Santander and Deutsche fail Fed tests, yet their solvency ratios much larger than their US peers

For the second time in a row, Spain’s largest bank, Banco Santander, has failed stress tests carried out by the US Fed as part of the Comprehensive Capital Analysis Review (CCAR). The Spanish lender’s US operation was found to have problems with its capital and risk management strategies. The bank’s share price was down marginally this morning on the back of the news, at -0.41%. German lender Deutsche Bank also failed the Fed test. As a result, US entities of the foreign banks will not be allowed to distribute capital to their parent firms.

Santander Holding USA Tier 1 capital ratio is of 9.4% (vs 7.3% in 2014), while Deutsche Bank’s is of 34.7% (the biggest of all tested banks). Solvency ratio of both lenders is largely over all US commercial banks such as Wells Fargo (7.5%), Bank of America (7.1%) and JP Morgan Chase (6.5%), and other banks more oriented to the investment business as Citigroup (8.2%), Goldman Sachs (6.3%) y Morgan Stanley (6.2%).

“We understand that deficiencies found will translate into more technology investment and strenghtening the risk and finance management divisions so they can present a new management plan to the Fed, which in the meantime will limit dividen payment to both entities,” analysts at Bankinter commented.


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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.

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