U.S. banking units of Deutsche Bank, Santander fail, same as last year; Morgan Stanley’s approval is conditional and bank has to resubmit capital plan
Big U.S. banks won permission from regulators Wednesday to boost dividends and buybacks, offering investors some welcome news after the sector got hammered when the U.K. voted last week to exit the European Union.
All but two of 33 institutions passed the final round of the Federal Reserve’s annual “stress tests,” conducted to gauge how such firms would fare in a new financial crisis. (See this interactive graphic on how each bank fared.)
Big firms such as Bank of America Corp. and Citigroup Inc., which struggled on the tests in recent years, passed this time. Morgan Stanley also passed but received a bit of a rebuke. The Fed said it found “weaknesses” in internal risk- management processes and required the bank to submit a revised capital plan by the end of the year, though it will still be able to return capital in the meantime.
Morgan Stanley Chairman and Chief Executive James Gorman said that the firm is able to increase its capital return to shareholders for the fourth consecutive year, adding “we are committed to addressing the Fed’s concerns about our capital planning process and fully expect to meet their requirements within the established time frame.”