ECB orders Deutsche Bank to increase common equity holdings

The European Central Bank (ECB) has increased the capital holding requirements for Deutsche Bank in 2018 to a little above the average for European lenders, according to City AM.

The German bank is now required to maintain a common equity tier one (CET1) ratio of 10.65% throughout 2018, up from the 9.52% requirement which applied in 2017. The change has been announced on Deutsche Bank’s website.

The change does not necessarily mean that the bank will have to raise additional funds, as it held a CET1 ratio of 14.58% in September.

The ECB decision was announced following an annual review and evaluation process which enables the central bank to judge the level of exposure to risk of individual banks.

All banks are required to hold a minimum of 4.5% of risk-adjusted assets as common equity within BAsel III banking regulations, but the ECB sometimes applies higher requirements for banks judged to be so important that their collapse could trigger a broader financial crisis.

The raise in the bank’s capital requirements shows that the capital conservation buffer is being implemented as well as a separate buffer which applies to globally important banks.