Most notably the European Banking Association’s (EBA) latest stress test casts a shadow over RBS’s ability to keep afloat in adverse economic conditions.

According to the score sheet, RBS's capital levels fell by 7.5% – the third biggest fall of the 51 banks tested for a decline in GDP of around 7% between now and 2018. With the global economy slowing and the UK economy expecting to accommodate a major shift in trading alliances, I am reminded of Ian Fraser’s 2014 publication ’Shredded’ in which he warns that RBS will continue to be in grave danger way into the future, mostly on account of a £100bn black hole in its balance sheet.

Meanwhile, the world’s oldest bank, Banca Monte dei Paschi di Siena, needs to raise €5bn and split itself into a good and bad bank. It should then scrape into the bottom rungs of the EBA’s listings in the event of an economic shock. Investors are awaited! 

Deutsche Bank fared somewhat better, but still ended up 10^th from bottom in the EBA’s rankings. Germany’s leading bank hopes to have dispensed with its non-core operations unit by the end of this year, but I am still curious about its acquisition of Postbank and how that is panning out. I am also reminded of the Fabian Society’s comment: “If there is one constant theme from ‘Shredded’, it is that bank reform is too important to be left in the hands of bankers and politicians.”

So are we to take comfort in what bankers and politicians have achieved when it comes to bank reform? Where regulators are concerned, the way forward has been to anticipate problems (such as a 7% drop in GDP) and thereafter publish baffling data that only a handful of people can interpret or verify. The net result is headlines in the financial press that add to existing uncertainties and institutional woes.

What would be useful is a test that reflects the moral qualities of bank CEOs. EBA graphs showing “fully loaded CET1 capital ratios” are all very well, but can anyone tell us who exactly is running these banks and whether or not they are capable of the shocking recklessness and greed that brought RBS to its knees?

It’s worth remembering that when Banca Monte dei Paschi di Siena was founded in 1472, there wouldn’t have been an abacus big enough to accommodate a bank stress test. Given that the logarithm hadn’t been invented either, the bank managed to survive centuries on the wisdom and skills of its management. As I see it, we are still as reliant on the skills and integrity of a bank’s senior management as we are on regulators inventing stress tests for eventualities that may or may not occur. You can call me old fashioned and I can hear you shouting at the screen that globalisation has already occurred, but we do still need trustworthy people on the ground in their local area capable of acting on their gut instincts.

Of course, regulators are right to limit exposure in investment banking where positions can be tipped out of bed in the time it takes a semi-conductor to close a circuit. But we need to remember that five years on from the RBS rescue, the Co-op Bank foundered on poor governance. And eight years down the line, The Economist is reporting that Deutsche Bank has outstanding issues with the US and the UK authorities, and has set aside €5.4bn to cover legal bills. It has been reported in the news that the bank also has questions to answer over money laundering and the alleged “spiriting” of money out of Russia – not much chance of reducing that uncertainty to a bar chart in a stress test!