FRANKFURT (Reuters) - The United States Federal Reserve last year designated Deutsche Bank AG's U.S. operations to be in "troubled condition", The Wall Street Journal reported on Thursday, citing people familiar with the matter.
The Fed's assessment has not previously been made public, it said, sending shares in the German lender down 7.2 percent to 9.16 euros, their lowest level in more than a year and a half.
The "troubled condition" status is one of the lowest designations employed by the Fed, The WSJ said.
The report comes a month after Deutsche Bank's new Chief Executive Christian Sewing announced plans to cut back bond and equities trading, where it has been unable to compete with U.S. powerhouses such as Goldman Sachs and JP Morgan.
Deutsche Bank's attempts to break into the U.S. markets, which are seen as an essential plank for delivering a global investment banking platform, proved to be costly as it ended up paying out billions of dollars to settle regulatory breaches, prompting speculation at one point of a bailout by Berlin.
The WSJ said that the Fed downgrade of Deutsche Bank's U.S. operations caused the U.S. Federal Deposit Insurance Corporation (FDIC) to put Deutsche Bank Trust Company Americas on its list of "Problem Banks".
The U.S. Federal Reserve declined to comment on the report. The FDIC was not immediately available for comment.
Deutsche Bank declined to comment on the WSJ report and on its relations with the Fed, but said it was working to remedy weaknesses in its U.S. business identified by regulators.
It said in a statement that despite potential weaknesses in parts of its United States operations, the parent Deutsche Bank AG remained well capitalised and had adequate liquidity reserves.
Thomas Hallett, banking analyst at Keefe, Bruyette & Woods, said while Deutsche Bank has in the meantime started to cut costs and shift capital away from the United States, the news indicated the pressure the group was under from U.S. regulators.
"The bank has failed to sufficiently restructure the business to operate in a low interest rate and regulatory constrained environment," he said.
(Reporting by Edward Taylor; Additional reporting by Kathrin Jones, Danilo Masoni and Pete Schroeder; Editing by Maria Sheahan and Alexandra Hudson)
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Updated Date: Jun 01, 2018 00:05 AM