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RBS Group • Annual Report and Accounts 2006
Operating and financial review
Risk management
Governance framework
The Board sets the overall risk appetite and philosophy for the Group. Various Board and executive sub-committees support these
goals, as follows:
•Group Audit Committee (“GAC”) is a committee comprising
independent non-executive directors that supports the Board
in carrying out its responsibilities for financial reporting
including accounting policies and in respect of internal
control and risk assessment. The Group Audit Committee
monitors the ongoing process of the identification, evaluation
and management of all significant risks throughout the
Group. The Committee is supported by Group Internal Audit
which provides an independent assessment of the design,
adequacy and effectiveness of the Group’s internal controls.
•Advances Committee is a board committee that deals with
all transactions that exceed the Group Credit Committee’s
delegated authority.
In addition to the responsibilities at Board level, operational
authority and oversight is delegated to the Group Executive
Management Committee (“GEMC”), which is responsible for
implementing a risk management framework consistent with
the Board’s risk appetite. The GEMC, in turn, is supported by
the following committees:
•Group Risk Committee (“GRC”) is an executive risk
governance committee which recommends and approves
limits, processes and policies in respect of the effective
management of all material non-balance sheet risks across
the Group.
•Group Credit Committee (“GCC”) is responsible for
approving credit proposals under authority delegated to it
by the Board. Credit proposals exceeding the authority of
GCC are referred to the Advances Committee. The GCC in
turn delegates authority to divisional credit committees.
•Group Asset and Liability Management Committee
(“GALCO”), is an executive committee which is responsible
for reviewing the balance sheet, funding, liquidity, structural
foreign exchange, capital adequacy and capital raising
across the Group as well as interest rate risk in the banking
book. In addition, GALCO monitors and reviews external,
economic and environmental changes affecting such risks.
These Committees are supported by Group Internal Audit and
also by two dedicated group level functions, Group Risk
Management (“GRM”), which has responsibility for credit,
market, regulatory and enterprise risk and Group Treasury
which is responsible for the management of the Group’s
balance sheet, capital raising, intra group credit exposure,
liquidity and hedging policies. Both functions report to GEMC
and the Group Board through the Group Finance Director and
play an active role in assessing and monitoring the
effectiveness of the divisional risk management functions.
Heads of Group Risk Management and Internal Audit have
direct access to the Group Chief Executive and the Chairman
of the Group Audit Committee.
Group Audit Committee
Group Board of Directors
Advances Committee
Group Executive
Management Committee
Group Credit Committee
Group Asset and
Liability Management
Committee
Group Risk Committee
Board Committees
Executive Committees
Key