WASHINGTON / NEW YORK (Reuters) – Deutsche Bank AG's. subsidiary failed on Thursday the second part of the U.S. Federal Reserve's annual stress tests due to "widespread and critical deficiencies" in the bank's capital planning controls.
The Fed board's unanimous objection to Deutsche Bank's U.S. capital plan marks another blow for the German lender, sending its shares down 1 percent after hours. Its financial health globally has been under scrutiny intense scrutiny after its rating and its plan to return to profitability.
The Fed has been placed on three banks that passed the test. Goldman Sachs Group Inc and Morgan Stanley may not increase their capital distribution and State Street Corp. needs to improve its counterparty risk management and analysis, the Fed said.
Deutsche Bank clears the Fed's easier first hurdle that measures its capital levels against a severe recession, the strictest ever run by the Fed.
Thursday's second test on the Bank's plan for that capital, as well as dividend payouts and investments, stands up against the harsh scenarios.
"Concerns include material weaknesses in the firm's data capabilities and controls its capital planning process, as well as weaknesses in its approaches and assumptions used to forecast revenues and losses under stress," the Fed said in a statement. [Failing the U.S.]
While failing the U.S. German Bank to make substantial investments in technology, operations, risk management and personnel, as well as changes to its governance.
It also means the bank would not be able to make any distributions to its German parent without the Fed's approval and could potentially result in the bank further paring back some of its U.S. operations.
In a statement on Thursday, Deutsche Bank said it had made significant investments to improve its capital planning capabilities. and would work with regulators to continue their efforts. "
The newly created subsidiaries of six foreign lenders, Deutsche Bank, Credit Suisse Group AG, UBS Group AG, BNP Paribas SA, Barclays Plc and Royal Bank of Canada, has now published their results for the first time.
Deutsche Bank's results cover DB USA Corp, a holding company with $ 133 billion in assets, according to Deutsche Bank's March filings. This includes all of Deutsche Bank's non-branch U.S. Patents. Wall Street broker-dealer trading business. assets, including its mortgage lending and debt financing.
turmoil for Germany's largest lender, whose shares are down 43 percent this year in Frankfurt.
The bank abruptly reshuffled management in April after three consecutive years of losses. It then announced it would scale back its global investment bank and refocus on Europe and its home market. It has flagged cuts to U.S. bond trading, equities and the business that serves hedge funds.
But Thursday's result wants to raise further questions among analysts and investors as to regulators should take a tougher line and even push the bank to more aggressively. operations.
David Hendler, an independent analyst at New York-based Viola Risk Advisors, said he was "astounded" with the findings of the study. 19659004] "It's like a plane that is not malfunctioning," he said.
The focus on German authorities, he added.
The Lenders Approved The Capital Plans For 34 Lenders, Giving Them The Use Of The Extra Capital For Stock Buybacks, Dividends And Other Purposes.
JPMorgan Chase & Co, Citigroup Inc, Bank of America Corp. and Wells Fargo & Co., as well as major regional lenders like Capital One Financial Corp, PNC Financial Services Group Inc and U.S. Bancorp.
Goldman Sachs and Morgan Stanley's capital plans have been approved. tax code.
Those banks want to maintain their capital distribution levels in-line with those paid in their capital cushion, the Fed said.
After the results were announced, Morgan Stanley said that it would distribute $ 6.8 billion, in line with last year's payout.
Goldman Sachs said it would return $ 6.3 billion, including $ 5 billion through share buybacks and $ 1.3 billion in dividends, which will rise to a quarterly rate of 85 cents per share from 80 cents.
Reporting by Michelle Price and David Henry; additional reporting by Tom Sims in Frankfurt; Editing by Lisa Shumaker