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Deutsche Bank AG | TG:DBK | Tradegate | Ordinary Share |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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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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