Deutsche Bank Shares Tumbled to a 30-Year Low After Fed, IMF Rebuke

By Friedrich Geiger and Hans Bentzien 

FRANKFURT--Deutsche Bank AG shares tumbled to a 30-year low Thursday morning after the International Monetary Fund and the Federal Reserve delivered the German lender a double whammy, saying it posed a significant risk to financial stability.

The IMF said Deutsche Bank was the riskiest financial institution in the world as a potential source of external shocks to the financial system. That came right after a U.S. unit of Deutsche Bank was one of just two banks to fail the Federal Reserve's "stress test," an exercise measuring how 33 banks would fare in a new financial crisis.

Deutsche Bank shares traded down 3.5% at EUR12.22 ($10.11) at 0900 GMT, after touching an intraday low of EUR12.05, the lowest in 30 years. Deutsche Bank and other banking shares already plummeted Friday and Monday in the wake of the U.K. referendum to leave the European Union.

A trader said the Fed's criticism of Deutsche Bank's capital planning could render future capital measures, such as a capital increase, more difficult. The bank is in the midst of a wide-reaching overhaul, after posting a EUR6.8 billion loss for 2015.

ING analyst Suvi Platerink Kosonen said "after last year's performance, the failures don't come as a surprise." He noted that the Fed didn't examine all of Deutsche Bank's U.S. operations.

Bill Woodley, an executive with Deutsche Bank in the U.S., said "the capital adequacy of Deutsche Bank Trust Corporation has never been in doubt," and "we will implement the lessons learned this year in order to strengthen our capital planning process."

It was the second year in a row that Deutsche Bank failed the Fed's stress test.

The IMF said in its Financial Sector Assessment Program: "Among the G-SIBs (globally systemically important banks), Deutsche Bank appears to be the most important net contributor to systemic risks, followed by HSBC and Credit Suisse."

The institution also said the German banking system poses a higher degree of possible outward contagion, compared with the risks it poses internally.

"In particular, Germany, France, the U.K. and the U.S. 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 added.

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

A Deutsche Bank spokesman declined to comment on the IMF assessment.

Germany needs to examine whether its resolution plans for banks are operable, including a timely valuation of assets to be transferred, continued access to financial market infrastructures, and whether authorities can ensure control over a bank if resolution actions take a few days, if needed, by imposing a moratorium, the IMF said.

Write to Friedrich Geiger at [e-mail] and Hans Bentzien at [e-mail]

(END) Dow Jones Newswires

June 30, 2016 05:42 ET (09:42 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.