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Santander and Deutsche banks fail a US Fed Reserve “stress test”

Friday, March 13th 2015 - 13:06 UTC
Full article 13 comments
Another institution, Bank of America, has been asked to revise its financial plans due to “certain weaknesses”. A further 28 banks passed the tests. Another institution, Bank of America, has been asked to revise its financial plans due to “certain weaknesses”. A further 28 banks passed the tests.
Germany's Deutsche Bank said it had hired 1,800 employees “dedicated to ensuring that its systems and controls are best in class”. Germany's Deutsche Bank said it had hired 1,800 employees “dedicated to ensuring that its systems and controls are best in class”.
Santander's US chief executive, Scott Powell, said the bank had “meaningful work to do to meet our regulator's expectations and our own standards of excellence”. Santander's US chief executive, Scott Powell, said the bank had “meaningful work to do to meet our regulator's expectations and our own standards of excellence”.

Spain's Santander and Deutsche Bank have failed a US “stress test” designed to assess whether lenders can withstand another financial crisis. The review, carried out by the Federal Reserve, gauges whether the biggest banks operating in the US have the “ability to lend to households and businesses even in times of stress”.

 Another institution, Bank of America, has been asked to revise its financial plans due to “certain weaknesses”. A further 28 banks passed the tests.

Officially known as the Comprehensive Capital Analysis and Review, the tests were implemented in the aftermath of the 2008 financial crisis, in which some lenders needed bailouts from the US central bank.

All banks with more than $50bn in assets are subject to the annual examinations, which assess the corporations' ability to deal with “doomsday” scenarios, such as rising unemployment and plummeting house prices.

The 31 lenders tested this year - which together account for roughly 80% of the banking sector - were all deemed to have enough reserve cash to deal with a shock, but the Fed found fault with Santander and Deutsche Bank's financial plans.

In previous years, banks that failed the tests were forced to suspend dividend payments to shareholders, and international lenders can be prevented from sending their earnings back to their parent companies.

In a statement reacting to the Fed's announcement, Germany's Deutsche Bank said it had hired 1,800 employees “dedicated to ensuring that its systems and controls are best in class”.

Santander's US chief executive, Scott Powell, said the bank, which failed some of the Fed's tests for the second year in a row, still had “meaningful work to do to meet our regulator's expectations and our own standards of excellence”.

However, the Spanish bank added that it had not been prevented from paying dividends.

Following news that they had passed the Fed's tests, several large US banks announced share buybacks - signalling long-anticipated paydays for investors.

Citigroup, which failed the tests last year, will buy back $7.8bn and strongly increase its dividend, while American Express will buy back $6.6bn in stock. Bank of America said it intended to buy back $4bn worth of shares, but only once it had addressed what the Fed called “deficiencies in its capital planning process”.

The bank has to submit revised plans to the Fed by 30 September. “We are committed to meeting the requirements in the time frame the Fed has established,” said Bank of America boss Brian Moynihan, in a statement.

Top Comments

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  • ilsen

    Tonight I 'stress-tested' my Santander Bank Card at the delightful restuarant Viet Ho!, just off Old Street in East London, whilst paying for a large group of well-fed and thoroughly inebreiated friends and colleagues.

    It passed.

    lol!

    :-))))))))))))))))))

    Mar 14th, 2015 - 03:31 am 0
  • ChrisR

    “A further 28 banks passed the tests.”

    HA, HA, HA, HA, you know the rest.

    You have to laugh at the Fed! Horse, gate, bolt. Do you think they speak jibber-jabber, because that is the order they are running things.

    You were supposed to stop the rot BEFORE it happened you numbnuts.

    As for “Santander's US chief executive, Scott Powell, said the bank had “meaningful work to do to meet our regulator's expectations and our own standards of excellence”.”

    I bet that little quip comes as a shock to Ana Patricia Botín the daughter of the main man who built the bank into what it is today now deceased, herself the new Chairman of the entire business.

    “Scott” has only just got the new job! I wonder how long he will last?

    Mar 14th, 2015 - 01:00 pm 0
  • Conqueror

    @1, 2. Your comments are all very well and, no doubt, extremely erudite. However spain is on its way down the tubes. Check out its economic prospects, its argie-like lies, its 'exposure ' to tourist departure, its economic war. Amazingly, a little country of 30,000 people has a much better economy, doesn't lie, is a magnet for tourists and has more 'supporters' than spain. Gibraltar abandons spain, sacks all spanish workers, closes frontier, enhances links with Morocco. Hi-speed catamaran cargo vessels. Linked by air. Spain suffers. More unemployment. Demands for more benefits. Businesses fail. Spain bankrupt. Might be bought by British tourists.

    Mar 14th, 2015 - 03:57 pm 0
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