MILAN/LONDON, Sept 16 (Reuters) – European shares ended at six-week lows on Friday, with Deutsche Bank dragging banking stocks lower after it said that the US government is demanding billions of dollars to settle a mortgages case. So did those of other European banks yet to agree terms with the DoJ over RMBSs. The bank’s shares clawed back some losses after the initial sell-off, standing down 6.5 percent by 0840 GMT at 12.27 euros.
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Many major banks in the USA have paid billions in settlements for allegedly misleading investors by selling home loans as safe RMBS that helped to create a housing bubble that lead to the financial crisis of 2007 – 2008. In Europe, shares closed at six-week lows on concerns on weakness in financials led by Deutsche Bank.
The settlement with Deutsche Bank opens a new round in Justice Department lawsuits, because most of the banks that have already settled are USA -based.
The U.S. -listed shares of Deutsche Bank, the German financial conglomerate, plunged $1.30, or 9%, to $13.46 after the bank said it did not intend to pay the $14 billion settlement that the Department of Justice had proposed.
It seems like it’s soon to be Deutsche Bank’s (NYSE: DB) turn on the regulatory wheel of punishment.
While the inflation data pushed the dollar to a more than two-week high against a basket of major currencies, uncertainty ahead of a Bank of Japan policy meeting on Wednesday limited the dollar’s gains against the yen.
The penalty aims to settle the U.S. Justice Department’s allegations tied to mortgage-backed securities, dating back to 2005, about the way the bank selected mortgages, packaged them into bonds and sold on to investors.
The claim against Deutsche, which is likely to be the subject of negotiations for several months, was much bigger than expected.
Deutsche Bank released a statement saying: “The negotiations are only just beginning”. John Cryan, its chief executive for the past 14 months, scrapped last year’s dividend and has told investors to expect none for 2016.
Royal Bank of Scotland is facing the threat of a crippling multi-billion-pound fine for selling toxic mortgage securities.
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Earlier this year, the Justice Department announced a roughly $5 billion settlement with Goldman Sachs over the sale of mortgage-backed securities. For one, it still has to account for improper trading in Russian Federation.
