Failure of the US subsidiary of Deutsche Bank stress tests from the Fed


by Michelle Price

WASHINGTON (Reuters) – The u.s. subsidiary of Deutsche Bank (DE:DBKGn) has not passed the second stage of stress tests (stress tests) statements of the federal Reserve, the central bank of the United States, pointing to “weaknesses substantial” in the capacity of data and the controls in terms of capital planning of the institution.

The rejection was unanimous, plans in respect of own funds of Deutsche Bank USA by the Fed is a new blow to the German bank, whose financial strength has been increased scrutiny in recent months after three consecutive years of losses.

Last week, Deutsche Bank had managed, as the 35 other banks tested by the Fed, the first stage of the stress tests focused on the evaluation of the level of own funds in the event of a severe recession.

The second step was focused on the planning of banks ‘ capital adequacy.

“(Our) concern (with respect to Deutsche Bank) are partly due to weaknesses substantial data capabilities of the company and in the control measures accompanying the process of planning of own funds”, underlines the Fed in a press release.

The latter also refers to the “weaknesses in (…) the assumptions used to forecast revenues and losses in case of tension”.

Even if this failure to test is not likely to limit the ability of the bank to pay dividends to its shareholders, it will require Deutsche Bank to implement changes in its u.s. operations.

And, because of this failure, the american subsidiary of Deutsche Bank may not make payments to its parent company without the approval of the Fed.

On the occasion of this series of tests, this is the first time that are made public the results of six foreign banks, including, in addition to Deutsche Bank, Credit Suisse Group, UBS, BNP Paribas (PA:BNPP), Barclays (LON:BARC) and Royal Bank of Canada.

The Fed approved the plans in respect of own funds of 24 banks, allowing them to use more capital to share repurchases, dividends and other assignments.

Among these institutions include JP Morgan Chase, Citigroup (NYSE:C), Bank of America (NYSE:BAC) and Wells Fargo (NYSE:WFC).

The case of Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS), whose capital levels have been adversely affected by the changes to the american tax system, the Fed has given a green light to plans of investment banks.

They therefore will not have the leisure to distribute a higher share of their profits, the increase in equity remaining the priority, added the Fed.

(Benoit Van Overstraeten for the French service)

Like this post? Please share to your friends:
Leave a Reply