Monday, March 16, 2015

The World’s Largest Derivative Holder…Just Failed the Stress Test

The US Federal Reserve has slammed the breaks on the German bank’s plans to raise dividends and buy back shares. The central bank says its US operations are too weak to survive another major economic crisis.
Fed tells Deutsche Bank US to reduce risk
The US divisions of Germany’s biggest bank failed a crucial stress test on Wednesday after the Federal Reserve in Washington deemed its financial foundation too weak to withstand a crisis like the one that threatened to crash the global economy in 2008.
The Fed faulted the capital plans of some 12 to 14 percent of Deutsche Bank’s US operations, saying they showed “numerous and significant deficiencies.”
For the second year in a row, the central bank also vetoed the US plans of Spain’s largest bank, Santander, pointing to “widespread and critical deficiencies” with regard to governance, planning for risks and other areas.
Santander and Deutsche Bank have $118 billion (111.1 billion euros) and $55 billion in assets in the US respectively.
Deutsche Bank offensive
For Deutsche Bank, it was the first US stress test since the Fed launched its review in 2009.
Reacting to the Fed’s objections, a Deutsche Bank spokeswoman in New York said the company had already recruited 500 employees and launched an investment offensive to the tune of 1 billion euros ($1.06 billion) meant to improve the shortcomings.
The Elephant In The Room: Deutsche Bank’s $75 Trillion In Derivatives Is 20 Times Greater Than German GDP
It is perhaps supremely ironic that the last time we did an in depth analysis of Deutsche Bank’s financial situation was precisely a year ago, when the largest bank in Europe (and according to some, the world), stunned its investors with a 10% equity dilution. Why the capital raise if everything was as peachy as the ECB promised it had been? It turned out, nothing was peachy, and in fact DB would proceed to undergo a massive balance sheet deleveraging campaign over the next year, in which it would quietly dispose of all the ugly stuff on its balance sheet during the relentless Fed and BOJ-inspired “dash for trash” rally in a way not to spook investors about everything else that may be beneath the Deutsche covers.
We note this because moments ago, Deutsche Bank did the same again when it announced that it would issue yet another €1.5 billion in Tier 1 capital.
Jim Willie: Swiss De-peg Triggers Massive Derivative Crisis, Potential END OF THE EURO!

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