Divisional Chief Executives Supported by Divisional Risk Committees

1. HBOS Board 2nd Line of Defence 3rd Line of Defence 1st Line of Defence Group Chief Executive Group Functions Executive Committee Divisional Chief Executives Supported by Divisional Risk Committees Audit Committee Group Finance Director Group Capital Committee Group Funding and Liquidity Share Market Activity Committee Divisional Risk Control Committees Regulatory Capital Adequacy Committee Group Credit Risk Committee Group Market Risk Committee Group Insurance Risk Committee Group Internal Audit Group Risk Director Group Operational Risk Committee

2. Risk Management

3. Role Breadth • Provide policy guidance and establish minimum standards for the conduct of Insurance risk management activities throughout the Group; • Provide policy guidance and establish minimum standards for the conduct of Investment Risk Management activities throughout the Group; • Ensure divisional insurance and investment risk policies are consistent with the principles established in the Group Insurance Risk Policy, the Group Market Risk Policy and the Group Credit Risk Policy; • Provide oversight of insurance and investment risk management activities across the Group to ensure that minimum standards are met, including monitoring of aggregate insurance and investment risk  at Group wide and regulated entity levels; • Monitor compliance with insurance and investment risk management standards and any limits incorporated therein; • Provide functional leadership for specialist personnel involved in insurance and investment risk management activities throughout the Group to ensure a professional cadre of risk management personnel operates at high standards throughout the Group; • Provide input into the research capability to ensure the Group is kept abreast of the latest insurance and investment risk developments and harness such development for the benefit of the Group; and • Provide an independent view on the effectiveness and efficiency of the Group’s insurance and investment risk management arrangements.

4. Skills required of team members • Knowledge of Insurance (Life and General) • Good Communication • Respect and Acceptance from key (senior) stakeholders • Actuarial, but not necessarily qualified

5. Challenges • Explaining market risk and life insurance accounting to bankers • Rationalising why Insurance risk metrics are different from banking • Persuading divisions to provide information (and access) • Not providing an extra source of competent staff for Divisions • No models