The Fed just handed an embarrassing smackdown to two European banks

The Federal Reserve has failed both Deutsche Bank Trust Corporation and Santander Holdings under the Dodd-Frank mandated stress tests.

The test measures each of the ability to respond to a crisis similar to the financial crisis for 33 financial institutions with more than $5 billion in capital in the US.

Both banks based the quantitative section of the test, meaning that under the high stress scenario, the banks would theoretically have enough capital to survive. The problem came in the qualitative review of the bank’s processes.

“The Federal Reserve objected to the capital plans of Deutsche Bank Trust Corporation and Santander Holdings USA, Inc. because of broad and substantial weaknesses across their capital planning processes, and insufficient progress these firms have made toward correcting those weaknesses and meeting supervisory expectations,” said a release form the Federal Reserve.

This is the second year in a row that the American holding side of Deutsche Bank has failed the test.

More to come…

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