Deutsche Bank fails Fed’s stress test

Deutsche Bank and Santander failed the stress test again. Santander has now failed the stress test thrice, while Deutsche has failed it for twice now. Thirty other banks have passed the stress test, while the Fed has asked Morgan Stanley to address some of its weakness and come with a capital plan by the end of this year.

In the aftermath of the British referendum vote, where people voted by majority to move the country out of the European Union, banks across Europe have been hit hard. The stress test provides a check on how the banks would perform in a severe economic shock and the Fed uses it to decide whether the bank can raise dividends or go for a share buyback. It can also impose harsh sanctions on banks that repeatedly fails the test. However, Fed hasn’t announced any such measures for Deutsche or Santander.

Shares of Deutsche Bank has declined about 20 percent since the British referendum. Billionaire investor George Soros has bet millions of dollars against Deutsche Bank shares in the referendum, equivalent of 0.51 percent of the equities according to a filing. He is still holding onto  a large chunk of the bet, about 0.46 percent.