Duetsche Bank hit with record fine

The Myanmar Times - - Business -

NEWS that US au­thor­i­ties are tar­get­ing Deutsche Bank for a record US$14 bil­lion fine marked the lat­est blow to Ger­many’s big­gest lender, which since the 2008 fi­nan­cial cri­sis has run a gaunt­let of set­backs.

The weighty de­mand from the Depart­ment of Jus­tice (DoJ) comes af­ter Deutsche has al­ready paid out bil­lions in fines over in­ter­est-rate fix­ing and sanc­tions vi­o­la­tions, and as it bat­tles some 8000 on­go­ing le­gal cases and a painful restruc­tur­ing.

The bank called the DoJ’s 12.5 bil­lion euro claim in re­la­tion to the 2008 mort­gage cri­sis an “open­ing po­si­tion”, say­ing it ex­pected to reach a lower fig­ure in ne­go­ti­a­tions.

The DoJ had in­vited the bank to sub­mit a counter-of­fer, it said.

Deutsche Bank is among sev­eral ma­jor fi­nan­cial in­sti­tu­tions ac­cused by US au­thor­i­ties of mis­lead­ing in­vestors about the val­ues and qual­ity of mort­gage-backed se­cu­ri­ties sold be­fore the 2008 fi­nan­cial cri­sis.

Much of the un­der­ly­ing lend­ing was worth­less or fraud­u­lent, de­liv­er­ing bil­lions of dol­lars in losses to bond hold­ers when the hous­ing mar­ket col­lapsed, bring­ing down nu­mer­ous banks and touch­ing off the worst US re­ces­sion since the 1930s.

A dou­ble-digit bil­lion pay­out would be the largest ever in­flicted on a for­eign bank in the United States, eas­ily sur­pass­ing the $8.9 bil­lion that the French bank BNP Paribas paid in 2014 for sanc­tions vi­o­la­tions.

US in­vest­ment bank Gold­man Sachs agreed to pay more than $5 bil­lion to set­tle sim­i­lar al­le­ga­tions.

An­a­lysts be­lieve that Deutsche Bank will ne­go­ti­ate a fi­nal set­tle­ment that is far smaller than the fig­ure sought.

“It prob­a­bly won’t reach $14 bil­lion if you com­pare it with other banks that were ac­tive in this busi­ness,” an­a­lyst Robert Halver of Baader bank told AFP.

“We’re count­ing on more like $5 bil­lion. But of course, $5 bil­lion is still painful.”

Deutsche Bank has set aside $5.5 bil­lion to re­solve a back­log of pend­ing le­gal mat­ters.

Re­cently in­stalled Deutsche Bank chief ex­ec­u­tive John Cryan has set an am­bi­tious tar­get of re­solv­ing the lender’s big­gest le­gal wor­ries by the end of 2016, in­clud­ing the US mort­gage-backed se­cu­ri­ties case.

Even once a deal has been reached, the bank will still have to face New York’s Depart­ment of Fi­nan­cial Ser­vices (DFS) reg­u­la­tor, which is in­ves­ti­gat­ing al­le­ga­tions of money laun­der­ing in Deutsche’s Rus­sian arm.

The Ger­man bank has al­ready paid out $2.5 bil­lion in the US over ma­nip­u­la­tion of the Li­bor in­ter­est rate used by banks to lend to one an­other, and set­tled a dis­pute with the US Fed­eral Re­serve and the DFS, which ac­cused it of vi­o­lat­ing bans on trad­ing with Syria and Iran.

As he fights le­gal chal­lenges on mul­ti­ple fronts, Mr Cryan has also vowed to press through an am­bi­tious restruc­tur­ing of the lender, slash­ing 200 branches in Ger­many alone and 9000 jobs world­wide. –

Photo: EPA

The Deutsche Bank head­quar­ters in Frank­furt, Ger­many. Deutsche Bank has no in­ten­tion to set­tle the civil claims any­where near the num­ber cited.

Newspapers in English

Newspapers from Myanmar

© PressReader. All rights reserved.