Feb 23 Deutsche Bank has laid out
plans to reduce its U.S. balance sheet as the U.S. Federal
Reserve adopts new rules to shield the country's taxpayers from
costly bailouts, the Financial Times reported on Sunday.
The lender is expected to reduce its $400 billion balance
sheet in the United States to around $300 billion in part by
reassigning operations such as its Mexican arm and its Frankfurt
and Tokyo-based repo businesses that are currently part of its
U.S. business elsewhere, the FT reported. ()
The financial daily said that the bank will also reduce a
sizeable chunk of its repo business in the U.S. after
discovering that some of its clients were not making use of its
The bank may reassign U.S.-based operations to Europe or
Asia to reduce assets in its U.S. division, the newspaper said.
Deutsche's Chief Financial Officer Stefan Krause told the FT
that the lender was confident it would be able to meet the new
capital and leverage requirements imposed on its U.S. unit.
Krause said that the balance sheet adjustment should not be
seen as a pullback from the bank's U.S. franchise, where the
lender is focused on growing its asset and wealth management
business as well as battling to regain ground lost to U.S.
rivals in its flagship fixed income arm.
Deutsche Bank plans to convert some of the existing debt its
U.S. arm owes to its German arm into hybrid debt that would
convert into equity capital under certain conditions, according
to the FT.
Deutsche Bank is also hoping that the German regulator will
soon give it the green light to raise up to 6 billion euros in
additional capital through hybrid debt to help it improve its
leverage ratio in Europe, the newspaper added.
According to the new capital rules for foreign banks
announced by the Fed last Wednesday, the largest foreign banks,
with $50 billion or more in U.S. assets, will need to set up an
intermediate holding company subject to the same capital, risk
management and liquidity standards as U.S. banks.
The Fed also gave foreign banks a year longer to meet the
requirement to set up the new structure, with the new deadline
set as July 1, 2016. Both changes had been widely expected in
Foreign banks with sizable operations on Wall Street such as
Deutsche Bank and Barclays had pushed back hard against
the plan because it means they will need to transfer costly
capital from Europe.