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Deutsche Bank to pay $7.2 billion to close U.S. mortgage probe

25 December 2016
Deutsche Bank to pay $7.2 billion to close U.S. mortgage probe

"A key area of concern has been removed", analysts at Goldman Sachs said, noting that the $1.2 billion charge Deutsche would take in its fourth quarter was "towards the lower end of market expectations".

Under the settlement, Deutsche's payment will be made up of a civil penalty of $3.1bn as well as $4.1bn in consumer relief that will help U.S. homeowners.

The agreement was not final and there could be no assurance that the DoJ and the bank would agree on the final documentation, the bank said on Friday. "With this filing, we are sending a clear message that the Department of Justice will not tolerate the defrauding of investors and the American people", Lynch said. It was down 1.4 percent, as the DoJ launched a lawsuit against the bank over its sale of mortgage-backed securities. Three major probes remain.

Three major probes remaining for DB, namely a probe into alleged manipulation of foreign exchange rates, suspicious equities trades in Russian Federation and alleged violations of U.S. sanctions on Iran and other countries.

Hours after the announcement Friday, Credit Suisse said it too had struck an agreement with USA authorities to pay nearly $5.3 billion to settle disputes over the sale of subprime mortgage bonds.

The DoJ has filed a civil complaint in a NY court which accuses the British bank and employees of misrepresenting the quality of loans they sold to tens of thousands of investors between 2005 and 2007 in the run-up to the country's financial meltdown.

Deutsche Bank declined to comment.

Deutsche shares rose 4% today to €18.44 as investors breathed a sigh of relief.

Its shares plunged to a record low of 9.90 euros in September, after the bank confirmed the Justice Department was demanding $14 billion.

The bank's shares have been pummelled on stock markets during 2016 over fears about its financial position.

Barclays could not reach an agreement, marking the first time the Justice Department has sued one of the banks at the centre of a government initiative to recoup investor losses on mortgage securities.

Credit Suisse, led by former Prudential boss Tidjane Thiam, will pay $5.28 billion to resolve similar allegations, made up of a $2.48 billion penalty and $2.8 billion customer relief. The fine includes a $3.1bn penalty and $4.1bn in consumer relief in the US.

In 2013, JPMorgan Chase & Co JPM.N agreed to pay $13 billion. Last year, U.S. market regulators fined the German lender $55 million, concluding that it had overvalued its holdings of credit derivatives by at least $15 billion during the financial crisis.