The test applied a hypothetical adverse scenario to the Group’s balance sheet as at 31 December 2017 and compared the theoretical Common Equity Tier 1 (“CET1”) ratio and Tier 1 leverage ratio positions of RBS before and after the impact of strategic management actions.
IFRS 9 Transitional basis
RBS's low point CET1 ratio under the hypothetical adverse scenario would have been 9.6% on a transitional basis pre management actions, excluding dividends and excluding CRD IV restrictions. This is above RBS’s 7.3% hurdle rate (please refer to definitions in notes below the table).
RBS’s Tier 1 leverage ratio under the hypothetical adverse scenario would have been 5.1% post the impact of strategic management actions. This is above the hurdle rate of 3.59%.
IFRS 9 Non-transitional basis (fully loaded)
RBS's low point CET1 ratio under the hypothetical adverse scenario would have been 9.2% on a fully loaded basis pre management actions, excluding dividends and excluding CRD IV restrictions. This is above RBS’s 6.9% hurdle rate (please refer to definitions in notes below the table).
RBS’s Tier 1 leverage ratio under the hypothetical adverse scenario would have been 4.8% on a fully loaded basis pre management actions, excluding dividends and excluding CRD IV restrictions. This is above the hurdle rate of 3.25%.
Commenting on the results, Katie Murray, Interim Chief Financial Officer, said:
“I am pleased that we have achieved a clear pass in the Bank of England’s stress test. This result provides confidence that RBS could continue to support its customers and the UK economy, even in the very tough economic conditions modelled in the test. It is a sign of further progress in rebuilding capital in a year when we also resolved our last major legacy issues as well as announcing an annual profit and paying a dividend for the first time in ten years.”
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1. Hurdle rate is Bank specific and set by the PRA.
2. 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 projections or base capital plan assumptions.
This announcement contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, including (but not limited to) those related to RBS and its subsidiaries' regulatory capital position and funding requirements, financial position, ongoing litigation and regulatory investigations, profitability and financial performance (including financial performance targets and expectations), structural reform and the implementation of the UK ring-fencing regime, the implementation of RBS’s restructuring and transformation programme, impairment losses and credit exposures under certain specified scenarios, increasing competition from new incumbents and disruptive technologies and RBS’s exposure to political and economic risks (including with respect to Brexit), operational risk, conduct risk, cyber and IT risk and credit rating risk. In addition, forward-looking statements may include, without limitation, the words ‘expect’, ‘estimate’, ‘project’, ‘anticipate’, ‘commit’, ‘believe’, ‘should’, ‘intend’, ‘plan’, ‘could’, ‘probability’, ‘risk’, ‘Value-at-Risk (VaR)’, ‘target’, ‘goal’, ‘objective’, ‘may’, ‘endeavour’, ‘outlook’, ‘optimistic’, ‘prospects’ and similar expressions or variations on these expressions. These statements concern or may affect future matters, such as RBS's future economic results, business plans and current strategies. Forward-looking statements are subject to a number of risks and uncertainties that might cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward-looking statements. Factors that could cause or contribute to differences in current expectations include, but are not limited to, legislative, political, fiscal and regulatory developments, accounting standards, competitive conditions, technological developments, interest and exchange rate fluctuations and general economic and political conditions. These and other factors, risks and uncertainties that may impact any forward-looking statement or RBS's actual results are discussed in RBS's UK 2017 Annual Report and Accounts (ARA) and materials filed with, or furnished to, the US Securities and Exchange Commission, including, but not limited to, RBS's most recent Annual Report on Form 20-F and Reports on Form 6-K. The forward-looking statements contained in this announcement speak only as of the date of this announcement and RBS does not assume or undertake any obligation or responsibility to update any of the forward-looking statements contained in this announcement, whether as a result of new information, future events or otherwise, except to the extent legally required.