The Strategist

US authorities to impose a record fine on Deutsche Bank

09/16/2016 - 15:34

US Justice Department demanded that Deutsche Bank pays $ 14 billion for its participation in the mortgage crisis of 2008. This amount may be the largest fine imposed by the American authorities to a foreign bank.

Alex Proimos
Alex Proimos
US officials sent to the Germany's largest bank Deutsche Bank requirement to pay $ 14 billion for compensation for losses incurred as a result of the mortgage crisis of 2008. Press service of the bank announced beginning of negotiations with the US Department of Justice when commenting on market rumors.

The $ 14 billion paid to the US Department of Justice would set a new record fine paid by a foreign bank, reports BBC. However, the bank has assured that it is not going to surrender to pressure.

"Deutsche Bank has no intention to resolve potential civil claims at a level close to the stated amount. The talks are just beginning. The bank is expecting that its results will be similar to agreements reached on the same issue with other banks, complaints against which have been settled at a significantly lower level", - says Deutsche Bank.

Earlier, JP Morgan Chase analysts said that if Deutsche Bank manages to settle claims of the US Ministry of Justice, and spends no more than $ 2.4 billion, the market "will perceive it very positively." If the price exceeds $ 4 billion, the bank will have to create additional provisions for litigation. Earlier, it was reported that Deutsche Bank reserved € 5,5 bln. for possible payment of various fines.

At the end of night trading after the closing of the main session on the New York Stock Exchange, shares of Deutsche Bank fell 6.78% to $ 13.76 per share. 

The US authorities claim major banks operating in the early 2000s in the US mortgage market provided their customers with false information about debtors' creditworthiness. This resulted in more than $ 30 billion of losses of mortgage companies Fannie Mae and Freddie Mac, controlled by Federal Housing Finance Agency (FHFA). Subsequently, the American taxpayers had to reimburse the losses.

In 2014, the US Justice Department reached an agreement with Bank of America on settlement of disputes about involvement in the mortgage crisis. Under the deal, the bank agreed to pay a fine of $ 9.65 billion in cash and to allocate about $ 7 billion on construction of affordable housing, benefits for mortgage borrowers etc. In exchange, the US Department of Justice, several federal agencies and authorities of the six states withdrew their claims.

Earlier, the US authorities settled claims for banks JP Morgan Chase and Citigroup. The two organizations paid $ 13 billion and $ 7 billion respectively for abandoning the prosecution. 

Deutsche Bank previously reported a record drop in profits. The largest financial institution in Germany reported a fall in quarterly profit by 98%. Head of the bank John Cryan warned of a possible further fall in rates.

In the second quarter of this year, the bank's net profit amounted to € 20 million, while for the same period in 2015 it reached € 796 million.