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Lender insists progress being made

RBS among weakest in latest bank stress tests

RBS GogarburnRoyal Bank of Scotland emerged as one of the weakest banks in the latest testing of their ability to withstand another financial crash.

RBS’s saw its capital levels suffer the third biggest fall of the 51 banks tested. The bank insisted the tests showed its “continued progress” in improving its balance sheet.

RBS was bailed out by the government in 2008 and the UK taxpayer continues to hold a 73% stake as its weak share price makes a sale to the private sector unlikely any time soon.

The health check was carried out by the London-based European Banking Authority to assess the ability of the lenders to withstand another sharp downturn.

Under the test scenario RBS saw its capital level fall by about seven percentage points. However, the tests do not take into account any action taken between now and 2018.

Barclays was also listed among the weakest of the British banks.

In its response RBS noted that the test does not include “a number of initiatives such as balance sheet reduction (including asset sales and divestments), business growth and cost savings are not factored into the stress outcomes.”

Ewen Stevenson, Chief Financial Officer, said: “The EBA stress test results demonstrate our continued progress towards transforming the balance sheet to being safe and sustainable.

“Over recent years we have materially strengthened our CET1 [capital strength] ratio, substantially reduced our balance sheet and leverage, and continued to de-risk our asset exposures. 

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

Banks from Italy, Ireland, Spain and Austria fared worst in the tests which showed there was still work to do in order to boost credit to the bloc’s economy, said the EBA.

Italy’s Monte dei Paschi,  Austria’s Raiffeisen, Spain’s Banco Popular, Allied Irish and Bank of Ireland came out with the worst results.

Germany’s biggest banks, Deutsche Bank and Commerzbank, were also among the 12 weakest banks in the test.

This was the third stress test in the EU since taxpayers had to bail out lenders in the 2007-09 financial crisis.

 

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