RBS fails Bank of England stress test

The stress test measured how the UK's seven biggest lenders would cope in the event of a global economic crash.

RBS, which is still 73 per cent owned by the nation’s taxpayers after its bailout in 2008, performed the worst in the test and has been forced to draw up a new plan to bolster capital by £2bn.

Two other banks, Barclays and Standard Chartered, also struggled in the stress tests, which are based on scenarios including house prices falling and the global economy contracting by 1.9 per cent. 

Barclays already has a plan in place to bolster its financial position, while Standard Chartered has not needed to take any action.

Three others banks, Lloyds Banking Group, HSBC and the UK arm of Santander, as well as Nationwide, were subjected to the test.

Ewen Stevenson, chief financial officer of RBS, said: "We are committed to creating a stronger, simpler and safer bank for our customers and shareholders. 

“We have taken further important steps in 2016 to enhance our capital strength, but we recognise that we have more to do to restore the bank's stress resilience including resolving outstanding legacy issues."

The individual vulnerabilities show that the job of ensuring our banks are capable of withstanding shocks remains challenging.Lucy O’Carroll

Commenting on the outcome of the Bank’s stress tests, Lucy O’Carroll, chief economist of Aberdeen Asset Management, said: “There is always a danger that these tests are effectively fighting the last war rather than the next one. 

“They are based on scenarios which might, or have, come to pass yet the Bank of England can’t fully predict what will actually happen. 

“But this is a worthwhile exercise. 2016 has shown what uncertain times we are in and the tests demonstrate that the banking sector is broadly well capitalised.

“The individual vulnerabilities show that the job of ensuring our banks are capable of withstanding shocks remains challenging. 

“The tests give banks no opportunity for complacency. Which is a good thing. This year has illustrated how the apparently unthinkable can happen and we all need banks that can absorb the inevitable unforeseen shocks.”

emma.hughes@ft.com