LONDON — Shares in Royal Bank of Scotland are plummeting on Wednesday after the lender failed the Bank of England’s 2016 stress test.
The results of the BoE’s stress test dropped at 7.00 a.m. GMT (2.00 a.m. ET) and showed that RBS’ key capital ratio, the so-called fully loaded common equity tier one (CET1) ratio, fell to just 5.9%, significantly below the BoE’s 7.3% “systemic reference point” as well as its 6.6% “hurdle rate.”
That failure understandably caused jitters among investors in RBS, who have sold aggressively so far during the trading day. Shares are down more than 4.5% soon after 10.00 a.m. GMT (5.00 a.m. ET). Here’s the chart:
The bank has now submitted plans to the Bank of England to boost its capital position by around £2 billion, something the BoE has welcomed, saying:
“Based on RBS’s own assessment of its resilience identified during the stress-testing process, RBS has already updated its capital plan to incorporate further capital strengthening actions and this revised plan has been accepted by the PRA Board. The PRA will continue to monitor RBS’s progress against its revised capital plan.”
RBS was not alone in struggling during the tests, with both Barclays and Standard Chartered both judged to have inadequacies in their capital positions.
“While the Prudential Regulation Authority (PRA) Board judged that some capital inadequacies were revealed for three banks (The Royal Bank of Scotland Group, Barclays and Standard Chartered), these banks now have plans in place to build further resilience,” the central bank said.
Shares in those banks have held up better than RBS, with Barclays just 0.86% lower, and Standard Chartered off by a similar margin.