RBS fails Bank of England stress test
RBS has failed to meet the requirements of the Bank of England’s stress test, designed to see how resilient banks would be in the face of major market problems.
It said it still had more to do to fix “outstanding legacy issues” the bank faced from the global financial crisis.
The seven biggest lenders in the UK were put through the exercise, which presented a more severe scenario than in the two previous annual tests.
Barclays and Standard Chartered did not meet all the criteria but the Prudential Regulation Authority (PRA) was satisfied that the steps that were already being taken to build further resilience were sufficient.
No “capital inadequacies” were found at HSBC, Lloyds Banking Group, Nationwide Building Society and Santander UK, based on its balance sheet at the end of 2015.
The test included the scenario of UK GDP falling by 4.3%, house prices dropping by 31% and unemployment rising to 9.5%.
RBS has agreed a revised capital plan with the PRA to improve its stress resilience including further decreasing the cost base of the bank, further reductions in risk-weighted assets across the bank and the management of undrawn facilities in 2017.
However it aclnowledges “additional management actions may be required until RBS’s balance sheet is sufficiently resilient to stressed scenarios”.
RBS’s Mr Stevenson said: “We are committed to creating a stronger, simpler and safer bank for our customers and shareholders. We have taken further important steps in 2016 to enhance our capital strength, but we recognise that we have more to do to restore the bank’s stress resilience including resolving outstanding legacy issues.”
