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Deutsche Bank passes US stress test with no problems

2022-06-24T00:54:20.491Z


Every year, the big financial institutions in the USA have to prove themselves in a decisive stress test: the Deutsche Bank subsidiary showed itself to be well prepared.


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Deutsche Bank office in New York City

Photo: JUSTIN LANE/EPA-EFE/REX

According to the Federal Reserve (Fed), the largest financial institutions in the USA have crisis-proof capital resources.

All 34 major banks passed the financial regulators' annual stress test, the Fed announced in Washington on Thursday.

Deutsche Bank also had no problems with its US subsidiary during the stress test using simulated crisis scenarios.

The supervisors want to ensure that lending to companies and households does not come to an abrupt halt in the event of a financial market collapse.

In the Federal Reserve's recession-simulating scenario, the 34 banks audited maintained an average capital ratio of 9.7 percent, more than double the required level, the Fed said on Thursday.

The US subsidiary of Deutsche Bank, which had failed the test several times in recent years, had the highest capital ratio of 22.8 percent, while the US bank Huntington Bancshares had the lowest at 6.8 percent.

At least 4.5 percent would have been required.

The stress tests are a consequence of the 2008 financial crisis. They are intended to prevent banks from having to be rescued again with tax money.

To do this, the Fed examines whether the capital reserves are sufficient to withstand extreme loads such as a rapid increase in unemployment or a collapse in real estate prices.

Test is important for payouts

For many of the big banks, the annual audit is crucial to being able to return money to investors in the form of dividends or share buybacks.

From Monday they are allowed to publish their capital plans.

Due to the corona crisis, the Fed had checked balance sheets particularly meticulously and at times imposed strict conditions on maintaining cash reserves.

Share buybacks and dividend increases were temporarily taboo or linked to strict conditions.

Unlike its US rivals, the dividends and share buybacks of subsidiaries of foreign financial institutions do not depend on the test result, but the profit distributions to their parent companies do.

jok/dpa

Source: spiegel

All business articles on 2022-06-24

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