpose of completing this field in relation to a Covered Asset allocated to the “Consumer Finance” Covered Asset Class which includes or comprises an overdraft:

(A) if it is possible, by reference to the systems and records of the relevant Covered Entity, to determine that a formal demand for repayment of an overdraft was issued, then for the purpose of determining the Initial Failure to Pay Date (if any) in respect of the relevant Covered Asset, the overdraft will be treated as due:

(i) in the case of Covered Assets managed by the UK Retail or Ulster Divisions of the Participant’s Group, eight days after the date on which the demand for repayment of the overdraft was issued by (or on behalf of) the relevant Covered Entity; or

(ii) in the case of Covered Assets managed by any other division of the Participant’s Group, on the date on which the demand for repayment of the overdraft was issued by (or on behalf of) the relevant Covered Entity; or

(B) if it is not possible, by reference to the systems and records of the relevant Covered Entity, to determine whether a formal demand for repayment of an overdraft was issued, then for the purpose of completing this field:

(i) it shall be assumed that there is no Potential Failure to Pay in respect of the overdraft; and

(ii) where the foregoing assumption results in there being no Potential Failure to Pay with respect to the Covered Asset which is continuing at the Trigger Date, this field must be completed with the same date as the date included in the “Trigger Date” field in respect of the Covered Asset in accordance with rule 5.

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6.4 For the purpose of completing this field with respect to a Covered Asset in relation to which the Participant is required to complete Quarterly Statement Data Fields set out in Part 5 (Recovery and Realisation) in respect of any Cash Realisation that falls within Condition 7.2(iv) or Condition 7.2(v), this field must be completed with the actual Initial Event Date (which shall include any date determined by the application of rule 6.3) of that Covered Asset.

Part C

(New rules to be added to Part 4 (Loss))

14.1 Where the relevant Loss arises under Condition 6.1 (which deals with a Loss arising on a Trigger), this field must be completed with:

(A) if the Initial Event Date of the Covered Asset is prior to 1 January 2009, the amount to be specified by the Participant in the Initial Data as the “Covered Amount” of the Covered Asset;

(B) if the Initial Event Date of the Covered Asset is on or after 1 January 2009 and the Participant can readily determine the Covered Amount as at the Initial Event Date, the Covered Amount as at the Initial Event Date; or

(C) if: (i) the Initial Event Date of the Covered Asset is on or after 1 January 2009 and on or prior to the Cover Termination Date of the Covered Asset; and (ii) the Participant cannot readily determine the Covered Amount as at the Initial Event Date, the Covered Amount as at the last day of the calendar month ending on or immediately after the Initial Event Date applicable to such Covered Asset,

stated in the Covered Amount Currency, in each case in respect of the relevant Covered Asset.  For the purpose of reporting the Covered Amount in accordance with rule 14.1(C), the Participant may calculate such Covered Amount: (i) as if Condition 6.5(B) were amended to require calculation of the Covered Amount only on month-end dates, so that the Covered Amount for a relevant month-end falling after 31 December 2008 but on or prior to the Initial Event Date would be determined as the lesser of the Covered Amount Cap on that month-end date and the Covered Amount for the preceding month-end date; (ii) as if the Covered Amount Cap for a month-end date were calculated by reference to the Actual Exposure on such month-end date, rather than the Actual Exposure on the day preceding such month-end date; and (iii) as if Condition 6.5(C) were replaced by a requirement, in a case where the Initial Event Date falls on a date other than a month-end date, to determine the Covered Amount on the final day of the month ending immediately after the Initial Event Date as the lowest of (x) the Covered Amount on the preceding month-end date, (y) the Actual Exposure on the final day of the month immediately after the Initial Event Date, and (z) the Original Maximum Exposure on the day immediately preceding the Initial Event Date.

14.4 References in this rule 14 to the Initial Event Date are to the Initial Event Date as reported in accordance with rule 6.

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15.1 Where the relevant Loss arises under Condition 6.1 (which deals with a Loss arising on a Trigger), this field must be completed by conversion of the amount reported in the “Covered Amount at Initial Event Date in Covered Amount Currency” Quarterly Statement Data Field in accordance with rule 14 in respect of the relevant Covered Asset to sterling.

15.2 For the purpose of completing this field, the Exchange Date shall be the Trigger Date reported in accordance with rule 5 in respect of the relevant Covered Asset.

15.3 Where the “Covered Amount at Initial Event Date in Covered Amount Currency” Quarterly Statement Data Field is completed with “N/A” in accordance with rule 14, this field must also be completed with “N/A”.

16.1 Where the relevant Loss arises under Condition 6.1 (which deals with a Loss arising on a Trigger), this field must be completed with:

(A) if the Trigger Date of the Covered Asset is prior to 1 January 2009, the Outstanding Amount of the Covered Asset on 31 December 2008;

(B) if the Trigger Date of the Covered Asset is on or after 1 January 2009 and the Participant can readily determine the Outstanding Amount as at the Trigger Date, the Outstanding Amount as at the Trigger Date; or

(C) if the Trigger Date of the Covered Asset is on or after 1 January 2009 and the Participant cannot readily determine the Outstanding Amount as at the Trigger Date, the Outstanding Amount as at the end of the calendar month ending on or immediately prior to the Trigger Date applicable to such Covered Asset,

stated in the actual underlying currency, in each case in respect of the relevant Covered Asset.

16.5 References in this rule 16 to the Trigger Date are to the Trigger Date as reported in accordance with rule 5.

17.1 Where the relevant Loss arises under Condition 6.1 (which deals with a Loss arising on a Trigger), this field must be completed with:

(A) if the Trigger Date of the Covered Asset is prior to 1 January 2009, the Outstanding Amount of the Covered Asset on 31 December 2008;

(B) if the Trigger Date of the Covered Asset is on or after 1 January 2009 and the Participant can readily determine the Outstanding Amount as at the Trigger Date, the Outstanding Amount as at the Trigger Date; or

(C) if the Trigger Date of the Covered Asset is on or after 1 January 2009 and the Participant cannot readily determine the Outstanding Amount as at the Trigger Date,

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the Outstanding Amount as at the end of the calendar month ending on or immediately prior to the Trigger Date applicable to such Covered Asset,

stated in the Covered Amount Currency, in each case in respect of the relevant Covered Asset.

17.5 References in this rule 17 to the Trigger Date are to the Trigger Date as reported in accordance with rule 5.

18.1 Where the relevant Loss arises under Condition 6.1 (which deals with a Loss arising on a Trigger), this field must be completed with:

(A) if the Trigger Date of the Covered Asset is prior to 1 January 2009, the “Outstanding Amount of the Covered Asset on 31 December 2008;

(B) if the Trigger Date of the Covered Asset is on or after 1 January 2009 and the Participant can readily determine the Outstanding Amount as at the Trigger Date, the Outstanding Amount as at the Trigger Date; or

(C) if the Trigger Date of the Covered Asset is on or after 1 January 2009 and the Participant cannot readily determine the Outstanding Amount as at the Trigger Date, the Outstanding Amount as at the end of the calendar month ending on or immediately prior to the Trigger Date applicable to such Covered Asset,

in each case in respect of the relevant Covered Asset, stated in sterling.

18.1A For the purpose of completing this field, the Exchange Date shall be the Trigger Date in respect of the relevant Covered Asset.

18.5 References in this rule 18 to the Trigger Date are to the Trigger Date as reported in accordance with rule 5.

Part D

(New rules to be added to Part 5 (Recovery or Realisation))

48A.           RECOVERIES OR REALISATIONS WITH RESPECT TO RELATED JUNIOR ASSETS

48A.1 The Participant shall not be required to include as part of any Quarterly Statement Data in respect of any Quarter ending on or before 31 December 2010 any information relating to Recoveries or Realisations (whether or not any such Realisations are Cash Realisations) with respect to, resulting from or arising out of any Related Junior Asset in respect of any Triggered Asset.

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48A.2 The Participant shall not be required to include as part of any Quarterly Statement Data in respect of any Quarter ending after 1 January 2011 any information relating to Recoveries or Realisations (whether or not any such Realisations are Cash Realisations) with respect to, resulting from or arising out of any Related Junior Asset in respect of a Triggered Asset which is allocated either to the “Consumer Finance” or the “Residential Mortgage” Covered Asset Class.

48A.3 The Participant shall be required to include in any Quarterly Statement Data in respect of any Quarter ending after 1 January 2011, information relating to Recoveries or Realisations (whether or not any such Realisations are Cash Realisations) with respect to, resulting from or arising out of any Related Junior Asset in respect of a Triggered Asset which is allocated to a Covered Asset Class other than the “Consumer Finance” and the “Residential Mortgage” Covered Asset Classes only if:

(A) there has been, since 1 January 2011, a full or partial write-off in respect of such Triggered Asset;

(B) the aggregate amount of all write-offs that are determined by the Participant’s Group as at the time of the determination of the write-off referred to in sub-paragraph (A) above in respect of:

(i) such Triggered Asset; and

(ii) any and all other assets and exposures which, at the time of the write-off in respect of the relevant Triggered Asset, are connected to such Triggered Asset

exceeds £50,000,000 (fifty million pounds); and

(C) the Recoveries or Realisations were made, realised, received, recovered or derived on or prior to the date on which the write-off referred to in sub-paragraph (A) above was recorded in the accounts of the relevant Covered Entity,

and the assessment of whether an asset or exposure is a Related Junior Asset in respect of any Triggered Asset shall be determined as at the time of the write-off referred to in sub-paragraph (A) above solely by reference to the rights attaching to such asset or exposure, and the relevant Covered Asset, at such time.

48A.4 For the purpose of applying the threshold in rule 48A.2 (B) above, where the amount of a write-off in respect of a Triggered Asset or an asset or exposure connected to a Triggered Asset is denominated in any Other Currency, such amount shall be converted into sterling using a market rate as reasonably determined by the Participant based on its ordinary course business and banking policies, practices and procedures consistently applied.

48A.5           For the purpose of this rule 48A:

(A) an asset or exposure shall be deemed to be “connected” to a Triggered Asset if it is an asset or exposure of any person falling within paragraph (A) or (C) of the definition of Applicable Entity in respect of which the credit limit, credit line or trading line (or equivalent) in respect of a Counterparty is aggregated with the credit limit, credit line or

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trading line (or equivalent) of a Counterparty in respect of such Triggered Asset pursuant to the Credit Aggregation Policy, or would be so aggregated if the Credit Aggregation Policy were to be consistently applied between Protected Assets and assets and exposures that do not comprise Protected Assets, and an asset or exposure of any person falling within paragraph (A) or (C) of the definition of Applicable Entity in respect of which any Counterparty (or any Group Member of a Counterparty) is also a Counterparty (including an Obligor) in respect of such Triggered Asset shall be deemed to be connected to such Triggered Asset; and

(B) “write-off” shall have the meaning given to it in the Accession Agreement.

48B.           TREATING CUSTOMERS FAIRLY

For the purposes of the completion of Quarterly Statement Data Fields in this Part 5, the Participant may report obligor receipts in accordance with the ordinary business practices and procedures of the Participant’s Group provided that:

(A) such practices and procedures are at all times consistent with the relevant terms of (or relating to) the obligations of the obligor, Applicable Law and the TCF Principles; and

(B) the basis on which such practices and processes treat assets and exposures which form part of Covered Assets does not differ from the basis on which such practices and processes treat equivalent assets and exposures which do not form part of Covered Assets.

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Schedule 3

Part A

(New definitions to be inserted in clause 1.1(A) of the Accession Agreement)

“Reporting Issues Side Letter” means the letter headed “Reporting issues relating to Post-Accession Data, Quarterly Statements and Quarterly Statement Data” from the Commissioners of HM Treasury (acting through the Asset Protection Agency) to the Participant and the Initial Parent and dated on or around 31 January 2011;

“write-off” means, in respect of a Triggered Asset (or in respect of any asset or exposure which is connected to a Triggered Asset), a write-off in the accounts of the relevant Covered Entity in accordance with its ordinary business practices from time to time, consistently applied, provided that the basis on which that Covered Entity and the Participant's Group treat assets and exposures which form part of Covered Assets does not differ from the basis on which that Covered Entity and the Participant's Group treat equivalent assets and exposures of that Covered Entity and the Participant's Group which do not form part of Covered Assets.

Part B

(New Clauses 5.24 and 5.25 of the Accession Agreement)

Covered Assets that divide or are consolidated

5.24 For the avoidance of doubt, the requirements in rule 1.11A of Part 2 of the Data Field Rules, rule 1.10A of Part 3 of the Data Field Rules and Clause 18A.2 that, where assets or exposures that comprise a Covered Asset are divided or consolidated, the Participant shall complete the Quarterly Statement Data Fields and the Post-Accession Data Fields, and prepare Quarterly Statements, in respect of such assets or exposures (as they are divided or consolidated) in a manner consistent with Annex H to Part 2 of the Data Field Rules or Annex 4 to Part 3 of the Data Field Rules (as the case may be) shall be without prejudice to the provisions of any Scheme Document (including, without limitation, Condition 4.4).

5.25 If the Treasury or the Participant is of the opinion that the application of Annex H to Part 2 of the Data Field Rules and / or Annex 4 to Part 3 of the Data Field Rules does not produce the intended effect in respect of the completion of any Quarterly Statement Data Field and / or any Post-Accession Data Field and / or the preparation of Quarterly Statements (whether or not in respect of a particular asset or exposure), then the Treasury and the Participant shall, as soon as reasonably practicable, participate in good faith discussions and seek to agree the manner in which the Quarterly Statement Data Fields and / or the Post-Accession Data Fields should be completed, and /or Quarterly Statements should be prepared.

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Part C

(New Clause 18.2(B) of the Accession Agreement)

(B) contains a confirmation from the Scheme Head (or another member of the Scheme Executive Team acceptable to the Treasury) that, to the best of his or her knowledge and belief, having made all due and reasonable enquiries, such QS data deficiencies result in the Quarterly Statement Data (and/or the Information contained in the relevant Quarterly Statement derived from such Quarterly Statement Data) containing amounts in respect of Losses and Recoveries which are such that, in relation to each Covered Asset individually or, if the Treasury in its sole discretion determines, all Covered Assets collectively to which in either case the QS data deficiencies relate:

(i) the aggregate amount of Losses in respect of such Covered Asset or Covered Assets; minus

(ii) the aggregate amount of Recoveries in respect of such Covered Asset or Covered Assets,

is no more than would have been the case if there were no such QS data deficiencies.

Part D

(New Clause 18A of the Accession Agreement)

18A.           Reporting Issues Side Letter

18A.1           It is acknowledged that:

(A) in so far as the Reporting Issues Side Letter sets out certain agreed modifications to the reporting obligations of the Participant in respect of Post-Accession Data, Quarterly Statements and Quarterly Statement Data, such modifications are not intended to, and shall not, in any way amend the financial extent of the protection provided to the Participant under the Scheme (in particular, but without limitation, with respect to the Losses and Recoveries attributable to any Covered Asset);

(B) the operation of Condition 8 on the basis of the Quarterly Statement Data completed, and Quarterly Statements prepared, in accordance with the Participant’s reporting obligations as modified by the Reporting Issues Side Letter may produce a different outcome compared with the operation of Condition 8 on the basis of Quarterly Statement Data completed, and Quarterly Statements prepared, in accordance with the Participant’s reporting obligations prior to the application of such modifications; and notwithstanding the foregoing it is agreed that Condition 8 shall be applied on the basis of the Quarterly Statement Data completed, and the Quarterly Statements prepared, in accordance with the Scheme Documents (as amended or modified by the Reporting Issues Side Letter) including, for the avoidance of doubt, as the Quarterly Statement Data and / or Quarterly Statements are required to be prepared and / or re-stated pursuant to the application of Clause 18A.4; and

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(C) the terms of the Reporting Issues Side Letter are not intended to, and shall not, in any way affect the Treasury’s rights to request Information pursuant to any Scheme Document or otherwise (including, without limitation, pursuant to Condition 15).

18A.2 The modifications made to the Participant’s reporting obligations by the deletion of rules in, and / or the insertion of rules into, Part 3 (Rules for Quarterly Statement Data Fields) of the Data Field Rules pursuant to the Reporting Issues Side Letter shall also apply, mutatis mutandis and notwithstanding Condition 16, to the preparation of each Quarterly Statement in so far as it is based on the Quarterly Statement Data provided by the application of the Quarterly Statement Data Field Rules as modified pursuant to the Reporting Issues Side Letter.

18A.3 It is acknowledged and agreed that the reporting of any Information in any Quarterly Statement Data Field or Quarterly Statement in accordance with the modifications made to the Participant’s reporting obligations by the deletion of rules in, and / or the insertion of rules into, Part 3 (Rules for Quarterly Statement Data Fields) of the Data Field Rules pursuant to the Reporting Issues Side Letter shall not, save where the Treasury disapplies any or all of such modifications or requires the Participant to re-state and / or provide any information or data (in each case pursuant to Clause 18A.4), be treated as giving rise to any breach of Condition 16 or as constituting any QS data deficiency or any error, inaccuracy or data deficiency for the purposes of any of Conditions 16, 31, 32, 33 or 34.

18A.4 Notwithstanding Clause 18A.1 and any of the other provisions of the Reporting Issues Side Letter, the Treasury may by giving reasonable written notice to the Participant:

(A) disapply any or all of the modifications to the Participant’s reporting obligations which are specified in, or effected by, the Reporting Issues Side Letter; and / or

(B) require the Participant:

(i) to re-state (and provide to the Treasury) any or all of the information or data provided pursuant to the Scheme Documents in accordance with the modifications to the Participant’s reporting obligations which are specified in, or effected by, the Reporting Issues Side Letter such that the information or data is accurately completed in accordance with the terms and requirements of the Scheme Documents without application of any or all of the modifications specified in the Reporting Issues Side Letter; and / or

(ii) to provide to the Treasury any or all of the information or data which, by virtue of the modifications to the Participant’s reporting obligations specified in, or effected by, the Reporting Issues Side Letter, the Participant has not provided to the Treasury.

18A.5 If under Clause 18A.4 the Treasury requires: (A) the disapplication of all of the modifications which are specified in, or effected by, the Reporting Issues Side Letter; (B) the restatement of all information or data which has been provided in accordance with the modifications specified in, or effected by, the Reporting Issues Side Letter; or (C) the provision of all the information or data which has not been provided by the Participant by virtue of the modifications specified

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in, or effected by, the Reporting Issues Side Letter, the Treasury shall give not less than 12 months’ written notice to the Participant.

18A.6 Where the Treasury requires the Participant to re-state any information or data pursuant to Clause 18A.4 and, as a result, any amount set out in a Quarterly Statement requires adjustment (including as a result of adjustments to the underlying Quarterly Statement Data), Condition 8.7 (and the other provisions in Condition 8 (other than Condition 8.11)) shall apply with respect to the adjustment of such amount.

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Appendix 1

(Paper titled “Post-Accession Data Reporting: Division or

Consolidation of Assets or Exposures”)

Appendix 1 Post Accession Reporting: Division or Consolidation of Assets or Exposures 1

Asset Continuity in Post Accession Data: Introduction Background: Over time, the structure of a Covered Asset may change. This may take many forms from a simple debt consolidation (where many Covered Assets are replaced by one new asset / component); to the more complex arrangements (for example where many Covered Assets are replaced by many new components. ) In each case RBSG must calculate the covered amount against the original APS asset(s) and allocate this cover across the resulting restructured asset(s) . For transparency purposes in PAD reporting we report against both the APS asset (using APS Covered Asset ID(ACAID)) and the restructured asset(s) (using Bank Covered Asset ID(BCAID)) . The number of rows of data post refinancing will equal the number of old loans multiplied by the number of new loans. Each row will be identified by the unique ACAID -BCAID combination At a high level there are three restructuring scenarios: [] Debt split (One to Many) -- This occurs where a single asset is refinanced into more than one assets. For example a single loan may be agreed for general property development purposes but then split into a number of individual loans for each of the properties (to facilitate monitoring, draw downs and repayments following sales). [] Debt consolidation (Many to One) -- This occurs where more than one asset is refinanced into a single asset. For example five loans may be consolidated onto a single loan to for the administrative convenience of the customer. [] Complex debt rearrangements (Many to Many) -- This occurs where more than one asset is refinanced into across several assets but not in a one-to-one relationship. For example two loans may be converted into three Purpose of this paper: The purpose of this paper is to outline the proposed cover re-allocation across refinanced assets for each of the above scenarios in relation to PAD Reporting and seek your approval for the same. Assumptions: 1. As this paper focuses on Post Accession Data reporting requirements, it is assumed in each case that Covered Assets remain covered under the Scheme and the Asset Continuity Requirements have not been breached. 2. Note that the reporting of Consumer Finance assets in Post Accession Data should not be affected by such changes to the structure of Covered Assets. This is because these assets are already reported at customer level, which would be unaffected by these changes. 3. For simplicity, the assets considered in these examples are amortising assets unless stated otherwise 4. This paper only deals with PAD reporting requirements; QS requirements are discussed in a separate paper 2

Allocation and reporting of covered amount for refinanced assets Principles: 1.Covere Covere d Amount calculation for APS assetsassets follows the rules exactly: [] Covered Amount cap is always applied based on Original OME and current Actual Exposure 2.Covered Amount apportionment to refinanced facilities is based on Actual Exposure of new facilities 3.Outstanding Amount and Actual Exposure are apportioned based on initial data covered amount Steps to allocate Covered Amount to refinanced assets: Step 1: Identify new facilities Step 2: Calculate the total Actual Exposure of new facilities Step 3: Calculate total Covered Amount of APS Assets: CAAPS Asset = min {OME, AE, CAmin since 31/12/08} Step 4: Covered Amount for restructured asset: CARes. Asset = AE/Total AE * Total CA Step 5: Actual Exposure for restructured asset: AERes. Asset = Init. CA/Total Initial CA * Total AE Reporting: For transparency purposes in PAD reporting we report against both the APS asset (using APS Covered Asset ID(ACAID)) and the restructured asset(s) (using Bank Covered Asset ID(BCAID)) [] A separate row of data is reported for each replacement loan * Each row will quote the same APS Covered Asset ID but different Bank Covered Asset ID (so the combination of APS and Bank Covered Asset ID will be unique* Certain data will be consistent across each row of data -- notably Triggered Asset Flag (because an asset cannot partially trigger), Imputed Maturity Flag and Currency [] The number of rows of data post refinancing will equal the number of old loans multiplied by the number of new loans Definitions (See Appendix for legal definitions) : Outstanding Amount (OA) -- Drawn balance as at the month-end reporting date Actual Exposure (AE) -- Sum of Drawn and Undrawn balances as at the month-end reporting date Covered Amount (CA) -- Covered Amount at the month-end reporting date Original Maximum Exposure (OME) -- The maximum amount of exposure with respect to the Covered Asset, amortised over time, in accordance with its terms as at 31st December 2008. Must be captured as at the day immediately before the relevant date. Cover Termination Date (CTD) -- The date on which the cover for an APS asset terminates 3

Asset Continuity: Debt Split in Post Accession Reporting (One to Many, AE > CA) Example: A single APS asset (loan) is refinanced into three loans such that there is a 50% increase in the total actual exposure. Proposal: To allocate the cover to refinanced loans apportion the Covered Amount of the APS asset across the new loans based on their Actual Exposures. CARes. Asset = AE/Total AE * Total CA Initial Data Before Refinancing: Post- Refinancing: Restructured asset Cover Allocation BCAID : 1 ACAID : A AE = 300 BCAID : 1 OA = 250 Alloc. CA = 20% of 1000 = 200 (20% of total AE) OA = 250 CA calculation ACAID : A BCAID : 2 ACAID : A ACAID : A BCAID : A Debt Split AE = 600 BCAID : 2 BCAID : A OME = 1,200 OA = 800 Alloc. CA = 40% of 1000 = 400 Initial CA = 2,000 OA = 500 AE = 1000 OA = 500 (40% of total AE) Calc. CA = 1,000 BCAID : 3 ACAID : A BCAID : 3 AE = 600 Alloc. CA = 40% of1000 = 400 OA = 500 OA = 500 (40% of total AE) Total for APS asset Total for APS asset Total for APS asset CA = 1,000 Total for restructured asset CA = min{1200, 1500, 1000} = 1,000 Initial CA = 2,000 AE = 1,000 AE = 300 + 600 + 600 = 1,500 OA = 250 + 500 + 500 = 1,250 OA = 800 Formulae used: (CA)APS Asset = min {OME, (AE, CA)min since 31/12/08} (CA)Res. Asset = AE/Total AE * Total CA 4

Asset Continuity: Debt Split in Post Accession Reporting (One to Many, AE CA) Example: A single APS asset (loan) is refinanced into three loans such that there is a 25% decrease in the total actual exposure. Proposal: To allocate the cover to refinanced loans apportion the Covered Amount of the APS asset across the new loans based on their Actual Exposures. CARes. Asset = AE/Total AE * Total CA Initial Data Before Refinancing: Post- Refinancing: Restructured asset Cover Allocation BCAID : 1 ACAID : A AE = 150 BCAID : 1 OA = 125 Alloc. CA = 20% of 750 = 150 (20% of total AE) OA = 125 CA calculation ACAID : A BCAID : 2 ACAID : A ACAID : A BCAID : A Debt Split BCAID : A OME = 1,200 AE = 300 BCAID : 2 OA = 800 OA = 250 Alloc. CA = 40% of 750 = 300 Initial CA = 2,000 OA = 250 AE = 1000 (40% of total AE) Calc. CA = 1,000 BCAID : 3 ACAID : A AE = 300 BCAID : 3 OA = 275 Alloc. CA = 40% of 750 = 300 OA = 275 (40% of total AE) Total for APS asset Total for APS asset Total for APS asset CA = 1,000 Total for restructured asset CA = min{1200, 750, 1000} = 750 Initial CA = 2,000 AE = 1,000 AE = 150 + 300 + 300 = 750 OA = 125 + 250 + 275 = 650 OA = 800 Formulae used: (CA)APS Asset = min {OME, (AE, CA)min since 31/12/08} (CA)Res. Asset = AE/Total AE * Total CA 5

Asset Continuity: Debt Split in Post Accession Reporting (One to Many, Different CTDs) Example: A single APS asset (loan) is refinanced into three loans such that one loan has an earlier CTD. Proposal: To allocate the cover to refinanced loans apportion the Covered Amount of the APS asset across the new loans based on their Actual Exposures. CARes. Asset = AE/Total AE * Total CA. Post-CTD of the first loan its cover drops to zero and the cover on the APS asset is reallocated between the remaining two assets in proportion to their Actual Exposures. Initial Data Before Refinancing: Post- Refinancing: Time 1: Allocated CA post- Time 2: Allocated CA after Time 3: Allocated CA after Restructured asset refinancing 31/05/10 before 31/10/10 31/10/10 BCAID : 1 ACAID : A ACAID: A ACAID : A AE = 300 BCAID : 1 BCAID: 1 BCAID : 1 Alloc. CA = 0 CTD = 1/06/10 CA = 0 (20% of total AE) Alloc. CA = 20% of 1000 = 200 CA calculation Debt Split ACAID : A ACAID : A BCAID : A BCAID : 2 ACAID : A ACAID : A BCAID : A OME = 1,200 AE = 525 BCAID : 2 ACAID: A Initial CA = 2,000 OA = 900 BCAID : 2 BCAID: 2 CTD = 31/10/10 AE = 500 CTD = 31/10/2010 AE = 1000 Alloc. CA = 35% of 1000 = 350 Alloc. CA = 0 (35% of total AE) Calc. CA = 500/1100*900 = 409 Calc. CA = 1,000 BCAID : 3 ACAID : A ACAID : A AE = 675 BCAID : 3 ACAID: A BCAID : 3 BCAID: 3 CTD = 31/10/10 AE = 600 Alloc. CA = 45% of 1000 = 450 Alloc. CA = 0 (45% of total AE) Calc. CA = 600/1100*900 = 491 Total for APS asset Total for APS asset OME = 1,200 Total for APS asset Total for APS asset Total for restructured asset OME = 900 Total for APS asset AE = 1,000 OME = 1,200 Initial CA = 2,000 AE = 300 + 525 + 675 = 1,500 Total AE =1100 CA = 0 OA = 900 CA = 1,000 CA = min{900, 1100, 1000} = 900 CA = 1,000 Formulae used: (CA)APS Asset = min {OME, (AE, CA)min since 31/12/08} (CA)Res. Asset = AE/Total AE * Total CA 6

Asset Continuity: Debt Consolidation in Post Accession Reporting (Many to One, AE CA) Example: Three APS covered loans are consolidated into a single loan such that there is a 50% increase in the total actual exposure Proposal: To calculate cover for restructured APS loans: Step 1: Apportion total exposure based on initial covered amount. AERes. Asset = Init. CA/Total Initial CA * Total AE Step 2: Calculate the cover as the lesser of OME, apportioned AE and CA since Dec'08. CAAPS Asset = min {OME, AE, CAmin since 31/12/08} Initial Data Before Refinancing: Post- Refinancing: -------------------- -------------------- ----------------------------------------------------------------------- CA calculation Cover allocation ACAID : A ACAID : A ACAID : A BCAID : A BCAID : 1 BCAID : A OME = 300 OME = 300 Initial CA = 300 OA = 200 OA = 360 (30% of total) AE = 250 Alloc. AE = 300/1000*1500 = 450 Calc. CA = 250 Calc. CA = min{300, 450, 250} = 250 Restructured asset ACAID : B ACAID : B ACAID : B BCAID : B Debts consolidated BCAID : 1 BCAID : B OME = 300 BCAID : 1 OME = 300 Initial CA = 300 OA = 200 AE = 1,500 OA = 360 (30% of total) AE = 250 OA = 1,200 Alloc. AE = 300/1000*1500 = 450 Calc. CA = 250 Calc. CA = min{300, 450, 250} = 250 ACAID : C ACAID : C ACAID : C BCAID : C BCAID : 1 BCAID : C OME = 300 OME = 300 Initial CA = 400 OA = 250 OA = 480 (40% of total) AE = 500 Alloc. AE = 400/1000*1500 = 600 Calc. CA = 300 Calc. CA = min{300, 600, 300} = 300 Total for APS assets Total for APS assets Total for APS assets CA = 800 Initial CA = 1,000 CA = 800 AE = 1,000 Formulae used: AERes. Asset = Init. CA/Total Initial CA * Total AE CAAPS Asset = min {OME, AE, CAmin since 31/12/08 } -------------------- --------------- ---- ------------------ ------------------ 7

Asset Continuity: Debt Consolidation in Post Accession Reporting (Many to One, AE CA) Example: Three APS covered loans are consolidated into a single loan such that there is a 50% decrease in the total actual exposure Proposal: To calculate cover for restructured APS loans: Step 1: Apportion total exposure based on initial covered amount. AERes. Asset = Init. CA/Total Initial CA * Total AE Step 2: Calculate the cover as the lesser of OME, apportioned AE and CA since Dec'08. CAAPS Asset = min {OME, AE, CAmin since 31/12/08} Initial Data Before Refinancing: Post- Refinancing: -------------------- -------------------- ----------------------------------------------------------------------- CA calculation Cover allocation ACAID : A ACAID : A ACAID : A BCAID : A BCAID : 1 BCAID : A OME = 300 OME = 300 Initial CA = 300 OA = 200 OA = 120 (30% of total) AE = 250 Alloc. AE = 300/1000*500 = 150 Calc. CA = 250 Alloc. CA = min{300, 150, 250} = 150 Restructured asset ACAID : B ACAID : B ACAID : B BCAID : B Debts consolidated BCAID : 1 BCAID : B OME = 300 BCAID : 1 OME = 300 Initial CA = 300 OA = 200 AE = 500 OA = 120 (30% of total) AE = 250 OA = 400 Alloc. AE = 300/1000*500 = 150 Calc. CA = 250 Alloc. CA = min{300, 150, 250} = 150 ACAID : C ACAID : C ACAID : C BCAID : C BCAID : 1 BCAID : C OME = 300 OME = 300 Initial CA = 400 OA = 250 OA = 160 (40% of total) AE = 500 Alloc. AE = 400/1000*500 = 200 Calc. CA = 300 Alloc. CA = min{300, 200, 300} = 200 Total for APS assets Total for APS assets Total for APS assets CA = 800 Initial CA = 1,000 CA = 500 AE = 1,000 Formulae used: AERes. Asset = Init. CA/Total Initial CA * Total AE CAAPS Asset = min {OME, AE, CAmin since 31/12/08 } -------------------- --------------- ---- ------------------ ------------------ 8

Asset Continuity: Complex Debt Rearrangement in Post Accession Reporting (Many to Many, AE CA) -- Detailed example Example: Two APS covered loans are refinanced into three single loans such that there is a 50% increase in the total actual exposure Proposal: Our approach will combine the approach used for One to Many and Many to One cases. The number of rows of data post refinancing will equal the number of old loans multiplied by the number of new loans. Step 1: The Actual Exposure is apportioned across the new loans according to their initial cover. AERes. Asset = Init. CA/Total Initial CA * Total AE Step 2: The Covered amount for the APS assets is calculated as the lesser of OME, apportioned AE and CA since Dec'08. CAAPS Asset = min {OME, AE, CAmin since 31/12/08} Step 3: The cover calculated above is allocated to refinanced loans in proportion to their Actual Exposure. CARes. Asset = AE/Total AE * Total CA Initial Data Before Refinancing: ACAID : A ACAID : A BCAID : A BCAID : A OME = 400 CA = 600 OA = 450 (60% of total) AE = 500 CA = 400 Debt Split ACAID : B ACAID : B BCAID : B BCAID : B OME = 300 CA = 400 OA = 400 (40% of total) AE = 500 CA = 300 Total for APS assets CA = 1,000 Total for APS assets CA = 700 Restructured asset BCAID : 1 AE = 300 (20% of total) BCAID : 2 AE = 600 (40% of total) BCAID : 3 AE = 600 (40% of total) Total for restructured assets AE = 1,500 Post- Refinancing: AE allocation CA calculation ACAID : A BCAID : 1 AE = 180 (60% of 300) ACAID : A ACAID : A OME = 400 BCAID : 2 AE = 360 (60% of 600) AE = 180 + 360 + 360 = 900 CA = min{400, 900, 400}=400 ACAID : A BCAID : 3 AE = 360 (60% of 600) ACAID : B BCAID : 1 AE = 120 (40% of 300) ACAID : B ACAID : B BCAID : 2 OME = 300 AE = 240 (40% of 600) AE = 120 + 240 + 240 = 600 CA = min{300, 600, 300} = ACAID : B 300 BCAID : 3 AE = 240 (40% of 600) CA allocation ACAID : A BCAID : 1 Alloc. CA = 80 (300/1500x400) ACAID : A BCAID : 2 Alloc. CA = 160 (600/1500x400) ACAID : A BCAID : 3 Alloc. CA = 160 (600/1500x400) ACAID : B BCAID : 1 Alloc. CA = 60 (300/1500x300) ACAID : B BCAID : 2 Alloc. CA = 120 (600/1500x300) ACAID : B BCAID : 3 Total for APS assets CA = 700 9 Total for APS assets AE = 1,500 Total for APS assets CA = 700

Asset Continuity: Complex Debt Rearrangement in Post Accession Reporting (Many to Many, AE CA) -- Detailed example Example: Two APS covered loans are refinanced into three single loans such that there is a 50% decrease in the total actual exposure Proposal: Our approach will combine the approach used for One to Many and Many to One cases. The number of rows of data post refinancing will equal the number of old loans multiplied by the number of new loans. Step 1: The Actual Exposure is apportioned across the new loans according to their initial cover. AERes. Asset = Init. CA/Total Initial CA * Total AE Step 2: The Covered amount for the APS assets is calculated as the lesser of OME, apportioned AE and CA since Dec'08. CAAPS Asset = min {OME, AE, CAmin since 31/12/08} Step 3: The cover calculated above is allocated to refinanced loans in proportion to their Actual Exposure. CARes. Asset = AE/Total AE * Total CA Initial Data Before Refinancing: ACAID : A ACAID : A BCAID : A BCAID : A OME = 400 CA = 600 OA = 450 (60% of total) AE = 500 CA = 400 Debt Split ACAID : B ACAID : B BCAID : B BCAID : B OME = 300 CA = 400 OA = 400 (40% of total) AE = 500 CA = 300 Total for APS assets CA = 1,000 Total for APS assets CA = 700 Restructured asset BCAID : 1 AE = 100 (20% of total) BCAID : 2 AE = 200 (40% of total) BCAID : 3 AE = 200 (40% of total) Total for restructured assets AE = 500 Post- Refinancing: AE allocation CA calculation ACAID : A BCAID : 1 AE = 60 (60% of 100) ACAID : A ACAID : A OME = 400 BCAID : 2 AE = 120 (60% of 200) AE = 60 + 120 + 120 = 300 CA = min{400, 300, 400}=300 ACAID : A BCAID : 3 AE = 120 (60% of 200) ACAID : B BCAID : 1 AE = 40 (40% of 100) ACAID : B ACAID : B BCAID : 2 OME = 300 AE = 80 (40% of 200) AE = 40 + 80 + 80 = 200 CA = min{300, 200, 300} = ACAID : B 200 BCAID : 3 AE = 80 (40% of 200) Total for APS assets Total for APS assets AE = 500 CA = 500 CA allocation ACAID : A BCAID : 1 Alloc. CA = 60 (100/500x300) ACAID : A BCAID : 2 Alloc. CA = 120 (200/500x300) ACAID : A BCAID : 3 Alloc. CA = 120 (200/500x300) ACAID : B BCAID : 1 Alloc. CA = 40 (100/500x200) ACAID : B BCAID : 2 Alloc. CA = 80 (200/500x200) ACAID : B BCAID : 3 Alloc. CA = 80 (200/500x200) Total for APS assets CA = 500 10

Asset Continuity: Complex Debt Rearrangement in Post Accession Reporting (Many to Many) Example -- More Complex Refinancing: Sometimes the original APS assets will not be linked to all the refinanced loans. E.g. if a customer had a loan and an overdraft facility then this may get refinanced such that a part of the overdraft is consolidated with the loan, resulting in a new loan and a new reduced overdraft facility. We illustrate this in the example below, where we consider two assets A and B such that Asset A is refinanced into two new facilities, while Asset B is refinanced to only one of these new facilities. Proposal: To allocate cover to new facilities we only apportion cover from the APS assets that feed into that new facility. So that in the example below, post-refinancing APS asset B's cover will be distributed only across new facility 2 and NOT to the new facility 1. Initial Data Before Post- Refinancing: ----------------------- ----------- ------------------------- Refinancing: AE allocation CA calculation CA allocation --------------- ACAID : A ACAID : A Restructured asset BCAID : 1 ACAID : A BCAID : 1 AE = 200 (100% of 200) Alloc. CA = 33% of 400 = 133 ------------------- ACAID : A ACAID : A OME = 500 ----------- ---------- BCAID : A BCAID : 1 AE = 200 + 240 = 440 BCAID : A OME = 500 AE = 200 ACAID : A CA ACAID : A CA = 600 BCAID : 2 = min{500, 440, BCAID : 2 AE = 400 (33% of total) 400}=400 (60% of total) CA = 400 AE = 240 (60% of 400) Alloc. CA =66% of 400 = 267 Debt Split In practice this would not be ---------- ------------ ----------- --- ---------- reported ACAID : B ACAID : B BCAID : B BCAID : 2 BCAID : B OME = 300 AE = 400 ACAID : B ACAID : B (40% CA = of 400 total) AE = 200 (67% of total) BCAID : 1 ACAID : B BCAID : 1 CA = 200 AE = 0 (0% of 300) Alloc. CA = 0% of 160 = 0 OME = 300 ACAID : B AE = 0 + 160 = 160 ACAID : B BCAID : 2 CA = min{300, 160, 200} = BCAID : 2 AE = 160 (40% of 400) 160 Alloc. CA = 1005 of 160 = 160 Total for APS assets CA = 600 + 400 = 1,000 Total for APS assets CA = 400 + 200 = 600 Total for restructured assets AE = 200 + 400 = 600 Total for APS assets AE = 200 + 240 + 0 + 160 = 600 Total for APS assets CA = 400 + 160 = 560 Total for APS assets CA = 133 + 267 + 0 + 160 = 560 11

Asset Continuity: Debt Consolidation in Post Accession Reporting (Inclusion of Covered and Non Covered Assets) Example -- AE< CA: In the example below, two covered assets are consolidated with one non-covered asset to form a single new loan such that AE of the new loan is less than the prior period cover of the APS assets. Proposal: AE of the consolidated loan is spread across both the Covered Assets and the non-Covered assets -- [] Determine the covered proportion of the AE of the refinanced assets based on the AEs of the covered/non-covered assets prior to refinancing in the Risk Management systems. [] Apportion this `Covered AE' across the APS assets as based on the Initial Cover Formulae used: AECovered = [] {AEAPS Assets prior to refinancing } * Total AERestructured assets RCovered = []{AEAPS Assets prior to refinancing } * Total RRestructured assets ------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------ [] {AEAPS Assets prior to refinancing } + []{AEUncovered assets prior to refinancing } []{AEAPS assets prior to refinancing } + []{AEUncovered assets prior to refinancing } AERes. Asset = Init. CA/ []{InitialCA} * []{AECovered(}) RRes. Asset = Init. CA/ []{InitialCA} * []{AECovered(}) Data immediately Post Refinancing ------------------------------------------------------------------------ --------------------- Initial Data prior to refinancing Restructured asset PAD Data at Trigger Date: QS Reporting: =================== ======================================================================== ---------------------------------- ===================== ------------------------------------------------------------------------- ===================== ACAID : A ACAID : A ACAID : A ACAID : A BCAID : 1 Appor. AE = OA = Appor. AE = OA = BCAID : 1 300/(300+300) * 250 = CA = 300 AE = OA = 250 300/(300+300) * 250 = 125 (50% of total) CA = 250 125 BCAID: 4 Calc. CA = 125 (25% of total OA/AE) Calc. CA = 125 R = 50% of 50 = 25 BCAID: 4 ACAID : B ACAID : B OA = 500 ACAID : B AE = 500 ACAID : B BCAID : 2 BCAID : 2 OA = 500 Appor. AE = OA = AECovered = Appor. AE = OA = Cov ered Assets CA = 300 AE = OA = 250 AE = 500 300/(300+300) * 250 = (250+250)/(250+250+50 300/(300+300) * = 250 CA = 250 125 0)*500 = 250 Calc. CA = 125 (50% of total) (25% of total OA/AE) AECovered = Calc. CA = 125 R = 100 R =50% of 50 = 25 (250+250)/(250+250+50 0)*500 = 250 RCovered = (250+250)/(250+250+50 Total for Covered Total for Covered Total for Covered Total for Covered 0)*100 = 50 Assets Assets Assets Assets AE = OA = 250 AE = OA = 500 AE = OA = 250 ------------ ------ ------------------------------------------------------------------------- --------------------- CA = [pound]600 CA = 500 CA = 250 CA R = = 50 250 ------------------- ------------------- ======================================================================== ---------------------------------- ===================== ------------------------------------------------------------------------- --------------------- --- BCAID: 3 BCAID: 3 AE immediately prior to (non covered asset) refinancing = 500 (50% of total OA/AE) Total assets Non C overed Assets consolidated AE = OA = 1,000 CA = 500 ------------------- ------------ ------ ------------------------------------------------------------------------ ---------------------------------- --------------------- ------------------------------------------------------------------------- --------------------- --- For simplicity, the OME in the above example is assumed to be the same as the Initial Data Covered Amount and AE is assumed equal to OA. 12

Appendix

Appendix -- Why we use Initial Covered Amount (CA) data to apportion Actual Exposure (AE) Outlined below are the two options for apportioning Actual Exposure post-restructuring and the merits of each of these approaches. Based on the considerations provided below, RBS had decided to use Option A, i.e. use initial covered amount data for apportioning AE, primarily made for operational reasons in terms of doability. Description Accuracy Materiality Traceability / Auditability Data Sourcing Technical Implementation Option A: Use initial covered amount as at 31(st) Dec 2008 (Currently being used) Use the Initial CA of APS Assets as at 31(st) Dec'08 to apportion AE across refinanced facilities This approach is less accurate if the facilities are amortizing at different rates, however, the impact of using this approach is to understate the AE of gradually amortising facilities and is therefore in APA's favour []Loss of cover for RBS for a small number of cases where ALL of the following conditions are met: --There is debt consolidation; and --The assets are amortizing at different rates; and --The CA is capped by AE (i.e. AE of the restructured asset(s) is less than OME and prior period CA) []In all other scenarios the CA calculated under both Option A and B will be the same Easy to trace and audit APS assets through their life as initial covered amount for all assets as at 31(st) Dec'08 is fixed Easy to source data as initial covered amount for all assets as at 31(st) Dec'08 is fixed This option is easier to implement technically as this always only uses the static data e.g. Initial CA Option B: Use covered amount prior to refinancing Use the CA of APS Assets just prior to refinancing to apportion AE across refinanced facilities This approach is more accurate to apportion AE if the facilities are amortizing at different rates No loss in cover to RBS and no impact on APA Difficult to audit covered amount calculations as it needs the data prior to refinancing; the calculation gets more complex is there is a restructure of a restructure It is difficult to source the CA data prior to refinancing -- Intra-month CA data is not available (refer to QS practice statement) -- Month-end CA only available for Sep'09, Dec'09, Mar'10 and then monthly from May'10 onwards It is difficult to implement this technically as the solution needs to be able to store and retrieve restructuring data e.g. date of restructure, covered amount etc. The solution becomes more complicated if the restructured asset gets further restructured Note: Option A is currently in practice and to now change the approach to Option B would necessitate a restatement of all previously reported PAD data for restructuring scenarios so that the assets are consistently traceable through their life. This will involve a disproportionately huge amount of time and effort and we do not recommend doing this 14

Appendix -- Reporting Treatment of PAD fields for refinanced Assets (1 : Many, Many : 1, Many : Many) ===================================================================================================== HMT Ref. No. Field Name Reported Data Source ------------------- ---------- ---------------------------------------------------------------------- 2 Bank Covered Asset ID Bank asset attribute === ============================================ =============================================== 3 APS Covered Asset ID APS asset attribute === ============================================ =============================================== 4 EPA ID APS asset attribute === ============================================ =============================================== 5 Covered Asset Class Sourced from Initial Data === ============================================ =============================================== 6 Long Dated Asset Flag APS asset attribute === ============================================ =============================================== 7 Limited Recourse Asset Flag APS asset attribute === ============================================ =============================================== 8 Sub Participation Flag Sourced from Initial Data === ============================================ =============================================== 9 Sub Participation Grantor Name APS asset attribute === ============================================ =============================================== 10 Sub Participation Grantor ID APS asset attribute === ============================================ =============================================== 11 ISIN APS asset attribute === ============================================ =============================================== 12 CUSIP APS asset attribute === ============================================ =============================================== Bank asset attribute for loans 13 Covered Asset Sub Class APS Asset attribute for all other asset classes === ============================================ =============================================== 14 Multi Currency Flag Bank asset attribute === ============================================ =============================================== 15 Booking Entity ID Bank asset attribute === ============================================ =============================================== 16 Management Entity ID Bank asset attribute === ============================================ =============================================== 17 Cover Termination Date APS asset attribute === ============================================ =============================================== 18 Imputed Maturity Flag APS asset attribute === ============================================ =============================================== 19 Covered Amount Currency Sourced from Initial Data === ============================================ =============================================== 20 Covered Amount Apportioned using asset continuity rules === ============================================ =============================================== 21 Outstanding Amount Apportioned using asset continuity rules === ============================================ =============================================== 22 Current Maturity Date Bank asset attribute === ============================================ =============================================== 23 Total Mark to Market (Derivatives) Apportioned using asset continuity rules === ============================================ =============================================== 24 Obligor Name Bank asset attribute === ============================================ =============================================== 25 Unique Internal Obligor ID Bank asset attribute === ============================================ =============================================== 26 Country of Obligor Incorporation / Domicile Bank asset attribute === ============================================ =============================================== 27 Obligor Industry Code Bank asset attribute === ============================================ =============================================== 28 Ultimate Parent Name Bank asset attribute === ============================================ =============================================== 29 Ultimate Parent ID Bank asset attribute === ============================================ =============================================== 30 Country of Ultimate Parent Incorporation Bank asset attribute === ============================================ =============================================== 31 Ultimate Parent Industry Code Bank asset attribute === ============================================ =============================================== 32 Collateral Flag Bank asset attribute === ============================================ =============================================== 33 Collateral Type Bank asset attribute === ============================================ =============================================== 34 Current Collateral Value Apportioned using asset continuity rules === ============================================ =============================================== 35 Current Collateral Currency Bank asset attribute === ============================================ =============================================== 36 Current Collateral Valuation Type Bank asset attribute === ============================================ =============================================== 37 Date of Latest Collateral Valuation Bank asset attribute === ============================================ =============================================== 38 Country of Exposure to Underlying Collateral Bank asset attribute === ============================================ =============================================== 39 Origination Date APS asset attribute === ============================================ =============================================== 40 Guarantor Name Bank asset attribute === ============================================ =============================================== 41 Internal guarantor ID Bank asset attribute === ============================================ =============================================== 42 Guarantor PD Bank asset attribute === ============================================ =============================================== 43 Guarantor Internal Rating Bank asset attribute === ============================================ =============================================== 15

Appendix -- Reporting Treatment of PAD fields for refinanced Assets (1 : Many, Many : 1, Many : Many) -- Contd. HMT Ref. No. Field Name Reported Data Source ============ ============================================================================== ======================================== 44 Most Recent Date of Credit Assessment / Rating of the Guarantor Bank asset attribute ============ ============================================================================== ======================================== 45 Guarantor S and P rating Bank asset attribute ============ ============================================================================== ======================================== 46 Guarantor Moody's rating Bank asset attribute ============ ============================================================================== ======================================== 47 Guarantor Fitch Rating Bank asset attribute ============ ============================================================================== ======================================== 48 Restricted Securitisation Flag APS asset attribute ============ ============================================================================== ======================================== 49 Restricted Conduit Flag APS asset attribute ============ ============================================================================== ======================================== 50 Restricted Arrangement ID APS asset attribute ============ ============================================================================== ======================================== 51 Rollover Asset Flag APS asset attribute ============ ============================================================================== ======================================== 52 Date of Rollover APS asset attribute ============ ============================================================================== ======================================== 53 Total Bank Exposure to Ultimate Parent Group Bank asset attribute ============ ============================================================================== ======================================== 54 Triggered Asset Flag APS asset attribute ============ ============================================================================== ======================================== 55 Asset Probability of Default Bank asset attribute ============ ============================================================================== ======================================== 56 Loss Given Default Bank asset attribute ============ ============================================================================== ======================================== 57 Current Obligor Rating Bank asset attribute ============ ============================================================================== ======================================== 58 Most Recent Date of Credit Assessment/Rating of the Obligor Bank asset attribute ============ ============================================================================== ======================================== 59 Obligor S and P Rating Bank asset attribute ============ ============================================================================== ======================================== 60 Obligor Moody's Rating Bank asset attribute ============ ============================================================================== ======================================== 61 Obligor Fitch Rating Bank asset attribute ============ ============================================================================== ======================================== 62 Fair Value Apportioned using asset continuity rules ============ ============================================================================== ======================================== 63 Historical impairment and/or write-down amount and/or credit value adjustments Bank asset attribute ============ ============================================================================== ======================================== 64 Current Ultimate Parent Internal Rating Bank asset attribute ============ ============================================================================== ======================================== 65 Most Recent Date of Internal Rating of the Ultimate Parent Bank asset attribute ============ ============================================================================== ======================================== 66 Current Ultimate Parent S and P Rating Bank asset attribute ============ ============================================================================== ======================================== 67 Current Ultimate Parent Moody's Rating Bank asset attribute ============ ============================================================================== ======================================== 68 Current Ultimate Parent Fitch Rating Bank asset attribute ============ ============================================================================== ======================================== 69 Buy to Let Flag Bank asset attribute ============ ============================================================================== ======================================== 70 Self Cert Flag Bank asset attribute ============ ============================================================================== ======================================== 71 Asset in Construction Flag APS asset attribute ============ ============================================================================== ======================================== 72 Interest Cover APS asset attribute ============ ============================================================================== ======================================== 73 Postcode APS asset attribute ============ ============================================================================== ======================================== 74 Amortisation Type APS asset attribute ============ ============================================================================== ======================================== Description: APS asset attribute Bank asset attribute Apportioned using asset continuity rules Sourced from Initial Data This attribute will be populated using the APS asset level data and will remain the same across all rows of ACAID -BCAID combinations for an APS asset This attribute will be populated using the Bank asset level data for all rows of ACAID -BCAID combinations for an APS asset As specified in the RI0020 paper on Asset Continuity This attribute will be sourced from Initial Data, as at 31/12/2008, and will be the same across all rows of ACAID -BCAID combinations for an APS asset 16

Appendix -- Glossary of terms as defined in APS TandCs Term Definition 6.5 Subject to Condition 34, the "Covered Amount" of a Covered Asset means: (A) on 31 December 2008, the amount specified by the Participant in the Initial Data as the "Covered Amount" Covered Amount of that Covered Asset, being an amount denominated in the currency (the "Covered Amount Currency") specified by the Participant in the Initial Data as the "Currency" of that Covered Asset (CA) (or, if no such amount or currency is specified by the Participant in the Initial Data, zero); (B) on each day (for the purpose of this paragraph (B), the "relevant day") from (and including) 1 January 2009 to (and including) the Cover Termination Date, the lesser of: (i) the Covered Amount Cap on the relevant day; and (ii) the Covered Amount of that Covered Asset on the day immediately preceding the relevant day; and (C) on each day falling after the later of (i) the Cover Termination Date and (ii) 31 December 2008, zero. Cover Termination 6.6 The "Cover Termination Date" means, in respect of a Covered Asset, but subject to Condition 6.35(A)(ii), the date specified by the Participant in the Initial Data as the "Cover Termination Date (CTD) Date" of that Covered Asset. 6.7 The "Covered Amount Cap" of a Covered Asset on any day (for the purpose of this Condition 6.7, the "relevant day") means an amount denominated in the Covered Amount Currency of that Covered Asset which: (A) if that Covered Asset is within neither the "Consumer Finance" nor the "Derivative" Covered Asset Class, is an amount equal to the sum of: (i) the lesser of: (a) the Original Maximum Exposure; and (b) the Actual Exposure, with respect to that Covered Asset on the day immediately preceding the relevant day; and (ii) the overdraft proportion of the Imputed Maximum Exposure with respect to that Covered Asset on the relevant day, where the "overdraft proportion" is: (1) if that Covered Asset did not include or comprise an Overdraft on Covered Amount 31 December 2008, zero; and (2) if that Covered Asset did include or comprise an Overdraft on 31 December 2008, a fraction determined as follows: A / B where: A is an amount equal to the Cap (CA cap) lesser of: (x) the Advised Amount with respect to that Overdraft; and (y) the Covered Amount of that Covered Asset on 31 December 2008 less the Original Maximum Exposure with respect to that Covered Asset on 31 December 2008 (or, if greater, zero) B is the Covered Amount of that Covered Asset on 31 December 2008; (B) if that Covered Asset is within the "Derivative" Covered Asset Class, is an amount equal to the Covered Amount of that Covered Asset on 31 December 2008; and (C) if that Covered Asset is within the "Consumer Finance" Covered Asset Class, is an amount equal to the higher of: (i) the Imputed Maximum Exposure with respect to that Covered Asset on the relevant day; and (ii) the lesser of: (a) the Original Maximum Exposure; and (b) the Actual Exposure, with respect to that Covered Asset on the day immediately preceding the relevant day. 6.8(A) The "Actual Exposure" with respect to a Covered Asset on any day means an amount denominated in the Covered Amount Currency of that Covered Asset equal to the sum of: (i) the Actual Exposure Outstanding Amount of that Covered Asset on that day; and (ii) if that Covered Asset is or includes a Covered Liability (but without double counting amounts), the maximum aggregate (AE) amount as of that day which the applicable Covered Entity or Covered Entities have (or, in the case of a Covered Asset that is the subject of a Permitted Arrangement, the relevant Applicable Entity or Applicable Entities have) an actual or contingent liability to pay in respect of CL Payment Amounts relating to that Covered Liability (but, for these purposes, excluding any Covered Liability which is an undrawn Overdraft); 6.8(B) The "Original Maximum Exposure" with respect to a Covered Asset on any day (in this paragraph (B), the "relevant day") means (subject to Condition 6.35(A)(i)), an amount denominated in the Covered Amount Currency of that Covered Asset equal to the maximum aggregate amount of the exposure which the terms of that Covered Asset in effect on 31 December 2008 commit the applicable Covered Entity or Covered Entities (or, in the case of a Covered Asset that is the subject of a Permitted Arrangement, the relevant Applicable Entity or Applicable Entities) to have on the relevant day, such amount to be determined without regard to any amendment or replacement affecting that Covered Asset or its terms after 31 December 2008 and on the basis that: (i) the exposure of the applicable Covered Entity or Covered Entities (or, in the case of a Covered Asset that is the subject of a Permitted Arrangement, the relevant Applicable Entity or Applicable Entities) with respect to a Covered Asset on any day is an amount denominated in the Covered Amount Currency of that Covered Asset equal to the sum of (a) the Outstanding Amount of that Covered Asset on that day and (b) if that Covered Asset is or includes a Covered Liability (but without double counting amounts) , the maximum aggregate amount as of that day which the applicable Covered Entity or Covered Entities have (or, in the case of a Covered Asset that is the subject of a Permitted Arrangement, the relevant Original Maximum Applicable Entity or Applicable Entities have) an actual or contingent liability to pay in respect of CL Payment Amounts relating to that Covered Liability; (ii) the applicable Obligors comply with Exposure (OME) their payment obligations under the terms of that Covered Asset; (iii) all conditions precedent to the effectiveness of: (a) the obligations and liabilities (whether actual or contingent) of the applicable Covered Entity or Covered Entities or the relevant Applicable Entity (as the case may be); and (b) the rights and assets (whether actual or contingent) of the applicable Obligors, with respect to that Covered Asset are satisfied; (iv) no events of default, early termination events or mandatory prepayment events (however described) have occurred or will occur in respect of that Covered Asset; (v) the applicable Covered Entity or Covered Entities do not (or, in the case of a Covered Asset that is the subject of a Permitted Arrangement, the relevant Applicable Entity or Applicable Entities do not) make any election, exercise any discretion or grant any consent which would increase the amount of the Original Maximum Exposure with respect to that Covered Asset on any day; and (vi) the Original Maximum Exposure on any day with respect to any part of that Covered Asset which on 31 December 2008 was an Overdraft shall be deemed to be zero, provided that, if and for so long as there is, following the notification to the Treasury in a Quarterly Statement of any Loss in respect of that Covered Asset, an absence of reasonable evidence as to the terms of that Covered Asset in effect on 31 December 2008 that needs to be known in order to calculate the Original Maximum Exposure with respect to that Covered Asset on any day, the Original Maximum Exposure with respect to that Covered Asset on that day shall be deemed to be zero; 17

Appendix -- Glossary of terms as defined in APS T and Cs (contd. ) Term Definition 6.8(C) The "Imputed Maximum Exposure" with respect to a Covered Asset on any day (in this paragraph (C), the "relevant day") means: (i) if the relevant day falls during the period from 1 January 2009 to 31 December 2010 (both dates inclusive), an amount equal to the Covered Amount of that Covered Asset on 31 December 2008; and (ii) if the relevant day falls during the Imputed (Maximum) period from 1 January 2011 to 31 December 2012 (both dates inclusive), an amount determined as follows: (A / 25) * B where: A is the actual number of calendar months in the period from Exposure (IME) (and including) the month in which the relevant day occurs to (and including) December 2012; B is the Covered Amount of that Covered Asset on 31 December 2008; and (iii) if the relevant day falls on or after 1 January 2013, zero; 6.8(D) an "Overdraft" means a Covered Asset which is (or to the extent it includes) an overdraft or other similar indebtedness (or a facility, to the extent an overdraft or other similar indebtedness may be incurred pursuant to that facility) which any member of the Participant's Group (or, in the case of a Covered Asset that is the subject of a Permitted Arrangement, a Overdraft (O/D) relevant Applicable Entity) is entitled at any time (whether on demand or on notice but without the need for any contractual event of default, termination event or specified repayment or prepayment requirement to have arisen) to terminate or require to be repaid in full or fully cash collateralised, provided that (for the avoidance of doubt) a Revolving Facility is not an Overdraft; and 6.8(E) the "Advised Amount" with respect to a Covered Asset which is or includes an Overdraft means an amount denominated in the Covered Amount Currency equal to the sum (without double counting) of the following as at 31 December 2008: (i) the Outstanding Amount of that Covered Asset (to the extent it is an Overdraft); (ii) if and to the extent that Overdraft includes a Covered Liability falling within Condition 6.23(A)(i), the maximum aggregate amount of cash collateral for which the applicable Covered Entity or Covered Entities are (or, in the case of an Advised Amount Overdraft that is the subject of a Permitted Arrangement, the relevant Applicable Entity or Applicable Entities are) entitled to call in respect of liabilities under letters of credit, guarantees, performance bonds or analogous instruments issued or granted by them or it which are comprised within that Overdraft; and (iii) the maximum aggregate amount of any unutilised portion of (AA) that Overdraft which the applicable Covered Entity or Covered Entities have (or, in the case of an Overdraft that is the subject of a Permitted Arrangement, the relevant Applicable Entity or Applicable Entities have) advised the applicable Obligors is available for utilisation, provided that, if and for so long as there is, following the notification to the Treasury in a Quarterly Statement of any Loss in respect of that Covered Asset, an absence of reasonable evidence as to the facts that need to be known in order to calculate the Advised Amount with respect to that Covered Asset, the Advised Amount with respect to that Covered Asset shall be deemed to be zero. 6.9 Save as otherwise provided in these Conditions, the "Outstanding Amount" of a Covered Asset on any day means an amount denominated in the Covered Amount Currency of that Covered Asset equal to the sum (without double counting) of: (A) the aggregate outstanding principal amount (if any) of that Covered Asset on that day (after taking into account any reduction in the aggregate outstanding principal amount on that day) and shall exclude: (i) any interest, fee, premium or other non-principal sum which has accrued or is payable in respect of that Covered Asset (save to the extent it was capitalised on or before 31 December 2008 or capitalised in respect of an overdraft), provided that the exclusion of such nonprincipal sums shall not apply to (i) any outstanding principal amount that was drawn to pay such non-principal sums in cash before the Trigger Date and (ii) in the case only of a Covered Asset within the "Consumer Finance" or "Residential Mortgage" Covered Asset Class, any outstanding principal amount representing the premium in respect of a related loan or mortgage payment protection insurance policy; and (ii) any amount payable or paid by the applicable Covered Entity or Covered Entities (or, in the case of a Covered Asset that is the subject of a Permitted Arrangement, the relevant Applicable Entity or Applicable Entities) pursuant to a Covered Liability falling within Condition 6.23(A)(i) (if and to the extent such amount would, but for this subparagraph (ii), be Outstanding regarded as an outstanding principal amount) (and without prejudice to paragraph (B) below); and (B) in the case of a Covered Asset which is or includes a Covered Liability falling within Amount (OA) Condition 6.23(A)(i), the aggregate amount which the applicable Covered Entity or Covered Entities have (or, in the case of a Covered Asset that is the subject of a Permitted Arrangement, the relevant Applicable Entity or Applicable Entities have) paid pursuant to such Covered Liability and for which the applicable Covered Entity or Covered Entities have or relevant Applicable Entity has (as the case may be) neither been reimbursed, nor waived (as such term is defined in Condition 5.2) their or its right to reimbursement, in each case as at that day. 6.10 If and to the extent that, on or after the Trigger Date in respect of a Covered Asset (or, if later, 31 December 2008), any payment which had the effect of reducing the Outstanding Amount of that Covered Asset becomes repayable as a result of Applicable Law which is binding on the applicable Covered Entity or Covered Entities or relevant Applicable Entity (as the case may be) or in accordance with the terms of the Covered Asset (including equalisation, turnover or loss-sharing provisions) and is repaid (including by way of set-off or true-up), the amount of such repayment shall be deemed to be added for the purposes of Conditions 6.1, 6.22 and 6.38 to the Outstanding Amount of that Covered Asset on its Trigger Date (or, if later, 31 December 2008) and (if and to the extent necessary) such adjustments shall be made pursuant to and in accordance with Condition 8.7 as are required to give effect to such deemed addition. 6.23 A "Covered Liability" means a Covered Asset (other than a Derivative Agreement) which is (or to the extent it includes): (A) an actual or contingent liability of a Covered Entity (or, in the case of a Covered Asset that is the subject of a Permitted Arrangement, a relevant Applicable Entity) to pay money: (i) under (or by way of reimbursement or indemnification of another Covered Liability person's obligations under) a letter of credit, guarantee, performance bond or analogous instrument issued or granted on or before the Trigger Date; (ii) under (or by way of reimbursement or (CL) indemnification of another person's obligations under) a letter of credit, guarantee, performance bond or analogous instrument issued or granted after the Trigger Date pursuant to a binding commitment to do so; or (iii) by way of the advance of money under a binding commitment to lend; or (B) an undrawn Overdraft 18

\

Appendix 2

(Paper titled “Quarterly Statement Data Reporting: Division or

Consolidation of Assets or Exposures”)

Appendix 2 Quarterly Statement Data Reporting: Division or Consolidation of Assets or Exposures

Asset Continuity: Introduction Over time, the structure of a Covered Asset may change. This may take many forms from a simple debt consolidation (where many Covered Assets are replaced by one new asset / component); to the more complex arrangements (for example where many Covered Assets are replaced by many new components. ) Also under the Consumer Finance approach, where new sub-assets have been opened post accession. In each case RBSG must consider whether the Asset(s) are still covered under the Scheme and satisfy the Asset Continuity Requirements. As this paper focuses on Quarterly Statement reporting requirements, it is assumed in each case that Covered Assets remain covered under the Scheme and the Asset Continuity Requirements have not been breached. Purpose: The purpose of this paper is to outline the proposed reporting treatment that would apply in each of the asset continuity scenarios in relation to the Quarterly Statement: Consumer Finance [] Consumer Finance Customer View -- see slides 10-12 Non Consumer Finance [] Debt split (One to Many) -- see slide 3 [] Debt consolidation (Many to One) -- see slide 4 [] Complex debt rearrangements (Many to Many) -- see slide 5 and 6 There are also other factors that may impact any of the above non consumer finance scenarios. These have been illustrated separately and are: [] Variable Cover Termination Dates -- see slide 7 [] Combining Covered and Non Covered Assets -- see slide 8 Non Consumer Finance Examples: To illustrate the proposed approach, examples have been provided for each scenario (see above) . In order to simplify the examples and clearly demonstrate the principles to be applied, the following assumptions have been made: * Assets are not Rollover Assets and do not contain an overdraft. * The Original Maximum Exposure (OME) is assumed to be the equal to the value of the Initial Data Covered Amount for each Asset. In reality the OME is calculated in accordance with the expected payment profile of the Covered Asset per the Asset's terms in place at 31/12/08. The notes as outlined in Appendix A illustrate the further details and rules that need to be considered in each case 2 Legend for all examples: ===================================================================================================== Acronym Description ------- --------------------------------------------------------------------------------------------- OA Outstanding Amount ------- --------------------------------------------------------------------------------------------- CA Covered Amount ------- --------------------------------------------------------------------------------------------- R Recoveries (note these generally occur post-Trigger ------- --------------------------------------------------------------------------------------------- CL Covered Liabilities (note CL arises post-Trigger ------- --------------------------------------------------------------------------------------------- AE Actual Exposure (component of CA calculation taken day prior to Initial Event Date) ------- --------------------------------------------------------------------------------------------- OME Original Maximum Exposure (component of CA calculation taken day prior to Initial Event Date)

Asset Continuity: Debt Split (One to Many) Requirement: For the purposes of the Quarterly Statement, regardless of changes to an asset's components, the Triggered Asset is to be reported in line with the asset as specified in the Initial Data. Treatment: Where a single asset is refinanced into more than one account, the approach is to sum the relevant values for each of the relevant accounts (BCAID's) and report as a single APS Covered Asset ID (ACAID) . Example: Single ACAID and single corresponding BCAID was reported in the Initial Data. Asset subsequently refinanced into 3 separate loans (3 new BCAID's) . Initial Data: Data at Trigger Date: Quarterly Statement Reporting: OA = [pound]300 BCAID : 2 AE = [pound]400 R = [pound]100 CL = [pound]50 OA = [pound]500 (300 + 100 + 100) OA = [pound]100 BCAID : 3 CA = [pound]1,000 -- see table AE = [pound]300 ACAID : A ACAID : A R = [pound]300 (100 + 100 + 100) R = [pound]100 Debt Split BCAID : 1 CL = [pound]0 CL = [pound]100 (50 + 0 + 50) Covered Amt = [pound] 1,200 OA = [pound]100 BCAID : 4 AE = [pound]300 R = [pound]100 CL = [pound]50 OA = [pound]500 TOTAL BCAID's AE = [pound]1,000 R = [pound]300 CL = [pound]100 Calculation of Reported Covered Amount ACAID AE OME CA (lower of AE and OME) A [pound]1,000 [pound]1,200 [pound]1,000 (400 + 300 + 300) For illustrative purposes, the OME in the above example is assumed to be the same as the Initial Data Covered Amount. See notes 4 and 5 in Appendix A for rules pertaining to Covered Amount calculation. 3

Asset Continuity: Debt Consolidation (Many to One) Debt consolidation may occur for example where there is a direct refinancing or where an additional drawing is made and there is an obligation to use the proceeds to pay out the original Assets. Requirement: Regardless of changes to an asset's components, the Triggered Asset is to be reported in line with the asset as specified in the Initial Data. This means that where Covered Assets have been consolidated into a single asset, the assets are to be reported in the Quarterly Statement as if the consolidation had not occurred. Treatment: Strict interpretation of the Rules would indicate that the consolidated asset could be seen as a continuation of all three original Covered Assets, and therefore the values for the consolidated asset could be applied individually across the original Covered Assets. (eg Outstanding Amount of 500 could be applied to each asset separately. Therefore total claim would be 1500, subject to covered amount cap.) However, given the loss in reality would only arise in relation to the consolidated asset, the proposed treatment is to apportion this asset's values across each of the 'original' individual Covered Assets. This will be done on the basis of the percentage split of the Initial Data Covered Amount for each of the individual Covered Assets. This treatment will ensure consistency of approach between PAD and QS, and between the various asset continuity scenarios. Initial Data: Data at Trigger Date: ACAID : A BCAID 1 Covered Amt = 300 (30% of total) 30% OA = [pound]500 Debts consolidated AE = [pound]700 BCAID : 4 30% ACAID : B R = [pound]100 BCAID 2 CL = [pound]200 40% Covered Amt = 300 (30% of total) ACAID : C BCAID 3 Calculation of Reported Covered Amount Covered Amt = 400 ACAID AE OME CA (lower of AE (40% of total) and OME) A [pound]210 (700 * 30%) [pound]300 [pound]210 B [pound]210 (700 * 30%) [pound]300 [pound]210 C [pound]280 (700 * 40%) [pound]400 [pound]280 TOTAL ASSETS Covered Amt = [pound]1,000 TOTAL ASSETS [pound]700 [pound]1,000 [pound]700 Quarterly Statement Reporting: OA = [pound]150 (500 * 30%) ----------------------------- ACAID : A CA = [pound]210 -- see table ----------------------------- R = [pound]30 (100 * 30%) (30% of total BCAID values) ----------------------------- CL = [pound]60 (200 * 40%) ============================= OA = [pound]150 (500 * 30%) ----------------------------- ACAID : B CA = [pound]210 -- see table ----------------------------- R = [pound]30 (100 * 30%) (30% of total BCAID values) ----------------------------- CL = [pound]60 (200 * 30%) ============================= OA = [pound]200 (500 * 40%) ----------------------------- ACAID : C CA = [pound]280 -- see table ----------------------------- R = [pound]40 (100 * 40%) (40% of total BCAID values) ----------------------------- CL = [pound]80 (200 * 40%) ============================= OA = [pound]500 ----------------------------- CA = [pound]700 ----------------------------- TOTAL ASSETS R = [pound]100 ----------------------------- CL = [pound]200 --------------------------- ----------------------------- For illustrative purposes, the OME in the above example is assumed to be the same as the Initial Data Covered Amount. See notes 4 and 5 in Appendix A for rules pertaining to Covered Amount calculation. 4

Asset Continuity: Complex Debt Rearrangement (Many to Many) Requirement: For the purposes of the Quarterly Statement, regardless of changes to an asset's components, the Triggered Asset is to be reported in line with the asset as specified in the Initial Data. Treatment: In line with the one to many approach, the restructured assets values will be apportioned to each of the 'original' Covered Assets. The values will be apportioned on the basis of the percentage split of the Initial Data Covered Amount for each of the individual Covered Assets. This treatment will ensure consistency of approach between Post Accession Data and QS; and also between the various asset continuity scenarios. Example 1: Two loans converted into three. Values for each individual BCAID are ascertained and added to provide overall BCAID total for each value. Each value is then apportioned to each ACAID on the basis of the Covered Amount as reported for each ACAID in the Initial Data. In this example further monies have been advanced upon refinancing, and the Outstanding Amount and Actual Exposure are now greater than the Initial Data values. Outstanding Amount at Trigger is [pound]1,100 compared to [pound]800 at Initial Data. Note that the Loss is capped by the Covered Amount (in this case [pound]1k), and all post-Trigger Recoveries received on the replacement assets must be reported. Initial Data: ACAID : A BCAID : 1 Covered Amt = 600 (60% of total) Outstanding Amt = 500 ACAID : B BCAID : 2 Covered Amt = 400 (40% of total) Outstanding Amt = 300 TOTAL ASSETS Covered Amt = [pound]1,000 Outstanding Amt = [pound]800 Debt Split Data at Trigger Date: OA = [pound]500 BCAID : 3 AE = [pound]600 R = [pound]100 CL = [pound]0 OA = [pound]300 BCAID : 4 AE = [pound]300 R = [pound]100 CL = [pound]0 OA = [pound]300 BCAID : 5 AE = [pound]300 R = [pound]0 CL = [pound]100 TOTAL BCAID's OA = [pound]1,100 AE = [pound]1,200 R = [pound]200 CL = [pound]100 60% 40% QS Reporting: OA = [pound]660 (1100 * 60%) ACAID : A CA = [pound]600 -- see below R = [pound]120 (200 * 60%) (60% of total BCAID value) CL = [pound]60 (100 * 60%) OA = [pound]440 (1100 * 40%) ACAID : B CA = [pound]400 -- see below R = [pound]80 (200 * 40%) (40% of total BCAID value) CL = [pound]40 (100 * 40%) OA = [pound]1,100 TOTAL ASSETS CA = [pound]1,000 R = [pound]200 CL = [pound]100 Calculation of Reported Covered Amount ------------ -------------------------------------- ----------------- ACAID AE OME CA (lower of AE and OME) ------------ ------------------------- ------------ ----------------- A [pound]720 (60% * 1,200) [pound]600 [pound]600 ------------ ------------------------- ------------ ----------------- B [pound]480 (40% * 1,200) [pound]400 [pound]400 ------------ ------------------------- ------------ ----------------- TOTAL ASSETS 1,200 [pound]1,000 [pound]1,000 ------------ ------------------------- ------------ ----------------- For illustrative purposes, the OME in the above example is assumed to be the same as the Initial Data Covered Amount. See notes 4 and 5 in Appendix A for rules pertaining to Covered Amount calculation. 5

Asset Continuity: Complex Debt Rearrangement (Many to Many) Example 2: Three loans is converted into two. the Covered Amount reported in the Initial Data. Same methodology applied -- values are ascertain for each individual BCAID and the total is apportioned on the basis of Initial Data: ACAID : A BCAID : 1 Covered Amt = 700 (50% of total) ACAID : B BCAID : 2 Covered Amt = 350 (25% of total) ACAID : C BCAID : 3 Covered Amt = 350 (25% of total) TOTAL ASSETS Covered Amt = [pound]1, 400 Data at Trigger Date: OA = [pound]400 BCAID : 4 AE = [pound]500 R = [pound]50 CL = [pound]0 OA = [pound]200 BCAID : 5 AE = [pound]300 R = [pound]50 CL = [pound]100 OA = [pound]600 Total BCAID's AE = [pound]800 R = [pound]100 CL = [pound]100 50% 25% 25% Quarterly Statement Reporting: OA = [pound]300 (600 * 50%) ACAID : A CA = [pound]400 -- see below 50% of total BCAID value R = [pound]50 (100 * 50%) CL = [pound]50 (100 * 50%) OA = [pound]150 (600 * 25%) ACAID : B CA = [pound]200 -- see below R = [pound]25 (100 * 25%) 25% of total BCAID value CL = [pound]25 (100 * 25%) OA = [pound]150 (600 * 25%) ACAID : C CA = [pound]200 -- see below R = [pound]25 (100 * 25%) 25% of total BCAID value CL = [pound]25 (100 * 25%) TOTAL ASSETS OA = [pound]600 CA = [pound]800 R = [pound]100 CL = [pound]100 Calculation of Reported Covered Amount ----------------------------------------------------------------- ACAID AE OME CA (lower of AE ------------ ---------------------- ------------ ---------------- and OME) ------------ ---------------------- ------------ ---------------- A [pound]400 (800 * 50%) [pound]700 [pound]400 ------------ ---------------------- ------------ ---------------- B [pound]200 (800 * 25%) [pound]350 [pound]200 ------------ ---------------------- ------------ ---------------- C [pound]200 (800 * 25%) [pound]350 [pound]200 ------------ ---------------------- ------------ ---------------- TOTAL ASSETS 800 [pound]1,400 [pound]800 For illustrative purposes, the OME in the above example is assumed to be the same as the Initial Data Covered Amount. See notes 4 and 5 in Appendix A for rules pertaining to Covered Amount calculation. 6

Asset Continuity: Variable Cover Termination Dates (CTD's) In each Asset Continuity scenario, it is likely that the Cover Termination Dates of the original Covered Assets will be different. The values of the replacement asset are apportioned in line with existing proposals, however the validity of reporting in respect of the Cover Termination Date is examined for each Asset. Where the Initial Event Date as determined by the replacement asset is after the Cover Termination Date of any of the original Covered Assets, that Asset cannot reported as Triggered. Similarly, Recoveries and Covered Liabilities apportioned to that Asset are not reported. Though this concept is illustrated below using the many to one scenario below, it would equally apply across all Asset Continuity scenarios (one to many, many to one, many to many). Initial Data: ACAID : A BCAID 1 Covered Amt = 300 (30% of total) CTD = 15/02/2010 ACAID : B BCAID 2 Covered Amt = 300 (30% of total) CTD = 31/12/2015 ACAID : C BCAID 3 Covered Amt = 400 (40% of total) CTD = 15/03/2011 TOTAL ASSETS Covered Amt = [pound]1,000 Debts consolidated Data at Trigger Date: OA = [pound]500 BCAID : 4 AE = [pound]700 Initial Event Date = 10/06/2010 R = [pound]100 CL = [pound]200 30% 30% 40% Quarterly Statement Reporting: Not reported OA = [pound]150 (500 * 30%) ACAID : A CA = [pound]210 -- see table R = [pound]30 (100 * 30%) (30% of total BCAID values) CTD = 15/02/2010 CL = [pound]60 (200 * 30%) OA = [pound]150 (500 * 30%) ACAID : B CA = [pound]210 -- see table R = [pound]30 (100 * 30%) (30% of total BCAID values) CTD = 31/12/2015 CL = [pound]60 (200 * 30%) OA = [pound]200 (500 * 40%) ACAID : C CA = [pound]280 -- see table R = [pound]40 (100 * 40%) (40% of total BCAID values) CTD = CL = [pound]80 (200 * 40%) TOTAL ASSETS OA = [pound]500 (Total includes ACAID A, CA = [pound]700 though note ACAID A not reported) R = [pound]100 CL = [pound]200 Calculation of Reported Covered Amount ================ ====================================== ========================= ACAID AE OME CA (lower of AE and OME) ---------------- ------------------------ ------------- ------------------------- A (not reported) [pound]210 (700 * 30%) [pound]300 [pound]210 (not reported) ---------------- ------------------------ ------------- ------------------------- B [pound]210 (700 * 30%) [pound]300 [pound]210 ---------------- ------------------------ ------------- ------------------------- C [pound]280 (700 * 40%) [pound]400 [pound]280 ---------------- ------------------------ ------------- ------------------------- TOTAL [pound]700 [pound]1,000 [pound]700 Total includes ACAID A, but note ACAID A is not reported Only ACAID B and C are reported as Triggered. For each of these Assets the Initial Event Date is before the Cover Termination Date. Reported values for these Assets are as listed above. ACAID A is not reported as Triggered. The Initial Event Date of the replacement asset is after ACAID A's Cover Termination Date. ACAID A not reported as Triggered. Recoveries and Covered Liabilities are also not reported for ACAID A. For illustrative purposes, the OME in the above example is assumed to be the same as the Initial Data Covered Amount. See notes 4 and 5 in Appendix A for rules pertaining to Covered Amount calculation. 7

Asset Continuity: Combining Covered and Non Covered Assets When combining Covered and Non Covered Assets the approach to apportionment is slightly different as RBS is unable to claim against the Non-Covered Asset. To enable the calculation of the reportable values for the Covered Assets, the limit (as per Risk Management systems) immediately prior to refinancing must be obtained for all of the assets involved in the refinancing. This will be used to determine the proportion of the replacement asset that is covered under the Scheme. It is this covered portion that will be allocated across the original Covered Assets. The covered element will be allocated to the Covered Assets, proportionally based on the Initial Data Covered Amounts for those Assets. These rules would apply across every Asset Continuity scenario, not just the one to many scenario as illustrated below. Initial Data: ACAID : A BCAID : 1 Covered Amt = 600 (60% of total) ts ACAID : B BCAID : 2 Covered Amt = 400 Covered Asse (40% of total) TOTAL COVERED ASSETS Covered Amt = [pound]1,000 Asset : 3 Assets (non covered asset) Non Covered Data immediately prior to refinancing:* ACAID : A BCAID : 1 Limit* = 300 (25% of total) ACAID : B BCAID : 2 Limit* = 300 (25% of total) TOTAL COVERED ASSETS = [pound]600 (50% of total) Asset : 3 Limit* = 600 (50% of total) TOTAL ASSETS TO BE CONSOLIDATED = [pound]1,200 Data at Trigger Date: Total replacement asset OA = [pound]800 AE = [pound]1,000 50 % covered BCAID : 4 R = [pound]100 CL = [pound]100 Covered Portion OA = [pound]400 AE = [pound]500 R = [pound]50 CL = [pound]50 60 % 40 % QS Reporting: ACAID : A OA = [pound]240 (400 * 60%) CA = [pound]300 -- see table (60% of covered portion) R = [pound]30 (50 * 60%) CL = [pound]30 (50 * 60%) ACAID : B OA = [pound]160 (400 * 40%) CA = [pound]200 -- see table R = [pound]20 (50 * 40%) (40% of covered portion) CL = [pound]20 (50 * 40%) OA = [pound]400 TOTAL COVERED ASSETS CA = [pound]500 R = [pound]50 CL = [pound]50 50% of the values of BCAID 4 are attributable to Covered Assets. Covered portion allocated to Covered Assets based on proportion of Initial Data Covered Amount (60/40 split in this example) Calculation of Reported Covered Amount --------------------- ----------------------------------------- ------------------- ACAID AE of Covered Portion OME CA (lower of AE and --------------------- ------------------------- --------------- ------------------- OME) --------------------- ------------------------- --------------- ------------------- A [pound]300 (60% * 500) [pound]600 [pound]300 --------------------- ------------------------- --------------- ------------------- B [pound]200 (40% * 500) [pound]400 [pound]200 --------------------- ------------------------- --------------- ------------------- BCAID 3 - Non Covered Not applicable Not applicable Not applicable Asset --------------------- ------------------------- --------------- ------------------- TOTAL: [pound]500 [pound]1,000 [pound]500 --------------------- ------------------------- --------------- ------------------- Note: In calculating the covered portion the limit as outlined above is to be obtained immediately prior to refinancing. This means the limit per the Risk Management Systems as at the date the monies were transferred. The limit in this case does not refer to the Actual Exposure required for the Covered Amount calculation (the Actual Exposure for QS must exclude interest, fees, charges etc unless capitalised on or before 31/12/08 or capitalised in respect of an overdraft. ) For illustrative purposes, the OME in the above example is assumed to be the same as the Initial Data Covered Amount. See also notes 4 and 5 overleaf. 8

Asset Continuity: Appendix A (Notes) The following notes to all previous examples unless otherwise stated: 1) Triggers (one to many, many to many examples): a) Failure to pay -- the first 'Trigger' for a part of the Covered Asset will be a Trigger for the whole Covered Asset (except in the case of Long Dated Assets or Limited Recourse Assets for which the additional Trigger tests must be applied to the Covered Asset as a whole b) Bankruptcy -- A 'Trigger' in relation to part of the Covered Asset would generally give rise to a Trigger as a whole. In relation to "charging off" of an asset in the Consumer Finance or Residential Mortgage Asset Classes however, 'charging off' of part of the Covered Asset would not give rise to a Trigger in respect of the Covered Asset as a whole. In practice, it may be unusual for one account in respect of such a Covered Asset to remain open when the others are closed. c) Restructuring A 'Trigger' in relation to part of the Covered Asset would generally give rise to a Trigger as a whole, except where the 'Trigger' arises from the Restructuring Event in condition 5.18F(release or discharge of all Security) . The fact that this is satisfied in relation to part of a Covered Asset does not entail a release or discharge of all Security in respect of the Covered Asset as a whole. 2) Triggers (many to one examples): It is assumed that a 'Trigger' of the BCAID would represent a Trigger of all the original Covered Assets (ACAIDs) . For example: - Failure to Pay under BCAID D (the replacement asset) would represent a Failure To Pay across all the original ACAID's. - Given that it is the counterparty which becomes Bankrupt, this would apply across all the original ACAID's 3) Variable Cover Termination Dates: The Cover Termination Date (CTD) for each of the original Covered Assets needs to be examined as illustrated in slide 7. Eligibility for Rollover would need to be considered for each of the original Covered Assets. The Cover Termination Date for assets that have been subject to a Rollover is deemed to be 31 December 2013 (see also note 5). 4) Covered Amount calculation: To calculate the Covered Amount, the Actual Exposure (AE) is sourced by reference to the relevant BCAID's, and apportioned to the Covered Assets as outlined in each of the relevant examples. The Original Maximum Exposure (OME) sourced by reference to the original Covered Asset(s) and is calculated in accordance with the expected payment profile per the Asset's terms in place at 31/12/08. The lower of the AE and OME reported as the Covered Amount in line with the Covered Amount requirement. If the Covered Asset was an Overdraft, the Covered Amount is calculated by reference to the Advised Amount and Imputed Maximum Exposure in line with the Scheme Rules. Further examples relating to Overdrafts will be developed upon finalisation of the Operational Accounts practice statement. Note also the Rollover requirement below. 5) Rollovers: Eligibility for Rollover will need to be considered for each of the original Covered Assets on an individual basis. Where the original Covered Asset has been subject to a Rollover, the Actual Exposure is to be apportioned in accordance with the methodology outlined in the relevant examples, and the Rules pertaining to calculation of Covered Amount for Rollovers is to be applied. 6) Additional lending : Where additional lending forms part of the refinancing, this will be included as part of the Outstanding Amount. Note that Loss is capped by the Covered Amount however Realisations would need to be reported on the full amount of the refinanced asset (ie including the additional lending). 7) Refinancing to an overdraft: Where the Covered Asset is refinanced into an overdraft, the approach outlined in the Operational Accounts practice statement is to be applied from that point. Note that treatment of Operational Accounts is still under discussion with the APA. 8) Realisations: In each example, the amounts pertaining to Realisations indicate the raw data as calculated at the Divisional level. It assumes correct allocation of Realisations has taken place (approach to be outlined in the Allocation of Recoveries practice statement). Any pro-rating necessary under S7.26C will be performed by the Scheme Ledger and correct pro- rated values reported to HMT. 9) Refinancings post Trigger: Realisations, Expenses and Covered Liabilities would need to be reported for any post-Trigger amendments in line with the post-Trigger structure in existence at applicable QS quarter end. 10) Limitations: As outlined in the PAD asset continuity paper, the solutions outlined in this document may result in loss of Cover in some cases. Please refer to 'Asset Continuity in Post Accession Data: Limitations' for more information. 9

Asset Continuity: Consumer Finance Overview: Consumer Finance is slightly different to other asset classes in that there may be many sub-assets that existed within the Covered Asset at Initial Data. The combination of these sub-assets may vary over time, as sub-assets are closed or new sub-assets are opened. This raises a question as to how these subcomponents should be treated and "rolled up" for reporting purposes. Proposed Treatment: Out of Scheme : Accounts / sub-assets that were deemed to be outside the Scheme at Initial Data will continue to be excluded for reporting purposes on the basis that they were not part of the Covered Asset as reported in Initial Data. This includes products that were out of scope (eg credit cards, savings accounts) or other sub-assets that were not included in the Covered Asset pool (eg overdraft deemed low risk at the time of Initial Data). New sub-assets at Trigger Date: Where new sub-assets have been opened since 31/12/08 but on or before Trigger Date, these sub-assets will be included for reporting purposes. This means that the Outstanding Amount is included in the loss claim (capped by 31/12/08 Covered Amount), and any Recoveries and Covered Liabilities arising will be reported. New sub-assets after Trigger Date: As no Loss was claimed for these sub-assets, Recoveries and Covered Liabilities will not be reported. The example overleaf illustrates the above proposed treatment. Note: Similar concept exists for Group Accounts (which may or may not be Consumer Finance Asset Class), in that a single Covered Asset exists which is comprised of a number of sub-assets. The number of children (sub-assets) under the master account (Covered Asset) will change over time. It is expected that a similar approach will apply. 10

Asset Continuity: Consumer Finance ------------------------------------------------------------------------------------------------------------------------------------ ---------------------------------------- Example: In line with the proposal overleaf, all assets outside the scheme are not included for reporting purposes. Loan 2, which was opened post 31/12/08 but before Trigger Date is included. The reported values for the ACAID being the sum of the individual sub-assets (loan 1, Overdraft 1 and loan 2 in this example) (2). Similarly , any Recoveries arising post-Trigger and Covered Liabilities will be reported in the applicable Quarterly Statement. Recoveries and Covered Liabilities arising from Loan 3 however, will not be included on the basis that this sub-asset was not included in the loss claim at Trigger Date.(4) Formal feedback from APA yet to be provided. Initial Data ACAID : Customer 1 BCAID : Custome omer r 1 Loan 1 Scheme Accounts In Overdraft 1 Legend: OA = Outstanding Amount at Trigger Date CA = Covered Amount at Initial Event Date R = Recoveries (note Recoveries generally occur post Trigger) CL = Covered Liabilities (note CL arises post Trigger) AE = Actual Exposure (component of CA calculation taken day prior to Initial Event Date) Trigger Date OA = [pound]900 ACAID : Customer 1 CA = [pound]1,200 BCAID : Customer 1 R = [pound]300 OA = [pound]300 Loan 1 AE = [pound]500 R = [pound]100 OA = [pound]300 Overdraft 1 CA = [pound]400 R = [pound]100 OA = [pound]300 Loan 2 AE = [pound]300 R = [pound]100 Post Trigger Date R = [pound]250 ACAID : Customer 1 BCAID : Customer 1 CL = [pound]400 R = [pound]0 Loan 1 CL = [pound]100 R = [pound]100 Overdraft 1 CL = [pound]0 R = [pound]50 Loan 2 CL = [pound]0 Not included in Loss claim at Trigger Date: Loan 3 R and CL not reported (not reported) Outside Covered Account C: Credit Card Asset pool Outside Covered Account D: Overdraft 2 Asset pool Account s Outside Scheme Outside Covered Account E: Savings Ac Asset pool No claim: Outside Account C: Credit Card Covered Asset pool No claim: Outside Account D: Overdraft 2 Covered Asset pool No Claim: Outside Account E: Savings Ac Covered Asset pool R and CL not Account C: Credit Card reported: Outside Covered Asset pool R and CL not Account D: Overdraft 2 reported: Outside Covered Asset pool R and CL not Account E: Savings Ac reported: Outside Covered Asset pool Inclusion of Overdrafts is included in the above for illustration purposes only. Reporting of Overdrafts is covered in the Operational Accounts paper. For additional notes see overleaf. 11

Asset Continuity: Consumer Finance Notes relating to example overleaf: 1) Triggers: a) Failure to pay -- the first 'Trigger' for a part of the Covered Asset will be a Trigger for the whole Covered Asset (except in the case of Long Dated Assets or Limited Recourse Assets for which the additional Trigger tests must be applied to the Covered Asset as a whole b) Bankruptcy -- A 'Trigger' in relation to part of the Covered Asset would generally give rise to a Trigger as a whole. In relation to "charging off" of an asset in the Consumer Finance Asset Class however, 'charging off' of part of the Covered Asset would not give rise to a Trigger in respect of the Covered Asset as a whole. In practice, it may be unusual for one account in respect of such a Covered Asset to remain open when the others are closed. c) Restructuring -- A 'Trigger' in relation to part of the Covered Asset would generally give rise to a Trigger as a whole, except where the 'Trigger' arises from the Restructuring Event in condition 5.18F(release or discharge of all Security) . The fact that this is satisfied in relation to part of a Covered Asset does not entail a release or discharge of all Security in respect of the Covered Asset as a whole. 2) Where the Cover Termination Date of the Covered Asset is before the Initial Event Date, the Asset is not reported as Triggered, and therefore Realisations and Covered Liabilities are not reported. 3) Covered amount components are generally the Original Maximum Exposure (taken by reference to 31/12/08 expected amortisation profile of the sub-asset), and the Actual Exposure by reference to the relevant sub asset as at day prior to Initial Event Date. 4) Treatment is to be applied regardless of whether the 'new' sub- asset represents refinancing or new lending. 5) In some Divisions there will be different Covered Assets (Customers) which are the same customer. This arises where the Customer has assets across several brands -- eg Natwest, RBS, Direct Line (eg. direct loans). Where this occurs, any 'new' assets within a brand will be aggregated into the relevant Customer (Covered Asset) within that brand. 12