Deutsche Bank reached a final settlement with the Justice Department over its handling of mortgage-backed securities before 2008, resolving one of its biggest litigation risks.
The bank agreed to pay $US7.2 billion ($9.5 billion) and admitted to misleading investors, according to the Justice Department. The penalty was in line with the bank's December 23 announcement that it had reached an agreement in principle in the matter. It will pay a $US3.1 billion civil penalty and provide $US4.1 billion in relief to homeowners
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Deutsche Bank reaches settlement
Deutsche Bank AG reaches a final settlement with the US Justice Department over its handling of mortgage-backed securities before 2008.
"This resolution holds Deutsche Bank accountable for its illegal conduct and irresponsible lending practices, which caused serious and lasting damage to investors and the American public," Attorney General Loretta Lynch said in a written statement. "Deutsche Bank did not merely mislead investors: It contributed directly to an international financial crisis."
Deutsche Bank, Germany's biggest bank, continues to defend itself from other US probes and potentially expensive civil suits -- liabilities that chief executive John Cryan has set out to resolve as he seeks to restore confidence. The bank declared a hit of $US1.2 billion from the Justice Department settlement to fourth-quarter pretax profit on December 23, saying at the time that "negotiation of definitive documentation" was still being completed.
The bank still faces investigations into whether it manipulated foreign-currency rates and precious metals prices and whether it facilitated transactions that helped investors illegally transfer billions of dollars out of Russia. In a memo to employees in December, the lender said it found "deficiencies" in the bank's systems and controls in Russia, but no indications that it breached sanctions in the country.
And on Tuesday, the US Supreme Court refused to stop antitrust lawsuits that accuse some of the world's biggest banks, including Deutsche Bank, of conspiring to rig the London Interbank Offered Rate, known as Libor. The court rejected the banks' appeal without explanation, leaving them vulnerable to the prospect of paying out billions of dollars in damages if the suits succeed.
Deutsche Bank had set aside €5.9 billion ($8.4 billion) for all of its outstanding legal costs as of September 30, about €2 billion of which it used for the settlement with the US Its common equity tier 1 ratio, a key metric of financial strength, stood at 11.1 per cent, below the target level of at least 12.5 per cent for 2018.
The final settlement caps a negotiation process that had sent the company's shares to a record low in September, when Deutsche Bank said the Justice Department had made an opening request of $US14 billion to settle. The news spurred concern that the bank might not have enough capital.
The Washington Post