Deutsche Bank riskiest global financial firm says IMF
(30 June 2016 – Germany) As part of its annual review of the stability of the German financial sector, the International Monetary Fund (IMF) has highlighted Deutsche Bank as the riskiest major financial institution in the world.
"Deutsche Bank appears to be the most important net contributor to systemic risks, followed by HSBC and Credit Suisse," the IMF said in its report, released earlier this week.
In a bid to avoid repeating history, global regulators have placed stricter capital holding requirements that provide incentives to financial institutions to become smaller and less complex.
“The relative importance of Deutsche Bank underscores the importance of risk management, intense supervision of G-SIBs and the close monitoring of their cross-border exposures, as well as rapidly completing capacity to implement the new resolution regime,” the IMF said.
Deutsche Bank currently exceeds its capital requirements and is shrinking its balance sheet to comply with regulations as they become stricter.
"In particular, Germany, France, the UK and the US have the highest degree of outward spillovers as measured by the average percentage of capital loss of other banking systems due to banking sector shock in the source country," the IMF said.
In the US, the German bank’s subsidiary, Deutsche Bank Trust Corp along with Santander Holdings were the only two banks to fail the US Federal Reserve’s annual stress test.
It was the second year that the subsidiary of the German lender failed the test while for Spain's Santander it was the third time. While the central bank noted improvements for the two banks, it said there were continued substantial weaknesses.
Launched following the Global Financial Crisis in 2008, the test examines the country’s 33 biggest providers’ ability to operate during a severe downturn. The Reserve bank passed 31 of the participating lender.
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