U.S. Banks Beat Fed’s Test as Deutsche Bank, Santander Fail Anew
Washington (Jun 30 ) Federal Reserve officials cleared dozens of U.S. banks to boost shareholder payouts after conducting annual stress tests that proved too rigorous, again, for subsidiaries of Deutsche Bank AG and Banco Santander SA.
JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp. and 27 other firms with major U.S. operations passed the exam Wednesday, with many unveiling plans to distribute more capital through dividends and stock buybacks. Even Morgan Stanley, which must shore up internal systems before the Fed issues a final verdict, got conditional permission to boost its dividend 33 percent.
Deutsche Bank Trust Corp. and Santander Holdings USA Inc. were alone in failing, due to “broad and substantial weaknesses across their capital planning processes,” the Fed said. While both had adequate capital and showed improvement after failing last year, their plans still relied on assumptions and analyses that “are not reasonable or appropriate,” the regulator said.
The findings show U.S. banks have largely adapted to the Fed’s stiffer oversight of capital and internal controls in the wake of 2008’s financial crisis. After years spent cleaning up their balance sheets and stumbling in past exams, Citigroup and Bank of America cleared handily this time and are now moving beyond the penny and nickel dividends they’ve been stuck paying. Deutsche Bank and Santander, meantime, both vowed anew to do better next time.
“It took the U.S.-based banks quite a bit of time to get the Fed comfortable,” said David Gibbons, a former bank regulator now at Alvarez & Marsal’s Financial Industry Advisory Services. Some European banks, which haven’t been subject to the test as many years, are still catching up, he