Tough grade for RBS in European stress test

Ewen Stevenson

Royal Bank of Scotland (RBS) was one of the worst performing banks in stress tests carried out by the European Banking Authority (EBA).

Under the imaginary stress conditions, RBS suffered the third biggest fall in an important capital ratio, the so-called “fully loaded common equity tier one (CET1)” ratio.

RBS fell about 7.5% to end up with a CET1 ratio of 8.08% — the 13th worst of the 51 big European banks that were tested.

“The objective of the stress test is to provide supervisors, banks and other market participants with a common analytical framework to consistently compare and assess the resilience of large EU banks to adverse economic developments,” said the EBA.

The Bank of England said the results for the four UK banks involved – Barclays, HSBC Holdings, Lloyds Banking Group and RBS – were 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,” said the UK central bank.

RBS is still 73% owned by the UK taxpayer following its £45.5 billion bail out by the state during the 2008 financial crisis.

Ewen Stevenson, RBS chief financial officer, said the EBA stress test results demonstrated his bank’s continued progress towards transforming its balance sheet to being “safe and sustainable.”

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

On July 4, RBS chief ececutive Ross McEwan said in a radio interview with LBC that the sale of the UK taxpayer’s remaining stake in RBS is likely to be delayed by “at least a couple of years” after the UK’s narrow vote to leave the EU.