The US$14 billion is considered an “opening bid” that could go “much lower”, according to the Wall Street Journal, which reported the figure shortly before Deutsche Bank issued its statement.
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Those talks are attempting to settle civil claims that involves Deutsche Bank’s activities in residential mortgage-backed securities (RMBS) between 2005 and 2007. One of the concerning news was that Deutsche Bank unexpectedly had been asked to pay a hefty amount to settle mortgage investigations.
But the news of the massive U.S. demand hit the bank’s stock, which dropped almost 7% in after-hours trading in the U.S. Its shares were already down 50% in the past year.
The CBOE Market Volatility index, Wall Street’s “fear gauge”, declined 5.7 percent. The central bank’s policy makers are meeting on September 20, although the chances of a rate hike are slim following a deluge of disappointing US data on Thursday.
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.
At the current figure, the fine facing Deutsche Bank it is one of the largest penalties handed out by USA authorities in the aftermath of the financial crisis.
A number of banks have settled with United States authorities over mis-selling of mortgage-backed securities.
The Department of Justice has taken a tough stance in settlement negotiations with other banks, requesting sums higher than the eventual fine. The shocking amount that the DoJ is ordering Deutsche Bank to pay could have severe effects on the German company’s future.
It seems like it’s soon to be Deutsche Bank’s (NYSE: DB) turn on the regulatory wheel of punishment. It lost €6.8 billion ($7.4 billion) a year ago and trades at around 30% of the net value of its assets.
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.
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She added that she does not “share the assessment” that the DoJ ruling is retaliation for a 13 billion euro (£11 billion) tax bill the European Commission slapped Apple with earlier this year. Goldman Sachs also ended up with a $5.06 billion fine to settle claims for their part in the financial crisis. CEO John Cryan plans to cut 9,000 jobs worldwide by 2020.
