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The European Bank is likely to reduce a capital surcharge for Deutsche Bank’s (NYSE:DB) leveraged finance business, in a move that could also reduce friction between the bank and its biggest regulator, according to a media report on Wednesday.
The ECB is assessing banks’ individual capital requirements for the next year, and the progress Deutsche Bank (DB) has achieved in lowering risks related to its leverage loan business means the regulators will likely lower the additional capital it has required, Bloomberg reported, citing people familiar with the matter. Still, the bank isn’t in full compliance, so the ECB probably will keep much of the surcharge, the people said.
The surcharge has been a matter of contention between banks and the ECB. Late last year, Deutsche Bank CEO Christian Sewing said the company doesn’t need warnings from the regulator on how to manage the risks it takes on with leveraged loans. Meanwhile, the ECB’s top bank oversight official, Andrea Enria, last week said he’s not easing up on banks over the matter.
Deutsche Bank (DB) stock gained 0.8% in U.S. premarket trading Wednesday.
The ECB is scheduled to disclose to banks individual capital requirements later this year. The regulator hasn’t yet made its decision on the surcharge and could change its view, one person told Bloomberg.
For 2023, DB’s capital requirement increased to 2.7% of risk-weighted assets from 2.5% in 2022, due to “assessment of risks stemming from leverage finance activities,” the company said at the time.
