RBS stress test failure: 'A lot of banks now find themselves in an induced coma'

Ross McEwan, chief executive of RBS, is seen speaking to investors in 2014

Wednesday, November 30, 2016

A leading financial market strategist has told Julia Hartley-Brewer that many banks now find themselves "in an induced coma."

Mike Ingram, of BCG Partners, was speaking to talkRADIO after RBS failed an annual banking stress test designed to assess lenders' preparedness for worst-case scenario outcomes such as a collapse in the global economy.

Ingram said that the 73% taxpayer-owned bank failed because it is too exposed to the property market and there was a feeling that UK consumer behaviour is now generating "alarm bells." He also suggested there is now a feeling that a collapse in the Italian banking system, feared by many economists, would have a knock-on effect in the UK.

"The Bank of England and other regulators have worked hard - not necessarily smart, but hard - to put various firewalls in place to stop these so-called overspills," Ingram said, "but one of the problems of this is they've had to keep interest rates too low for too long and that means bank's profitability has been severely depressed and that means they haven't been able to generate more capital internally.

"It's rather like putting somebody in an induced coma. The patient isn't dead, but they can't necessarily do anything useful."