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Deutsche shares crash to all-time low on reports of 'problem,' 'troubled' tags

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Deutsche shares crash to all-time low on reports of 'problem,' 'troubled' tags

Shares in Germany's biggest bank plunged May 31 after reports that its U.S. unit has been added to a pair of regulatory watchlists.

The Federal Deposit Insurance Corp. has added Deutsche Bank Trust Co. Americas to its list of "problem banks," a year after the Federal Reserve deemed Deutsche Bank AG's U.S. business to be in "troubled condition," The Wall Street Journal reported May 31, citing people familiar with the matter. Shares in the bank, which had been trading effectively flat until the news broke, closed down 7.2% in Frankfurt trading to a record-low close of €9.16 per share.

While the FDIC does not publicly identify "problem banks" on its list, it did disclose on May 22 that total assets for its group of "problem banks" had increased to $56.4 billion at March 31 from $13.9 billion at Dec. 31, 2017. The $42.5 billion increase from the previous quarter suggests the addition of Deutsche Bank Trust Co. Americas, which had $42.1 billion in assets as of March 31, the WSJ said.

Unnamed sources also said the Fed had tagged Deutsche with its "troubled condition" designation about a year ago, meaning that it had to seek Fed approval for decisions on U.S. hiring, firing, job reassignments, and severance payments for certain employees. It also reportedly contributed to the bank's recent decisions to lessen risk-taking in trading and lending.

In April, Deutsche Bank was reportedly considering making significant cuts to its U.S. cash equities business as part of a broader restructuring of its investment bank. A month later several publications reported that the bank will close its Houston office and pull back on its investment banking coverage of the U.S. oil and gas sector to cut costs.

Bloomberg News reported May 17, citing people with direct knowledge of the situation, that Fed officials warned Deutsche Bank in late March that it must act with more urgency on lapses outlined in its several settlements with the regulator over the past few years.