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).