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Virgin Money UK : 2021 Pillar 3 Report (opens in a new window)

11/24/2021 | 03:20am EDT

Pillar 3 Disclosures 2021

Inside this year's report


Executive summary




Risk management


Capital resources


Capital requirements


Credit risk


Operational risk


Counterparty credit risk


Market risk


Funding and liquidity risk




Asset encumbrance




Appendix 1: Disclosures for CB Group consolidated


Appendix 2: Group remuneration disclosures


Appendix 3: Main features of regulatory


capital instruments - Virgin Money UK PLC

Appendix 4: Main features of regulatory


capital instruments - Clydesdale Bank PLC

Appendix 5: CRR mapping to reports


Appendix 6: Tables


Appendix 7: Glossary


Appendix 8: Abbreviations


Virgin Money UK PLC Pillar 3 Disclosures 2021

001 Executive summary

Executive summary

management Risk summary Executive

1.1 Introduction

This document presents the consolidated Pillar 3 disclosures of Virgin Money UK PLC ('Virgin Money' or 'the Company'), together with its subsidiary undertakings (which comprise 'the Group') as at 30 September 2021. This report should be read in conjunction with the Virgin Money UK PLC Annual Report & Accounts. The analysis presented within the Pillar 3 disclosures provides detail on aspects of the Group's risk profile and, along with detail on the Risk Management Framework (RMF), supports the Group's position as a strongly capitalised firm which employs robust systems and processes in order to assess, manage and mitigate risk.

The numbers presented within this report are on a consolidated basis, with Virgin Money UK PLC numbers shown in the body of the report and CB Group consolidated numbers shown in Appendix 1.

1.2 Group at a glance

The Group's business model draws on Our Purpose of 'Making you happier about money' and internal guiding principles to use our unique combination of resources to deliver our core activities as a bank, aligned to the environment we operate in. Our strategic priorities remain as follows:

  • Pioneering growth - reshaping the balance sheet mix, growing our margin accretive assets and low-cost relationship deposits;
  • Delighting customers and colleagues - enhancing the customer experience, encouraging digital adoption and delivering Our Purpose;
  • Super straightforward efficiency - realising transformation synergies, digitising and simplifying the business and streamlining our operating model; and
  • Discipline and sustainability - maintaining a disciplined risk approach, optimising the Group's risk-weighted assets (RWA) and delivering sustainable returns.

Further information on our Purpose can be found in

the Strategic report within the Group's 2021 Annual Report & Accounts.

1.3 Summary of risk profile

Effective management of risk is a key capability for a successful financial services provider and is fundamental to the Group's strategy. The Group has continued to advance and strengthen its risk management capabilities, evolving in line with industry developments and best practice.

The Board is responsible for determining the nature and extent of the risks it is willing to take in order to achieve its strategic objectives.

As part of its viability assessment under the UK Corporate Governance Code (the Code) requirements, the Directors have performed a robust assessment of the risks facing the Group, including those that would threaten its business model and future performance, solvency, liquidity

or reputation.

Appendices encumbrance Asset Securitisation risk liquidity and Funding requirements Capital resources Capital

Virgin Money UK PLC Pillar 3 Disclosures 2021

002 Executive summary

1.4 Principal risks

The Group's principal risks are those which could result in events or circumstances that might threaten the Group's business model, future performance, solvency, liquidity and reputation. The table below sets out the Group's principal risks and for further information on the mitigating actions and future focus for each risk, refer to pages 46 to 49 in the Group's 2021 Annual Report & Accounts.

Principal risk


Credit risk

Group's 2021 Annual Report & Accounts Pages 153 to 182

Financial risk

Group's 2021 Annual Report & Accounts Pages 183 to 206

Model risk

Group's 2021 Annual Report & Accounts Page 207

Regulatory and compliance risk

Group's 2021 Annual Report & Accounts Page 208

Conduct risk

Group's 2021 Annual Report & Accounts Page 209

Operational risk

Group's 2021 Annual Report & Accounts Pages 210 to 211

Technology risk

Group's 2021 Annual Report & Accounts Page 212

Financial crime and fraud risk

Group's 2021 Annual Report & Accounts Page 213

Strategic and enterprise risk

Group's 2021 Annual Report & Accounts Page 214

People risk

Group's 2021 Annual Report & Accounts Page 215

The risk of loss of principal or interest stemming from a borrower's failure

to meet contractual obligations to the Group in accordance with their agreed terms. Credit risk manifests at both a portfolio and transactional level.

Financial risk includes capital risk, funding risk, liquidity risk, market risk and pension risk, all of which have the ability to impact the financial performance of the Group, if managed improperly.

The potential for adverse consequences from decisions based on incorrect or misused model outputs and reports.

The risk of failing to comply with relevant laws and regulatory requirements, not keeping regulators informed of relevant issues, not responding effectively to information requests, not meeting regulatory deadlines

or obstructing the regulator.

The risk of undertaking business in a way that is contrary to the interests of customers, resulting in inappropriate customer outcomes or detriment, regulatory censure, redress costs and/or reputational damage.

The risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.

The risk of loss resulting from inadequate or failed information technology processes. Technology risk includes cyber security, IT resilience, information security, data risk and payment risk.

The risk that the Group's products and services will be used to facilitate financial crime against the Group, its customers or third parties. This includes money laundering, counter terrorist financing, sanctions, fraud and bribery and corruption.

The risk of significant loss of earnings or damage arising from decisions or actions that impact the long-term interests of the Group's stakeholders or from an inability to adapt to external developments, including potential execution risk as a result of transformation activity.

The risk of not having sufficiently skilled and motivated colleagues, who are clear on their responsibilities and accountabilities and behave in an ethical way.

Virgin Money UK PLC Pillar 3 Disclosures 2021


1.5 Cross-cutting risks

Operational resilience and climate risk are treated as cross-cutting risks in the Group's RMF, manifesting through the established principal risk framework.

Operational resilience - Defined as the ability of the Group to protect and sustain its most critical functions and underlying assets, while adapting to expected or unexpected operational stress or disruption and having the capacity

to recover from issues as and when they arise. Further information can be found on page 216 of the Risk report within the Group's 2021 Annual Report & Accounts.

Climate risk - The Group is exposed to physical and transition risks arising from climate change both in terms of its own operations but also, importantly, in relation to the Businesses and Personal customers it services.

Further information on climate risk is available in the Group's inaugural Task Force for Climate-Related Disclosures (TCFD) report, shown on pages 217 to 234 in the Group's 2021 Annual Report & Accounts. The report is structured across the TCFD framework's four thematic areas: governance, strategy, risk management and metrics and targets. The report conveys the progress made in assessing climate- related risks and opportunities whilst recognising the Group's ambition to continue to increase the extent of our disclosures on environmental measures.

1.6 Emerging risks

The Group considers an emerging risk to be any risk which has a material unknown and unpredictable component, with the potential to significantly impact the future performance of the Group.

Amendments have been made to the emerging risk classifications reported in the Group's 2020 Annual Report and Accounts, with technology and cyber risk renamed and repositioned as resilience risk, and critical infrastructure repositioned as third-party risk. New ways of working and changing skill requirements is a new emerging risk, recognising the changes to workforce dynamics brought about by COVID-19.

The Group's external emerging risks are:

  • Political and economic risks;
  • Regulatory change;
  • Climate risk; and
  • Third-partyrisk.

The internal emerging risks are:

  • Data stewardship;
  • Resilience risk; and
  • New ways of working and changing skill requirements.

For further information on these, refer to pages 42 to 45 of the Group's 2021 Annual Report & Accounts.

1.7 Key ratios

The key ratios for the Group are presented below.

Table 1: Key ratios



Common Equity Tier 1 (CET1) ratio



Tier 1 capital ratio



Total capital ratio



CRD IV leverage ratio(1)



UK leverage ratio(1)



Liquidity coverage ratio








Total assets



  1. IFRS 9 transitional capital arrangements have been applied to the leverage ratio calculation.

The Group's CET1 capital increased by £345m during the year, primarily due to statutory profit after tax of £474m, a reduction in intangible assets of £118m and

the beneficial effect of the Capital Requirements Regulation (CRR) Quick Fix amendments in relation to software assets of £151m. During the year, the Prudential Regulation Authority (PRA) announced that this relief would be removed

on 1 January 2022.

These increases were partially offset by an increase of £107m in the deferred tax recognised on tax losses carried forward, an increase in the defined benefit fund pension asset of £81m, and the reduction in IFRS 9 provisions recognised in the year reduced the transitional relief available by £176m.

The Group continues to maintain a significant buffer to

its Capital Requirements Directive IV (CRD IV) minimum CET1 requirement, with excess CET1 of 5.7%, being a buffer equivalent to £1,384m.

The Group's leverage ratio is 5.1% which exceeds the Basel Committee's proposed minimum of 3%. The Group is also subject to the UK leverage ratio framework, which came into force on 1 January 2016 and is relevant to PRA regulated banks and building societies with consolidated retail deposits equal to or greater than £50bn. The Group's UK leverage ratio is 5.2%, which exceeds the PRA minimum of 3.25%.

Further details on the Group's capital ratios, RWA and leverage ratio are presented in section 4.

Virgin Money UK PLC Pillar 3 Disclosures 2021

Appendices encumbrance Asset Securitisation risk liquidity and Funding requirements Capital resources Capital management Risk summary Executive


Virgin Money plc published this content on 24 November 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 24 November 2021 08:19:01 UTC.

© Publicnow 2021
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