Annual Report and Financial Statements
For the Year Ended 31 December 2022
Company Number: 07312896
OneSavings Bank plc
Contents
1
Company Information
2
Strategic Report
3
Directors’ Report
70
Statement of Directors’ Responsibilities in respect of the Strategic
Report, the Directors' Report and the Financial Statements
76
Independent Auditor’s Report
77
Statement of Comprehensive Income
92
Statement of Financial Position
93
Statement of Changes in Equity
94
Statement of Cash Flows
96
Notes to the Financial Statements
97
Independent Reasonable Assurance Report
220
OneSavings Bank plc
Company Information
2
DIRECTORS
Graham Allatt
Kalvinder Atwal
Andrew Golding
Noël Harwerth
Sarah Hedger
Rajan Kapoor
Mary McNamara
April Talintyre
Simon Walker
David Weymouth
COMPANY SECRETARY
Jason Elphick
REGISTERED OFFICE
Reliance House
Sun Pier
Chatham
Kent
ME4 4ET
United Kingdom
REGISTERED NUMBER
07312896 (England and Wales)
AUDITOR
Deloitte LLP
Statutory Auditor
Birmingham
United Kingdom
OneSavings Bank plc
Strategic Report
For the Year Ended 31 December 2022
3
The Directors present their Annual Report, including the Strategic Report, Directors’ Report and
Statement of Directors’ Responsibilities, together with the audited Consolidated Financial Statements
and Auditor’s Report for the year ended 31 December 2022.
OneSavings Bank plc (the Company or OSB) is a wholly-owned subsidiary of OSB GROUP PLC
(OSBG). The Group comprises OSB and its subsidiaries; the OSB Group comprises OSBG and its
subsidiaries.
Our business model
Resources and relationships
Brands and heritage
We have a family of specialist lending brands targeting selected segments of the mortgage market
which are underserved by large UK banking institutions. We have well-established savings franchises
through Kent Reliance, with its 150-year heritage, and the Charter Savings Bank brand.
Colleagues
Our team of highly skilled employees possess expertise and in-depth knowledge of the lending,
property, capital and savings markets, underwriting and risk assessment, and customer management.
Infrastructure
We benefit from cost and efficiency advantages provided by our wholly-owned subsidiaries, OSB India,
as well as credit expertise and mortgage administration services provided by Charter Court Financial
Services (CCFS).
Relationships with intermediaries and customers
Our strong and deep relationships with the mortgage intermediaries that distribute our products continue
to win us industry recognition.
Capital strength
We have a strong common equity tier one (CET1) ratio and capability to generate capital through
profitability.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
4
Our business model explained
The Group operates its lending business through two segments: OSB and CCFS.
OneSavings Bank
Through our brands we tailor our lending proposition to the specific needs of our borrowers. Under our
Kent Reliance and Interbay brands all of our loans are underwritten by experienced and skilled
underwriters, supported by technology to reduce the administrative burden on underwriters and
mortgage intermediaries. We refer to scorecards and bureau data to support our skilled underwriter
loan assessments. We consider each loan on its own merits, responding quickly and flexibly to offer the
best solution for each of our customers. No case is too complex for us, and for those borrowers with
more tailored or larger borrowing requirements, our Transactional Credit Committee meets three times
each week, demonstrating our responsiveness to customer needs.
Buy-to-let/SME sub-segments
Buy-to-Let
We provide loans to limited companies and individuals, secured on residential property held for
investment purposes. We target experienced and professional landlords or high net worth individuals
with established and extensive property portfolios.
Commercial mortgages
We provide loans to limited companies and individuals, secured on commercial and semi-commercial
properties held for investment purposes or for owner-occupation.
Residential development
We provide development loans to small and medium sized developers of residential property.
Funding lines
We provide loans to non-bank finance companies secured against portfolios of financial assets,
principally mortgages.
Asset finance
We provide loans under hire purchase, leasing and refinancing arrangements to UK SMEs and small
corporates to finance business-critical assets.
Residential sub-segment
First charge
We provide loans to individuals, secured by a first charge against their residential home. Our target
customers include those with a high net worth and complex income streams, and near-prime borrowers.
We are also experts in shared ownership, lending to first-time buyers and key workers buying a property
in conjunction with a housing association.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
5
Our business model explained (continued)
Charter Court Financial Services
Specialist lending business
Our Precise Mortgages brand uses an automated underwriting platform to manage mortgage
applications and to deliver a rapid decision in principle, based on rigorous lending policy rules and credit
scores. The platform is underpinned by extensive underwriting expertise, enabling identification of new
niches and determining appropriate lending parameters. It allows for consistent underwriting within the
Group’s risk appetite. Quick response times help the Group to compete for the ‘first look’ at credit
opportunities, while a robust manual verification process further strengthens the disciplined approach
to credit risk.
Buy-to-Let
We provide products to professional and non-professional landlords with good quality credit histories,
through a wide product offering, including personal and limited company ownership.
Residential
We provide a range of competitive products to prime borrowers and complex prime borrowers, including
self-employed, as well as near-prime borrowers.
Bridging
We focus on lending to customers with short-term cash flow needs, for example, to cover light
refurbishments, home improvements, auction purchases and to ‘bridge’ delays in obtaining mortgages
and ‘chain breaks’.
Second charge
Second charge products under the Precise Mortgage brand were withdrawn in the first half of 2022 and
are no longer available to new customers.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
6
Our business model explained (continued)
Retail savings
The Group is predominantly funded by retail savings deposits sourced through two brands: Kent
Reliance and Charter Savings Bank (CSB).
Kent Reliance is an award-winning retail savings franchise with over 150 years of heritage and nine
branches in the South East of England. It also takes deposits via post, telephone and online, while CSB,
a multi award-winning retail savings bank, offers its products online and via post.
Both Banks have a wide range of savings products, including easy access, fixed term bonds, cash ISAs
and business savings accounts. CSB and Kent Reliance have diversified their retail funding sources
through pooled funding platforms. The range of products sourced via these platforms includes easy
access, longer term bonds and non-retail deposits.
In 2022, both Banks won industry awards, including the prestigious Moneyfacts Consumer Awards for
Best Bank Savings Provider, Best Cash ISA Provider and ISA Provider of the Year for CSB and Best
Cash ISA Provider from Yourmoney.com Personal Finance Awards for Kent Reliance.
Kent Reliance’s proposition for savers is simple: to offer consistently good-value savings products that
meet customer needs for cash savings and loyalty rates for existing customers.
CSB’s philosophy is to maintain and develop its award-winning business, offering competitively priced
savings products. Operating with an agile, nimble approach, CSB can respond quickly to the funding
requirements of the business at an advantageous cost of funds.
Our securitisation platforms
The Group has built attractive diversification opportunities to supplement its retail funding.
CCFS uses its securitisation platform as a means of providing low-cost term funding. Wholesale funding
enables the business to rebalance the weighted average life of liabilities away from shorter duration
retail funding and thereby optimise the funding mix. The Group recognises the cyclical nature of capital
markets funding and therefore utilises it opportunistically, taking advantage of favourable market
conditions.
CCFS is a programmatic issuer of high-quality residential mortgage-backed securities (RMBS) through
the Precise Mortgage Funding and Charter Mortgage Funding (CMF) franchises, completing 14
securitisations worth more than £4.5bn to 31 December 2022.
In 2019, OSB established its Canterbury Finance securitisation programme, to enable it to issue high-
quality RMBS. It has since issued five securitisations of organically originated mortgages totalling
£5.6bn to 31 December 2022.
OSB also issued three deals totalling £971m of owner-occupied and Buy-to-Let acquired mortgages via
Rochester Financing since 2013.
The Group also has the capability to engage in transactions which could result in the full derecognition
of the underlying mortgage assets, through the sale of residual positions in its securitisation vehicles.
The Group also takes advantage of the Bank of England’s funding schemes. Drawings under the Term
Funding Scheme for SMEs remained at £4.2bn and the drawings under Index Long-Term Repo were
£301m as at 31 December 2022 (2021: £4.2bn and £nil, respectively).
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
7
Our business model explained (continued)
Unique operating model
Customer service
The Group operates customer service functions in multiple locations across the UK including Chatham,
Wolverhampton, Fareham, London and Fleet. These, together with our wholly-owned subsidiary OSB
India, help us deliver on our aim of putting customers first.
The Group has proven collections capabilities and expertise in case management and supporting
customers in financial difficulty.
This offers valuable insights into, as well as the opportunity to learn from, the performance of mortgage
loan products. We have deep credit expertise through strong data analytical capabilities.
We deliver cost efficiencies through excellent process design and management. We have an efficient,
scalable and resilient infrastructure supported by strong IT security
and continue to invest in enhancing
our digital offering as customer demand changes.
OSB India
OSB India (OSBI) is a wholly-owned subsidiary based in Bangalore and Hyderabad, India.
OSBI puts customer service at the heart of everything it does and we reward our colleagues based on
the quality of service they provide to customers, demonstrated by our excellent customer Net Promoter
Score (NPS).
At OSBI, we employ highly talented and motivated colleagues at a competitive cost. We benchmark our
processes against industry best practice, challenging what we do and eliminating customer pain points
as they arise. We continue to invest in developing skills that enable highly efficient service management,
matching those to business needs both in India and the UK.
Various functions are also supported by OSBI, including Support Services, Operations, IT, Finance and
Human Resources. We have a one team approach between the UK and India. The employee turnover
in India compares favourably to local industry averages, despite an increase in the regretted attrition
rate to 24% in 2022 as a result of an extremely buoyant recruitment market.
OSBI operates a fully paperless office – all data and processing are in the UK.
Environmental, social and governance (ESG)
We operate in a sustainable way with relevant Environmental, Social and Governance matters at the
heart of all everything we do.
As a specialist lender, we have been long aware of our responsibilities and the positive impact we can
make in society through our activities.
In 2022, we made progress on our path to achieve our commitment to net zero greenhouse gas
emissions by 2050. We also launched our first of a range of mortgage products to improve the energy
efficiency of a property.
We also renewed our commitment to have 33% women in senior management roles in the UK by
2023 and donated nearly £225k to charitable causes in the year.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
8
Relationships with our key stakeholders
Building strong relationships with all of our stakeholders through regular engagement and open dialogue
is fundamental to achieving the Group’s purpose to help our customers, colleagues and communities
prosper. Our relationships with our stakeholders are central to the Group’s strategy and culture; and
are embedded in the Board’s responsibilities.
We outline below how the Group and its Directors engaged with key stakeholders, and in doing so,
discharged their duties under section 172
of the Companies Act 2006.
Colleagues
Our colleagues are our key asset and our success depends on the 2,021 talented individuals we
employ.
We have always favoured interactive communication between management and our colleagues through
regular town hall meetings, informal sessions with management and opportunities to ask questions
anonymously directly to the Chief Executive Officer (CEO), with the questions and responses available
on the intranet. These methods of engagement proved popular with employees and have contributed
to many initiatives that were undertaken by the business during the year.
How the Board has engaged with colleagues
The Group has adopted a combination of methods for engaging with its workforce, including the
establishment of a formal workforce advisory panel and a designated Non-Executive Director (NED).
During 2022, Mary McNamara was the NED appointed by the Board with responsibility for representing
employees at Board level and she is a permanent member of the Workforce Advisory Forum (known
internally as OurVoice). Mary has direct engagement with the workforce by attending OurVoice
meetings and other events organised by the Diversity and Inclusion Working Group. This provides her
with an insight into the culture and concerns of the workforce, which she is able to bring to the attention
of the Board. Sarah Hedger will become a permanent member of OurVoice and will replace Mary
McNamara as the designated NED with responsibility for OurVoice on 11 May 2023.
OurVoice gives the Board and management insight into a broadly representative range of employee
views to guide strategic decisions for the future of the Group and oversee their alignment to the Values.
OurVoice has its own Terms of Reference which outlines the objectives and composition of the Forum.
Members of the workforce are invited to apply to become an employee representative.
Members of the Board and management attended OurVoice meetings throughout the year in order to
understand and discuss employee-related issues directly with representatives across the business.
Employee representatives are encouraged to be open and honest in their feedback at each meeting.
The themes from OurVoice discussions are shared and discussed with the Board and this informs the
approach towards new policies, benefits, resource allocations and any other employee- related projects.
Engagement also took place via the annual Best Companies to Work For survey. 82.5% of UK
employees responded to the survey in 2022 demonstrating a high level of engagement. Following the
results of the survey, the Group received a 2 star accreditation which means that it was recognised as
an ‘Outstanding’ company to work for. The Group Executive Committee and the Board reviewed the
results, considered the key themes that had emerged from the responses and discussed what steps
could be taken to capitalise on the positive themes and also address areas for improvement. OSB India
participates in a separate engagement survey and was officially certified a ‘Great Place to Work’ for a
sixth consecutive year in 2022.
The Board and its Committees also received regular updates on matters impacting employees from
senior management and the Group’s HR function. Members of the Board oversee the Group’s talent
management initiatives and senior management succession planning.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
9
Relationships with our key stakeholders (continued)
Finally, the Board has oversight of the Group’s whistleblowing activity and reviews and approves the
Group’s gender pay gap reporting and its commitment to the Women in Finance Charter.
The Board monitors the effectiveness of its methods of engaging with employees and adapts them
where necessary.
Areas of continued focus include developing a broader people and culture strategy for the Group and
continuing to improve in the areas that have been identified as lower scoring in the results of employee
surveys.
Outcomes following engagement
–
a key topic of discussion at Board level was the impact of continuing interest rate rises and the
cost of living and cost of borrowing on our colleagues, both professionally and personally, their
well-being and mental health.
–
a one-off cost of living payment of £1,200 was made to lower paid employees and two further
payments of £600 have been approved for payment in 2023 to the same population.
–
the Group became formally accredited as a Living Wage Employer.
–
refreshed the Group’s Homeworking Policy to formalise employee hybrid working arrangements.
–
approved a higher than usual salary increase arrangement for over 80% of employees in light of
the high rate of inflation.
Customers
We pride ourselves on building strong, long-term relationships with our customers. Our continued
commitment to providing excellent service to borrowers and savers remained a priority in 2022 in light
of the rise in cost of living and borrowing.
We offer our savers an opportunity to let us know how we are doing whenever they call or interact with
the Banks by listening to their views and acting upon what they tell us. Customer feedback is collected
throughout the year and satisfaction scores produced as a result.
During 2022, as the interest rates continued to rise, we saw a significant increase in the volume of calls
from our savers wishing to benefit from attractively priced savings products and our borrowers who
were concerned about the rising cost of borrowing. As a result, there was a decrease in the savings
and the broker NPS compared to 2021. Service levels have since improved and they remain our key
focus.
How the Board has engaged with customers
The Board’s engagement with customers is indirect and Directors are kept informed of customer-related
matters through regular reports, feedback and research. Satisfaction scores and retention rates,
together with the number of complaints and resolution times, form part of the management and Board
monthly reporting packs, ensuring the visibility of our customers’ experiences. Customer satisfaction
scores are also used as part of the Executive remuneration assessment, and form the basis of new
initiatives and actions which continually improve customer experience.
In addition, each year, the Board allocates additional time at one Board meeting for dedicated deep
dives on a range of matters related to how customers are treated.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
10
Relationships with our key stakeholders (continued)
The Board was kept informed about progress in embedding the new FCA Consumer Duty requirements
as well as the support for customers who require additional assistance.
Customers and intermediaries may be consulted when the business is considering the launch of a new
product to ensure it meets their needs and any concerns raised are addressed.
Outcomes following engagement with customers
–
ensured that additional support was available to customers who need it.
–
a pledge of £50m to the newly-established Landlord Leader Fund to help landords enhance energy
efficiency.
–
introduced the first of a range of products for landlords wishing to improve the energy efficiency of
their properties.
The savings NPS for Kent Reliance in 2022 was +64 (2021: +70) and for Charter Savings Bank was
+61 (2021: +71).
Intermediaries
Our lending products, with the exception of funding lines and residential development loans, are
distributed via mortgage brokers. Mortgage brokers are vital to our success; it is important for us to
understand the challenges they face and what they are trying to achieve in terms of serving their
customers, so we can adapt the way in which we support them, to provide an even better service.
How the Board has engaged with intermediaries
The Board’s engagement with intermediaries is indirect and Directors are kept informed of customer-
related matters through regular updates at Board meetings. Broker and borrower satisfaction scores
are tracked on a regular basis, along with details of all complaints, and are reviewed by the Board and
management within monthly reporting packs.
Towards the end of 2022, research was commissioned with the aim of supporting our brokers and
landlords with improving the sustainability of their investment properties. A number of key findings were
identified which included the creation of a Landlord Leaders community to bring brokers, landlords and
other industry members together.
The Board received updates and reviewed the progress of this
initiative. Further information on this can be found on page 14.
We pride ourselves in providing unique and consistent lending propositions across all lending brands,
which fulfil our goal of making it easier for intermediaries to serve their customers, our borrowers.
Regular engagement with the broker community extends beyond our propositions and enables us to
continuously enhance the service we provide, with our business development managers working
closely with intermediaries to discuss cases and help to obtain swift and reliable decisions.
The Group’s Sales teams participated in 330 physical and virtual intermediary events during 2022. The
events are an opportunity for the Sales team to interact with brokers, discuss their requirements and
keep up to date with industry developments.
Outcomes following engagement with intermediaries
–
launch of the Landlord Leaders thought leadership report and the creation of a landlord leaders
community, bringing brokers, landlords and other industry members together.
The broker NPS for OSB in 2022 was +37 (2021: +55) and for CCFS was +39 (2021: +42), both
impacted by high application and completion volumes as a result of the market disruption following
September’s mini budget.
Strategic
report
Governance
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
11
Relationships with our key stakeholders (continued)
Suppliers
Our business is supported by a large number of suppliers, which allows the Group to provide high
standards of service to our customers.
How the Board engages with suppliers
The members of the Board do not interact directly with the Group’s suppliers; however, they are involved
in overseeing the Group’s supplier relationships and are kept up to date by management on supplier
considerations and developments.
Supplier payment practice reports are published on a six-monthly basis and approved and signed by
the CFO and Chief Operating Officer on behalf of the main operating entities. The Group enters into
standard terms with suppliers, which include terms requiring payment within 30 days of the invoice date
following receipt of a valid invoice. Over 95% of all invoices are paid within 30 days in line with the
standard payment period for qualifying contracts. The average time taken to pay invoices ranges from
five to 11 days across the Group. The maximum contractual payment period agreed varies between 30
days to 45 days. There have been no changes to the standard payment terms in the reporting period.
Any complaints received in respect of invoice payments are considered as part of the dispute resolution
process. During the year, the Group did not deduct any sums from payments under qualifying contracts
as a charge for remaining on a supplier list.
In 2022, the Board was also involved with the following aspects of supplier relationships: consideration
of the risks associated with suppliers and the framework for assurance; oversight of key supplier
relationships including engagement between the Group Audit Committee and the external auditor; and
oversight of all levels of insurance in place for the Group.
We are committed to complying with both the law and best practice in respect of Modern Slavery,
workforce rights and the environment. We expect our suppliers to share that commitment by complying
with our Vendor Code of Conduct and Ethics.
The Group’s Modern Slavery and Human Trafficking Statement is reviewed and approved on an annual
basis by the Board and can be found on our website at www.
osb.co.uk.
ESG is being embedded into every aspect of our business and part of doing so is to ensure that our
suppliers share similar values and aspirations to our own.
During 2022, our suppliers and business partners were asked to complete a questionnaire in order for
us to understand how they are addressing topics such as climate change, Diversity, Equity and Inclusion
and Modern Slavery and to identify areas of focus in the future. We understand that organisations will
be at various stages of their own ESG and sustainability journey and we are committed to encouraging
and supporting our suppliers with their transition to an ESG strategy that aligns to the Group’s ambitions.
Outcomes following engagement with suppliers
–
enhanced understanding of suppliers’ ESG and sustainability strategies to ensure that they are in
alignment with the Group’s ESG ambitions.
Strategic
report
Governance
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
12
Relationships with our key stakeholders (continued)
Regulators
The Board recognises the importance of having an open and continuous dialogue with all of our
regulators, as well as other government bodies, trade associations and UK Finance.
How the Board engages with Regulators
The Group maintains a proactive dialogue with the Prudential Regulation Authority (PRA) and Financial
Conduct Authority (FCA). Engagement typically takes the form of regular and ad hoc meetings attended
by both members of the Board and Executives, as well as subject matter experts.
Even though the Directors do not participate in all meetings, Executives, including the Group Chief Risk
Officer and Group Chief Credit and Compliance Officer, provide the Board and its Committees with
feedback and regular updates in respect of the broader regulatory developments and compliance
considerations. The PRA was invited to and attended one Board meeting during 2022.
The Group also regularly interacts and has constructive relationships with the Bank of England and HM
Revenue & Customs, amongst others, which helps to ensure that the Group is aligned with the relevant
regulatory frameworks and that the business is engaged with issues impacting the financial services
industry.
Outcomes following engagement
–
Meetings held with regulators during the year covered, amongst other topics, operational
resilience, operational continuity in resolution, resolvability assessment framework, business
continuity, capital management and the optimisation of our capital structure. These are all areas
that have been considered by the Board in its meetings.
Communities
The Group partners with national and local charities, which offer employees the chance to make a
difference both nationwide and closer to home. Giving something back to our community is important
to all of us, whether it is through volunteering, fundraising or efforts that help protect our environment,
and aligns with the Group’s Values. Our nominated charity partners are chosen by employees with the
aim of making a meaningful impact to these charities and to the lives of those that the charities help.
How the Board engages with communities
The Board and management actively encourage and fully support engagement with our local
communities to make a positive impact.
Outcomes following engagement with communities
–
The total amount donated to charity partners and good causes by the Group and colleagues in
the year was nearly £225k.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
13
Relationships with our key stakeholders (continued)
Environment
Sustainability is becoming increasingly important to the Board and management. The Group operates
under the highest governance and ethical standards and is focused on reducing its impact on the
environment.
The Board and management are cognisant of the impact of social and environmental change on our
business and stakeholders and regularly promote awareness of environmental issues among our
employees, as well as adhering to our plan to become a greener organisation and comply with
enhanced regulation and disclosures.
The Board is responsible for encouraging and overseeing an environmentally friendly culture and
ensuring that the business is ready to respond to the growing impact of climate change on the Group’s
activities in line with its Stewardship value.
Section 172 statement
The Directors are bound by their duties under section 172(1)(a) to (f) of the Companies Act 2006 and
the manner in which these have been discharged; in particular their duty to act in the way they consider,
in good faith, promotes the success of the Company for the benefit of its shareholders as a whole.
The preceding pages 8 to 12 demonstrate how the Board has engaged with the Group’s key
stakeholders (customers, intermediaries, colleagues, shareholders, suppliers, regulators and the local
communities in which we are located). Examples of strategic decisions which have impacted the
Group’s key stakeholders are set out below. Pages 8 to 12 and those that follow, set out examples of
how Directors complied with the requirements of section 172 during the year.
Decision making
The Board recognises that considering our stakeholders in key business decisions is fundamental to
our ability to deliver the Group’s strategy in line with our long-term values and operating the business
in a sustainable way. Balancing the needs and expectations of our key stakeholders has been at the
forefront of the Board’s thinking and has been more important than ever during 2022, as a result of the
economic environment and the rising cost of living. The Board acknowledges that some decisions will
result in different outcomes for each stakeholder.
Financial statements
Appendices
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
14
Section 172 statement (continued)
Key strategic decisions in the year
Employee remuneration
The Board has considered the impact of ongoing interest rate rises and the rising cost of living and cost
of borrowing in the UK on its employees, in terms of their financial and mental health well-being.
The increase in the cost of living and its impact on employees was discussed at the Workforce Advisory
Forum (OurVoice), which includes attendance from members of the Board and the Group Executive
Committee. In line with the Group’s commitment to ensuring that employees receive a fair deal, the
Board supported the decision approved by the Group Executive Committee in respect of a one-off
payment of £1,200 to all qualifying UK employees on lower salary grades representing approximately
80% of the employee population. The Board also supported the decision to increase salaries of the
Group’s lowest paid employees in the UK to £19,250 in line with the Living Wage Foundation. The
Board recognises the ongoing challenges faced by employees in the current economic environment. In
January 2023, the Group Remuneration and People Committee discussed and approved the payment
of two further cost of living payments of £600 each for all qualifying UK employees.
Landlord Leaders
The Board received updates on progress in relation to the Landlord Leaders initiative. Following
engagement with landlords and brokers, and as part of its commitment to helping customers prosper,
the Group has committed to delivering a number of initiatives to support the building of a future-focused
sustainable industry. The Group has pledged £50m of funding to the newly established Landlord Leader
Fund to help landlords enhance energy efficiency. Other initiatives include the launch of new products
to support landlords with refurbishing their properties, redesigning the underwriting process and
partnering with tax specialists to provide advice and guidance on tax planning for parttime landlords
looking to professionalise. As part of this commitment, the Group will create a new Landlord Leaders
community to bring brokers, landlords and other industry members together.
Customer Experience
The Board was kept informed of a number of enhancements made to the customer journey. In particular,
the launch of a new, simplified product range which was proactively communicated to customers to
ensure that they had sufficient time to take action prior to the end of their fixed period. Additional
resource was allocated to improve the customer experience, including following up with customers who
had not taken action upon entering the reversion period. In addition, enhancements were made to the
Group’s eligibility criteria to enable more customers to take advantage of the revised rates in order to
minimise payment shocks and redemptions.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
15
Market review
The UK housing and mortgage market
The last 12 months were defined by changing market conditions brought about by the war in Ukraine,
continuing supply chain issues, high inflation, rising cost of living and borrowing and the disruption
following September’s mini-budget. Despite these developments, the housing and mortgage markets
were resilient and activity levels remained strong.
Inflation gathered pace following the invasion of Ukraine, exacerbating supply chain issues and leading
to large increases in energy and food prices. Data from the Office of National Statistics (ONS) estimated
that prices had seen a year on year increase of 10.5% at the end of December 2022, down slightly from
a peak of 11.1% at the end of October.
The Bank of England implemented eight successive increases in the base rate in 2022 to reduce
inflation towards its 2.0% target. Overall, the base rate rose to 3.5% in December 2022 from 0.25% in
December 2021.
Mortgage interest rates increased significantly over the course of 2022, with rising cost of funds for
lenders and volatile swap spreads. According to the Bank of England, the average rate on a new two-
year fixed rate mortgage at 75% loan to value rose from 1.64% in January 2022 to 5.43% in December
2022, an increase of +3.79%.
The most significant increase in mortgage rates during the year was observed following September’s
mini-budget, which saw mortgage lenders withdrawing products and increasing rates as a result of
volatile swap spreads.
Overall, the number of residential property transactions in the UK fell by 14% to 1.3m in 2022 from a
record high of 1.5m in 2021, however activity levels in 2021 were inflated by the Stamp Duty Land Tax
holiday which saw a large number of property purchases
brought forward to benefit from lower
transactional costs. Beyond this year-on-year comparison, 2022 saw more property transactions than
any other year since 2007
UK gross mortgage lending increased by 4% to £322bn in 2022, reflecting a resilient market that was
buoyed by rising property prices, with an average house price increasing by 9.8% in 2022, stimulated
by high levels of demand and a lack of supply.
The UK savings market
2022 marked the end to the ‘accidental savings’ brought about by pandemic lockdowns, as the rising
cost of living saw many customers withdrawing from their savings, or not being able to add to them.
There was more competition in the savings market as providers passed on a proportion of the base rate
rises to savers via attractively priced savings products, despite the significant delays in doing so during
the first half of the year. The Bank of England reported that savings balances in the UK grew by £67bn
from £2,135.3bn at the start of the year to £2,202.4bn in December 2022.
There were also more providers and more savings accounts on offer in the year, with 1,690 savings
products promoted in December 2022 compared to 1,646 in December 2021.
According to the ONS, the household savings ratio that peaked at 26.8% in 2020, as a result of
‘accidental savings’, reduced to 9.0% by the fourth quarter of 2022.
The base rate rises introduced by the Bank of England led to higher rates across all types of savings
accounts. By the end of 2022, fixed rate bonds had increased by 293bps over the year.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
16
Market review (continued)
Easy access accounts held by financial institutions continued to exceed fixed term accounts. This was
driven in part by increased rates on traditionally lower-earning easy access accounts, and a likely desire
by customers to remain nimble, according to the Household Sector Deposits report.
The UK mortgage market and climate change
It has been estimated that privately owned residential properties represent 15% of total carbon
emissions in the UK and it is acknowledged that there are significant barriers to implementing energy
efficiency improvements. The UK Government’s focus on achieving its net zero goals has highlighted
the need to improve the energy efficiency of UK housing stock.
Two key consultations relating to improving home energy performance were held by the Department for
Business, Energy and Industrial Strategy, with outcomes yet to be published:
• Improving the Energy Performance of Privately Rented Homes in England and Wales closed
in January 2021. The outcome is widely expected to introduce a minimum requirement to
ensure that all rental properties achieve an EPC (Energy Performance Certificate) rating of
C or higher from 2028. It is also expected to increase the current required works cap (the
maximum amount that is expected to be paid to improve the property’s EPC rating) from
£3,500 to £10,000, before exemptions can be applied.
• Improving Home Energy Performance through Lenders closed in February 2021. The
outcome is expected to impose a requirement on all lenders to report on the EPC of their
loan portfolio, along with a commitment to show annual improvements towards an average
rating of C or higher.
These changes could have a significant impact on the private rented sector in the UK. The industry
eagerly anticipates the publication of the final outcomes from each of these consultations, however
discussion as well as action from lenders have already taken place, with the emergence of a ‘green
finance sector’. The Green Finance Institute reported that 19 Buy-to-Let lenders had launched
dedicated green finance products by the end of May 2022, a notable increase from nine lenders at the
end of 2021.
The Group’s lending sub-segments
Buy-to-Let
According to UK Finance, Buy-to-Let gross advances reached £55.7bn in 2022, a 17% increase from
£47.4bn in 2021. This was supported by strong refinancing activity in the year, with Buy-to-Let
remortgages increasing by 33% to £37.0bn as the early wave of five-year fixed rate products taken post
the PRA’s changes to the underwriting standards reached the end of their initial term.
Research conducted by BVA BDRC on behalf of the Group showed that the number of landlords
planning to purchase new properties fell to 9% in the fourth quarter of 2022 from 14% in 2021, and the
proportion of landlords looking to sell increased to 30% from 24% in 2021. The Landlords Panel survey
suggested that landlords with larger portfolios were more likely to make changes to their portfolio over
the next year with 16% looking to buy and 44% looking to sell. It also showed that of those who planned
to purchase new properties in the next 12 months, the majority (57%) planned to do so within a limited
company structure, further supporting the market-wide trend towards professionalisation.
Governance
Financial statements
Appendices
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
17
Market review (continued)
Tenant demand remained strong, with RICS reporting that demand was still rising at the time of its
December report, with supply remaining weak as evidenced by a decline in landlord instructions coming
to market during that month. This imbalance between demand and supply continued to exert upwards
pressure on rents in support of the fundamentals underpinning the Private Rented Sector. Rightmove
reported that the average asking rent increased by 15.7% in Greater London during 2022 and rose by
9.7% across the rest of the country.
Residential
According to UK Finance, total Residential loans to home owners reached £251bn in 2022, a minor
decrease from £255bn in 2021. However this stability in overall lending volumes masked a shift in the
type of business written, with a buoyant refinancing market compensating for a declining purchase
market during the year.
Purchase completions decreased by 9% to £193bn in 2022 (2021: £213bn) as the prior year benefitted
from a spike in purchase completions while the stamp duty holiday was in effect. Despite this, annual
purchase completions were still considerably higher than the pre-pandemic period in 2019 (£158bn).
Remortgage completions increased by 30% to £107bn (2021: £83bn) as borrowers sought to lock in to
the best deals before mortgage affordability deteriorated and rates increased further, with remortgages
representing 36% of the market total (2021: 28%).
Commercial
Throughout the first half of the year, there was a strong sense of confidence in commercial property,
supported by improving valuations and rising rents. In the first quarter capital values increased by 3.9%
and by a further 3.0% in the second quarter, with rents rising 1.5% and 1.0% respectively. However,
wider geopolitical and macroeconomic challenges began to impact in late summer, reversing the value
growth recorded in the first half, although some property types were affected more significantly than
others.
Retail rents remained broadly static in 2022 according to CBRE, with some insulation from further
declines provided by pandemic-induced price corrections throughout 2020 and 2021. Mixed-use asset
classes such as semi-commercial property, which offer a diverse income stream underpinned by
residential lettings, remained attractive to investors. This property type demonstrated more resilience
due to the residential rentals outperforming expectations. Overall, CBRE reported that capital values
for ‘all retail’ decreased by 8.1% during the year whilst rents increased by approximately 0.7%.
During 2022, all commercial segments saw a 10% increase in demand since 2021. The volume of
transactions in commercial property investment reached £50.4bn in 2022, just 8% below the five-year
average.
Residential development
Despite the withdrawal of the government’s pandemic support, housing demand remained strong
throughout most of 2022, although tailed off at the end of the year as a result of the uncertainty in future
economic conditions and increasing interest rates.
Demand remained strongest for houses that were affordable to local populations. It was notable that
sales rates for the few apartment schemes funded in London were also high, seemingly bucking that
trend.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
18
Key performance indicators (KPIs)
Throughout the Strategic report the Key performance indicators (KPIs) are presented on a statutory and
an underlying basis.
Management believes that the underlying results and the underlying KPIs provide a more consistent
basis for comparing the Group’s performance between financial periods. Underlying results for 2022
and 2021 exclude exceptional items, integration costs and other acquisition-related items.
For a reconciliation of statutory results to underlying results, see page 29.
1. Gross new lending
Statutory £5.8bn (2021: £4.5bn)
Definition - Gross new lending is defined as gross new organic lending before redemptions.
2022 performance:
Gross new lending increased 29% in the year and reflected a return to pre-pandemic criteria in our core
sub-segments including the reintroduction of lending at higher LTVs for higher credit quality customers.
2. Loan loss ratio
Statutory 13bps (2021: -2bps)
Underlying 14bps (2021: -2bps)
Definition - Loan loss ratio is defined as impairment losses expressed as a percentage of a 13 point
average of gross loans and advances. It is a measure of the credit performance of the loan book.
2022 performance:
Statutory and underlying loan loss ratios increased in the year as the Group adopted more severe
forward-looking macroeconomic scenarios and post model adjustments to account for the potential
impact of rising cost of living and borrowing concerns. Loan book growth and changes in the observed
risk profile also added to the charge and were partially offset by a release of pandemic-related
adjustments and house price appreciation.
3. Net interest margin (NIM)
Statutory 278bps (2021: 253bps)
Underlying 303bps (2021: 282bps)
Definition - NIM is defined as net interest income as a percentage of a 13 point average of interest
earning assets (cash, investment securities, loans and advances to customers and credit institutions).
It represents the margin earned on loans and advances and liquid assets after swap expense/income
and cost of funds.
2022 performance:
Both statutory and underlying NIM improved in 2022, primarily due to the benefit of delays in the market
passing on base rate rises to savers in full, especially in the first half of the year, partially offset by a net
effective interest rate loss as higher reversionary income was more than offset by customers refinancing
earlier.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
19
Key performance indicators (continued)
4. Cost to income ratio
Statutory 27% (2021: 26%)
Underlying 25% (2021: 24%)
Definition - Cost to income ratio is defined as administrative expenses as a percentage of total income.
It is a measure of operational efficiency.
2022 performance:
Statutory and underlying cost to income ratios increased in 2022 as a result of the growth in
administrative expenses due primarily to a more normalised level of post-pandemic spend, inflationary
headwinds and planned investment in the business, including refreshing and upgrading our technology
infrastructure post-integration. These costs were moderated by strong income generation in the year,
including fair value gains on hedging activities.
5. Management expense ratio
Statutory 81bps (2021: 71bps)
Underlying 80bps (2021: 70bps)
Definition - Management expense ratio is defined as administrative expenses as a percentage of a 13
point average of total assets. It is a measure of operational efficiency.
2022 performance:
Statutory and underlying management expense ratios increased in 2022 largely due to higher
administrative costs that reflected a more normalised level post-pandemic spend, inflationary
headwinds and planned investment in the business, including refreshing and upgrading our technology
infrastructure post-integration.
6. Return on equity
Statutory 20% (2021: 20%)
Underlying 23% (2021: 24%)
Definition - Return on equity (RoE) is defined as profit attributable to ordinary shareholders, which is
profit after tax and after deducting coupons on AT1 securities, gross of tax, as a percentage of a 13
point average of shareholders’ equity (excluding £150m of AT1 securities).
2022 performance:
Statutory and underlying return on equity remained strong in 2022 due to strong profitability in the year.
Governance
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
20
Key performance indicators (continued)
7. OSB solo CRD IV Common Equity Tier 1 capital ratio
The PRA has granted the Company a waiver to comply with the Capital Requirements Regulation
(CRR) as an individual consolidation which includes the Company and subsidiaries except for the
offshore servicing entity OSBI, Special Purpose Vehicles (SPVs) relating to securitisations and the
CCFS entities acquired in October 2019, defined as OSB solo.
OSB solo 18.4% (2021: 19.4%)
Definition
This is defined as CET1 capital as a percentage of risk-weighted assets (calculated on a standardised
basis) and is a measure of the capital strength of the Company.
2022 performance:
The CET1 ratio remained strong, although reduced marginally as capital generation from profitability in
the year was offset by loan book growth and payments of dividends.
8. Savings customer satisfaction – Net Promoter Score (NPS)
OSB 64 (2021: 70)
CCFS 61 (2020: 71)
Definition - The NPS measures customers’ satisfaction with services and products. It is based on
customer responses to the question of whether they would recommend us to a friend. The response
scale is 0 for absolutely not to 10 for definitely yes. Based on the score, a customer is a detractor
between 0 and 6, a passive between 7 and 8 and a promoter between 9 and 10. Subtracting the
percentage of detractors from promoters gives an NPS of between -100 and +100.
2022 performance:
Savings customer NPS declined slightly due to very strong demand in the year which temporarily
impacted the service response times and performance levels.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
21
Financial review
Summary statutory results for 2022 and 2021
For the year ended
31 December
2022
For the year ended
31 December
2021
Summary Profit or Loss
£m
£m
Net interest income
709.9
587.6
Net fair value gain on financial instruments
58.9
29.5
Gain on sale of financial instruments
–
4.0
Other operating income
6.6
7.9
Administrative expenses
(206.5)
(166.5)
Provisions
1.6
(0.2)
Impairment of financial assets
(29.8)
4.4
Impairment of intangible assets
–
3.1
Integration costs
(7.9)
(5.0)
Exceptional items
–
(0.2)
Profit before taxation
532.8
464.6
Profit after taxation
411.3
345.0
Key ratios
Net interest margin
278bps
253bps
Cost to income ratio
27%
26%
Management expense ratio
81bps
71bps
Loan loss ratio
13bps
-2bps
Return on equity
20%
20%
As at
31 December
2022
As at
31 December
2021
Extracts from the Statement of Financial Position
£m
£m
Loans and advances to customers
23,612.7
21,080.3
Retail deposits
19,755.8
17,526.4
Total assets
27,567.5
24,532.5
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
22
Financial review (continued)
Statutory profit
Group’s statutory profit before tax increased by 15% to £532.8m (2021: £464.6m) after exceptional
items, integration costs and other acquisition-related items of £59.6m (2021: £57.6m). The increase
was primarily due to growth in the loan book, an improved net interest margin and net fair value gains
on financial instruments resulting from rising swap rates, partially offset by higher administration costs
and an impairment charge compared to an impairment credit in 2021.
Statutory profit after tax was £411.3m in 2022, an increase of 19% from £345.0m in the prior year, and
included after-tax exceptional items, integration costs and other acquisition related items of £38.7m
(2021: £47.8m).
The Group’s effective tax rate reduced to 22.8% compared to 25.7% in the prior year, primarily due to
a reduction in the deferred tax provision following the enactment of the expected decrease in the bank
surcharge from 8% to 3% from April 2023.
Statutory return on equity for 2022 was 20% (2021: 20%).
Net interest income
Statutory net interest income increased by 21% in 2022 to £709.9m (2021: £587.6m),
largely reflecting
growth in the loan book and an improved net interest margin.
Statutory net interest margin (NIM) was 278bps compared to 253bps in the prior year, up 25bps,
primarily due to the benefit of base rate rises. There were delays, especially in the first half of the year,
in the market passing base rate rises on to savers in full. In addition, as rates rose, mortgage interest
income benefitted from higher expected reversionary income following the end of the fixed product term.
This benefit was partially offset by an expectation that customers would on average spend less time on
the higher reversionary rate before refinancing. The impact of this, together with other behavioural
changes, resulted in a net effective interest rate (EIR) reset loss of £31.6m (2021: £11.5m gain).
Net fair value gain on financial instruments
Statutory net fair value gain on financial instruments of £58.9m in 2022 (2021: £29.5m) included a
£57.1m net gain on unmatched swaps (2021: £10.3m) following the significant rise in swap prices in
the fourth quarter and a net loss of £8.1m (2021: £2.4m gain) in respect of the ineffective portion of
hedges.
The Group also recorded a £10.2m net gain (2021: £13.4m gain) from the unwind of acquisition-related
inception adjustments, a £1.2m gain (2021: £3.0m) from the amortisation of hedge accounting inception
adjustments and a loss of £1.5m from other items (2021: £0.4m gain).
The net gain on unmatched swaps related primarily to fair value movements on mortgage pipeline
swaps prior to them being matched against completed mortgages. This benefitted from a step up in
interest rate outlook on the SONIA yield curve largely in response to the actions announced in the
September ‘mini budget’. The Group economically hedges its committed pipeline of mortgages and this
unrealised gain unwinds over the life of the swaps through hedge accounting inception adjustments.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
23
Financial review (continued)
Gain on sale of financial instruments
There were no sales of financial instruments in 2022.
The gain on sale of financial instruments of £4.0m in 2021, related to the disposal of A2 notes in the
PMF 2019-1B securitisation in February 2021.
Other operating income
Statutory other operating income of £6.6m (2021: £7.9m) mainly comprised CCFS’ commissions and
servicing fees, including those from servicing securitised loans that have been derecognised from the
Group’s balance sheet.
Administrative expenses
Statutory administrative expenses increased by 24% to £206.5m in 2022 (2021: £166.5m), due primarily
to spend returning to a more normalised level post-pandemic, inflationary headwinds and planned
investment in the business, including refreshing and upgrading our technology infrastructure post-
integration.
The Group’s statutory cost to income ratio increased to 27% (2021: 26%) as a result of the growth in
administrative expenses, moderated by strong income generation in the year, including the fair value
gains on hedging activities.
The statutory management expense ratio increased to 81bps in 2022 (2021: 71bps) reflecting the higher
administrative expenses.
Impairment of financial assets
The Group recorded a statutory impairment charge of £29.8m in 2022 (2021: £4.4m credit) representing
a statutory loan loss ratio of 13bps (2021: -2bps).
The Group adopted more severe macroeconomic scenarios in its IFRS 9 models as the outlook
deteriorated, which led to a charge of £11.6m. Post-model adjustments, to account for rising cost of
living and borrowing concerns amounted to a charge of £13.3m and the strong loan book growth and
changes in the risk profile in the year resulted in a charge of £15.2m. These were partially offset by a
release of £10.3m due to house price appreciation in the year and a £8.3m release from a reduction in
pandemic-related post-model adjustments and modelling enhancements. Other charges amounted to
£8.3m.
In the prior year, the impairment credit was largely due to the Group’s adoption of less severe forward-
looking macroeconomic scenarios in its IFRS 9 models, reflecting an improved outlook together with
the benefit of strong house price performance in the year.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
24
Financial review (continued)
Impairment of intangible assets
There were no intangible asset impairments in 2022.
The impairment credit to intangible assets of £3.1m in the prior year related to a partial reversal of the
impairment of the broker relationships intangible of £7.0m recorded in 2020, as lending volumes in 2021
were higher than previously anticipated.
Integration costs
The Group recorded £7.9m of integration costs in 2022 (2021: £5.0m), which largely related to
redundancy costs and consultant fees for advice on the Group’s future operating structure.
Exceptional items
There were no exceptional costs in 2022.
In the prior year, exceptional costs of £0.2m related to the insertion of OSB GROUP PLC as the new
holding company and listed entity of the Group.
Balance sheet growth
On a statutory basis, net loans and advances to customers grew by 12% to £23,612.7m in 2022 (31
December 2021: £21,080.3m), supported by originations of £5.8bn in the year.
Total assets also grew by 12% to £27,567.5m (31 December 2021: £24,532.5m), largely due to
the growth in loans and advances to customers and an increase in liquid assets.
On a statutory basis, retail deposits increased by 13% to £19,755.8m as at 31 December 2022 from
£17,526.4m in the prior year, as the Group’s attractively priced savings products proved popular with
customers.
The Group complemented its retail deposits funding with drawings under the Bank of England’s
schemes. Drawings under the Term Funding Scheme for SMEs as at 31 December 2022 remained
unchanged from £4.2bn at the end of 2021 and drawings under the Index Long-Term Repo scheme
were £300.9m.
Liquidity
OSB and CCFS operate under the Prudential Regulation Authority’s liquidity regime and are managed
separately for liquidity risk. Each Bank holds its own significant liquidity buffer of liquidity coverage ratio
(LCR) eligible high-quality liquid assets (HQLA).
Each Bank operates within a target liquidity runway in excess of the minimum LCR regulatory
requirement, which is based on internal stress testing. Each Bank has a range of contingent liquidity
and funding options available for possible stress periods.
As at 31 December 2022, OSB had £1,494.1m and CCFS had £1,522.8m of HQLA (31 December
2021: £1,322.8m and £1,318.0m, respectively).
Overview
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
25
Financial review (continued)
OSB and CCFS also held portfolios of unencumbered prepositioned Bank of England level B and C
eligible collateral in the Bank of England Single Collateral Pool.
As at 31 December 2022, OSB had an LCR of 229% and CCFS 148% (31 December 2021: 240% and
158%, respectively) and the Group LCR was 185% (31 December 2021: 196%), all significantly in
excess of the regulatory minimum of 100% plus Individual Liquidity Guidance.
Capital
The OSB solo capital position remained strong with a CET1 capital ratio of 18.4% as at 31 December
2022 (31 December 2021: 19.4%).
Summary cash flow statement
For the year
ended
31 December
2022
For the year
ended
31 December
2021
1
Profit before tax
532.8
464.6
Net cash generated/(used in):
Operating activities
428.2
(347.1)
Investing activities
63.2
80.6
Financing activities
(184.0)
632.6
Net increase in cash and cash equivalents
307.4
366.1
Cash and cash equivalents at the beginning of the period
2,736.7
2,370.6
Cash and cash equivalents at the end of the period
3,044.1
2,736.7
1. 2021 figures were restated, see note 1 b) in the Group’s Consolidated Financial Statements for further details.
Cash flow statement
The Group’s cash and cash equivalents increased by £307.4m during the year to £3,044.1m as at 31
December 2022.
In 2022, loans and advances to customers increased by £2,563.1m, primarily funded by £2,229.4m of
deposits from retail customers. The Group received £434.3m of cash collateral on derivative exposures and
paid £137.5m of initial margin, reflecting new derivatives during the year. Cash used from financing activities
of £184.0m included £300.9m drawings under the ILTR scheme offset by £193.6m repayment of debt
securities, £233.1m dividend payments and £45.3m interest on financing liabilities. Total drawings under the
Bank of England’s TFSME scheme remained unchanged at £4.2bn. Cash generated from investing activities
was £63.2m.
In 2021, loans and advances to customers increased by £1,844.0m during the year, partially funded by
£923.3m of deposits from retail customers and a decrease in loans and advances to credit institutions
(primarily the Bank of England call account) of £167.4m. Additional funding was provided by cash generated
from financing activities of £632.6m included £633.9m of net drawings under the Bank of England’s TFS and
TFSME schemes and £36.1m of net proceeds from securitisation of mortgages offset by £86.7m dividend
payments and £8.4m interest on financing liabilities during the year. Cash generated from investing activities
was £80.6m.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
26
Financial review (continued)
Summary of underlying results for 2022 and 2021
For the year ended
31 December
2022
For the year ended
31 December
2021
Summary Profit or Loss
£m
£m
Net interest income
769.1
650.5
Net fair value loss on financial instruments
48.5
18.5
Gain on sale of financial instruments
–
2.3
Other operating income
6.6
7.9
Administrative expenses
(202.7)
(161.7)
Provisions
1.6
(0.2)
Impairment of financial assets
(30.7)
4.9
Profit before taxation
592.4
522.2
Profit after taxation
450.0
392.8
Key ratios
Net interest margin
303bps
282bps
Cost to income ratio
25%
24%
Management expense ratio
80bps
70bps
Loan loss ratio
14bps
-2bps
Return on equity
23%
24%
Extracts from the Statement of Financial
Position
As at
31 December
2022
As at
31 December
2021
£m
£m
Loans and advances
23,529.8
20,936.9
Retail deposits
19,755.2
17,524.8
Total assets
27,488.4
24,404.2
Alternative performance measures
The Group presents alternative performance measures (APMs) in this Strategic report as Management
believe they provide a more consistent basis for comparing the Group’s performance between financial
periods.
Underlying results for 2022 and 2021 exclude exceptional items, integration costs and other acquisition-
related items. A reconciliation of statutory to underlying results is disclosed on page 29.
APMs reflect an important aspect of the way in which operating targets are defined and performance is
monitored by the Board. However, any APMs in this document are not a substitute for IFRS measures and
readers should consider the IFRS measures as well.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
27
Financial review (continued)
Underlying profit
The Group’s underlying profit before tax increased by 13% to £592.4m from £522.2m in 2021. The
increase was primarily due to growth in the loan book, an improved net interest margin and net fair
value gains on financial instruments resulting from rising swap rates, partially offset by higher
administration costs and an impairment charge compared to an impairment credit in 2021.
Underlying profit after tax was £450.0m, up 15% (2021: £392.8m), broadly in line with the increase in
profit before tax. The Group’s effective tax rate on an underlying basis reduced to 24.0% for 2022 (2021:
24.8%).
On an underlying basis, return on equity for 2022 was 23% (2021: 24%).
Net interest income
Underlying net interest income increased by 18% to £769.1m in 2022 (2021: £650.5m), largely reflecting
growth in the loan book and an improved net interest margin.
The underlying net interest margin increased to 303bps from 282bps in 2021, primarily due to the benefit
of base rate rises. There were delays, especially in the first half of the year, in the market passing base
rate rises on to savers in full. In addition, as rates rose, mortgage interest income benefitted from higher
expected reversionary income following the end of the fixed product term. This benefit was partially
offset by an expectation that customers would on average spend less time on the higher reversionary
rate before refinancing. The impact of this, together with other behavioural changes, resulted in a net
effective interest rate (EIR) reset loss of £23.1m (2021: £18.6m gain).
Net fair value gain on financial instruments
Underlying net fair value gain on financial instruments of £48.5m in 2022 compared to a gain of £18.5m
in 2021. This included a gain on unmatched swaps of £57.1m (2021: £10.3m) following the significant
rise in swap prices in the fourth quarter, a loss of £8.1m (2021: £2.4m gain) from hedge ineffectiveness.
The Group also recorded a £1.2m gain (2021: £5.4m) from the amortisation of hedge accounting
inception adjustments and a loss of £1.7m (2021: £0.4m gain) from other items.
The net gain on unmatched swaps related primarily to fair value movements on mortgage pipeline
swaps prior to them being matched against completed mortgages. This benefitted from a step up in
interest rate outlook on the SONIA yield curve largely in response to the actions announced in the
September mini budget. The Group economically hedges its committed pipeline of mortgages and this
unrealised gain unwinds over the life of the swaps through hedge accounting inception adjustments.
Gain on sale of financial instruments
There were no sales of financial instruments in 2022.
The gain on sale of financial instruments of £2.3m in 2021 related to the disposal of A2 notes in the
PMF 2019-1B securitisation in February 2021.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
28
Financial review (continued)
Other operating income
On an underlying basis, other operating income was £6.6m in 2022 (2021: £7.9m) and mainly
comprised CCFS’ commissions and servicing fees, including those from servicing securitised loans that
have been derecognised from the Group’s balance sheet.
Administrative expenses
Underlying administrative expenses were up 25% to £202.7m in 2022 (2021: £161.7m), due primarily
to spend returning to a more normalised level post pandemic, inflationary headwinds and planned
investment in the business, including refreshing and upgrading our technology infrastructure post-
integration.
The Group’s underlying cost to income ratio increased to 25% (2021: 24%) as a result of the growth in
administrative expenses, moderated by strong income generation in the year, including the fair value
gains on hedging activities.
The underlying management expense ratio increased to 80bps in 2022 (2021: 70bps) reflecting the
higher administrative expenses.
Impairment of financial assets
The Group recorded an underlying impairment charge of £30.7m in 2022 (2021: £4.9m credit)
representing an underlying loan loss ratio of 14bps (2021: -2bps).
The Group adopted more severe macroeconomic scenarios in its IFRS 9 models as the outlook
deteriorated, which led to a charge of £11.6m. Post-model adjustments to account for rising cost of
living and borrowing concerns, amounted to a charge of £13.3m and the strong loan book growth and
changes in the risk profile in the year resulted in a charge of £15.2m. These were partially offset by a
release of £10.3m due to house price appreciation in the year and a £8.3m release from a reduction in
pandemic-related post-model adjustments and modelling enhancements. Other charges amounted to
£9.2m.
In the prior year, the impairment credit was largely due the Group’s adoption of less severe forward-
looking macroeconomic scenarios in its IFRS 9 models, reflecting an improved outlook together with
the benefit of strong house price performance in the year.
Balance sheet growth
On an underlying basis, net loans and advances to customers were £23,529.8m (31 December 2021:
£20,936.9m) an increase of 12%, supported by gross originations of £5.8bn in the year.
Total underlying assets grew by 13% to £27,488.4m (31 December 2021: £24,404.2m), largely due to
the growth in loans and advances to customers and an increase in liquid assets.
On an underlying basis, retail deposits increased by 13% to £19,755.2m (31 December 2021:
£17,524.8m) as the Group’s attractively priced savings products proved popular with customers in 2022.
The Group complemented its retail deposits funding with drawings under the Bank of England’s
schemes. Drawings under the Term Funding Scheme for SMEs (TFSME) at 31 December 2022
remained unchanged from £4.2bn at the end of 2021 and drawings under the Index Long-Term Repo
scheme were £300.9m.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
29
Financial review (continued)
Reconciliation of statutory to underlying results
2022
2021
Statutory
results
£m
Reverse
acquisition-
related and
exceptional
items
£m
Underlying
results
£m
Statutory
results
£m
Reverse
acquisition-
related and
exceptional
items
£m
Underlying
results
£m
Net interest income
709.9
59.2
1
769.1
587.6
62.9
1
650.5
Net fair value gain/(loss) on financial
instruments
58.9
(10.4)
2
48.5
29.5
(11.0)
2
18.5
Gain on sale of financial instruments
–
–
–
4.0
(1.7)
3
2.3
Other operating income
6.6
–
6.6
7.9
-
7.9
Total income
775.4
48.8
824.2
629.0
50.2
679.2
Administrative expenses
(206.5)
3.8
4
(202.7)
(166.5)
4.8
4
(161.7)
Provisions
1.6
–
1.6
(0.2)
-
(0.2)
Impairment of financial assets
(29.8)
(0.9)
5
(30.7)
4.4
0.5
5
4.9
Impairment of intangible assets
–
–
–
3.1
(3.1)
-
Integration costs
(7.9)
7.9
7
–
(5.0)
5.0
6
-
Exceptional items
–
–
–
(0.2)
0.2
7
-
Profit before tax
532.8
59.6
592.4
464.6
57.6
522.2
Profit after tax
411.3
38.7
450.0
345.0
47.8
392.8
Summary Balance Sheet
Loans and advances to customers
23,612.7
(82.9)
9
23,529.8
21,080.3
(143.4)
8
20,936.9
Other financial assets
3,878.9
9.1
10
3,888.0
3,382.3
22.0
9
3,404.3
Other non-financial assets
75.9
(5.3)
11
70.6
69.9
(6.9)
10
63.0
Total assets
27,567.5
(79.1)
27,488.4
24,532.5
(128.3)
24,404.2
Amounts owed to retail depositors
19,755.8
(0.6)
12
19,755.2
17,526.4
(1.6)
11
17,524.8
Other financial liabilities
5,548.5
0.8
13
5,549.3
4,908.7
2.3
12
4,911.0
Other non-financial liabilities
61.4
(30.2)
14
31.2
72.6
(45.0)
13
27.6
Total liabilities
25,365.7
(30.0)
25,335.7
22,507.7
(44.3)
22,463.4
Net assets
2,201.8
(49.1)
2,152.7
2,024.8
(84.0)
1,940.8
1. Amortisation of the net fair value uplift to CCFS’ mortgage loans and retail deposits on Combination
2. Inception adjustment on CCFS’ derivative assets and liabilities on Combination
3. Recognition of a loss on sale of securitisation notes
4. Amortisation of intangible assets recognised on Combination
5. Adjustment to expected credit losses on CCFS loans on Combination
6. Reversal of impairment of intangible assets
7. Reversal of integration costs related to the Combination
8. Reversal of exceptional items
9. Recognition of a fair value uplift to CCFS’ loan book less accumulated amortisation of the fair value uplift and a movement on credit provisions
10. Fair value adjustment to hedged assets
11. Recognition of acquired intangibles on Combination
12. Fair value adjustment to CCFS’ retail deposits less accumulated amortisation
13. Fair value adjustment to hedged liabilities
14. Adjustment to deferred tax liability and other acquisition-related adjustments
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
30
Risk review
Executive summary
Progress was made in 2022 against the Group’s strategic risk management objectives for the year,
including the priority areas set out in the Annual Report and Accounts for the year ended 31 December
2021.
The Group delivered strong financial performance against the backdrop of the United Kingdom’s
uncertain macroeconomic outlook resulting from the high levels of inflation and the ongoing conflict in
Ukraine. The strong performance was delivered within the confines of a prudent risk appetite. The
Group operated within the boundaries of its risk appetite limits during 2022.
The impact of the rising cost of living, the rising cost of borrowing and the prospect of further increases
in the Bank of England base rate were key areas of focus for the Group in 2022. The Group conducted
additional analysis and made adjustments to the macroeconomic scenarios used in its modelling and
provisioning to ensure the impacts on customer affordability were covered.
The Group remained alert to the heightened cyber risk environment driven by the situation in Ukraine
and the embedding of the hybrid working model for colleagues across the Group. Our cyber security
capabilities were maintained through continued investment and frequent penetration testing.
The Group’s overall asset quality remained stable with respect to customer behaviour and affordability
levels, whilst collateral values improved during the year. Arrears levels remained broadly stable. The
Group has a negligible exposure to Ukrainian, Russian and Belorussian customers and closely
monitored and managed these customers as required.
The Group’s risk management framework ensures risks continued to be identified, monitored and
managed effectively, which in turn supported the strong operational and financial performance in the
year. A full review of the risk appetite statements and limits across all principal risk types was
undertaken in 2022, which informed the management of the Group’s lending and retail savings
businesses in an uncertain and competitive operating environment. Group risk appetite statements and
limits were designed and implemented, based on aligned approaches calibrated for anticipated
financial forecasts and stress test analysis. Risk appetite is monitored and managed at the Group and
at the individual Bank levels.
The Group also maintained strong levels of capital and funding throughout 2022, being mindful of the
heightened levels of future uncertainty. Capital and funding levels were assessed against the impacts
of extreme but plausible economic, business and operational shocks and reflected in the Group’s
solvency and liquidity risk appetites. A number of reverse stress tests were performed to identify what
severity of macroeconomic scenario could result in the Group and its entities breaching minimum
regulatory requirements, which were utilised in the going concern and viability assessments.
The Group experienced some operational challenges during 2022. The number of base rate rises was
responsible for strong demand for savings accounts and the number of product rate changes required
was operationally challenging. In the second half, the market saw an increasing level of borrowers
looking to refinance with their existing lender and in some cases refinance early to avoid anticipated
future interest rate rises. This caused a spike in enquiries and application timelines which also resulted
in elongated call wait times.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
31
Risk review (continued)
The Group continues to focus on enhancing forecasting and stress testing capabilities, with a particular
focus on Internal Ratings Based (IRB) stress testing and stress testing using Basel 3.1 scenarios.
The Group continues to advance towards IRB accreditation, with progress made throughout the year.
The Group has undertaken a comprehensive self-assessment exercise to validate its level of
compliance, in conjunction with drafting all required module 1 submission documentation, which has
passed through internal governance. The Group has noted the PRA’s industry level feedback to ensure
effective adherence to regulatory expectation. Pre-application discussions have been held with the PRA
to outline the Group’s approach to integrating IRB capabilities and compliance. The Group is now
actively engaging with the PRA regarding a module 1 submission date. The programme continues to
integrate IRB capabilities informing the Group’s business, key risk and capital management disciplines.
Active monitoring and assessment of the Group’s credit risk portfolio drivers is a critical risk
management discipline. This was achieved through the active monitoring of credit portfolio performance
indicators, sensitivity and stress test analysis and thematic deep dives.
Cross-functional expertise was leveraged to review emerging trends and take pre-emptive actions in
accordance with the defined
risk appetite and governance standards. The Group’s investment in
advanced credit analytics greatly enhanced monitoring capabilities, improved forward-looking
assessments and supported stress testing and capacity planning analysis. This in turn allowed the
Board to make more informed decisions in the uncertain macroeconomic and political environment.
Ensuring that the Group continued to maintain appropriate expected credit loss provisions was an
important consideration of the Board and senior management. The Group undertook detailed analysis
to assess portfolio risks and consider if these were adequately accounted for in IFRS 9 models and
frameworks. The Group identified a number of areas requiring post-model adjustments, most notably
to account for the increased credit risk from the heightened cost of living and cost of borrowing, resulting
in an increase in provisions and a more pronounced increase in the balances of accounts in stage 2,
which was expected given the mechanics of the IFRS 9 framework. In addition, a new suite of IFRS 9
models were implemented, which further increased alignment across the Group. Expected credit loss
provisions were assessed using the Group’s revised IFRS 9 methodologies, individually assessed
provisioning approaches and portfolio segment based stress and sensitivity analysis. Benchmarking
analysis was provided to the Board and senior management, enabling review and challenge of provision
coverage levels and underlying macroeconomic scenarios.
Significant investment continues to be made across the Group’s risk management capabilities and
resources, to ensure that all categories of risk continue to be managed effectively. An independent
third-party review was undertaken during the year which indicated that the Group’s risk management
framework was well-designed and embedded to support the Group’s current and future strategic plans.
The review’s recommended actions confirmed management’s existing plans and will drive further
enhancements ensuring that the Group continues to meet emerging regulatory expectations, whilst
supporting shareholder returns via the management of financial risks.
A number of deep dive thematic reviews across all core loan portfolios were conducted to ensure that
credit risk strategies and operational capabilities remained appropriate. As a secured lender, the Group
has prudent credit risk appetite limits in place which, together with well-established management
capabilities, position the Group well to manage the impact of any potential affordability stress from the
ongoing rising cost of living or further increases in interest rates. The Group continues to conduct
sensitivity and stress testing analysis to understand the financial and operational impact of differing
scenarios on arrears levels, financial performance metrics and prudential requirements. These
scenarios also support operational capacity planning
to help ensure that the correct level of resourcing
is in place within the Servicing and Collections function. During the pandemic, the Group demonstrated
the effectiveness of its capabilities in managing and supporting customers during a period of stress.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
32
Risk review (continued)
The ongoing delivery of planned enhancements to the Group’s operational resilience capabilities
remains a key area of focus. The Group’s programme of work to ensure appropriate capabilities and
processes are in place to facilitate an orderly resolution of the Group completed as planned, including
the successful completion of a resolution scenario fire drill which walked selected Board members and
senior management through the core steps of the resolution timeline. The Group has put in place
arrangements designed to ensure that it is able to continue to serve customers through resolution and
any post-stabilisation restructuring.
The Group continues to implement a programme of work to further embed the operational risk
management framework across the Group, including the completion of an enhanced risk and controls
selfassessment process and delivery of a more aligned approach to the setting of operational risk
appetite. The Group’s Risk and Control Self-Assessment (RCSA) process was integrated into a Group-
wide risk system which will ensure more dynamic and continuous assessment, adherence to common
standards, an improved user interface and increased review and challenge.
The Group views fair customer outcomes and provision of timely and effective support to customers in
distress as a central pillar supporting its Purpose, Vision and Values. The Group has customer-centric
policies and procedures in place which are subject to ongoing reviews and benchmarking. The Group
was also appropriately attuned to the emerging industry and regulatory focus on customer vulnerability
recognising that Consumer Duty regulations set higher expectations for the Group in terms of
demonstrating that good outcomes for its customers is at the heart of the Group’s strategy and business
objectives.
The Group continued to embed its approach to managing climate risk through the further development
of its climate risk management framework. A dedicated ESG Technical Committee ensures that
enhancements are delivered as required.
Priority areas for 2023
A significant level of uncertainty remains around the UK economic outlook and the operating
environment for 2023 and beyond. Therefore, continued close monitoring of the Group’s risk profile
and operating effectiveness remains a key priority for the Risk and Compliance function. Other
priorities include:
• Continue to leverage the Group’s Enterprise Risk Management Framework and existing
capabilities to actively identify, assess and manage risks in line with approved risk appetite.
• Leverage enhancements made across the Group’s portfolio analytical capabilities, including
the implementation of an enhanced stress testing capability to improve riskbased pricing,
balance sheet management, capital planning and stress testing.
• Make continued progress in obtaining IRB accreditation and further leverage capabilities within
wider risk management disciplines such as IFRS 9 Expected Credit Loss (ECL) calculations,
underwriting, existing customer management and collections to drive portfolio performance
benefits and improvements in shareholder returns.
• Implement and embed the FCA’s Consumer Duty rules and requirements, via 5 key pillars of
activity, to ensure that the Group complies with the new Consumer Principle, cross-cutting rules
and the four Consumer Duty outcomes by 31 July 2023 for new and existing products and 31
July 2024 for closed products.
• Continue to strengthen engagement and support with the first line of defence to enhance
conduct, regulatory and financial crime risk awareness and key preventative and detective
controls.
• Further enhance and embed the Group’s resolution framework, including testing valuation and
funding in resolution capabilities and testing interactions between other resolution barriers.
• Maintain oversight of capital management including the impact of MREL, Basel 3.1 and IRB.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
33
Risk review (continued)
• Continue the optimisation of funding strategy and enhancement of sensitivity analysis around
key liquidity drivers.
Enterprise Risk Management Framework
The Enterprise Risk Management Framework (ERMF) sets out the principles and approach with respect
to the management of the Group’s risk profile in order to successfully fulfil its business strategy and
objectives, including compliance with all conduct and prudential regulatory objectives.
The ERMF is the overarching framework that enables the Board and senior management to actively
manage and optimise the risk profile within the constraints of its risk appetite. The ERMF also enables
informed risk-based decisions to be taken in a timely manner, ensuring that the interests and
expectations of key stakeholders can be met.
The ERMF also provides a structured mechanism to align critical components of an effective approach
to risk management. The ERMF links overarching risk principles to day-to-day risk monitoring and
management activities.
The modular construct of the ERMF provides an agile approach to keeping pace with the evolving
nature of the risk profile and underlying drivers. The ERMF and its core modular components are
subject to periodic review and approval by the Board and its relevant Committees.
The key modules of the ERMF structure are as follows:
1. Risk principles and culture – the Group established a set of risk management and oversight
principles that inform and guide all underlying risk management and assessment activities. These
principles are informed by the Group’s Purpose, Vision and Values.
2. Risk strategy and appetite – the Group established a clear business vision and strategy which is
supported by an articulated risk vision and underlying principles. The Board is accountable for ensuring
that the Group’s ERMF is structured against the strategic vision and is delivered within agreed risk
appetite thresholds.
3. Risk assessment and control – the Group is committed to building a safe and secure banking
operation via an integrated and effective enterprise strategic risk management framework.
4. Risk definitions and categorisation – the Group sets out its principal risks which represent the
primary risks to which the Group is exposed.
5. Risk analytics – the Group uses quantitative analysis and statistical modelling to help improve its
business decisions.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
34
Risk review (continued)
6. Stress testing and scenario development – stress testing is an important risk management tool which
is used to evaluate the potential effects of a specific event and or movement in a set of variables to
understand the impact on the Group’s financial and operating performance. The Group has a stress
testing framework which sets out the Group’s approach.
7. Risk data and information technology – the maintenance of high-quality risk information, along with
the Group’s data enrichment and aggregation capabilities, are central to the Risk function’s objectives
being achieved.
8. Risk Management Framework’s policies and procedures – risk frameworks, policies and supporting
documentation outline the process by which risk is effectively managed and governed within the Group.
9. Risk management information and reporting – the Group established a comprehensive suite of risk
Management Information (MI) and reports covering all principal risk types.
10. Risk governance and function organisation – risk governance refers to the processes and
structures established by the Board to ensure that risks are assumed and managed within the Board-
approved risk appetite, with clear delineation between risk taking, oversight and assurance
responsibilities. The Group’s risk governance framework is structured to adhere to the ‘three lines of
defence’ model.
11. Use and embedding - dissemination of key framework components across the Group to ensure
that business activities and decisionmaking are undertaken in line with the Board expectations.
Group organisational structure
The Board has ultimate responsibility for the oversight of the Group’s risk profile and risk management
framework and, where it deems it appropriate, it delegates its authority to relevant Committees. The
Board and its Committees are provided with appropriate and timely information relating to the nature
and level of the risks to which the Group is exposed and the adequacy of the risk controls and mitigants.
The Internal Audit function provides independent assurance to the Board and its Committees as to the
effectiveness of the systems and controls and the level of adherence to internal policies and regulatory
requirements. The Board also commissions third party subject matter expert reviews and reports in
relation to issues and areas requiring deeper technical assessment and guidance.
Risk appetite
The Group aligns its strategic and business objectives with its risk appetite, which defines the level of
risk that the Group is willing to accept, enabling the Board and senior management to monitor the risk
profile relative to its strategic and business performance objectives. Risk appetite is a critical
mechanism through which the Board and senior management are able to identify adverse trends and
respond to unexpected developments in a timely and considered manner.
The risk appetite is calibrated to reflect the Group’s strategic objectives, business operating plans, as
well as external economic, business and regulatory constraints. In particular, the risk appetite is
calibrated to ensure that the Group continues to deliver against its strategic objectives and operates
with sufficient financial buffers even when subjected to plausible but extreme stress scenarios. The
objective of the Board’s risk appetite is to ensure that the strategy and business operating model is
sufficiently resilient.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
35
Risk review (continued)
The Group’s risk appetite is calibrated using statistical analysis and stress testing to inform the process
for setting management triggers and limits against key risk indicators. The calibration process is
designed to ensure that timely and appropriate actions are taken to maintain the risk profile within
approved thresholds. The Board and senior management actively monitor actual performance against
approved management triggers and limits. Currently, there are two regulated banking entities within the
Group. Risk appetite metrics and thresholds are set at both individual entity and Group levels.
The Group’s risk appetite is subject to a full refresh annually across all principal risk types and a mid-
year review where any metrics can be assessed and updated as appropriate.
Management of climate change risk
There was further embedding of the Group’s approach to climate risk during 2022, with the Climate
Risk Management Framework and ESG governance structures now established.
The Group is exposed to the following climate related risks:
• Physical risk – relates to climate or weather-related events such as heatwaves, droughts,
floods, storms, rising sea levels, coastal erosion and subsidence. These risks could result in
financial losses with respect to the Group’s own real estate and customer loan portfolios.
• Transition risk – arising from the effect of adjusting to a low-carbon economy and changes to
appetite, strategy, policy or technology. These changes could result in a reassessment of asset
values and increased credit exposures for banks and other lenders as the costs and
opportunities arising from climate change become apparent. Reputational risk arises from a
failure to meet changing and more demanding societal, investor and regulatory expectations.
Approach to analysing climate risk on the loan book
As part of the ICAAP, the Risk function engaged with a third party to provide detailed climate change
assessments at a collateral level for the Group’s loan portfolios. The data was in turn utilised to conduct
profiling and financial risk assessments.
a) Climate scenarios considered
The standard metric for assessing climate change risk is the global greenhouse gas concentration as
measured by Representative Concentration Pathway (RCP) levels. The four levels adopted by the
Intergovernmental Panel for Climate Change for its fifth assessment report (AR5) in 2014 are:
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
36
Risk review (continued)
Emissions scenario
Scenario
Change in temperature
(°C) by 2100
RCP 2.6
1.6 (0.9 – 2.3)
RCP 4.5
2.4 (1.7 – 3.2)
RCP 6.0
2.8 (2.0 – 3.7)
RCP 8.5
4.3 (3.2 – 5.4)
Note: figures within the brackets above detail the range in temperatures. Single figures outside the
brackets indicate the averages.
b) Climate risk perils considered
The following three physical perils of climate change were assessed:
• Flood - wetter winters and more concentrated rainfall events will increase flooding.
• Subsidence - drier summers will increase subsidence via the shrink or swell of clay.
• Coastal erosion - increased storm surge and rising sea levels will increase the rate of erosion.
For each of the physical perils and climate scenarios detailed above, a decade by decade prediction,
from the current year to 2100 on the likelihood of each was provided.
For flood and subsidence, the likelihood took the form of a probability that a flood or subsidence event
would occur over the next ten years. For coastal erosion the distance of the property to the coast line
is provided by scenario and decade.
All peril impacts are calculated at the property level to a one metre accuracy. This resolution is essential
because flood and subsidence risk factors can vary considerably between neighbouring properties.
In addition to the physical perils, the current Energy Performance Certificate (EPC) of each property
was considered to allow for an assessment of transitional risk due to policy change. EPC ratings are
based on a Standard Energy Procedure (SAP) calculation which uses a methodology to determine the
energy performance of properties by considering factors such as construction materials, heating
systems, insulation and air leakage.
Both the OSB and CCFS portfolios were profiled against each of the perils detailed under the best (RCP
2.6) and worst (RCP 8.5) climate scenarios.
• Flood risk
By the 2030’s, at the Group level, the percentage of properties predicted to experience a flood
is expected to increase from 0.49% in the least severe scenario to 0.51% in the most severe
scenario. Both scenarios represent a low proportion of the Group’s loan portfolios.
• Subsidence
In the 2030’s, at the Group level the percentage of properties predicted to experience
subsidence is expected to increase from 0.42% in the least severe scenario to 0.45% in the
most severe scenario. The outcome of both scenarios represents a low proportion of the
Group’s loan portfolios.
• Coastal erosion
There are two elements to coastal erosion risk. The first relates to the proximity of the property
to the coast. The second depends on whether the area in which the property is located is likely
to experience coastal erosion in the future.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
37
Risk review (continued)
Both Banks have over 93% of their portfolios more than 1000 metres from the coastline, indicating a
very low coastal erosion risk across the Group.
The CCFS bank entity has 32 properties within 100 metres of the coastline, whilst the OSB bank entity
has 34.
c) Energy Performance Certificate profile
The EPC profile of both bank entities follows a similar trend to the national average. At the Group level
40% of properties have an EPC of C or better, 45% have an EPC of D, 13% with an EPC of E and
negligible percentages in F or G. Over 90% of the properties supporting the Group’s loan portfolios
have the potential to have at least an EPC rating of C.
Value at Risk assessment
The Value at Risk to each Bank, measured through change to Expected Credit Loss (ECL) and
Standardised and IRB Risk Weighted Assets (RWAs), is assessed through the application of stress to
collateral valuations as per the methodology outlined below. Impacts are assessed against the latest
year end position.
Climate change scenarios
To get the full range of impacts, the most and least severe climate change stress scenarios were
considered.
The most severe, RCP 8.5, assumes there will be no concerted effort at a global level to reduce
greenhouse gas emissions. Under this scenario, the predicted increase in global temperature is 3.2 -
5.4°C by 2100.
The least severe scenario, RCP 2.6, assumes early action is taken to limit future greenhouse gas
emissions. Under this scenario, the predicted increase in global temperature is 0.9-2.3°C by 2100.
Methodology – physical risks
For the physical risks, updated valuations are produced to reflect the impact of a flood, subsidence and
coastal erosion risk.
Methodology – transitional risks
The Group’s expectation is that, under the early action scenario (RCP 2.6), the government will require
all properties to achieve EPC A, B and C grades where possible. We considered this risk for Buy-to-Let
accounts only.
d) Analysis outcome
The physical risks currently present an immaterial ECL or capital risk to the Group. The sensitivity to
transitional risk is larger than that of physical risk, although still very small, particularly when considering
the aggressive time frames on government policy relating to minimum EPC requirements.
e) Planned enhancements during 2023
In the future, the Group’s climate risk data and scenario analysis capabilities will continue to be
enhanced.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
38
Principal risks and uncertainties
1. Strategic and business risk
The risk to the Group’s earnings and profitability arising from its strategic decisions, change in business
conditions, improper implementation of decisions or lack of responsiveness to industry changes.
Risk appetite statement: The Group’s strategic and business risk appetite states that the Group does
not intend to undertake any medium- to long-term strategic actions that would put at risk its vision of
being a leading specialist lender, backed by strong and dependable savings franchises. The Group
adopts a long-term sustainable business model which, while focused on niche sub-sectors, is capable
of adapting to growth objectives and external developments.
1.1 Performance against targets
Performance against strategic and business targets does not meet stakeholder expectations. This has
the potential to damage the Group’s franchise value and reputation.
Mitigation
Regular monitoring by the Board and the Group Executive Committee of business and financial
performance against the strategic agenda and risk appetite. The financial plan is subject to regular
reforecasts. The balanced business scorecard is the primary mechanism to support how the Board
assesses management performance against key targets. Use of stress testing to flex core business
planning assumptions to assess potential performance under stressed operating conditions.
Direction: increased
The Group delivered strong performance against targets during 2022 despite the continued impact of
inflation, increasing interest rates and the conflict in Ukraine. The ongoing macroeconomic uncertainty
and its potential impact on net interest margin, affordability levels and house prices present an
increased risk to the Group’s performance in 2023.
1.2 Economic environment
The economic environment in the UK is an important factor impacting the strategic and business risk
profile.
A macroeconomic downturn may impact the credit quality of the Group’s existing loan portfolios and
may influence future business strategy as the Group’s new business proposition becomes less
attractive due to lower returns.
Mitigation
The Group’s business model as a secured lender helps limit potential credit risk losses and supports
performance through the economic cycle. The Group continues to utilise and enhance its stress testing
capabilities to assess and minimise potential areas of macroeconomic vulnerability.
Direction: increased
The increase in macroeconomic environment risk in 2022 related to inflation and increasing interest
rates creating a squeeze on borrowers’ affordability levels. The ongoing macroeconomic uncertainty
will continue into 2023 with an increased risk to the Group’s credit risk profile, including the possibility
of a fall in house prices.
1.3 Competition risk
The risk that new bank entrants and existing peer banks shift focus to the Group’s market sub-
segments, increasing the level of competition.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
39
Principal risks and uncertainties (continued)
Mitigation
The Group continues to develop products and services that meet the requirements of the markets in
which it operates. The Group has a diversified suite of products and capabilities to utilise, together with
significant financial resources to support a response to changes in competition.
Direction: unchanged
The current economic outlook may limit the number of competitors shifting their focus to the Group’s
key market subsegments.
2. Reputational risk
The potential risk of the Group’s reputation being affected due to factors such as unethical practices,
adverse regulatory actions, customer or broker dissatisfaction and complaints or negative/adverse
publicity.
Reputational risk can arise from a variety of sources and is a second order risk – the crystallisation of
any principal risk can lead to a reputational risk impact.
The Group has a very low appetite for reputational risks. The Group will not conduct its business or
engage with stakeholders in a manner that could adversely impact its reputation or franchise value. The
Group recognises that reputational risk is a consequence of other risks materialising and in turn seeks
to actively manage all risks within Board-approved risk appetite levels. The Group strives to protect and
enhance its reputation at all times.
2. 1 Deterioration of reputation
Potential loss of trust and confidence that our stakeholders place in us as a responsible and fair provider
of financial services.
Mitigation
Culture and commitment to treating customers fairly and being open and transparent in communication
with key stakeholders. Established processes in place to proactively identify and manage potential
sources of reputational risk. Review of relevant Management Information (MI) including complaint
volumes, Net Promoter Scores, Customer Satisfaction results, Social Media and Trustpilot feedback.
Direction: increased
The challenging macroeconomic environment in 2022 resulted in significant shifts within both the UK’s
lending and savings markets. This has brought about the need for all banks to become increasingly
agile with products offered in order to ensure that all core targets continued to be met. Operational
scalability and efficiency challenges have impacted the Group’s reputational risk profile.
3. Credit risk
Potential for loss due to the failure of a counterparty to meet its contractual obligation to repay a debt
in accordance with the agreed terms.
Risk appetite statement: The Group seeks to maintain a high-quality lending portfolio that generates
adequate returns under normal and stressed conditions. The portfolio is actively managed to operate
within set criteria and limits based on profit volatility focusing on key sectors, recoverable values and
affordability and exposure levels. The Group aims to continue to generate sufficient income and control
credit losses to a level such that it remains profitable even when subjected to a credit portfolio stress of
a 1 in 20 intensity stress scenario.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
40
Principal risks and uncertainties (continued)
3.1 Individual borrower defaults
Borrowers may encounter idiosyncratic problems in repaying their loans, for example loss of a job or
execution problems with a development project.
While in most cases of default the Group’s lending is secured, some borrowers may fail to maintain the
value of the security, which may result in a loss being incurred.
Mitigation
Across both OSB and CCFS, a robust underwriting assessment is undertaken to ensure that a customer
has the ability and propensity to repay and sufficient security is available to support the new loan
requested. At CCFS, an automated scorecard approach is taken, whilst OSB utilises a bespoke manual
underwriting approach, supplemented by bespoke application scorecards to inform the lending
decision.
Should there be problems with a loan, the Collections and Recoveries team works with customers who
are unable to meet their loan service obligations to reach a satisfactory conclusion while adhering to
the principle of treating customers fairly.
Our strategic focus on lending to professional landlords means that properties are likely to be well
managed, with income from a diversified portfolio mitigating the impact of rental voids or maintenance
costs. Lending to owner-occupiers is subject to a detailed affordability assessment, including the
borrower’s ability to continue payments if interest rates increase. Lending on commercial property is
based more on security, and is scrutinised by the Group’s independent Real Estate team as well as by
external valuers.
Development finance lending is extended only after a deep investigation of the borrower’s track record
and stress testing the economics of the specific project.
Direction: increased
The drivers of borrower default risk have shifted to rising inflation and the consequential increases in
interest rates which impact affordability for accounts which revert onto higher interest rates and increase
the risk of borrower default.
3.2 Macroeconomic downturn
A broad deterioration in the UK economy would adversely impact both the ability of borrowers to repay
loans and the value of the Group’s security. Credit losses would impact the Group’s lending portfolios,
even if individual impacts were to be small, the aggregate impact on the Group could be significant.
Mitigation
The Group works within portfolio limits on LTV, affordability, name, sector and geographic concentration
that are approved by the Group Risk Committee and the Board. These are reviewed on a semi-annual
basis. In addition, stress testing is performed to ensure that the Group maintains sufficient capital to
absorb losses in an economic downturn and continues to meet its regulatory requirements.
Direction: increased
The uncertain economic outlook and the ongoing geopolitical risk due to the conflict in Ukraine resulted
in high inflation and increases in interest rates could drive higher levels of customer defaults, rising
impairment levels and falling residential and commercial collateral values.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
41
Principal risks and uncertainties (continued)
3.3 Wholesale credit risk
The Group has wholesale exposures both through call accounts used for transactional and liquidity
purposes and through derivative exposures used for hedging.
Mitigation
The Group transacts only with high quality wholesale counterparties. Derivative exposures include
collateral agreements to mitigate credit exposures.
Direction: unchanged
The Group’s wholesale credit risk exposure remains limited to high-quality counterparties, overnight
exposures to clearing banks and swap counterparties.
4. Market risk
Potential loss due to changes in market prices or values.
Risk appetite statement: The Group actively manages market risk arising from structural interest rate
positions. The Group does not seek to take a significant interest rate position or a directional view on
interest rates and it limits its mismatched and basis risk exposures.
4.1 Interest rate risk
The risk of loss from adverse movement in the overall level of interest rates. It arises from mismatches
in the timing of repricing of assets and liabilities, both on and off balance sheet. It includes the risks
arising from imperfect hedging of exposures and the risk of customer behaviour driven by interest rates,
e.g. early redemption.
Mitigation
The Group’s Treasury function actively hedges to match the timing of cash flows from assets and
liabilities.
Direction: unchanged
Interest rate risk remained unchanged in 2022 due to the Group’s simple asset and liability structure
and ongoing careful management.
4.2 Basis risk
The risk of loss from an adverse divergence in interest rates. It arises where assets and liabilities reprice
from different variable rate indices. These indices may be market, administered, other discretionary
variable rates, or that received on call accounts with other banks.
Mitigation
The Group did not require active management of basis risk in 2022 due to its balance sheet structure.
Direction: decreased
Basis risk exposures reduced year on year as a result of the LIBOR Transition at the end of 2021.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
42
Principal risks and uncertainties (continued)
5. Liquidity and funding risk
The risk that the Group, although solvent, does not have sufficient financial resources to enable it to
meet its obligations as they fall due.
Risk appetite statement: The Group will maintain sufficient liquidity to meet its liabilities as they fall due
under normal and stressed business conditions; this will be achieved by maintaining strong retail
savings franchises, supported by high-quality liquid asset portfolios comprised of cash and readily-
monetisable assets, and through access to pre-arranged secured funding facilities. The Board
requirement to maintain balance sheet resources sufficient to survive a range of severe but plausible
stress scenarios is interpreted in terms of the liquidity coverage ratio and the ILAAP stress scenarios.
5.1 Retail funding stress
As the Group is primarily funded by retail deposits, a retail run could put it in a position where it could
not meet its financial obligations.
Increased competition for retail savings driving up funding costs, adversely impacting retention levels
and profitability.
Mitigation
The Group’s funding strategy is focused on a highly stable retail deposit franchise. The Group’s large
number of depositors provides diversification, where a high proportion of balances are covered by the
FSCS protection scheme, largely mitigating the risk of a retail run.
In addition, the Group performs in-depth liquidity stress testing and maintains a liquid asset portfolio
sufficient to meet obligations under stress. The Group holds prudential liquidity buffers to manage
funding requirements under normal and stressed conditions.
The Group has further diversified its retail channels by expanding the range of pooled deposit providers
used.
The Group proactively manages its savings proposition through both the Liquidity Working Group and
the Group Assets and Liabilities Committee. Finally, the Group has prepositioned mortgage collateral
and securitised notes with the Bank of England, which allows it to consider alternative funding sources
to ensure it is not solely reliant on retail savings. The Group also has a mature Retail Mortgage
Backed Security (RMBS) programme.
Direction: increased
The Group’s funding levels and mix remained strong throughout the year.
In 2022, OSB and CCFS were able to attract significant flows of new deposits and depositors, despite
the volatile interest rate environment and competitive savings market. During periods of exceptionally
high volatility, funding was drawn from the Bank of England using the Index Long-term Repo scheme
to support retail funding and customer operations.
5.2 Wholesale funding stress
A market-wide stress could close securitisation markets or make issuance costs unattractive for the
Group.
Mitigation
The Group continuously monitors wholesale funding markets and is experienced in taking proactive
management actions where required.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
43
Principal risks and uncertainties (continued)
The Group issued one securitisation in 2022 and has a range of wholesale funding options available
outside retained securitisation, including Bank of England facilities, for which collateral has been
prepositioned.
Direction: unchanged
The Group’s range of wholesale funding options available, including repo or sale of retained notes or
collateral upgrade trades remained broadly unchanged.
5. 3 Refinancing of TFSME
Current Term Funding Scheme for Small and Medium-sized Enterprises (TFSME) borrowing by the
Group remained at ￡4.2bn at the end of 2022, with a refinancing concentration scheduled for October
2025.
Mitigation
The Group has other wholesale options available to it, including securitisation programmes and repo or
sale of held notes, as well as retail funding via its strong franchises, to replace the TFSME borrowing
gradually over the next few years ahead of the maturity of this funding.
Direction: unchanged
TFSME borrowing remained unchanged during the year; however, the current funding plan to refinance
TFSME requires significant securitisation issuance. These markets have seen increased volatility
during 2022, which could continue into 2023 so additional refinancing options are being considered.
6. Solvency risk
The potential inability of the Group to ensure that it maintains sufficient capital levels for its business
strategy and risk profile under both the base and stress case financial forecasts.
Risk appetite statement: the Group seeks to ensure that it is able to meet its Board-level capital buffer
requirements under a severe but plausible stress scenario. The solvency risk appetite is informed by
the Group’s prudential requirements and strategic and financial objectives. We manage our capital
resources in a manner which avoids excessive leverage and allows us flexibility in raising capital.
6.1 Deterioration of capital ratios
Key risks to solvency arise from balance sheet growth and unexpected losses which can result in the
Group’s capital requirements increasing, or capital resources being depleted, such that it no longer
meets the solvency ratios as mandated by the PRA and Board risk appetite.
The regulatory capital regime is subject to change and could lead to increases in the level and quality
of capital that the Group needs to hold to meet regulatory requirements. In particular, we note the PRA’s
recently published consultation paper (CP) on the implementation of Basel 3.1.
Mitigation
The Group operates from a strong capital position and has a consistent record of strong profitability.
The Group actively monitors its capital requirements and resources against financial forecasts and
plans and undertakes stress testing analysis to subject its solvency ratios to extreme but plausible
scenarios.
The Group also holds prudent levels of capital buffers based on CRD IV requirements and expected
balance sheet growth.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
44
Principal risks and uncertainties (continued)
The Group engages actively with regulators, industry bodies and advisers to keep abreast of potential
changes and provides feedback through the consultation process.
Direction: increased
The stable credit profile and ongoing profitability mean that the Group’s capital resources remain strong.
Risks remain around adverse credit profile performance resulting from rising inflation and interest rates.
We have estimated the impact of Basel 3.1 on our 31 December 2022 CET1 ratio to be a reduction of
up to 2% points, should the proposed rules be implemented as drafted in the CP and prior to the
Group receiving Internal Ratings Based (IRB) accreditation.
7. Operational risk
The risk of loss or a negative impact on the Group resulting from inadequate or failed internal processes,
people or systems, or from external events.
Risk appetite statement: The Group’s operational processes, systems and controls are designed to
minimise disruption to customers, damage to the Group’s reputation and any detrimental impact on
financial performance. The Group actively promotes the continuous evolution of its operating
environment through the identification, evaluation and mitigation of risks, whilst recognising that the
complete elimination of operational risk is not possible.
7.1 IT security (including cyber risk)
The risks resulting from a failure to protect the Group’s systems and the data within them. This includes
both internal and external threats.
Mitigation
The Group programme of IT and cyber improvements continued with the aim of enhancing its protection
against IT security threats, deploying a series of tools designed to identify and prevent network/system
intrusions. This is further supported by documented and tested procedures intended to ensure the
effective response to a security breach.
Direction: unchanged
The Group has processes in place to allow it to operate effectively when employees work from home
and manage the cyber risks related to working remotely.
Whilst IT security risks continue to evolve, work continues to enhance the level of maturity of the Group’s
controls and defences, supported by dedicated IT security experts.
The Group has an ongoing programme of penetration testing in place to drive enhancements by
identifying potential areas of risk.
7. 2 Data quality and completeness
The risks resulting from data being either inaccurate or incomplete.
Mitigation
The Group previously established a dedicated Data Strategy Programme, involving the recruitment of
a Chief Data Officer and a Data Governance Director, designed to ensure a consistent approach to the
maintenance and use of data. This includes both documented procedures and frameworks and also
tools intended to improve the consistency of data use.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
45
Principal risks and uncertainties (continued)
Direction: unchanged
Progress was made in 2022 to embed Group-wide governance frameworks in part driven by the Group’s
IRB project. Further work is planned for 2023, to move closer to the Group’s target end state.
7.3 Change management
The risks resulting from unsuccessful change management implementations, including the failure to
respond effectively to release-related incidents.
Mitigation
The Group recognises that implementing change introduces significant operational risk and has
therefore implemented a series of control gateways designed to ensure that each stage of the change
management process has the necessary level of oversight.
Direction: increased
The Group continued to adopt an ambitious change agenda, which was monitored and managed well
in 2022. We are now turning our attention towards identifying opportunities to further digitise our
business operations, to deliver additional efficiencies and invest in the Group to ensure it remains well-
positioned to meet the changing needs of our customers, brokers and wider stakeholders.
7.4 IT failure
The risks resulting from a major IT application or infrastructure failure impacting access to the Group’s
IT systems.
Mitigation
The Group continues to invest in improving the resilience of its core infrastructure. It has identified its
prioritised business services and the infrastructure that is required to support them. Tests are performed
regularly to validate its ability to recover from an incident.
The Group has established a site in Hyderabad to ensure that, in the event of an operational incident
in Bangalore, services can be maintained.
Direction: unchanged
Whilst progress was made in reducing both the likelihood and impact of an IT failure, the risks remain,
in particular due to new hybrid working arrangement. Further work is planned during 2023.
8. Conduct risk
The risk that the Group’s culture, organisation, behaviours and actions result in poor outcomes and
detriment for customers and/or damage to consumer trust and integrity of the markets in which it
operates.
Risk appetite statement: The Group has a very low appetite to assume risks which may result in either
poor or unfair customer outcomes and/or cause disruptions in the market segments in which it operates.
The Group aims to avoid causing detriment or harm to its customers and operates to the highest
standards of conduct. The Group will treat its customers, third-party partners, investors and regulators
with respect, fairness and transparency. The Group will proactively look to identify where its products
and services could lead to poor outcomes or harm to its customers, and will take appropriate action to
mitigate this. Where customer harm occurs, the Group will ensure that effective solutions are
implemented to address the root cause and a fair outcome is achieved.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
46
Principal risks and uncertainties (continued)
8.1 Conduct risk
The risk that the Group fails to meet its expectations with respect to conduct risk.
Mitigation
The Group’s culture is clearly defined and monitored via its Purpose, Vision and Values driven
behaviours.
The Group has a strategic commitment to provide simple, customer focused products. In addition, a
Product Governance framework is established to oversee both the origination of new products and to
revisit the ongoing suitability of the existing product suite.
The Group has an embedded Conduct Risk Management Framework which clearly define roles and
responsibilities for conduct risk management and oversight across the Group’s three lines of defence.
Direction: increased
The conduct risk level increased due to macroeconomic uncertainty. Some customers, particularly
those who are vulnerable, may experience financial difficulty as a result of the rising cost of living and
cost of borrowing. Volatile lending and savings markets led to unprecedented high volumes of new
business adversely impacting customer service level agreements and leading to increased complaints
and reputational risk.
Conduct losses have remained stable with no breaches of risk appetite reported during the last 12
months.
9. Regulatory risk
The risk of failure to effectively identify, interpret, implement and adhere to all regulatory or legislative
change that impacts the Group.
Risk appetite statement: The Group views ongoing conformance with regulatory rules and standards
across all the jurisdictions in which it operates as a critical facet of its risk culture. The Group has a very
low appetite to assume regulatory risk, which could result in poor customer outcomes, customer
detriment, regulatory sanctions, financial loss or damage to its reputation. The Group will proactively
monitor for and will not tolerate any systemic failure to comply with applicable laws, regulations or codes
of conduct relevant to its business.
The Group acknowledges that regulatory rules and standards are subject to interpretation and
subsequent translation into internal policies and procedures. The Group interprets requirements to
ensure adherence with the intended purpose and spirit of the regulation whilst being cognisant of
commercial considerations and good customer outcomes. To minimise regulatory risk, the Group
proactively engages with its regulators in a transparent manner, participates in industry forums and
seeks external advice to validate its interpretations, where appropriate.
9.1 Prudential regulatory changes
The Group continues to see a high volume of key compliance regulatory changes that impact its
business activities. These include the implementation of Basel 3.1 capital rules and increased
Resolvability Assessment Framework requirements, including updated minimum requirements for own
funds and eligible liabilities (MREL).
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
47
Principal risks and uncertainties (continued)
Mitigation
The Group has an effective horizon scanning process to identify regulatory change.
All significant regulatory initiatives are managed by structured programmes overseen by the Project
Management team and sponsored at Executive level.
The Group has proactively sought external expert opinions to support interpretation of the requirements
and validation of its response, where required.
Direction: unchanged
The Group continued to have a high level of interaction with UK regulators and continues to identify and
respond effectively to all regulatory changes.
9.2 Conduct regulation
Regulatory changes focused on the conduct of business could force changes in the way the Group
carries out business and impose substantial compliance costs.
This includes the risk that product design, underwriting, arrears and forbearance and vulnerable
customer policies are misaligned to regulatory expectations which result in customers not being treated
fairly, particularly those experiencing financial hardship or vulnerable customers, with the potential for
reputational damage, redress and other regulatory actions.
Mitigation
The Group has a programme of regulatory horizon scanning linking into a formal regulatory change
management programme. In addition, the focus on simple products and customer-oriented culture
means that current practice may not have to change significantly to meet new conduct regulations.
All Group entities utilise underwriting, arrears and forbearance and vulnerable customer policies, which
are designed to comply with regulatory principles, rules and expectations. These policies articulate the
Group’s commitment to ensuring that all customers, including those who are vulnerable or experiencing
financial hardship, are treated fairly, consistently and in a way that considers their individual needs and
circumstances.
The Group does not tolerate any systematic failure to deliver fair customer outcomes. On an isolated
basis, incidents can result in detriment due to human and/or operational failures. Where such incidents
occur, they are thoroughly investigated, and the appropriate remedial actions are taken to address any
customer detriment and prevent recurrence.
Direction: increased
The level of regulatory change continued to be high but the Group has sufficient resources and
capabilities to respond to any changes in an effective and efficient manner.
The Group continues to proactively interact with regulatory bodies to take part in thematic reviews and
information requests, as required.
Identifying, monitoring and supporting vulnerable customers continues to be a key area of focus.
Ongoing reviews of long term arrears and forbearance customers, continues to ensure that payment
terms still remain appropriate.
The Group has instigated a formal project to implement the FCA’s new Consumer Duty requirements
within the required timelines.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
48
Principal risks and uncertainties (continued)
10. Financial crime risk
The risk of financial or reputational loss resulting from inadequate systems and controls to mitigate the
risks from financial crime.
Risk appetite statement: To minimise financial crime risk the Group will design and maintain robust
systems and controls to identify, assess, manage and report any activity (internal or external in nature)
which exposes the Group to financial crime risk in the form of money laundering, human trafficking,
terrorist financing, sanctions breaches, bribery, corruption and fraud. The Group recognises the need
to continuously review its systems and controls to ensure that they are aligned to the nature and scale
of financial crime risk it is exposed to on a current and forward looking basis.
10.1 Financial crime risk
The risk of financial or reputational loss resulting from a failure to implement systems and controls to
manage the risk from money laundering, terrorist financing, sanctions, bribery, corruption and cyber-
crime.
Mitigation
The Group operates in a low-risk environment providing relatively simple products to UK domiciled
customers serviced through a UK registered bank account. The Group has an established screening
programme that is deployed at the point of origination and on a regular basis throughout the customer
lifecycle. Where applicable, enhanced due diligence is applied to ensure that any increase in risk is
appropriately managed and any activity remains within risk appetite.
The Group has a horizon scanning programme that identifies changes to money laundering regulations
and any other financial crime related legislation to ensure that we comply with all regulatory obligations.
The Group reacted swiftly to the events in Ukraine and the regular updates released in relation to the
Russia and Belarus financial sanctions regimes. The Group has negligible exposure to the affected
jurisdictions and no exposure to any specific individual or entity contained within the revised sanctions
listings.
The Group’s programme of cyber improvements continued with the aim of enhancing its protection
against IT security threats, deploying a series of tools designed to identify and prevent network/ system
intrusions. The Group’s Financial Crime team will support the Information Security Team, where
appropriate, to ensure that there are robust and effective controls in place and sufficient training and
awareness for all colleagues.
Direction: Unchanged
The Group continues to focus primarily on the UK market with accounts serviced from UK bank
accounts.
The Group has processes in place to allow it to operate effectively when employees work from home
and manage the cyber risks related to working remotely. Whilst IT security risks continue to evolve, the
level of maturity of the Group’s controls and defences has significantly increased, supported by
dedicated IT security experts.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
49
Principal risks and uncertainties (continued)
10.2 Fraud risk
The risk of financial loss resulting from fraudulent action by a person either internal or external.
Mitigation
The Group continues to invest in a range of systems and controls that are deployed across its product
range in order to detect and prevent the exposure to fraud through the customer lifecycle. All new
business applications are subject to a range of controls to identify and mitigate fraud. Customer activity
is monitored in order to detect suspicious activity or behaviour that may be indicative of fraud.
These controls are further supported by documented policies and procedures that are managed by
experienced employees in a dedicated Financial Crime function.
The Group continually monitors its detection capability with periodic reviews of the parameters within
its systems and control framework to ensure that these remain fit for purpose and aligned to mitigate
any emerging risks.
Direction:Increased
The Group remains aware that any potential downturn in the wider economic environment may increase
the risk of fraud activity across its product range and will closely monitor changes in trends that may be
indicative of any new or emerging risks.
Emerging risks
The Group proactively scans for emerging risks which may have an impact on its ongoing operations
and strategy and considers its top emerging risks to be:
Political and macroeconomic uncertainty
The Group’s lending activity is predominantly focused in the United Kingdom (with a legacy back-book
of mortgages in the Channel Islands) and, as such, will be impacted by any risks emerging from changes
in the macroeconomic environment. Rising inflation and interest rates pose risks to the Group’s loan
portfolio performance.
Mitigation
The Group has mature and robust monitoring processes and via various stress testing activities (i.e. ad
hoc, risk appetite and Internal Capital Adequacy Assessment Process (ICAAP)) understands how the
Group performs over a variety of macroeconomic stress scenarios and has developed a suite of early
warning indicators, which are closely monitored to identify changes in the economic environment. The
Board and management review detailed portfolio reports to identify any changes in the Group’s risk
profile.
Climate change
As the focus on climate change intensifies, both the physical risks and the transitional risks associated
with climate change continue to grow. Climate change risks include:
• Physical risks which relate to specific weather events, such as storms and flooding, or to longer-
term shifts in the climate, such as rising sea levels. These risks could include adverse
movements in the value of certain properties that are in coastal and low-lying areas, or located
in areas prone to increased subsidence and heave.
• Transitional risks may arise from the adjustment towards a low-carbon economy, such as
tightening energy efficiency standards for domestic and commercial buildings. These risks
could include a potential adverse movement in the value of properties requiring substantial
updates to meet future energy performance requirements.
• Reputational risk arising from a failure to meet changing societal, investor or regulatory
demands.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
50
Principal risks and uncertainties (continued)
Mitigation
During 2022, the Group further embedded its approach to climate risk management, which included the
development of a climate risk appetite. Further detail are set out in the OSBG annual report and
accounts Task Force on Climate-related Financial Disclosures (TCFD) report.
The Group’s Chief Risk Officer has designated senior management responsibility for the management
of climate change risk.
Model risk
The risk of financial loss, adverse regulatory outcomes, reputational damage or customer detriment
resulting from deficiencies in the development, application or ongoing operation of models and ratings
systems.
The Group also notes changes in industry best practice with respect to model risk management
including a PRA consultation paper containing proposed expectations regarding banks’ management
of model risk.
Mitigation
The Group has well-established model risk governance arrangements in place, with Board and
Executive Committees in place to ensure robust oversight of the Group’s model risk profile. Dedicated
resources are in place to ensure that model governance arrangements continue to meet any changes
in industry and regulatory expectations.
Regulatory change
The Group remains subject to high levels of regulatory oversight and an extensive and broad ranging
regulatory change agenda, including meeting the requirements of the Resolvability Assessment
Framework and Operational Continuity in Resolution. The Group is therefore required to respond to
prudential and conduct-related regulatory changes, taking part in thematic reviews, as required.
There is also residual uncertainty in relation to the regulatory landscape post the United Kingdom’s
exit from the European Union.
Mitigation
The Group has established horizon scanning capabilities, coupled with dedicated prudential and
conduct regulatory experts in place to ensure the Group manages future regulatory changes effectively.
The Group also has strong relationships with regulatory bodies, and via membership of UK Finance,
inputs into upcoming regulatory consultations.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
51
Risk review
Risk profile performance overview
Credit risk
Group’s loan portfolios performed robustly during 2022. Prudent criteria for new originations delivered
strong new business quality, whilst the back book also outperformed forecast expectations. In
particular, the Group saw lower arrears levels than forecast and better than expected house price
inflation.
The Group’s prudent credit risk appetite ensures that loan portfolios are positioned to perform well in
both benign and stressed macroeconomic environments.
The Group delivered 12% net loan book growth in 2022 with strong originations in the Group’s core
Buy-to-Let and residential owner-occupier sub-segments, which more than offset reductions in the
second charge and funding lines sub-segments. New lending also improved in semi-commercial and
commercial as well as in the Group’s development finance sub-segments.
Favourable property price indexing resulted in a reduction in the weighted average stock LTV for OSB
and CCFS to 58% and 63% respectively as at 31 December 2022 (31 December 2021: OSB 60% and
CCFS 65%), and a prudent weighted average LTV profile of 60% for the Group, down from 62% at the
end of 2021.
A low and stable level of arrears continued to be observed, with just 1.1% of the Group’s net loan
balances being greater than three months in arrears as at 31 December 2022, unchanged from the
prior year. Increasing arrears levels were observed across a small number of portfolios as payment
deferrals expired; however, these increases were partially offset by improving performance across
other loan portfolios.
Solo bank interest coverage ratios for Buy-to-Let loans remained strong during 2022 at 207% for OSB
and 191% for CCFS (2021: 199% OSB and 188% CCFS).
During 2022, forward-looking external credit bureau probability of default and customer indebtedness
scores remained strong, with some reversion back to pre-pandemic levels as customers returned to
spending, once lockdown restrictions were relaxed.
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Strategic Report (continued)
For the Year Ended 31 December 2022
52
Risk profile performance overview (continued)
Expected Credit Losses (ECL)
Balance sheet expected credit losses increased from £101.5m to £130.0m as at 31 December 2022.
Other non-material items further contributed to the increase and resulted in a full year statutory
impairment charge of £29.8m representing a loan loss ratio of 13bps (2021: £4.4m release, -2bps,
respectively), with the provision charge primarily driven by post-model adjustments to account for the
rising cost of living and cost of borrowing concerns, as well as the strong growth in the loan book in the
year.
A summary of the key impairment charge drivers for 2022 included:
a. Macroeconomic outlook – positive House Price Index (HPI) movements and continued low
unemployment were observed throughout 2022, however, the outlook deteriorated
throughout the year due to the war between Russia and Ukraine and the fallout from the
mini budget. The economic outlook at the end of 2022 was driven by rising interest rates,
higher than target inflation and most notably a decrease in house prices. The change in
economic outlook contributed £11.6m of impairment charge in 2022, whilst the improvement
in house prices drove a release of £10.3m.
b. Model and staging enhancements – enhancements were made to the Group’s underlying
models to ensure that estimates continued to reflect actual credit profile performance. Most
notably, the Group’s enhancements to models, as part of the IRB programme, were
incorporated into the Group’s IFRS 9 framework. In addition, the Group enhanced its
Significant Increase in Credit Risk (SICR) framework to adopt a default risk trigger, sensitive
to the economic outlook. The cumulative impact of these modelling and staging
enhancements was an £8.3m release for 2022.
c. Post model adjustments – the Group adopted a number of post-model adjustments,
predominantly to account for external risks that were not sufficiently addressed in the model
and staging framework. The most significant adjustments were made to the stage 2
approach to account for cost of borrowing and cost of living stresses due to the sharp
increase in interest rates and the historically high inflation. In total, the postmodel
adjustments contributed £13.3m of impairment charge in 2022.
d. Credit profile provision charges - impairment charges driven by changes in the credit profile
such as portfolio growth, portfolio product mix and changes in staging mix totalled £15.2m.
Other charges, including changes to individually assessed provisions and write offs, totalled
£8.3m.
The Group continued to closely monitor impairment coverage levels in the year.
Impairment coverage levels were strengthened due to both the observed cost of living and cost of
borrowing drivers, and the renewed uncertainty surrounding the macroeconomic outlook, with coverage
levels approaching those held at the peak of the pandemic. The Group’s Risk function conducted top-
down analysis, assessing portfolio-specific risks, which confirmed the appropriateness of provision
levels after taking into account the post-model adjustments.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
53
Risk profile performance overview (continued)
Coverage ratios table
As at 31 December 2022
Gross carrying
amount
£m
Expected credit
losses
£m
Coverage
ratio
Stage 1
18,722.3
7.2
0.04%
Stage 2
4,417.1
50.9
1.15%
Stage 3 (+ POCI)
588.7
71.9
12.21%
Total
23,728.1
130.0
0.55%
As at 31 December 2021
Stage 1
18,188.4
12.1
0.07%
Stage 2
2,413.6
25.0
1.04%
Stage 3 (+ POCI)
562.1
64.4
11.46%
Total
21,164.1
101.5
0.48%
Macroeconomic scenarios
The measurement of ECL under the IFRS 9 approach is complex and requires a high level of judgement.
The approach includes the estimation of probability of default (PD), loss given default (LGD) and likely
exposure at default (EAD). An assessment of the maximum contractual period with which the Group is
exposed to the credit risk of the asset is also undertaken.
IFRS 9 requires firms to calculate ECL allowances simulating the effect of a range of possible economic
outcomes, calculated on a probability-weighted basis. This requires firms to formulate forward-looking
macroeconomic forecasts and incorporate them in ECL calculations.
i. How macroeconomic variables and scenarios are selected
During the IFRS 9 modelling process, the relationship between macroeconomic drivers and arrears, default
rates and collateral values is established. For example, if unemployment levels increase, the Group would
observe an increasing number of accounts moving into arrears. If residential or commercial property prices
fall, the risk of losses being realised on the sale of a property would increase.
The Group adopted an approach which utilises four macroeconomic scenarios. These scenarios are
provided by an industry-leading economics advisory firm, that provides management and the Board with
advice.
A base case forecast is provided, together with a plausible upside scenario. Two downside scenarios
are also provided (downside and a severe downside).
ii. How macroeconomic scenarios are utilised within ECL calculations
Probability of default estimates are either scaled up or down based on the macroeconomic scenarios
utilised.
Loss given default estimates are principally impacted by property price forecasts which are utilised
within loss estimates, should an account be possessed and sold.
Exposure at default estimates are not impacted by the macroeconomic scenarios utilised.
Each of the above components are then directly utilised within the ECL calculation process.
iii. Macroeconomic scenario governance
The Group has a robust governance process to oversee macroeconomic scenarios and probability
weightings used within ECL calculations.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
54
Risk profile performance overview (continued)
On a periodic basis, the Group’s Risk function and economic adviser provide the Group Risk and
Audit Committees with an overview of recent economic performance, together with updated base,
upside and two downside scenarios. The Risk function conducts a review of the scenarios comparing
them to other economic forecasts, which results in a proposed course of action, which once
approved, is implemented.
iv. Changes made during 2022
Throughout 2022, the scenario suite was monitored and updated as UK political and geopolitical
developments occurred.
The Group’s Risk and Audit Committees focused on assessing whether specific risks had been
captured within externally provided forward-looking forecasts. Of particular focus were the risks relating
to rising costs of living and subsequent rising interest rates to control inflation levels. The Group
undertook a detailed analysis to assess the portfolio risks and consider whether these were adequately
accounted for in the IFRS 9 models and frameworks, and identified a number of areas requiring post-
model adjustments, most notably to account for the increased credit risk from the heightened cost of
living and cost of borrowing resulting in an increase in the balance of accounts in stage 2.
The Board reflected on the ongoing appropriateness of probabilities attached to the suite of IFRS 9
scenarios as the macroeconomic outlook evolved throughout the year.
Scenarios were adjusted to a
symmetrical probability, where the upside and downside scenarios carry equal weightings, as a result
of separate post-model adjustments being raised to ensure that the current IFRS 9 framework
adequately provisioned the underlying portfolio risk.
Details relating to the scenarios utilised to set the 31 December 2022 IFRS 9 provision levels are
provided in the table below.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
55
Forecast macroeconomic variables over a five-year period
Probability
weighting
(%)
Scenario %
Scenario
Economic measure
Year
end
2022
Year
end
2023
Year
end
2024
Year
end
2025
Year
end
2026
Base case
40
GDP
4.3
(0.7)
1.8
2.7
2.1
Unemployment
3.7
4.7
4.2
3.9
3.8
House Price growth
9.0
(9.0)
(3.4)
2.8
5.8
CPI
10.7
3.4
2.0
1.6
1.2
Bank Base Rate
2.8
4.0
3.6
2.6
1.8
Upside
30
GDP
4.6
1.9
2.9
3.4
2.2
Unemployment
3.6
4.2
4.0
3.7
3.7
House Price growth
10.6
(6.7)
(1.3)
4.4
5.6
CPI
11.0
4.7
2.9
1.4
1.1
Bank Base Rate
3.0
5.3
4.8
3.4
2.3
Downside
20
GDP
3.7
(4.4)
1.0
2.4
2.1
Unemployment
4.2
6.3
7.0
7.0
6.7
House Price growth
6.8
(14.4)
(8.0)
(1.2)
6.1
CPI
10.2
1.6
1.5
1.8
0.8
Bank Base Rate
2.9
3.8
3.1
1.9
1.3
Severe
10
GDP
3.2
(7.5)
0.1
1.9
2.1
downside
Unemployment
4.3
6.8
7.6
7.6
7.2
House Price growth
5.0
(18.6)
(12.1)
(5.0)
6.5
CPI
9.5
0.7
0.9
2.1
0.5
Bank Base Rate
2.6
2.8
2.0
0.6
0.5
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
56
Risk profile performance overview (continued)
Forbearance
Where a borrower experiences financial difficulty, which impacts their ability to service their financial
commitments under the loan agreement, forbearance may be used to achieve an outcome which is
mutually beneficial to both the borrower and the Group.
By identifying borrowers who are experiencing financial difficulties pre-arrears or in arrears, a
consultative process is initiated to ascertain the underlying reasons and to establish the best course
of action to enable the borrower to develop credible repayment plans to see them through the period
of financial stress.
The specific tools available to assist customers vary by product and the customers’ circumstances.
The various options considered for customers are as follows:
• Temporary switch to interest only: a temporary account change to assist customers through
periods of financial difficulty where the contractual monthly payment is reduced to the amount
of interest owed in the month for the duration of the account change. Any arrears existing at
the commencement of the arrangement are retained.
• Interest rate reduction: the Group may, in certain circumstances, where the borrower meets
the required eligibility criteria, transfer the mortgage to a lower contractual rate. Where this is
a formal contractual change, the borrower will be requested to obtain independent financial
advice as part of the process.
• Loan term extension: a permanent account change for customers in financial distress where
the overall term of the mortgage is extended, resulting in a lower contractual monthly payment.
• Payment holiday: a temporary account change to assist customers through periods of financial
difficulty where capital and interest accruals during the payment holiday period are repaid from
the end of the payment holiday over the remaining term. Any arrears existing at the
commencement of the arrangement are retained.
• Voluntary-assisted sale: a period of time is given to allow borrowers to sell the property and
arrears accrue based on the contractual monthly payment.
• Reduced monthly payments: a temporary arrangement for customers in financial distress. For
example, a short-term arrangement to pay less than the contractual monthly payment. Arrears
continue to accrue based on the contractual monthly payment.
• Capitalisation of interest: arrears are added to the loan balance and are repaid over the
remaining term of the facility or at maturity for interest only products. A new payment is
calculated, which will be higher than the previous payment.
• Full or partial debt forgiveness: where appropriate, the Group will consider writing-off part of
the debt. This may occur where the borrower has an agreed sale and there will be a shortfall
in the amount required to redeem the Group’s charge, in which case repayment of the shortfall
may be agreed over a period of time, subject to an affordability assessment; or where
possession has been taken by the Group, and on the subsequent sale where there has been
a shortfall loss.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
57
Risk profile performance overview (continued)
• Arrangement to pay: where an arrangement is made with the borrower to repay an amount
above the contractual monthly payment, which will repay arrears over a period of time.
• Promise to pay: where an arrangement is made with the borrower to defer payment or pay a
lump sum at a later date.
• Bridging loans which are more than 30 days past their maturity date. Repayment is
rescheduled to receive a balloon or bullet payment at the end of the term extension, where the
institution can duly demonstrate future cash-flow availability.
The Group aims to proactively identify and manage forborne accounts, utilising external credit reference
bureau information to analyse probability of default and customer indebtedness trends over time,
feeding prearrears watch-list reports. Watch-list cases are in turn carefully monitored and managed as
appropriate.
Fair value of collateral methodology
The Group ensures that security valuations are reviewed on an ongoing basis for accuracy and
appropriateness. Commercial properties are subject to quarterly indexing using Commercial Real
Estate (CRE) data. Residential properties are indexed at least quarterly, using House Price Index data.
Solvency risk
The Group maintains an appropriate level and quality of capital to support its prudential requirements
with sufficient contingency to withstand a severe but plausible stress scenario. The solvency risk
appetite is based on a stacking approach, whereby the various capital requirements (Pillar 1, CRD IV
buffers, Board and management buffers) are incrementally aggregated as a percentage of available
capital (CET1 and total capital). Solvency risk is a function of balance sheet growth, profitability, access
to capital markets and regulatory changes. The Group actively monitors all key drivers of solvency risk
and takes prompt action to maintain its solvency ratios at acceptable levels. The Board and
management also assess solvency when reviewing the Group’s business plans and inorganic growth
opportunities. The OSB solo fully-loaded CET1 and total capital ratios under CRD IV reduced to 18.4%
and 20.0%, respectively as at 31 December 2022 (31 December 2021: 19.4% and 21.3%, respectively).
Liquidity and funding risk
The Group has a prudent approach to liquidity management through maintaining sufficient liquidity
resources to cover cash-flow imbalances and fluctuations in funding, under both normal and stressed
conditions, arising from market-wide and Bank-specific events. OSB’s and CCFS’ liquidity risk appetites
have been calibrated to ensure that both Banks always operate above the minimum prudential
requirements with sufficient contingency for unexpected stresses, whilst actively minimising the risk of
holding excessive liquidity, which would adversely impact the financial efficiency of the business model.
The Group continues to attract new retail savers and has high retention levels with existing customers.
In addition, the Group is able to access a wide range of wholesale funding options, including
securitisation issuances and use of retained notes from both Banks
as collateral for Bank of England
facilities and repurchase agreements with third parties.
In 2022, both Banks actively managed their respective liquidity and funding profiles within the confines
of their risk appetites as set out in the Group’s ILAAP.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
58
Risk profile performance overview (continued)
Retail funding rates increased throughout the year due to the significant increase in the Bank of England
Base Rate. However, swap rate increases during the year allowed both Banks to retain more margin
on savings rates offered to customers. There was a short period towards the end of the first quarter
where retail funding was volatile as the first of the larger Base Rate increases pushed competitor
savings rates higher and increased competition; however, both Banks were able to attract new
depositors with competitive rates.
Swap rate increases in 2022 also led to the Group receiving a high level of variation margin collateral
on the Group’s interest rate swaps. The Group has increased internal buffers to ensure that sufficient
funds are held at the Bank of England to meet any swap margin calls that may arise if swap rates
reduce.
Each Bank’s risk appetite is based on internal stress tests that cover a range of scenarios and time
periods and therefore are a more severe measure of resilience to a liquidity event than the standalone
liquidity coverage ratio (LCR). As at 31 December 2022, OSB had a liquidity coverage ratio of 229%
(2021: 240%) and CCFS 148% (2021: 158%), and the Group LCR was 185%, all significantly above
regulatory requirements.
Market risk
The Group proactively manages its risk profile in respect of adverse movements in interest rates,
foreign exchange rates and counterparty exposures.
The Group accepts interest rate risk and basis risk as a consequence of structural mismatches
between fixed rate mortgage lending, sight and fixed-term savings and the maintenance of a portfolio
of highquality liquid assets. Interest rate exposure is mitigated on a continuous basis through portfolio
diversification, reserve allocation and the use of financial derivatives, within limits set by the Group
ALCO, and approved by the Board.
The Group’s balance sheet is predominantly GBP denominated. The Group has some minor foreign
exchange risk from funding the OSBI business. This is minimised by pre-funding a number of months
in advance and regularly monitoring GBP/INR rates. Wholesale counterparty risk is measured on a
daily basis and constrained by counterparty risk limits.
Operational risk
The Group continues to adopt a proactive approach to the management of operational risks. The
operational risk management framework has been designed to ensure a robust approach to the
identification, measurement and mitigation of operational risks, utilising a combination of both
qualitative and quantitative evaluations. The Group’s operational processes, systems and controls are
designed to minimise disruption to customers, damage to the Group’s reputation and any detrimental
impact on financial performance. The Group actively promotes the continual evolution of its operating
environment.
Where risks continue to exist, there are established processes to provide the appropriate levels of
governance and oversight, together with an alignment to the level of risk appetite stated by the Board.
A strong culture of transparency and escalation has been cultivated throughout the organisation, with
the Operational Risk function having a Group-wide remit, ensuring a risk management model that is
well-embedded and consistently applied. In addition, a community of Risk Champions representing
each business line and location has been identified, together with dedicated first line risk and controls
teams in some key areas of the business. Both the dedicated first line risk and control teams and the
Risk Champions ensure that the operational risk identification and assessment processes are
established across the Group in a consistent manner. Risk Champions are provided with appropriate
support and training by the Operational Risk function.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
59
Risk profile performance overview (continued)
A hybrid working model has been adopted across the Group, with the exception being front-line
customer-facing colleagues, following the return to the office after the COVID-19 pandemic. With a
high number of employees working and accessing systems from home, the risk of a cyber-attack has
heightened. Whilst IT security risks continue to evolve, the level of maturity of the Group’s controls and
defences has significantly increased, supported by dedicated IT security experts. The Group’s ongoing
penetration testing continues to drive enhancements by identifying potential areas of risk.
The Group has established a site in Hyderabad to ensure that, in the event of an operational incident
in Bangalore, services can be maintained.
Regulatory and compliance risk
The Group is committed to the highest standards of regulatory conduct and aims to minimise breaches,
financial costs and reputational damage associated with non-compliance.
The Group has an established Compliance function which actively identifies, assesses and monitors
adherence with current regulation and the impact of emerging regulation.
In order to minimise regulatory risk, the Group maintains a proactive relationship with key regulators,
engages with industry bodies such as UK Finance and seeks external expert advice. The Group also
assesses the impact of forthcoming regulation on itself and the market in which it operates, and
undertakes robust assurance assessments from within the Risk and Compliance functions.
Conduct risk
The Group considers its culture and behaviour in ensuring the fair treatment of customers and in
maintaining the integrity of the market sub-segments in which it operates to be a fundamental part of
its strategy and a key driver to sustainable profitability and growth. The Group does not tolerate any
systemic failure to deliver fair customer outcomes.
On an isolated basis, incidents can result in detriment owing to human and/or operational failures.
Where such incidents occur, they are thoroughly investigated and the appropriate remedial actions are
taken to address any customer detriment and to prevent recurrence.
The Group considers effective conduct risk management to be a product of the positive behaviour of all
employees, influenced by the customer-centric culture throughout the organisation and therefore
continues to promote a strong sense of awareness and accountability.
Financial crime risk
The Group operates in a low risk environment providing relatively simple products to UK domiciled
customers serviced through a UK-registered bank account. The Group has an established screening
programme that is deployed at the point of origination and on a regular basis throughout the customer
lifecycle.
The Group continues to invest in a range of systems and controls that are deployed across its product
range in order to detect and prevent the exposure to fraud through the customer lifecycle. All new-to-
business applications are subject to a range of controls to identify and mitigate fraud. Customer activity
is monitored in order to detect suspicious activity or behaviour that may be indicative of fraud.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
60
Risk profile performance overview (continued)
Strategic and business risk
The Board has clearly articulated the Group’s strategic vision and business objectives supported by
performance targets. The Group does not intend to undertake any medium to long-term strategic
actions, which would put the Group’s strategic or financial objectives at risk.
To deliver against its strategic objectives and business plan, the Group has adopted a sustainable
business model based on a focused approach to core niche market sub-segments where its experience
and capabilities give it a clear competitive advantage.
The Group remains focused on delivering against its core strategic and financial objectives, against a
highly competitive and uncertain backdrop.
Reputational risk
Reputational risk can arise from a variety of sources and is a second order risk – the crystallisation of
another principal risk can lead to a reputational risk impact.
The Group monitors reputational risk through tracking media coverage, customer satisfaction scores,
the share price and Net Promoter Scores provided by brokers.
Non-Financial Information Statement
The requirements of sections 414CA and 414CB of the Companies Act 2006 relating to non-financial
reporting are addressed in this section.
We have a range of policies and guidance that support key outcomes for all our stakeholders.
Performance against our strategic non-financial performance measures is one indicator of the
effectiveness and outcomes of policies and statements. The Group’s policies and statements include, but
are not limited to, those summarised in the table below.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
61
Non-Financial Information Statement
Description of
policies/statement
Due diligence undertaken
Outcomes/Impacts/Risks
Environmental matters
Our Environmental Policy embodies our
Stewardship value
, outlining our
commitment to taking responsibility for the
environment. The policy commits to
respecting the environment, minimising
environmental impact and maintaining
resilience to environmental risks and
impacts and helping to limit the speed of
climate change and resource depletion.
The policy articulates the Group’s ambition
to achieve net zero value chain Greenhouse
Gas Emissions by no later than 2050 in line
with the ambitions of the Paris Climate
Accord 2015.
The Environmental Policy was
reviewed
by the Environmental
Working Group,
ESG Technical
Committee and ESG Committee
and approved by the Board.
Importantly the policy scope was
expanded to explicitly include
operations within OSB India and
the Group’s alignment to the Paris
Climate Accord ambitions.
The policy focuses on:
– meeting or
exceeding all
applicable
legal and regulatory
environmental obligations,
stakeholders’ expectations and
obligations;
– aligning with the Paris Climate
Accord ambitions of achieving net
zero value chain Greenhouse gas
emissions no later than 2050;
– aligning policy objectives with the
Group’s commitments to the Net
Zero Banking Alliance, Partnership
for Carbon Accounting Financials
and the
Science Based Targets
initiative.
The focus of actions in 2022 has
been on establishing the Group’s
carbon reduction plans in order to
deliver on the commitments set
out within the Policy.
Key highlights for the year
include:
– defining the Group’s high level
carbon reduction plan towards net
zero direct emissions by 2030;
– initiating work on defining the
Group’s climate transition plan for
financed
emissions (Scope 3,
category 15);
– approval of the Group’s Climate
Risk Management Framework;
–
completing a materiality
assessment of emission sources
associated
with Scope 3
categories 1-14 of the
Greenhouse gas protocol;
– continuing to procure electricity
from renewable energy tariffs
where the Group is responsible
for utilities procurement;
– completing feasibility studies on
the installation of Solar panels to
owned real estate in the UK;
–
increasing the number of
electric
vehicle charging points
across our UK real estate;
–
increasing management
information
reporting including
climate risk, utilities consumption
and carbon emissions;
–
key greenhouse gas metrics
subject to independent
assurance; and
–
completing environmental
initiatives in the UK and India to
raise awareness of environmental
issues.
Our Environmental, Social and
Governance (ESG) Metrics Policy
sets out the non-financial performance
indicators which include ethical,
sustainability and corporate governance
considerations that are reported to relevant
Committees. These metrics
have been
determined to be important to the Group’s
stakeholders and ESG
strategy and
commitments.
The ESG Metrics Policy is reviewed
by the ESG team and approved by
the Group Audit Committee.
Non-financial metrics are subject to
the
ESG metrics lifecycle and
principles of the Group’
s Data
Quality Policy. This is monitored by
the ESG team on a monthly basis.
Functional providers of information
and data are responsible for the
management and reporting of the
ESG metrics.
Second line review and monitoring
is
provided by Risk and
Compliance. Internal Audit provide
a third line review and challenge on
an annual basis.
Through the compilation and
reporting of non-financial metrics,
performance towards achieving
the Group’s ESG strategy and
commitments and management
of risk is monitored.
The ESG Technical Committee
review and challenge the
reported metrics. Suitability of
metrics is reviewed annually and
updates presented through the
governance process for approval.
Accuracy of reported metrics is a
risk that is managed through data
quality processes and controls.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
62
Non-Financial Information Statement (continued)
Description of
policies/statement
Due diligence undertaken
Outcomes/Impacts/Risks
Employee matters
Our Group Flexible Working Policy sets
out a range of flexible working arrangements
and the approach that the Group will take in
reviewing formal Flexible Working Requests
from employees.
Our Group Homeworking Policy is
applicable to all UK employees and provides
clarity in respect of the Group’s approach
regarding formal homeworking
arrangements (i.e. following a Flexible
Working Request being agreed), informal
arrangements and enforced arrangements
(e.g. COVID-19).
The Group Flexible Working Policy
was initially drafted by HR
Management and reviewed by the
Group’
s Legal and Company
Secretariat function. It was most
recently updated and approved by
the Group Executive Committee in
August 2022.
A similar process, as outlined
above, was followed for the Group
Homeworking Policy which, in line
with policy review requirements,
was last updated and subsequently
approved by the Group Executive
Committee in May 2022.
We seek to accommodate, where
possible, all requests for flexible
working, with the majority of
requests being agreed.
The Group Homeworking Policy
contains an attestation for those
working from home (formally,
informally and on an enforced
basis), with this requiring
employees who work from home
to confirm that they are aware of
and can
appropriately mitigate
risks presented by working from
home in respect of data
protection, information security
and health and safety.
Our Group Diversity, Equity and Inclusion
Policy sets out the Group’s commitment to
promoting equality of opportunity, providing
an inclusive workplace and eliminating any
unfair treatment or unlawful discrimination.
In order to ensure appropriate
Board oversight of matters relating
to diversity and inclusion, updates
are regularly provided to the Group
Remuneration
and People
Committee.
In addition, the Group General
Counsel and Company Secretary,
who is the Executive responsible
for diversity and inclusion, issues
regular updates to all employees in
order to drive awareness of
ongoing internal initiatives and
progress relating to diversity and
inclusion.
The current version of the Group
Diversity, Equity and Inclusion
Policy has been reviewed in line
with the governance and approval
processes detailed above and will
be subject to a detailed review by
the Group’s
newly appointed
Diversity, Equity and Inclusion
Specialist.
Our Group-wide Diversity and
Inclusion
Working Group has
progressed a number of initiatives
and activities,
some of which
supported gender related focus
areas, such as progressing
towards our published Women in
Finance Charter target and
reducing our gender pay gap. The
Diversity and Inclusion Working
Group has ensured a far broader
focus on other areas of diversity,
which will be further enhanced
given the appointment of a
Diversity,
Equity and Inclusion
Specialist.
In 2022 we commenced the
process of collating diversity data
from our UK
employee base
across the broad range of
diversity categories which align
with regulatory guidance. This will
enable us to build a picture of the
diverse nature of our workforce
and understand areas of under
representation.
Our Group Whistleblowing Policy –
Raising a Concern aims to encourage all
employees, and others who have serious
concerns about wrongdoing in the
workplace, to raise their concerns at the
earliest opportunity.
The Group’s whistleblowing arrangements
endeavour to manage whistleblowing cases
fairly, consistently
and in a way which
protects individual whistleblowers.
A Whistleblowing Report is
presented to
the Group Audit
Committee on a regular basis,
whilst the Annual Whistleblowing
Report is presented to the Board.
The Chair of the Group Audit
Committee is the designated
Whistleblowers’ Champion.
The Group Audit Committee is
responsible for overseeing the
effective operation of the policy;
this aims to mitigate the risk of
undetected
wrongdoing and
unwanted exposure for the
Group.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
63
Non-Financial Information Statement (continued)
Description of
policies/statement
Due diligence undertaken
Outcomes/Impacts/Risks
Employee matters (continued)
Our Group Health and Safety Policy
outlines our approach and responsibilities
under statutory legislation. We recognise our
duty and responsibility and the Health and
Safety
Policy ensures that the Group
complies
with legislation to protect its
employees and customers, and provides a
suitable and safe environment for
employees, customers and anyone affected
by the Group’s operations.
The Group adopts a robust
approach to ensuring compliance
with its internal
policies and all
legislative requirements. A range of
controls are in place and tested
regularly to ensure their
effectiveness. All controls are
subject to independent oversight.
The Health and Safety Working
Group meets twice per annum to
review the objectives of the Health
and Safety
Policy. Any relevant
matters arising
from these
meetings are reported to
Operational Risk.
An accountable Executive is
responsible
for the Health and
Safety Policy and a
third party
adviser reviews it annually prior to
it being approved by the Board.
Health and safety statistics are
provided on a dashboard shared
monthly with the Board along with
an annual Health
and Safety
Report.
Risk assessments are completed
across the Group annually.
Annual health and safety training
is completed by all employees.
Health and Safety awareness in
the workplace has increased with
updates provided on the Group
intranet to reduce the possibility of
injury to
employees and
customers.
Social matters
Our Modern Slavery Statement and
Vendor Code of Conduct and Ethics
outlines the measures we have taken to
combat the risks of modern slavery and
human trafficking in our businesses and
supply chains.
The Modern Slavery Statement is
updated in line with the
requirements. In addition, as part of
an annual review, the Group has
updated both of its Vendor Codes
of Conduct and Ethics.
The UK
Vendor Code of Conduct and
Ethics (UK VCCE) is issued at the
start of any new vendor relationship
and on an annual basis to existing
categorised and identified vendors.
The UK Code includes provisions
on the Group’s Values, Diversity
and Inclusion and Human Rights. It
also provides details of breach
reporting procedures.
OSB India also has a Vendor Code
of Conduct which receives external
assurances from Indian qualified
legal professionals and issued for
all new third parties and annually to
all existing arrangements in India.
We perform relevant checks via the
Organisation for Economic Co-
operation and Development
(OECD) Watch at the onboarding
stage and, where required, as part
of our ongoing due diligence
checks. In addition, we continue to
ensure that our standard
contractual
terms include
references to modern slavery,
where relevant.
The greatest modern slavery risks
to the Group are its supply chain,
its Indian
operations and
employment processes. To
sufficiently mitigate the risks, our
Vendor Management team
includes specific testing of key
controls within the Vendor
Management Risk Assessment
Matrix in line with the Vendor
Management Framework. The
Group ensures that appropriate
contractual wording is included in
its recruitment related contractual
documentation where
appropriate. The Group also
ensures that suppliers are paid in
sufficiently reasonable
timescales.
There are breach reporting
procedures
in place and there
were no reportable incidents in
this financial year.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
64
Non-Financial Information Statement (continued)
Description of
policies/statement
Due diligence undertaken
Outcomes/Impacts/Risks
Social matters (continued)
The Group remains cognizant of policies
potentially impacted by modern slavery
and human trafficking and continues to
ensure that modern slavery is
referenced, where appropriate.
All employees are required to complete
mandatory training to raise awareness
with additional targeted training
provided to our Branch Network in
recognition of their face-to-face
interactions with our customers.
Our Group Vendor Management
and Outsourcing Policy sets out the
core requirements which we must meet
and provides a structure to efficiently
manage potential and contracted third
party relationships ensuring the right
level of engagement and due diligence,
in compliance with our regulatory
obligations.
All third parties are classified according
to the nature of the services provided
and the associated risk. Due diligence
relating to issues such as data security,
financial stability, legal and reputational
risks is undertaken when onboarding,
monitoring and exiting all third parties.
The monthly Vendor Management
Committee reviews compliance with our
Group Vendor Management and
Outsourcing Policy and the performance
of our key third parties. There is regular
reporting to the Group Risk Committee
and an annual
assurance update is
provided to the Board.
We recognise the importance of
building strong relationships and
governance with our third parties
and of the possible reputational
risk this can impose. We actively
monitor our third parties to ensure
that they are adhering to our
requirements and standards, so
that
we can in turn meet our
obligations to stakeholders.
Our Lending Policy sets out the
parameters within which we are willing
to lend money responsibly within our set
criteria and credit risk appetite.
All changes to the Lending Policy
require approval from the Group Credit
Committee, with material changes
escalated to the Group Risk Committee.
As a second line of defence, the Credit
Quality Assurance process monitors
adherence to the policy through a
riskbased sampling approach.
System parameters and underwriting
processes act as an additional control to
ensure that lending parameters are not
breached.
The affordability approach is calibrated
to ensure the recent cost of living
changes are reflected in the
assessment of a customer’s
creditworthiness.
The Group applies interest rate stress
tests to ensure that customers will still
be able to afford their mortgages during
a
rising interest rates market
environment.
In line with policy, the Compliance
function conducts risk-based second
line assurance reviews across the
Group to test regulatory adherence and
customer outcomes, in accordance with
its annual Compliance Assurance Plan.
The Group Risk Committee
challenges
how the Lending
Policy is applied to ensure that the
right outcomes are achieved.
The credit risk appetite of the
Group
provides a benchmark
against preagreed
trigger limits
and therefore is a measure of the
overall performance of the
Lending Policy.
Non-adherence to the credit risk
appetite could lead to business
being written outside the agreed
risk appetite.
The recent rise in the cost of
certain commodities (e.g. energy
and fuel)
has been reflected
within the Group’s assessment of
customers’ affordability.
The interest rate stress tests have
been formally reviewed to ensure
that the Group continues to lend
responsibly
during this volatile
rate environment.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
65
Non-Financial Information Statement (continued)
Description of
policies/statement
Due diligence undertaken
Outcomes/Impacts/Risks
Social matters (continued)
Our Group Complaint Handling
Policy outlines, at a high level, our
regulatory expectations for complaint
handling from a customer-centric
perspective.
We investigate complaints
competently,
diligently and
impartially, supported by
appropriately trained employees. Our
complaints processes are designed
to
be easily accessible by all
customers and ensure that those in
vulnerable circumstances experience
the same opportunities to complain
and a service
that is tailored to
individual needs. Root cause
analysis is used to identify and solve
underlying issues rather than apply
quick fixes.
Complaint performance forms part of
the management information
provided
to Management
Committees and to the Board.
Analysis of complaints outcomes and
potential business and customer
impac
t is an integral part of the
Group’s processes.
In line with policy, the Compliance
function conducts risk-based second
line
assurance reviews across the
Group to test regulatory adherence
and customer
outcomes, in
accordance with its annual
Compliance Assurance Plan.
Complaints are also a component of
Executive bonus scheme metrics
affecting remuneration outcomes.
Complaints may be an early warning of
not treating customers fairly, which has
regulatory consequences for the
Group.
Our Group Customer Vulnerability
Policy
sets the standards and
approach
for the identification and
treatment
of vulnerable customers
and provides guidance to all areas of
the Group to ensure that vulnerable
customers
consistently receive fair
outcomes.
Regular case study reviews through
the Vulnerable Customer Review
Committee ensure that best practice
processes across the different
customer journeys are monitored and
shared with
representatives from
differing customerfacing and second
line functions.
In line with policy, the Compliance
function conducts risk-based second
line
assurance reviews across the
Group to test regulatory adherence
and customer
outcomes, in
accordance with its annual
Compliance Assurance Plan.
An enhanced training programme has
been developed to focus on more
complex customer scenarios including
identifying vulnerable customers and
how best to serve them and their
changing needs.
There is a potential impact to our
reputation and regulatory risks for not
treating customers fairly.
Customer complaint data shows that
there were no systemic issues in
vulnerability processes and outcomes
for the year.
Our Group Data Protection Policy
ensures that there are adequate
policies and procedures in place to
enable compliance with the UK
General Data Protection Regulation
(GDPR) and the Data Protection Act
2018; and sets out the necessary
steps that should be taken when
processing personal data.
The Group Data Protection Officer
reports twice each year, to the Group
Executive Committee and the Board,
regarding compliance with legal
requirements and the Data Protection
Policy and reports on any data
incidents
and data subject access
requests.
The privacy and security of personal
information is respected and
protected. We regard sound privacy
practices as
a key element of
corporate governance and
accountability. Non-compliance would
expose the Group to the potential
breach of UK GDPR provisions and
fines.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
66
Non-Financial Information Statement (continued)
Description of
policies/statement
Due diligence undertaken
Outcomes/Impacts/Risks
Social matters (continued)
Our Group Arrears Management and
Forbearance Policy ensures that we
address the need for internal systems
and processes to treat customers in
financial difficulties fairly, including
being proactive with customers who
display characteristics of being on the
cusp of financial difficulty.
As the second line of defence, the
Credit Quality Assurance process
monitors adherence to the policy
through a riskbased sampling
approach.
Due consideration has been given
to
the implications of customers
reverting
from fixed rates to a
variable rate in the face of the rising
interest rate market environment.
In line with policy, the Compliance
function conducts risk-based
second line
assurance reviews
across the Group to test regulatory
adherence and customer outcomes
in accordance with its annual
Compliance Assurance Plan.
Our arrears rates are monitored
through the Group Credit
Committee on a monthly basis to
ensure senior management
oversight of arrears trends. There
is credit risk associated with credit
losses following the ineffective
management of customer
accounts.
The existing forbearance and
collection
toolkit and mandates
have been reviewed to ensure
that the sufficient level of support
is available to customers
experiencing financial difficulties
due to
increased mortgage
payments.
Our Anti-Bribery and Corruption
Policy outlines our stance to conduct
all of our business in an honest and
ethical manner. We take a zero-tolerance
approach to bribery and corruption and
are committed to acting professionally,
fairly and with integrity in all of our
business dealings and relationships.
The purpose of the policy is to provide
employees, contractors and third party
service providers with clear guidelines
to ensure that we conduct our activity
in an ethical and appropriate manner
including complying with the laws and
regulations of each jurisdiction in which
we operate.
The policy forms an integral part of the
Group Financial Crime Risk Management
Framework.
The policy is subject to an annual
review
process with approval
provided by the
Group Audit
Committee.
Anti-Bribery and Corruption training
forms part of the wider Financial
Crime train
ing package that is
mandatory for each employee to
complete on an annual basis.
In addition, the requirements set
out in the Anti-
Bribery and
Corruption Policy are incorporated
into the Group’s Vendor
Management and Outsourcing
Policy.
Gifts, hospitality and donations
are closely monitored through a log
maintained by the Group Financial
Crime function in accordance with
our
associated policy and
procedures.
No material issues or breaches
have arisen from the Group’s
adherence to the existing Anti-
Bribery and Corruption Policy and
processes.
We recognise that there may be
instances where an employee
may be exposed to the risk of
bribery or
corruption and, as
result, provide numerous
channels in which an employee
can report such an event,
including via the whistleblowing
process.
During the tender process for a
new
supplier, all employees
involved in the
process must
ensure compliance with the
Anti-Bribery and Corruption Policy
and requirements. This approach
also applies to the Conflicts of
Interest Policy.
Our Conflicts of Interest Policy aims to
identify, maintain and operate effective
organisational and administrative
arrangements to identify and take
all reasonable steps in order to avoid
conflicts where possible.
The policy is subject to an annual
review
process with approval
provided by the Group Executive
Committee. Conflicts
of interest
training forms part of the wider
Financial Crime training package
that is mandatory for each
employee to complete on an annual
basis.
Conflicts of interest disclosures are
typically made as part of the
recruitment process, as part of the
annual attestation process and/or
when there is a change to
circumstances, such as a new
potential conflict arising.
No material issues or breaches
have arisen from the Group’s
adherence to the existing
Conflicts of Interest Policy and
processes.
As a financial services provider,
we face the risk of actual and
potential conflicts
of interest
periodically.
We recognise that there may be
instances where
conflicts of
interest are unavoidable and that
a conflict may exist even if no
unethical or improper act or
outcome results from it. Where it
is not possible to avoid a potential
conflict of interest, we are
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
67
Non-Financial Information Statement (continued)
Description of policies/statement
Due diligence undertaken
Outcomes/Impacts/Risks
Social matters (continued)
In addition, conflicts of interest
requirements are incorporated into
the Group’s Vendor Management
and Outsourcing Policy.
Group Compliance maintains the
conflicts of interest register, which
is reviewed quarterly by the Group
Conduct Risk Management
Committee
and escalated to the
Group Risk Management
Committee, as required. In
addition, the Group Nomination and
Governance Committe
e annually
reviews
Executive and Director
conflicts.
committed to ensuring that any
conflicts of interest that arise
are managed fairly and in the best
interests of our customers.
Our Fraud Policy outlines our duty to
comply with prevailing legal and regulatory
requirements and to have appropriate
systems and controls in place to mitigate the
risk of fraud. This includes ensuring that
appropriate
monitoring and escalation
procedures are in place and are operating
effectively.
Our strategy for managing fraud risk is to
adopt a zero-tolerance approach towards
any form of fraud; however, we accept that
incidents of fraud will occur as a result of
doing business.
The purpose of the policy and supporting
procedures is to provide a consistent
approach throughout the Group to the
prevention, detection and investigation of
fraud. The policy forms an integral part
of the Group Financial Crime Framework.
The policy is subject to an annual
review with approval provided by
the Group Audit Committee.
Fraud awareness training forms
part of the wider Financial Crime
training package that is mandatory
for each employee to complete on
an annual basis.
External stakeholders, customers,
clients and relevant third parties are
made aware of our robust stance
towards fraud management
through literature or similar
communication channels.
All potential fraud incidents are
investigated by a dedicated Group
Financial Crime team that is
specifically
trained in identifying
and reporting fraudulent behaviour.
The Group will seek to recover all
losses arising from fraud-related
activities and
to take necessary
action, as appropriate. The Group
Conduct Risk Management
Committee, Group Operational
Risk
Management Committee,
Group Risk Management
Committee and Group Risk
Committee regularly review and
monitor fraud reporting.
As a financial services provider,
we
recognise that we are
inherently exposed to the risk of
fraud and that losses may occur
as a result of doing business. In
order to deter, detect and disrupt
those who would seek to use the
Group to facilitate any form of
financial crime we have
appropriate systems and controls
in place.
Key risk and performance
indicators are agreed by senior
management and reviewed on a
regular basis. Management
information on fraud related
activity is presented on a regular
basis to senior management in
order to provide visibility of our
fraud exposure
and any
associated loss.
Our Anti-Money Laundering and
Counter Terrorist Financing Policy
seeks to explain the responsibility of
senior managers, the Money Laundering
and Reporting Officer (MLRO) and all
employees. The policy requires
that the
highest ethical standards are
met and
requires all employees to act with integrity at
all times. We have no appetite for breaching
legislation or regulation regarding anti-
moneylaundering or counter terrorist
financing.
The policy is subject to an annual
review with approval provided by
the Group Audit Committee.
Anti-money laundering and counter
terrorist financing forms part of the
wider Financial Crime training
package that is mandatory for each
employee to complete on an annual
basis.
No material issues or breaches
have arisen from the Group’s
adherence to the existing Anti-
Money Laundering and Counter
Terrorist Financing Policy and
processes.
As a financial services provider,
the Group recognises that it is
inherently exposed to the risk of
financial crime.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
68
Non-Financial Information Statement (continued)
Description of
policies/statement
Due diligence undertaken
Outcomes/Impacts/Risks
Social matters (continued)
The policy provides a consistent approach to
the deterrence and
detection of those
suspected of
laundering the proceeds of
crime or those involved in the funding of
terrorism and the relevant disclosure to the
necessary authorities. The policy forms
an integral part of the Group Financial
Crime Risk Management Framework.
We have documented processes
and procedures in place to identify
the Group’
s customers prior to
entering into
a relationship.
Systems and controls have been
adopted to identify and report
activity deemed to be suspicious.
All suspicious activity is
investigated by a dedicated Group
Financial Crime team
who are
specifically trained in identifying
and
reporting suspicious
behaviour.
Key risk and performance
indicators are agreed by senior
management and reviewed on a
regular basis.
Management information on
financial crime-related activity is
presented to senior management
in order to provide visibility of our
exposure to financial crime.
Our Group Operational Resilience
Policy documents the approach and
expectations of the Group in establishing
and enhancing its levels of resilience and
recognises Operational Resilience as a
key area of focus for the Group.
The implementation and ongoing
compliance with the requirements of this
Policy is achieved through the Group’s
existing governance arrangements and
overseen by the Group Operational
Resilience function.
The policy references how the Group
complies with all relevant UK regulatory
requirements (e.g. the Financial Conduct
Authority (FCA) and Prudential Regulation
Authority (PRA)) and aligns to industry good
practice and standards. This includes the
March 2021 published
FCA and PRA
policies on Operational Resilience. These
policies require all firms to adopt a proactive
approach to preventing a disruption to its
services, whilst also ensuring that sufficient
planning and testing is established in order
to respond effectively to a disruptive
incident.
The Group continues to make progress
in implementing the requirements of the
two regulatory policies.
The Group’s response throughout
the COVID-
19 pandemic was
proportionate and pragmatic, and
was designed to consider both the
needs of our employees and our
customers and the
services we
provide. The widespread and
prolonged period of the pandemic
required the Group to adapt its
approach reflecting both the local
challenges of our business and the
historical legacy
differences in
respect of governance; however,
where a common Group-wide
approach was required, it was
applied. Whilst COVID-19 brought
operational
resilience into sharp
focus, we recognize there are a
number of threats that will not be as
slow to impact or as prolonged and
we plan for these against a range of
severe but plausible scenarios.
In the event of a disruptive incident,
the Group is well-placed to respond
and deliver our Important Business
Services. By assessing the level of
risk
our businesses face when
exposed to a range
of possible
scenarios, developing the
appropriate plans and then testing
those plans; the Group is well
positioned to respond to disruptive
events.
The Group continues to invest in
improving its infrastructure and is
committed to delivering a number
of
enhancements in 2023 and
beyond, with the aim of re-
engineering how technology
enables services provided by the
Group.
Enhancing Operational
Resilience remains a key
consideration when setting the
change management agenda.
The Group continues to maintain
strong relationships with our key
third
parties and validates that
they are able to recover services
in line with our expectations and
standards.
Description of the business model
A description of the business model is set out on pages 4 to 7 and includes non-financial KPIs relating to broker and customer
satisfaction scores, customer retention, greenhouse gas emissions, sponsorship and donations and women in senior
management roles.
Principal risks and uncertainties
A description of the principal risks and uncertainties is set out on pages 38 to 50.
OneSavings Bank plc
Strategic Report (continued)
For the Year Ended 31 December 2022
69
This Strategic report was approved by the Board and signed on its behalf by:
Jason Elphick
Group General Counsel and Company Secretary
30 March 2023
OneSavings Bank plc
Directors’ Report
For the Year Ended 31 December 2022
70
The Directors present their Report, together with the audited Financial Statements and Auditor’s Report,
for the year ended 31 December 2022.
Information presented in other sections
Information relating to future developments, principal risks and uncertainties and engagement with
suppliers, customers and others has been included in the Strategic Report.
Information on financial instruments including financial risk management objectives and policies
including, the policy for hedging the exposure of the Group to price risk, credit risk, liquidity risk and
cash flow risk can be found in the Risk review on pages 30 to 60.
Details on how the Company has complied with section 172 can be found throughout the Strategic and
Directors’ Reports and on pages 13 and 14.
Results
The results for the year are set out in the Statement of Comprehensive Income on page 92.
Directors
The Directors who served during the year and to the date of this report were as follows:
Graham Allatt
Kalvinder Atwal (appointed on 7 February 2023)
Andrew Golding
Noël Harwerth
Sarah Hedger
Rajan Kapoor
Mary McNamara
April Talintyre
Simon Walker
David Weymouth
None of the Directors had any interest either during or at the end of the year in any material contract or
arrangement with the Company.
Directors’ indemnities
The Articles provide, subject to the provisions of UK legislation, an indemnity for Directors and Officers
of the Group in respect of liabilities they may incur in the discharge of their duties or in the exercise of
their powers, including any liabilities relating to the defence of any proceedings brought against them,
which relate to anything done or omitted, or alleged to have been done or omitted, by them as Officers
or employees of the Group. Directors’ and Officers’ Liability Insurance cover is in place for all Directors
and Officers.
OneSavings Bank plc
Directors’ Report (continued)
For the Year Ended 31 December 2022
71
Equal opportunities
The Group is committed to applying its Group Diversity, Equity and Inclusion Policy at all stages of
recruitment and selection. Short-listing, interviewing and selection will always be conducted without
regard to gender, gender reassignment, sexual orientation, marital or civil partnership status, colour,
race, nationality, ethnic or national origins, religion or belief, age, pregnancy or maternity leave or trade
union membership. Any candidate with a disability will not be excluded unless it is clear that the
candidate is unable to perform a duty that is intrinsic to the role, having taken into account reasonable
adjustments. Reasonable adjustments to the recruitment process will be made to ensure that no
applicant is disadvantaged because of disability. Line Managers conducting recruitment interviews will
ensure that the questions they ask job applicants are not in any way discriminatory or unnecessarily
intrusive. This commitment also applies to existing employees, with the necessary adjustments made,
where there is a change in circumstances.
Employee engagement
Employees are kept informed of developments within the business and in respect of their employment
through a variety of means, such as employee meetings, briefings and the intranet. Employee
involvement is encouraged and views and suggestions are taken into account when planning new
products and projects.
The Sharesave ‘save as you earn’ Scheme is an all-employee share option scheme which is open to
all UK-based employees. The Sharesave Scheme allows employees to purchase options by saving a
fixed amount of between £10 and £500 per month over a period of three years, at the end of which the
options, subject to leaver provisions, are usually exercisable (options granted prior to 2021 have a lower
limit of £5 and only three-year schemes will be offered from 2021 onwards). The Sharesave Scheme
has been in operation since June 2014 and options are granted annually, with the exercise price set at
a 20% discount of the share price on the date of grant.
The Workforce Advisory Forum (known as OurVoice) is in place to gather the views of the workforce to
enable the Board and Group Executive Committee to consider a broadly representative range of
stakeholder perspectives to guide strategic decisions for the future of the Group. OurVoice consists of
volunteer representatives (of which there are 33 in total) from each of the various business areas and
locations, as well as permanent members including a designated NED, Mary McNamara; a member of
the Group Executive Committee, Jason Elphick; and a representative from HR Management. Other
NEDs and members of the Group Executive Committee are invited to attend meetings throughout the
year and do so on a regular basis. Sarah Hedger will become a permanent member of OurVoice and
will replace Mary McNamara as the designated NED with responsibility for OurVoice with effect from
11 May 2023.
Members of the Board are keen to engage with our employees across all locations and find the
experience of visiting our branches and offices within the UK and India invaluable.
Three OurVoice meetings were held during 2022, with employee representatives encouraged to engage
with employees within their nominated business areas and across all Group locations in advance of
each meeting in order to identify topics impacting the workforce and which it is felt should be brought
to the attention of the Board and Group Executive Committee. A number of items were considered and
discussed by OurVoice, including 2021 Bonus and Salary increase, Best Companies survey results and
Mental Health First Aiders, as well as topics relating to ESG matters such as community activities,
culture, diversity and inclusion and the governance of pay within the Group. The permanent members
of OurVoice were particularly interested in feedback from the workforce in respect of employee morale,
employee engagement and hybrid working/working from home.
OneSavings Bank plc
Directors’ Report (continued)
For the Year Ended 31 December 2022
72
The Group is committed to diversity and to making sure everyone in our business feels included. The
Diversity and Inclusion Working Group continued to develop the Group’s Diversity and Inclusion
Strategy in line with the Respect Others value throughout 2022. The Diversity and Inclusion Working
Group brings together a broad mix of employees from across the UK business, as well as representation
from OSB India, to drive our diversity and inclusion agenda to appreciate differences in age, gender,
ethnicity, religion, disability, sexual orientation, education, socio-economic background and national
origin and ensure that all employees are treated fairly, with respect and given equal opportunities. Jason
Elphick, our Diversity Champion, along with the Diversity and Inclusion Working Group, hosted a
number of activities throughout the year including International Women’s Day with senior females from
across the business taking part in a Q&A panel, launching the Group’s menopause statement and
National Inclusion Week 2022, which included a range of daily activities under the annual theme of
‘Time to Act: the Power of Now’ with a number of personal stories from our employees. The 2022 annual
calendar provided a number of national days for our employees to celebrate.
Political donations
Neither the Company nor any of its subsidiaries made any political donations this year.
Going concern statement
The Board undertakes regular rigorous assessments of whether the Group is a going concern in light
of current economic conditions and all available information about future risks and uncertainties.
In assessing whether the going concern basis is appropriate, projections for the Group have been
prepared, covering its future performance, capital and liquidity for a period in excess of 12 months from
the date of approval of these financial statements. These forecasts have been subject to sensitivity
tests, including stress scenarios, which have been compared to the latest economic scenarios provided
by the Group’s external economic advisors, as well as reverse stress tests.
The assessments include the following:
• Financial and capital forecasts were prepared under stress scenarios which were assessed against
the latest economic forecasts provided by the Group’s external economic advisors. Reverse stress tests
were also run, to assess what combinations of House Price Index (HPI), unemployment, default rates
and consumer price index variables would result in the Group utilising its regulatory capital buffers in
full and breaching the Group’s minimum prudential requirements along with analysis and insight from
the Group’s Internal Capital Adequacy Assessment Process (ICAAP). The Directors assessed the
likelihood of those reverse stress scenarios occurring within the next 12 months and concluded that the
likelihood is remote.
• The latest liquidity and contingent liquidity positions and forecasts were assessed against the Internal
Liquidity Adequacy Assessment Process (ILAAP) stress scenarios, with the Group maintaining
sufficient liquidity throughout the going concern assessment period.
• The Group continues to assess the resilience of its business operating model and supporting
infrastructure in the context of the emerging economic, business and regulatory environment. The key
areas of focus continues to be on the provision of the Group’s Important Business Services, minimising
the impact of any service disruptions on the Group’s customers or the wider financial services industry.
The Group’s response to the COVID-19 pandemic demonstrated the inherent resilience of its critical
processes and infrastructure and its agility in responding to changing operational demands. The Group
recognises the need to continually invest in the resilience of its services, with specific focus in 2023 on
ensuring that the third parties on which it depends have the appropriate levels of resilience and in further
automating those processes that are sensitive to increases in volume.
OneSavings Bank plc
Directors’ Report (continued)
For the Year Ended 31 December 2022
73
The Group’s financial projections demonstrate that the Group has sufficient capital and liquidity to
continue to meet its regulatory capital requirements as set out by the Prudential Regulation Authority
(PRA).
The Board has therefore concluded that the Group has sufficient resources to continue in operational
existence for a period in excess of 12 months and as a result, it is appropriate to prepare these financial
statements on a going concern basis.
The role and structure of the Board
The Board of Directors (the Board) is responsible for the long-term sustainable success of the Company
and provides leadership to the Group. The Board focuses on generating value for shareholders by
setting strategy, monitoring performance and ensuring that appropriate systems, controls and resources
are in place to enable the Company to meet its objectives whilst safeguarding the interests of
stakeholders and maintaining effective corporate governance.
The Board is responsible for setting the tone from the top in relation to conduct, culture and values, for
ensuring continuing commitment to treating customers fairly, carrying out business honestly and openly
and preventing bribery, corruption, fraud or the facilitation of tax evasion.
The Board operates in accordance with the Company’s Articles of Association (the Articles) and its own
written terms of reference. The Board has established an Audit and a Risk Committee, which each have
their own terms of reference and are reviewed at least annually. Details of each Committee’s activities
during 2022 are shown below.
The Board retains specific powers in relation to the approval of the Group’s strategic aims, policies and
other matters, which must be approved by it under legislation or the Articles. These powers are set out
in the Board’s written terms of reference and Matters Reserved to the Board which are reviewed at least
annually.
The Board met 10 times during the year. The Board has a formal meeting schedule with ad hoc
meetings called as and when circumstances require. There is an annual calendar of agenda items to
ensure that all matters are given due consideration and are reviewed at the appropriate point in the
regulatory and financial cycle.
Roles of the Chairman, Chief Executive Officer and Senior Independent Director
The roles of Chairman and Chief Executive Officer (CEO) are distinct and held by different people.
There is a clear division of responsibilities, which has been agreed by the Board and is formalised in a
schedule of responsibilities for each.
The Chairman, David Weymouth,
leads the Board and is responsible for its overall effectiveness and
for directing the Group. He ensures that the Board has the right mix of skills, experience and
development so that it can focus on the key issues affecting the business and for leading the Board and
ensuring that it acts effectively. Andy Golding, as CEO, has overall responsibility for managing the
Group and implementing the strategies and policies agreed by the Board.
Noël Harwerth is the Senior Independent Director (SID). The SID’s role is to act as a sounding board
for the Chairman and to support him in the delivery of his objectives. This includes ensuring that the
views of all other Directors are communicated to, and given due consideration by, the Chairman.
OneSavings Bank plc
Directors’ Report (continued)
For the Year Ended 31 December 2022
74
Balance and independence
The effectiveness of the Board and its Committees in discharging their duties is essential for the
success of the Company. In order to operate effectively, the Board and its Committees comprise a
balance of skills, experience, independence and knowledge to encourage constructive debate and
challenge to the decision-making process.
Audit Committee
The primary role of the Committee is to assist the Board in overseeing the systems of internal control
and external financial reporting. The Committee’s specific responsibilities are set out in its terms of
reference, which are reviewed at least annually. The Audit Committee is chaired by Rajan Kapoor, the
other members are Graham Allatt, Noël Harwerth, Sarah Hedger and Simon Walker. The Committee
met seven times during 2022; all members attended these meetings, except Noel Harwerth who
attended six times. Graham Allatt will cease to be a member of the Committee on 11 May 2023. The
Committee considered, on behalf of the Board, whether the 2022 Annual Report and Accounts taken
as a whole are fair, balanced and understandable and, whether the disclosures are appropriate. Further
details on the activities of the Committee are set out in the OSB Group’s annual report and accounts.
Risk Committee
The primary objective of the Committee is to support the Board in discharging its risk oversight and
governance responsibilities. The Committee’s specific responsibilities are set out in its terms of
reference, which are reviewed at least annually. The Committee is chaired by Graham Allatt, the other
members are Noël Harwerth, Rajan Kapoor and Simon Walker. The Committee met seven times during
2022. All members attended these meetings. Further details on the activities of the Committee are set
out in the OSB Group’s annual report and accounts.
Environment
Environmental matters are considered in the Strategic report above.
Internal Control
The Board retains ultimate responsibility for setting the Company’s risk appetite and ensuring that there
is an effective Risk Management Framework to maintain levels of risk within the risk appetite. The Board
regularly reviews its procedures for identifying, evaluating and managing risk, acknowledging that a
sound system of internal control should be designed to manage rather than eliminate the risk of failure
to achieve business objectives.
Key information in respect of the Group’s ERMF and objectives and processes for mitigating risks,
including liquidity risk, are set out in detail on pages 30 to 37.
OneSavings Bank plc
Directors’ Report (continued)
For the Year Ended 31 December 2022
75
Auditor
Deloitte LLP was appointed as auditor for the year and has indicated its willingness to continue in office
as auditor. A resolution to re-appoint Deloitte as external auditor will be presented at the Company’s
Annual General Meeting.
Each of the persons who is a director at the date of approval of this Annual Report confirms that:
• the financial statements, prepared in accordance with the applicable set of accounting standards,
give a true and fair view of the assets, liabilities, financial position and profit or loss of the
Company and the undertakings included in the consolidation taken as a whole; and
• the Strategic Report and Directors’ Report includes a fair review of the development and
performance of the business and the position of the Company and the undertakings included in the
consolidation taken as a whole, together with a description of the principal risks and uncertainties
that they face.
• so far as the Director is aware, there is no relevant audit information of which the Company's auditor
is unaware; and
• the Director has taken all the steps that they ought to have taken as a director in order to make
themselves aware of any relevant audit information and to establish that the Company's auditor is
aware of that information.
This confirmation is given and should be interpreted in accordance with the provisions of s418 of the
Companies Act 2006.
This report was approved by the Board on 30 March 2023 and signed on its behalf by:
Jason Elphick
Group General Counsel and Company Secretary
OneSavings Bank plc
Registered number: 07312896
OneSavings Bank plc
Statement of Directors’ Responsibilities in respect of the
Strategic Report, the Directors’ Report and the Financial
Statements
For the Year Ended 31 December 2022
76
The Directors are responsible for preparing the Annual Report and the Group and parent Company
financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and parent Company financial statements for each
financial year. Under that law they are required to prepare the Group financial statements in accordance
with UK-adopted International Financial Reporting Standards (IFRS) and applicable law and have elected
to prepare the parent Company financial statements on the same basis.
Under company law the Directors must not approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the Group and parent Company and of their profit or
loss for that period. In preparing each of the Group and parent Company financial statements, the Directors
are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable, relevant and reliable;
• state whether they have been prepared in accordance with IFRSs as adopted by the UK;
• assess the Group and parent Company’s ability to continue as a going concern, disclosing, as
applicable, matters related to going concern; and
• use the going concern basis of accounting unless they either intend to liquidate the Group or the
parent Company or to cease operations, or have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and
explain the parent Company’s transactions and disclose with reasonable accuracy at any time the financial
position of the parent Company and the Group enabling them to ensure that the financial statements
comply with the Companies Act 2006. They are responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open
to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report
and Directors’ Report that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information
included on the Company’s website. Legislation in the UK governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
Approved by the Board and signed on its behalf by:
Jason Elphick
Group General Counsel and Company Secretary
30 March 2023
Independent Auditor’s Report to the Members of
OneSavings Bank plc
For the Year Ended 31 December 2022
77
Report on the audit of the Financial Statements
1. Opinion
In our opinion:
• the financial statements of OneSavings Bank plc (the parent company) and its subsidiaries
(the Group) give a true and fair view of the state of the Group’s and of the parent company’s
affairs as at 31 December 2022 and of the Group’s profit for the year then ended;
• the Group financial statements have been properly prepared in accordance with United
Kingdom adopted international accounting standards;
• the parent company financial statements have been properly prepared in accordance with
United Kingdom adopted international accounting standards and as applied in accordance
with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the
Companies Act 2006.
We have audited the financial statements which comprise:
• the Consolidated Statement of Comprehensive Income;
• the consolidated and parent company Statements of Financial Position;
• the consolidated and parent company Statements of Changes in Equity;
• the consolidated and parent company Statements of Cash Flow; and
• the related notes 1 to 53.
The financial reporting framework that has been applied in their preparation is applicable law
and United Kingdom adopted international accounting standards and, as regards the parent
company financial statements, as applied in accordance with the provisions of the Companies
Act 2006.
2. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs
(UK)) and applicable law. Our responsibilities under those standards are further described in
the auditor’s responsibilities for the audit of the financial statements section of our report.
We are independent of the Group and the parent company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK, including the
Financial Reporting Council’s (the FRC’s) Ethical Standard as applied to listed public interest
entities, and we have fulfilled our other ethical responsibilities in accordance with these
requirements. The non-audit services provided to the Group and parent company for the year
are disclosed in note 8 to the financial statements. We confirm that we have not provided any
non-audit services prohibited by the FRC’s Ethical Standard to the Group or the parent
company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Independent Auditor’s Report to the Members of
One Savings Bank plc (continued)
For the Year Ended 31 December 2022
78
3. Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current year were:
• loan impairment provisions; and
• effective interest rate income recognition.
Within this report, key audit matters are identified as follows:
Newly identified
Increased level of risk
Similar level of risk
Decreased level of risk
Materiality
The materiality that we used for the Group financial statements was £21.6m which
was determined by reference to profit before tax and net assets.
Scoping
Our Group audit scope focused primarily on three subsidiaries subject to a full scope
audit. The subsidiaries selected for a full scope audit were OneSavings Bank plc,
Charter Court Financial Services Limited and Interbay ML Ltd. These three
subsidiaries a
ccount for 97% of the Group’s interest receivable and similar income,
94% of the Group’s profit before tax, 98% of the Group’s total assets and 99% of the
Group’s total liabilities. All audit work was performed by the Group engagement team.
Significant changes in
our approach
In the current year, the Group
has assessed how increases in inflation and interest
rates may impact customers, and has recognised separate cost of living and cost of
borrowing post model adjustments (PMAs) in estimating provisions f
or expected
credit losses on loans to address these emerging risks. The calculation of these
PMAs is inherently judgemental because there is limited recent data available to
estimate how increases in inflation and interest rates may impact customers. We
have considered these PMAs in our loan impairment provisions key audit matter.
In the prior year, our key audit matter in respect of effective interest rate (EIR) income
recognition included estimating EIRs in respect of the Group’s legacy acquired
portfolios. The legacy acquired portfolios continue to reduce in size and the Group’s
income recognition on the acquired portfolios is less sensitive to changes in customer
prepayment behaviour relative to our audit materiality. This area no longer feature
s
in our EIR income recognition key audit matter.
Independent Auditor’s Report to the Members of
OneSavings Bank plc (continued)
For the Year Ended 31 December 2022
79
4. Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going
concern basis of accounting in the preparation of the financial statements is appropriate.
Our evaluation of the directors’ assessment of the Group’s and parent company’s ability to
continue to adopt the going concern basis of accounting included:
• We obtained and read management’s going concern assessment, which included
consideration of the Group’s operational resilience, in order to understand, challenge
and evidence the key judgements made by management;
• We obtained an understanding of relevant controls around management’s going
concern assessment;
• We obtained management’s income statement, balance sheet and capital and liquidity
forecasts and assessed key assumptions, including climate risk considerations, for
reasonableness and their projected impact on capital and liquidity ratios, particularly
with respect to loan book growth and potential credit losses;
• Supported by our in-house prudential risk specialists, we read the most recent ICAAP
and ILAAP submissions, assessed management’s capital and liquidity projections,
assessed the results of management’s capital reverse stress testing, evaluated key
assumptions and methods used in the capital reverse stress testing model and tested
the mechanical accuracy of the capital reverse stress testing model;
• We read correspondence with regulators to understand the capital and liquidity
requirements imposed by the Group’s regulators, and evidence any changes to those
requirements;
• We met with the Group’s lead regulator, the Prudential Regulation Authority, and
discussed their views on existing and emerging risks to the Group and considered
whether these were reflected appropriately in management’s forecasts and stress
tests;
• We assessed the historical accuracy of forecasts prepared by management;
• We assessed the impact of the ongoing economic uncertainty, including how further
rises in living and borrowing costs may impact potential credit losses; and
• We evaluated the Group’s disclosures on going concern against the requirements of
IFRS and in view of the FRC guidance.
Based on the work we have performed, we have not identified any material uncertainties
relating to events or conditions that, individually or collectively, may cast significant doubt on
the Group's and parent company’s ability to continue as a going concern for a period of at least
twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are
described in the relevant sections of this report.
5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most
significance in our audit of the financial statements of the current period and include the most
significant assessed risks of material misstatement (whether or not due to fraud) that we
identified. These matters included those which had the greatest effect on: the overall audit
strategy, the allocation of resources in the audit; and directing the efforts of the engagement
team.
These matters were addressed in the context of our audit of the financial statements as a whole,
and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Independent Auditor’s Report to the Members of
OneSavings Bank plc (continued)
For the Year Ended 31 December 2022
80
5.1. Loan impairment provisions
Refer to the judgements in applying accounting policies and critical accounting estimates on page
115 and Note 22 on page 137.
Key audit matter
description
IFRS 9 requires loan impairment provisions to be recognised on an expected
credit loss (ECL) basis. The estimation of ECL provisions in the Group’s loan
portfolios is inherently uncertain and requires significant judgements and
estimates. We therefore cons
ider this to be a key audit matter due to the risk of
fraud or error in respect of the Group’s ECL provision. ECL provisions as at 31
December 2022 were £130.0m (2021: £101.5m), which represented 0.54%
(2021: 0.48%) of loans and advances to customers. ECLs
are calculated both for
individually significant loans and collectively on a portfolio basis which require the
use of statistical models incorporating loss data and assumptions on the
recoverability of customers’ outstanding balances.
As set out on page 51 the
Group has implemented various model and staging
enhancements during the year as well as updating the IFRS 9 models as part of
the Internal Ratings Based (IRB) programme.
The uncertain economic environment continues to increase the complexity in
e
stimating ECLs, particularly with regards to determining appropriate forward
looking macroeconomic scenarios and identifying customers who have
experienced significant increases in credit risk. Additionally, rising living and
borrowing costs observed over
the past year have increased the degree of
subjectivity in estimating an appropriate probability of default (PD) for customers.
We identified four specific areas in relation to ECL that require significant
judgement or relate to assumptions to which
the overall ECL provision is
particularly sensitive.
•
Significant increase in credit risk (SICR): The assessment of whether
there has been a significant increase in credit risk between the date of
origination of the exposure and 31 December 2022. There is
a risk that
the Group’s staging criteria does not capture SICR or are applied
incorrectly.
• Macroeconomic scenarios: As set out on page 53
, the Group sources
economic forecasts from a third-party economics expert and then applies
judgement to determine whic
h scenarios to select and the probability
weightings to assign. The Group considered four probability weighted
scenarios, including base, upside, downside and severe downside
scenarios. The key economic variables used within the macroeconomics
model were d
etermined to be the house price index (HPI) and
unemployment. The estimation of these variables involves a high degree
of subjectivity and estimation uncertainty.
•
Post model adjustments (PMAs): The Group has assessed how
increases in inflation and interest
rates may impact customers, and has
recognised separate cost of living and cost of borrowing PMAs to reflect
these emerging risks. The calculation of these PMAs is inherently
judgemental because there is limited recent data available to estimate
how increases in inflation and interest rates may impact customers.
•
Propensity to go into possession following default (PPD) and forced sale
discount (FSD) assumptions: PPD measures the likelihood that a
defaulted loan will progress into repossession. FSD
measures the
difference in sale proceeds between a sale under normal conditions and
sale at auction. The loss given default (LGD) by loan assumed in the ECL
provision calculation is highly sensitive to the PPD and FSD assumptions.
Independent Auditor’s Report to the Members of
OneSavings Bank plc (continued)
For the Year Ended 31 December 2022
81
How the scope
of our audit
responded to
the key audit
matter
We obtained an understanding of the relevant financial controls over the ECL
provision with particular focus on controls over significant assumptions and
judgements used in the ECL determination.
To challenge the Group’s SICR criteria, we:
•
Evaluated the Group’s SICR policy and assessed whether it complies with
IFRS 9;
•
Assessed the quantitative and qualitative thresholds used in the SICR
assessment by reference to standard validation metrics including the
proportio
n of transfers to stage two driven solely by being 30 days past
due, the volatility of loans in stage two and the proportion of loans that
spend little or no time in stage two before moving to stage three;
• Tested the completeness and accuracy of the data u
sed in applying the
quantitative and qualitative criteria in the SICR assessment to assess
whether loans were assigned to the correct stage;
• Supported by our credit risk specialists, performed
a full review of the
computer codes used to perform the SICR assessment;
•
As part of our testing of the application of the SICR criteria within the ECL
model and with support from our credit risk specialists, we independently
reperformed the Group’s staging assessment across all three stages using
our in-house analytics tool; and
•
Performed an independent assessment for a sample of loan accounts
which exited forbearance, to determine whether they had been
appropriately allocated to the correct stage.
To challenge the Group’s macroeconomic scenarios and the probability
weightings
applied we:
•
Agreed the macroeconomics scenarios used in the ECL model to reports
prepared by the third-party economics expert;
• Assessed the competence, capability and objectivity of the third-
party
economics expert, which included making spec
ific inquiries to understand
their approach and modelling assumptions to derive the scenarios;
•
Supported by our economic specialists, assessed and challenged the
scenarios considered and the probability weightings assigned to them in
light of the economic environment as at 31 December 2022;
• With the involvement of our economic specialists challenge
d the Group’s
economic outlook by reference to other available economic outlook data;
•
Supported by our credit risk specialists, assessed the model methodology
and performed a full review of the computer code used in the
macroeconomics model which applies
the scenarios to the relevant ECL
components;
•
Compared the appropriateness of selected macroeconomic variables (HPI
and unemployment) and the four probability weightings used in the
macroeconomics model to those used by peer lenders;
• Supported by our cre
dit risk specialists, assessed the performance of the
macroeconomic model to confirm whether the economic variables
previously selected were still appropriate through considering the modelled
macroeconomic results relative to those observed in historical r
ecessions;
and
•
For a sample of loans, we independently recalculated the ECL using the
macroeconomic variables to check they were being applied appropriately.
Independent Auditor’s Report to the Members of
OneSavings Bank plc (continued)
For the Year Ended 31 December 2022
82
To challenge the Group’s cost of living and cost of borrowing PMAs we:
• Supported by our credit
risk specialists, we assessed whether the risks
were already captured within the existing macroeconomics models;
•
Evaluated the methodology , including key assumptions and reviewed the
computer codes used to determine the PMAs; and
• Tested the completeness, accuracy and relevance of the data used.
To challenge the Group’s PPD and FSD assumptions we:
•
Supported by our credit risk specialists, performed a full review of the
computer codes in the LGD models;
• Recalculated the PPD rates observed on defaulted l
oans and compared
them to the rates used by the Group in the ECL models;
•
Recalculated the FSD observed on recent property sales on defaulted
loans and compared them to the rates used by the Group in the ECL
models;
• Considered the findings raised in the Gro
up’s model monitoring and
validation exercise and assessed the impact on the year-end provision; and
•
Performed a stand back test to consider potential contradictory evidence
and assessed the appropriateness of PPD and FSD assumptions by
comparison to industry peers.
Key observations
We determined that the methodology used, and the SICR criteria and PPD
and FSD assumptions in determining the ECL provision as at 31 December
2022 are reasonable.
We observed that the macroeconomic scenarios selected by the directors
and the probability
weightings applied generate an appropriate portfolio
loss distribution, and we determined the Group’s cost of living and cost of
borrowing PMAs are reasonable.
We therefore determined that loan impairment provisions are appropriately
stated.
Independent Auditor’s Report to the Members of
OneSavings Bank plc (continued)
For the Year Ended 31 December 2022
83
5.2. Effective interest rate income recognition
Refer to the judgements in applying accounting policies and critical accounting estimates on
page 117, the accounting policy on page 100 and Notes 3 and 4 on pages 118 and 119.
Key audit matter
description
In accordance with the requirements of IFRS 9, directly attributable
fees, discounts, incentives and commissions on a constant yield basis
(effective interest rate, EIR) are required to be spread over the
expected life of the loan assets. EIR i
s complex and the Group’s
approach to determining the EIR involves the use of models and
significant estimation in determining the behavioural life of loan assets.
Given the complexity and judgement involved in accounting for EIR
and given that revenue rec
ognition is an area susceptible to fraud,
there is an opportunity for management to manipulate the amount of
interest income reported in the financial statements.
The Group’s net interest income for the year ended 31 December 2022
was £709.9m (2021: £587.6m).
EIR adjustments arise from revisions to estimated cash receipts or
payments for loan assets that occur for reasons other than a
movement in market interest rates or credit losses. They result in an
adjustment to the carrying amount of the loan asset
, with the
adjustment recognised in the income statement in interest receivable
and similar income. As the EIR adjustments reflect changes to the
timing and volume of forecast customer redemptions, they are
inherently judgemental.
The level of judgement
exercised is increased where there is limited
availability of historical repayment information. For two of the loan
portfolios, Kent Reliance and Precise, the EIR adjustments are
sensitive to changes in the behavioural life curves. As set out on page
117, changes in the modelled behavioural life of these portfolios during
the year resulted in an interest income loss of
£31.6m (2021: £11.0m
gain). The EIR adjustments have increased as a result of the rising
interest rate environment. The current economic env
ironment brings
additional uncertainty with regards to forecasting expected
behavioural lives and prepayment rates.
We therefore considered
there to be an increased level of risk in respect of this key audit matter
in the current year.
How the scope of our
audit responded to the
key audit matter
We obtained an understanding of the relevant controls over EIR, focusing
on the calculation and review of EIR adjustments and the determination of
prepayment curves.
For the two portfolios where the EIR adjustments were most significant and
sensitive to changes in behavioural life, Kent Reliance and Precise, with
the involvement of our in-
house analytics and modelling specialists we run
the loan data for all products through our own independent EIR model,
using the behavioural life curves derived by the Group. We compared our
calculation of the EIR adjustment required to the amount recorded by the
Group.
A number of assumptions are made to adjust actual behavioural data over
recent years to reflect the Gr
oup’s best estimate of expected future
behaviour. For material assumptions, we independently challenged the
reasonableness of the assumptions considering the context of the rising
rate environment that has been experienced over the last year. For the
Independent Auditor’s Report to the Members of
OneSavings Bank plc (continued)
For the Year Ended 31 December 2022
84
same portfolios referenced above, with the involvement of our in-house
analytics and modelling specialists we independently derived a behavioural
life curve using the Group’s actual loan data over recent years and
incorporating those assumptions that we conside
red reasonable. We used
these curves in our own independent EIR model to calculate the EIR
adjustments. We compared this output to the amounts recorded by the
Group.
We also tested the completeness and accuracy of a sample of inputs into
the EIR model for originated loans.
Key observations
We determined that the EIR models and assumptions used are appropriate
and that net interest income for the period is appropriately stated.
6. Our application of materiality
6.1. Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes
it probable that the economic decisions of a reasonably knowledgeable person would be
changed or influenced. We use materiality both in planning the scope of our audit work and in
evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements
as a whole as follows:
Group financial statements
Parent company financial
statements
Materiality
£21.6m (2021: £20.1m)
£17.9m (2021: £16.7m)
Basis for
determining
materiality
We determined materiality for the
Group to be approximately 1% of net
assets of £2,201.8m (£21.6m) which
equates to 4% of statutory profit
before tax of £532.8m. The basis of
materiality is consistent with
prior
year.
We determined materiality for the
parent company by reference to 1% of
net assets. This is consistent with prior
year.
Rationale for
the
benchmark
applied
Consistent with the prior year, we
considered both net assets and a
profit before tax
based measure as
benchmarks for determining
materiality.
We determined net assets to be the
most relevant and stable benchmark
to determine materiality.
The parent company is principally a
holding company and we have
therefore determined net assets to be
the most relevant benchmark to
determine materiality.
Independent Auditor’s Report to the Members of
OneSavings Bank plc (continued)
For the Year Ended 31 December 2022
85
6.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that,
in aggregate, uncorrected and undetected misstatements exceed the materiality for the
financial statements as a whole.
Group financial statements
Parent company financial
statements
Performance
materiality
70% (2021: 60%) of Group materiality
70% (2021: 60%) of parent company
materiality
Basis and
rationale for
determining
performance
materiality
Group performance materiality was set at 70% of Group materiality (2021:
60%). In determining performance materiality, we considered a number of
factors, including: our understanding of the control environment; our
understanding of the business; and the lo
w number of uncorrected
misstatements identified in the prior year.
In the prior year we maintained a reduced level of performance materiality to
reflect the continued uncertainty arising as a result of the Covid-
19 pandemic.
Given that the impact of Covid-
19 has now reduced, we have increased
performance materiality for the current year.
6.3. Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences
in excess of £1.1m (2021: £1.0m), as well as differences below that threshold that, in our view,
warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure
matters that we identified when assessing the overall presentation of the financial statements.
7. An overview of the scope of our audit
7.1. Identification and scoping of components
Our Group audit was scoped by obtaining an understanding of the Group and its environment,
including Group-wide controls and assessing the risks of material misstatement at the Group
level.
Our Group audit scope focused primarily on three subsidiaries: the two main banking entities
OneSavings Bank plc and Charter Court Financial Services Limited, as well as Interbay ML Ltd,
another significant lending subsidiary. These three subsidiaries were significant components
and subject to a full scope audit (2021: three significant components subject to a full scope
audit). They represent 97% (2021: 98%) of the Group’s interest receivable and similar income,
94% (2021: 96%) of profit before tax, 98% (2021: 97%) of total assets and 99% (2021: 99%) of
total liabilities. The subsidiaries were selected to provide an appropriate basis of undertaking
audit work to address the risks of material misstatement including those identified as key audit
matters above. Our audits of each of the subsidiaries were performed using lower levels of
materiality based on their size relative to the Group. The materiality for each subsidiary audit
ranged from £6.6m to £17.9m (2021: £5.5m to £16.7m).
Independent Auditor’s Report to the Members of
OneSavings Bank plc (continued)
For the Year Ended 31 December 2022
86
We tested the Group’s consolidation process and carried out analytical procedures to confirm
that there were no significant risks of material misstatement in the aggregated financial
information of the remaining subsidiaries not subject to a full scope audit or specified audit
procedures.
7.2. Our consideration of the control environment
We identified the key IT systems relevant to the audit to be those used in financial reporting,
lending and savings areas. For these controls with the involvement of our IT specialists we
performed testing over the general IT controls, including testing of user access and change
management systems.
Where deficiencies were identified in the control environment, including deficiencies in IT
controls, our risk assessment procedures included an assessment of those deficiencies to
determine the impact on our audit plan. Where we were unable to identify or test mitigating
controls, we adopted a non-controls reliance approach and performed additional substantive
procedures. As a result of deficiencies identified in internal IT access controls across the Group,
we amended our planned audit procedures to adopt a non-controls reliance approach over
lending and related interest income, and over deposit balances and related interest expense.
7.3. Our consideration of climate-related risks
In planning our audit, we have considered the impact of climate change on the Group’s
operations and impact on its financial statements. The Group has set out its commitments,
aligned with the goals of the Paris Climate Accord, to be a net zero bank by 2050. Further
information is provided in the Group’s Environment, Social and Governance report on page 7.
The Group sets out its assessment of the potential impact of climate change on ECL on page
51 of the Risk Management section of the Annual Report and the potential impact on the
financial statements in note 22 on page 137.
In conjunction with our climate risk specialists, we have held discussions with the Group to
understand:
• the process for identifying affected operations, including the governance and controls over
this process, and the subsequent effect on the financial reporting for the Group; and
• the long-term strategy to respond to climate change risks as they evolve.
Our audit work has involved:
• challenging the completeness of the physical and transition risks identified and considered in
the Group’s climate risk assessment and the conclusion that there is no material impact of
climate change risk on current year financial reporting;
• with the involvement of our credit risk specialists, assessing management’s approach to the
incorporation and quantification of climate change risks within a PMA in the ECL provision,
which included:
Interest receivable
and similar income
Full audit scope 97%
Review at group level 3%
Profit before tax
Full audit scope 94%
Review at group level 6%
Total assets
Full audit scope 98%
Review at group level 2%
Total liabilities
Full audit scope 99%
Review at group level 1%
Independent Auditor’s Report to the Members of
OneSavings Bank plc (continued)
For the Year Ended 31 December 2022
87
o assessing management’s selected climate pathway used in order to quantify
the potential impact of physical risks on the Group’s loan book and in particular
how the underlying property may be impacted as a result;
o assessing how different lending segments may be impacted by transition risks
and in particular how the buy-to-let portfolio may be impacted by more stringent
EPC criteria; and
o assessing the relevance of the data used in the assessment.
• assessing disclosures in the Annual Report, and challenging the consistency between the
financial statements and the remainder of the Annual Report.
8. Other information
The other information comprises the information included in the Annual Report, other than the
financial statements and our auditor’s report thereon. The directors are responsible for the other
information contained within the Annual Report.
Our opinion on the financial statements does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do not express any form of assurance
conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our knowledge obtained
in the course of the audit, or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required
to determine whether this gives rise to a material misstatement in the financial statements
themselves. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
9. Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and
fair view, and for such internal control as the directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s
and the parent company’s ability to continue as a going concern, disclosing as applicable,
matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Group or the parent company or to cease operations, or
have no realistic alternative but to do so.
Independent Auditor’s Report to the Members of
OneSavings Bank plc (continued)
For the Year Ended 31 December 2022
88
10. Auditor’s responsibilities for the audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect
a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on
the FRC’s website at: www.frc.org.uk/auditorsresponsibilities
. This description forms part of our
auditor’s report.
11. Extent to which the audit was considered capable of detecting irregularities,
including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We
design procedures in line with our responsibilities, outlined above, to detect material
misstatements in respect of irregularities, including fraud. The extent to which our procedures
are capable of detecting irregularities, including fraud is detailed below.
11.1. Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including
fraud and non-compliance with laws and regulations, we considered the following:
• the nature of the industry and sector, control environment and business performance
including the design of the Group’s remuneration policies, key drivers for directors’
remuneration, bonus levels and performance targets;
• the Group’s own assessment of the risks that irregularities may occur either as a result
of fraud or error that was approved by the Board;
• results of our enquiries of management, internal audit and the Audit Committee about
their own identification and assessment of the risks of irregularities;
• any matters we identified having obtained and reviewed the Group’s documentation of
their policies and procedures relating to:
o identifying, evaluating and complying with laws and regulations and whether they
were aware of any instances of non-compliance;
o detecting and responding to the risks of fraud and whether they have knowledge
of any actual, suspected or alleged fraud;
o the internal controls established to mitigate risks of fraud or non-compliance with
laws and regulations; and
• the matters discussed among the audit engagement team and relevant internal
specialists, including tax, valuations, real estate, IT, climate risk, prudential risk,
economics, credit risk and analytics and modelling specialists regarding how and where
fraud might occur in the financial statements and any potential indicators of fraud.
Independent Auditor’s Report to the Members of
OneSavings Bank plc (continued)
For the Year Ended 31 December 2022
89
As a result of these procedures, we considered the opportunities and incentives that may exist
within the organisation for fraud and identified the greatest potential for fraud in the following
areas: loan impairment provisions and effective interest rate income recognition. In common
with all audits under ISAs (UK), we are also required to perform specific procedures to respond
to the risk of management override.
We also obtained an understanding of the legal and regulatory frameworks that the Group
operates in, focusing on provisions of those laws and regulations that had a direct effect on the
determination of material amounts and disclosures in the financial statements. The key laws
and regulations we considered in this context included the UK Companies Act, Listing Rules
and tax legislation.
In addition, we considered provisions of other laws and regulations that do not have a direct
effect on the financial statements but compliance with which may be fundamental to the Group’s
ability to operate or to avoid a material penalty. These included the Group’s prudential
regulatory requirements and capital, liquidity and conduct requirements.
11.2. Audit response to risks identified
As a result of performing the above, we identified loan impairment provisions and effective
interest rate income recognition as key audit matters related to the potential risk of fraud. The
key audit matters section of our report explains the matters in more detail and also describes
the specific procedures we performed in response to those key audit matters.
In addition to the above, our procedures to respond to risks identified included the following:
• reviewing the financial statement disclosures and testing to supporting documentation
to assess compliance with provisions of relevant laws and regulations described as
having a direct effect on the financial statements;
• enquiring of management, the Audit Committee and in-house and external legal
counsel concerning actual and potential litigation and claims;
• performing analytical procedures to identify any unusual or unexpected relationships
that may indicate risks of material misstatement due to fraud;
• reading minutes of meetings of those charged with governance, reviewing internal audit
reports and reviewing correspondence with the Prudential Regulation Authority, the
Financial Conduct Authority and HMRC; and
• in addressing the risk of fraud through management override of controls, testing the
appropriateness of journal entries and other adjustments; assessing whether the
judgements made in making accounting estimates are indicative of a potential bias;
and evaluating the business rationale of any significant transactions that are unusual
or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all
engagement team members, including internal specialists, and remained alert to any
indications of fraud or non-compliance with laws and regulations throughout the audit.
Independent Auditor’s Report to the Members of
OneSavings Bank plc (continued)
For the Year Ended 31 December 2022
90
Report on other legal and regulatory requirements
12. Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the directors’ report for the financial year
for which the financial statements are prepared is consistent with the financial statements;
and
• the strategic report and the directors’ report have been prepared in accordance with
applicable legal requirements.
In the light of the knowledge and understanding of the Group and the parent company and their
environment obtained in the course of the audit, we have not identified any material
misstatements in the strategic report or the directors’ report.
13. Matters on which we are required to report by exception
13.1. Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the parent company, or returns
adequate for our audit have not been received from branches not visited by us; or
• the parent company financial statements are not in agreement with the accounting
records and returns.
We have nothing to report in respect of these matters.
13.2. Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain
disclosures of directors’ remuneration have not been made.
We have nothing to report in respect of this matter.
14. Other matters which we are required to address
14.1. Auditor tenure
Following the recommendation of the Audit Committee, we were appointed by the shareholders
of the Group on 9 May 2019 to audit the Group Financial Statements for the year ending 31
December 2019 and subsequent financial periods. The period of total uninterrupted
engagement including previous renewals and reappointments of the firm is four years, covering
the years ending 31 December 2019 to 31 December 2022.
14.2. Consistency of the audit report with the additional report to the audit
committee
Our audit opinion is consistent with the additional report to the Audit Committee we are required
to provide in accordance with ISAs (UK).
Independent Auditor’s Report to the Members of
OneSavings Bank plc (continued)
For the Year Ended 31 December 2022
91
15. Use of our report
This report is made solely to the company’s members, as a body, in accordance with
Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so
that we might state to the company’s members those matters we are required to state to
them in an auditor’s report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the company and the
company’s members as a body, for our audit work, for this report, or for the opinions we
have formed.
As required by the Financial Conduct Authority (FCA) Disclosure Guidance and Transparency
Rule (DTR) 4.1.14R, these financial statements will form part of the European Single Electronic
Format (ESEF) prepared Annual Financial Report filed on the National Storage Mechanism of
the UK FCA in accordance with the ESEF Regulatory Technical Standard (‘ESEF RTS’). This
auditor’s report provides no assurance over whether the annual financial report has been
prepared using the single electronic format specified in the ESEF RTS. We have been engaged
to provide assurance on whether the annual financial report has been prepared using the single
electronic format specified in the ESEF RTS and will publicly report separately to the members
on this.
Neel Reed, FCA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
Birmingham, United Kingdom
30 March 2023
OneSavings Bank plc
Statement of Comprehensive Income
For the Year Ended 31 December 2022
92
Group
Group
2022
2021
Note
£m
£m
Interest receivable and similar income
3
Interest payable and similar charges
4
(359.4 )
(159.2 )
Net interest income
Fair value gains on financial instruments
5
Gain on sale of financial instruments
6
Other operating income
7
Total income
Administrative expenses
8
(206.5 )
(166.5 )
Provisions
37
(0.2 )
Impairment of financial assets
23
(29.8 )
Impairment of intangible assets
9
Integration costs
12
(7.9 )
(5.0 )
Exceptional items
13
(0.2 )
Profit before taxation
Taxation
14
(121.5 )
(119.6 )
Profit for the year
Other comprehensive expense
Items which may be reclassified to profit or loss:
Fair value changes on financial instruments measured at fair
value through other comprehensive income (FVOCI):
Arising in the year
18
Amounts reclassified to profit or loss for investment
securities at FVOCI
(0.7 )
(2.0 )
Tax on items in other comprehensive expense
Revaluation of foreign operations
(0.2 )
(0.1 )
Other comprehensive expense
(0.5 )
(0.5 )
Total comprehensive income for the year
The above results are derived wholly from continuing operations.
The notes on pages 97 to 219 form part of these accounts.
The financial statements on pages 92 to 219 were approved by the Board of Directors on 30 March 2023.
OneSavings Bank plc
Statement of Financial Position
As at 31 December 2022
93
Group
Group
Company
Company
2022
2021
2022
2021
Note
£m
£m
£m
£m
Assets
Cash in hand
0.4
0.5
Loans and advances to credit institutions
17
1,506.1
1,405.0
Investment securities
18
211.4
16.2
Loans and advances to customers
19
10,531.9
9,476.4
Fair value adjustments on hedged assets
25
(789.0 )
(138.9 )
(200.8)
1.3
Derivative assets
24
234.0
50.5
Other assets
26
13.1
8.3
Current taxation asset
2.6
-
Deferred taxation asset
27
4.1
4.9
Deemed loan assets
20
31.2
-
Property, plant and equipment
28
20.9
17.3
Intangible assets
29
6.5
7.7
Investments in subsidiaries and intercompany
loans
30
3,242.5
3,096.4
Total assets
15,603.9
14,084.5
Liabilities
Amounts owed to credit institutions
31
2,568.5
2,420.7
Amounts owed to retail depositors
32
11,132.2
9,739.4
Fair value adjustments on hedged liabilities
25
(55.1 )
(19.7 )
(33.7)
(8.8)
Amounts owed to other customers
33
0.5
5.7
Debt securities in issue
34
-
-
Derivative liabilities
24
63.8
8.7
Lease liabilities
35
3.6
3.9
Other liabilities
36
23.9
17.3
Provisions
37
0.1
1.9
Current taxation liability
-
2.7
Deferred taxation liability
38
-
-
Deemed loan liabilities
20
-
142.8
Intercompany loans
30
33.3
33.2
Subordinated liabilities
39
-
10.3
Perpetual subordinated bonds
40
15.2
15.2
13,807.4
12,393.0
Equity
Share capital
42
4.5
4.5
Retained earnings
1,690.9
1,587.6
Other reserves
43
101.1
99.4
1,796.5
1,691.5
Total equity and liabilities
15,603.9
14,084.5
The profit after tax for the year ended 31 December 2022 of OneSavings Bank plc as a company was £335.9m
(2021: £255.1m). As permitted by section 408 of the Companies Act 2006, no separate Statement of Comprehensive
Income is presented in respect of the Company.
Company number: 07312896
OneSavings Bank plc
Statement of Changes in Equity
For the Year Ended 31 December 2022
94
Share
capital
Capital
contribution
Foreign
exchange
reserve
FVOCI
reserve
Share-
based
payment
reserve
Retained
earnings
Additional
Tier 1 (AT1)
securities
Total
Group
£m
£m
£m
£m
£m
£m
£m
£m
At 1 January 2021
(1.0 )
Profit for the year
Other comprehensive expense
(0.1 )
(0.9 )
(1.0 )
Tax on items in other comprehensive expense
Total comprehensive (expense)/income
(0.1 )
(0.4 )
Coupon paid on AT1 securities
(4.7 )
(4.7 )
Dividends paid
(86.7 )
(86.7 )
Share-based payments
Redemption of AT1 securities
(60.0 )
(60.0 )
Transactions costs on redemption of AT1
securities
(3.5 )
(3.5 )
Issuance of AT1 securities
Tax recognised in equity
At 31 December 2021
(1.1 )
Profit for the year
Other comprehensive expense
(0.2 )
(0.4 )
(0.6 )
Tax on items in other comprehensive expense
Total comprehensive (expense)/income
(0.2 )
(0.3 )
Coupon paid on AT1 securities
(9.0 )
(9.0 )
Dividends paid
(233.1 )
(233.1 )
Share-based payments
(1.7 )
At 31 December 2022
(1.3 )
Share capital is disclosed in note 42 and the reserves are further disclosed in note 43.
OneSavings Bank plc
Statement of Changes in Equity (continued)
For the Year Ended 31 December 2022
95
Share
capital
FVOCI
reserve
Share-based
payment
reserve
Retained
earnings
AT1
securities
Total
Company
£m
£m
£m
£m
£m
£m
At 1 January 2021
4.5
(0.1)
6.7
1,423.7
60.0
1,494.8
Profit for the year
-
-
-
255.1
-
255.1
Other comprehensive income
-
0.1
-
-
-
0.1
Total comprehensive income
-
0.1
-
255.1
-
255.2
Coupon paid on AT1 securities
-
-
-
(4.7)
-
(4.7)
Dividends paid
-
-
-
(86.7)
-
(86.7)
Share-based payments
-
-
1.1
3.7
-
4.8
Redemption of AT1 securities
-
-
-
-
(60.0)
(60.0)
Transactions costs on redemption of AT1 securities
-
-
-
(3.5)
-
(3.5)
Issuance of AT1 securities
-
-
-
-
90.0
90.0
Tax recognised in equity
-
-
1.6
-
-
1.6
At 31 December 2021
4.5
-
9.4
1,587.6
90.0
1,691.5
Profit for the year
-
-
-
335.9
-
335.9
Other comprehensive income
-
0.3
-
-
-
0.3
Tax on items in other comprehensive income
-
(0.1)
-
-
-
(0.1)
Total comprehensive income
-
0.2
-
335.9
-
336.1
Coupon paid on AT1 securities
-
-
-
(5.4)
-
(5.4)
Dividends paid
-
-
-
(233.1)
-
(233.1)
Share-based payments
-
-
1.5
5.9
-
7.4
At 31 December 2022
4.5
0.2
10.9
1,690.9
90.0
1,796.5
Share capital is disclosed in note 42 and the reserves are further disclosed in note 43.
OneSavings Bank plc
Statement of Cash Flows
For the Year Ended 31 December 2022
96
Group
Group
Company
Company
2022
2021
2022
2021
Note
£m
£m
£m
£m
(Restated)
1
(Restated)
1
Cash flows from operating activities
Profit before taxation
387.3
314.5
Adjustments for non-cash items
49
(10.0 )
68.6
12.2
Changes in operating assets and liabilities
1
49
(24.5 )
(684.4 )
276.6
(775.3)
Cash generated/(used) in operating activities
(229.8 )
732.5
(448.6)
Net tax paid
(142.5 )
(117.3 )
(54.0)
(53.2)
Net cash generated/(used) in operating
activities
1
(347.1 )
678.5
(501.8)
Cash flows from investing activities
Maturity and sales of investment securities
451.0
215.4
Purchases of investment securities
(596.5 )
(468.2 )
(556.4)
(216.6)
Interest received on investment securities
3.0
0.2
Investments in subsidiaries
(3.2)
-
Sales of financial instruments
6
-
0.3
Proceeds from sale of property, plant and
equipment
28
-
2.0
Purchases of property, plant and equipment and
intangible assets
28,29
(11.7 )
(6.8 )
(7.2)
(5.0)
Cash generated/(used) from investing
activities
(112.8)
(3.7)
Cash flows from financing activities
Financing received
1
41
120.0
3,121.5
Financing repaid
41
(324.2 )
(4,295.4 )
(304.1)
(2,589.1)
Interest paid on financing
41
(45.3 )
(8.4 )
(25.5)
(6.6)
Coupon paid on AT1 securities
(9.0 )
(4.7 )
(5.4)
(4.7)
Dividends paid
15
(233.1 )
(86.7 )
(233.1)
(86.7)
Redemption of AT1 securities
(63.5 )
-
(63.5)
Issuance of AT1 securities
-
90.0
Cash payments on lease liabilities
35
(1.9 )
(1.9 )
(0.8)
(0.7)
Cash (used)/generated from financing
activities
(184.0 )
(448.9)
460.2
Net increase/(decrease) in cash and cash
equivalents
116.8
(45.3)
Cash and cash equivalents at the beginning
of the year
16
1,332.3
1,377.6
Cash and cash equivalents at the end of the
year
16
1,449.1
1,332.3
Movement in cash and cash equivalents
116.8
(45.3)
1. 2021 figures restated see note 1 b) for further details.
97
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
98
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
99
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
100
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
101
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
102
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
103
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
104
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
105
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
106
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
107
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
108
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
109
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
110
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
111
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
112
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
113
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
114
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
115
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
116
2. Judgements in applying accounting policies and critical accounting estimates (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
117
2. Judgements in applying accounting policies and critical accounting estimates (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
118
2. Judgements in applying accounting policies and critical accounting estimates (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
119
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
120
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
121
8. Administrative expenses (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
122
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
123
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
124
11. Share-based payments (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
125
11. Share-based payments (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
126
11. Share-based payments (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
127
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
128
14. Taxation (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
129
14. Taxation (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
130
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
131
18. Investment securities (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
132
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
133
20. Loans and advances (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
134
20. Loans and advances (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
135
20. Loans and advances (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
136
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
137
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
138
22. Expected credit losses (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
139
22. Expected credit losses (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
140
22. Expected credit losses (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
141
22. Expected credit losses (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
142
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
143
24. Derivatives (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
144
24. Derivatives (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
145
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
146
25. Hedge accounting (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
147
25. Hedge accounting (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
148
25. Hedge accounting (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
149
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
150
27. Deferred taxation asset (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
151
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
152
28. Property, plant and equipment (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
153
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
154
29. Intangible assets (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
155
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
156
30. Investments in subsidiaries, intercompany loans and transactions with related parties
(continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
157
30. Investments in subsidiaries, intercompany loans and transactions with related parties
(continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
158
30. Investments in subsidiaries, intercompany loans and transactions with related parties
(continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
159
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
160
30. Investments in subsidiaries, intercompany loans and transactions with related parties
(continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
161
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
162
34. Debt securities in issue (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
163
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
164
37. Provisions and contingent liabilities (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
165
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
166
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
167
41. Reconciliation of cash flows for financing activities (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
168
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
169
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
170
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
171
45. Risk management (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
172
45. Risk management (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
173
45. Risk management (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
174
45. Risk management (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
175
45. Risk management (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
176
45. Risk management (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
177
45. Risk management (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
178
45. Risk management (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
179
45. Risk management (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
180
45. Risk management (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
181
45. Risk management (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
182
45. Risk management (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
183
45. Risk management (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
184
45. Risk management (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
185
45. Risk management (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
186
45. Risk management (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
187
45. Risk management (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
188
45. Risk management (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
189
45. Risk management (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
190
45. Risk management (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
191
45. Risk management (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
192
45. Risk management (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
193
45. Risk management (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
194
45. Risk management (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
195
45. Risk management (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
196
45. Risk management (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
197
45. Risk management (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
198
45. Risk management (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
199
45. Risk management (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
200
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
201
46. Financial instruments and fair values (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
202
46. Financial instruments and fair values (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
203
46. Financial instruments and fair values (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
204
46. Financial instruments and fair values (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
205
46. Financial instruments and fair values (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
206
46. Financial instruments and fair values (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
207
46. Financial instruments and fair values (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
208
46. Financial instruments and fair values (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
209
46. Financial instruments and fair values (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
210
46. Financial instruments and fair values (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
211
46. Financial instruments and fair values (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
212
47. Financial instruments and fair values (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
213
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
214
48. Operating segments (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
215
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
216
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
217
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
218
53. Capital management (continued)
OneSavings Bank plc
Notes to the Financial Statements (continued)
For the Year Ended 31 December 2022
219
OneSavings Bank plc
Appendices
Independent Reasonable Assurance Report (continued)
220
Independent auditor’s reasonable assurance report on the compliance of OneSavings Bank plc’s
European Single Electronic Format (ESEF) prepared Annual Financial Report with the European
Single Electronic Format Regulatory Technical Standard (‘ESEF RTS’) as required by the Financial
Conduct Authority (FCA) Disclosure Guidance and Transparency Rule (DTR) 4.1.14R
To the Members of OneSavings Bank plc
Report on compliance with the requirements for iXBRL mark up (‘tagging’) of consolidated financial
statements included in the ESEF-prepared Annual Financial Report
We have undertaken a reasonable assurance engagement on the iXBRL mark up of consolidated financial
statements for the year ended 31 December 2022 of OneSavings Bank plc (the “Company”) included in the
ESEF-prepared Annual Financial Report prepared by the Company.
Opinion
In our opinion, the consolidated financial statements for the year ended 31 December 2022 of the Company
included in the ESEF-prepared Annual Financial Report, are marked up, in all material respects, in
compliance with the ESEF RTS.
The directors’ responsibility for the ESEF-prepared Annual Financial Report prepared in
compliance with the ESEF RTS
The directors are responsible for preparing the ESEF-prepared Annual Financial Report. This responsibility
includes:
• the selection and application of appropriate iXBRL tags using judgement where necessary;
• ensuring consistency between digitised information and the consolidated financial statements
presented in human-readable format; and
• the design, implementation and maintenance of internal control relevant to the application of the
ESEF RTS.
Our independence and quality control
We have complied with the independence and other ethical requirements of Financial Reporting Council’s
(the ‘FRC’s’) Ethical Standard as applied to listed public interest entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements.
We apply International Standard on Quality Control 1 and, accordingly, maintain a comprehensive system
of quality control including documented policies and procedures regarding compliance with ethical
requirements, professional standards and applicable legal and regulatory requirements.
Our responsibility
Our responsibility is to express an opinion on whether the electronic mark up of consolidated financial
statements complies in all material respects with the ESEF RTS based on the evidence we have obtained.
We conducted our reasonable assurance engagement in accordance with International Standard on
Assurance Engagements (UK) 3000, Assurance Engagements Other than Audits or Reviews of Historical
Financial Information (‘ISAE (UK) 3000’) issued by the FRC.
OneSavings Bank plc
Appendices
Independent Reasonable Assurance Report (continued)
221
A reasonable assurance engagement in accordance with ISAE (UK) 3000 involves performing procedures
to obtain reasonable assurance about the compliance of the mark up of the consolidated financial
statements with the ESEF RTS. The nature, timing and extent of procedures selected depend on the
practitioner's judgement, including the assessment of the risks of material departures from the requirements
set out in the ESEF RTS, whether due to fraud or error. Our reasonable assurance engagement consisted
primarily of:
• obtaining an understanding of the ESEF RTS mark up process, including internal control over the
mark up process relevant to the engagement;
• reconciling the marked up data with the audited consolidated financial statements of the Company
dated 31 December 2022;
• evaluating the appropriateness of the Company’s mark up of the consolidated financial statements
using the XBRL mark-up language;
• evaluating the appropriateness of the Company’s use of iXBRL elements selected from a permitted
taxonomy and the creation of extension elements where no suitable element in the permitted
taxonomy has been identified; and
• evaluating the use of anchoring in relation to the extension elements.
In this report we do not express an audit opinion, review conclusion or any other assurance conclusion on
the consolidated financial statements. Our audit opinion relating to the consolidated financial statements of
the company for the year ended 31 December 2022 is set out in our Independent Auditor’s Report dated
30 March 2023.
Use of our report
Our report is made solely to the Company’s members, as a body, in accordance with ISAE (UK) 3000. Our
work has been undertaken so that we might state to the Company those matters we are required to state
to them in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company and the Company’s members as a body for our
work, this report, or for the conclusions we have formed.
Neil Reed, FCA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
Birmingham, United Kingdom
4 April 2023
OneSavings Bank plc
Appendices
Glossary
222
AGM
Annual General Meeting
IRB
Internal Ratings-Based approach to credit risk
ALCO
Group Assets and Liabilities Committee
ISA
Individual
Savings
Account
BoE
Bank of England
KRFI
Kent Reliance for Intermediaries
CCFS
Charter Court Financial Services
KRPS
Kent
Reliance
Provident
Society
Limited
CEO
Chief
Executive
Officer
LCR
Liquidity Coverage Ratio
CET1
Common Equity Tier 1
LGD
Loss
Given
Default
CFO
Chief Financial Officer
LIBOR
London Interbank Offered Rate
CRD
IV
Capital Requirements Directive and Regulation
LTIP
Long-Term Incentive Plan
CRO
Chief Risk Officer
LTV
Loan to value
DSBP
Deferred Share Bonus Plan
NIM
Net Interest Margin
EAD
Exposure
at
Default
NPS
Net
Promoter
Score
ECL
Expected Credit Loss
OSB
OneSavings
Bank
plc
EIR
Effective Interest Rate
OSBG
OSB
GROUP
PLC
EPS
Earnings Per Share
PD
Probability of Default
EU
European
Union
PPD
Propensity
to
go
to
Possession
Given
Default
FCA
Financial Conduct Authority
PRA
Prudential Regulation Authority
FRC
Financial Reporting Council
PSBs
Perpetual Subordinated Bonds
FSCS
Financial
Services
Compensation
Scheme
PSP
Performance
Share
Plan
FSD
Forced Sale Discount
RMBS
Residential Mortgage-Backed Securities
FTSE
Financial Times Stock Exchange
RoE
Return on equity
HMRC
Her Majesty’s Revenue and Customs
RWA
Risk
weighted
assets
HPI
House
Price
Index
SAYE
Save
As
You
Earn
or
Sharesave
IAS
International Accounting Standards
SDLT
Stamp Duty Land Tax
IBOR
Interbank Offered Rate
SICR
Significant Increase in Credit Risk
ICAAP
Internal Capital Adequacy Assessment Process
SID
Senior
Independent
Director
ICR
Interest Coverage Ratio
SME
Small and Medium Enterprises
IFRS
International Financial Reporting Standards
SONIA
Sterling Overnight Index Average
ILAAP
Internal Liquidity Adequacy Assessment Process
SRMF
Strategic Risk Management Framework
ILTR
Index
Long-Term
Repo
TFS
Term Funding Scheme
IPO
Initial Public Offering
TFSME
Term Funding Scheme with additional incentives
for SMEs