European stocks were wrapped up in red Friday, with a selloff in Deutsche Bank AG pacing punishment among bank shares and rounding out what looks set to be a losing week for the market.
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Energy companies are trading lower as the price of oil continues to slip.
The Justice Department is seeking a settlement over the bank’s handling of home mortgage-backed securities and “related securitization activities” from 2005 to 2007, according to Deutsche Bank.
LONDON, Sept 16 (Reuters) – Britain’s top share index fell on Friday to record a second straight week of losses as heavyweight bank stocks dropped after US regulators demanded $14 billion from Deutsche Bank to settle claims over misselling mortgage-backed bonds.
The KBW Bank index .BKX fell 0.90 percent, putting it on track for its second straight week of decline.
Deutsche Bank’s shares stumbled 8.5%, wiping off roughly €1.5 billion from the German lenders’ market capitalization.
It is likely the next president and the Justice Department will ultimately determine how this case is resolved or take it to trial.
At a recent banking conference in New York, Ewen Stevenson, Royal Bank of Scotland’s chief financial officer, pointed out that while the bank was making steady progress on legacy conduct issues, the bank could still be hit by punitive penalties.
“The negotiations are only just beginning”.
While trading in bank shares in Canada has been choppy in the past week, the sector rose in the past two sessions, including a 1 percent gain on Thursday. One of the concerning news was that Deutsche Bank unexpectedly had been asked to pay a hefty amount to settle mortgage investigations.
Other big banks have reached deals in recent years with United States authorities over their mortgage activities in the run-up to the financial crisis. For instance, Citigroup Inc (NYSE: C) paid $7 billion while Goldman Sachs Group Inc (NYSE: GS) paid $5 billion to settle similar charges. This was caused by banks that promoted bundled mortgages they sold as safe investments, but were actually poor-quality loans with adjustable-rate mortgages that borrowers were unlikely to pay back.
American banks have settled with the department for amounts between $3.2 billion (Morgan Stanley) and $16.7 billion (Bank of America), as well as paying smaller sums to the Federal Housing Finance Agency (FHFA), another regulator.
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DB has been on a major restructuring since the appointment of its current CEO John Cryan.
