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Royal Bank of Scotland struggles in 'MoT test' for lenders

By Ryan Wilkinson

Published 02/12/2015

Concerns: Governor Mark Carney
Concerns: Governor Mark Carney

Ulster Bank owner Royal Bank of Scotland (RBS) has emerged as one of the two weakest performing firms in the Bank of England's stress test.

The banks, which included Standard Chartered, did not have enough capital strength to meet some of the measures laid down as part of the annual MoT of lenders' capacity to deal with financial shocks.

Regulators allowed the banks to pass the overall test after considering steps they had taken to shore up their central reserves and crisis survival strategies. Meanwhile Barclays, HSBC, Lloyds Banking Group, Nationwide Building Society and Santander UK cleared the assessment.

Governor Mark Carney said the UK lending sector was "already most of the way there" and the results showed banks were "significantly more resilient" now, than before the global financial crisis.

The improvement was testament to reforms brought in after the 2008 meltdown that "have rebuilt capital and confidence in the UK banking system".

Speaking as the results were published, Mr Carney also noted concerns over lending practices in the buy-to-let market, saying the Financial Policy Committee (FPC) will "monitor developments in buy-to-let activity closely." It is the second year that the Bank of England has put UK lenders through their paces by simulating a major financial crisis.

The projections showed RBS, bailed out by the taxpayer in the last downturn, did not meet its individual capital level expected by the regulators in the stress scenario.

Ewen Stevenson, RBS chief financial officer, said: "We are pleased with the progress we have made relative to the 2014 stress test, but recognise we still have much to do to restore RBS to be a strong and resilient bank for our customers."

The FPC's assessment of global markets was that growth was sluggish and emerging and developed markets posed challenges.

Belfast Telegraph

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