Out of 33 banks, just three were fucking retarded, according to the capital creators at the Fed. Both DB and SAN were viewed in a disagreeable manner, deplorable even, while Morgan Stanley was asked to resubmit a new plan.
Maybe the Fed doesn’t like Deutsche Bank’s capital structure of $24 billion in market cap and a $1.8 trillion balance sheet? What do you think?
The Federal Reserve objects to capital distribution plans proposed at the U.S. units of Deutsche Bank and Santander, meaning that the banks cannot issue dividends or make share buybacks until they establish a new plan, the central bank said Wednesday.
Further, central bank regulators are requiring Morgan Stanley to submit a new capital plan by the end of the fourth quarter of 2016, but said they did not object to the bank’s capital plan.
The Federal Reserve’s Wednesday announcement of the results of its Comprehensive Capital Analysis and Review marks the second and final portion of the annual, two-part stress tests aimed at gauging Wall Street’s ability to adequately respond to an economic crisis.
There were only three objections out of 33 institutions tested.
The Fed’s objections to Santander Holdings USA and Deutsche Bank Trust, the U.S. units of each bank, mark the second consecutive year regulators flagged both banks. Santander’s U.S. unit also saw objections from the Fed in its 2014 stress test, however. A senior Fed official said Wednesday that “serious deficiencies remain in a number of areas” for each of the firms’ U.S. units.
Typically, these stress test results are quickly looked at by traders, then tossed into the circular file. However, considering the recent stresses that Deutsche Bank has been enduring, it’s somewhat possible this might be a market moving event.
On this news, Bank of America has announced a $5 billion buyback and a 50% increase in their dividend.
UPDATE: re Morgan Stanley
If you enjoy the content at iBankCoin, please follow us on TwitterThe Board of Governors did not object to Morgan Stanley’s capital plan. However, Morgan Stanley exhibited material weaknesses in its capital planning process. These weaknesses warrant further near-term attention but do not undermine the quantitative results of the stress tests for the firm. They include shortcomings in the firm’s scenario design practices, which do not adequately reflect risks and vulnerabilities specific to the firm, weaknesses in some aspects of the firm’s modeling practices, and weaknesses in governance and controls around both scenario design and modeling practices. Accordingly, as a condition of not objecting to Morgan Stanley’s capital plan, the Board of Governors is requiring Morgan Stanley to address these weaknesses and resubmit its capital plan by December 29, 2016. If Morgan Stanley does not satisfactorily address the identified weaknesses in its capital planning process by that time, the Board of Governors would expect to object to the resubmitted capital plan and may restrict Morgan Stanley’s capital distributions.
same as it ever was.
Morgan Stanley always seems to be on weak legs, but they did survive 2008
Morgan Stanley and Goldman did not “survive”: they were rescued. Big difference.
They (as well as Lehman, Bear Stearns, and Merril Lych) relied on sellign short-terms bonds to fund their operations. Their funding dried up, and only a hasty conversion to a BHC (funded by depositors, insured by the FDIC, and able to take loans from the FED) kept them from being just another name in a history book.
http://www.federalreserve.gov/newsevents/press/orders/20080922a.htm
The 2008 crisis destroyed the capitalistic Investment Bank model and now these banks are funded by socialist models relying on FDIC, the FED, and the Treasury in a “heads I win, tails you bail me out” model.
MS would have crumbled like dust without a bailout in 2008.
“Deutsche Bank’s capital structure of… $24 billion in market cap and a $1.8 trillion balance sheet? What do you think?”
I think this is one case where the Fed is correct. DB is a prime example of why there shouldn’t be TBTF banks. If any crisis should occur, DB stock holders may find DB to be an even better “cash incinerator”, as Fly calls such companies, than TWLO.
As the Fed indicates, DB needs to get their act together before they incinerate the world’s stock markets.
You know…..there’s a section of your first sentence that pretty much sums up the last 9-10 years and it contains Grand Canyon sized truth.
“according to the capital creators at the Fed.”
In a real economy, capital/wealth is created by the goods, services, work and industry of the nation itself. Not by some nebulous and ethereal agency that simply says, Print more or Print less.
Artificially induced inflation is just that. Artificial. There is always that pesky day of reckoning when a strong wind blows that house of cards into the ash heap of history.
Man that was a gut punch to the bears today. Will see if douche bank needs to force sell again.
Worth watching the European banks very closely. Many of them have similar chart patterns that are pointing to systemic issues. Give it time.
The “Leave EU” Brits are catching hell from four corners.Hey wouldn’t it be ironic if Brexit actually ends up being a most wise decision even as European banks eventually slip into contagion? Oh wait, the narrative of the intelligentsia and the news media will blame Brexit for the next credit crisis. Never mind.
When have any of you ever heard someone say that their bank is SANTANDER? Besides old people looking for free kitchen machines