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RBS fails stress test: BoE outlook "challenging"

Wednesday, November 30, 2016 - 01:45

Royal Bank of Scotland says it will cut costs and sell loans to boost capital levels after failing this year's Bank of England stress test of seven British lenders. As Hayley Platt reports, Bank Governor Mark Carney also warned of a ''challenging'' outlook for Britain's financial system.

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It's been struggling since the financial crisis and remains state-funded. But few had expected RBS to fail Bank of England stress tests. Shares fell two percent when it did. And the bank quickly responded by announcing measures to make up a £2 billion capital shortfall. (SOUNDBITE) (ENGLISH): BANK OF ENGLAND GOVERNOR, MARK CARNEY, SAYING: "It lost its way over a number of years and became focussed on other things that it didn't do particularly well. Now its challenge is that it still has legacy issues associated with that, there's misconduct costs, there's impaired assets, they're still working through the so-called non-core assets." on which they have made progress." RBS's legal bill for misconduct is a huge drain. So too its failure to sell its Williams and Glyn banking business. But not all were alarmed by the "failure" headlines. (SOUNDBITE) (English) PANMURE GORDON CHIEF ECONOMIST, SIMON FRENCH, SAYING: "If you look at their tier 1 capital numbers they've increased markedly to a starting position of more than 15% of their balance sheet is covered by tier 1 capital. That is almost double where they were at just a couple of years ago and way up on the averages of 2-3% that we saw across the banking industry during the financial crisis." The performance of seven other UK lenders tested was also worse than many expected. Barclays only escaped failure because it had already announced plans to strengthen defences. So too Standard Chartered. It's reportedly planning widespread job losses. This year's health check was the toughest since the financial crisis. Global shocks combined with domestic ones among the scenarios With Carney warning of elevated risks from Britain's vote to leave the EU and Trump's election.

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RBS fails stress test: BoE outlook "challenging"

Wednesday, November 30, 2016 - 01:45