Publication of the 2015 Bank of England stress test results


Publication of the 2015 Bank of England stress test results

The Royal Bank of Scotland Group plc ("RBS") notes the announcement made today by the Bank of England (“BoE”) regarding the results of its 2015 stress test.

Our news

01 December 2015

RBS does not need to alter its current capital plan as a result of the stress test.

RBS's transitional Common Equity Tier 1 (“CET1”) capital ratio under the hypothetical adverse scenario was 5.9%. After the impact of management actions, the ratio was 6.1%, which was above the 4.5% post-stress minimum CET1 capital ratio threshold set by the BoE.

RBS’s Tier 1 leverage ratio under the hypothetical adverse scenario was 2.9%. After the impact of management actions, the ratio was 3.0%, which met the 3.0% post-stress minimum Tier 1 leverage ratio threshold set by the BoE.

Taking into account the capital actions achieved so far in 2015 and those planned in the future, RBS does not need to alter its current capital plan as a result of the stress test, including the requirements relating to its Individual Capital Guidance (“ICG”).

Commenting on the results, Ewen Stevenson, 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.”

“During 2015 we have continued to strengthen our core capital ratio and improve our leverage position. Following the divestment of Citizens in October 2015, our pro-forma CET1 ratio at 30 September 2015 would have been 16.2% and our leverage ratio 5.6%.”

 

Table 1: RBS, BoE modelled stress test result overview

 

 

PRA Transitional Basis  

   

End-point CRR(1

Basis

 

RBS actual 31 December 2014

BoE minimum stressed ratio before the impact of ‘strategic’ management actions

BoE minimum stressed ratio after the impact of ‘strategic’ management actions

RBS actual 
31 December 2014

RBS 30 September 2015 pro-forma for regulatory deconsolidation of Citizens

CET1 capital ratio

11.1%

5.9%

6.1%

11.2%

16.2%

Tier 1 capital ratio

13.2%

7.8%

8.0%

11.2%

17.0%

Total capital ratio

17.1%

12.1%

12.3%

13.7%

20.3%

           

Risk-weighted assets

£356bn

£306bn

£306bn

£326bn

£249bn

CET1 capital

£40bn

£18bn

£19bn

£40bn

£40bn

           

End-point CRR basis

         

Leverage exposure

£940bn

£615bn

£615bn

£940bn

£751bn

Tier 1 leverage ratio(2)

4.2%

2.9%

3.0%

4.2%

5.6%

Notes to table: (1) Capital Requirements Regulation (“CRR”) as implemented by the Prudential Regulation Authority (“PRA”) in the UK. (2) The leverage ratio is calculated on an end-point CRR basis with no benefit from RBS’s 2015 £2bn Additional Tier 1 (“AT1”) issuance.

 

Additional information:

  1. The projections of RBS’s financial performance under hypothetical stress included in this announcement are based on the methodology and calculations of the BoE. This does not represent RBS’s projection, or base capital plan assumptions.
  2. Detailed disclosure is available from the BoE website: http://www.bankofengland.co.uk/financialstability/Pages/fpc/stresstest.aspx
  3. RBS’s capital and leverage stress test result assumes no benefit from any AT1 capital issuance or conversion into ordinary (CET1) equity, as RBS’s current AT1 capital of c.£2bn was issued after 31 December 2014, the start point of this stress test.
  4. Management actions focus on additional cost savings.
  5. Citizens Financial Group (“Citizens”) was deconsolidated for accounting purposes at 30 September 2015 and regulatory deconsolidation was effective in November 2015. Citizen’s RWAs and leverage exposure will be deconsolidated at 31 December 2015, following its divestment in October 2015. The actual price realised for the divestment of Citizens was higher than that assumed in the 2015 Stress Test.
  6. ICG relates to guidance given to a firm about the amount and quality of capital resources that the appropriate regulator thinks the firm should hold at all times under the overall financial adequacy rules.
  7. For details of our 2014 results please refer to: http://otp.investis.com/clients/uk/rbs/RNS/regulatory-story.aspx?cid=365&newsid=464706

 

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