A new report from UNITE HERE examines how the European Union’s proposal
to include financial services in a trade agreement came into being, and
how it would primarily benefit a single German bank.
“No other global bank has as much to gain from continued avoidance of
new Federal Reserve capital and liquidity rules than Deutsche Bank,”
says report author Meredith Schafer, “Why would European negotiators
expect the U.S. to support a process that would weaken bank solvency
rules designed to protect American taxpayers?”
Deutsche Bank’s (NYSE: DB) US subsidiary (Taunus) was operating with
negative Tier 1 capital at the time of its last report to the Federal
Reserve in 2010. If the EU proposal is incorporated into the
Transatlantic Trade and Investment Partnership (TTIP), foreign-owned
banks operating in the US could continue to avoid post-financial crisis
rules designed to protect taxpayers by requiring foreign banks to
maintain larger capital and liquidity buffers in US operations. The
inclusion of financial services of this scope is unprecedented.
As the report illustrates, U.S. policymakers from both parties support
higher capital standards for too-big-to-fail banks. Yet Germany has
consistently opposed higher capital standards in international Basel
discussions, unlike most other Basel Committee members.
After Congress included provisions in the Dodd-Frank banking reform law
that would require foreign banks in the US to operate with the same
capital requirements as US banks (aka the “Collins Amendment”), Deutsche
Bank decided to deregister its US holding company for the stated purpose
of avoiding the new capital rule.
The Fed responded to Deutsche Bank’s move to avoid DFA requirements with
a new rule for foreign banks finalized in January 2014. Estimates of the
amounts the bank would have to move to its US affiliate to comply with
the Fed’s FBO rule range from $7 billion to $13 billion.
Despite receiving hundreds of billions of dollars from the Fed in low
cost loans and other assistance, and despite the fact that its capital
and liquidity ratios have lagged peers, the bank’s German parent
astonishingly paid out over US $9 billion in dividends to its
shareholders over the last six years.
Read the report here: The
German Agenda: Helping It’s Largest Bank Avoid US Capital Rules.
Copyright Business Wire 2014