‘Stressed’ RBS named among weakest UK banks by BoE

It is the second time the central bank carried out its annual test of the UK’s biggest lenders in order to gauge their resilience in the face of a financial shock on the scale that forced some of them –including RBS – to the wall in 2008.

Banks were this time tested against a scenario where oil had fallen to $38 a barrel and the global economy had slumped.

RBS and Standard Chartered were found not to have enough capital strength, but both took steps to raise additional capital.

The lenders were not told by the Bank to come up with a new plan, as Co-operative Bank was last year after similar tests.

The five other lenders tested – HSBC, Barclays, Lloyds Banking Group, Santander and Nationwide – did not have to take action.

Responding to the test findings. RBS chief financial officer Ewen Stevenson said: “We are pleased with the progress we have made relative to the 2014 stress test, but recognise we still have much to do to restore RBS to be a strong and resilient bank for our customers.”

“During 2015 we have continued to strengthen our core capital ratio and improve our leverage position. Following the divestment of Citizens in October 2015, our pro-forma CET1 ratio at 30 September 2015 would have been 16.2 per cent and our leverage ratio 5.6 per cent.”

Standard Chartered chief executive Bill Winters said: “The results of the test demonstrate our resilience to a marked slowdown across the key markets in which we operate.

“The test was conducted on our balance sheet as at the end of 2014. Since then we have made further significant progress in strengthening our capital position.

“We are operating at capital levels above current minimum regulatory requirements and have a number of additional levers at our disposal to further manage capital.”

However, all banks were told they would have to set aside capital to protect their UK exposures as part of a new measure that the bank is phasing in, called a “countercyclical capital buffer”.

The extra cash should allow banks more room in times of economic decline to absorb losses from bad loans and other problems.

It will mean the banks have to allocate more money to protect against lending losses in the UK, but some of this will be brought in from other reserves that the banks already have.

Still, the extra capital needed will represent £10bn across UK banking, and banks will have to make profits or sell bonds or shares to fill that buffer.