The US Federal Reserve rejected the capital plans of the US operations of Spain’s Banco Santander SA and Germany’s Deutsche Bank AG, saying it saw serious problems in the planning processes of both.
Capping the second phase of stress tests on the 31 largest US banks, the Fed also gave Bank of America’s plan a qualified pass, while the other 28 gained full approval for their dividend and share buyback programs.
The three top investment banks, JPMorgan Chase & Co, Goldman Sachs Group Inc and Morgan Stanley, meanwhile all earned approvals after revising their capital plans in the wake of last week’s first-phase results.
Explaining the rejections of Santander Holdings USA and Deutsche Bank Trust Corp, the Fed cited “widespread and substantial weaknesses across their capital planning processes.”
Stressing that the problems were qualitative, not quantitative — that on paper both banks had adequate capital resources — the Fed said it saw problems in governance, internal controls, risk assessment and other issues in both.
The effect of Wednesday’s decision is that neither can distribute their profits to shareholders — their parent banks — without the express permission of the Fed, itself dependent on addressing the shortcomings that the Fed bank examiners highlighted.
Both are significant, though not dominant, arms of their parents. Santander Holdings USA is a business with US$150 billion in assets and counts as 10 percent of the parent’s global business, according to the Fed.
With about US$54 billion in assets, Deutsche Bank Trust counts as 5 percent of Deutsche Bank’s global business.
In a statement responding to the decision, Deutsche Bank said it was committed to strengthening its capital planning process, key to ensuring it maintains a sound financial footing in a crisis.
“Deutsche Bank has hired 1,300 employees dedicated to ensuring that its systems and controls are best in class and has hired over 500 employees across its various control functions in the US,” it said.
Santander USA chairman Timothy Ryan said in a statement that the bank “will continue to reinforce our governance and management to address our supervisor’s qualitative concerns. Changes in both areas are forthcoming.”
The Fed also saw problems in Bank of America’s capital planning process, specifically its loss and revenue modeling practices.
“These deficiencies warrant further near-term attention but do not undermine the quantitative results of the stress tests for the firm,” the Fed said.
Bank of America has until September to remedy the problems, it said.
Bank of America immediately announced that is board had approved a US$4 billion stock repurchase plan through the second quarter of next year, while acknowledging the Fed’s requirement for resubmitting its capital plan.
Overall, a senior Fed official told reporters, the banks continue to strengthen, as shown by all of them passing the first phase of the stress tests — measurements of capital adequacy — last week.
SEEKING CLARITY: Washington should not adopt measures that create uncertainties for ‘existing semiconductor investments,’ TSMC said referring to its US$165 billion in the US Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) told the US that any future tariffs on Taiwanese semiconductors could reduce demand for chips and derail its pledge to increase its investment in Arizona. “New import restrictions could jeopardize current US leadership in the competitive technology industry and create uncertainties for many committed semiconductor capital projects in the US, including TSMC Arizona’s significant investment plan in Phoenix,” the chipmaker wrote in a letter to the US Department of Commerce. TSMC issued the warning in response to a solicitation for comments by the department on a possible tariff on semiconductor imports by US President Donald Trump’s
The government has launched a three-pronged strategy to attract local and international talent, aiming to position Taiwan as a new global hub following Nvidia Corp’s announcement that it has chosen Taipei as the site of its Taiwan headquarters. Nvidia cofounder and CEO Jensen Huang (黃仁勳) on Monday last week announced during his keynote speech at the Computex trade show in Taipei that the Nvidia Constellation, the company’s planned Taiwan headquarters, would be located in the Beitou-Shilin Technology Park (北投士林科技園區) in Taipei. Huang’s decision to establish a base in Taiwan is “primarily due to Taiwan’s talent pool and its strength in the semiconductor
An earnings report from semiconductor giant and artificial intelligence (AI) bellwether Nvidia Corp takes center stage for Wall Street this week, as stocks hit a speed bump of worries over US federal deficits driving up Treasury yields. US equities pulled back last week after a torrid rally, as investors turned their attention to tax and spending legislation poised to swell the US government’s US$36 trillion in debt. Long-dated US Treasury yields rose amid the fiscal worries, with the 30-year yield topping 5 percent and hitting its highest level since late 2023. Stocks were dealt another blow on Friday when US President Donald
UNCERTAINTY: Investors remain worried that trade negotiations with Washington could go poorly, given Trump’s inconsistency on tariffs in his second term, experts said The consumer confidence index this month fell for a ninth consecutive month to its lowest level in 13 months, as global trade uncertainties and tariff risks cloud Taiwan’s economic outlook, a survey released yesterday by National Central University found. The biggest decline came from the timing for stock investments, which plunged 11.82 points to 26.82, underscoring bleak investor confidence, it said. “Although the TAIEX reclaimed the 21,000-point mark after the US and China agreed to bury the hatchet for 90 days, investors remain worried that the situation would turn sour later,” said Dachrahn Wu (吳大任), director of the university’s Research Center for
RSS