WASHINGTON--(BUSINESS WIRE)--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.