By Max Colchester and David Enrich
LONDON-- Royal Bank of Scotland Group PLC on Friday admitted
there were errors in the data it submitted to last month's European
stress tests, the latest mishap to hit an exercise aimed at
rebuilding confidence in Europe's banks.
RBS, which is 80% owned by the U.K. government, said that it had
overstated the amount of top quality capital it held. The
adjustment wiped around EUR5 billion of capital from the bank's
balance sheet, meaning it only just passed the stress test.
"We are examining how this mistake was made, and will be working
with our regulators as we do so," said an RBS spokeswoman.
The error is the latest in a string of data problems that have
affected the test, which was orchestrated by the European Banking
Authority as a way of rebuilding confidence in the embattled
European banking sector. Soon after the test results were
published, European Central Bank officials found an error in the
2013 capital ratio of Italy's Banca Monte dei Paschi di Siena SpA .
The ECB and EBA also published different numbers for Deutsche Bank
AG's litigation costs.
The Bank of England notified the European Banking Authority
about the latest mistake Friday, after RBS previously notified the
Bank of England.
"The error is being rectified as soon as it was detected," an
EBA spokeswoman said, adding that she isn't currently aware of any
other banks having made similar errors.
Following the stress test, the Bank of England spotted the RBS's
capital calculations were out of sync with other banks and asked
the lender to look at its numbers again, according to a person
familiar with the matter.
The Bank of England is supposed to "challenge" the data given by
U.K. banks but doesn't have the numbers audited, this person said.
The EBA said it isn't its responsibility to check the data
submitted by banks.
The RBS error stemmed from the way it accounted for the tax
relief it gets from previous losses. RBS accounted for some
Deferred Tax Assets as top quality capital, artificially boosting
its capital base. When the revised figures are applied to the
"stressed scenario" of the EBA's test, RBS's capital ratio falls to
5.7% versus the 6.7% it previously reported. The pass rate for the
test was 5.5%.
The mistake comes as RBS gears up for a U.K. stress-test on Dec.
16. Analysts expect that stress test, which is being run by the
Bank of England, to be tougher than the EBA's test. People close to
the government say that there is little appetite from the U.K.
Treasury to pump more equity into the bank ahead of next year's
general election.
The latest debacle caps a tough couple of weeks for RBS. The
bank was among half a dozen banks fined for trying to rig foreign
exchange markets and it was also fined for a 2012 computer meltdown
which left 10% of the British population unable to access their
accounts. RBS is currently slimming down and refocusing on its
corporate and retail operations in the U.K. Any privatization of
the bank remains on the distant horizon, according to people close
to the U.K. Treasury.
Write to Max Colchester at max.colchester@wsj.com and David
Enrich at david.enrich@wsj.com
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