The American divisions of Deutsche Bank and Santander they did not pass the Federal Reserve's stress tests, seeing their capital plans, those relating to the distribution of dividends and the repurchase of own securities again rejected. For the German parent company this is the second year in a row of rejection while for the Spanish one it is the third. Santander is the only company to have failed US stress tests for such a long stretch of time: the Fed cited improvements but still "insufficient progress" since March 2015.
The big Wall Street banks instead got the green light, following which they immediately ran to reward the shareholders (in the case of Citigroup, promoted for the second year in a row, the coupon was tripled to 16 from 5 cents on a dollar ). Only Morgan Stanley received a conditional ok: while obtaining approval on the distribution of profits to shareholders, the group was reprimanded for its "weakness" in its internal processes. For this he will have to resubmit his capital plan by 29 December next, responding to those shortcomings. If it is still dissatisfied, then the Fed can freeze the bank's programs.
Created after the 2008 financial crisis, those released yesterday and concerning 33 groups represent the second round of stress tests after those of last week. Those concerned lenders' capital levels, well above the minimum deemed acceptable by regulators even in the event of a hypothetical recession. Those whose results were released yesterday focused on risk management and precisely on the intentions of the banks analyzed in terms of dividends and buybacks.
He also intervened on Deutsche Bank the International Monetary Fund, defining it in its Financial Sector Assessment Program as the greatest source of risk for the entire global financial system as a potential source of negative externalities. “Among G-SIBs (Globally Systemically Important Banks), Deutsche Bank appears to make the largest contributor to systemic risks, followed by HSBC and Credit Suisse,” the Washington-based institution said, also underlining how the entire banking system German poses the greatest threat of possible contagion outside its own internal risks.
"In particular, Germany, France, the UK and the US have the highest level of external spillovers when measured in terms of the average percentage of capital losses compared to other banking systems due to sector shocks in the country," the IMF. Deutsche Bank's relevance underscores the need for risk management, intensive supervision and monitoring of cross-border exposures, and the ability of global systemically important banks to equip themselves with new resolution systems, adds the Fund, calling on the Germany to examine the feasibility of bank resolution plans and in particular the precise estimate of the assets to be transferred, the continued access to financial market infrastructures and the possibility for the authorities to guarantee control of a bank in a few days in the event of measures of resolution. On the Frankfurt Stock Exchange, after this series of negative news, the Deutsche Bank share lost 3,2%.
