Deutsche Bank’s US arm fails stress test

The Daily Telegraph - Business - - Business - By Hannah Boland

DEUTSCHE Bank’s US di­vi­sion has failed its first pub­lic Fed­eral Re­serve stress test, while a raft of oth­ers, in­clud­ing Gold­man Sachs and Mor­gan Stan­ley, have had to re­vise their pay­out plans.

Deutsche Bank’s US hold­ing com­pany had al­ready been put on the Fed’s list of trou­bled lenders but the cen­tral bank said it had now failed the stress test on qual­i­ta­tive grounds, cit­ing con­cerns over the com­pany’s abil­ity to “ef­fec­tively de­ter­mine its cap­i­tal needs on a for­ward-look­ing ba­sis”.

Deutsche Bank’s US hold­ing com­pany had taken part in pre­vi­ous stress tests, but this was the first time its re­sults have been made pub­lic.

Its fail­ure will mean it will have to get div­i­dend pay­ments it wants to pay back to its Frank­furt par­ent com­pany signed off by the Fed.

Deutsche Bank last night re­it­er­ated the busi­ness was just one part of the US oper­a­tion, and said the other en­ti­ties had had “nine years to ad­just to reg­u­la­tory re­quire­ments as Fed­eral Re­serve stress tests have evolved”.

While Deutsche Bank was alone in fail­ing the stress test, Gold­man Sachs and Mor­gan Stan­ley re­ceived a warn­ing to keep share­holder pay­outs at last year’s lev­els.

The pair were handed con­di­tional non-ob­jec­tions to their plans, as the Trump ad­min­is­tra­tion’s tax cut had partly been be­hind their cap­i­tal ra­tios fall­ing. The two banks were among six which had to re­vise pay­out plans.

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