RBS’s latest own goal may knock shares on Monday

<p>RBS verged on failing European stress test Royal Bank of Scotland may this afternoon have opened a new front in the punishment it faces from the UK […]</p>

RBS verged on failing European stress test

Royal Bank of Scotland may this afternoon have opened a new front in the punishment it faces from the UK government, European regulators and in public opinion with another own goal.

The 80% government-owned bank has admitted it handed in wrong results during the recent European bank stress tests.

RBS said the error was down to an incorrect calculation of core capital for a test of its financial health.

On Friday, it said in fact, it only marginally passed a test that it initially appeared to have passed comfortably.

If the calculations had been conducted correctly, the bank’s score capital on full Basel III rules would amount to 5.7% under the adverse scenarios set in the test.

Banks needed a 5.5% minimum to pass the test.

Its Tier 1 Capital was incorrectly stated as 6.7% in the original result.


Shares saved by the Friday bell

Since the announcement was coincidentally announced in the last 45 minutes of trade, it appears the stock reaction was limited, albeit still negative.

The stock closed a moderate 0.8% lower at 377.7p.

However, the market may be inclined to sell the shares rather lower than that.

Looking at a chart of half-hourly intervals in RBS Group Daily Funded Trade within City Index’s Advantage Trader platform, clients already sold the name well past the underlying stock’s close, with the DFT settling just above 369.

The gap between today’s closing level and the next clear step lower, created by the leap up from 366.6 on 31st October, may be a tempting one.

But the real test will come when the market reopens on Monday.




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