The Federal Reserve objects to capital distribution plans proposed at Deutsche Bank Trust and the Santander U.S. operation, meaning that the banks cannot issue dividends or make share buybacks until they establish a new plan, the central bank said Wednesday.
Further, regulators are requiring Morgan Stanley to submit a new capital plan by the end of the fourth quarter of 2016, but said they did not object to the bank's capital plan.
The Fed's Wednesday announcement of the results of its Comprehensive Capital Analysis and Review marks the second and final portion of the annual, two-part stress tests aimed at gauging Wall Street's ability to adequately respond to an economic crisis.
There were only three objections out of 33 institutions tested.
The Fed's objections to Santander Holdings USA and Deutsche Bank Trust, the bank's U.S. transaction bank and wealth management business, mark the second consecutive year regulators flagged both banks.
"The capital adequacy of Deutsche Bank Trust Corporation has never been in doubt," Bill Woodley, CEO of DB USA and deputy CEO of Deutsche Bank Americas, said in a statement. "We appreciate the Federal Reserve's recognition of our progress, and we will implement the lessons learned this year in order to strengthen our capital planning process for future CCAR submissions."
Santander's U.S. unit also saw objections from the Fed in its 2014 stress test, however. A senior central bank official said Wednesday that "serious deficiencies remain in a number of areas" for each of the companies' U.S. units.
"If a firm were to have a repeat [fail], it would be serious," David Wright, managing director of banking and securities at Deloitte, who previously held various roles within the Fed, said before test results were announced. "Multiple objections are something to be avoided."