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Financial instruments - classification | 6 Months Ended
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Jun. 30, 2022
Financial instruments - classification |
Financial instruments - classification | 9. Financial instruments - classification The following tables analyse financial assets and liabilities in accordance with the categories of financial instruments in IFRS 9. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | Amortised | ​ | Other |  | ​
​ | ​ | MFVTPL | ​ | FVOCI | ​ | cost | ​ | assets |  | Total
Assets |  | £m |  | £m |  | £m |  | £m |  | £m
Cash and balances at central banks |  | ​ |  | ​ |  | 179,525 |  | ​ | ​ | 179,525
Trading assets | ​ | 65,604 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 65,604
Derivatives (1) | ​ | 109,342 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 109,342
Settlement balances |  | ​ | ​ | ​ | ​ | 10,294 | ​ | ​ | ​ | 10,294
Loans to banks - amortised cost |  | ​ |  | ​ |  | 10,668 |  | ​ | ​ | 10,668
Loans to customers - amortised cost (2) |  | ​ |  | ​ |  | 362,551 |  | ​ | ​ | 362,551
Other financial assets |  | 242 | ​ | 26,691 |  | 11,963 |  | ​ | ​ | 38,896
Intangible assets | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 6,869 | ​ | 6,869
Other assets |  | ​ | ​ | ​ | ​ | ​ |  | 8,542 | ​ | 8,542
Assets of disposal groups | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 14,187 | ​ | 14,187
30 June 2022 |  | 175,188 |  | 26,691 |  | 575,001 |  | 29,598 |  | 806,478
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Cash and balances at central banks | ​ | ​ | ​ | ​ | ​ | 177,757 | ​ | ​ | ​ | 177,757
Trading assets | ​ | 59,158 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 59,158
Derivatives (1) | ​ | 106,139 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 106,139
Settlement balances | ​ | ​ | ​ | ​ | ​ | 2,141 | ​ | ​ | ​ | 2,141
Loans to banks - amortised cost | ​ | ​ | ​ | ​ | ​ | 7,682 | ​ | ​ | ​ | 7,682
Loans to customers - amortised cost (2) | ​ | ​ | ​ | ​ | ​ | 358,990 | ​ | ​ | ​ | 358,990
Other financial assets | ​ | 317 | ​ | 37,266 | ​ | 8,562 | ​ | ​ | ​ | 46,145
Intangible assets | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 6,723 | ​ | 6,723
Other assets | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 8,242 | ​ | 8,242
Assets of disposal groups | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 9,015 | ​ | 9,015
31 December 2021 |  | 165,614 |  | 37,266 |  | 555,132 |  | 23,980 |  | 781,992
​ ​ ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Held-for- | ​ | ​ | ​ | Amortised | ​ | Other | ​ | ​
​ |  | trading |  | DFV |  | cost |  | liabilities |  | Total
Liabilities |  | £m | ​ | £m | ​ | £m | ​ | £m | ​ | £m
Bank deposits |  | ​ |  | ​ | ​ | 24,862 |  | ​ |  | 24,862
Customer deposits |  | ​ |  | ​ | ​ | 492,075 |  | ​ |  | 492,075
Settlement balances |  | ​ |  | ​ | ​ | 9,779 |  | ​ |  | 9,779
Trading liabilities | ​ | 74,345 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 74,345
Derivatives (1) |  | 102,719 |  | ​ | ​ | ​ |  | ​ |  | 102,719
Other financial liabilities |  | ​ |  | 1,779 | ​ | 45,965 |  | ​ |  | 47,744
Subordinated liabilities |  | ​ |  | 340 | ​ | 7,770 |  | ​ |  | 8,110
Notes in circulation | ​ | ​ | ​ | ​ | ​ | 2,947 | ​ | ​ | ​ | 2,947
Other liabilities (3) |  | ​ |  | ​ | ​ | 1,275 |  | 3,995 |  | 5,270
30 June 2022 |  | 177,064 |  | 2,119 | ​ | 584,673 |  | 3,995 |  | 767,851
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Bank deposits |  | ​ |  | ​ | ​ | 26,279 |  | ​ |  | 26,279
Customer deposits |  | ​ |  | ​ | ​ | 479,810 |  | ​ |  | 479,810
Settlement balances |  | ​ |  | ​ | ​ | 2,068 |  | ​ |  | 2,068
Trading liabilities |  | 64,598 |  | ​ | ​ | ​ |  | ​ |  | 64,598
Derivatives (1) |  | 100,835 |  | ​ | ​ | ​ |  | ​ |  | 100,835
Other financial liabilities |  | ​ |  | 1,671 | ​ | 47,655 |  | ​ |  | 49,326
Subordinated liabilities |  | ​ |  | 703 | ​ | 7,726 |  | ​ |  | 8,429
Notes in circulation | ​ | ​ | ​ | ​ | ​ | 3,047 | ​ | ​ | ​ | 3,047
Other liabilities (3) |  | ​ |  | ​ | ​ | 1,356 |  | 4,441 |  | 5,797
31 December 2021 |  | 165,433 |  | 2,374 | ​ | 567,941 |  | 4,441 |  | 740,189
​
(1) | Includes net hedging derivatives assets of £136 million (31 December 2021 - £44 million) and net hedging derivatives liabilities of £166 million (31 December 2021 - £120 million).
(2) | Includes finance lease receivables of £8,113 million (31 December 2021 - £8,531 million).
(3) | Includes lease liabilities of £1,189 million (31 December 2021 - £1,263 million) in amortised cost.
​ ​ Notes 9. Financial instruments - classification continued ​
​ | ​ | ​ | ​ | ​
​ | ​ | 30 June | ​ | 31 December
​ |  | 2022 |  | 2021
​ | ​ | £m | ​ | £m
Reverse repos |  | ​ |  |
Trading assets | ​ | 25,893 | ​ | 20,742
Loans to banks - amortised cost |  | 8 |  | 189
Loans to customers - amortised cost |  | 25,084 |  | 25,962
​ |  |  |  |
Repos |  | ​ |  |
Bank deposits |  | 4,720 |  | 7,912
Customer deposits |  | 19,195 |  | 14,541
Trading liabilities |  | 29,406 | ​ | 19,389
​ ​ ​ Notes 9. Financial instruments - valuation Disclosures relating to the control environment, valuation techniques and related aspects pertaining to financial instruments measured at fair value are included in the NatWest Group plc 2021 Annual Report on Form 20-F. Valuation, sensitivity methodologies and inputs at 30 June 2022 are consistent with those described in Note 11 to the NatWest Group plc 2021 Annual Report on Form 20-F. Fair value hierarchy The table below shows the assets and liabilities held by NatWest Group split by fair value hierarchy level. Level 1 are considered the most liquid instruments, and level 3 the most illiquid, valued using expert judgment and hence carry the most significant price uncertainty. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | 30 June 2022 | ​ | 31 December 2021
​ |  | Level 1 |  | Level 2 |  | Level 3 | ​ | Total |  | Level 1 |  | Level 2 |  | Level 3 | ​ | Total
​ | ​ | £m | ​ | £m | ​ | £m | ​ | £m | ​ | £m | ​ | £m | ​ | £m | ​ | £m
Assets |  |  |  |  |  | ​ | ​ |  |  |  |  |  |  | ​ | ​ |
Trading assets |  | ​ |  | ​ |  | ​ | ​ | ​ |  |  |  |  |  | ​ | ​ |
Loans |  | — |  | 40,722 |  | 642 | ​ | 41,364 |  | — |  | 33,482 |  | 721 | ​ | 34,203
Securities |  | 20,032 |  | 4,206 |  | 2 | ​ | 24,240 |  | 19,563 |  | 5,371 |  | 21 | ​ | 24,955
Derivatives |  | — |  | 108,349 |  | 993 | ​ | 109,342 |  | — |  | 105,222 |  | 917 | ​ | 106,139
Other financial assets |  | ​ |  | ​ |  | ​ | ​ | ​ |  | ​ |  | ​ |  | ​ | ​ | ​
Loans |  | — |  | 111 |  | 230 | ​ | 341 |  | — |  | 359 |  | 207 | ​ | 566
Securities |  | 18,879 |  | 7,521 |  | 192 | ​ | 26,592 |  | 28,880 |  | 7,951 |  | 186 | ​ | 37,017
Total financial assets held at fair value |  | 38,911 |  | 160,909 |  | 2,059 | ​ | 201,879 |  | 48,443 |  | 152,385 |  | 2,052 | ​ | 202,880
As a % of total fair value assets | ​ | 19 | % | 80 | % | 1 | % | ​ | ​ | 24 | % | 75 | % | 1 | % | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Liabilities |  |  |  |  |  | ​ | ​ |  |  |  |  |  |  | ​ | ​ |
Trading liabilities |  |  |  |  |  | ​ | ​ |  |  |  |  |  |  | ​ | ​ |
Deposits |  | — |  | 48,780 |  | 1 | ​ | 48,781 |  | — |  | 38,658 |  | 2 | ​ | 38,660
Debt securities in issue |  | — |  | 801 |  | 2 | ​ | 803 |  | — |  | 974 |  | — | ​ | 974
Short positions |  | 22,022 |  | 2,738 |  | 1 | ​ | 24,761 |  | 20,507 |  | 4,456 |  | 1 | ​ | 24,964
Derivatives |  | — |  | 101,972 |  | 747 | ​ | 102,719 |  | — |  | 100,229 |  | 606 | ​ | 100,835
Other financial liabilities |  | ​ |  | ​ |  | ​ | ​ | ​ |  | ​ |  | ​ |  | ​ | ​ | ​
Debt securities in issue |  | — |  | 1,237 |  | — | ​ | 1,237 |  | — |  | 1,103 |  | — | ​ | 1,103
Other deposits |  | — |  | 542 |  | — | ​ | 542 |  | — |  | 568 |  | — | ​ | 568
Subordinated liabilities |  | — |  | 340 |  | — | ​ | 340 |  | — |  | 703 |  | — | ​ | 703
Total financial liabilities held at fair value | ​ | 22,022 | ​ | 156,410 | ​ | 751 | ​ | 179,183 | ​ | 20,507 | ​ | 146,691 | ​ | 609 | ​ | 167,807
As a % of total fair value liabilities |  | 12 | % | 88 | % | 0 | % | ​ |  | 12 | % | 88 | % | 0 | % | ​
​
(1) | Level 1 - Instruments valued using unadjusted quoted prices in active and liquid markets, for identical financial instruments. Examples include government bonds, listed equity shares and certain exchange-traded derivatives.
Level 2 - Instruments valued using valuation techniques that have observable inputs. Observable inputs are those that are readily available with limited adjustments required. Examples include most government agency securities, investment-grade corporate bonds, certain mortgage products - including CLOs, most bank loans, repos and reverse repos, state and municipal obligations, most notes issued, certain money market securities, loan commitments and most OTC derivatives. Level 3 - Instruments valued using a valuation technique where at least one input which could have a significant effect on the instrument's valuation, is not based on observable market data. Examples include non-derivative instruments which trade infrequently, certain syndicated and commercial mortgage loans, private equity, and derivatives with unobservable model inputs.
(2) | Transfers between levels are deemed to have occurred at the beginning of the quarter in which the instrument was transferred.
(3) | For an analysis of debt securities held at mandatorily fair value through profit or loss by issuer as well as ratings and derivatives, by type and contract, refer to Risk and capital management – Credit risk.
​ Valuation adjustments When valuing financial instruments in the trading book, adjustments are made to mid-market valuations to cover bid-offer spread, funding and credit risk. These adjustments are presented in the table below. For further information refer to the descriptions of valuation adjustments within ‘Financial instruments – valuation’ on page 70 of the NatWest Group plc 2021 Annual Report on Form 20-F. ​
​ | ​ | ​ | ​ | ​
​ | ​ | 30 June | ​ | 31 December
​ | ​ | 2022 | ​ | 2021
​ |  | £m |  | £m
Funding – FVA |  | 121 |  | 90
Credit - CVA |  | 365 |  | 390
Bid - Offer |  | 120 |  | 113
Product and deal specific |  | 128 |  | 119
​ |  | 734 |  | 712
​
- | Valuation reserves comprising of credit valuation adjustments (CVA), funding valuation adjustment (FVA), bid-offer and product and deal specific reserves, increased to £734 million at 30 June 2022 (31 December 2021 – £712 million).
- | The net increase in FVA was driven by a net increase in the underlying derivative exposure, driven by an increase in interest rates. The increase in bid-offer was driven by an increase in risk and wider bid-offer spreads. The decrease in CVA was driven by a reduction in exposures, primarily due to increases in interest rates and trade exit activity, partially offset by the net impact of credit spreads widening and specific counterparty activity.
​ ​ Notes 9. Financial instruments – valuation continued Level 3 sensitivities The table below shows the high and low range of fair value of the level 3 assets and liabilities. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | 30 June 2022 | ​ | 31 December 2021
​ | ​ | Level 3 | ​ | Favourable | ​ | Unfavourable | ​ | Level 3 | ​ | Favourable | ​ | Unfavourable
​ |  | £m |  | £m |  | £m |  | £m |  | £m |  | £m
Assets | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Trading assets | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Loans |  | 642 |  | 10 |  | (10) |  | 721 |  | 10 |  | (10)
Securities |  | 2 |  | — |  | — |  | 21 |  | — |  | —
Derivatives |  | 993 |  | 60 |  | (60) |  | 917 | ​ | 60 |  | (70)
Other financial assets |  | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  | ​
Loans |  | 230 |  | 10 |  | (10) |  | 207 |  | 10 |  | (10)
Securities |  | 192 |  | 30 |  | (30) |  | 186 |  | 20 |  | (20)
Total financial assets held at fair value |  | 2,059 |  | 110 |  | (110) |  | 2,052 |  | 100 |  | (110)
​ |  |  |  |  |  | ​ |  |  |  |  |  |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |
Trading liabilities |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  | 1 |  | — |  | — |  | 2 |  | — |  | —
Debt securities in issue | ​ | 2 | ​ | — | ​ | — | ​ | — | ​ | — | ​ | —
Short positions |  | 1 |  | — |  | — |  | 1 |  | — |  | —
Derivatives |  | 747 |  | 30 |  | (30) |  | 606 |  | 30 |  | (30)
Total financial liabilities held at fair value |  | 751 |  | 30 |  | (30) | ​ | 609 |  | 30 |  | (30)
​ Alternative assumptions Reasonably plausible alternative assumptions of unobservable inputs are determined based on a specified target level of certainty of 90%. Alternative assumptions are determined with reference to all available evidence including consideration of the following: quality of independent pricing information considering consistency between different sources, variation over time, perceived tradability or otherwise of available quotes; consensus service dispersion ranges; volume of trading activity and market bias (e.g. one-way inventory); day 1 profit or loss arising on new trades; number and nature of market participants; market conditions; modelling consistency in the market; size and nature of risk; length of holding of position; and market intelligence. ​ Movement in level 3 assets and liabilities The following table shows the movement in level 3 assets and liabilities. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Half year ended 30 June 2022 | ​ | Half year ended 30 June 2021
​ | ​ | ​ | ​ | Other | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Other | ​ | ​ | ​ | ​
​ | ​ | Trading | ​ | financial | ​ | Total | ​ | Total | ​ | Trading | ​ | financial | ​ | Total | ​ | Total
​ | ​ | assets (1) | ​ | assets (2) | ​ | assets | ​ | liabilities | ​ | assets (1) | ​ | assets (2) | ​ | assets | ​ | liabilities
​ |  | £m |  | £m |  | £m |  | £m |  | £m |  | £m |  | £m |  | £m
At 1 January |  | 1,659 |  | 393 |  | 2,052 |  | 609 |  | 1,388 |  | 335 |  | 1,723 |  | 894
Amount recorded in the income statement (3) |  | 134 |  | (20) |  | 114 |  | 139 |  | (125) |  | 3 |  | (122) |  | (98)
Amount recorded in the statement of comprehensive income |  | — |  | (19) |  | (19) |  | — |  | — |  | 17 |  | 17 |  | —
Level 3 transfers in |  | 143 |  | — |  | 143 |  | 31 |  | 42 |  | 428 |  | 470 |  | 15
Level 3 transfers out |  | (101) |  | (1) |  | (102) |  | (36) |  | (68) |  | — |  | (68) |  | (116)
Purchases/originations |  | 352 |  | 67 |  | 419 |  | 154 |  | 168 |  | 10 |  | 178 |  | 114
Settlements/other decreases |  | (28) |  | — |  | (28) |  | (15) |  | (36) |  | (4) |  | (40) |  | (15)
Sales |  | (526) |  | — |  | (526) |  | (133) |  | (156) |  | (4) |  | (160) |  | (107)
Foreign exchange and other |  | 4 |  | 2 |  | 6 |  | 2 |  | (1) |  | (3) |  | (4) |  | (2)
At 30 June |  | 1,637 |  | 422 |  | 2,059 |  | 751 |  | 1,212 |  | 782 |  | 1,994 |  | 685
Amounts recorded in the income statement in respect of balances held at year end |  | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  | ​
- unrealised |  | 134 |  | (20) |  | 114 |  | 139 |  | (125) |  | 3 |  | (122) |  | (98)
​
(1) | Trading assets comprise assets held at fair value in trading portfolios.
(2) | Other financial assets comprise fair value through other comprehensive income, designated at fair value through profit or loss and other fair value through profit or loss.
(3) | Net losses of £5 million on trading assets and liabilities (30 June 2021 - £27 million) were recorded in income from trading activities. Net losses on other instruments of £20 million (30 June 2021 – £3 million gains) were recorded in other operating income and interest income as appropriate.
​ ​ Notes 9. Financial instruments – valuation continued Fair value of financial instruments measured at amortised cost on the balance sheet The following table shows the carrying value and fair value of financial instruments carried at amortised cost on the balance sheet. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Items where fair value |  | ​ |  | ​ |  | ​ |  | ​ |  | ​
​ | ​ | approximates | ​ | Carrying | ​ | ​ | ​ | Fair value hierarchy level
​ | ​ | carrying value | ​ | value | ​ | Fair value | ​ | Level 1 | ​ | Level 2 | ​ | Level 3
30 June 2022 | ​ | £bn | ​ | £bn | ​ | £bn | ​ | £bn | ​ | £bn | ​ | £bn
Financial assets |  | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  | ​
Cash and balances at central banks |  | 179.5 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Settlement balances | ​ | 10.3 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Loans to banks |  | 0.7 | ​ | 10.0 | ​ | 10.0 | ​ | — | ​ | 5.9 | ​ | 4.1
Loans to customers | ​ | ​ | ​ | 362.6 | ​ | 355.4 | ​ | — | ​ | 27.2 | ​ | 328.2
Other financial assets - securities |  | ​ | ​ | 12.0 | ​ | 11.7 | ​ | 4.7 | ​ | 2.1 | ​ | 4.9
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
31 December 2021 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Financial assets |  | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Cash and balances at central banks |  | 177.8 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Settlement balances |  | 2.1 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Loans to banks | ​ | 0.1 | ​ | 7.5 | ​ | 7.5 | ​ | — | ​ | 5.0 | ​ | 2.5
Loans to customers |  | ​ | ​ | 359.0 | ​ | 354.1 | ​ | — | ​ | 28.0 | ​ | 326.1
Other financial assets - securities | ​ | ​ | ​ | 8.6 | ​ | 8.6 | ​ | 4.4 | ​ | 0.7 | ​ | 3.5
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
30 June 2022 |  | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Financial liabilities |  | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Bank deposits |  | 6.2 |  | 18.7 |  | 17.6 |  | — |  | 15.1 |  | 2.5
Customer deposits |  | 444.1 |  | 47.9 |  | 47.9 |  | — |  | 22.1 |  | 25.8
Settlement balances |  | 9.8 |  | ​ |  | ​ |  | ​ |  | ​ |  | ​
Other financial liabilities - debt securities in issue | ​ | ​ | ​ | 46.0 | ​ | 45.9 | ​ | — | ​ | 39.3 | ​ | 6.6
Subordinated liabilities |  | ​ |  | 7.8 |  | 7.9 |  | — |  | 7.8 | ​ | 0.1
Notes in circulation | ​ | 2.9 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
31 December 2021 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Financial liabilities |  | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  | ​
Bank deposits | ​ | 4.9 |  | 21.4 |  | 21.0 |  | — |  | 18.7 |  | 2.3
Customer deposits |  | 442.4 |  | 37.4 |  | 37.6 |  | — |  | 18.1 |  | 19.5
Settlement balances |  | 2.1 |  | ​ |  | ​ |  | ​ |  | ​ |  | ​
Other financial liabilities - debt securities in issue |  | ​ |  | 47.7 |  | 48.6 |  | — |  | 41.4 |  | 7.2
Subordinated liabilities | ​ | ​ | ​ | 7.7 | ​ | 8.3 | ​ | — | ​ | 8.2 | ​ | 0.1
Notes in circulation |  | 3.0 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ Short-term financial instruments For certain short-term financial instruments: cash and balances at central banks, items in the course of collection from other banks, settlement balances, items in the course of transmission to other banks, customer demand deposits and notes in circulation, carrying value is deemed a reasonable approximation of fair value. ​ Loans to banks and customers In estimating the fair value of net loans to customers and banks measured at amortised cost, NatWest Group’s loans are segregated into appropriate portfolios reflecting the characteristics of the constituent loans. Two principal methods are used to estimate fair value; contractual cash flows and expected cash flows. ​ Debt securities and subordinated liabilities Most debt securities are valued using quoted prices in active markets or from quoted prices of similar financial instruments in active markets. For the remaining population, fair values are determined using market standard valuation techniques, such as discounted cash flows. ​ Bank and customer deposits Fair value of deposits are estimated using discounted cash flow valuation techniques.

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