Deutsche Bank Passes ECB Test, Braces for Libor Deal: Report
Frankfurt: Deutsche Bank passed the stress test led by the European Central Bank (ECB) by a wide margin, showing balance sheet strength well above the minimum requirements set by Europe's new banking regulator, two sources familiar with the matter said on Friday.
The ECB review is only one of the challenges faced by Juergen Fitschen and co-CEO Anshu Jain, who have already raised 8.5 billion euros ($10.8 billion) in new capital and are seeking to resolve a long list of legal issues as they pursue a sweeping restructuring plan.
The bank, which has already paid 6.1 billion euros in fines and settlements in the past two and a half years, is now preparing to pay almost 1 billion euros for Libor-related charges, two sources familiar with the matter told Reuters.
"People are doing everything to get this issue off of the table by the end of the year," said one source who declined to be named because he was not authorised to speak to the media.
In the stress tests, Deutsche Bank had a core equity ratio of 8.8 per cent against a minimum requirement of 5.5 per cent in the ECB's so-called adverse scenario, the sources said.
The stress test is meant to run banks through rough conditions that model a recession and sharp market declines over three years.
In the preliminary results, Germany's flagship bank also posted a common equity tier one ratio of 12.6 per cent in the so-called baseline scenario, meant to model economic conditions with mild growth, the sources said.
The ECB's assessment, which is designed to allow the central bank to take over with a clean sheet when it becomes the euro zone's banking supervisor on Nov. 4, is based on the banks' financial positions at the end of 2013.
Deutsche Bank declined to comment.
Results due on Sunday
The 130 banks participating in the ECB's comprehensive assessment received partial and preliminary results of the health checks on Thursday. The ECB plans to publish final results on Sunday, October 26, and the exact balance sheet calculations may change before then.
If confirmed, the results would give Germany's flagship lender a clean bill of health. Deutsche has positioned itself as Europe's "last man standing" in investment banking after rivals such as Barclays and Credit Suisse retreated in the wake of the financial crisis.
Co-CEO Fitschen, also head of the BdB association of German private-sector banks, hinted on Thursday that the test results probably gave his country's banks a clean bill of health.
The bank has never publicly revealed how much it has put aside for specific legal risks like the Libor case, referring to alleged manipulation of benchmark interest rates.
Deutsche Bank already settled with European antitrust regulators over Libor and its euro equivalent Euribor last year, agreeing to pay 725 million euros.
The bank, which declined to comment, originally hoped to clear the decks of legal issues in 2014 but has guided recently that 2015 will likely be the year instead when the majority of investigations are concluded.
(1 dollar = 0.7888 euro)
Copyright @ Thomson Reuters 2014
