Deutsche Bank has a new CEO taking over, John Cyran.
Cyran’s predecessors, a pair of co-CEOs named Anshu Jain and Juergen Fitschen, resigned over the weekend.
Many in the banking community say they saw the firing coming as early as March, when it was announced that Deutche Bank had failed the US regulatory procedure broadly referred to as a stress test.
Some thought Jain and Fitschen would be spared after Deutche Bank announced a restructuring plan in late April.
They were not.
Failing the stress test wasn’t the only reason Jain and Fitcshen are out. Deutsche Bank has lagged bigger US firms like competitors JP Morgan and Goldman Sachs, in market gains post-crisis. The pair also failed to address cultural issues that have hobbled the German bank for years.
Business Insider spoke with banking sector pros about the surprise move at Deutsche Bank.
Here’s what they’re whispering:
- “Failing one stress test puts the CEO on notice,” a sector analyst said. After Citigroup failed its stress test last year, CEO Michael Corbat was expected to face a potential ouster if his bank couldn’t pass muster in this year’s regulatory examination. But Citi passed in 2015 with flying colours, solidifying his role — for now. Another big bank that flunked the Federal Reserve’s annual tests, BNY Mellon, has been dogged by reports it plans to replace its CEO.
- A recent scandal played no role. No one on Wall Street thinks the $US2.5 billion fine that Deutsche Bank was hit with in connection with its role in the LIBOR trading scandal was a tipping point for co-CEOs Jain and Fitschen. “It might have been one of the bullets,” Ryan Mendy, COO of research firm Edge Consulting Group. “LIBOR as a single element isn’t the straw that broke the camel’s back.”
- Jan and Fistchen’ splans will go forward. Many on Wall Street expect the bank to move forward with some version of the restructuring plan Jain and Fitschen revealed earlier this year. “One way or another, Deutsche Bank is going to do that restructuring,” one banking pro said.
- How they blew the test. Risk planning and capital management is what hampered the bank most in the tests, Mendy said. That is ordinarily enough to attract shareholders’ ire. He called the stress tests a leading cause of the management changes atop the German bank.
- Is the test fair? Not according to one banking pro, who said the Fed’s stress test is “too subjective.” In other words, stress tests results depend too much on how the test’s administrators feel about the bank’s responses, rather than the actual numbers. It’s like going in front of a co-op board.