The US branch of Deutsche Bank (NYSE: DB) has failed the second round Federal Reserve’s stress test, which assesses a bank’s capabilities during a financial crisis.
The results released on Thursday revealed the German lender to be the only bank to fail the second round of assessment outright due to “widespread and critical deficiencies across [its] capital planning practices.”
The Federal Reserve continued that the bank also had “weaknesses in its approaches and assumptions used to forecast revenues and losses under stress”.
Stress tests were introduced following the 2008 financial crisis. This year’s US stress test led to 31 of 35 banks tested given the all clear. Morgan Stanley (NYSE: MS), Goldman Sachs (NYSE: GS) and Street State (NYSE: STT) were only given conditional passes.
Part two of the tests determine how much lenders can return to shareholders in the form of items like share buybacks and dividends.
Deutsche Bank said in a statement that it will continue to make progress on its capital-planning capabilities and infrastructure. The results of the stress test “will not impact capital actions, such as the payment of dividends or other capital distributions,” by the parent company.
“Deutsche Bank USA continues to make progress across a range of programmes and will continue to build on these efforts and to engage constructively with regulators to meet both internal and regulatory expectations,” the bank added.
The results come as a blow to the German-based bank, who last month announced 7,000 job cuts and an annual loss of €500 million (£438 million) at the end of February.
The vast job cuts were decided by Mr Sewing, who began the role last month after John Cryan, was sacked.
The bank employs about 66,000 people in Europe.
Shares in the bank are trading at just below €11. This is down more than a third from 2017’s high of €17.57.