Risk Assessment Analysis of the Royal Bank of Scotland - Essay Example

The paper "Risk Assessment Analysis of the Royal Bank of Scotland" is an excellent example of an essay on finance and accounting. The liquid and credit assessment of the Royal Bank of Scotland indicates that it has a diverse profile of revenue. In addition, it has a large market share that has in its business empire. Despite all these, its performance has greatly been wreaked by the bailouts by the government (Sydney, 2012, p.56). This has had severe consequences on its liquidity besides the credit operations of the bank. As a way out of this mess, the bank drafted a strategic plan to ensure that the performance is enhanced.

The royal bank of Scotland is faced with many challenges especially from the retail and the commercial banking sector (Young, 2011, p.35). The royal bank is a competitor to other banks in the UK and globally. Internationally; it has explored other opportunities in America and Ireland. The major issue that makes the liquidity of the bank to be sensitive remains the sensitive nature of the market shares.

From the year 2011, the capital, as well as the liquidity of the royal bank of Scotland, has been adequate. The bank’s capital position has consistently been underpinned by the support it receives from the government. (Young, 2011, p.98).The support is majorly in two forms; equity injections, as well as laws that ensure credits of banks, are well regulated. In the United Kingdom, the scheme is called Asset protection. The assets of the banks as of September 2010 was about 258 billion euros. In the year 2012 December, this figure reduced by 10%. This suggests that the bank is experiencing higher risks. In the year 2011, it had gross nonscoring loans which were categorized as those that are not performing. These assets thus rated to be about 48% which according to financial analysts were very helpful in reducing the charges of the bad debts. The risk assessment took into consideration that the slow pace of the non-score assets went down because of the weak conditions of the markets as well as the economy. These subsequently led to a funding condition of the bank being described as average with and adequate liquidity position (Solving the RBS Problems, 2011, p.3). With such conditions, the Royal bank has been able to attain a funding position that is manageable. Besides; the refinancing burden has also been lowered significantly. All theses have led to the lathe Royal bank of Scotland relying less on the wholesale markets which are usually a short term remedy in times of crisis (Business and the Banking Sector of the United Kingdom, 2009, 2).

Such risks have prompted the management of the bank to come up with some measures and remedies to help in further growth of the bank. The strategies for the year 2013 have been geared towards the realization of 100% target (Dey, 2009, p.35). Through the major business it undertakes, it will accomplish the goals. To this effect, the credit rating of the royal bank of Scotland has been lifted by about two notches. This is an indicator that the Royal bank is significant to the United Kingdom and the government as far as banking is concerned.

It is envisaged that the bank will continuously strive to ensure that its capital position is improved, with the current trend of the Royal Bank of Scotland (Sydney, 2012, p.22). Besides, assets that do not score will be managed down. Finally, the rebuilding of its franchise hence its performance will be very useful in ensuring that the risks the bank has are counteracted.