RBS takes biggest knock of UK banks in EU-wide financial stress test

Royal Bank of Scotland was third-most affected of 51 banks tested, while Barclays also fared poorly under stress scenario

The Royal Bank of Scotland has taken the biggest hit to its financial strength of any UK bank subjected to European-wide health checks on major banks.

The 73% taxpayer-owned bank insisted that despite being the third-most affected of any of the 51 banks, it was well on the way to becoming stronger and more risk-averse.

Its capital ratios fall by more than seven percentage points under the tests imposed by the European Banking Authority and, under the imaginary scenario, ends up with an 8% capital ratio. The absolute minimum is 4.5%.

It means that RBS, like Barclays, is among the 15 weakest banks tested.

But the tests do not allow the banks to take any actions, such as selling off risky operations between the test period of 2015 and 2018.

The Bank of England, which will conduct its own tests later in the year, said: “The results for the four banks [RBS, Barclays, Lloyds Banking Group and HSBC] are consistent with those of previous Bank of England stress tests.

“They provide evidence that major UK banks have the resilience necessary to maintain lending to the real economy, even in a macroeconomic stress scenario.”

Ewen Stevenson, RBS’s finance director, said the stress test results showed the bank’s “continued progress towards transforming the balance sheet to being safe and sustainable”.

“We are confident that in delivering our strategy, we will transform RBS into a low risk, resilient bank,” he said.

The Edinburgh-based bank, which publishes its results on 5 August, is braced for a penalty from US regulators for the way it sold mortgage bonds in the run up to the 2008 banking crisis, which could amount to £8bn.


Jill Treanor

The GuardianTramp

Related Content

Article image
Banking watchdog to announce measures to boost competition
Competition and Markets Authority set to unveil focus on overdraft and bank account switching after two-year investigation

Jill Treanor

07, Aug, 2016 @11:01 PM

Article image
UK banks receive first report cards from Banking Standards Board
Assessments sent to Barclays, HSBC, Lloyds, RBS, Santander, Standard Chartered, Nationwide, Metro, Citi and Morgan Stanley

Jill Treanor and Larry Elliott

29, Dec, 2015 @7:00 AM

Article image
Only 547 compensation offers to small businesses mis-sold financial products
FCA wants banks to move quicker to handle claims made by 29,000 small businesses that were mis-sold interest-rate swaps

Jill Treanor

06, Dec, 2013 @6:37 PM

Article image
Banks must cut executive pay, warns shareholders group
Association of British Insurers joins clamour against bumper bonuses with stiff letter to five biggest banks

Jill Treanor, City editor

05, Dec, 2011 @10:01 PM

Article image
European banks storing €20bn a year in tax havens
Barclays and HSBC among banks booking money equivalent to 14% of annual profits in offshore entities

Daniel Boffey

06, Sep, 2021 @5:00 AM

Article image
FSA to set out proposals for new banks to challenge high street 'big four'
Proposals to be unveiled as Bank of England announces its estimate of the size of capital shortfalls at the UK's major lenders

Jill Treanor, City editor

25, Mar, 2013 @12:04 AM

Article image
High street banks agree to payouts for mis-selling financial products
FSA says it has had personal assurances from big four over compensation following its verdict of 'serious failings'

Jill Treanor, City editor

29, Jun, 2012 @6:18 PM

Article image
Costs of overdrafts to fall as part of UK banks overhaul
Consumer groups, challenger banks and analysts say CMA proposals will not reduce big four’s stranglehold on current accounts

Jill Treanor

17, May, 2016 @3:35 PM

Article image
Banks in Germany, Greece and Spain could face fund-raising call when stress tests published this week
Concerns mount that health check for two-thirds of Europe's banks will uncover weaknesses

Jill Treanor

18, Jul, 2010 @4:39 PM

Article image
Bank of England prepares stress tests to ensure banks can survive housing crash
Eight institutions face checks to see if they can survive 35% slump in property prices and interest rates jumping to 5%

Jill Treanor and Katie Allen

28, Apr, 2014 @8:24 PM