Britain’s biggest government-owned lender will issue additional Tier 1 securities that will convert to equity if its capital ratio falls below 7 percent, RBS said in a statement. The tests show the bank’s capital ratio would have fallen to 4.6 percent in a crisis, just above the 4.5 percent pass threshold.
“New total loss absorbing capital rules for global, systemically important banks, of which RBS is one, have re-written the rule book,” said Jonathan Tyce, a senior bank analyst with Bloomberg Intelligence. “Bail-in ability is the buzzword.”
The Edinburgh-based lender is among eight U.K. banks tested by the Bank of England to ensure they won’t need to rely on taxpayers for a rescue in a crisis. RBS is 80 percent owned by the British government after receiving the world’s biggest bank bailout in 2008 and 2009.
It will join the nation’s biggest lenders in
selling additional Tier 1 securities since the market opened in April last year. U.K. banks have issued the equivalent of about $23.7 billion of the high-yield contingent capital notes, which have no maturity dates and optional interest payments, compared with a total $65 billion from all European issuers, according to data compiled by Bloomberg.
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