Deutsche Bank AG has pledged to cap the amount of retail deposits it will use to support US activities as it seeks permission from European regulators to deploy German savers’ funds to other parts of the business, according to people with knowledge of the matter.
The commitment is an attempt to reassure both the European Central Bank and German regulator Bafin that savers’ cash won’t enable risky international activities, the people said, asking not to be identified. While a previous request to tap those deposits under the former management was rejected, regulators now have a more benign view in part because of Deutsche Bank’s pledge on the US cap, the people said without defining the limit.
Deutsche Bank CEO John Cryan is merging the company’s consumer-banking activities in Germany, giving the firm access to funds held at its Postbank unit, about $140 billion in retail deposits which over time could be re-invested in higher-yielding assets instead of mortgages. Constraints on Deutsche Bank’s ability to use the liquidity more broadly across the firm had played an important role in the decision to sell Postbank in April 2015, a sale that Cryan abandoned this year. Representatives for Deutsche Bank, the ECB and Bafin declined to comment.
Deutsche Bank in January finalised a $7.2 billion agreement to resolve a years-long US investigation into its dealings in mortgage-backed securities before 2008. Regulators had argued that the bank’s representatives misled investors on the quality of loans underpinning mortgage securities, while some German banks had to be bailed out by the state after the securities blew up.
In the US, Deutsche Bank is among foreign banks that from July 2016 have had to set up fully-funded umbrella legal structures for their local operations and take part in the Federal Reserve’s annual stress tests because their local assets exceed $50 billion.