European Banks Vow to Increase Capital Organizing

Date: 15 March 2015 - 21:25

News ID: ۱۲۰۹۸

LONDON (Dispatches) -  Santander and Deutsche Bank have promised to increase their capital organizing, controls and reporting following the two massive European lenders failed the US pressure tests carried out by the Federal Reserve.
Analysts said the benefits have been a different indication of how the duo have had tense relationships with US regulators in recent years.
Failing the test prevents the US entities of the foreign banks from distributing capital to their parent firms — but the benefits have been anticipated and shares in each lenders had been flat on Thursday.
Santander is the only foreign bank to fail the test twice in a row, although Deutsche’s debut failure comes only weeks before the lender announces a strategic overhaul.
Next year the US tension tests will be expanded to incorporate BancWest, the US operation of France’s BNP Paribas, and TD Bank of Canada, the Fed stated.
All foreign banks with big US operations are being forced to set up US bank holding companies by next year to comply with hard neighborhood capital, leverage and governance needs. Other folks in this category, such as Barclays, will join the US pressure tests in 2018.
A senior Fed official stated Santander and Deutsche had been found to have really serious deficiencies in capital arranging and risk management.
The biggest banks in Spain and Germany respectively have been identified to have adequate capital to remain above the minimum required under stressed circumstances, but they failed the "qualitative” portion of the test.
Ana Botin has identified Santander’s US operations as a priority because taking over as executive chairman from her late father in September. Final week, the Madrid-based lender appointed a new chief executive of its US bank holding corporation.
Francisco Riquel, an analyst at N+1, a Madrid-primarily based investment bank, mentioned the failure was a costly distraction for Santander in the US. "I don’t consider they can afford to fail this test for a third consecutive year,” he added. "If that happens, they might be forced to exit.”
Final year, the Fed stated Santander’s consumer lending unit had paid an unauthorised $52 million dividend to its shareholders, including its US bank holding organization. It had been barred from generating any capital distributions except dividend payments on particular preferred stock instruments right after failing final year’s tension test.
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