RBS fails banking stress test
(30 November 2016 – United Kingdom) The Bank of England (BoE) has found that the Royal Bank of Scotland (RBS) is the worst prepared among the UK's biggest lenders to cope with another financial crisis.
Following the results, RBS announced plans to increase its balance sheet by £2 billion (A$3.4 billion) through cutting costs and reducing assets.
Under the "very severe" tests, banks had to be able to handle a house price crash in the UK and a global recession.
In a statement, RBS said it had "agreed a revised capital plan... to improve its stress resilience".
It said the change came "in light of the various challenges and uncertainties facing both the bank and the wider economy highlighted by the concurrent stress testing process".
The bank submitted the new plan to BoE after running its own internal tests and finding its balance sheet would fall short.
Additionally, the central bank found Barclays and Standard Chartered (StanChart) also missed targets but had already taken steps to cope.
The Bank highlighted that Barclays fell short of one hurdle, but it added that the bank's existing plans to safeguard its balance sheet were enough.
StanChart missed a key metric as well, although it was not asked to take any action.
The Bank's Financial Policy Committee said in light of the findings and action taken by RBS, "the banking system is in aggregate capitalised to support the real economy in a severe, broad and synchronised stress scenario".
The central bank’s governor Mark Carney, said: "There were three of the institutions who could see the direction of travel and took actions of their own accord."
He added that the tests showed the banks would still be able to lend to households and businesses, despite the "very severe shock".
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