R.B.S. Overstated Capital Ratio in European Stress Test

Seems like RBS just keeps having problems. I guess that is why the British government had to bail them out during the financial crisis. The bank, which is 81 percent owned by the British government after a bailout during the financial crisis, said that it did not properly recognize certain tax credits on theoretical losses as part of a stress test by the European Banking Authority. As a result, R.B.S., based in Edinburgh, said that its “fully loaded” common equity Tier 1 capital ratio in 2016 should have been 5.7 percent under an “adverse scenario,” essentially a future financial crisis, as part of the test, instead of the 6.7 percent that was reported. The capital ratio is an important measure of the bank’s ability to weather financial disturbances. The new number is still above the minimum threshold set by the authority.

“This revised result was above the post-stress minimum ratio requirement of 5.5 percent used in the 2014 E.B.A. stress test for the adverse scenario,” the bank said in a statement.

It’s a good thing we don’t have too many banks like this in the US… or wait we did…

The bank, which is 81 percent owned by the British government after a bailout during the financial crisis, said that it did not properly recognize certain tax credits on theoretical losses as part of a stress test by the European Banking Authority.

Read more at NYTIMES.com

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