Santander, Deutsche Bank: U.S. stress test repeat offenders

Thu Jun 30, 2016 7:28am EDT
 
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By David Henry

New York (Reuters) - U.S. units of Deutsche Bank DBKGN.DE and Santander (SAN.MC: Quote) suffered the ignominy of failing U.S. stress tests yet again this year, less than a week after Britain's shocking vote to leave the European Union sent their investors running for cover.

Santander's U.S. bank is the first to fail the test three years in a row.

Both banks failed because of poor risk management and financial planning, not for lack of capital, the Fed said.

Santander's Chairman Ana Botin vowed in January to fix it within two years, after which she would consider selling it.

Yet any disposal will be tough while the Fed's standards are unmet, meaning Santander cannot access the capital to invest in its bigger businesses in Spain, Brazil and Britain. And it cannot even draw a dividend from the unit in the meantime because of Fed stipulations.

Santander's U.S. unit operates a retail and commercial bank with 670 branches and 9,800 employees in the northeast part of the country. It also owns nearly 60 percent of publicly traded lender Santander Consumer USA Holdings Inc (SC.N: Quote).

Santander said it is fixing the problems and is already preparing for next year's test when it expects the Fed to take a better view of the quality of its management.

"We are well on our way to making the enhancements necessary to improve our qualitative assessment,” Scott Powell, the chief executive of Santander Holdings USA, said in a statement.   Continued...

 
Spanish bank Santander chairman Ana Patricia Botin attends a Let Girls Learn event, in Madrid, Spain, June 30, 2016. REUTERS/Andrea Comas