Whitehall is nervous that the government may have to inject further capital into the Royal Bank of Scotland.
Nervousness is growing in Whitehall that Royal Bank of Scotland will need a further injection of capital from the government in an effort to recapitalise the Europe’s banking system, according to the Financial Times.
The paper reported this week that the European Banking Authority was rerunning the data on 91 European banks that were subjected to stress tests in July, applying market-based write-downs to their sovereign debt holdings.
Although all of Europe’s big banks passed the EBA’s July stress test, with capital ratios above the 5 per cent core tier one pass mark.
RBS, Commerzbank, Deutsche Bank, Société Générale and UniCredit had stress test results in a grey area above the minimum but below 7 per cent. Once sovereign haircuts – likely to range from 20 per cent on Spain up to 65 per cent on Greece – are applied, those numbers will fall.
“[RBS’s] sovereign exposure is not fundamentally worrying but if there is a broader European drive to recapitalise the banks it’s conceivable they may need more government money,” one government official told the Financial Times.
RBS received the world’s biggest bail-out during the financial crisis, at a cost of £45bn to the UK taxpayer.