Deutsche Bank and Santander have failed their second consecutive US stress test, following a rejection from Federal Reserve over their capital plans.
According to a statement from the Fed, it rejected their capital plan “based on qualitative concerns.” The result means the US units of both banks will not be able increase shareholder pay-outs until they establish a new plan.
“We appreciate the Federal Reserve’s recognition of our progress, and we will implement the lessons learned this year in order to strengthen our capital planning process for future CCAR submissions,” said Bill Woodley, CEO of DB USA and deputy CEO of Deutsche Bank Americas in a statement.
Deutsche Bank plans to launch its new US intermediate holding company, DB USA on 1 July.
The Fed is also requiring Morgan Stanley to submit a new capital plan by the end of the year “to address certain weaknesses in its capital planning processing.”
Meanwhile 30 US banks passed stress tests, including BNY Mellon, Citigroup, Goldman Sachs, JP Morgan and State Street, showing that the banks have largely adapted to the new standards.
Stress tests have been at the cornerstone of post-financial crisis policy in the US, providing a check on how the biggest banks would cope in the event of another market shock.
Since 2009, common equity capital ratios, which compare high quality capital and risk-weighted assets, have more than doubled, reflecting an increase of more than $700 billion.