Royal Bank of Scotland would need to more than double its provisions against potential losses on its Irish loan book if it faced the stress tests with the same criteria used by the Irish government earlier this week.
The part-nationalised bank has so far put aside £6bn to cover the losses it expects to make on its Irish portfolio. However, UBS analysts estimate RBS would need to raise this to £15bn using the loss assumptions Blackrock applied to Irish banks.
In contrast, Lloyds Banking Group would need to increase its provisions by just £200m to £8bn, according to UBS.
On Thursday, Ireland's central bank revealed the country's four main banks will have to raise an additional €24bn (£21bn) in capital following stress tests designed to repair market confidence in the country's shattered financial system.
The tests uncovered the level of loan losses Allied Irish Bank, Bank of Ireland, Irish Life & Permanent and the EBS Building Society would face in a scenario where property prices continue to fall and economic growth remains weak.
The European Central Bank and International Monetary Fund, which last year provided Ireland with a €85bn bail-out, welcomed the announcements by the Irish government. The ECB said it would suspend the BBB– rating threshold for the eligibility of collateral for the Eurosystem credit operations for all debt instruments issued or guaranteed by the Irish government.
The Telegraph
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