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June 24, 2019

Deutsche Bank faces Fed scrutiny over “bad bank” plans

By Jamie Crawley

Deutsche Bank has been quizzed by US regulators over the plans to overhaul its investment bank, according to the Financial Times.

Concerns have been raised about the German bank’s intention to create a “bad bank” holding up to €50bn’s worth of non-core assets, with the indication that this would cause a significant reduction in Deutsche’s operations in the US.

The proposals are part of a large-scale restructuring of Deutsche Bank, with a view to pivoting towards wealth management at investment banking’s expense.

It has been reported that Deutsche Bank is planning to reduce or close its US equities trading business.

This has caused concern for US regulators, given the uncertainty it would create for the composition of Deutsche Bank’s US holdings.

“The Fed needs to know from Frankfurt how this is going to change its US operations,” according to one person familiar with the matter.

“There are lots of rumours swirling around about the scale of the cuts the bank is going to make.”

Deutsche’s US bank’s operations are currently under Fed restriction after it failed its annual stress test in 2018.

The bank passed this year’s first round of stress testing, and will look forward to a lift on these restrictions pending the second round later this week.

Deutsche Bank has been prominent in the news in recent months amidst aborted merger discussions with Commerzbank.

The German bank’s woes were added to last week when the New York Times reported that US federal authorities are investigating Deutsche over non-compliance of anti-money laundering laws.

This includes a probing of the bank’s involvement in suspicious activity concerning legal entities controlled by President Trump and his son-in-law, Jared Kushner.

 

 

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