BoE's Carney: RBS faces challenges from past misconduct, bad assets

Mark Carney, Governor of the Bank of England speaks during the quarterly Inflation Report press conference at The Bank of England in London, Britain November 3, 2016. REUTERS/Kirsty Wigglesworth/Pool

LONDON (Reuters) - Royal Bank of Scotland RBS.L still faces challenges from past misconduct and bad assets, Bank of England Governor Mark Carney said on Wednesday after the British lender failed the central bank's latest stress test.

The BoE ruled that RBS must boost its capital buffers, an unexpected result that underlines a litany of problems that RBS is grappling with.

“That institution (RBS) has made a lot of progress over the last several years, particularly around its core business franchise,” Carney said at a news conference after the central bank published its latest financial stability outlook.

“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.”

Royal Bank of Scotland may have to pay out as much as $27 billion in misconduct fines and lawsuits over the next few years, according to estimates by lawyers and analysts.

Analysts say the bank could have to pay the U.S. Department of Justice as much as 9 billion pounds in the next few months for mis-selling mortgage backed bonds in what would be largest fine in the bank’s history.

Reporting by David Milliken and Huw Jones; Writing by Andy Bruce; Editing by Rachel Armstrong