Deutsche Bank AG and Banco Santander SA are among European banks that will probably fail US Federal Reserve stress tests of their US operations this year because they are not good enough at measuring their risks, the Wall Street Journal reported, citing people familiar with the matter.
While the tests will probably find that Deutsche Bank Trust Corp has adequate capital, the unit likely will receive a warning about that quality of its processes, according to the report. The bank already is in a remediation process with the Fed over how it handles matters like regulatory reporting, risk control, and compliance, the report said.
“Deutsche Bank Trust Corporation, which represents less than 5 percent of Deutsche Bank AG’s total assets, was pleased to participate” in the Fed tests, Michele Allison, a spokeswoman for Deutsche Bank in New York, said in an e-mailed statement. “We will know our results after the Federal Reserve’s announcements on March 5 and March 11.”
Santander’s US unit will also probably fail because of the quality of its processes even though its capital is likely to be adequate, the Journal reported.
Peter Greiff, a spokesman for Santander, declined to comment, as did Eric Kollig of the Fed.
While Deutsche Bank is undergoing its first Fed test this year, it would be the second straight failure for Madrid-based Banco Santander’s US unit.
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