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The Royal Bank of Scotland Group plc

With regards to definition of (f) ‘hold value’, an element of subjective judgment should be included as regards the reasonably attainable cash flow stream, discount rates, etc. The use of judgement by an appropriately experienced expert is necessary, and the basis for determining the inputs to such valuation would need to be documented so that the judgement calls are evident.

With regards to definition of (i) ‘equity value’, no changes suggested although clarity that this is intended to refer to each individual share immediately following the resolution actions would be useful
We agree that, in terms of the equity valuation, generally accepted valuation methodology" is likely to be most appropriate as being too specific could result in having to use a valuation approach that is appropriate now but may not be in the future"
We agree that, where fundamental assumptions have changed, it is reasonable to expect these to be explicitly identified in communication with the market and other stakeholders. However, we would suggest that these are not made overly specific otherwise banks may be forced to disclose information that is irrelevant.
We agree that by wording in the form “likely to include, but not limited to”, means that this does not have to be a comprehensive list. “Deferred Tax” and “Pensions” are other areas that could be added further examples
We consider that, in the absence of facts and circumstances supporting the existence of additional losses, the buffer shall have a value of zero. If the valuations impose sufficient additional discount, especially with regard to the exit valuation, then no additional buffer would be appropriate. The provisional valuation should provide clarity where subjective judgement has been used, and the basis for approximating any discount.
Yes, the equity value, being an estimate of the market price for those shares that would result from generally accepted valuation methodologies informing the determination of the conversion rate or rates, is necessary to assure all holders of converted instruments of fair and equitable treatment.
See response to Q1(i).

We expect that in the event of resolution, there will be considerable uncertainty and the “assessed market price” could be influenced heavily by illiquidity in the market. As a result of this we believe that market value would be very challenging to estimate and the reliability of valuations could be called into question.
We agree that only contemporaneous evidence which might reasonably be expected to be available to the valuer should be considered. Information should only be permitted if it refers to facts and circumstances existing at the resolution date which could reasonably have been known at that date
We agree but there needs to be a definition of what constitutes ‘significant change’.
We believe the technical standards should provide further guidance to ensure that valuers and users of the information have clarity as to how the discount rates have been derived but that this should avoid prescribing an approach that might diminish in relevance overtime. It is important that rates are derived consistently within a jurisdiction and the RTS should consider including reference to where this mandate currently exists within a competent authority as it does in the UK through HMT.
No comments to make.
Yes, each creditor bailed in requires evidence of fair process and valuation. The valuer needs to have a prescribed set of valuations and accompanying disclosures to be provided, so that the expectations of creditors are met without favour.
The Royal Bank of Scotland Group plc