The UK’s seven largest banks were included in the test: Barclays, HSBC, Lloyds Banking Group, Nationwide Building Society, Santander UK, RBS and Standard Chartered. While all banks passed the test based on their balance sheets at end-2014, it revealed that RBS and Standard Chartered need to strengthen their capital positions.
RBS did not meet its individual capital guidance while Standard Chartered did not meet its Tier 1 minimum capital requirement of 6%, after management actions in the test’s scenario.
The scenario in the central bank’s test this year was that oil had fallen to $38 a barrel and that the global economy had headed for a downturn.
In light of the steps that RBS has already taken to strengthen its capital position, coupled with its plans for future additional Tier 1 (AM1) issuance, the PRA board did not require the bank to submit a revised capital plan. Similarly, Standard Chartered’s recent strategy review and the associated steps taken to strengthen its capital position exempts it from further action.
Mark Carney, governor at the Bank of England, said the successful tests underscored the improvements made in recent years by the UK’s banking system to solidify its capital base.
