The Royal Bank of Scotland has vowed to improve after it failed the Bank of England’s stress test.
The Bank in its third annual test found that RBS could struggle to meet its responsibilities in the case of a future financial crisis or recession.
The test also exposed Barclays and Standard Chartered as having “some capital inadequacies”.
All three banks will have to strengthen their financial resilience.
HSBC, Lloyds Banking Group, Santander UK and Nationwide Building Society all passed the test.
The lowest results came from RBS whose CEO said the bank will cut costs, sell off more of its assets such as personal and commercial loan portfolios, and reduce lending to customers in order to add to its capital wherewithal.
“The stress test demonstrates that RBS remains susceptible to financial and economic stress,” the Bank of England said.
British taxpayers still own a major chunk of RBS which is trying to sell off Williams & Glyn, a move required as part of its 2008 bailout by the UK Government. In August this year, RBS said that Williams & Glyn was not likely to survive as a stand-alone business and that RBS now hopes to sell it to another bank as an asset transfer.
Adding to its woes, RBS is facing a multi-billion dollar charge from US authorities over its mis-selling of securities backed by toxic mortgages, a practice which helped introduce the Great Recession felt around the globe.
The Bank of England said its assessment included projections of such misconduct costs, which RBS referred to as “outstanding legacy issues”.
