World Economy

Deutsche Rebuffs $14b US Penalty

Deutsche Rebuffs $14b US Penalty
Deutsche Rebuffs $14b US Penalty

The US Department of Justice is asking Deutsche Bank to pay $14 billion to settle an investigation into mortgage-backed securities, the bank has said.

Deutsche Bank said it "has no intention to settle these potential civil claims anywhere near the figure cited", BBC reported.

The claim against Deutsche, which is likely to be the subject of negotiations for several months, was much bigger than expected.

The bank's shares fell nearly 7% in early trading.

"The negotiations are only just beginning. The bank expects that they will lead to an outcome similar to those of peer banks which have settled at materially lower amounts," Deutsche Bank said.

The sale of residential mortgage-backed securities played a significant role in the 2008 financial crisis.

Banks in the US have been subject to a number of investigations over allegations of giving mortgages to unqualified borrowers, then repackaging those loans as safe investments and selling the risk on to others.

 At the current figure, the fine facing Deutsche Bank is one of the largest penalties handed out by US authorities in the aftermath of the financial crisis.

The Department of Justice sought $12 billion from Citigroup in 2014 for the sale of mortgage-backed financial products. The bank ended up paying $7 billion.

In 2013, JP Morgan Chase was fined $13 billion following allegations it overstated the quality of mortgages being sold to investors. In the following year, Bank of America paid $16.7 billion to settle similar charges. And Goldman Sachs settled for $5.1 billion in January this year.

The fine has emerged at a difficult time for Deutsche Bank. Its most recent results revealed a 20% fall in second quarter revenues and a 67% drop in profits.