UPDATE 2-Fed stress test upset weighs on sale of RBS unit in U.S.
* U.S. Fed objects to capital plans of RBS, HSBC, Santander
* All three banks say will resubmit plans
* Fed objections around processes, not capital strength
* Timing of Citizens IPO could slip (Adds details of Fed objections)
By Steve Slater
LONDON, March 27 (Reuters) - Royal Bank of Scotland's separation and flotation of its U.S. business Citizens could be delayed after it was one of three foreign banks which had their plans for dealing with a financial crisis rejected by the U.S. Federal Reserve.
The U.S. central bank started scrutinising foreign banks' emergency plans only this year but its tough verdict on RBS, HSBC and Santander - three of Europe's largest banks - as well as U.S. giant Citigroup throws down a gauntlet to the European Central Bank (ECB) as it readies its own bank stress tests this year.
It also serves as a warning shot for Deutsche Bank and Barclays as they will have to participate in future U.S. stress tests due to their large operations there.
RBS, HSBC and Santander said they would resubmit their plans for how to deal with rising losses under a stressed financial scenario. Continued...