Highlights IFRS9 ● RBS continues to develop its processes to enable IFRS 9 Financial Instruments to be implemented on 1 January 2018; an estimate of the initial impact will be included in 2017 H1 interim reporting. Williams & Glyn ● On 17 February 2017, RBS announced that it had been informed by HM Treasury ("HMT") that the Commissioner responsible for EU competition policy plans to propose to the College of Commissioners to open proceedings to gather evidence on an alternative plan for RBS to meet its remaining State Aid obligations. If adopted, this alternative plan would replace the existing requirement to achieve separation and divestment by 31 December 2017 of Williams & Glyn. As previously disclosed, none of the proposals to acquire the business received by RBS can deliver a full separation and divestment before the 31 December 2017 deadline. ● RBS has agreed that HMT will now seek formal amendment to RBS's State Aid commitments to pave the way for the Commissioner to propose to open proceedings, as described above. In addition to the Commission's proceedings, HMT will carry out a market testing exercise in parallel. The opening of the Commission's proceedings does not prejudge the outcome of the investigation. ● The plan envisages that RBS will deliver the following revised package of remedies to promote competition in the market for banking services to small and medium enterprises ("SMEs") in the UK:  ○ A fund, administered by an independent body, that eligible challenger banks can access to increase their business banking capabilities;  ○ Funding for eligible challenger banks to help them incentivise SMEs to switch their accounts from RBS paid in the form of "dowries" to eligible challenger banks;  ○ RBS granting business customers of eligible challenger banks access to its branch network for cash and cheque handling, to support the measures above; and  ○ An independent fund to invest in fintech to support the business banking of the future. ● The 2016 Annual Results include a £750 million restructuring provision as a consequence of this proposal. 12 RBS – Annual results 2016