The U.S. divisions of Deutsche Bank and Santander will likely fail the Federal Reserve's stress test over faults in predicting risk and losses, The Wall Street Journal reported, citing sources.
The banks' United States units may face restrictions on paying dividends to their parent companies or other shareholders if they fail, the Journal wrote. Santander didn't pass its first test last year, while Deutsche is in its first year of evaluation.
The Fed started stress testing large foreign banks last year. As banks have bulked up on capital to withstand losses in volatile periods, the Fed has increasingly evaluated factors like how they measure losses and risk exposure.
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The Fed's Board of Governors will give full test results on March 11.
A Santander spokeswoman declined to comment on the report.
A Deutsche Bank representative said, "Deutsche Bank Trust Corporation, which represents less than 5% of Deutsche Bank AG's total assets, was pleased to participate in DFAST (Dodd-Frank Act Bank Stress Tests) and CCAR (Comprehensive Capital Analysis and Review) for the first time this year. Like the other 30 banks that have participated in CCAR, we will know our results after the Federal Reserve's announcements on March 5 and March 11."
Click here to read the full Journal report.