Q3 2011 EBA Recapitalisation Exercise
The Royal Bank of Scotland Group plc
Statement on the publication of the final aggregate results of the Q3 2011 EBA
recapitalisation exercise
The Royal Bank of Scotland Group plc ("RBS") notes the announcements made today by the European Banking Authority and competent National Supervisor regarding the capital exercise, which demonstrate the following result for RBS.
The capital exercise proposed by the EBA and agreed by the Council on 26 October 2011 requires banks to strengthen their capital positions by building up a temporary capital buffer against sovereign debt exposures to reflect current market prices. In addition, it requires them to establish a buffer such that the Core Tier 1 capital ratio reaches a level of 9% by the end of June 2012. The amount of any final capital shortfall identified is based on September 2011 figures. The amount of the sovereign capital buffer will not be revised.
71 banks across Europe, including RBS, were subject to the capital exercise whose objective is to create an exceptional and temporary capital buffer to address current market concerns over sovereign risk and other residual credit risk related to the current difficult market environment. This buffer would explicitly not be designed to cover losses in sovereigns but to provide a reassurance to markets about banks' ability to withstand a range of shocks and still maintain adequate capital.
Following completion of the capital exercise conducted by the European Banking Authority, in close cooperation with the competent national authority, the exercise has determined that RBS meets the 9% Core Tier 1 ratio after the removal of the prudential filters on sovereign assets in the Available-for-Sale portfolio and prudent valuation of sovereign debt in the Loans and receivables portfolios, reflecting current market prices.
The methodology underlying the capital exercise was outlined by the EBA prior to its announcement to ensure consistency across all banks in the EU banking system involved in the exercise.
RBS confirms it remains well capitalised with a Core Tier 1 capital ratio under the exercise of 10.5% compared with our published ratio of 11.3% as of 30 September 2011.
The removal of prudential filters on sovereign assets prescribed by the EBA recapitalisation exercise lead to a positive revaluation reserve adjustment of £1,050m, hence there was no impact on the Core Tier 1 ratio under the exercise.
A reconciliation between the exercise and RBS's published Core Tier 1 capital as at 30 September 2011 is provided below:
|
EBA Template |
EBA Methodology |
|
|
|||
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|
Published Sept 11 |
Material Holdings1 |
Loss of tax on EL vs provisions2 |
EBA CT1 methodology |
CRD 3 impact3 |
EBA CT1 including CRD 3 |
|
Core Tier 1, £m |
47,830 |
(303) |
(767) |
46,760 |
(381) |
46,379 |
|
RWAs, £m |
423,308 |
0 |
0 |
423,308 |
16,730 |
440,038 |
|
Core Tier 1 % |
11.3% |
|
|
11.0% |
|
10.5% |
1 Material holdings deducted from Total Tier 1 in the published ratio, deducted from Core Tier 1 under EBA methodology.
2 Tax on the excess of expected loss over provisions - disallowed for Core Tier 1 under EBA methodology.
3 Core Tier 1 deduction of £381m equates to £4,763m of RWAs at 1250%, resulting in a total RWA equivalent impact of £21,493m for CRD3.
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For further information, please contact: |
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Investor Relations Richard O'Connor Head of Investor Relations |
Media Relations Deputy Head of Group Media Relations |
Notes to Editors
The detailed results of the recapitalisation exercise as well as information on RBS exposures to central, regional and local governments in the EEA are available via the link below.
http://www.rns-pdf.londonstockexchange.com/rns/6534T_-2011-12-8.pdf
This announcement contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including those related to RBS's regulatory capital position, risk-weighted assets, impairment losses and credit exposures under certain specified scenarios. In addition, forward-looking statements may include, without limitation, statements typically containing words such as "intends", "expects", "anticipates", "targets", "plans", "estimates" and words of similar import. These statements concern or may affect future matters, such as RBS's future economic results, business plans and current strategies. Forward-looking statements are subject to a number of risks and uncertainties that might cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward-looking statements. Factors that could cause or contribute to differences in current expectations include, but are not limited to, legislative, fiscal and regulatory developments, competitive conditions, technological developments, exchange rate fluctuations and general economic conditions. These and other factors, risks and uncertainties that may impact any forward-looking statement or the Group's actual results are discussed in RBS's UK Annual Report and materials filed with, or furnished to, the US Securities and Exchange Commission, including, but not limited to, RBS's Reports on Form 6-K and most recent Annual Report on Form 20-F. The forward-looking statements contained in this announcement speak only as of the date of this announcement and RBS does not assume or undertake any obligation or responsibility to update any of the forward-looking statements contained in this announcement, whether as a result of new information, future events or otherwise, except to the extent legally required.
ENDS
This information is provided by RNS
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