Analysis of results Key points  The CET1 ratio decreased by 210 basis points to 13.4% in 2016, reflecting lower CET1 capital partially offset by a reduction in RWAs.  Litigation and conduct charges of £5.9 billion in 2016 contributed to a significant reduction in the CET1 capital. Management actions to normalise the ownership structure and improve the long-term resilience of RBS also contributed to the reduction. These actions included the final Dividend Access Share payment of £1.2 billion and the impact of the accelerated pension payment of £4.2 billion.  Tier 1 capital benefitted from the successful issuance of £2 billion of Additional Tier 1 (AT1) capital notes in August 2016. Total end-point CRR compliant AT1 capital now stands at £4.0 billion.  RWAs decreased by £14.4 billion in the year to £228.2 billion consisting of reductions across all risk types predominantly driven by the run down activity within Capital Resolution which resulted in an RWA decrease of £14.5 billion.  o Non-counterparty credit risk RWAs have decreased by £4.2 billion reflecting disposal activity in Capital Resolution partly offset by the adverse impact of foreign exchange movements.  o The impact of sterling weakening and the implementation of a new risk model for banks in the first half of the year, led to an increase of £2.8 billion in counterparty credit risk RWAs in NatWest Markets. This was offset by a reduction of £3.3 billion in Capital Resolution to result in an overall decrease of £0.5 billion.  o Market risk RWAs reduced by £3.8 billion driven by disposals in Capital Resolution, business mitigation activity in NatWest Markets and lower US dollar position risk in Treasury.  o Operational risk RWAs decreased by £5.9 billion as a result of the annual recalculation and the removal of the element relating to Citizens following regulatory approval.  The leverage ratio reduced by 50 basis points to 5.1% at 31 December 2016, primarily reflecting CET1 capital erosion partially offset by additional AT1 issuance.  The leverage exposure decreased by £19.2 billion to £683.3 billion. Growth in PBB and CPB lending has been more than offset by lower undrawn commitments and derivative potential future exposures. During 2016, approximately half the interest rate trades cleared through London Clearing House have been settled-to-market each day rather than being collateralised, reducing potential future exposures by £10.3 billion.  The UK leverage ratio reflecting the post EU referendum measures announced by the Bank of England in Q3 2016 was estimated at 5.6%. 29 RBS – Annual results 2016