Washington, Jun 29 (IANS): The Deutsche Bank's US division has failed the second round of the Federal Reserve's annual two-stage stress tests, designed to assess how well the sector could withstand another financial crisis.

The German lender suffered from "widespread and critical deficiencies" in parts of its business, the Fed said on Thursday.

The Fed found Deutsche Bank's US arm had "material weaknesses in the firm's data capabilities and controls supporting its capital planning process, as well as weaknesses in its approaches and assumptions used to forecast revenues and losses under stress", reports the BBC.

The verdict is another blow for the troubled German lender whose financial health has been under the spotlight recently.

It will require the bank to make changes to the way it operates in the US.

Meanwhile, Goldman Sachs and Morgan Stanley were only granted "conditional" passes.

The Fed said it had granted the conditional pass to Goldman and Morgan Stanley because the companies' results had been skewed by tax changes passed last year.

But 31 of the 35 banks tested were given the all-clear.

Stress tests were introduced in the wake of the 2008 financial crisis and every year America's central bank, the Federal Reserve, puts the country's banks, including foreign subsidiaries operating in the country, through their paces.

The Fed measures whether banks are holding sufficient capital to cope with a recession and in the second part of the process it focuses on banks' "capital plans" such as how much cash they intend to return to shareholders.

However this is the first year that the results of the US units of foreign banks have been publicly released, the BBC reported.

In response to the development, Deutsche said its US division had "made significant investments to improve its capital planning capabilities as well as controls and infrastructure".

"Deutsche Bank USA continues to make progress across a range of programmes and will continue to build on these efforts and to engage constructively with regulators to meet both internal and regulatory expectations," the bank said.