TIDMRBS
RNS Number : 4848Q
Royal Bank of Scotland Group PLC
29 November 2016
The Royal Bank of Scotland Group plc
Statement on the publication of the 2016 Bank of England stress
test results
30 November 2016
The Royal Bank of Scotland Group plc ("RBS") notes the
announcement made today by the Bank of England ("BoE") regarding
the results of its 2016 stress test. The test applied a
hypothetical adverse scenario to the Group's balance sheet as at 31
December 2015 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, including CRD
IV distribution restrictions and conversion of Additional Tier 1
securities ("AT1").
RBS's low point CET1 ratio under the hypothetical adverse
scenario would have been 5.5% which is below RBS's updated 6.6%
Individual Capital Guidance ("ICG") and below the post-stress CET1
Systemic Reference Point ("SRP") of 7.1% (please refer to
definitions in notes below the table). After the impact of
management actions and restriction of the CRD IV distribution, the
ratio would have been 5.9%; and subsequently 6.7% post the
conversion of AT1 securities. This takes the result above the ICG
hurdle rate of 6.6% but it remains below the SRP of 7.1%.
RBS's Tier 1 leverage ratio under the hypothetical adverse
scenario would have been 2.7% which is below the hurdle rate of
3.0% and below the post-stress leverage ratio SRP of 3.2%. After
the impact of management actions, the ratio would have been 2.9%,
which remains below both the hurdle rate and the Tier 1 leverage
ratio SRP.
The bank has taken a number of actions since 31 December 2015 to
improve its capital position stress resilience, including the
on-going run-down of Capital Resolution (risk-weighted assets
("RWAs") reduced by GBP10.4 billion (21%) to GBP38.6 billion in the
first nine months of 2016), the continued reduction in higher risk
credit portfolios, the settlement of various litigation cases and
regulatory investigations and the issuance of an additional GBP2
billion equivalent in AT1 securities. A number of these actions
impacted our CET1 ratio which was 15.0% as at Q3 2016, compared to
15.5% as at FY 2015. This is above RBS's CET1 ratio target of
13.0%.
RBS has agreed a revised capital plan with the PRA to improve
its stress resilience in light of the various challenges and
uncertainties facing both the bank and the wider economy
highlighted by the concurrent stress testing process. RBS intends
to execute an array of capital management actions to supplement the
organic capital generation from its core franchises and further
improve its stress resilience, including: further decreasing the
cost base of the bank; further reductions in RWAs across the bank;
further run-down and sale of other non-core loan portfolios in
relation to our personal and commercial franchises; reduction in
certain non-core commercial portfolios in Commercial Banking; and
the proactive management of undrawn facilities in 2017. RBS expects
its revised capital plan to address the shortfall identified in
today's stress test results. However, additional management actions
may be required until RBS's balance sheet is sufficiently resilient
to stressed scenarios.
Commenting on the results, Ewen Stevenson, Chief Financial
Officer, said:
"We are committed to creating a stronger, simpler and safer bank
for our customers and shareholders. We have taken further important
steps in 2016 to enhance our capital strength, but we recognise
that we have more to do to restore the bank's stress resilience
including resolving outstanding legacy issues."
Table: RBS projected consolidated solvency ratios in the stress
scenario.
Minimum stressed
ratio after 'strategic'
management actions
and before conversion
of AT1
----------------------------
Actual Minimum Non-dividend All Minimum Hurdle Systematic Actual Submit
(end-2015) stressed 'strategic' 'strategic' stressed rate reference (2016 revised
ratio management management ratio point Q3) capital
(before actions actions (after plan?
the impact only(i) including the impact
of CRD IV of
'strategic' distribution 'strategic'
management restrictions management
actions actions and
or AT1 conversion
conversion) of AT1)
---------------- ----------- ------------ ------------- ------------- ------------ -------- ----------- ------- ---------
Revised
capital
Common plan
equity received
Tier 1 and
ratio(a)(b) 15.5% 5.5% 5.8% 5.9% 6.7% 6.6%(j) 7.1% 15.0% accepted
Tier 1
capital
ratio(c) 19.1% 8.1%(f) 8.5%(f) 8.5%(f) 8.5%(f) 19.1%
Total
capital
ratio(d) 24.7% 12.5%(f) 12.8%(f) 12.9%(f) 12.9%(f) 24.1%
Memo:
risk weighted
assets
(GBP billion) 243 255(f) 255(f) 255(f) 255(f) 235
Memo:
CET1 37.6 14(f) 15(f) 15(f) 17(f) 35.2
(GBP billion)
---------------- ----------- ------------ ------------- ------------- ------------ -------- ----------- -------
Tier 1
leverage
ratio(a)(e) 5.6% 2.7% 2.9% 2.9% 2.9% 3.0% 3.2% 5.6%
Memo:
leverage
exposure
(GBP billion) 702(g) 591(h) 591(h) 591(h) 591(h) 703
Notes to table:
a) The low points for the common equity Tier 1 (CET1) ratio and
leverage ratio shown in the table do not necessarily occur in the
same year of the stress scenario and correspond to the year where
the minimum stressed ratio is calculated after all 'strategic'
management actions and before conversion of AT1.
b) The CET1 ratio is defined as CET1 capital expressed as a
percentage of risk-weighted assets (RWAs) where CET1 capital is
defined in line with the UK implementation of CRD IV as set out in
the PRA Rulebook and in Supervisory Statement SS7/13, 'CRD IV and
capital', December 2013, and RWAs are defined in line with the UK
implementation of CRD IV as set out in the PRA Rulebook and
relevant Supervisory Statements, December 2013.
c) Tier 1 capital ratio is defined as Tier 1 capital expressed
as a percentage of RWAs where Tier 1 capital is defined as the sum
of CET1 capital and additional Tier 1 capital in line with the UK
implementation of CRD IV.
d) Total capital ratio is defined as total capital expressed as
a percentage of RWAs where total capital is defined as the sum of
Tier 1 capital and Tier 2 capital in line with the UK
implementation of CRD IV.
e) The leverage ratio is calculated in line with the Policy
Statement 'The Financial Policy Committee's powers over leverage
ratio tools', July 2015.
f) Corresponds to the same year as the minimum CET1 ratio over the stress scenario.
g) Leverage exposure measure taken from the bank's annual accounts.
h) Corresponds to the same year as the minimum leverage ratio over its stress scenario.
i) This includes CRD IV distribution restrictions. Where a bank
is subject to such restrictions all non business as usual cuts to
distributions subject to CRD IV restrictions will appear in the
next column - 'All 'strategic' management actions including CRD IV
distribution restrictions'. This should not be interpreted as a
judgement by the Bank that any or all of such cuts are conditional
on such restrictions.
j) The hurdle rate for CET1 ratio refers to the Individual Capital Guidance.
Additional information:
1. As part of its Supervisory Review and Evaluation Process
("SREP") the PRA has reduced the CET1 Pillar 2A component of RBS's
ICG from the previously disclosed 2.8% to 2.1% of RWAs.
2. ICG is the amount and quality of capital resources which the
regulator requires a firm should hold at all times under the
overall financial adequacy rules. RBS's 2016 CET1 ICG comprises
4.5% Pillar 1 requirement and 2.1% Pillar 2A.
3. Systemic reference point defined as sum of P1, P2A and a 25%
per annum phase-in of the current 1% G-SIB buffer.
4. 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.
5. 'Adjusted' measures of financial performance are before own
credit adjustments; gain or loss on redemption of own debt;
strategic disposals; restructuring costs and litigation and conduct
costs.
6. Detailed disclosure is available from the BoE website:
http://www.bankofengland.co.uk/financialstability/Pages/fpc/stresstest.aspx
7. For details of our 2015 results please refer to:
http://otp.investis.com/clients/uk/rbs1/rns1/regulatory-story.aspx?cid=365&newsid=615667
For further information, please contact:
Investor Relations
Alexander Holcroft
Head of Equity Investor Relations
+44 (0) 20 7672 1758
Matthew Richardson
Head of Fixed Income Investor Relations
+44 (0) 20 7678 1800
RBS Media Relations
+44 (0) 131 523 4205
Forward Looking Statements
This announcement contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995,
including those related to RBS and its subsidiaries' regulatory
capital position, risk-weighted assets, impairment losses and
credit exposures under certain specified scenarios. In addition,
forward-looking statements may include, without limitation,
statements typically containing words such as "intends", "expects",
"anticipates", "targets", "plans", "estimates" and words of similar
import. These statements concern or may affect future matters, such
as RBS's future economic results, business and capital 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, fiscal and regulatory developments, competitive
conditions, technological developments, exchange rate fluctuations
and general economic 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 Annual Report and
materials filed with, or furnished to, the US Securities and
Exchange Commission, including, but not limited to, RBS's Reports
on Form 6-K and most recent Annual Report on Form 20-F. 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.
ENDS
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The company news service from the London Stock Exchange
END
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