Risk Management

Deutsche Bank Criticized by IMF, Fed

Deutsche Bank 'is one of the most important net contributors to systemic risks in the global banking system,' the IMF said.
Katie Kuehner-HebertJune 30, 2016

Both the International Monetary Fund and the U.S. Federal Reserve criticized Deutsche Bank in reports this week, the IMF saying the German financial institution posed a significant risk to financial stability. The news sent the German bank’s shares tumbling to a 30-year low Thursday.

Deutsche Bank “is found to be a major source of outward spillover to publicly listed banks in Germany and some insurance companies,” the IMF wrote in its financial sector assessment program report. “Further, it is one of the most important net contributors to systemic risks in the global banking system.”

The importance of Deutsche Bank emphasizes the need for risk management, intense supervision and monitoring of cross-border exposure, as well as the ability of globally systemic banks to carry out procedures for winding down if necessary, the IMF said.

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A Deutsche Bank spokesman declined to comment to The Wall Street Journal on the IMF assessment.

Meanwhile, Deutsche Bank was among the three institutions out of 33 that did not have their capital plans accepted by the Fed in the central bank’s so-called Comprehensive Capital Analysis and Review.

In the CCAR, the Fed said it had “identified deficiencies in the risk management and control infrastructure at [Deutsche Bank’s U.S. unit], including risk measurement processes; stress testing processes; and data infrastructure.” The Fed said that the “deficiencies limit the reliability of the capital planning process of [the banking unit] and its ability to conduct a comprehensive assessment of its capital adequacy.”

Deutsche Bank shares traded down 2.7% at €12.32 ($13.71) Thursday afternoon in Frankfurt, after touching an intraday nadir of €12.05, the lowest in 30 years, according to the WSJ.