Spain's Santander and Germany's Deutsche Bank have failed Federal Reserve's "stress test" created to estimate if lenders can withstand another financial crisis.
Officially known as the Comprehensive Capital Analysis and
Review, the tests were implemented in the aftermath of the 2008
financial crisis, in which some lenders needed bailouts from the US
central bank.
All banks with more than $50bn in assets are subject to the annual examinations, which estimate the firms' ability to deal with "doomsday" scenarios, such as rising unemployment and plummeting house prices.
The 31 lenders tested this year - which together account for roughly 80% of the banking sector - were all deemed to have enough reserve cash to deal with a shock, but the Fed found fault with Santander and Deutsche Bank's financial plans.
Previously, banks failing the tests had to suspend dividend payments to shareholders, and international lenders can be prevented from sending their earnings back to their parent companies.
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Germany's Deutsche Bank commented that it had hired 1,800 employees "dedicated to ensuring that its systems and controls are best in class".
Santander's US chief executive, Scott Powell, said the bank, which failed some of the Fed's tests for the second year in a row, still had "meaningful work to do to meet our regulator's expectations and our own standards of excellence".
The Spanish bank also added that it had not been prevented from paying dividends.
Several large US banks announced share buybacks - signalling long-anticipated paydays for investors, after the news they had passed the Fed's stress test.
Citigroup, which failed the tests last year, will buy back $7.8bn and strongly increase its dividend, while American Express will buy back $6.6bn in stock.
Bank of America said it intended to buy back $4bn worth of shares, but only once it had addressed what the Fed called "deficiencies in its capital planning process". The body has to submit revised plans to the Fed by 30 September.
