Market Overview

Deutsche Bank's Coming US Stress Test Results Are Worrying European Regulators


European Central Bank regulators are concerned that Deutsche Bank (NYSE: DB) might fail the Federal Reserve's stress test of its combined U.S. business. In the past, the German lender failed three times to impress the regulator with its financial standing.

Another failed attempt is likely to affect the confidence of Deutsche Bank's customers and investors on the bank's financial performance. Additionally, a European bank supervisor told Reuters that the Fed may impose restrictions on the bank's expansion capabilities in the United States, in case Deutsche Bank fails.

Though the bank has worked toward improving its internal control processes and has addressed certain other weak areas, it still requires to bolster capital determining processes.

Along with concerns regarding stress tests, Deutsche Bank is facing pressure for restructuring its investment bank unit after merger discussions with Commerzbank collapsed. Several investors and even credit rating agencies have put forth similar opinions.

However, CEO Christian Sewing sees no need to curb the bank's presence in the United States.

Though Deutsche Bank's restructuring efforts like cost-saving measures look encouraging, it is really difficult to determine how much the bank will gain, considering the lingering headwinds. Moreover, dismal revenue performance remains another concern.

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The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

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