Deutsche Bank Asked to Pay $14B to Settle Probe Into Mortgage Securities

The US Justice Department has asked Deutsche Bank to pay $14 billion in settlement of a number of investigations in respect of mortgage securities, as reported by the Wall Street Journal.

Join the industry leaders at the Finance Magnates London Summit, 14-15 November, 2016. Register here!

According to a statement, the bank said that it "has no intent to settle these potential civil claims anywhere near the number cited." The bank emphasised that negotiations have just started and that it expects the outcome to be "similar to those of peer banks which have settled at materially lower amounts."

Deutsche Bank's US-listed shares fell sharply by more than 6 percent in extended trading on Thursday as the bank scurried to play down the chances of paying back a figure of this amount.

A settlement of around $2 - $3 billion was deemed to be fair, as it had already paid $1.9 billion in 2013 to resolve similar claims, according to the WSJ.

Back in January, Goldman Sachs settled a $5 billion claim after it misled mortgage bond investors during the financial crisis. The following month, Wells Fargo reached a $1.2 billion settlement over mortgage fraud allegations.

Further Failures

This is the latest setback for Deutsche Bank in the US which has ruffled feathers in Washington following a series of controversies.

Earlier this year, summer, Deutsche Bank Trust Corporation, a US arm of the German bank, failed the Federal Reserve’s stress tests for a second year in a row, making it one of only two of 33 banks which failed outright in 2016.

Furthermore, the US Securities and Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term Commission (SEC) also fined the bank $55 million for underrating the risks to the bank during the crisis.

The latest development is a further reminder of how banks are continuing to contend with the regulatory fallout after the financial crisis.