US and European stocks were moderately lower in early trading Friday after Deutsche Bank said it wouldn’t settle with the Department of Justice over its handling of mortgage-backed securities in the run-up to the 2008 financial crisis.
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“Even without bad outcomes on litigation, the capital position is precariously thin in the event of a failure to sell Postbank”, said Piers Brown, a Macquarie analyst with an underperform rating on the stock.
Other big banks have reached deals in recent years with USA authorities over their mortgage activities in the run-up to the financial crisis.
In addition to the U.S. mortgage investigation, Deutsche Bank faces litigation and regulatory probes relating to issues such as foreign-currency rate manipulation and precious metals trading.
Deutsche Bank also confirmed that DOJ did demand $14 billion. Still, the figure seemed to be much more than Deutsche Bank expected.
“The negotiations are only just beginning”, the bank said in a statement emailed in the early hours of Friday.
The Justice Department is seeking a $14 billion civil settlement with Deutsche Bank over the German financial institution’s alleged role in artificially propping up the USA housing market in the lead up to the Great Recession.
He said: “RBS could have to pay up to 13 billion U.S. dollars (£9.8 billion) to settle the claims”.
The DoJ has taken a tough stance in settlement negotiations with other banks, requesting sums higher than the eventual fine.
NEW YORK (AP) – U.S. and European stocks were moderately lower in early trading Friday after Deutsche Bank said it wouldn’t settle with the Department of Justice over its role in the 2008 financial crisis. “But because of the election campaign it may end up higher – at maybe 6 or 7 billion”. The bank has already settled other claims such as $1.9 billion for defrauding Fannie May and Freddie Mac.
Deutsche Bank gladly told shareholders in July that it planned to close its biggest pending legal cases this year, including one for its sales of residential mortgage-backed securities in the USA before the financial crisis.
Many financial institutions were investigated about issuing and underwriting of residential mortgage-backed securities in the run-up to the 2008 financial crisis. (GS) had agreed to pay more $5.1 billion to settle similar allegations, while Morgan Stanley (MS) agreed to pay about $3.2 billion. These banks compromised the integrity of the financial markets by packing the risky loans as safe securities and then passing on the risks to the public which bought them.
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Since he took over past year, John Cryan, Deutsche’s chief executive, has said he aims to settle major outstanding legal issues as soon as possible as part of his wider overhaul.
