Lenders fined £10bn in toxic loans scandal

Deutsche and Credit Suisse hit by US regulator

TWO of Europe’s biggest banks have been hit with fines of more than £10bn for mis-selling toxic mortgages before the financial crisis.

US regulators yesterday ordered Deutsche Bank to pay £5.9bn for its part in the debacle – less than expected – while Credit Suisse agreed to shell out £4.3bn.

The announcement draws a line under the pair’s role in causing the Great Recession by touting bundles of worthless debt to unsuspecting investors.

But Barclays, HSBC and the Royal Bank of Scotland are still being pursued by the US Department of Justice over the scandal.

Panicked investors feared Deutsche could face a fine of up to £11.4bn after details of the Americans’ demands were leaked this summer. This led to concerns that it would be unable to pay and would collapse, dragging Europe’s financial system down.

So yesterday’s fine was greeted with relief by analysts.

In a memo to staff, Deutsche boss John Cryan said German ministers had not helped in the negotiation with US officials, and the bank was now on a secure footing with no risk of needing a government bailout.

‘By agreeing this settlement, we are removing a long-standing uncertainty from Deutsche Bank,’ the memo said. ‘We anticipated that the credit market will welcome the sentiment.’

But Chris Ralph, chief invest- ment officer at St James’s Place, said: ‘They’ve got a reasonable deal, but not as good as hoped.’

NatWest owner RBS is expected to face a fine of a similar size to Deutsche’s. An investigation into HSBC is also under way, while Barclays will appear in the civil courts to challenge DoJ claims that it tricked investors. Despite the relief at Deutsche, still faces a string of investigations over claims of bad practice.

There are probes into whether it manipulated foreign currency rates and precious metals prices, and whether it tried to stop investors from illegally transferring billions of pounds out of Russia.

‘For Deutsche it was quite positive,’ said Kyle Kloc, of Fisch Asset Management. ‘With Credit Suisse it is more complicated.

‘Yes, it reduces uncertainty but it is toward the high end of what people expected.’

The Swiss lender has been seeking to slash costs under chief executive Tidjane Thiam, who is axing 6,000 jobs to boost profits.