SHARES in Lloyds and RBS fell by around two per cent yesterday after the banks said they had both passed the latest regulatory health check inspired by the European Banking Authority.
Lloyds in particular came under early pressure as investors worried that capital requirements might weigh on its ability to make an early resumption of dividends.
But the bank said the figures were based on a static balance sheet and ignored its recent progress. Lloyds said it was "not required to take any action as a result of this stress test and will continue to ensure that its robust capital position is maintained".
The latest exercise, involving the EBA and the Prudential Regulation Authority, sets a minimum tier 1 capital ratio of 5.5 per cent after assuming various adverse scenarios on asset values. Lloyds, which published a tier 1 ratio figure of 10.2 per cent at the end of 2013 using a PRA transitional model, said that ratio falls to 6.2 per cent after the stress tests, or 6 per cent on a 'fully-loaded' basis, for the end of 2016. RBS said its PRA-modelled ratio falls from 8.6 per cent to 6.7 per cent, on both bases.
But Lloyds also stressed that the PRA model is "significantly more onerous" than the one "generally applied across other European jurisdictions" by the EBA. On the EBA model, the Lloyds ratio would be a far healthier 9.6 per cent after the tests. RBS also made the comparison, noting that its ratio would be 8.6 per cent on the EBA model.
Meanwhile Citizens Financial, where RBS still owns 75 per cent after the US bank's $3billion September flotation, has reported a 31 per cent rise in third quarter profit to $189million (£118m).
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article