WASHINGTON (Reuters) - Deutsche Bank AG’s (DBKGn.DE) U.S. subsidiary failed on Thursday the second part of the U.S. Federal Reserve’s annual stress tests due to “material weaknesses” in its data capabilities and capital planning controls.
The Fed board’s unanimous objection to Deutsche Bank’s U.S. capital plan marks another blow for the German lender, whose financial health globally has been under intense scrutiny in recent months.
Deutsche Bank last week cleared the Fed’s easier first hurdle that measures its capital levels against a severe recession scenario.
The Fed’s second test focuses on the bank’s capital plan.
“Concerns include material weaknesses in the firm’s data capabilities and controls supporting 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.
While failing the U.S. stress test would not likely affect the banks’ ability to pay dividends to shareholders, which are typically paid out at the group level, it will require Deutsche Bank to make changes to its U.S. operations.
It also means the bank would not be able to make any distributions to its German parent without the Fed’s approval.
The newly created U.S. subsidiaries of six foreign lenders, Deutsche Bank, Credit Suisse Group AG (CSGN.S), UBS Group AG (UBSG.S), BNP Paribas SA (BNPP.PA), Barclays Plc (BARC.L) and Royal Bank of Canada (RY.TO), went through the test for the second time this year had their results publicly released for the first time.
Deutsche Bank’s results cover DB USA Corp, a holding company with
