Deutsche Bank fails Fed's annual stress test

The Federal Reserve concluded its annual stress tests this week and has confirmed that Deutsche Bank would not overcome a new financial crisis, while also blocking Goldman Sachs, Morgan Stanley and JP Morgan Chase from increasing dividends and stock buybacks this year.

Deutsche was the only one out of the 18 tested that did not pass the exam, though this was not a surprise for the Fed which had said in May that Deutsche Bank was on its list of “problematic banks”.

“Concerns include material weaknesses in the firm’s data capabilities and controls supporting its capital planning process, as well as weaknesses in its approaches and assumptions used to forecast revenues and losses under stress,” the Fed said in a statement overnight.

Failing the test will require Deutsche Bank to make substantial investment in technology, operations, risk management and personnel, as well as changes to its governance. The bank said it had already made significant investments and will "continue to build on these efforts".

Its financial health has been under intense scrutiny after S&P cut its rating and questioned its plan to return to profitability.

After the end of the central bank’s stress tests, the four largest US lenders, JPMorgan Chase, Bank of America, Wells Fargo and Citigroup, said they will pay out more than $110bn to shareholders.

Meanwhile, joining Goldman and Morgan Stanley in a group of six having to revise their payout plans in order to pass the test, were JPMorgan Chase, AmEx, KeyCorp and M&T Bank.