Deutsche, Santander fail U.S. stress test; Morgan Stanley gets second chance

Wed Jun 29, 2016 4:30pm EDT
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By David Henry and Patrick Rucker

NEW YORK/WASHINGTON, June 29 (Reuters) - U.S. bank subsidiaries of Deutsche Bank AG and Banco Santander SA yet again failed the Federal Reserve's stress test on Wednesday due to "broad and substantial weaknesses" in their capital planning processes.

The Fed gave Morgan Stanley only a conditional pass, saying that the bank also had to resolve weaknesses in its processes. Morgan Stanley has until Dec. 29 to resubmit its capital plan for approval.

The stress test results announced on Wednesday, known as CCAR, are particularly important because they determine how much capital big U.S. banks can put toward dividends, stock buybacks, acquisitions or investments.

The vast majority of participants passed with flying colors, including some that have had trouble in the past, like Citigroup Inc, Bank of America Corp and Ally Financial Inc . JPMorgan Chase & Co, Goldman Sachs Group Inc and Wells Fargo & Co also passed.

(Click here to see how the banks performed:

Later on Wednesday, many of the banks that passed will release statements on dividend and stock buyback plans.

The CCAR results come after the Fed released results of a separate stress test last week, in which all 33 banks exceeded minimum regulatory capital requirements. But CCAR is a more nuanced examination, in which the Fed can fail banks for the way they go about capital planning as well as whether they technically pass a numerical threshold.

Banks had a few days to resubmit their capital plans last week if they felt that they were on shaky ground. M&T Bank Corp was the only bank to do so.   Continued...