RELATED PARTY TRANSACTIONS

The Company is an indirect subsidiary of RBS. In September 2014, the Company entered into certain agreements that will provide a framework for its ongoing relationship with RBS. Specifically, the Company entered into the following agreements with RBS: Separation and Shareholder Agreement, Registration Rights Agreement, Trade Mark License Agreement, Amended and Restated Master Services Agreement, and Transitional Services Agreements. These agreements were filed as exhibits in Part II, Item 6 — Exhibits to the Company’s quarterly report on Form 10-Q/A filed November 14, 2014.

The following is a summary borrowed funds from RBS:



(dollars in millions)	Interest Rate	Maturity Date	March 31, 2015	December 31, 2014
Subordinated debt	4.082%	January 2025	$334		$334
	4.023%	October 2024	333	333
	4.153%	July 2024	333	333
	4.691%	January 2024	334	334
	4.771%	October 2023	333	333
	5.158%	June 2023	333	333

Total interest expense recorded on inter-company subordinated debt was $20 million and $12 million for the three months ended March 31, 2015 and 2014, respectively.

The Company enters into interest rate swap agreements with RBS for the purpose of reducing the Company’s exposure to interest rate fluctuations. As of March 31, 2015, the total notional amount of swaps outstanding was $7.5 billion with fixed rates ranging from 1.66% to 4.30%. Included in this balance were $4.0 billion of receive-fixed swaps with rates ranging from 1.78% to 2.04% maturing in 2023 and $2.8 billion of pay-fixed swaps with fixed rates ranging from 2.03% to 4.30% maturing in 2023. The company also has a medium term swap agreement with a notional of $750 million and a receive-fixed rate of 1.66% as of March 31, 2015. As of December 31, 2014, the total notional amount of swaps outstanding was $5.8 billion, with fixed rates ranging from 1.66% to 4.30%. Included in this balance were $4.0 billion of receive-fixed swaps with fixed rates ranging from 1.78% to 2.04% maturing in 2023 and $1.0 billion of pay-fixed swaps with fixed rates ranging from 4.18% to 4.30% maturing in 2016. The Company also has a medium term swap agreement with a notional amount of $750 million and a receive-fixed rate of 1.66% that had been executed as of December 31, 2014. The Company recorded net interest income of $3 million for the three months ended March 31, 2015 and net interest expense of $11 million for the three months ended March 31, 2014.

In order to meet the financing needs of its customers, the Company enters into interest rate swap and cap agreements with its customers and simultaneously enters into offsetting swap and cap agreements with RBS. The Company earns a spread equal to the difference between rates charged to the customer and rates charged by RBS. The notional amount of these interest rate swap and cap agreements outstanding with RBS was $9.3 billion and $9.8 billion at March 31, 2015 and December 31, 2014, respectively. The Company recorded expense of $68 million and $53 million within other income for the three months ended March 31, 2015 and 2014, respectively.

Also to meet the financing needs of its customers, the Company enters into a variety of foreign currency denominated products, such as loans, deposits and foreign exchange contracts. To manage the foreign exchange risk associated with these products, the Company simultaneously enters into offsetting foreign exchange contracts with RBS. The Company earns a spread equal to the difference between rates charged to the customer and rates charged by RBS. The notional amount of foreign exchange contracts outstanding with RBS was $4.5 billion and $4.7 billion at March 31, 2015 and December 31, 2014, respectively. Within foreign exchange and trade finance fees the Company recorded income of $35 million for the three months ended March 31, 2015 and expense of $6 million for the three months ended March 31, 2014.

The Company receives income for providing services and referring customers to RBS. The Company also shares office space with certain RBS entities for which rent expense and/or income is recorded in occupancy expense. The total fee income, net of occupancy expense, was $3 million and $5 million for the three months ended March 31, 2015 and 2014, respectively. Also, the Company receives certain services provided by RBS and by certain RBS entities the fees for which were recorded in outside services expense. Total outside services expense was $2 million and $8 million for the three months ended March 31, 2015 and 2014, respectively.

The Company paid $39 million and $25 million in regular common stock dividends to RBS for the three months ended March 31, 2015 and 2014, respectively.

The Company, as a matter of policy and during the ordinary course of business with underwriting terms similar to those offered to the public, has made loans to directors and executive officers and their immediate families, as well as their affiliated companies. Such loans amounted to $125 million and $126 million at March 31, 2015 and December 31, 2014, respectively.