Liquidity risk is the risk of not being able to meet liabilities as they fall due and arises mainly in our Banking division. Each of our operations is responsible for its own liquidity within specified guidelines. Each is capitalised at a level required to meet its business and regulatory needs and, where necessary, has appropriate borrowing facilities from the company, the bank or external lenders. The liquidity of each division is reviewed at its monthly board meeting and the overall funding position is reported to the group board each month.

In the Banking division our policy remains to be able to finance our customer loans and advances by capital and reserves, longer term deposits and committed facilities. This policy is kept under review by the Treasury Committee with compliance monitored daily. At 31st July, 2007 the group’s committed facilities amounted to over £1.8 billion, of which £1.0 billion was drawn.