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									        Alliance & Leicester plc
Pillar 3 disclosures for the year ended 31 December 2007
Alliance & Leicester plc
Pillar 3 disclosures for the year ended 31 December 2007

Contents

1.    Overview                                                                                                                      02

2.    Risk management objectives and policies                                                                                       03

3.    Scope of application of Directive requirements                                                                                07

4.    Capital resources                                                                                                             08

5.    Capital adequacy                                                                                                              10

6.    Counterparty credit risk                                                                                                      11

7.    Credit risk and dilution risk                                                                                                 12

8.    Credit Risk: Standardised approach                                                                                            16

9.    Credit Risk: Specialised lending & equity exposures                                                                           17

10.   Interest rate risk in the non-trading book                                                                                    18

11.   Securitisation                                                                                                                19

12.   Internal Ratings Based disclosures                                                                                            21

13.   Credit risk mitigation                                                                                                        25

14.   Contacts                                                                                                                      26




                                                            Alliance & Leicester plc Pillar 3 disclosures for the year ended 31 December 2007 1
1      Overview

Background
Since 1 January 2007, Alliance & Leicester plc has been operating under the Basel II regime. The Capital Requirements Directive (Basel II)
sets out new disclosure requirements for banks operating under the Framework. The disclosure requirements (Pillar 3) aim to complement
the minimum capital requirements (Pillar 1) and the supervisory review process (Pillar 2) and aim to encourage market discipline by allowing
market participants to assess key pieces of information on risk exposures and the risk assessment processes of the firm.

Basis of Disclosures
The disclosures have been prepared for Alliance & Leicester plc. These disclosures cover the Pillar 3 qualitative and quantitative disclosure
requirements.

Frequency
This report will be made on an annual basis. The disclosures will be as at the Accounting Reference Date (ARD), i.e. as at 31 December,
and will be published within four months of the ARD. The Group will aim, however, to make the disclosures shortly after the publication of the
Annual Report & Accounts.

Media and Location
The report will be published on the Alliance & Leicester plc corporate website (www.alliance-leicester-group.co.uk)

Verification
Disclosures will only be externally audited if they are deemed to be equivalent to those made under accounting or listing requirements.

The Pillar 3 disclosures have been prepared purely for explaining the basis on which the Group has prepared and disclosed certain capital
requirements and information about the management of certain risks and for no other purpose. They do not constitute any form of financial
statement and must not be relied upon in making any judgement on the Group.




                                                                                  Alliance & Leicester plc Pillar 3 disclosures for the year ended 31 December 2007 2
2       Risk management objectives and policies

The Group’s risk management governance structure is composed of several committees that have responsibility for key risk management
areas. An illustration of how these committees report up to the Group Board is provided below:



                                                         Group Board



                    GAC                                      GRC                                             EC


       CBCSC          RRC          CRC          MVC          ALCO               GORC                  FCSG

     Large Credit   Retail        Commercial    Credit      Market Risk      Operational Risk          Fraud
     Transactions   Credit Risk   Credit Risk   Models      Liquidity Risk   Business Risk             Money Laundering
                                                            Funding Risk     Controls / Compliance




The main roles of the committees are as follows:

Group Risk Committee (GRC)
GRC considers and approves on behalf of the Group Board the Group’s risk management framework, its risk appetite and its key risk
management policies for all risk categories. The Committee also monitors key risk management information and reviews the Group’s
(including Treasury) overall capital adequacy. The Chairman of GRC reports to the Group Board on the Committee’s activities quarterly.

Group Audit Committee (GAC)
GAC approves the Group’s financial statements, manages the relationship with the Group’s external auditors, reviews reports on the
operation of internal controls and monitors control issues of major significance to the Group.

Executive Committee (EC)
EC acts as the Group’s senior executive committee, ensuring that it meets its strategic and operational objectives.

Model Validation Committee (MVC)
MVC provides an independent review and validation of the Group’s internal ratings models to ensure that the systems are producing
consistent and accurate results to support pricing, lending decisions, asset quality monitoring and capital adequacy.

Assets and Liabilities Committee (ALCO)
ALCO recommends Group policy in relation to liquidity and funding, market risk, trading policy and treasury delegations and monitors
compliance with these policies. ALCO is also responsible for considering and agreeing the economic capital framework, and for considering
the Group’s capital structure.

Group Operational Risk Committee (GORC)
GORC reviews and approves the Group’s key operational risk management policies, monitors the Group’s exposure to operational risks and
reviews the arrangements for measuring and controlling operational risks.

Financial Crime Steering Group (FCSG)
FCSG exists to facilitate a coordinated and effective response to financial crime across the Group, focusing primarily on implementing the
Group’s strategy on anti-money laundering and anti-fraud measures.

Retail Risk Committee (RRC)
RRC reviews credit risk, fraud, money laundering and other risk reports relating to Retail Banking, as well as approving changes to policy
prior to their submission to the GRC for formal ratification. This committee meets on a monthly basis and is chaired by the Group Chief
Executive.

Commercial Risk Committee (CRC)
CRC reviews credit risk, fraud, money laundering and other risk reports relating to the Commercial Bank, as well as approving changes to
policy prior to their submission to the GRC for formal ratification. This committee meets on a monthly basis and is chaired by the Managing
Director, Commercial Banking.

                                                                                     Alliance & Leicester plc Pillar 3 disclosures for the year ended 31 December 2007 3
Commercial Bank Credit Sanctioning Committee (CBCSC)
CBCSC considers and approves applications for commercial credit in excess of predefined risk limits. Loans approved by CBCSC are
reported to both the Group Board and GRC.


The most significant risk types to which the Group is exposed are discussed below:

Operational Risk
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events. The
Group sub-divides the operational risk category by type such as legal, regulatory, environmental, criminal, systems failure and personnel
risk. Operational risk policies are in place for key operational activities; these policies set out how the Group manages the relevant risks. The
policies are approved by the GORC.

The Group manages its operational risks through a variety of techniques, including monitoring key risk indicators, internal controls, and
various risk mitigation techniques, such as insurance and business continuity planning. Risks are monitored through control and risk self-
assessment, use of key risk indicators and analysis of actual and near miss loss data. Risk self-assessment is undertaken by each business
unit, specifying the likelihood and financial impact of specific operational risk events (analysed by risk category), together with a narrative
justification for each loss scenario identified. Output from the self-assessment process is used to calculate the Group’s operational risk
unexpected loss and economic capital requirements. GRC receives quarterly operational risk data, including realised loss data, near miss
data and a dashboard which assesses the status of all key current and emerging operational risks using agreed key risk indicators. A
summary of the dashboard is submitted to the Group Board on a monthly basis. In addition, senior management certify the effectiveness of
the risk and control environment every six months. A summary of the results of the certification process is presented to GRC.

An independent operational risk team within the Group Risk function has the overall responsibility for ensuring effective operation of the
framework within which operational risk is managed, and for its consistent application across the Group. Day to day management of
operational risk rests with line managers. Oversight of regulatory risk is the responsibility of the Group Risk and Compliance functions.
Group Risk has primary responsibility for oversight of prudential risks and Group Compliance for other regulatory risks. The Group has
established a regular forum, the Legal & Regulatory Risk Group, to ensure the Group is properly prepared for regulatory developments.

The Group has adopted the standardised approach for calculating the Pillar 1 capital requirements for operational risk.

Credit Risk
Credit Risk: Overview
Credit risk is the risk of loss arising from a customer or counterparty failing to meet their financial obligations to the Group as and when they
fall due. The GRC approves the Group’s credit risk appetite through approval of the Group’s risk appetite statement and of business area
lending and credit policies. These policies define the risk appetite for each business area, including specifying risk and exposure limits. The
policies also define the types of lending that the Group is prepared to advance and set out how the Group limits its exposure to groups of
counterparties and to concentration risk.

The Group uses a variety of analytical tools to assist with lending decisions, pricing, capital adequacy, stress testing, strategic planning and
asset quality monitoring. These tools include internal ratings based models, behavioural scoring and other scorecard based underwriting
techniques. The internal ratings based models are approved by the MVC and GRC.

Credit Risk: Retail Banking
Retail credit risk management is the responsibility of the Retail Credit & Risk team, which is independent of the rest of the Retail Bank up to
Executive Director level and is subject to oversight by Group Risk. Risks are managed in accordance with policy and asset quality plans
which are approved by GRC. Retail Credit & Risk uses a combination of lending policy criteria, credit scoring (including behavioural scoring),
policy rules and underwriting to make a decision on applications for credit. The primary factors considered are affordability, residency,
residential history, credit history, employment history, nature of income and loan to value. In addition, confirmation of borrower identity and
an assessment of the value of any security are undertaken prior to granting a credit facility. When considering applications, the primary focus
is placed on the willingness and ability to repay.

Credit scoring is used to support the customer account management process in the following ways:
• To set customer maximum lending limits.
• To pre-determine lending limits for selected further advances.
• To determine account specific recommended limits and product types.
• To set shadow limits to manage unauthorised borrowing.
• To prioritise collections activity.

The maximum mortgage loan available is based on the lower of the current value or purchase price of the property. No lending is undertaken
based solely upon security provided by the value of the underlying assets and all mortgages are secured by way of a first legal charge
against the property.


                                                                                    Alliance & Leicester plc Pillar 3 disclosures for the year ended 31 December 2007 4
In order to minimise delinquency problems progressing to more serious levels and ultimate loss, arrears procedures comply with the
Financial Services Authority (FSA) requirements and the “Handling of Arrears and Possessions – Council of Mortgage Lenders Statement of
Practice”. The arrears management team adopts a responsible and constructive stance to managing delinquency in order to protect the best
interests of both the customer and the Bank. Properties are only taken into possession when this is necessary to minimise loss. All steps are
taken to work with the customer to set up an achievable repayment plan so that the property possession only occurs as a last resort.

Asset quality monitoring, product pricing decisions, provisioning and capital requirements are all derived from the relevant internal ratings
models. These models segment retail portfolios into key probability of default and loss given default segments based on factors such as
credit score and indexed loan to value. The models generate both point in time and long run average estimates of probability of default, loss
given default and exposure at default.

Credit Risk: Commercial Bank (excluding Treasury)
Commercial credit risk management is the responsibility of the Commercial Bank Credit & Risk team, which is independent of the rest of the
Commercial Bank up to Executive Director level, and is subject to oversight by Group Risk. Risks are managed in accordance with policy
and asset quality plans which are approved by GRC. These place limits on the levels of unsecured business and the sector, geography,
residual value and seniority of exposures. The Commercial Bank Credit & Risk team has a level of delegated sanctioning authority and
underwrites certain credit risks, with large or higher risk exposures subject to further Group Risk or Credit Committee sanction.

Lending decisions are based on independent credit risk analysis supplemented by the use of internal ratings tools which assess the obligor’s
likelihood of default. The output of the ratings tools is a borrower grade which maps to a long-run average one year probability of default.
Borrower grades are reviewed at least annually, allowing identification of adverse individual and sector trends. The grade is integrated into
an overall Credit & Risk evaluation, including wider factors such as transaction and borrower structure (ranking and structural subordination),
debt serviceability and security (initial and residual value considerations). Consideration is also given to risk mitigation measures to protect
the Group, such as third-party guarantees, supporting collateral and security, robust legal documentation, financial covenants and hedging.
Transactions are further assessed using an internal pricing model which measures both the return on equity and the risk adjusted return on
capital against a series of benchmarks to ensure risks are appropriately priced.

Portfolio asset quality monitoring is based on a number of measures, including expected loss, financial covenant monitoring, security
revaluations, pricing movements and external input from rating agencies and other organisations. Should particular exposures begin to show
adverse features such as payment arrears, covenant breaches or business trading performance that is materially worse than expected at the
point of lending, a full risk reappraisal is undertaken. Where appropriate, case management is transferred to a specialist recovery team that
works with the customer in an attempt to resolve the situation. If this does not prove possible, cases are classified as being unsatisfactory
and are subject to intensive monitoring and management procedures designed to maximise debt recovery.

Credit Risk: Financial Institutions and Other Treasury Assets
Group Risk is responsible for the credit control of assets held by Treasury, as well as for all country, sovereign and financial institution
exposures. Group Risk is independent of the Treasury business unit up to Board level. Risks are managed in accordance with limits, asset
quality plans and criteria set out in the relevant policy statement which is approved by GRC. The policy sets out devolved powers which
require higher levels of authorisation according to the size or risks of transactions.

Lending and investment decisions are based on independent credit risk analysis, supplemented by the output of internal ratings tools and
external rating agency analysis. An internal ratings model is used to grade financial institution exposures and to generate probability of
default and expected loss. The Group uses external ratings supplemented by internal analysis to assess the risks associated with structured
credit and securitisation investments. Individual exposures are reviewed at least annually. Treasury uses a number of risk mitigation
techniques including guarantees, netting and collateralisation agreements. Asset quality is monitored by regular management reporting,
quarterly reporting to the GRC and exception reporting against a range of asset quality triggers, which include expected loss analysis.

Liquidity and Funding Risk

Liquidity risk is the risk that the Group does not have sufficient financial resources available to meet its obligations as they fall due, or that
the Group is unable to meet regulatory prudential liquidity ratios. It is Group policy to ensure that sufficient liquid assets are at all times
available to meet the Group’s obligations, after taking into account withdrawals of customer deposits, draw-down of customer facilities and
growth in the balance sheet. The management of the Group’s liquidity is the responsibility of Treasury, which provides funding to and takes
surplus funds from each of the Group’s businesses as required, and also holds liquid assets and committed facilities to cover any liquidity
shortfall. Daily monitoring of liquidity limits is performed by Group Risk. Liquidity policy is approved by ALCO and ratified by GRC.

The policy requires compliance with Sterling Stock Liquidity rules and places limits on maximum wholesale outflow over particular time
horizons, and specifies minimum holdings of eligible liquid assets and committed facilities. The policy also specifies the minimum amount of
wholesale funding over one year, and specifies the maximum ratio of customer loans and advances to the sum of wholesale funding with a
residual maturity in excess of one year and customer deposits.




                                                                                     Alliance & Leicester plc Pillar 3 disclosures for the year ended 31 December 2007 5
The Group performs liquidity stress testing based on a range of adverse scenarios, and has a liquidity contingency funding plan which is
maintained in order to ensure that the Group has access to sufficient resources to meet obligations as they fall due if these scenarios occur.
Stressed liquidity profiles are reported to ALCO quarterly.

Market Risk

Market risk is the potential adverse change in Group income or in the value of the Group’s assets and liabilities arising from movements in
market rates, including interest rates, exchange rates, inflation rates and equity prices. The Group’s exposure to market risk is governed by
a policy approved by ALCO and ratified by GRC. The policy sets out the nature of risk which may be taken, and applicable maximum risk
limits. The Group risk limits are allocated by ALCO to all Group business units. Group Risk monitors compliance with market risk limits and
reports excesses to ALCO.

Interest Rate Risk
Interest rate re-pricing risk mainly arises from mismatches between the re-pricing dates of the assets and liabilities on the Group’s balance
sheet, changes in the value of non-linear interest rate positions such as interest rate caps, and from the investment of the Group’s reserves
and non-interest and low interest rate liabilities. The Group has established a transfer pricing system which passes interest rate re-pricing
risks that arise in the various Group businesses to Treasury. Treasury manages the Group’s overall interest rate risk within policy limits. In
addition, strategic hedges are agreed by ALCO for the investment of the Group’s reserves and non interest and low interest rate liabilities.
External hedges of reserves, non interest and low interest rate liabilities and other fixed rate assets and liabilities are executed by Treasury.
Where material, behavioural assumptions based on historic customer prepayment and retention analysis are applied in determining the size
of hedges.

Interest rate risk limits are expressed as the maximum principal amount which is re-priced during a given time period. In the case of
Treasury, interest rate risk is measured and limited according to the market value impact of a one basis point shift in particular points on the
yield curve. In addition Value at Risk (VaR) is used to measure the Group’s total exposure to interest rate risks and to generate an economic
capital estimate for interest rate risk. The VaR measurement methodology calculates the maximum amount likely to be lost, in market value
terms, from existing risk positions as a result of movement in market interest rates. The Group uses a variance-covariance VaR model
based on historical volatility and correlation data and measures VaR to 95% confidence over a one month holding period. A separate model
is used to calculate the VaR on positions, such as interest rate options, whose market value varies with changes in interest rates in a non-
linear way.

Foreign Exchange Risk
The Group’s policy is to have no material open foreign currency positions. The Group offers foreign exchange services to customers through
both Treasury and Commercial Bank operations. Detailed limits and controls are established within those businesses to control the
exposure. Commercial Bank clears its positions with Treasury in accordance with the policy of transferring market risk positions to Treasury
wherever possible. As part of its normal operations, Treasury borrows and invests funds in currencies other than sterling. The foreign
exchange risks of these activities are hedged within Treasury’s limits.

Equity Risk
The Group’s policy is to have no material exposure to equity price risk. Retail Banking sells third party stock market bonds. The equity and
interest rate risks from these bonds are borne entirely by the third party. Alliance & Leicester International Limited sells stock market bonds
to customers. Positions may arise in the management of such bonds due to mismatches between the hedging contracts and the underlying
customer liabilities. Procedures are established to minimise these positions as tightly as is operationally practicable and to report open
positions to ALCO on a monthly basis.

Inflation Risk
The Group’s policy is to have no material exposure to inflation risk. This risk arises due to the exposure to inflation linked bonds and loans in
Commercial Banking. It is the Group’s policy to fully hedge inflation risk, using inflation swaps or other effective hedge instruments.

Stress Testing

The Group performs regular stress tests on its capital adequacy and liquidity position under a range of scenarios. The scenarios are agreed
by ALCO and reviewed by GRC, and are regularly updated to reflect the Group’s risk profile and external risks, including the risks of an
economic recession and of a significant fall in house prices. Where applicable the stress tests cover all relevant risks to which the Group is
exposed; for example, capital adequacy stress tests based on macro-economic scenarios analyse the impact on both credit and market risk
exposures. Liquidity stress tests are performed quarterly and capital adequacy stress tests are performed twice yearly. In addition, periodic
ad-hoc stress tests are performed as required by the executive team or the key risk committees.

Detailed results of stress tests are presented to ALCO, including the impact of the stress scenario on the Group’s capital requirement, its
capital resources and its profitability; summary results are presented to GRC. Stress testing is used to determine the Group’s capital
adequacy, the adequacy of its liquidity position and to influence strategy and medium term planning.



                                                                                    Alliance & Leicester plc Pillar 3 disclosures for the year ended 31 December 2007 6
3      Scope of application of Directive requirements

Alliance & Leicester plc is a UK bank regulated by the Financial Services Authority (FSA) and is the parent company of the Alliance &
Leicester plc Group. The Pillar 3 disclosures have been prepared for Alliance & Leicester plc Group in accordance with the rules laid out in
the FSA handbook BIPRU Chapter 11. These disclosures provide information on the capital adequacy and risk management of the Alliance
& Leicester plc Group.

The principal operating subsidiary undertakings of Alliance & Leicester plc at 31 December 2007 are listed below. These subsidiary
undertakings, which all have 31 December year ends, are incorporated and all operate in Great Britain, except Alliance & Leicester
International Limited which is incorporated and operates in the Isle of Man.

Subsidiary                                                  Nature of business
Alliance & Leicester Personal Finance Limited               Unsecured Lending
Alliance & Leicester Commercial Finance plc                 Asset Leasing
Alliance & Leicester International Limited                  Offshore deposit taking

All subsidiary undertakings are limited by ordinary shares and are unlisted. The Company holds a 100% interest in the ordinary share capital
and voting rights of all its subsidiary undertakings, except for Crossbill Investments Limited, Lanebridge Securities Limited and Mitre Capital
Partners Limited.

Alliance & Leicester plc acquired a 51% interest in the share capital of Lanebridge Securities Limited on 23 April 2007. Mitre Capital Partners
Limited is a wholly owned subsidiary of Lanebridge Securities Limited.

The results of all subsidiary undertakings have been included in the consolidated Pillar 3 disclosures. The ability of Alliance & Leicester
International Limited to pay dividends to the Company is restricted by regulatory capital requirements. Apart from this, there are no current
or foreseen material practical or legal impediments to the prompt transfer of capital resources or repayment of liabilities when due between
Alliance & Leicester plc and its subsidiaries.

Alliance & Leicester plc makes use of the provisions laid down in the FSA handbook BIPRU Chapter 2.1 and reports to the FSA on a solo-
consolidated basis. Alliance & Leicester plc’s solo-consolidated group includes Alliance & Leicester plc and several Special Purpose
Vehicles (SPVs). These SPVs adhere to the minimum standards set by the FSA for solo-consolidation and the Company holds a 100%
interest in the share capital and voting rights of these subsidiaries. The Group also has to ensure that the solo-consolidated group holds
adequate capital to cover its own capital requirements.




                                                                                  Alliance & Leicester plc Pillar 3 disclosures for the year ended 31 December 2007 7
4        Capital resources
The table below summarises the composition of regulatory capital for the Group as at 31 December 2007.
During the year ended 31 December 2007, the individual entities within the Group and the Group complied with all of the externally imposed
capital requirements to which they are subject.

                                                                                                                                                             As at
                                                                                                                                                          31.12.07
                                                                                                                                       Notes                   £m
Core tier 1 capital
   Called up share capital                                                                                                                                 210.3
   Share premium account                                                                                                                                   125.1
   Retained earnings and other reserves                                                                                                    1             1,254.1
   Externally verified profits                                                                                                                             256.7
                                                                                                                                                         1,846.2
Preference shares
    Perpetual non cumulative preference shares                                                                                             2                294.0
                                                                                                                                                            294.0
Deductions from tier 1 capital
   Intangible assets                                                                                                                       3               (116.1)
   Expected losses                                                                                                                                          (63.9)
                                                                                                                                                           (180.0)

Tier 1 capital after deductions                                                                                                                          1,960.2

Innovative tier 1 instruments                                                                                                              4                310.6

Tier 2 capital
    Subordinated debt                                                                                                                       5                649.7
    Collective provisions                                                                                                                                      5.5
                                                                                                                                                             655.2
Deductions from tier 2 capital
   Expected losses                                                                                                                                          (63.9)
                                                                                                                                                            (63.9)

Innovative tier 1 and tier 2 capital after deductions                                                                                                       901.9

Deductions from total of tier 1 and tier 2 capital                                                                                                            (5.0)

Total capital resources                                                                                                                                  2,857.1

Notes:
1. Retained earnings and other reserves exclude gains or losses on cashflow hedges and available-for-sale assets. The regulatory capital
rules allow the pension scheme deficit to be added back to regulatory capital and a deduction taken for an estimate of the additional
contributions to be made in the next 5 years, less associated deferred tax. When the scheme is in surplus, the pension fund asset is not
included within capital. This adjustment is reflected in the reserves number.

2. On 24 May 2006, Alliance & Leicester plc issued £300m fixed/floating rate non-cumulative callable preference shares, resulting in net
proceeds of £294m. The preference shares entitle the holders to a discretionary fixed non-cumulative dividend of 6.222% per annum
payable annually from 24 May 2008 until 24 May 2019 and quarterly thereafter at a rate of 1.13% per annum above three month sterling
LIBOR. The preference shares are redeemable at the option of Alliance & Leicester plc on 24 May 2019 or on each quarterly dividend
payment date thereafter. No such redemption may be made without the consent of the Financial Services Authority.

3. Intangible assets include capitalised software and goodwill.

4. On 22 March 2004, Alliance & Leicester plc issued £300m of innovative tier 1 capital securities. The tier 1 securities are perpetual
securities and pay a coupon on 22 March each year, with the first coupon paid on 22 March 2005. At each payment date, Alliance &
Leicester plc can decide whether to declare or defer the coupon indefinitely. If a coupon is deferred then Alliance & Leicester plc may not
pay a dividend on any share until it next makes a coupon payment. Alliance & Leicester plc can be obliged to make payment only in the
event of winding up.

The coupon is 5.827% per annum until 22 March 2016. Thereafter the coupon steps up to a rate, reset every five years, of 2.13% per annum
above the redemption yield on a UK Government Treasury Security. The tier 1 securities are redeemable at the option of Alliance &

                                                                                  Alliance & Leicester plc Pillar 3 disclosures for the year ended 31 December 2007 8
Leicester plc on 22 March 2016 or on each coupon payment date thereafter. No such redemption may be made without the consent of the
Financial Services Authority.

Although innovative tier one is shown within the above table after the calculation of tier one capital, this is purely for Pillar 3 prescribed
reporting purposes and innovative tier 1 is allowable as tier 1 capital for capital gearing purposes. Tier 2 capital in excess of Tier 1 capital
after deductions does not count towards regulatory capital. For the purpose of this test perpetual preferred securities (commonly referred to
as Innovative Tier 1instruments) are counted as part of Tier 1. The table above is provided in the format above as prescribed by Pillar 3
reporting requirements.

5. The subordinated debt was raised in order to increase the capital base of the company.
In accordance with FSA guidance, in the last five years to maturity the subordinated debt is amortised on a straight line basis.

                                                                                                                                                        Unamortised
                                                                                                                                                              value
                                                                                                                                                               as at
                                                                                                                                                           31.12.07
                                                 Terms                                                                                                           £m
Subordinated Notes due 2008                      Fixed interest rate of 9.75%                                                                                   75.0
Subordinated Notes due 2013                      Floating Rate                                                                                                  55.0
Subordinated Notes due 2015                      Floating Rate                                                                                                  74.9
Subordinated Notes due 2017                      Floating Rate                                                                                                 110.0
Subordinated Notes due 2017                      Floating Rate                                                                                                  73.3
Subordinated Notes due 2023                      Fixed interest rate of 5.25%                                                                                  150.0
Subordinated Notes due 2031                      Fixed interest rate of 5.875%                                                                                 150.0
Total subordinated liabilities                                                                                                                                 688.2
Accrued interest                                                                                                                                                17.2
Fair value hedging adjustments                                                                                                                                   9.0
Amortisation of subordinated debt                                                                                                                              (64.7)
Total                                                                                                                                                          649.7

The interest rate liabilities of 9.75% on the £75m Notes due 2008, 5.25% on the £150m Notes due 2023 and 5.875% on the £150m Notes
due 2031 have each been swapped into floating rate, with rates of up to 1.36% above sterling LIBOR.

The Subordinated Notes due 2008, 2023 and 2031 are denominated in UK Sterling. The Subordinated Notes due 2015 are denominated in
US Dollars. The Subordinated Notes due 2013 and 2017 are denominated in Euros.

The Notes are subordinated to the claims of depositors and all other creditors.

All the Notes may be redeemed at the option of the Group, at the outstanding principal amount plus accrued interest, in the event of certain
changes in UK taxation. The Group may also purchase the Notes in the open market. The 2008 Notes can be redeemed, at the option of the
Group, at the higher of their principal amount and the price at which the gross redemption yield on the Notes is equal to the gross
redemption yield on 9% Treasury Stock 2008. The 2013 Notes can be redeemed, at the option of the Group, at the outstanding principal
amount plus accrued interest, not before November 2008. The 2015 Notes can be redeemed, at the option of the Group, at the outstanding
principal amount plus accrued interest, not before September 2010. The £110.0m 2017 Notes can be redeemed, at the option of the Group,
at the outstanding principal amount plus accrued interest, not before August 2012. The £73.3m 2017 Notes can be redeemed, at the option
of the Group, at the outstanding principal amount plus accrued interest, not before October 2012. The 2023 Notes can be redeemed, at the
option of the Group, at the outstanding principal amount plus accrued interest, not before March 2018. For all the Notes, no such purchase
or redemption may be made without the consent of the Financial Services Authority.

The Group has not had any defaults of principal, interest or other breaches with respect to all liabilities during the period.




                                                                                     Alliance & Leicester plc Pillar 3 disclosures for the year ended 31 December 2007 9
5       Capital adequacy

In order to protect the solvency of the Group, internal capital is held to provide a cushion for unexpected losses. In assessing the adequacy
of its capital, the Group considers its risk appetite, the material risks to which the Group is exposed and the appropriate management
strategies for each of the Group’s material risks, including whether or not capital provides an appropriate mitigant. In addition to capital
adequacy reporting to the FSA, a FICAA (Full Internal Capital Adequacy Assessment) is performed semi-annually, in order to assess the
Group’s capital adequacy and to determine the levels of capital required going forward to support the current and future risks in the
business. All parts of this analysis are pulled together into a single document, the executive summary of which is approved by the GRC.
Finance is responsible for producing budgets to identify expected future capital requirements from changes to business volumes and mix of
assets and activities. Group Risk is responsible for ensuring that the Group’s current and future risks are reflected in the capital adequacy
assessment and that sufficient capital is maintained to provide the Group with adequate headroom given multiple stressed scenarios.

The amount and composition of the Group’s capital requirement is determined by assessing the minimum capital requirement under Pillar 1
based upon the Capital Requirements Directive (CRD), the Group’s economic capital requirement, the impact of stress and scenario tests,
the Group’s Individual Capital Guidance and the capital requirement that is consistent with the Group’s target external rating.


The following table shows the Group’s Pillar 1 capital requirement by asset class:

                                                                                                                                                             As at
                                                                                                                                                          31.12.07
                                                                                                                                                               £m
Standardised Approach
    Central government or central banks                                                                                                                       4.6
    Regional governments or local authorities                                                                                                                 1.1
    Administrative bodies and non-commercial undertakings                                                                                                       -
    Multilateral development banks                                                                                                                              -
    International organisations                                                                                                                                 -
    Institutions                                                                                                                                                -
    Corporates                                                                                                                                              101.3
    Retail                                                                                                                                                   46.6
    Secured on real estate property                                                                                                                           0.8
    Past due items                                                                                                                                              -
    Items belonging to regulatory high risk categories                                                                                                          -
    Securitisation positions                                                                                                                                    -
    Short term claims on institutions or corporates                                                                                                             -
    Other items                                                                                                                                              61.9
                                                                                                                                                            216.3

Operational Risk – Standardised Approach                                                                                                                    182.4

IRB Approach
    Retail exposures secured by real estate collateral                                                                                                     280.3
    Qualifying revolving retail                                                                                                                              6.3
    Other retail                                                                                                                                           288.4
    Institutions                                                                                                                                           227.5
    Corporates                                                                                                                                             444.2
    Securitisation positions                                                                                                                               237.9
    Equity claims                                                                                                                                            1.8
    Non-credit obligation assets                                                                                                                             8.5
                                                                                                                                                         1,494.9
Trading book
    Interest rate PRR                                                                                                                                        32.0
    Counterparty risk capital component                                                                                                                       0.9
    Foreign exchange PRR                                                                                                                                      0.1
                                                                                                                                                             33.0

Total Pillar 1 capital requirement                                                                                                                       1,926.6




                                                                                 Alliance & Leicester plc Pillar 3 disclosures for the year ended 31 December 2007 10
6       Counterparty credit risk

Counterparty credit risk (CCR) in the context of this disclosure is the risk that the counterparty to a derivative transaction posted to either the
Banking Book or Trading Book could default before the final settlement of the transaction's cash flows. The duration of the derivative and
the credit quality of the counterparty are both factored into the internal capital and credit limits for counterparty credit exposures.

Credit Support Annexes (CSA) exist for collateralising derivative transactions with counterparties to which the Group has its largest
derivative exposures in order to mitigate the risk of loss on default. Although these CSAs are taken into consideration when setting the
internal credit risk limits for derivative counterparties, they are not recognised as credit risk mitigation for reducing the exposure at default
(EAD) on the derivative transactions in the Pillar 1 regulatory capital calculations.

A downgrade in the Group’s credit rating would have the effect of reducing the market value triggers for margin calls on some of the CSAs
resulting in a potential increase in the amount of collateral the Group would have to provide against the derivatives within the CSAs.
However, due to the small number of CSAs with downgrade triggers, this is not deemed a significant risk for the Group.

A one notch short term rating downgrade would result in the Group being required to either post collateral or find a Guarantor for the swaps
it provides to its securitisation vehicles with the amount of collateral needing to be posted being dependent on the duration of the swaps and
LIBOR curves at the time the downgrade occurs.

The Group measures exposure value on counterparty credit exposures under the CCR mark to market method. This exposure value is
derived by adding the gross positive fair value of the contract (replacement cost) to the contracts potential credit exposure, which is derived
by applying a multiple based on the contracts residual maturity to the notional value of the contract.

The following table includes interest rate and foreign currency derivative contracts:

                                                    Gross Positive Fair Value of
                                                                      contracts            Potential Credit Exposure               Total Derivatives Credit Exposure
                                                                             (A)                                 (B)                                    (C) = (A)+(B)
                                                                             £m                                  £m                                               £m


Banking Book                                                               758                                    328                                          1,086
Trading Book                                                                13                                     38                                             51
Total                                                                      771                                    366                                          1,137

This table excludes credit derivatives against traditional and synthetic securitisations. These exposures are included in note 11.




                                                                                     Alliance & Leicester plc Pillar 3 disclosures for the year ended 31 December 2007 11
7       Credit risk and dilution risk

Impairment of financial assets
A financial asset or a group of financial assets is impaired and impairment losses are incurred if, and only if, there is objective evidence of
impairment as a result of events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event has an impact on
the estimated future cash flows of the financial asset or group of financial assets. Objective evidence that a financial asset or group of assets
is impaired includes observable data that comes to the attention of the Group about the following loss events:
• significant financial difficulty of the issuer or obligor;
• a breach of contract, such as default or delinquency in interest or principal repayments;
• the Group, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the
     Group would not otherwise consider;
• it becoming probable that the borrower will enter bankruptcy or other financial reorganisation;
• the disappearance of an active market for that financial asset because of financial difficulties; or
• observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets since
     the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the group,
     including:
           - adverse changes of the payment status of borrowers in the group; or
           - national or local economic conditions that correlate with defaults on the assets in the group.

The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and
individually or collectively for financial assets that are not individually significant. If there is no objective evidence of impairment for an
individually assessed financial asset it is included in a group of financial assets with similar credit risk characteristics and collectively
assessed for impairment.

Residential and commercial mortgages are initially assessed individually for impairment. Mortgages not individually impaired are then
assessed collectively. Personal loans and current accounts are collectively assessed for impairment on a portfolio basis. Commercial
lending is reviewed for impairment on a case by case basis for individually significant loans. Loans that are not individually significant are
assessed for impairment on a portfolio basis. Available-for-sale and held-to-maturity assets are assessed for impairment on a case by case
basis.

Impairment is calculated based on the probability of default, exposure at default and the loss given default, using recent data. An adjustment
is made for the effect of discounting cash flows.

If there is objective evidence that an impairment loss on loans and receivables or held-to-maturity investments carried at amortised cost has
been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated
future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s effective interest rate.

If there is objective evidence of impairment for financial assets classified as available-for-sale, the cumulative fair value loss on the
instrument is removed from equity and recognised in the Income Statement.

Financial assets are written off when it is reasonably certain that receivables are irrecoverable.

Past due and impaired loans
The Group is managed as follows, in segments determined according to similar economic characteristics and customer base:
• Retail Banking
     This comprises the Core 4 products of current accounts, mortgages, personal loans and savings, plus the Partner 4 products of long
     term investments, life assurance, general insurance and credit cards.
• Commercial Banking
     This comprises Commercial Bank, consisting of the core business lines of lending, business banking and money transmission, and
     Treasury.
• Group Items
     This represents corporate overheads and income not allocated to business units.




                                                                                    Alliance & Leicester plc Pillar 3 disclosures for the year ended 31 December 2007 12
The following tables provide an analysis of impaired and past due loans for the Retail Banking and Commercial Banking segments. There
was no impairment within Group Items.

Retail Banking
Payment due status:
                                                                                                                                                                           Retail Banking
                                                                                                                                                2007                                 2007
                                                                                                                                                 £m                                     %
Not impaired:
    Neither past due or impaired                                                                                                             46,428                                 99.38
Past due, but not impaired1:
    Up to 3 months                                                                                                                               77                                 0.16
    3 to 6 months                                                                                                                                45                                 0.10
    6 to 12 months                                                                                                                               48                                 0.10
    Over 12 months                                                                                                                              122                                 0.26
    Possessions                                                                                                                                   1                                 0.00
Individually assessed impairments                                                                                                                 2                                 0.00
                                                                                                                                             46,723                               100.00
1. Amounts reported as past due, but not impaired reflect the value of arrears as at 31 December 2007.


£1.2m of loans that would have been past due or impaired, have had their terms renegotiated. These loans have been restructured or
renegotiated by capitalising arrears where customers in arrears have maintained an agreed monthly repayment scheme.

Commercial Bank
Payment due status:
                                                                                                                                                                        Commercial Bank
                                                                                                                                                2007                               2007
                                                                                                                                                 £m                                  %
Not impaired:
    Neither past due or impaired                                                                                                              8,480                                 99.61
Past due, but not impaired1:
    Up to 3 months                                                                                                                                5                                 0.06
    3 to 5 months                                                                                                                                 1                                 0.01
    Over 5 months                                                                                                                                 1                                 0.01
Individually assessed impairments                                                                                                                26                                 0.31
                                                                                                                                              8,513                               100.00
1. Amounts reported as past due, but not impaired reflect the value of arrears as at 31 December 2007.


The carrying value of the repossessed stock (buses, coaches and commercial stock) was £2.1m. These assets are not utilised by the
Group’s operations and are sold and converted to cash as soon as is practicable. The fair value of the collateral held against assets that
have been individually impaired was £12.4m. £5.1m of loans that would have been past due or impaired, have had their terms renegotiated.

Treasury
Payment due status:
                                                                                                                                                                                 Treasury
                                                                                                                                                2007                                 2007
                                                                                                                                                 £m                                    %
Not impaired:
    Neither past due or impaired                                                                                                             22,868                                98.54
Individually assessed impairments                                                                                                               339                                 1.46
                                                                                                                                             23,207                               100.00

£nil of loans that would have been past due or impaired, have had their terms renegotiated.




                                                                                                         Alliance & Leicester plc Pillar 3 disclosures for the year ended 31 December 2007 13
Impairment losses

                                                                                       Retail Banking                   Commercial Banking
                                                       Mortgages    Personal Loans            Current          Commercial         Treasury                       Total
                                                                                            Accounts               Bank

                                                             £m                £m                   £m                   £m                   £m                   £m
At 1 January 2007
     Individual                                             2.0                 -                    -                  8.6                      -              10.6
     Collective                                            11.4             126.4                 10.1                  9.8                      -             157.7
Total                                                      13.4             126.4                 10.1                 18.4                      -             168.3
Charge for the year:
     Increase in provisions                                  1.6             82.8                 16.6                 15.9                152.9               269.8
     Recoveries of amounts previously written off           (0.8)           (14.5)                (0.3)                (1.1)                   -               (16.7)
Total                                                        0.8             68.3                 16.3                 14.8                152.9               253.1
Amounts written off in year                                 (1.2)           (87.4)               (10.3)                (8.8)               (31.2)             (138.9)
Arising on acquisitions                                        -                -                    -                  2.2                    -                 2.2
At 31 December 2007
     Individual                                             1.9                 -                   -                  13.4               121.7                137.0
     Collective                                            11.1             107.3                16.1                  13.2                   -                147.7
Total                                                      13.0             107.3                16.1                  26.6               121.7                284.7

The majority of the treasury impairments are against USD denominated assets. The majority of the remaining impairment relates to UK
assets.

Analysis of credit risk exposures
Tables (i) to (iv) analyse the Group’s regulatory credit risk exposures as at 31 December 2007.
These exposures equate to the exposure at default (EAD), including on balance sheet exposures and off-balance sheet exposures after
credit conversion factors (CCF) have been applied.

(i)        Analysis of exposures by asset class
                                                                                                                                                       Exposure as at
                                                                                                                                                            31.12.07
                                                                                                                                                                 £m
Sovereigns                                                                                                                                                  3,135.6
Institutions                                                                                                                                               15,999.4
Corporates                                                                                                                                                  9,785.4
Retail                                                                                                                                                     49,689.0
Equity                                                                                                                                                          6.2
Securitisation positions                                                                                                                                    4,576.1
Non credit-obligation assets                                                                                                                                  105.8
Total                                                                                                                                                      83,297.5

(ii)       Geographic distribution of exposures by asset class
                                                                              UK                   EU                    US         Rest of world                Total
                                                                              £m                   £m                    £m                   £m                   £m
Sovereigns                                                               3,065.5                15.1                   0.0                  55.0            3,135.6
Institutions                                                             2,899.2             8,617.3               1,658.0               2,824.9           15,999.4
Corporates                                                               7,717.5               662.4                 350.8               1,054.7            9,785.4
Retail                                                                  49,689.0                    -                     -                     -          49,689.0
Equity                                                                       6.2                    -                     -                     -               6.2
Securitisation positions                                                   944.7               976.5               2,376.7                 278.2            4,576.1
Non credit-obligation assets                                               105.8                    -                     -                     -             105.8
Total                                                                   64,427.9            10,271.3               4,385.5               4,212.8           83,297.5




                                                                                     Alliance & Leicester plc Pillar 3 disclosures for the year ended 31 December 2007 14
(iii)      Distribution of exposures by industry and asset class
                                       Sovereigns   Institutions   Corporates      Retail              Equity    Securitisation        Non-credit              Total
                                                                                                                     positions        obligations
                                                                                                                                           assets
                                              £m            £m            £m          £m                  £m                 £m                £m                £m
Agriculture, hunting, forestry and              -              -         6.3            -                   -                 -               0.7                7.0
fishing
Mining & Quarrying                             -          17.2         119.0            -                   -                 -              0.3             136.5
Manufacturing                                  -             -         435.0            -                   -                 -             12.8             447.8
Electricity, gas and water supply              -             -         601.2            -                   -                 -              0.1             601.3
Construction                                   -             -         209.3            -                   -                 -              2.5             211.8
Wholesale and retail trade; repairs            -             -         669.3            -                   -                 -             15.0             684.3
Hotels and restaurants                       0.1             -         238.2            -                   -                 -              0.2             238.5
Transport, storage and                       0.2         161.9       3,317.8            -                   -                 -             56.8           3,536.7
communication
Real estate, renting and other                  -              -     1,768.6            -                6.2                  -               9.1          1,783.9
business activities
Public administrations and defence          68.8               -        21.8            -                   -                 -                 -             90.6
Education                                    0.6               -       137.1            -                   -                 -                 -            137.7
Health and social work                       0.1               -       216.7            -                   -                 -               5.9            222.7
Recreational, personal and                   0.1               -     1,402.2            -                   -                 -               2.3          1,404.6
community service activities
Financial intermediation & financial     3,065.4     15,815.3          423.1            -                   -         4,576.1                    -       23,879.9
institutions
Insurance companies and pension                 -           5.0          3.0            -                   -                 -                  -               8.0
funds
Activities auxiliary to financial               -              -        18.0            -                   -                 -                  -             18.0
intermediation
Individuals and individual trusts               -           -           12.3    49,689.0                    -                -                 -         49,701.3
Other                                        0.3            -          186.5            -                   -                -              0.1             186.9
Total                                    3,135.6    15,999.4         9,785.4    49,689.0                 6.2          4,576.1             105.8          83,297.5

(iv)      Residual maturity breakdown of exposures by asset class
The following table shows the residual maturity of exposures stated on a contractual rather than an expected basis, and does not take into
account the cash flows payable or receivable over the life of the exposure. For example, if a mortgage has a remaining maturity of over 5
years, the whole of the exposure will be shown in the over 5 year category.
An analysis of the maturity of the exposures for liquidity purposes can be found in Note 2 in the Annual Report & Accounts.

                                                                                            < 1 year             1-5 years           > 5 years                 Total
                                                                                                 £m                    £m                  £m                    £m
Sovereigns                                                                               3,070.3                    33.8                31.5               3,135.6
Institutions                                                                             6,507.8                 8,743.2               748.4              15,999.4
Corporates                                                                                 662.9                 2,920.1             6,202.4               9,785.4
Retail                                                                                     653.4                 4,771.9            44,263.7              49,689.0
Equity                                                                                          -                       -                6.2                   6.2
Securitisation positions                                                                   810.6                   193.8             3,571.7               4,576.1
Non credit-obligation assets                                                                22.6                    57.4                25.8                 105.8
Total                                                                                   11,727.6                16,720.2            54,849.7              83,297.5




                                                                                   Alliance & Leicester plc Pillar 3 disclosures for the year ended 31 December 2007 15
8         Credit risk: Standardised approach

The Group uses external credit assessments provided by Moody’s, Standard & Poor’s and Fitch. These are all recognised by the FSA as
eligible external credit assessment institutions (ECAI) for the purpose of calculating credit risk requirements under the standardised
approach.

The following table details the ECAIs used for the standardised credit risk exposure classes.

Asset Class                                                              ECAI
Central Government or Central Banks                                      Standard & Poor’s, Moody’s, Fitch
Regional Governments or Local Authorities                                Standard & Poor’s, Moody’s, Fitch
Multilateral Development Banks                                           Standard & Poor’s, Moody’s, Fitch
Corporates                                                               Standard & Poor’s, Moody’s, Fitch

Corporates
Credit Quality Step                                        Risk weight                                 Exposure                                    Exposure after
(CQS)                                                                                                                                       Credit Risk Mitigation
                                                                    %                                         £m                                               £m
1                                                               20%                                        62.9                                             62.9
2                                                               50%                                            -                                                -
3                                                              100%                                            -                                                -
4                                                              100%                                            -                                                -
5                                                              150%                                            -                                                -
6                                                              150%                                            -                                                -
Unrated – Non default                                          100%                                     1,320.4                                          1,231.1
Unrated – Default                                              150%                                        17.8                                             17.8
Total                                                                                                   1,401.1                                          1,311.8

Regional Governments or Local Authorities
Credit Quality Step                                        Risk weight                                 Exposure                                    Exposure after
(CQS)                                                                                                                                       Credit Risk Mitigation
                                                                    %                                         £m                                               £m
1                                                               20%                                        70.1                                              70.1
2                                                               50%                                            -                                                 -
3                                                              100%                                            -                                                 -
4                                                              100%                                            -                                                 -
5                                                              100%                                            -                                                 -
6                                                              150%                                            -                                                 -
Unrated                                                        100%                                            -                                                 -
Total                                                                                                      70.1                                              70.1

Central Governments or Central Banks
Credit Quality Step                                        Risk weight                                 Exposure                                    Exposure after
(CQS)                                                                                                                                       Credit Risk Mitigation
                                                                    %                                         £m                                               £m
1                                                                0%                                     2,995.4                                          2,995.4
2                                                               20%                                        15.1                                             15.1
3                                                               50%                                            -                                                -
4                                                              100%                                            -                                                -
5                                                              100%                                            -                                                -
6                                                              150%                                            -                                                -
Unrated                                                        100%                                        55.0                                             55.0
Total                                                                                                   3,065.5                                          3,065.5

In addition, the Group calculates credit risk for exposures secured by mortgages on commercial real estate using the standardised
approach, as well as for the PlusMortgage, a combined secured and unsecured loan product, and buy to let mortgages.

                                                                                                                            Exposure value           Average risk
                                                                                                                                       £m               weight %
Secured on Real Estate Property – Commercial Mortgages                                                                                 10.6                 100%
Retail - PlusMortgage Secured / Buy to Let                                                                                          1,251.4                  38%
Retail - PlusMortgage Unsecured                                                                                                        55.8                  75%
Retail – Flexiplan Account                                                                                                             22.1                  75%
Retail – Secured Personal Loan                                                                                                         63.1                  75%


                                                                                 Alliance & Leicester plc Pillar 3 disclosures for the year ended 31 December 2007 16
9        Credit risk: Specialised lending and equity exposures

Specialised lending exposures
Specialised Lending exposures comprise facilities that are serviced by the cash flow generated from the specific asset(s) that is/are being
funded rather than the performance of a broader corporate entity. The lack of sufficient and reliable default information means there is an
inability to separate out the borrower and transaction aspects. The bank applies specific models and processes for rating such exposures
where the internal rating is mapped to the “Supervisory Slotting Criteria” in BIPRU 4.5 to allocate the appropriate risk weighting.

The Specialised Lending asset types applied by the bank are:
• Income Producing Real Estate
  – Commercial property investment transactions, involving purchase of a commercial property, often via a Single Purpose Entity (SPE)
    created for that specific purpose.
  – The repayment of principal or debt service comes from the rental income from the tenant(s) in situ during the term of the facility.
  – In some instances, a sale of the property or a debt refinance at the term end will provide a bullet capital repayment.

•   Object Finance
    – Covers the funding of transportation – e.g. Aircraft, Shipping.
    – Often as part of a larger, syndicated finance arrangement.
    – The repayment of principal or servicing of the debt comes from the income generated by the specific asset being funded, often with a
      full or partial bullet repayment at the term end.

•   Project Finance
    – Covers the funding of large privately funded projects, including PFI.
    – Often as part of a larger, syndicated finance arrangement.
    – The repayment of principal or servicing of the debt comes from the income generated by the specific asset being funded, often with a
      full or partial bullet repayment at the term end.

The following table provides an analysis of the Group’s Specialised Lending exposures by Grade.

                                                                                                                            Exposure value        Exposure value
                                                                                                                                    where                 where
                                                                                                                                remaining             remaining
                                                                                                                             maturity < 2.5        maturity > 2.5
                                                                                                                                     years                 years
Grade                                                                                                                                   £m                    £m
1 (Strong)                                                                                                                             50.9                138.3
2 (Good)                                                                                                                              340.2              2,199.7
3 (Satisfactory)                                                                                                                       14.4                 79.7
4 (Weak)                                                                                                                                   -                    -
5 (Default)                                                                                                                                -                 0.8
Total                                                                                                                                 405.5              2,418.5


Equity exposures
The Group uses the simple risk weight approach for calculating risk weighted exposure amounts for equity exposures.

                                                                                                                                                  Exposure value
Risk weight                                                                                                                                                  £m
190% (Private equity exposures in diversified portfolios)                                                                                                         -
290% (Exchange traded equity exposures)                                                                                                                           -
370% (Other)                                                                                                                                                   6.2
Total                                                                                                                                                          6.2




                                                                                 Alliance & Leicester plc Pillar 3 disclosures for the year ended 31 December 2007 17
10         Exposures to interest rate risk in the non-trading book

A discussion of the Group’s interest rate risk is included within Section 2: Risk management objectives and policies.

The following table shows the change in the market value of the Group given a 200bps shift in interest rates, broken down by currency.

                                                                                                                                                                  Increase / (decrease) in market
                                                                                                                                                                                value1
                                                                                                                                                                     +200 basis            -200 basis
                                                                                                                                                                  points shift in      points shift in
                                                                                                                                                                    yield curve           yield curve
Currency                                                                                                                                                                     £m                   £m
£ Sterling                                                                                                                                                                 (15.8)                15.8
$ US                                                                                                                                                                        (2.1)                 2.1
€                                                                                                                                                                           (2.8)                 2.8
Other                                                                                                                                                                        0.1                 (0.1)
Total                                                                                                                                                                     (20.6)                 20.6
1. Excludes market value changes of strategic hedges of Group reserves, non-interest and low interest liabilities.




                                                                                                                     Alliance & Leicester plc Pillar 3 disclosures for the year ended 31 December 2007 18
11        Securitisation

Alliance & Leicester plc has established a number of securitisation structures to raise funding for the Group. Special Purpose Vehicles
(‘SPVs’) have purchased beneficial interests in portfolios of residential mortgages that are funded by floating rate mortgage backed debt
securities (‘Notes’). The assets and liabilities of the SPVs are consolidated on a line by line basis, as Alliance & Leicester plc controls the
SPVs.

Alliance & Leicester plc (‘the Company’) provides subordinated loans of £374.6m to its Securitisation Structures. The Notes are serviceable
firstly from cash flows generated by the mortgage assets and thereafter from the proceeds of the subordinated loans. The Company
receives the excess spread on the transactions as deferred consideration, after the SPVs have met their liabilities. The Group’s maximum
exposure (including subordinated loans) to the credit risk of securitised mortgages is £14,041.9m. This credit risk exposure relates to the
subordinated loans, Notes purchased and retained by the Group and the risks retained upon the transfer of Notes to investors outside the
Group.

Fosse Securities No. 1 plc
In 2000, the Company securitised £250.0m of residential mortgage assets to Fosse Securities No. 1 plc. Fosse Securities No. 1 plc issued
Notes to finance the purchase of a portfolio of loans. In 2007, the remaining £28.8m of Notes in issue were redeemed at par and the
associated mortgage assets were repurchased by the Company

Fosse Master Trust
Alliance & Leicester plc established the Fosse Master Trust securitisation structure in 2006. Notes are issued by Fosse Master Issuer plc
and the proceeds loaned to Fosse Funding (No. 1) Limited, which in turn uses the funds to purchase beneficial interests in mortgages held
by Fosse Trustee Limited. Alliance & Leicester plc and its subsidiaries are not obliged to support any losses that may be suffered by the
Note holders and do not intend to offer such support. The Note holders only receive payments of interest and principal to the extent that
Fosse Master Issuer plc has received sufficient funds from the transferred loans and after certain expenses have been met. The Company
raised £2,505.4m in 2006 and a further £2,502.3m in 2007 from securitisations involving the Fosse Master Trust.

Bracken Securities plc
In October 2007 the Company securitised £10,367.0m of residential mortgage assets to Bracken Securities plc. Notes of £10,367.0m were
issued by Bracken Securities plc to Alliance & Leicester plc, either for the purpose of creating collateral to be used for funding or for
subsequent transfer of Notes to investors outside the Group.

The balances of assets subject to securitisation and Notes in issue at 31 December are as follows:

                                                                                                                                                           Gross assets        External Notes in
                                                                                                                                                             securitised                 Issue1
Securitisation company                      Type                                                                         Date of Securitisation                       £m                     £m
Fosse Master Issuer plc                     Residential mortgage – traditional securitisation                           28 November 2006                       2,145.8                  2.292.1
Fosse Master Issuer plc                     Residential mortgage – traditional securitisation                               1 August 2007                      2,357.4                  2,568.2
A&L plc’s retained interests                Residential mortgage – traditional securitisation                               1 August 2007                      3,991.2                      n/a
Total Fosse Master Issuer plc                                                                                                                                  8,494.4                  4,860.3

Bracken Securities plc                      Residential mortgage – traditional securitisation                              11 October 2007                     9,969.7                         -2
A&L plc’s retained interests                                                                                                                                   9,969.7                        n/a
Total Bracken Securities plc                                                                                                                                   9,969.7

Total                                                                                                                                                         18,464.1                  4,860.3
1. External Notes in issue include accrued interest of £61.7m and currency movements of £110.4m but exclude principal cash balances collected but not yet repayable on the Notes of £199.2m
2. Excluding Notes sold by Bracken Securities plc where the Company is contractually required or expected to repurchase prior to maturity.


The Group sponsors some bankruptcy remote Special Purpose Vehicles (SPVs). The SPVs, owned by charitable trusts, are funded by Asset
Backed Commercial Paper and invest in ‘AAA’ rated assets. Since the purchase, a number of assets have been downgraded from AAA. The
Group provides liquidity facilities to the SPVs, amounting to £698m at 31 December 2007. The liquidity facility can be drawn in the event of
asset downgrades in the SPV, but cannot be drawn to fund asset defaults. The recoverability of the liquidity facility is considered with
respect to the asset quality of the SPV assets, and to date no impairment is considered necessary. The SPVs are not controlled by the
Group and the benefits the Group receives from the SPVs are restricted to interest and fees relating directly to the loans and liquidity
facilities provided.

Treatment of securitisations in capital calculations
The securitisation of the residential mortgages is not recognised by the Group in its Pillar 1 capital calculations. The Group continues to hold
capital against the credit risk of the mortgages. The capital requirement is calculated using the Retail Internal Ratings Based (IRB)
approach, further details can be found in Section 12.



                                                                                                               Alliance & Leicester plc Pillar 3 disclosures for the year ended 31 December 2007 19
Securitisation positions retained or purchased
The Group also invests in securitisation vehicles. A combination of Moody’s, Standard and Poor’s and Fitch are used to derive the external
rating to be used in the Ratings Based Method for all securitisation investment exposures. In line with BIPRU 9.8, where two credit
assessments by the ECAI’s are available, the less favourable of the two credit assessments is applied. Where more than two credit
assessments are available, the two most favourable credit assessments are used and where the two most favourable assessments are
different, the less favourable of the two is applied.

The following tables provide an analysis of the Group’s investments in securitisations.

                                                                                                                                                                                             Amounts
                                                                                                                                                                                             retained /
                                                                                                                                                                                            purchased
                                                                                                                                                                                                    £m
Residential mortgage backed securities (RMBS)                                                                                                                                                 1,954.3
Commercial mortgage backed securities (CMBS)                                                                                                                                                    123.4
Other asset backed securities (ABS)                                                                                                                                                             907.5
Liquidity facilities and other off balance sheet exposures                                                                                                                                    1,041.6
Structured investment vehicles (SIV)                                                                                                                                                            212.7
Collateralised debt obligations (CDO) / Collateralised loan obligations (CLO)                                                                                                                   336.6
Total                                                                                                                                                                                         4,576.1


                                                                                                                                                                                             Amounts
                                                                                                                                                                                             retained /
Risk Weighting                                                                                                                                                                              purchased
                                                                                                                                                                                                    £m
6%                                                                                                                                                                                               65.2
7%                                                                                                                                                                                            2,984.2
8%                                                                                                                                                                                               12.8
12%                                                                                                                                                                                             122.2
15%                                                                                                                                                                                              99.3
20%                                                                                                                                                                                              54.8
35%                                                                                                                                                                                              29.2
50%                                                                                                                                                                                                  -
75%                                                                                                                                                                                               7.7
100%                                                                                                                                                                                                 -
1250%                                                                                                                                                                                           195.9
Deduction                                                                                                                                                                                            -
Look through to underlying assets1                                                                                                                                                            1,004.8
Total                                                                                                                                                                                         4,576.1
1. Includes the exposure arising from the Group’s off balance sheet conduit facility and credit default swaps against securitised assets. As at 31 December 2007, the capital requirement for these
exposures was calculated as £7.3m.




                                                                                                                   Alliance & Leicester plc Pillar 3 disclosures for the year ended 31 December 2007 20
12        Internal Ratings Based (IRB) disclosures

The scope of the firm’s IRB permission

CRD Asset Class                                                                    Alliance & Leicester Portfolio /                     CRD Approach
                                                                                   Business Line
Retail - Residential Mortgages                                                     Mortgages / Retail Banking                           Retail IRB
Retail - Other                                                                     Unsecured Personal Loans / Retail                    Retail IRB
                                                                                   Banking
Retail - Qualifying Revolving Retail Exposures (QRRE)                              Current Accounts / Retail Banking                    Retail IRB
Corporate (excluding leveraged transactions1)                                      Quoted and Unquoted Corporates /                     Foundation IRB
                                                                                   Commercial Bank and Treasury
Specialised Lending                                                                Specialised Lending / Commercial BankFoundation IRB (Supervisory slotting
                                                                                                                        criteria)
Financial Institutions (other than Central Banks and Multilateral                  Banks / Treasury and Commercial Bank Foundation IRB
Development Banks)
Securitisation                                                                     Securitisation / Treasury                            Foundation IRB (Securitisation ratings
                                                                                                                                        based approach (external ratings))
Small businesses                                                Small businesses / Commercial Bank                                      Standardised (Materiality exemption from
                                                                and Treasury                                                            IRB)
Sovereign (including Central Banks and Multilateral Development Sovereigns / Commercial Bank and                                        Standardised (Materiality exemption from
Banks)                                                          Treasury                                                                IRB)
Corporate (leveraged transactions1)                             Corporates / Commercial Banking                                         Standardised (Materiality exemption from
                                                                                                                                        IRB)
Other (including Commercial, PlusMortgage and Buy to Let                           Other / Commercial Banking and Retail                Standardised
mortgages)                                                                         Banking
1. Leveraged transactions – where counterparties have undergone a step-change in their financing and/or capital structure. The most common types of such transactions are leveraged buy-outs or
public flotations such as initial public offerings and qualified public offerings.


The Group’s IRB (Internal Ratings Based) Waiver Application Pack was approved by the FSA in 2006 for capital adequacy monitoring and
reporting beginning on 1 January 2007. The scope of this permission covers the retail business of residential mortgages, personal loans and
current accounts, the specialised lending and corporate business (excluding leveraged transactions and Public Sector Entities), and
exposures to financial institutions and securitised investments. The areas of the business falling outside the scope of the Group’s IRB
permission are limited to corporate leveraged loans, SME’s, Commercial, PlusMortgage and Buy to Let mortgages, Sovereigns (including
central banks and multilateral development banks) and Public Sector Entities (including local authorities). Asset classes not falling within the
scope of the Group’s IRB permission are treated under the standardised approach.

The IRB approach to monitoring and reporting risk has been built up around the primary revenue streams of the Group: Retail Banking,
Commercial Bank and Treasury. The credit risk function for each area is responsible for the development, validation, implementation,
monitoring and use of credit rating models. In order to ensure the integrity and independence of these models, the credit risk function in each
business unit has clearly segregated duties from those responsible for originating exposures. Each business risk area is responsible for
monitoring the validity of its models and completeness of the supporting documentation and reporting on these to the Model Validation
Committee (MVC). The MVC has been established as the principal forum for independently overseeing the Group’s credit rating models, to
ensure that the systems are producing consistent and accurate results in line with the Group’s objectives and FSA minimum requirements.
Although the internal credit rating models vary across the Group, the definitions of certain variables feeding into and being produced by
these models are broadly consistent across the Group. It is the MVC’s responsibility to ensure that the integrity of these Group wide
definitions is being maintained.

Retail Banking
The Group has extensive internal loss data histories which have enabled it to build in-house credit rating models for the residential
mortgage, unsecured personal loan and current account portfolios. These models facilitate an appropriate risk sensitive approach to risk
management and capital allocation. The models determine long run average probabilities of default (PD), downturn loss given default (LGD)
and appropriate exposures at default (EAD) for each segment in order to calculate expected loss, economic capital and risk weighted
assets. In addition, the models are used to support lending strategy and the provision of management information.

Retail Banking’s rating models group obligors into segments differentiated by a number of factors, which include application and behavioural
scores and delinquency status. For each segment a long run average PD, downturn LGD and EAD are estimated from a combination of
recent and historic data. Data covering the period back to the early 1990s are utilised in the derivation of the PD, LGD and EAD. Internal
loss data is supplemented with external industry loss data where there is not sufficient internal data.

For all products EAD is restricted so that it cannot be lower than 100% of the current exposure. An EAD for undrawn assets such as
applications not yet taken up is also built into the models through the use of credit conversion factors.



                                                                                                                Alliance & Leicester plc Pillar 3 disclosures for the year ended 31 December 2007 21
Commercial Banking
Under the Foundation IRB approach, the Group utilises regulatory LGD and EAD measures in determining the level of risk weighted assets
for Commercial Banking exposures. Internal ratings models are used to generate obligor PDs.

The high credit quality of the corporate portfolio and low volumes of credit exposures have meant that there is insufficient statistically
significant internal loss data upon which to build in-house credit rating models. A suite of vendor solutions is therefore used to deliver long
run average one year PD estimates. Validation of these models demonstrates a good fit to the limited internal loss experience of the
corporate portfolio.

Specialised lending exposures are assessed via the supervisory slotting criteria for IRB purposes. To date, for small business exposures,
the lack of internal loss data, the modest exposure of the portfolio and the lack of an appropriate vendor solution has prevented the
development of an internal ratings solution.

Financial Institutions
For exposures to financial institutions, the Group utilises regulatory LGDs for determining risk weighted assets (since the Group’s waiver is
to apply Foundation IRB). Internal ratings models are used to generate obligor PDs.

Exposures to financial institutions arise in Treasury operations and in the Commercial Bank in the form of third-party bank guarantees. An in-
house model combining quantitative and qualitative measures is used to assess the creditworthiness of these financial institutions by
assigning them an internal rating. This model delivers a point in time rating that is calibrated to long run external loss data supplied by an
External Credit Assessment Institution (ECAI) to generate a long run average PD for each rating.


IRB data by exposure class

(i)        IRB exposure values
The following table details the Group’s exposures by Basel IRB exposure class. These exposures equate to the exposure at default (EAD),
after credit risk mitigation (CRM), including on balance sheet exposures and off-balance sheet exposures after credit conversion factors
(CCF) have been applied. The undrawn commitment values, shown separately for the retail asset classes, are reported gross.

                                                                                                                                                                                       Exposure
                                                                                                                                                                                            £m
Retail IRB
    Retail exposures secured by real estate collateral                                                                                                                                 44,404.3
    Other retail exposures                                                                                                                                                              3,738.8
    Qualifying revolving retail exposures                                                                                                                                                 153.5
Foundation IRB
    Institutions                                                                                                                                                                       15,994.3
    Corporates                                                                                                                                                                          5,341.6
    Corporates – Specialised Lending1                                                                                                                                                   2,824.0
    Equities1                                                                                                                                                                               6.2
Other IRB
    Securitisation positions2                                                                                                                                                           4,576.1
1. Details on these exposure classes are in Section 9: Specialised lending and equity exposures.
2. Details on this exposure class are included in Section 11: Securitisation.


Tables (ii) to (vii) include credit risk information on the Group’s IRB asset classes

(ii)          Retail exposures secured by real estate collateral
                Obligor          Average PD Grade                      Exposure           Exposure-weighted         Exposure-weighted                    Undrawn             Exposure-weighted
                 Grade                                                                    average risk weight            average LGD                  Commitments             average exposure
                                                                                                                                                                                         value
                                                   %                          £m                           %                           %                          £m                         £
                    1                         0.07                    18,300.0                         3.36                       17.83                     1,009.3                     90,858
                    2                         0.11                    13,423.3                         5.37                       19.66                       320.6                    101,419
                    3                         0.17                     6,949.1                         8.86                       22.41                       281.2                     77,901
                    4                         0.42                     4,339.2                        15.05                       21.48                       135.4                    101,613
                    5                         1.36                       847.2                        27.88                       17.29                         0.6                     61,537
                    6                         5.56                       286.0                        64.88                       19.05                         0.0                     65,335
                    7                        29.69                       156.6                       112.80                       23.10                         0.0                     63,813
               Default                      Default                      102.9                       292.66                       27.71                         0.0                     70,955
                Total                                                 44,404.3                                                                              1,747.1




                                                                                                                Alliance & Leicester plc Pillar 3 disclosures for the year ended 31 December 2007 22
(iii)   Other retail exposures
         Obligor      Average PD Grade          Exposure     Exposure-weighted         Exposure-weighted                    Undrawn             Exposure-weighted
          Grade                                              average risk weight            average LGD                  Commitments             average exposure
                                                                                                                                                            value
                                      %              £m                       %                           %                          £m                         £
              1                    0.58         1,300.3                  58.16                       69.62                         24.2                       6,331
              2                    1.12           704.8                  78.88                       69.83                          3.1                       5,136
              3                    2.26           569.3                 101.59                       72.52                          5.1                       6,071
              4                    3.47           472.4                 112.64                       75.17                          2.8                       5,679
              5                    7.00           326.8                 123.53                       75.02                          0.4                       6,245
              6                   13.00           108.3                 153.52                       77.87                          0.2                       5,209
              7                   44.90            61.1                 180.37                       78.57                          0.0                       5,389
         Default                 Default          195.8                 256.49                       77.89                          0.0                       6,101
          Total                                 3,738.8                                                                            35.8

(iv)    Qualifying revolving retail exposures
         Obligor      Average PD Grade          Exposure     Exposure-weighted         Exposure-weighted                    Undrawn             Exposure-weighted
          Grade                                              average risk weight            average LGD                  Commitments             average exposure
                                                                                                                                                            value
                                      %              £m                       %                           %                          £m                         £
              1                    0.50            25.4                  11.13                       26.70                       452.1                           20
              2                    3.59            31.1                  26.63                       26.24                        47.4                          221
              3                    7.42            19.5                  44.60                       26.58                        21.8                          167
              4                   12.29            15.4                  61.50                       26.39                         8.8                           74
              5                   23.02            17.1                  75.78                       25.77                         3.6                          579
              6                   30.40            11.2                  80.76                       25.98                         5.2                          179
              7                   74.84             8.0                  55.52                       26.73                         5.5                          111
         Default                 Default           25.8                  87.86                       28.23                         0.0                          212
          Total                                   153.5                                                                          544.4

(v)     Financial institutions
                          Obligor                          PD Grade                                      Exposure                               Exposure-weighted
                           Grade                                                                                                                average risk weight
                                                                 %                                              £m                                               %
                              1                               0.03                                       7,514.8                                               15.0
                              2                               0.04                                       3,031.4                                               17.3
                              3                               0.06                                       4,406.2                                               21.3
                              4                               0.09                                         912.2                                               28.4
                              5                               0.14                                          96.4                                               34.7
                              6                               0.21                                          31.8                                               44.3
                              7                               1.33                                           1.5                                              141.8
                         Default                            Default                                             -                                                 -
                          Total                                                                         15,994.3

(vi)    Corporates with bank guarantees
                          Obligor                          PD Grade                                      Exposure                               Exposure-weighted
                           Grade                                                                                                                average risk weight
                                                                 %                                              £m                                               %
                              1                               0.03                                        1,607.8                                              27.3
                              2                               0.04                                          139.4                                              31.8
                              3                               0.06                                           12.9                                              39.2
                              4                               0.09                                               -                                                -
                              5                               0.14                                               -                                                -
                              6                               0.21                                            3.5                                              72.6
                              7                               1.33                                               -                                                -
                         Default                            Default                                              -                                                -
                          Total                                                                           1,763.6




                                                                                   Alliance & Leicester plc Pillar 3 disclosures for the year ended 31 December 2007 23
(vii)     Corporates without bank guarantees
                            Obligor       Exposure-weighted average PD Grade                          Exposure                               Exposure-weighted
                             Grade                                                                                                           average risk weight
                                                                          %                                  £m                                               %
                                 1                                    0.10                             1,218.7                                              39.1
                                 2                                    0.22                               815.5                                              62.5
                                 3                                    0.47                               527.0                                              85.4
                                 4                                    0.80                               331.5                                              98.4
                                 5                                    1.38                               346.7                                             114.9
                                 6                                    2.50                               273.5                                             130.1
                                 7                                    5.48                                61.3                                             160.7
                            Default                                 Default                                3.8                                               0.0
                             Total                                                                     3,578.0


(viii)    Impairment
The following table shows the charges for the year relating to impairment losses on the various Basel asset classes. This analysis also
includes charges made for assets where the credit risk requirement is calculated using the standardised approach.

                                                                                                                                               Value adjustment
                                                                                                                                                   as at 31.12.07
                                                                                                                                                              £m
    Retail exposures secured by real estate                                                                                                                 0.8
    Other retail                                                                                                                                           68.3
    QRRE                                                                                                                                                   16.3
    Corporates (including Specialised Lending)                                                                                                             14.8
    Sovereigns                                                                                                                                                 -
    Institutions                                                                                                                                               -
    Equities                                                                                                                                                   -
    Securitisation positions                                                                                                                              152.9
Total                                                                                                                                                     253.1




                                                                                Alliance & Leicester plc Pillar 3 disclosures for the year ended 31 December 2007 24
13      Credit risk mitigation

Retail Banking
91.6% of the Retail balances are secured on residential properties, with the remainder of the balance relating primarily to unsecured
personal loans. The carrying value of the repossessed stock (properties in possession) was £12.4m at 31 December 2007, for which £11.9m
collateral was held. These assets are not utilised by the Group’s operations and are sold and converted to cash as soon as practicable. The
average LTV of our prime mortgage book at the end of 2007 was 46%, with 58% of the book having an indexed LTV of less than 50%, and
just 2% over 90%.

Commercial Bank
Within Commercial Bank, just under £1.8bn of exposures were guaranteed by banks as at 31 December 2007. These guarantees are
recognised as credit risk mitigation within the capital calculations.

In addition, the Commercial Bank utilises a broad range of collateral types as credit risk mitigation. These serve to reduce the exposure to a
counterparty against which capital is required to be held. Financial collateral is predominantly cash. Other eligible collateral includes first
priority charges on commercial and residential real estate and other physical assets such as aircraft, shipping, commercial vehicles
(including buses and coaches) and car fleets.

Treasury
Credit Support Annexes (CSA) exist for collateralising derivative transactions with counterparties to which the Group has its largest
derivative exposures in order to mitigate the risk of loss on default. The Credit Support Annexes allow margin calls to be made on the net
mark to market value of derivative exposures with a particular counterparty. Although these CSAs are taken into consideration when setting
the internal credit risk limits for derivative counterparties, the Group does not currently recognise the risk mitigating effect of these CSAs in
its Pillar 1 capital calculations.

The Group also utilises reverse repurchase agreements for short term liquidity management. Market prices on the collateral received on
these transactions are monitored daily. There were no reverse repurchase agreements in place at 31 December 2007.

Defeasance deposits are cash collateral placed with treasury to support Letters of Credit. These deposits amounted to £208m at year end.

Treasury also utilises guarantees where appropriate. General guarantees by a parent to its subsidiary businesses are incorporated in the
internal and external rating used to determine the capital requirement for a particular exposure. However, any guarantee made specifically
to the Group is recognised separately as credit risk mitigation in the capital calculations.

The following table shows the values of collateral and guarantees used as credit risk mitigation within the Pillar 1 calculations.

                                                                                         Financial         Other Eligible          Guarantees                 Credit
                                                                                         Collateral           Collateral                                 Derivatives
                                                                                                £m                    £m                   £m                    £m
Retail IRB
    Retail exposures secured by real estate collateral                                            -                     -                     -                     -
    Other retail                                                                                  -                     -                     -                     -
    QRRE                                                                                          -                     -                     -                     -
Foundation IRB
    Corporates                                                                              217.7                 665.3               1,778.7                       -
    Institutions                                                                                -                     -                  25.1                       -
    Equities                                                                                    -                     -                      -                      -
Other IRB
    Securitisation positions                                                                      -                     -                     -                     -
Standardised
    Central government or central banks                                                          -                      -                   -                       -
    Regional governments or local authorities                                                    -                      -                   -                       -
    Multilateral development banks                                                               -                      -                   -                       -
    Corporates                                                                                89.3                      -                62.9                       -
    Secured on real estate property                                                              -                      -                   -                       -
    Retail                                                                                       -                      -                   -                       -




                                                                                   Alliance & Leicester plc Pillar 3 disclosures for the year ended 31 December 2007 25
14     Contacts

Should you have any queries please contact:-
Mark Jones        Head of Investor Relations                                               Tel: 0116 200 4492
Mark Browne       Head of Financial Relations and External Reporting                       Tel: 0116 200 2123

Alliance & Leicester plc. Registered Office: Carlton Park, Narborough, Leicester LE19 0AL.
Company No: 3263713. Registered in England.




                                                                               Alliance & Leicester plc Pillar 3 disclosures for the year ended 31 December 2007 26

								
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