British banks pass European stress tests

23rd July 2010, Comments 0 comments

British banks Barclays, HSBC, Lloyds and RBS have passed European stress tests on their ability to survive a crisis, the Financial Services Authority said on Friday.

"The FSA welcomes the publication of the results of the EU-wide stress test exercise conducted by the Committee of European Banking Supervisors," the FSA said in a statement.

"The CEBS exercise shows that the UK banks are well placed to handle further periods of economic stress, as outlined in the macro economic parameters detailed by CEBS, should such stress develop."

Barclays, HSBC, Lloyds and Royal Bank of Scotland -- the "big four" of the British banking sector -- easily passed the stress tests. The last two groups were partly nationalised at the height of the global financial crisis.

Lloyds and RBS are now 41-percent and 83-percent state-owned, after both groups received massive government bailouts.

Britain's four main lenders had already been subjected to stress tests by the FSA last year.

"This resilience is a result of the considerable work that has been undertaken to strengthen UK banks in recent years," the FSA regulator added on Friday.

HSBC chief executive Michael Geoghegan welcomed news that his bank had passed the crucial European test.

"The outcome for HSBC reinforces what we have been saying -- that HSBC is both financially strong and well positioned to deal with any further foreseeable economic downturn," Geoghegan said in a company statement.

He also added that the exercise was "a timely and important contribution to building investor and market confidence and supporting financial stability".

Lloyds Banking Group said that it has "a robust capital position that reflects the significant capital raising undertaken in 2009", while Barclays also noted the positive test results.

And Royal Bank of Scotland also applauded news that its capital ratio was deemed to be strong.

"We support the need for banks to maintain strong capital ratios and we believe that stress tests like these, whilst theoretical, can provide insights into absolute and relative strength," said RBS finance director Bruce Van Saun.

"We are pleased that the results demonstrate the strong capital position of RBS as we endeavour to execute our recovery plans over the coming years."

There was also a positive reaction from industry body the British Bankers' Association (BBA).

"UK banks have already put in the work to rebuild their businesses and put more money aside against future financial problems. It is no surprise to find they have exceeded the standards set out by CEBS," the BBA said in a statement.

© 2010 AFP

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