Deutsche Bank fails first combined US stress test

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Deutsche Bank failed the first public stress test of its combined US business as the Federal Reserve faulted the company's internal controls, another black eye to executives trying to shore up investor confidence.

The Fed found "widespread and critical deficiencies across the firm's capital-planning practices", according to a statement.

It cited weaknesses in Deutsche Bank's risk-management functions and data capabilities, as well as the methodology and assumptions used to forecast how the unit would fare under stress.

Deutsche Bank was the only one of 18 domestic and foreign banks to receive an objection.

It shows authorities remain frustrated with the company's US arm, which they added last year to a confidential list of troubled lenders.

"Together, these weaknesses raise concerns about DB USA's ability to effectively determine its capital needs on a forward- looking basis," the Federal Reserve said.

Deutsche Bank said the US business "has made significant investments to improve its capital planning capabilities as well as controls and infrastructure". The unit is still making progress and working with regulators, according to a statement.

Deutsche Bank shares actually rose 1pc to €9.15 each in early trading in Frankfurt, narrowing its decline this year to 42pc.

The US unit of Germany's largest bank failed the second round of this year's stress tests, which were established as part of the Dodd-Frank overhaul of financial regulations.

All 35 of the lenders in the opening round showed they could withstand a severe economic downturn, the Fed announced last week.