Driven by the reassuring improvement in prudential and conduct risk fundamentals as well as the return to profitability, Scope Ratings today took rating actions on the long-term ratings of various entities of The Royal Bank of Scotland Group PLC (RBS Group PLC). With legacy issues largely resolved and the group’s business transformation nearly completed, the rating agency expects these fundamental improvements to be sustained.

In addition, Scope removed the one-notch of rating uplift which was incorporated in the Issuer Rating and the senior debt ratings (but not the AT1 securities ratings) due to majority ownership by the UK government. The rating agency concluded that this rating uplift is no longer warranted, given the UK government’s medium-term plan to gradually exit the RBS ownership.

The rating actions further reflect RBS Group’s new organisational and legal structure due to UK ring-fencing requirements. All necessary changes to implement ring-fencing are expected to be completed in September 2018. However, the effective separation of ring-fenced entities from non-ring-fenced entities within RBS Group is already in place.

The following rating actions have been taken regarding the various entities of the RBS group:

• Assigned new Issuer Rating of A to RBS Group PLC.
   
• Assigned new Issuer Rating of A to NatWest Holdings Limited, a ring-fenced bank intermediate holding company containing the core retail and commercial banking businesses of the group.
   
• Affirmed Issuer Rating of A- on NatWest Markets PLC (formerly The Royal Bank of Scotland PLC). Under the group’s new organisational structure, NatWest Markets PLC is a markets-focused business and accounts for about 15% of group RWAs. The rating differential between NatWest Markets and RBS Group is due to its business profile and lesser significance to the group.
   
• Affirmed A- rating on senior unsecured debt (not TLAC/MREL eligible) issued by NatWest Markets PLC (formerly The Royal Bank of Scotland PLC).
   
• Upgraded to A- from BBB+ the rating on senior unsecured debt (TLAC/MREL eligible) issued by RBS Group PLC.
   
• Upgraded to BB from B+ the rating on AT1 securities issued by RBS Group PLC. One notch of the upgrade reflects the improved fundamentals of RBS Group leading to a higher base for notching down the AT1 rating. The other notch reflects an improvement in the risk profile of the AT1 securities. The AT1 rating had incorporated an additional notch down due to material litigation risks.

All ratings have a Stable Outlook. The S-1 short-term debt rating and its Stable Outlook were not reviewed.

Stress testing & cash flow analysis
No stress testing was performed. No cash flow analysis was performed.

Methodology
The methodologies used for this ratings and/or rating outlooks Bank Ratings Methodology and Bank Capital Instruments Methodology are available on www.scoperatings.com.
Historical default rates of Scope Ratings can be viewed in the rating performance report on https://www.scoperatings.com/#governance-and-policies/regulatory-ESMA Please also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope’s definition of default as well as definitions of rating notations can be found in Scope’s public credit rating methodologies on www.scoperatings.com.
The rating outlook indicates the most likely direction of the rating if the rating were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The rating was not requested by the rated entity or its agents. The rated entity and/or its agents participated in the rating process. Scope had no access to accounts, management and/or other relevant internal documents for the rated entity or related third party.
The following substantially material sources of information were used to prepare the credit rating: public domain, the rated entity and third parties.
Scope considers the quality of information available to Scope on the rated entity or instrument to be satisfactory. The information and data supporting Scope’s ratings originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the rating or outlook action, the rated entity was given the opportunity to review the rating and/or outlook and the principal grounds on which the credit rating and/or outlook is based. Following that review, the rating was not amended before being issued.

Regulatory Disclosures
This credit rating and/or rating outlook is issued by Scope Ratings GmbH.
Lead analyst Pauline Lambert, Executive Director
Person responsible for approval of the rating: Samuel Theodore, Group Managing Director
NatWest Markets PLC’s issuer rating/outlook was first released by Scope on 02.04.2014. The rating/outlook was last updated on 24.05.2018.
NatWest Markets PLC’s short-term rating/outlook was first released by Scope on 22.05.2014. The rating/outlook was last updated on 26.10.2017.
NatWest Markets PLC’s senior unsecured debt rating/outlook was first released by Scope on 02.04.2014. The rating/outlook was last updated on 24.05.2018
RBS Group PLC’s issuer rating/outlook was first released by Scope on 11.07.2018. 
RBS Group PLC’s senior unsecured debt rating/outlook was first released by Scope on 02.04.2014. The rating/outlook was last updated on 24.05.2018
NatWest Holdings Limited rating/outlook was first released by Scope on 11.07.2018. 

Potential conflicts
Please see www.scoperatings.com. for a list of potential conflicts of interest related to the issuance of credit ratings.

Conditions of use / exclusion of liability
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